BALTIMORE – We now have a great treasure trove of historical research proving that…
…you can’t drain the Swamp!
It’s almost impossible.
The process is well documented. The rich get richer. And richer. And richer. The Swamp gets deeper. And deeper. And deeper.
Then, suddenly, a “leveling” comes along – plague, war, revolution… or the collapse of government.
Then, people are much more equal in income… but usually, much more dead, too.
But let’s back up…
Why do the rich get so rich?
Partly because they are smart, disciplined, and hard working (the traditional Republican Party view)…
…partly because they use their capital to gain more capital (they “make money when they sleep,” as socialist French president François Mitterrand put it)…
…but largely because the government colludes to rig the system on their behalf (our focus here at the Diary).
We have nothing against wealth “inequality” ourselves; it doesn’t bother us that we are much richer than the typical Pakistani peasant or much poorer than President Trump and his crony friends.
But many people don’t like it. They bellyache that it portends disaster or portrays unfairness.
President Obama once said that he thought the problem of wealth inequality was the “defining challenge of our time.”
Instead, it seems to be a natural process… and not a bad one.
Clever, ambitious people always want to get ahead. Periods of stability give the honest ones a chance to multiply their wealth by doing more win-win deals. Society ends up with more capital, making everyone better off.
The trouble is that the scoundrels, rascals, and vermin benefit, too. They burrow into the rotten wood of government and build their nests in its nooks and crannies.
Gradually, the cronies and the parasites collude. New rules are written. New regulations are imposed. The number of win-win deals goes down; then, there are fewer people contributing to growth and prosperity.
Profiteers and Swindlers
We saw yesterday that real wealth is produced only by win-win deals – private, voluntary trades where each party has to satisfy his customer.
But then, after wealth is created, it is available to be taxed and redistributed by the feds.
As a society ages, surplus wealth increases… and so do win-lose deals.
The profiteers and swindlers grow bolder – getting disability, bridges, wars, research studies, sinecures, contracts, monopolies, subsidies, pills, and protections. Everybody else gets regulations, rules, taxes, and debt.
Growth rates slow. Over time, the insiders gain more power. Win-lose deals dominate. The Swamp gets deeper.
This is why, after a war, it is frequently the losers who end up the winners. Their governments have been destroyed (often, their factories and fields, too).
In the winning camp, the insiders get more and more of a hold on old industries and corrupt, geriatric governments.
In the losing camp, the old government has been dismantled… and the cronies and zombies have been chased away or killed; new wealth can be created from the rubble.
After World War II, for example, which were the world’s most successful economies?
Germany and Japan.
The U.S. was on top of the world after World War II. Its industries and political systems were intact. But the Republic was 175 years old; as Eisenhower warned in his farewell address, the rough beasts were already slouching towards the District of Columbia.
Winter Is Coming
Many are the economists – especially in the pages of The Wall Street Journal – who claim that the recent tax cut will help everyone by “stimulating” the economy.
But the U.S. economy has been so stimulated with cheap money already, it practically has the shakes.
Someone has to pay for the resources the feds use. So unless there is a spending cut – which there ain’t – the tax cut is better understood as a payoff to the rich than a boon to the economy.
It shifts the burden of the government from today’s rich political campaign contributors onto future generations, unknown bondholders, and unaware consumers.
Who will ultimately pay?
We don’t know… but it won’t go unsettled forever.
Meantime, the rich get most of the benefits… which is what you’d expect after such a long period of stability.
The fix is in, just like “The Donald” said. The rich get richer.
How long can this go on? What happens?
Well… according to Walter Scheidel’s book (mentioned yesterday), The Great Leveler, it can go on for a long time… until it can’t go on anymore.
Rarely, if ever, has a society managed to reduce the share of wealth that goes to its elite without violence. Just as inequality lives by the sword, so, too, does it die by the sword.
It is violence (win-lose deals) that helps the rich get richer. And it is extreme violence – war, revolution, government collapse, or severe epidemics – that brings down their power and their fortunes.
Once entrenched and in control of the government, the insiders don’t roll over. You can’t drain the Swamp, in other words; the whole system has to blow up first.
When that happens, debts will be erased. Assets will be wiped out. And the rich will hide their wealth… or lose it.
MARKET INSIGHT: BRIC STOCKS CONTINUE TO CLIMB
By Chris Lowe, Editor at Large, Bonner & Partners
Keep an eye on the BRIC stocks in 2018.
BRIC stands for Brazil, Russia, India, and China – the “big four” emerging markets.
Today’s chart is of the Guggenheim BRIC ETF (EEB).
It tracks the performance of a basket of blue-chip stocks in the BRIC nations.
After climbing 27% in 2017, EEB leaped out of the gates in 2018.
So far, it’s up 6%.
That’s more than double the year-to-date performance of the S&P 500.
– Chris Lowe
Is This the Death of the Bond Bull?
Central banks have been buying government bonds for years as part of their stimulus programs. But now, these banks are expected to flood the market with more than $30 billion worth of bonds. Is this the end of the thirty-year bull market in bonds?
Jeff Sessions Can’t Kill the Marijuana Market
Attorney General Jeff Sessions is famously against the legal marijuana market. He recently called pot “only slightly less worse than heroin.” But Casey Research analyst Nick Giambruno says that Sessions couldn’t kill this marijuana boom even if he tried. Here’s why.
The Secret Life of a Dorm Room Crypto Miner
It used to be that college students would get part-time jobs to supplement their incomes while in school. But these students aren’t washing dishes. They’re mining cryptocurrencies right from their dorm rooms.
Recently, Bill has been taking punches in the mailbag. Today, more dear readers jump to his defense:
Short, sweet, and to the point. Your missive is by far my favorite read of the day. Yours is an opinion, not some political fantasy masked as fact. Please continue to provide me with your unfiltered opinion masked as nothing else.
– Tim C.
You guys are the best. Keep up the good work. Blind people’s comments are very funny. What a show. Wonderful world. Never a boring Diary story.
– Randy W.
Interesting feedback you are getting… I am amazed at the loyalty of the Donald base and the blindness it causes. You are so “on the spot” in the big picture understanding of the game played, just missing a few key insights about the mechanisms/fights/goals of the people at “the core” of the global money creation system.
– Anders A.
I have no trouble should you envy Trump’s hair. It’s a bit superficial, but in context, it was meant to provide contrast. After all, your envy doesn’t come with political authority, so we’re not too scared of what you might do about it. I’m glad you don’t comment as though politics is a sport the way others do. It is not a sport.
The political process is not supposed to be a contest between teams, with winners and losers, and letting the majority rule (I know you know this). If it were a sport, the president should not be on one of the teams. He’d be in charge of keeping the stadium toilets clean, the snack bar stocked, and the box office balanced; an executive public servant, not a player or team owner. Voters need to start electing more public servants who serve the public at large, not any one segment, rich or poor, tall or short, ugly or beautiful, young or old, citizen or merely human.
I prefer presidents who treat us all as equals, with equal respect for our inalienable rights.
– Sandra K.
I thought you were at your best the day you thanked Trump! I could see your sincere joy with the tax break on Friday… I’m also jealous of all the Americans who devote such a profound respect to Mr. Trump – they must have a lot of love and respect that they can spend it on a guy like that.
As far as entertainment, I prefer to read your Diary to any kind of news. It’s kind of learning while we have fun – I would like to have had more teachers like you during my school years. Your Diary helped and inspired me to connect a lot of dots… During this past year, every day I’ve read your Diary.
Some days, I begin and don’t finish. Some days, it inspires me to go and search for more info and for more thinking. Some days, I don’t agree, or think it’s too much mocking. But I read your essay about you “thanking” Trump twice or more… I even showed it to some friends!
– Pedro V.
Wow, what a great response to the vituperation of your authoritarianism-loving critics. You were measured, balanced, self-deprecating, and humorous. This sort of discursive judo is exactly what will be required to bring us through our end-of-empire paroxysms without wholesale bloodshed!
– Rod D.
You, sir, have a great majority of the thinking man and woman’s support! At least, I pray you do, or we’re all screwed and waiting for the embalmers. I must correct you, however, on one point you made regarding the current monkey playing POTUS. It may be just my lowly opinion, but I can’t remember one of his speeches that he did well.
I must close with a strong, a very strong, request that you continue to bring balance to the insanity which is now our world.
– Kerry D.
I think you are the only one that can see where we are headed as a nation. People are easy to lead with the right type of showmanship. No one seems to understand that we have set up an economy that needs infinite expansion in a world of finite resources. Most people today need a reality check. Mocking the leaders in charge helps to remove their godly image that most of the steeple have. Keep up the good work.
– Steve J.
I liked your responses to the rude readers. You’re a straight talker for both the right and the left. You hit the mark each time. And it’s actually how I have been feeling. Keep it up.
– Robbie T.
I always enjoy the wry wit and insights contained in your Diary. And I doubt you will be deterred in continuing to express your views in the manner to which you are accustomed. The punches you have recently received come from those whose sacred cow, The Donald, is being skewered.
Some people just lack perspective or a sense of humor, and are just too committed emotionally to their hero to be able to accept any other view than blind loyalty. Of course, POTUS might earn our sympathy and pity were he not in such a position to do so much damage to the nation’s moral character and direction. Well done. And please don’t dilute your views because doing so would be like Stephen Colbert talking about the weather.
– Paul H.
Don’t pay attention to any of them people who gets irate with your good sense. I do like The Donald. He has guts. But he is dangerous, more than many imagine. Carry on, mate, and keep it up. And remember to keep us informed of the Deep State and the Swamp things. As far as the ranch and the winery are concerned, I gave up on you ever communicating with me and letting me run it for you.
– Tony M.
I was shocked and dismayed in reading some of the angry letters you have received over an article where you made fun of Donald Trump. I enjoyed the article. It gave me pause to think. And in many ways, I believe you are right. Was it Mark Twain who said, “It is better to be thought an idiot, than to open one’s mouth and remove all doubt”? I thought I recognized several of them in the letters to you. I have read your books and enjoyed your wit and farsightedness. Please keep up the good work.
– Victor D.
I enjoy your articles (not all). But this last one was spot on!
– Albert P.
There will always be detractors. When you are cutting your way through the jungle, you don’t stop to swat mosquitos. I appreciate your unpretentious perspective and ability to “cut through the crap,” as they say. Keep up the good work! There are more of us that enjoy your letter, and even look forward to it, than the critics who feel a necessity to give you a piece of their mind. It is always a pleasure to see your name in my inbox!
– Bill S.
Eh… cranky readers… I like the Zappa quote best… quoting Frank Zappa, “politics is basically the entertainment arm of the military/industrial complex.” I would add, often, we are watching a drama… roll with it, learn from it.
– Robin H.
I read with incredulity the letters from your “readers” who viciously attacked your writings and character. It suddenly dawned on me that no readers of yours could be so stupid, and that somewhere in the deep closets of government resides a group of defenders of the status quo (DSQ), whose sole task is to write such puerile garbage as you have received. Propaganda is being emitted thick and fast, and can be found in all kinds of places.
– Alan W.
I cannot believe some of the punches that are being thrown at you! So many people seem to still be duped by politicians and the news media… amazing! Politics have been run by scoundrels since the beginning of time, and still, people fall for it! I think the only way to react is with lots of humor (as you do so well) from a distance (gives you some perspective), and to run your own life as well as possible, despite the scoundrels!
In the meantime, I am happy to read your daily comments about the world stage, smile a lot, and feel good that I am not the only one thinking what I do. Keep in mind that for every bad comment there must be 10 good comments… but as human nature goes, generally, the bad comments get expressed, fueled by negative feelings… while all the good comments often don’t get sent!
– Luc C.
IN CASE YOU MISSED IT…
Today is the day…
At 8 p.m. ET tonight, legendary speculator Doug Casey is hosting his free online investing summit. Doug will show attendees how he turned $50,000 into $1 million by investing in one marijuana penny stock… and how readers could do the same. Reserve your spot here.