Humbug

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“A lot of Americans can’t work any harder, borrow any more, or save any less,” says the sage senator from the great state of New York, Hillary Clinton. She is running for president of the United States of America, so far unannounced, on a “Humbug for Everyone” platform, betting that she can tap into the alienated middle-class vote. It’s the “American Dream,” she offered in last week’s stump speech in Colorado. But what she is really offering the United States is the idle daydream that it can improve its standards of living with more claptrap and swindles. She promises a “fair wage, access to college, home ownership, and a path out of poverty into the middle class.”

And there we have to stop. Our sides hurt too much from laughing. This is, after all, summer, and in the spirit of it, we permit ourselves to relax, dress down, ramble irrelevantly, and have a guffaw.

How will Senator Clinton provide all these fine things? How will she raise wages in the face of two billion Asian competitors? How will she provide greater access to college? How could she possibly increase home ownership, when homes are already in the hands of millions of people who can’t afford them? What road out of poverty still lies undiscovered? Every one we have ever heard of is clogged with traffic…going in the opposite direction. From the middle class back…to destitution.

We will give you a little soupcon of how the Hillary program works. In 2005, the federal government, of which after all she is an important part, spent $318 billion more than it took in — providing bread and circuses to the voters. That number was only according to the press releases. The government’s own auditors, meanwhile, sticking with standard accounting principles, put the loss at $760 billion. And if the true measure of the deficit were taken — including Social Security and Medicare — it would total about $3.5 trillion.

This same government — now declaiming in the hectoring accents of the Senator from New York — proposes another “American Dream.” Each child born in America will get a “baby bond” worth $500. Alas, the poor baby’s share of the total federal debt is far closer to $500,000 than to $500. Baby bond? Compared to the debt they have laid on, it is not even a spermatozoon of a bond. And the new dream is so hollow, it is closer to a nightmare.

The “American Dream” was that anyone could come to the New World, enjoy the privilege of being left alone, and make what he could of himself. Hillary Clinton’s offer does not restore the dream, but takes out the last scrap of heart in it. Now, we are all being harnessed to debt from the “baby bond” to the grave.

Yes, dear reader, it is the new American nightmare, haunted by bamboozles, bribes, and boondoggles. The getting…the spending…the borrowing…the empty money…the decaying institutions…the threadbare habits…the corrupted thoughts…

Oh, what a delight! It is summertime…and we are a boy with a stone in his hand…living in a glass town!

u2022 Here is something interesting. There’s a war in Lebanon — at least, a kind of war…with conventional forces on one side, and a non-state organization on the other.

You’d think the dollar would rise; it’s the world’s reserve currency. People used to flee to it in times of trouble. This time, the dollar is going down. People are walking away from it, but so far, sedately.

The English pound seems to be headed to the $2 barrier, says the Financial Times. And the euro is back over $1.29. We remember when the pound traded at scarcely more than one buck. England was a bargain in the early ’80s. If you had dollars, London was a marvelous place for a vacation or an investment.

The house we lived in last year, a modest place in South Kensington, could have been bought in the early ’80s for less than $100,000. Now, two decades and a serious renovation later, it rents for $120,000 a year.

And now the pound is worth almost twice as much. What is pushing up the pound now is that Bank of England’s latest move to a 4.75% lending rate…and the expectation of more to come.

But what is pushing up the euro?

The euro is the Esperanto Currency. Do you remember Esperanto, dear reader? It was a language invented to help cure the world of its ailments. And its inventor thought what ailed the globe was linguistic division. So, in 1887, Ledger Ludwik Zamenhof decided that we should all speak the same lingo. Since it wouldn’t be fair for some people to have to learn some other peoples’ language, he decided also that we should all have to learn a completely new one, which he called Esperanto.

Back in the ’60s and ’70s, there were hopeful and earnest Esperanto-phones all over the world. People wrote to each other in Esperanto. They exchanged visits and sat around the dinner table imagining what a wonderful world it would be if the lambs of Southern Lebanon, for example, would only lie down with the lions of Israel, murmuring to each other in the dulcet tones of Zamenhof’s ersatz language.

Jean Monnet and others had the same idea about money. What Europe needed was its own currency. Not only would the new euro-currency rival the dollar (a thought that appealed to many Europeans), it would provide something Europe’s variegated peoples could actually share.

Monnet probably dreamed how much more peaceful and prosperous Europe would be if the huns and frogs would only get along. It turned out his dream was realized only a few years ago, amid widespread skepticism. Whoever heard of a currency backed by a committee? After all, we know who backs the dollar. The U.S. Treasury and the Federal Reserve (and ultimately, the entire government of the United States of America) stand resolutely behind the greenback. If anyone destroys the U.S. dollar, it will be them!

But who stands behind the euro? In a crisis, will Denmark, France, Ireland, or Luxembourg trip over themselves to defend it? Will they risk bankruptcy to protect an Esperanto currency? Or, will they renounce it and revert to the French franc and the Irish punt? Nobody knows.

Actually, one of the great overlooked strengths of Europe is that it is very hard to get Europeans to agree to anything at all. In a pinch, even if they aren’t able to agree on saving the euro, they will be just as unable to agree to destroy it. In short, while the dollar is helpless to fend off the feds, the euro is ensconced in relative security.

Cursed is the race saddled with hectoring leaders, for they are forever tackling problems…and making them worse. Blessed, on the other hand, are the people with spineless leaders, for they shall be left alone.

u2022 Spending the summer in the middle of France is a little like spending it in Iowa or Indiana. But here, people take the summer social season much more seriously than in the American heartland. We are not French. Nor are we related by marriage or blood to a single soul in the whole department. Still, hardly a day goes by without an invitation — dinner, a wedding, a cocktail. In Maryland, where we know everyone (and where we have many cousins and distant relations), social functions are relatively rare. Here, they happen every day.

Yesterday, we drove over to a friend’s house for a concert on the lawn.

“Oh, you write books,” said a graceful woman with gray hair. She was clearly over the age of 60, but still very attractive, with sharp blue eyes and a coquettish smile. “What kind of books do you write?”

“Economics…finance…investment…” we began.

“Oh, I’m afraid I wouldn’t be able to understand them. I don’t know anything about economics,” she replied.

“Well, neither do I. The books I write are not really about economics, but about philosophy, using the world of money for illustration. I am what other economists call, pejoratively, a ‘literary economist’,” was our response.

“That sounds a lot more interesting than finance,” she said.

“I was hoping it would,” we said.

While the lady was disappointed to find we wrote about investments…a gentleman was disappointed to discover that we didn’t.

“Since I’ve been retired, I have focused on investments,” he began. “I don’t believe in any of the theories I read. They’re worthless, in my opinion. I’m a stock-picker. That’s the only way to do it. And you have to do it yourself. You can’t trust what you read in the paper. I used to study U.S. companies, but now I look only at French firms.

“I’ve made a lot of money at it. It’s not that difficult really. The secret is to find companies that make things. You find a company that makes a profit by making things that people want; you’re not going to go too far wrong.

“And right now, I’m concentrating on one sector that I am sure is going to make a lot of money: railroads. It’s obvious. Fuel is so expensive. The trucking firms have to increase prices. And the roads are clogged up anyway. But the railroads have completely different economics. The real cost is the capital it takes to build the things. Then, after the first investors go broke, they’re very good businesses. And getting better all the time. Once you’ve paid off the capital costs and reached a certain level of volume…everything else goes right to the bottom line.

“Of course, in France you can’t buy the railroads; they’re owned by the government. But there are a couple of railroad suppliers — companies that make parts for the trains — that are very profitable.”

u2022 “Why do we have to go to all these events?” we asked Elizabeth on Saturday.

We have no quarrel with socializing; we are just badly adapted to it. We do not like small talk; we cannot stand in one place for very long, even with a strong drink in our hand; nor can we stay awake after midnight.

“We have to go…because it is fun,” came the reply. “And if we don’t go, we won’t be invited again.”

“Wouldn’t that be a good thing?” we asked.

We were on our way to celebrate the marriage of people we had never met. We are only vaguely acquainted with the parents. Still, we got an invitation from the Comtesse of something-or-other, summoning us to the Chateau Gere le Puy for the reception. Tout Aquitaine would be there.

“Stop being such a curmudgeon,” said Elizabeth. “You know you never want to go to any social event.”

“At least we’re consistent,” we replied. “And, we don’t discriminate.”

Whether it is a high-society to-do…or a low-life shindig, we never regret when our invitation is lost in the mail. But once there, we stop grouching and always enjoy ourselves. There is so much to see. So many people to talk to. We are all eyes, ears…and even hands.

“What a lovely wedding,” we said, imitating the 200 guests ahead of us in the receiving line. “And such a nice-looking young couple. And you couldn’t have better weather.”

The weather was beautiful. The chateau was magnificent. It was a 19th century chateau, with beautiful large windows looking out over a vast park of English design. Everywhere we looked were signs of recent labor. The windows were freshly painted. The terrace stones were freshly laid down. The garden was carefully tended. Only the old stables were a bit neglected…the inside full of old auto and tractor parts.

The bride’s parents must have worked like dogs for months in preparation. Taking their hands in ours to salute them, we noticed they were hard as nails.

“You know,” said the father of the bride, “you need to have a wedding once in a while. Otherwise, you’d never get your house in shape.”

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.

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