America has been built on one lie after another

Dec 13, 2010

Baltimore, Maryland

Lies, lies, lies...

The days are dwindling down fast now. There are only a precious few left in 2010. The Dow rose 40 points on Friday. Gold fell off $7.

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But let's forget the market action for a little while....most of it is noise anyway.

It is time to relax a little. Time to think.

"Everybody is so busy now," said a colleague in Australia. "No one has time to think. Instead, we're busy answering our email or checking our Blackberries. It's amazing. You get in an elevator and everyone pulls out a phone. No one talks anymore. Or looks at anyone. Or has a thought.

"I don't even think we writers bother to think anymore. We're too busy. We have to produce too much material. We don't really have anything to say...but we say a lot."

Of course, that's been true at the Daily Reckoning for years. We were always ahead of the trend. We write every day, whether we have something to say or not.

Do we have something to say today? To tell you the truth, we don't know yet. But let's begin by thinking about this, a quote from the Daily Bell, we passed along yesterday:

"The problem with where America is now is that the country has been built on one lie after another for the past decade and the lies show no signs of slowing down."?

And then, there's this from Charles Hugh Smith via Marc Faber:

"...the status quo would collapse were systemic fraud and complicity banished. Rather than the acts of evil conspirators, they have become the foundation of the US economy and financial system...."

You will recall how Goldman Sachs wowed the whole world with its dazzling trading. Day in, day out...the traders at Goldman made money. The firm turned in "perfect" trading quarters, with not a single day showing a loss.

Surely, one of the junior traders would have miscalculated at least once? Or a seasoned old pro, after a well-irrigated lunch, take his fat finger and hit the wrong button? Nope. Not once did Goldman's trading machine err. It was uncanny. Almost unnatural.

Who was on the other side of those trades, we wondered? Trading is a zero sum game. One side wins. The other loses. So some poor schmuck must have taken a loss for every gain earned by Goldman's geniuses. Imagine him taking his lumps day after day...and still coming back for more. How could anyone stand so many losses? What kind of fighter could take that kind of beating and still be on his feet? And yet, there were no major new bankruptcies announced during that period. How was it possible? Who was losing all that money?

We don't know. But we know who the schmuck was ...the poor sap was us! Had it not been for Senator Bernie Sanders from the Green Mountain State, who was curious enough to insist, we would never have known what had happened to the Fed's $1.3 trillion in bailout cash. Now we know. Goldman helped itself 212 times roughly every business day -- during the 12 month period beginning in March '09, all the while telling the world that it needed no bailout.

Lies, lies, lies...

The first lie was the biggest whopper of all that you could get rich by spending money rather than saving it.

The second was that the stock market would make you rich. All you had to do was to buy a well-balanced portfolio and hold for the long run.

When that one ran into a wall, along came the lie that you couldn't lose money in real estate.

There was also the lie that the free market would make people rich...and if it didn't, the authorities would force it to do so!

Then there was the lie that an economy saturated in debt could be stimulated to heights of prosperity by splashing on more debt.

And then there was the lie that you didn't need real money in the system; the authorities could manage a flexible, paper money system so as to help maintain full employment.

And then, after half a century of adding cash and credit, when the Wall Street speculators cried and moaned, we were told that they were "too big to fail." They needed to be saved.

Then came the lie that monetary and fiscal stimulus would lead to "recovery."

When recovery didn't come, we were told that QEI would do the trick - so they pumped hundreds of billions of dollars into Wall Street's failed institutions. When it didn't work, we got QEII.

And now, the federal government is headed to bankruptcy. We are told not to worry. No need to change course. Tax. Spend. Overspend. Stimulate.

The same goofballs, liars and incompetents who have brought us this far say they'll take care of us.

Which is what we're worried about.

More news:

And more thoughts...

*** What new thoughts for a Monday morning?

Corruption is not only at the top. Like a Christmas pudding steeped in rum, the whole economy - from top to bottom - reeks of it. Here's the latest proof from Bloomberg:

"Americans want Congress to bring down a federal budget deficit that many believe is "dangerously out of control," only under two conditions: minimize the pain and make the rich pay.

"The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense. They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And they're against an increase in the gasoline tax. "

Let's see, how does that work again? Yeah, balance the books...says the noble citizen...but make sure it's at someone else's expense. Make the rich pay.

That's how corruption works. People want something for nothing all the time. But only some of the time are they able to get it. Now, Goldman gets free money from the Fed. The taxpayers expect free money too. And so, the whole society lives a lie - that each man can live at the expense of someone else.

But why CAN'T people live by taking money from the rich? Well, of course they can. For a while. Maybe even a long while. But not forever. And every time they spend someone else's money the less money there is left to spend.

The rich are just as self-interested as everyone else. Take away their money and they dodge. They feint. They play dead. They hire lobbyists, bribe Congressmen and play the game. If that doesn't work, they hide their loot and flee.

The problem with trying to live at the expense of others is that others don't like it much. They stop producing and try to live at someone else's expense too. And pretty soon, you have a nation of poor zombies...feeding on the little living flesh still left a live.

Bloomberg continues:

"...a spate of recent studies, including one by President Barack Obama's debt panel, that say reductions in Medicare, Social Security, military and other spending are necessary to curb a deficit that totaled $1.29 trillion in the fiscal year ended Sept. 30, or 9 percent of the gross domestic product."

"The idea that we can solve our structural-deficit problems merely by asking more of the well-off is totally unrealistic," said David Walker, who was U.S. comptroller general from 1998 to 2008 and now leads a group advocating against deficits. "The math simply doesn't work."

"According to the Dec. 4-7 poll, taken days after Obama's commission sounded an alarm over the nation's "unsustainable fiscal path," the public still believes it's more important to "minimize sacrifice" than to take "bold and fast" action to pare the $13.7 trillion national debt.

"The one place Americans are willing to see sacrifice is in the wallets of the wealthy and Wall Street."

"While they say they strongly support balancing the budget over the next 20 years, when offered a list of more than a dozen possible spending cuts or tax increases, majorities opposed every one of them except imposing a bigger burden on the rich. "

"A majority backs raising the cap on earnings covered by the tax on the Social Security retirement program above the current limit of $107,000. Two-thirds would means test Social Security and Medicare benefits. Six of 10 would end tax cuts for the highest-earning Americans. And 7 of 10 favor a tax on Wall Street profits. "

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.

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3 Responses to "America has been built on one lie after another"

Ganesh K

Dec 13, 2010

Refer to second lie in the article. "Invest in stock market with balanced portfolio, hold on to it and it will make you rich." All the stock market experts (including Equitymaster), and all the MFs( including SIP) had been advising us poor investers all these years the same thing. Isn't it!!Now you say it is lie. I am confused.



Dec 13, 2010

The writeup smacks of a typical lobby approach. How can you run a democracy,without appearing as a messiah to the majority; that is the poor.



Dec 13, 2010

It is interesting to read that politicians in countries other than India are also given to populism as opposed to visionary policies. Anybody can become s successful politician, but only a few can become a Lincoln, a Roosevelt!!

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