Elites calculate, while the masses react

Oct 28, 2014

Baltimore, Maryland

Dear Diary,

An old friend sends this comment:

    I can tell you that I fully agree with your points about the war. I was particularly interesting to me to read your thoughts, as I was born and lived in Leningrad where everyone remembered the blockade during the 1941- 1944. When I was a teenager, I went to the famous Piskaryovskoye Memorial Cemetery where in a small museum the Savicheva's diary is displayed. Have you been there too? I still remember reading it, like it was yesterday. Very emotional stuff, indeed. Now, we are having over 3000 dead in Ukraine. What a pity! And what for?
Another reader (an immigrant to Canada) adds:
    My Dad was near Leningrad and he was very fortunate that he was wounded and that was the only way he was able to escape the carnage since at that time wounded soldiers were send back by airplane to the nearest hospital. He survived but did not return to our hometown of Berlin until the end of 1946. My mother and I assumed he was dead. The stories my dad told me later on does not make pleasant reading.

    I myself was also fortunate that I was not hurt during the war years in Berlin. Although there were many times my mother and I had to walk over dead or dying people to escape shelters that were bombed. I don't wish anyone to have the experience my family had but people that believe a few innocent people that die is nothing compared to what a lot of other people experience.

What we've been reaching for in these last few Diary entries is a way of understanding why governments do what they do...even when it is unproductive, expensive and dangerous.

--- Advertisement ---
It's Not Just About Picking The Right Stocks...

Take a look at the pyramid alongside...

This simple structure holds the secret to investing success!

That's right! You could read a dozen books on how to pick the right stocks, and yet never really create solid wealth from your portfolio.

And most of the times, the reason has something to do with this pyramid.

So, what's this all about? Find out all about this simple yet powerful investment rule here...

"War is hell," William Tecumseh Sherman told the graduating class of the Michigan Military Academy in 1879. But governments go to war. Sometimes because they have to. But often because they want to.

The battle and siege of Leningrad was particularly hellish. It left 3 million dead... Those who survived lived with appalling memories...of war, cannibalism, frostbite and starvation.

And now, people who've never missed a meal in their lives are calling for more war. Why?

As Profession Glennon showed us yesterday, there are two parts to a modern democracy. There are the voters...and the elite. They operate in completely different ways. The elites figure out what is best for them...and plan how to get it. The voters respond emotionally...with no real knowledge of what is going on.

The voters don't have time to deconstruct the backstory. They can barely keep up with the front page headlines. They have real lives, nagging wives or layabout husbands, football games, drug problems and funerals. They can't parse out the conflicting claims or disentangle motives. It would be a waste of their time to try; they have little influence over public policy. The best they can do is to use their instincts...applying the brain that evolved over millions of years in entirely different circumstances. All they know is what they want...and what they fear.

More health care spending? You bet! They can't follow the money and see that most of it goes to the insurance and health care industries, with little benefit to themselves.

What politician stands up and tells them he is opposed to giving them more free education? The voters can't see how the system is rigged so that the additional spending goes into the elites' pockets.

And pity the poor president who is seen as 'weak' in defending the nation. The voter can't tell a real enemy from a fabricated threat. He can't know when it makes sense to intervene in a country he's never heard of ...and when it makes sense to butt out. And how is he to know where the money ends up?

Elites calculate. The masses react.

But if you want to understand why our government does what it does, follow the money. For example, voters are told that the Fed helped protect them from another Great Depression. Who could be against that? Our Fed created nearly $4 trillion of QE for that purpose.

"QE" asks the voter? "What's that?" Good luck explaining it!

And where did it go? Did you get some, dear reader? We didn't. Not directly. Neither did the typical voter. It was the weakest recovery ever. GDP grew at only a third of the 20th century rate. And household incomes went down!

But a few people made a killing. The financial industry has been in high clover for the last 6 years. Stocks, bonds, real estate - everything floated higher on a flood tide of new money. Practically every major central bank joined in, increasing their balance sheets more in the last 5 years than in the last 100 years combined. The typical guy might have less in his bank account, but the world's filthy rich are filthier than ever. Stock markets alone have added about $22 trillion to their wealth.

"Why use $4 trillion relief fund to hoover up financial assets held by the financial elite instead of simply crediting the bank accounts of all America," asks a Mr. Jaap F Westerling in yesterday's Financial Times.

Ah...Mr. Westerling that's not how it works, is it?

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

Disclaimer: 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.

Recent Articles

A New Infrastructure Boom March 26, 2019
Selva Freigedo talks about the potential in 5G network and how it could transform the way we communicate.
A 40 Somethings Guide to YouTube Hits March 20, 2019
Vivek dwells into a new YouTube phenomenon.
As the Economy Slows Down, Maruti and Two-Wheeler Companies Cut Production March 19, 2019
The country's largest car maker has cut production by more than a fourth.
In Supporting Demonetisation, RBI Behaved Like an Old Uncle Not Willing to Take a Stand March 13, 2019
The minutes of the meeting of the RBI Board which happened before demonetisation have been released.

Equitymaster requests your view! Post a comment on "Elites calculate, while the masses react". Click here!