by
Bill Bonner Recently by Bill Bonner: What Government Really Is
Occasionally, when we’ve had too much to drink, we lull ourselves to sleep with the notion that someone like Ron Paul might succeed. Maybe America won’t become a police state after all. Maybe it will abandon its empire and its imperial death-wish before it’s too late. Maybe it will cut its budget and save the dollar. Maybe the zombies can be brought under control before the nation is ruined by them… Then, we sober up. And make sure our passport is up to date. You’ve seen our theories…
Eventually, war…revolution…or a bankruptcy stop them. The old systems blow up. The incompetent, the corrupt and the zombified are swept aside. A Dear Reader wrote to tell us what we had guessed for ourselves. The insiders are behind the latest outrage – the defense authorization bill that allows the feds to put anyone in jail and hold them there forever, without trial.
Let’s see, if you’re going to get rid of the Bill of Rights, you might as well get rid of the First Amendment as well as the rest of them. Don’t worry; the feds are on the case. Another proposed law – SOPA – would give the feds the power to shut down websites that they don’t like. Yes, dear reader, it is all coming together… Perpetual war overseas. Police state at home. Spend…spend…spend to support the zombies. And when you run out of money? You print some more! Industries that used to provide value for money are corrupted. Each makes a deal with devil government. The education industry hasn’t produced any real gains in 40 years – despite a massive “investment” of public and private funds. The health care industry gets no better results – measured by life expectancy – than Cuba, even though it spends 45 times more per person. The defense industry – with its related empire spending – now costs the nation about 7% of GDP, and probably makes the country much less safe than countries that spend a small fraction of that amount. Taken together, with the rest of government spending added in, and more than half the economy is now zombified – producing little or nothing of value. And more than half the voters, too, are now dependent on the feds. And now the bankers have made their devil deal too. There was a time when banks were honest businesses. Bankers took deposits and made loans. The banker himself was responsible for the losses. If the bank went down, so did he. More than one banker, ruined by losses, blew his brains out rather than face the embarrassment of his own mistakes. Now banks are shielded from the harsh light of legal liability by corporate veils and federal umbrellas. They can still make money – more than ever. But now they are no longer working in the private sector, providing a service, making profits and always threatened the risk of fatal losses. Now they are practically public utilities – like Amtrak or the Post Office. Here’s the deal: the feds keep the incompetent bankers in business…and the bankers help the feds borrow money. That is the message of the European bank bailout last week. Banks are no longer private sector enterprises. They provide a public service. In return, they are protected from their own gross errors. What public service? The Bank of Tokyo Mitsubishi recently noticed that it now owns more government debt than private loans and corporate bonds. It is no longer a private enterprise; it made its pact with the feds. It takes bailout money; and it helps fund the government’s deficits. But given all that has gone on over the last 5 years, you have to wonder whether bankers are clever enough to figure it out. So, French President Nicholas Sarkozy spelled it out for them: the ECB would give them 489 billion euros (and call it a loan); they should use the money to buy government bonds (and call it an investment).
This cozy arrangement suits the bankers. They make profits without taking real risks. Besides, how hard is it to borrow from the ECB at 1% interest and re-lend to European sovereign nations at 6%? Even a banker could make money under those circumstances. But now we have another major industry – one that was responsible for 40% of all US corporate profits in the mid-’00s – that sups with the devil. And now major capital allocation decisions – involving billions or even trillions of dollars – are no longer made by independent, profit-seeking investors. Instead, they are made by favor-seeking zombies. Who can guess where the zombies will place their money? Into risky, visionary new businesses which, if successful, will create new jobs and help power a renaissance of real output? Or, into more zombie projects? And poor Ron Paul. Last week he was leading the Republican pack in Iowa polls. The zombies were petrified. They attacked in waves. Some said he was a ‘racist’ – referring to fears of a ‘race war’ attributed to him in 1993. Others said he was anti-gay… Ron Paul represents no real threat to blacks or gays… But the outrageous slings and arrows that did the most damage were those that attacked his support for America’s military empire. Here’s The Wall Street Journal:
December 29, 2011 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. Copyright © 2011 Daily Reckoning
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