Recently by Bill Bonner: The Day QE2 Ended
We always take my car ‘cause it’s never been beat. And we ain’t missed yet with the girls we meet.
~ The Beach Boys
We are sitting in our favorite café in Paris…listening to the Beach Boys and reflecting on the decline of the US Empire. Back in the ’60s, the Beach Boys celebrated a country that was young, growing, optimistic…and a winner. Now, what we see is the whole kit-and-kaboodle of life in the US giving way to desperation, delusion and an irresistible impulse to commit imperial suicide. The economy turns sour. The military becomes malignant. Households are corrupt, bankrupt and dependent. Even the churches sing their hallelujahs to Caesar now.
What’s “imperial suicide?” It’s what empires do. If no other empire arises to kill them…they kill themselves. China will probably eventually crush the US militarily. But that is far in the future. The US can’t wait. It lets the zombies run wild.
At home, Congress debates a “debt ceiling” measure, as if it made any difference. They’ve raised the ceiling 93 times since they first imposed a debt ceiling 94 years ago. What are the odds that they will hold the line this time?
Zilch. Instead, they’ll continue borrowing and spending until the nation goes broke. Count on it.
The US economy was a free-market success story for a hundred years…from the end of the US War Between the States to the end of the Vietnam War. It was the richest, fastest-growing, most innovative, most competitive, and most admired economy in the world. But then, in 1971, Richard Nixon replaced a more-or-less solid dollar, vaguely backed by gold, with a pure paper dollar, backed by nothing but the good intentions of government employees.
As the money went, so went the nation. Our friend and colleague Byron King opines:
The problem with the US over the last 40 or 50 years is that there’s too much free money…
We raise three generations of population who are untied from the basics of monetary education – millions of minds poisoned by Economics 101 in universities across the land. “Elastic currency,” courtesy of the Fed.
Media & political classes are no smarter than the dummies who walk the land, so they make policy based on “free” money from the Fed… Deficits don’t matter.
Currency circulates and inflates the general price levels… People learn to live with it. Even make a virtue of it, doing things like “buy as much house as you can afford; the market will rise and you’ll make money.” That kind of idiocy.
There’s all this excess currency sloshing around the economy, leading to people doing stupid things like drugs, too much alcohol, divorce (Cherchez les femmes), food (obesity), theft, etc…
“Wars cost much silver,” wrote Sun Tzu. [Lack of money] kept a lot of nations out of a lot of trouble over the years. Not any more. Who needs silver when you can just print up bricks of paper cash and fly it over to Iraq and such.
Kind of gives a whole new meaning to the term American Exceptionalism… yep, we’re exceptional. That’s for sure. More prisoners in jail than anywhere else. We fight longer wars than anyone else…and don’t win. We give more welfare to more idle people than anywhere else on earth…and we’re proud of it.
There’s so much money that we don’t know how to say no. No limits. Just raise the debt ceiling…spend until you can’t spend any more. Then spend some more.
Well, there are no limits until there are limits. Per Ayn Rand… “You can avoid reality. But you cannot avoid the consequences of avoiding reality.”
In the space of 40 years the US lost its winning ways. Real, hourly wages stopped growing in 1973. Stock prices, in real terms, peaked out in ’99…about the same time that real, per capita private sector growth came to a halt. The number of full time jobs topped out about two years later…and housing hit its peak in 2007.
Abroad, US armed forces continue to squander the most magnificent advantage that a military has ever had. The Pentagon spends 7 times as much as the next biggest spender. And it doesn’t even have a worthy opponent. Where does it get the money? It borrows from the Chinese!
And what does it do with all that money? It engages in pointless, blood sucking zombie wars. Its three current engagements alone are expected to cost $4 trillion, according to the latest independent estimates – about as much as its trade deficit over the last 10 years.
Ask your neighbors. What strategic advantage does the US gain from fighting in Afghanistan, Iraq or Libya? They will have no good answer. Probably some claptrap about ‘fighting terrorism’ is the best they will be able to do; that’s what they were told on TV.
A 94-year-old retired Army colonel came over to our house for the 4th of July festivities. A Silver Star winner in WWII, veteran of the Korean War too…we asked what he thought of the Pentagon’s strategy in North Africa and the Middle East.
“I am disgusted,” he replied. “Those guys just don’t know what they’re doing. We have no business getting involved in these things…especially in Libya. They’re just traps. I have arguments about it when I go into the VA hospital. The young guys – you know, they’re in their ’80s – are in favor of these wars. Wave the flag. Rah rah…let’s go in and do the job. Teach them a lesson… That sort of thing.
“But real war is not a football game. And nobody learns anything…except not to do it again.”
Who – with the exception of a 94-year-old veteran – objects to squandering the national treasure, blood and honor on these wars? Almost no one. Why not? Because they’ve all drunk deeply from the intoxicating cup of imperial power. An ordinary nation fights wars to protect itself. An empire fights wars because that is what an empire does. And it continues fighting until it finally beats itself.
Why didn’t Rome pull back its troops from the Rhine or Anatolia or North Africa…in order to protect its homeland from the barbarians? Why didn’t Alexander retire to Macedonia, while he still had breath? Why didn’t the Germans retreat to the banks of the Oder when they still had the means to resist the Soviet onslaught?
Why doesn’t the US bring home its troops, cut its spending, balance its budget and protect its future? Ha…ha…you know the answer. Because the system has been taken over by zombies…people who want to see the spending continue, no matter what the cost. Zombie wars. Zombie social spending. And zombie finance.
And every time we look at it, we see more evidence. California, the West Coast Greece, is going broke. Any guess why? From Bloomberg:
California Prison Psychiatrist Paid $838,706, Data Shows
July 5 (Bloomberg) – A chief psychiatrist for California’s overcrowded prison system was paid $838,706 in 2010, more than any other state employee that year, according to payroll figures released today.
The doctor, whose name wasn’t released, had a salary range of $261,408 to $308,640, according to data released by Controller John Chiang. The total compensation was raised either by bonuses or payout of unused vacation time or sick days, according to the controller’s office.
The 10 highest-paid state employees each earned more than $500,000 in the 2010 calendar year, for a total of $6.2 million, the figures show. All except three were a prison doctor or dentist. The most-populous US state runs the nation’s largest correctional system, with about 163,000 inmates, and is at 175 percent of capacity, according to the Corrections and Rehabilitation Department.
And here’s a headline from The Financial Times:
“The state is now the dominant force in US capital markets.”
The article goes on to explain that American capitalism is now dominated by credit provided by the US government. For the first time ever, the feds are the “biggest source of outstanding home mortgage and consumer credit loans in the US.”
What do you call a free market economy where the major source of financing comes from the government?
Oh…and how about this headline from The International Herald Tribune:
“For Mexicans, home is now an option.”
The point of the article is that Mexicans no longer see the US as the land of opportunity. They see more opportunity in Mexico. According to some estimates, there are now more of them sneaking across the Rio Grande to go home than there are coming to the US.
“Illegal immigration to the US sputters,” continues the headline.
Which means, the US is in greater danger than we thought. Illegal immigrants were the “last real Americans.” They came to work. Like the first real Americans. In the Washington area, they’re the ones who do the real work. Almost everyone else is a zombie – on the government payroll, in one way or another.
Here’s an item from the website “Gawker” that helps understand how the zombies operate:
John Cook – The White House released its annual salary report last week, and as usual, it’s nice to work for Barack Obama: Most staffers who were there for more than a year got a salary bump. A bigger one than you did.
The last time we checked in on White House salaries, we found that an astonishing 75% of continuing staffers got raises from 2009 to 2010 – a huge number given the fact that, according to compensation experts, most companies had skipped routine raises that year in reaction to the economic crisis that the White House was busy failing to solve. This time around – from 2010 to 2011 – the ratio is a little less dramatic. Of the 270 White House staffers who have been there for more than a year, 146 – or 54% – received raises. The average salary increase was 8%. If you look at only staffers who got raises, the average increase was twice that.
That’s a much bigger raise than the average white-collar worker got. According to a survey conducted last year by the human resources consulting firm Mercer, most firms were projecting a 3% increase in base pay for executives. White House workers did nearly three times as well.
One of Obama’s first acts as president was to freeze the salaries of all White House officials earning more than $100,000 because “during this period of economic emergency, families are tightening their belts, and so should Washington.” Two years later, he extended that policy to all federal workers, using the same logic: “Small businesses and families are tightening their belts. Their government should too.” But the across-the-board freeze didn’t take effect until January 1, 2011, so the most recent report (which goes back to July 2010) features some eye-opening raises, like special assistant to the president for economic policy Matthew Vogel’s $59,000, 82% raise to an annual salary of $130,500, or director of African American media Kevin Lewis’ $36,000, 86% pay hike.
How about that…a “director of African American media?” On the White House payroll. Just what the country needs.
Reprinted with permission from the Daily Reckoning.
Bill Bonner is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and The New Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007). His latest book is Dice Have No Memory. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning.