Reflections on the Impossibility of Government

By Fred Reed - July 30, 2011

God it's wonderful—really diverting in a macabre sort of way, at least if you have a diseased sense of humor and enough Padre Kino red. Which I do. As I write the world's only delusional superflower, perennially in love with itself, navel-gazing as narcissistically as ever, ignorant, self-indulgent, gurbling like an insane relative in the attic and fondling electro-trinkets from Japan, is broke. Yes, we see a beautiful dive from the high board, two somersaults and a half-twist, into the Third World. And so richly deserved.

Congress, a collection of whores, con-men, and penny-ante sharpers from East Jesus, Nebraska, ponders the Great Question: Default now, and admit manfully to being the economic lepers everyone else already knows we are? Or raise the debt ceiling, keep spending like a spoiled Swarthmore sophomore with daddy's credit card, and collapse a bit later?

It's just lovely. The World’s Greatest Economy holding out the begging bowl to China. “Alms? Alms for the poor?” Maybe I don't have enough Padre Kino after all. Maybe there isn't enough.

On the lobotomy box, congressmen come and go, not talking of Michelangelo, like mayflies but without the brains, calling each other names. They seem to think that they are in an off-year election. I mean, it's only the future of the country. What, me worry? What if a huge cosmic flyswatter came down on Cap Hill and turned them into barely historical smears? How the hell do you start a cosmic flyswatter?

The Republicans want to protect the wars, the rich, and the military companies. The Democrats want to protect the entitlements. Well, ok, I guess killing Afghans matters more than feeding Granny in Spokane. Unless of course you are Granny. Who really cares? I mean, how many “defense” contracts does she have?

But actually the Dems have the best of the argument of national security. Entitlements are our friend. Welfare is the price we pay for not having the cities burn. Mailbox money is our protection, not gaudy aircraft carriers like the USS Thundertrinket, zooom-kerpow.

It's the Empire, stupid. You want spending cuts? Easy, if you don't want to rule the world for three more years before going down history's cloaca. Pull out of Iraq, Afghanistan, Korea, Japan, and NATO tomorrow. Pull out. Pull out. Coitus interruptus. Stop wasting precious engineering talent and non-existent money on pointless funsy weapons of no utility: the F35, the Airborne Laser.

Come to think of it, don't bother. It's too late. The only sensible answer is cheap Mexican red. The US really is poised to enter Central America. You know, continental drift. It can't be stopped. South Korea and Finland among others are far more advanced in their internets. Health care in America is first-priced and second-rate. The country is thirty-third in infant mortality. Schooling would be pathetic if we could raise it to that level, the universities largely farces. The Russians and Chinese have manned space programs; we don't. Industry flees Gringolandia or has fled. The great moiling gerbiltry out there hasn't figured it out. Wait.

I hear babbling about “the recovery.” Which recovery is that? There ain't none, boys and girls. There won't be one. We are not in a temporary recession or correction or what have you. We are going poor. The last dance just finished, and the band is leaving.

And it is self-inflicted. There is, I grant you, a pleasing monumentality about truly phenomenal stupidity. A certain brilliance is needed to be so witless. In this sense the American political system is a work of genius, relying on the principle of Sufficient Ditz-Rabbitry.

You don't need to fool all of the people all of the time. Enough of the people, enough of the time is entirely adequate. Lincoln knew this but, being a politician, didn't point it out. Here is the basis of what Americans believe to be a democracy. Curious: Mexicans know they have a corrupt government, but Americans don't. In the US, books are written about the scams and cons and rips practiced on the public. Few read them, though, and those who do already know what is in them. Enough of the people, enough of the time. If the talking heads on the blinking hamster-diverter don't talk about the swindles, the rubes never know.

The country is in fact ruled by the interlocking directorates of Wall Street, Washington, and the media, Triamese twins joined at the head and aimed at sucking money from the easily fleeced. We're not talking Senior Civics and the Federalist Papers. It's straight drain-the-dullards. And it works. Boy does it.

Can you name anything in America today that is not a disguised fraud? Credit cards are not a convenience, but a way of luring suckers into borrowing crippling amounts of money at usurious interest. The sub-prime circus was carefully designed to do just what it did. There's the student-loan racket, and Big Pharma: A tiny bottle of ophthalmic salt water from Bausch & Lomb, called Muro, costs $23 in Washington, and about $6 in Mexico. That's our government, fixing prices that weren't broken. Pure Third World.

I dunno. What's going to happen when what's left of the cream-flow dries up? Maybe it's the Padre Kino, but...in the last depression of '29, most of the country was rural or close. People, many of them, lived on farms, and didn't need much money.

Today most of the population is utterly dependent on remote mechanized farms winch are dependent on supplies of gasoline and chemicals and then on trucks to take the crop to cities that, if the foregoing chain broke down, could not possibly support themselves. The discovery that food doesn't really come from Safeway will astonish.

I guess I'm paranoid, and no real unrest and disruption could really occur. I guess. I mean, probably. I think. And that's a good thing, because with so many people dependent on entitlements, to the extent that they can't eat without them, and everything dependent on intricate systems that can't handle chaos—hooboy. Think: What happens to skyscrapers if there's no electricity for elevators?

I say invest in drug cartels. Some say gold, but you can't smoke gold. When times get bad people want booze, grass, crack, scag, crank, Oxys, and maybe shrooms for the more advanced. Investment is low, and governmental interference has proved minimal.

I hope I'm crazy. I'd better be.

America’s WASP Rot

By Henry Allen, Published: June 17

I know why America is falling into a cataclysm of debt and can’t get out.

I know because I’ve seen the cataclysm before on a smaller but no less poignant scale while growing up in New England. A Boston friend calls it WASP rot: a squalor of doom and debt that prompts the best sort of people to spit sarcasms at each other during cocktail hour, to weep and rage the way Congress is doing as the debt limit looms on Aug. 2. Of course, losing a summer house isn’t losing a war or America defaulting on its debts. Yet to me, at least, the feeling is oddly the same. I worry that America is becoming a character in a story by John Cheever or F. Scott Fitzgerald.

My ancestors arrived early in North America, founded towns, fought at Bunker Hill, built railroads and cornered markets. But that day was long done when I was growing up. We were not unusual — in so many families, the money had been made, the money had been spent.

What made these families exceptional, the way America is exceptional, is that they believed that standards had to be maintained at all costs, a moral obligation, even though there never seemed to be much difference between the material and the moral. Houses in the right neighborhoods, alumni donations and keeping one’s word all seemed to have the same value.

As John Kennedy said in 1961, quoting John Winthrop’s speech to the Puritans aboard the Arbella: “We must always consider that we shall be as a city upon a hill — the eyes of all people are upon us.” To maintain the city, he’d say later, we had to “pay any price, bear any burden.”

If the trust fund played out or Aunt Cornelia turned out to be broke when she died, the rotting WASPs believed they had no choice but to bear the burden of borrowing to maintain their place in the world.

There was nothing wildly luxurious in their spending, no polo ponies or pearls, just the obligatory private schools, Bloody Mary brunches at the Inn, station wagons with yachting flags, silver wedding presents, lots of dogs, the whiskey. They borrowed from banks and relatives to keep the city shining. They borrowed against their houses. They sold Aunt Cornelia’s breakfront. They ignored bills and they despaired.

Imagine a cocktail hour.

“I hate living like this,” says a wife — we’ll call her Martha. She rattles the ice in her glass.

“Do we have any choice?” asks her husband — we’ll call him George. “Do you really want to pull Ted out of Dartmouth? Do you want to move into an apartment?”

“I could get a job,” Martha says. “I could manage a bookstore, like when you met me. It’s odd — we were poorer then, but we seemed so much richer.”

“We didn’t have money, but we did have a future,” says George. “Freshen up that drink for you?”

The conversation usually goes this way: proposals for impossible cuts in spending are met by equally impossible refusals to make them. Slash Medicare? Stop saving oppressed foreigners from tyranny? Raise taxes? The rock and the hard place. It’s a question of standards.

“We have to face the facts,” says Martha.

“I’m so goddam sick of the facts,” says George.

“If your brother would come to his senses, we could sell Seely’s Cove,” Martha says, referring to a summer house with porches and a mossy roof and photo albums from the days when men wore neckties as they sailed.

“We have to sell it or put a new roof on it, but Buell is happy just to let it molder,” George says. “He says keeping it in the family is a matter of principle.”

“You could call Tom about getting another loan from the bank. “

“We’re at the point where we’re just using loans to pay off other loans.”

This is what the American government is doing, too. Whether the problem is summer places or wars, sailboats or health care, the despair and folly feel the same. So does the decline in power and prestige, and the poig­nant denial of decline, prompted by the fear that if we don’t live and spend a certain way we’ll cease to be us — we’ll lose our place in the world.

Cheever writes: “Where had they lost their competence, their freedom, their greatness? Why should these good and gentle people . . . seem like the figures in a tragedy?”

It’s WASP rot. They drop out of the country club. The drinking eases the pain. They don’t pull Ted out of college; he quits and says he wants to be a chef. The daughter ends up living with a jazz musician who beats her.

It’s as if they, and the United States, have lost their luck.

As for America, magical ideas float through the media: Sell the gold in Fort Knox. Sell the federal government’s land to the Chinese. Maybe the Wampanoag Indians could turn the city upon a hill into a casino resort.

The troops may come home, not because of casualties or futility but because they cost too much. We might have to impoverish the old and ignore the poor and sick, not on the principle that we’re creating welfare dependency but because they cost too much. How sad. How vulgar.

I know the ending of George and Martha’s story, but I won’t depress you with it. I have no idea what will happen to America. It’s impossible to imagine Americans starving to death or the Chinese owning Yellowstone. Next thing, we’d be tossing the bodies of veterans into common graves, though this has already happened at Arlington National Cemetery.

Well-trained in situations like this, I try not to think about it, the goddam facts of it all. Freshen up that drink for you?

Henry Allen, who won the Pulitzer Prize for criticism in 2000, was a Post editor and reporter for 39 years.

How To Rebuild the American Economy

So here we are folks.  The US is at an economic crossroads; it can only go back to the former paradigm, or develop a new strategy for growth.

If we go back to expecting Americans to go shopping in a frenzy as in years past, we will sink again and perhaps lower than in the last 4 years.

So the best strategy for us to bolster employment, and grow for the next several decades is to build a manufacuring base for consumption by the Chinese consumer.  China's growing middle class is still in the saving mode.  Once disposable income becomes spendable, the vast population will be looking for products to buy in the same way Americans bought things during the last 10 years.

The federal government and the business community should be doing research and funding everything that leads to pandering to the Chinese consumer.  American products already have a leg up status-wise, but we need to compete with Chinese companies to win over the swaths of people there ready to spend their money.

If we miss this opportunity, economic ruin will be just around the corner.

Iran dumps US dollar for euro.

Arabian Business reports that the Iranian government and its President ordered the removal of the US dollar to be replaced by the Euro, which was introduced in 1999, in order to protect themselves from the crumbling United States economy and devaluing dollar.

The Euro will be the calculating factor of the Oil Stabilization Fund (OSF), which is a fund that is set up to help the Iranian economy against fluctuating oil prices. It is also set up to help both the public and private sectors with their currency needs by extending loans.

Iran's Central Bank deputy chief Reza Raei stated in December, according to Iran Daily, that the nation’s foreign exchange reserves were over $80 billion.
Since the inception of the Euro in 1999, it has gain popularity by many nations and businesses across the globe. Currently, there are more Euros than dollars in circulation. After it was introduced in 1999, Iraq, at the time having the second-largest oil reserves, traded its oil in Euros.

Venezuela has also pressured OPEC to abandon the US dollar, according to ADN Kronos.

The Coming Collapse of the Dollar, Part 2

This is the second part for those so inclined....

Would You Trust This Arrogant Nerd's Financial Advice?

Sometimes we Americans can allow our financial better judgment to be suspended by clever marketing, polished wall street analysts, and the seductive power of CNBC, CNNf, etc. It was not enough to endure the dot.com bubble from 1995-2001. Oh no, Americans listened to the same pinheads tell them to stay fully invested for the long term, and to diversify their portfolios over a wide variety of stock classes.

Those who fell for this nonsense are now paying the price for their misplaced trust.

I removed the greater portion of my stock holdings in 2007 in reaction to the felling of market overvalue. My reaction was private as I did not want to subject myself to the jeers of my peers. I have been vindicated, no doubt, by the market drop of 2008-2009.

The myth of "diversifying" over a wide variety of stock classes is not diversification AT ALL. I fell for this scam back in the late 1990's but then noticed that all stocks (even international ones) were highly correlated in trend. No variety of stock classes would have saved anyone in the current downturn!

My point of this piece is to urge you to spread your assets between US dollars in a reputable US credit union (not a bank); a Euro cash account in a country like Switzerland, Germany, or France; the US stock market (10 to 25 percent according to your time horizen); a municipal bond fund; and precious metals like gold and silver (via ETFs like GLD or SLV). This is the diversification.

I do believe we all should be dollar cost averaging into the US stock market at the present time, but we should be doing it moderately and with the intention to continue over the next several years.

US stocks will correct again and again. When the doom and gloom are heavy on CNBC, that is the time to take chunks of your wealth and bottom feed an S&P 500 or Wilshire 4500 fund. This is called contrarian investing and you will reap great rewards if you can purchase cheap shares when the pessimism is high.

Resist the nerds who want to be fully invested at all times so their fees can still be generated from your holdings. They are out for their interests, not yours. You've been warned.

The Return of the Blue Collar Man

Several years ago, there was a book called The Millionaire Next Door. This book detailed the characteristics of typical American self-made millionaires. Perhaps the most surprising contribution of the book was the revelation that blue collar people who own their own businesses are disproportionately represented among self-made millionaires.

That fact is counter intuitive for several reasons. Most glaringly, the entertainment media has long promoted the white collar man as the better and more affluent. Hollywood movies, and promotion of university education at all costs fueled this thinking.

Stigma grew around the blue collar trades and blue collar tradesmen from the recent immigrant waves took over and enriched themselves and their families.

This recession will whittle away at the stigma of blue collar work. I think this is a great opportunity for young American men to rediscover the rewards of mastering a trade.

Get your hands dirty guys and make yourselves rich!

It's The Lack of Confidence, Stupid!

I just finished watching one of those weekend pundit shows with the 4 talking heads debating whether the economy needs a robust "stimulus plan" or more tax cuts. Folks, I think we are in trouble more than we realize when these so-called cognitive elites still don't get it.

People are not spending disposable income you idiots! Trillion dollar new spending from the federal government may employ a fraction of the unemployed (to include some illegals aliens), and a tax cut may enable a fraction more to save more, but neither of those strategies solve the core problem of getting people to spend, spend, spend.

Our elected officials are still in an intellectual holding pattern as to what to do. Perhaps years of decisions based on special interests created this mess.

The economy will turn around when there is more good news, and the doom and gloom reports decrease. Americans are terrified, and they are undoing years of stupid consumption. Eventually, the savings floodgates will gradually open and consumer spending will increase with the renewed prosperity. But until then, the beltway's insistence on arguing about supporting special interests under the guise of fixing the economy will only prolong our current malaise.

A Layman's View of What Went Wrong With Our Economy.

I am not an economist, but I am versed enough in the discipline to gloat that I was correct back in the 1990's even. I know many will not agree with my version of what went wrong, but many others will.

The first blunder we made was our head-first foray into the global market frenzy. I was skeptical even when NAFTA was the flavor of the month. The open market model was a way for companies to sidestep manufacturing in the US in favor of using third world labor. Their gains were our losses. Now, the US produces very little and it has become a service based economy. Sure, labor unions have priced American laborers out of work, but the demise of the US Manufacturing sector was hastened by globalization.

Next, the US stock market has functioned as a promoted and regulated Ponzi scheme. The early in and out investors will and the late comers (usually the greater portion) lose money. The Fed manipulates interest rates to keep investment flowing, and the media (CNBC, Bloomberg, etc.) constantly cheer lead and promote stocks. I recall one anaylist touting AOL as a long term great investment due to the growth potential and the internet as a more important vehicle. Then the dot-com bubble burst and AOL was reduced to shreds a few months later.

Before the current market 40% downturn, I recall various financial pundits proclaiming how attractive "valuations" were for stocks. After the 40% drop they were still using that rationale to attract more stock investment. What they know deep down is that "valuations" mean nothing but a numerical correlation that is used to justify promoting more investment. Stock prices are more influenced by sentiment than valuation and no amount of value analysis will make stocks an attractive investment to spooked investors.

Finally, Americans and our industries became addicted to OPM (other people's money). OPM financed our McMansions, our 4 flat-screen TV's, our SUV's, and our yearly iPod model upgrades. Companies relied on bond issuances, and investors to finance their ventures. When recession comes to rear its head, we are at a loss to pay back OPM. That's what we face now.

What is the solution? I wish I knew, but I feel that we as a nation must expect job loss, economic uncertainty, and saving to be inevitable parts of our futures. I'm a fan of market forces fixing our problems, but market forces are undermined by bailouts, interest rate manipulations, cash infusions, and stimulus plans proposed by our government representatives. These are temporary measures that might provide short term relief, but long term consequences. I feel that the federal government just wants to prod Americans to buy, buy, buy, again just to get the juices of consumption flowing again. However, this is no resolution to the undiversified economic model we have grown into.

Adam Smith must be turning in his grave.

What the Housing Crash Can Teach Us About Marriage

It's not news anymore. We all know that home foreclosures are skyrocketing and hundreds of thousands of Americans stand to lose their biggest "investment."

But take a step backward 2 to 4 years. I can recall the frantic push for universal housing ownership. I can recall ads and marketing blitzes telling renters that they too could likely afford a mortgage even if they thought they could not. I recall state and federal government campaigns to increase "minority" home ownership, especially among Blacks and Latinos.

Now what do we have? Now the press is saying that all these government-encouraged home purchases were ill-advised and irresponsibly financed by mortgage companies. A huge proportion of those Black and Latino home buyers are now losing their homes to foreclosure and the rate of home loss will multiply each year when their "alluringly low" adjustable mortgage rates adjust higher and higher.

So what does this have to do with marriage you ask? The lesson here is to ignore the corporate and government campaigns to encourage marriage. Corporations and government have an interest in marriage only to suit their own ends. Just as in the frantic rush to get everyone in a owned-homes against their best interest, corporate America and government wish to get you married just to flaunt growth statistics and reap marriage consumption profits (new homes, new cars, new furniture, etc) , and resultant tax benefits.

Smart men should never allow government to advise us in our personal lives. In the final analysis, millions of Americans will meet their financial ruin because of policy agenda "campaigns."

Do not let this be you; ignore the calls for men to marry or expect your financial house to be "foreclosed" and turned over to the Financial Bank of Ex-Wives.