The wealthy society

First, we check in with the markets. What’s new? Not much. The Dow crossed the 17,000 mark yesterday.

Janet Yellen is supposed to address the world today, from Jackson Hole, Wyoming.

It is hard to imagine that she will say anything surprising or even meaningful. Commentators all over the planet are waiting to analyse each word, hoping for a hint of what is coming.

Particularly, they want to know when we will be leaving this wacky world of money-printing and price-fixing by central banks. They want to know when we will get back to ‘normal’ interest rates and a neutral monetary policy.

We think we have the answer already: only when we have no other choice.

The world’s largest economy – and its asset markets – depend on cheap credit. Take it away and asset prices will collapse and the economy will go into a recession/depression.

Ms Yellen can’t allow that. It goes against all her training, her convictions, and her most treasured delusions. She will fight the inevitable downturn with more cheap cash and credit, until the whole shebang blows up. Then, and only then, will things go back to ‘normal’.

Meanwhile, the Congressional Budget Office (CBO) issued a report last month that was barely noticed by anyone. But its news was shocking. Turns out, the system will go broke 20 years sooner than projected. Not in 2050 as previously forecast, but in 2030 – just 15 years from now.

Fifteen years is a long time. Anything can happen. But our job is to look ahead. And when we take a peek at Social Security’s finances, we’re glad we’re not counting on it to fund our old age.

CBO says its deficit has increased 400% in the last six years. It is now $15trn short of the amount required to fulfil its commitments over the next 75 years.

So, what does this mean?


Bill Bonner on markets, economics & the madness of crowds

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As it also turns out, we were sitting at our window at the Mount Juliet hotel looking down at the north-flowing river beside it when we were suddenly overcome with an insight so profound we had to grip the arm of our chair to steady ourselves with one arm and reach for our glass of Jameson with the other.

Government is widely seen as ‘a force for good’. Republicans often think it is only a force for good overseas, as when it is invading a foreign country. Democrats usually think it is a force for good at home as well as abroad.

At least Hillary Clinton thinks so. And there is little doubt it has done her a lot of good. She’s spent almost her entire life on the government payroll, never having to provide a marketable product or render a real service to anyone.

Historically and intrinsically, government is just a means for some people to control and exploit other people – as slaves, soldiers or taxpayers.

But recently, compared to traditional standards, government seems almost benign, as if it really were concerned with the welfare of the people it ruled. After all, isn’t Social Security a good thing? Doesn’t it prove that government is now civilised, and that we should all get behind Mrs Clinton and other well-intentioned politicians so they can do a better job of helping us?

Stop! We’re feeling a little sick.

But not so sick as to forget the point. How come government seems more benign now than it did in the past? Has it finally abandoned the brute-force of Genghis Khan’s army or the naked aggression of the Third Crusade?

Social Security appears to offer no particular advantage to the ruling elite (except helping them to remain the ruling elite, by getting re-elected)?

And aren’t the governments of the richest, and most civilised societies, also the most civilised?

Glad you asked those questions. Because we have a good answer:

Civilisation goes hand in hand with wealth. The more civilised a nation, the richer it is. Wealth goes hand in hand with power; the wealthier a society is, the more lethal it is, because it can afford more firepower and more advanced weapons.

In other words, it is not military success that breeds civilisation. It is the other way around.

What does this have to do with Social Security and the stock market?

We’ll try to remember over the weekend, and have an answer on Monday.

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One Response

  1. 22/08/2014, Antony Tighe - Trustee The Woodstock Estate wrote

    Message for Bill Bonner – while you are staying at Mt Juliet, may I suggest you take a moment to visit the Woodstock Gardens at Inistioge which are “just down the road”? I would be interested to hear comments (the property was gifted by the Tighe family Trustees to the KCC in 2000 to enable the 50 acres Gardens to be restored with the benefit of a large EU Grant). NB Woodstock House was burnt in 1922 during The Troubles because it had been taken over by the Black & Tans and then the Free State National Army used it after the granting of Home Rule – and then the IRA torched it to get them out (and I was assured it was not torched to get the Tighe family out – but, like all Broker’s Recommendations, one needs to take things with a “pinch of Salt” when listening to “gossip”!

    yours sincerely

    Antony Tighe

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