Whoa! The feds put at risk an amount equal to 200% of US GDP. And for what? So that a depression wouldn't knock 5% off GDP? Even the Great Depression of the '30s only set the US back by 30% of GDP. A similar setback today would cost the economy less than $5 trillion.
Do you see what we see? Even if it worked - which it didn't - the feds' efforts would have been a disaster. Who would spend $29 trillion to save $5 trillion?
But wait. There's more. This assumes that a depression is unnecessary...or that it doesn't do any good. We know that's not true. A depression does a lot of good. It wipes out bad investments and eliminates bad speculators. It forces capital into more productive, more profitable uses. It kills off zombie industries. It retires worn-out industries ...and reduces costs so that new industries can arise. It's the 'destruction' that Schumpeter's 'creative destruction' needs.
The more we think about it, the more we're beginning to like depressions. After scammy bailouts and bogus recoveries, a depression would be something to look forward to.
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*** "People die in different ways," said our friend. "Some die well. Some die badly."
We had just related the story of an aunt whose funeral we attended a few weeks ago. She had been given last rites. She fell asleep. When she awoke she seemed disappointed.
"What...am I still alive?"
"Well, she had the right attitude," our friend continued. "So many of my friends and family have died in the last few years I've become almost a connoisseur of death. There are good ways to die. And not-so-good ways.
"Most people accept it. But not all. A friend I was with a couple weeks ago fought it every step of the way. And it made her mean. It was as if she thought it was our fault she was dying.
"She was disturbed by the whole thing. So, we tried to get her to come to terms with it. We told her that it was okay... We told her that it was okay to die. But she acted as if that meant we wanted her to die. Her last words were "what are you trying to do?"
"And you remember Paul? He thought it wasn't fair. He couldn't figure out why he was dying. He wasn't a smoker. And he was dying of lung cancer. He thought there had to be a reason. And he couldn't figure out the reason. It bothered him until the day he died.
"But now Randy [her ex-husband] is dying. He's in intensive care. The doctors are amazed. They're not trying to prevent him from dying; they're trying to figure out how come he's still alive. He's had so many heart operations, it's amazing that there is anything left of it. He's got so many pig valves you expect him to oink. He's had a lung removed too. And he's got something else wrong with him...nobody seems to know what it is.
"And everybody thinks he's indestructible. He's been shot. Stabbed. Beaten up. But he's fearless. I think he has a gene missing or something. You know, he ran away from home at 14. He lived in pool halls and bars. In the worst part of town. He hustled pool games. He smoke. He drank. Men always respected him, because he had no fear of anything. Women loved him.
"He would go into bars in the worst part of Washington. All black bars...rough places. Most white guys would be afraid to go into those places. But they called him the "white nigger." He was always at home in those places.
"And you know how handsome he was. He still is. But now, it's over. He knows it's over. He's saying goodbye to everyone. And now he's sorry about the way he lived. He told me 'I should never have let you divorce me..."
"And he's right. But he didn't give me any choice. I gave him 5 years to get off drugs. But he never did get off. And I didn't want our child to grow up with a drug addict father. So, I had to divorce him. But I loved him anyway. And he knew it.
"And now, he's dying...
"Funny how your life can take a turn...it could have turned out so much better for both of us if he had just given up the drugs. But he wouldn't...and you never know when you're at one of those turning points."
Man for all Seasons
In which the Daily Reckoning picks a candidate
The Daily Reckoning has no voice in the US presidential elections. But we will nevertheless declare a preference. Were he to toss his hat in the ring, we would line up behind former Senator Jon Corzine. The ex-Goldman chief has the experience that America needs. He has been a front-runner in politics...and in the world of finance, what he doesn't know about front running is probably not worth knowing. Presuming, however, that Corzine will be too busy fending off lawsuits or jail sentences, our next choice is Republican Newt Gingrich. Of course, we find him completely repulsive, who wouldn't? But we believe he's the man of the hour. History needs him, to carry on the work of Bush and Obama, hustling the great nation on its way to Hell.
It is rare for a decent man to seek public office. He is ashamed of pandering. He is embarrassed by the stupidity of his own slogans. He is appalled by the low-lifes and quasi criminals with whom he must associate and from whom he must beg support.
They are all swarming around Newt Gingrich now. The handlers, pollsters, word polishers, idea chiselers, fund raisers, donors, hangers on, groupies, roadies -- carpet-bagging rascals every one of them. Now they've got the scent in their nostrils. Their chests eave. The hearts pump. If they can just keep their man Newt from blowing himself up they'll be in high cotton for at least 4 years. One will head a commission or a cushy seat at the UN. Another will get a contract to provide the pentagon with new ID badges. Another will ride into a remote Congressional seat on Newt's coattails. Power. Money. If Newt wins, they win. Newt's women will think themselves smarter and prettier. The men among them will feel their most private part growing bigger.
American presidential candidates generally fall into three categories. Those who are obviously incompetent. Those who are scalawags. And those that are jackasses. The job of the voters is to choose the defect most suited to the time.
Winston Churchill was a disaster as First Lord of the Admiralty during WWI; the Gallipoli campaign was his doing. Then, on how to deal with the Iraqi insurgents, circa 1920, he offered this advice: Use chemical weapons
"against recalcitrant Arabs as an experiment," he suggested, adding, "I am strongly in favour of using poisoned gas against uncivilised tribes to spread a lively terror." Later, as Chancellor of the Exchequer, he put Britain back on the gold standard, but at a level that was bound to cause trouble. It came, in 1929.
He may have been incompetent. He may have been a big-mouth imperialist. But Churchill was the man Britain needed in 1940.
When times are good the public generally prefers a scalawag. Clinton was the perfect president for the '90s boom years. Warren Harding would have been a great fit with the boom of the '20s. He drank. He played cards. He snuck out of the White House to go to girlie shows. Otherwise, he left people alone. But he was a little early. Most of the "Roaring Twenties" boom happened during the Coolidge administration. On the surface, Coolidge was a mismatch. Straitlaced. A bit of a scold. But he minded his own business and - like Clinton during the dotcom bubble or Bush during the property bubble - he let speculators ruin themselves without raising an objection. .
The trouble with Herbert Hoover was that he was too much of a nuts and bolts engineer. The public turned him out. They preferred Roosevelt's confident malarkey. They wanted a man with a plan. No matter that the plan was claptrap. They'd never figure that out.
That's the problem with Obama. He has no plan. He doesn't know what is going on, or what to do about it. Which at least marks him as more intelligent than most of his challengers, who have the wrong idea on both counts. But neither brains nor competence is not what the public wants now. In an emergency it wants Churchill, not Chamberlain. A Roosevelt, not a Hoover. It wants a bold liar. A hearty delusional.
Gingrich is their man. A letter in the Financial Times compared him to Churchill. He compares himself to de Gaulle. Both are correct, in our view. He is as humble as de Gaulle and at least as competent as Churchill. He is a cad who reportedly told his second wife that she was too old and too ugly to be a president's wife. He is a scoundrel who took $1.8 million from zombie mortgage lender, Freddie Mac. He makes angels weep; the gods get their backs up. So cometh Newt Gingrich to the Republican race. If you're dumb enough, you think he's smart. If you're corrupt enough, you think he is honest. If you compare him to the field of candidates, he doesn't seem any more assinine than the rest.
He is incompetent, scalawag and jackass all in one package. A man for all seasons. Most importantly, he is committed to keeping America on course to its own destruction. The US already runs the biggest deficits in the developed world. Gingrich would add to them - by about $850 billion, according to one estimate. He hopes Reagan-era growth will eventually balance the books. He also thinks an Electro-Magnetic Pulse is one of the biggest dangers America faces. And he believes in American exceptionalism - as if the nation can dodge fate with some special math that applies to it alone. But if you begin asking questions about Newt's pensee you are missing the point. America's empire is decadent and degenerate. It needs a man like Newt to help it on its way... to where all exceptional empires end up - on the scrap heap of history.
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.
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