 | | The Daily Reckoning | Monday, February 27, 2012 |
- Joel Bowman gets high...over the Pacific...
- A few Reckoners reckon...
- Plus, Bill Bonner surprises us with one more reckoning...
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|  | | | | Beginning With the End | | A Few Quick Notes on the End of Humanity | | |  | | Joel Bowman | High over the Pacific and en route to New Zealand...
As mentioned in Friday’s reckoning, your editor is today traveling to the end of the world. Aotearoa, or roughly, the “Land of the Long White Cloud,” is about as far away from the Syntagma Square riots and Wall Street shenanigans as one can comfortably get. That’s probably a good thing.
When the world’s about to end, why not go to the end of the world?
We’re not there yet, of course. This wee jaunt is more recon mission than permanent move.
“There is a lot of ruin in a nation,” Adam Smith is said to have responded to a student who told him that the surrender at Yorktown would be the ruin of England. Empires, currencies, nation states and the egos of the men and women who “run” (read: ruin) them still have a long way to fall. Patience is in order.
Look at the US markets. The Dow closed last week very near 13,000 points. Prices are still a long way from panic mode. Reckons Bill:
At 16 times earnings, stocks are higher than usual...and earnings are at near record levels. We expect earnings to fall...and stocks to fall too... Then, they will keep falling...until they finally reach the bottom. You could probably hit “find and replace” and substitute the words “stocks” and “earnings” with “growth,” “real wages” and “living standards” and still the paragraph above would make sense. Heck, try throwing in “dominance of the developed world” for good measure.
Of course, nobody knows how long the Feds can keep up the charade. They throw money they don’t have at problems they didn’t see coming (and, in most cases, caused themselves). When will it go belly up?
“Are we (the human race) ripe for the ‘end’?” a curious reader, currently residing in Brazil, wrote in over the Weekend. We threw the question open to the floor. Reckoners responded in turn.
Here’s one from “Reckoning in Nebraska”...
I do so enjoy The Daily Reckoning. [Ed: Thanks!]
As regards the post from the reckoner in Brazil: We human beings have been “ripe for the end” from the beginning!
As regards our current travails: Seems like we are constantly trying to stay ahead of our fellow homo sapiens who have this unrelenting bent toward dominating (dictating to) the lives of their fellow earth travelers. Where does this tendency come from if not from those endearing human characteristics illuminated in Dante’s Divine Comedy?
Most of these dictators end up in the halls of some governing body somewhere in the world, such as the US and Brazil etc., because for some reason that is the prime location for the pick pockets club members to gather. What’s a human to do but look beyond this ongoing chaos to The promised paradise to come, happy reckoning!
And this thoughtful musing from Reckoner Mikhail Dvortsov...
I’d like to ease up fears of the devoted Reckoner in Brazil by reminding him that absolutely all predictions of the future are non sequiturs that lack a theoretical power of necessity. Nothing is inevitable in other words. Even when we get to a point when all we see is blood in the streets of Brazil, USA, Asia, etc. it still won’t be sufficient to proclaim the end of the human race. Things might turn around in a flash. The question of course is whether on that beautiful V-Day you’ll count yourself among the dead or the living?
On the other hand, what is the issue? Don’t you know you are heading for the grave with or without the human race? Hmmm... or is it a non sequitur too? Yes, it is. But it is very, very likely.
What I am proposing is to keep a bigger picture in mind. We might very well be living in the last days. But is there a cosmic law that says the humanity can’t, won’t or shouldn’t end? No, there isn’t.
I believe that whatever the outcome, nonparticipating in the insanity of the legacy communities — nations, cultures, traditions — is the healthy way to live. I stopped calling myself Russian when I left the Soviet Union years ago. Then stopped calling myself American when I got fed up with conservative Christian and the socialist Christian mobs of this country. I may even say that I don’t feel belonging to human race.
I belong to communities I choose and form myself — my friends, my partners, my family. Some of these communities come and go, some spread across the globe. They change in scope, content, rules and purpose. But in all cases I remain a voluntary member. I myself legitimize my life regardless of governments, ideologies and traditions of the whole world. On my deathbed I’ll know I have lived an honest life. Or I might say — I am the human race. YOU are the human race, my friend.
Chimes in Reckoner Benton H. Marder, from Florida...
Our brother Reckoner in Brazil asks if the human race might be on its last legs.
I look at the whole scene, and wonder. Last night I was watching John Stossel’s show on laws and regulations making just about everything illegal or regulated into sheer impossibility.
However, I read a lot of history. The human race might not be on its last legs, but our modern Western Civilization almost certainly is. We have allowed governance at all levels to choke up, to seize up with the gunk of regulation. A kid can’t set up a lemonade stand in his/her front yard. No wonder the likes of Obama have no real-world experience. It’s all intended to inculcate serfdom. No real middle class based upon the entrepreneurial ability, which defines ‘middle class’.
So, our present civilization needs to collapse of its own weight so that the human race might learn from the present and carry on. In a sense, we are reminded of the present economic situation. Banks and major corporations are not allowed to go broke so that something more practical might be built out of the ruins. The banks should have been allowed to fail so we’d learn not to create bubble after bubble. The car companies should have been allowed to fail so that the divisions might be salvaged as separate companies. Great civilizations reach their limits and collapse. By and by, something better might be built — as after Rome fell, western Europe emerged.
Bill Bonner returns with an unscheduled reckoning below. Enjoy...
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| | | | | | Bill Bonner | | Abandon All Hope... | | How to Engender the Return of a Bull Market | | |  | | Bill Bonner | Did you miss us, Dear Reader?
You won’t believe this...we hardly believe it ourselves...but after months of planning and preparation for our expedition to the high, dry mountains of Argentina, we’re still here in the city of Salta... Our project has been delayed...by floods.
As you may recall, it is so dry up at the ranch that visitors wonder what the cows eat. We tell them we have developed a new race of low- fat, low cholesterol cattle we call “sand fed beef.”
But what ho! Now we are still in Salta, a city about a 5-hour drive from the ranch, and we are stuck.
“Well...” says our foreman “...the road to Angastaco is blocked by the river. The road to Molinos is blocked by mud. But you don’t have to worry about that. You can’t get anywhere near there, because the road to Cafayate is impassable because of rockslides...and the road over the mountain pass has been washed out completely.”
Yes, dear reader, we have been hit by a low, unexpected blow...from water! The ranch got only 120 mm, or about 5 inches, of rain last year. The year before it was only about 4 inches. It looked to us as though the whole place was going to dry up and blow away.
But so far this year, the gods have poured 15 inches of water on that parched ground...and it keeps raining. Fifteen inches is not a lot. Not for Maryland. But up in the barren mountains, the water rolls of the rocks...down through the gullies...and fills the rivers. Soon, it is over its banks, floating automobiles and rolling boulders.
“They’re clearing the main road now,” says our friend. It should be passable tomorrow...if it doesn’t rain tonight. But getting from Cafayate up to your ranch is another matter. Nobody knows what has happened up there. They’ve been cut off for weeks.”
Hmmm...
And so, we cool our heels...we rest our heads...we pace the room and watch the skies...eager to see a ray of sunlight...and some hope of proceeding to our objective.
And so...we have time to reckon after all.
And we reckon that investors are in ‘hope mode.’ How else to explain the recent bullishness? Albert Edwards elaborates:
One key lesson from Japan is that an essential ingredient to the end of a long valuation bear market is revulsion. It is when “buyers-on- dips” become “sellers-on-rallies”. It is when volume dries up to almost nothing. It is the loss of hope. In Japan we saw huge rallies in the Nikkei on the back of short-lived cyclical recoveries. Each cyclical failure and further new lows in the equity market saw hope being progressively crushed. Previous US valuation bear markets typically take 4 or 5 recessions to fully play out. We have only had two.
The market is once again in a hope phase — hoping that the US is now in a self-sustaining recovery; hoping that China might be soft- landing; hoping that the Greece bailout and the ECB liquidity polices have settled things down in the eurozone. These bursts of hope are essential in long bear markets. Essential in the sense that hope must be crushed. It will be crushed. Hope still beats in the breasts of equity investors. The market will rip out that hope and consume it in front of investors’ eyes. Only then can the bull market begin. In our view, the real turning point came in the year 2000. That’s when America’s decline began to speed up. It’s when the credit- driven economy could no longer produce real jobs...or real GDP...or real wealth.
Stocks rose. But they were rising on a bubble of debt. Then, it was mostly private debt. Now, they rise again...this time on public debt.
Either way, it can’t last. Eventually, the bear market will resume...taking down the prices of assets until they are cheap again. At 16 times earnings, stocks are higher than usual...and earnings are at near record levels. We expect earnings to fall...and stocks to fall too... Then, they will keep falling...until they finally reach the bottom. Edwards:
A flattening of the profits cycle is exactly what you might expect as the easy, early cycle productivity gains come to an end. It is worth noting that the last time this occurred was just ahead of the start of the recession which the NBER date as having started in December 2007. Back then too, both markets and policymakers all felt the economy was still quite healthy. Indeed neither non-farm payrolls nor the headline ISM signaled the economy had already entered recession at the end of 2007 — indeed like now, payrolls actually accelerated in the second half of 2007, just as profits began to slip! But we can’t reach the bottom of this cycle unless and until investors give up hope. As long as they have hope they will buy the dips, hoping to catch the next up-move. Only when they become convinced that there will be no move to the upside, will they stop buying the dips and prices can finally fall to their ultimate low.
Hope must be destroyed. Then, a real bull market can begin.
And more thoughts...
“We understand what happened in Greece very well,” explains a friend in Salta. ”It happened to us too. Just 10 years earlier...
“During the Menem years, in the ’90s, I lived in Buenos Aires. Things were good then. Because Menem had tied the peso to the dollar. He said he would never break the link. So people lent money to Argentina. They thought they couldn’t lose, because the peso was linked to the dollar. It was like lending money to the US. Almost.
“But eventually — it only took 10 years — Argentina had borrowed too much money. It couldn’t keep up. People who knew what was going on began taking their money out of Argentina. Speculators began betting against the peso.
“Then, it was just a matter of a few weeks...and we defaulted. The link to the dollar was broken, the peso lost two-thirds of its value and investors and savers lost a lot of money.
“Greece did the same thing. Instead of linking the drachma to the euro...it just took up the euro. That way, it was able to borrow a lot of money at low rates. Since it was part of the eurozone...and since the euro was controlled by the Germans...people thought it was safe to lend, so Greece went on a borrowing and spending spree. Now they’re suffering. They should default...like we did.
“Here in Argentina, the middle class was practically wiped out. People griped. They lost a lot of money. And for a couple years, it was pretty rough. But we were able to pick ourselves up and start over again...”
*** Democracy — at least as practiced in the US — is a fraud.
Andrew Napolitano agrees with us:
What If Democracy Is Bunk?
by Andrew Napolitano
What if you are only allowed to vote because it doesn’t make a difference? What if no matter how you vote, the elites get to have it their way? What if “one person, one vote” is just a fiction created by the government to induce your compliance? What if democracy is dangerous to personal freedom? What if democracy erodes the people’s understanding of natural rights and the foundations of government, and instead turns elections into beauty contests?
What if democracy allows the government to do anything it wants, as long as more people bother to show up at the voting booth to support it than to oppose it? What if the purpose of democracy is to convince people that they could prosper not through the creation of wealth but through theft from others? What if the only moral way to acquire wealth — aside from inheritance — is through voluntary economic activity? What if the government persuaded you that you could acquire wealth through political activity? What if economic activity included all the productive and peaceful things we do? What if political activity included all the parasitical and destructive things the government does?
What if governments were originally established to protect people’s freedom, but always turn into political and imperialist enterprises that seek to expand their power, increase their territory and heighten their control of the population? What if the idea that we need a government to take care of us is actually a fiction? What if our strength as individuals and durability as a culture are contingent not on the strength of the government but on the amount of freedom we have from the government?
What if we’re seeing civil unrest around the world precisely because government is out of control? What if the cocktail of big government and democracy brings dependence and destruction? What if big government destroys people’s motivations and democracy convinces them that the only motivation they need is to vote and go along with whatever the government does?
What if the Republican primaries we’re seeing unfold aren’t actually as democratic as they may appear to be? What if the results you have seen from the states that have voted thus far don’t match the composition of the delegates those states send to the Tampa convention this summer because the polls aren’t what counts, but what counts are the secret meetings that come after the voting? What if Joe Stalin was right when he said the most powerful person in the world is the guy who counts the votes?
What if the greatest tyrant in history lives among us? What if that tyrant always gets its way, no matter what the laws are or what the Constitution says? What if that tyrant is the majority of voters? What if the tyranny of the majority in a democracy recognizes no limits on its power?
What if the government misinforms voters so as to justify anything the government wants to do? What if the government bribes people with the money it prints? What if it gives entitlements to the poor, tax breaks to the middle class and bailouts to the rich just to keep all of us dependent upon it? What if a vibrant republic requires not just the democratic process of voting, but also informed and engaged voters who understand first principles of limited government and free-market economics, and the divine origin of natural rights?
What if we could free ourselves from the yoke of big government through a campaign of education and information and personal courage that leads to a revolutionary return to first principles? What if the establishment doesn’t want this? What if the government remains the same no matter who wins elections?
What if because of Ron Paul’s presidential campaign, because he isn’t campaigning just for votes as his competition is, because he is educating the population and winning the hearts and minds of a once free people and inspiring them to fight for their freedom once more, freedom wins? What if we can be free again? What will it take to make that happen? Regards,
Bill Bonner,
for The Daily Reckoning
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Here at The Daily Reckoning, we value your questions and comments. If you would like to send us a few thoughts of your own, please address them to your managing editor at joel@dailyreckoning.com
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