"These things are much less common than you think. I'm not saying it's not a bad thing. It's a terrible crime. It's just not that common. The left is just using this as another way to push its agenda on college campuses."
This was just one of many skirmishes the conservatives are fighting.
Another activist offered a comment on CRomnibus, the $1.1 trillion spending bill approved at 1am on Saturday morning.
"We have to give our colleagues credit. There were about 50 different things in there that were good for our side."
What they were, he didn't say. And no one asked. But when you spend a trillion dollars in the dark of night, there are bound to be a few presents under the tree.
At least one of them was eager to 'get the word out' about the CIA's enhanced interrogation program:
"Torture is defined as inflicting pain. Waterboarding is not painful. So, it's not torture. Our own soldiers undergo this as part of their training."
Another speaker wanted to let us know that there would be a major gathering of 'our side' coming up. The conservative movement sponsors a large convention each year, he explained:
"This will give us a chance to tell people what we believe..."
'What do you really believe,' was the question we didn't ask. Many seemed ready to believe anything.
Were these men and women brave zombie fighters...or zombies themselves? We weren't quite sure...
But we need to move on... back to the Crash Course on Money. This is the third installment in our section on the Macro situation...the Big Picture, in all its splendor.
When we left you on Monday, we had just laid the keel. Today, we put on the sides and see if this baby will float.
In 1958, the first credit card was introduced, followed by other innovations, such as low-doc mortgages, mortgage backed securities, subprime energy debt, lines of credit, nothing down auto finance...and more. Together, this produced an entirely new money system. Capitalism without capital! You no longer needed real money. You could live...invest...do business...all on credit. There was only about $1 trillion of credit outstanding in the late '60s. By 2010 it has risen to $50 trillion. Of this sum, approximately $33 trillion was 'excess' - above and beyond the amounts needed for a normally-functioning economy.
Never before in the history of money had so much spending power come from nowhere. Since the advent of the managed, paper money system in 1968, money no longer has to be earned...or saved. Now, it can just be 'created'...at will, by the banking system. When your money is backed by gold, the money supply is limited. There's only so much gold. But when you abandon the gold standard, the sky's the limit.
The problem this presents is obvious. The more credit, the more debt. The more debt, the more claims you have on the output of the economy. This is true for individuals as for whole economies. They reach a point where they can't afford any more debt. They just don't have the earnings to support it.
This point came for the US household sector in 2008. Households had too much debt - particularly, too much mortgage debt. Then, when house prices fell, the value of their collateral fell with it...putting the entire mortgage finance industry in jeopardy.
This was a correction. The excesses of the housing bubble were being corrected in the classic way. Bubble gave way to bust.
But instead of allowing the correction to take its course, the US government and its central bank, the Fed, stepped in. They were determined to stop the contraction in the only way they could - by sponsoring further credit expansion.
Readers may raise their eyebrows and clear their throats. Can you really fix a debt problem with more debt? You may wonder. It won't do you any good. Part of the mythomania of modern economists is the idea that every slowdown reflects a lack of 'demand' and that demand can be stimulated with more credit. It's a long, boring discussion. Let's skip over it. The essential point is that the feds are hell bent on keeping the supply of credit growing. They think, correctly, that a credit contraction would be devastating. Whether they believe they can hold it off forever or not, we don't know. But we have no doubt that they think they can kick the can far enough down the road so that it will be someone else's problem. The open questions are when will we come upon the can...and then what will happen?
So, the whole macro situation can reduced to the following:
After 60 years of credit expansion, we now have too much debt (too many claims on output). The natural, market reaction is a credit contraction. But the feds resist. Like 'rectal feeding' of a fat man, central bankers are making a grotesque situation worse.
This puts the investor in a very difficult position. He faces the irresistible force of a credit market deflation on one side...and the immoveable object of central bank credit inflation on the other.
So what's ahead? Inflation? Deflation? A catastrophic collision? You bet!
More to come...
Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.