The Law of Limp really only describes the ineluctable process of degeneration. People rush to pleasure, and retreat to respectability with a limp only when they have to. The resulting bias in favor of hedonism over virtue dooms us all. A man eats too much and vows to go on a diet. But while he is quick to pick up a burger, he is slow to put it down. A householder takes giant strides into the mall to buy his new home entertainment center. But he is content to pay for it in baby steps of minimum payments on his credit card. So does this bias wreck a whole economy and a whole empire.
In the beginning of the American republic, the job of Treasury Secretary was typically given to an anonymous man of probity who could count accurately. His job was to make sure funds were taken in and disbursed properly. At the end of his term, he was expected to leave the nation in at least as good shape as he had found it.
Later, as the nation became a major industrial power, the job was given to proven industrialists — men who had shown they knew how to run a major business and make a profit.
And then, as the rot set in, so did the parasites. Often, the Treasury Secretary was a political hack whose real role was not to balance the books, but to lie about it. The last half of the 20th century rarely saw balanced accounts in Washington or a Treasury secretary willing to own up to it. Instead, his labor was spent moving projects “off budget” and cooking the books to look less awful than they really were.
And now, we are in a new stage. We have not a productive economy, but a speculative economy. We have a Treasury secretary to go with it. Goldman’s first-quarter earnings report shows that of the firm’s total intake of $10.34 billion, $6.88 billion was made largely from proprietary trading and investments. In effect, the firm is a hedge fund crossed with an investment bank. As CEO, Paulson’s share of the take was $38.3 million in salary, stock, and options last year alone. And his net worth is estimated at $500 million. But we do not grudge the man or the cream he has licked off the platter. As leader the speculative economy, who else would you want except the leading speculator?
When he interviewed Paulson for the job, we can guarantee you George W. Bush never once mentioned that part of it would be to “balance the books.” Nor was there any further discussion of “cooking the books.” The kitchen work is now done long before it reaches the top. It’s routinely done by wonks and wigglers with GS ratings on their pay slips and sadistic tendencies in their hearts. They stretch the numbers on the racks like medieval inquisitors working on heretics. When they’re finished, the figures will break down and babble whatever dogma is current.
No, Mr. Paulson was not hired to balance the books or lie about them. He was hired for the same reason the Astros hired Roger Clemens, to give the team a lift. In the game of speculation, Mr. Paulson is the Babe. Every time at bat, he aims for the bleachers. He leaves his team, the Goldman Sachs, in top form and at the top of the league, in order to help keep Speculation Nation in the game. He, perhaps better than anyone, understands the significance of ZIRP, CBCPI, and EEMP.
u2022 Most economists go to Argentina or Zimbabwe to offer advice. We do so to learn something.
We have not been to Zimbabwe, but we have a feeling that now is the time to go. The country has the highest inflation rate in the world — at about 1,000%. At that rate, a dollar earned in January is worth about 10 cents by December. A few years of this and you will probably find some bargains.
Today, Zimbabwean monetary officials rise to the challenge in the typical way: they add zeros to their notes. The latest offering from the Bank of Zimbabwe is a bill with 100,000 printed on it. We have not seen it, but we imagine it is very impressive. Five of them should get you a cup of coffee in a Starbucks in the capital city. That is, if there were a Starbucks in Harare…and if it had any coffee. The Daily Mail reports, “acute shortages of food, hard currency, petrol and imports.”
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.