What happens when everything is rigged? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 28 May 2014
What happens when everything is rigged? A  A  A

Baltimore, Maryland

We're still on our Commencement Day address, whence our callow graduates find out that they've been set up.

Dear Class of '14

Except in the sciences and engineering - a college education might do more harm than good. As I explained yesterday, in order to be taught, studied and learned, the arts and humanities must be reduced to a caricature. People are turned into stick figures. Complex storylines become narratives so simple even a college student can understand them.

You're young. And now that you're leaving school you can begin to learn. It will take you many years to develop the deep suspicion and cynicism you need to understand what is really going on. But I'll give it to you a little preview:

America's armed forces protect our freedom, right? Memorial Day is set aside to honor them - in spirit. The Veterans Administration provides them with material benefits. That is the information that is taught to every schoolboy and rehearsed annually by every newspaper in the nation.

On Memorial Day, our minister chose to tell the story of Mose Triplett, whose daughter is the last person from the Civil War era still receiving veterans' benefits. Triplett was a soldier in the army of the Confederacy. On the road to Gettysburg, Mr. Triplett defected to the Union cause. He survived the war. Married. His wife died. Late in life, Mr. Triplett remarried to a woman fifty years younger (apparently retarded) and had a child who is still alive.

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But why should we honor a man who betrayed his people and his nation? Why does the Veterans Administration support the traitors' child, 150 years after the wars end?

The trouble with Memorial Day and higher education is similar. You have to ignore the particulars to appreciate them. Take out the inconvenient details. Remove the embarrassing facts. Often what is left is sterile nonsense. Every Memorial Day editorial tells us that our veterans fought for 'freedom.' Yet, in not a single one of America's wars was an enemy preparing to reduce our freedom. The huns wanted Alsace, not Pennsylvania. The poor Philippinos intended no subjugation of Indiana. And what about the Nicaraguans? Nobody even remembers the shackles they were meant to clamp onto American wrists. But after every victory, we know what happened next; the doughboys and grunts came home to higher taxes and more prohibitions.

What you learn in college is the way things are 'supposed to' work. But few things in real life are as simpleminded as they're 'supposed' to be.

Our government is not run by or for the people. Government is merely a way one group of people - the insiders - take advantage of other people - the outsiders. You can call it a democracy or a dictatorship, it hardly matters. It can be gentle and broadly tolerable or brutal and widely detested. What makes it a government is that it has a monopoly on the use of violence; ultimately, the insiders use it to get what they want.

As for the economy, you have learned how it is a capitalist system. You have been told that it needs regulation by the SEC, the Fed, the Justice Department, the FDA, the FTC and other agencies to keep the capitalists honest. You have been lied to.

It's not a capitalist system; the feds took the capital out 40 years ago. Now, it depends on cronies and credit. It's a corrupt system, in other words, the product of collusion between industry and the agencies meant to regulate them. Its real purpose is to transfer more wealth and power to the insiders.

William Baumol understood. He guessed that prices for manufactured goods would go down - because there was a lot of competition - while prices for locally-produced services would go up. That's why your TVs are cheap...but your health care has become so expensive; health care can be more closely controlled and manipulated by the insiders. It is largely protected from competition and distorted by third parties who pay the bills - including the government and insurance companies.

This also helps explain why a university education is 8 times more costly than it was in 1978. Because, as I explained on Friday, college was optional to a decent income in the '70s. Now, it's almost obligatory.

When everything is rigged, the riggers have the money and the power. Lobbyists, lawyers, accountants, administrators... Whether you want to take a business public...or just build a house...you come face to face with someone who can stop you, with paperwork, legal razz-ma-tazz and nauseating administration. You need to play the game too.

More to come... including the Cantillon Effect...and Intertemporal Discoordination. You'll find out what they mean: (hint...you're 'screwed')

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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3 Responses to "What happens when everything is rigged?"


May 30, 2014

Uh!! Amar thinks he knows better and thinks people who have a counter view can be categorised as CNBC chums or sas bahu serial specialists. Your world view is very narrow indeed!

if you continue to predict something long enough, it will eventually come true. The it may be true that eventually the Fed will go bankrupt or some or the other bubble will burst, he has been predicting it for 5 years and if you have heed his advise / views you would have lost a lot of money by staying out of the market!!

I dont watch any



May 29, 2014

Above reader should ignore Bill Bonner columns and
watch more cnbc instead or the other so called TV
market analysts. Personally I like Bill Bonner
columns. What he says is right and are long term
trends, not good for the day traders and people
who spend most of their time in cricket or saas
bahu serials. People reading Bill Bonner should
realize that inevitable doesn't mean imminent. It
is good to have a view like of Mr Bonner. 50% of
time I come to EM is to read his columns.



May 28, 2014

Though I understand that Bill owns Agora, which in turn owns equitymaster partly, I dont see why this guy has been let loose in Indian investors!

I have been reading his articles for the last 4+ years and he has always written completely non sensical, irrelevant pieces of gibberish. Doom mongering is his favourite passtime, which is also a common theme across all of Agora's 'publications', including Moneyweek here in the UK that I used to read!

I subscribe to a lot of EM's services, but Bill's articles actually making me doubt whether I should continue to use them! Remove these columns at once and instead, ask some successful Indian investor (of which there are plenty)or another global investor to share their views!!

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