We came to Aiken, South Carolina, partly to get away from Maryland’s ice and snow, and partly so Elizabeth could enter horse-riding competitions. But ol’ man winter must have snuck into the back seat. He arrived here in South Carolina when we did. An ice storm hit yesterday, immobilising almost the entire South. The horses were left shivering in their stables. And we were stuck too.
But let us turn to the financial news, then we’ll come back to the hotel, where we are currently snowed in.
Yesterday, there was no follow through to Tuesday’s strong showing in the stock market. The Dow lost 32 points, while gold rose $5 closer to the $1,300 mark. Stocks don’t seem to know what direction they want to go. Gold seems to want to go up.
Our guess is that gold won’t go very far up… not yet. There’s little inflation pressure. And the expectation that quantitative easing (QE) would lead to higher prices has largely faded from investors’ imaginations.
The more experience we get of the Fed’s experimental policies, the more we realise that they neither stimulate a recovery nor inflation. We’re in Japan, in other words. And we may be there for a long, long time. Buenos Aires will have to wait.
Yesterday, the Senate went along with the House. No debt ceiling problems this year, it said.
Government finances are looking better. January’s deficit was only $10bn, down from $100bn for the same period a year ago. The Congressional Budget Office (CBO) is calling for a $514bn shortfall for this year, and a $478bn deficit in 2015.
That’s good news, isn’t it? Well, depends on your point of view. Deficits are a way for the feds to waste money on their favourite projects. Billions for the bankers. Billions for retirees. Billions for the halt and the lame. Take away these billions and we’re better off in the long run. Government spending is consumed, not invested. It does little to build a real economy.
But deficits are also ‘stimulus’. When the banks won’t lend and the people won’t borrow, they’re about the only way to get money into the hands of consumers. In the short run at least, this money keeps the lights on and the wheels turning.
Economists are such simpletons. They believe this spending by the government is as good as spending by the private sector. Nor can they tell the difference between ‘demand’ that comes from real people, with real money they get from real wages, and the ‘demand’ that comes from the feds spending funny money from the Fed.
The difference is critical. One leads to real growth and wealth. The other leads to a disastrous debt bubble and poverty.
But remember, that’s in the long run. In the short run, we’re in a spell of Tokyo-style deleveraging. And QE and deficit spending have not been enough to overcome the private sector’s resistance to take on more debt. As in Japan, only the public sector – bless its stupid, shrivelled-up little heart – goes deeper and deeper into debt.
Already, the feds have more debt than they can repay. The biggest financial story of the next quarter century will be what happens to that debt.
Now, back to Aiken, South Carolina.
Cornered in our hotel, we were afraid we would develop a kind of cabin fever. We might go crazy and become a danger to the other guests. Instead, we found the whole thing kind of a lark.
The hotel was redone a few years ago. It has wood panelling in the lobby, with fireplaces on each end. Richly furnished, it is not a bad place to be holed up as long as the food holds out and the power stays on.
Last night, a pianist played for a few hours – Scott Joplin, Gershwin, Cole Porter. The small crowd of refugees who had slid into the hotel before the traffic stopped gathered round. Among them is a thespian troupe, who are supposed to perform in a local theatre – unless it is cancelled.
One of them sat down at the piano and began a lively medley of show tunes, while others began singing. ‘Boisterously’ and ‘enthusiastically’ probably describes their singing style better than ‘elegantly’ or ‘smoothly’. It was lively and uninhibited.
Today, we sit in the lobby, working on our computer as the other denizens of the hotel come and go, looking out of the window at the sleet and snow.
“It’s not letting up,” says one.
“Guess we’ll be here for a while longer,” says another.
“Hope they don’t run out of victuals,” adds a third.
One young woman sits before the fire, knitting. Another works on her computer on a side table. Her companion keeps an eye on his stocks, looking at a laptop computer.
“Hey… I knew I should have bought more of that,” he said.
“I’m going to short Amazon and Green Mountain Coffee”, he announced to no one in particular.
A little later…“Gold is the worst. You can’t spend it You gotta store it…”
He went on and on. His companion, a pretty woman in her 40s, put her head down on his shoulder. “Would you shut up…” she seemed to say.
Meanwhile, the theatre group is rehearsing “I get my kicks on route 66” at the other end of the room.
“No,” says the hotel manager, speaking into a telephone, “No ma’am. We’re not open. We’re only serving lunch to our hotel guests.”
A couple of retirees showed up at the door, driven from their home by cold, hunger or boredom. They came in. The manager rushed over.
The poor couple looked around. About a dozen people were in the lobby, drinking tea in front of the fire, sitting at the bar sipping wine, practising their musical numbers, checking their stock prices.
“I’m sorry. We’re closed.”[xyz_lbx_custom_shortcode id=5]