Finally we get to see the new Fed chief in his splendor at the first meeting of the Federal Open Market Committee. You don’t even have to peep behind the curtain to find the humbug; it’s right there where you can see it. The express purpose of the Open Market Committee is to subvert the open market.
Price fixing is illegal in other industries, but the honchos of central banking are allowed to collude to fix the most important price in an economy, the price of money. Every single one of them praises a free and open market. All read Adam Smith nodding their heads approvingly. None would dream of resorting to central planning on the Soviet model. But, not one of them would give up his membership in the elite centralized club of apparatchiks that determines Americans’ short-term lending rates.
What makes them think they can know the precise rate at which we should borrow or lend? What makes them think that their judgment is better than that of the market itself? Why can’t short-term lenders and short-term borrowers get together at whatever rate they want, rather than at the rate urged by the Fed?
Don’t even bother to ask, dear reader. No one has an answer — save that these sages of easy money will help make sure the economy has the money it wants, rather than the money it actually has. There are times when lenders get worried, frightened, and tight. They think they see trouble coming and are reluctant to give up the bird in the hand for the two in the bush. They want to see three birds in the bush — or four. Maybe then they’ll consider parting with their cash. It is at times such as these that the Fed flies to the rescue of the economy, all aflutter, with birds twittering in both fists.
But, we are getting off our subject. It is Monday morning; we will have to save the influence of ornithology on central banking for later in the week. Besides, we are still in “Good News” mode and there’s no good news in the Fed’s work.
u2022 Our good news, today, carries over from last week. We were delighted to discover — in the figures from economist Walter J. Williams — that the world really is going to hell in a handcart, just as we thought it was. If they did the numbers correctly, or even as they used to do them, unemployment would be twice today’s reported levels, inflation would be higher, and the GDP would be shrinking.
This makes us feel better. Not that we want to the United States to go into recession — not at all — but we are pleased to see that what ought to happen…really does happen. Otherwise, we’d have to go back and examine our whole outlook on life. Maybe we’d become day traders, or put on saffron robes and join the Hare Krishna. We might even begin reading Thomas Friedman’s work with admiration.
We are spared! We’d hate to lose the little dignity we have left. So, we thank the gods for these little signals…these little reassurances that things still work the way they are supposed to work. And yes, we saw another hint this weekend. We stood in front of the Uffizi museum in Florence and studied a sculpture at the entrance. The “Blue Guide” explained that it represented the “eternal and inevitable triumph of virtue over evil…reminding Florentines that good behavior was always rewarded, while sin and error were always “punished” or words to that effect.
Well there! That’s the way it ought to be, isn’t it? We looked again at the statue. It was a bronze of a beautiful woman with bare breasts and a sword in her hands about to cut off the head of some poor man. She had him on the ground, with her knee on his back and her left hand holding onto his hair. He was a goner, for sure.
And, if a people spend more than they can afford…if we borrow more than we can comfortably repay…if we become too concerned with the things of this world…coveting our neighbors’ houses, perhaps, or envying their big screen TVs…we will be goners, too.
Now comes more bad news. First, the knockdown: New house sales fell 10.5% last month — the biggest drop in almost 10 years. Then, the knee to the back: Gasoline prices rose 15 cents in the last two weeks, says the AP. Finally, the terrible swift sword: Personal bankruptcy filings went up 30% last year. More than two million people went broke.
We can’t help but like Italy’s head of state, Silvio Berlusconi. Asked what he would say to poor people, he didn’t lie or mumble. He stated, “I’d tell them to earn more money,” he said.
But what can you say to America’s lower-middle classes, who are growing poorer every day? Earn more money? How? On the globalized labor market, they are already overpaid. Maybe they should learn some new skills?
But what’s this? “Retraining laid-off workers…for what?” asks the New York Times.
We wonder too.
u2022 Here’s a comparison we’ve never heard before:
“You probably won’t like this, but Bill Bonner frequently reminds me of Howard Stern. Not in the content department, of course,” writes a reader from Melbourne, Florida.
“Stern’s radio program showcases the strange and bizarre things that people will do and just stands back, watches and reports what is occurring. The Stern show does not follow conventions. It develops its own ideas and follows through on them unconcerned about anyone else’s opinion. Howard Stern is nothing if not completely honest about his own life and what he observes in the world. Howard has assembled a team of people with the same sensibilities and they have a great synergy going. Sound familiar?
“Bill Bonner — Howard Stern
“Addison Wiggin — Robin Quivers”
Heh. We’re not sure if we should be offended or not…
u2022 What a lovely place Europe is! There is now so much of it available to you, these days. This weekend was Elizabeth’s birthday, so we decided to celebrate by going off to Florence. The airport in Florence is closed for repairs, so you have to fly to Pisa and then take a one-hour train ride.
Ryanair offers low-cost tickets to various cities in Europe. You can fly from London to Limoges, for example, for as little as 29 pounds. Easy-Jet is another competitor in the low-cost, no frills airline business. Between the two of them, you can get around Europe easily and cheaply.
The flight to Pisa was quick. We left London on Friday evening, but the airport is only a few miles from the heart of town, so we were able to check into our hotel and then go out for dinner. We offer a hotel recommendation: The Royal Victoria is a marvelous hotel. In the 10th century the Winemakers’ Guild erected the oldest tower in the building. It served as an inn and as their headquarters, the “Universitá de’ Vinajoli,” which eventually became the University of Pisa. In the 16th century, when Florence overcame Pisa, the tavern became known as the “Locanda della Vittoria” (Inn of the Victory). The hotel, as it is today, was built in the 19th century (1837), and has scarcely been changed since. The rooms are a bit Spartan — not luxurious — but it is what an Italian hotel is supposed to be. And, you can get a room with a view for under $200.
On Saturday morning, Elizabeth came back from her run, excited:
“You won’t believe it. This is more than I imagined. I mean, I’ve seen pictures of it, but when I saw the Leaning Tower of Pisa and the Duomo…I was stunned. There was no one there, and the white marble against the gray sky…it looks unworldly.”
After breakfast, we walked over. By 9:00 a.m., crowds of tourists were already forming up, but Elizabeth was right. When the tower came into view, we couldn’t believe it was real. It really does lean over so much…it seems to defy gravity. It is a colossus of stone, rising what seems like hundreds of feet above the town and tilting over at a striking angle — as if it were in the middle of falling down. How come it hasn’t already fallen? We don’t have an answer.
We bought tickets and climbed to the top. It gave us an odd sensation, marching up the stairs, listing as we rose. The marble stairs were worn by so many generations of gawkers — the handrails, too. When we finally got to the top, the sensation was startling. It felt as though you might slip and slide right off. We worried that the tower would finally come down — that some fat tourist would walk over to the sinking side. We began to think that the whole thing had remained standing all this time only by luck — waiting for that last leaf to fall, a twist of wind and weather, or a big derriere that would finally bring the whole pile crashing down.
“What a way to go,” said Elizabeth. “There would be something gloriously historic about it. It would be like going down with the Titanic, or getting scorched in Pompeii. Our children would have to say something every time they mentioned us:
“Oh…Mom and Dad were standing on the top of the Leaning Tower of Pisa when it fell over.”
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis.
