POITOU, FRANCE – St. Augustine blamed the fall of Rome on the failure of its pagan gods.
Historian Edward Gibbon took the opposite view: He thought the empire had been weakened by Augustine’s god.
Here at the Diary, we take no position on what brought down Rome. But we have some ideas about which gods will bring down the U.S. empire.
Readers will note that we’ve been using the term “god” loosely.
It is not the same as God, for whom we maintain a wary reverence.
“Gods,” on the other hand, are easily mixed up with heroes and myths… and other things that are largely fraudulent or incomprehensible.
Someday, perhaps more precision will be brought to bear. But that will take more hard thinking than we have time for today. We are still on our summer vacation.
As a matter of habit and a point of honor, we do no hard thinking in August. This is a season to let the thoughts come easily, like a gin and tonic on a warm afternoon.
And we remind readers that the subject of the Diary – at least the ostensible subject – is money. So you can be sure that our lofty ruminations on the divine will return to the muddy sty, eventually, and wallow in filthy lucre.
Wasting no time, we look at the dots. How do these Confederate monuments connect to anything else?
For more than 150 years, Yankees and Rebels… abolitionists and racists… conservative and liberal… red and blue… have lived side by side, with no evident desire to murder each other.
They tolerated each other’s opinions, each other’s statues, and each other’s gods.
Why is the Confederate Soldiers and Sailors Monument – a fixture of the Bolton Hill area of Baltimore for the last 114 years, with no word of protest even from the Yankee veterans who lived in the area when it was erected – suddenly faced with a wrecking ball?
Our mother, who died a few months ago, lived nearby and recalled playing on the monument as a child.
But now, City Councilman Brandon Scott says it is not enough to remove it. “These people were terrorists and traitors,” he said yesterday, calling for public destruction of the monument.
Poor Johnny Reb. He answered the call to serve his nation… taking up arms to protect it against invaders coming down from the North. And now he’s branded a “terrorist”!
Why? Why now?
President Trump says we have a great economy with low unemployment, low inflation, and high stock prices.
He’s creating new jobs and making America great again. He’s got a “tremendous tax cut” coming… that will give a “tremendous stimulus” to the economy… and create a “tremendous number of new jobs.”
Mr. Trump is in the White House and the gods are in their heavens; what’s not to like?
But the president errs and the gods fail.
As to the economy, over the past 18 years, these Diary pages… and the pages of our previous e-letter The Daily Reckoning… have recorded its decline and fall.
We have not been able to confirm this – yet – but we believe that much of the country… perhaps the majority of it geographically… has been in depression for many years. Just go to the industrial heartland and have a look around.
As a whole, the U.S. economy shows only modest growth, but even that is mostly an illusion caused by the deliberate miscalculation of inflation.
Were the raw numbers adjusted for consumer price inflation, as it was reckoned during the Reagan administration, the whole country would be seeing on-again, off-again recession, much like Japan since 1989.
The jobs numbers are similarly scammy. They purport to show a nation at full employment. But the actual number of people working, as a percentage of the population, has fallen back to levels last seen 40 years ago.
Good-wage jobs in the manufacturing sector have disappeared. In their place are low-paying jobs in the HES – health, education, services – complex.
They leave men – particularly in the Midwest – out of luck with few ways to earn enough money to support their families… and a lot of idle time on their hands to google “Schwarze Sonne” on the internet.
Not only have many men lost their place in the family, but also their country has lost its place in the world.
A recent study by the International Monetary Fund reports:
For some time now there has been a general sense that household incomes are stagnating for a large share of the population, job opportunities are deteriorating, prospects for upward mobility are waning, and economic gains are increasingly accruing to those that are already wealthy. This sense is generally borne out by economic data and when comparing the U.S. with other advanced economies.
And Bloomberg elaborated:
[T]he U.S. has been losing ground relative to other OECD members in most measures of living standards. And in the areas where the U.S. hasn’t lost ground (poverty rates, high school graduation rates), it was at or near the bottom of the heap to begin with.
The clear message is that the U.S. – the richest nation on Earth, as is frequently proclaimed, although it’s actually not the richest per capita – is increasingly becoming the developed world’s poor relative as far as the actual living standards of most of its population go.
As he loses ground at home, the typical citizen loses faith in his gods.
The promises of everlasting prosperity – financed by fake money, funded with debt, and managed by the feds – seem hollow and worthless.
He looks for something else to feel good about.
What does he find?
Mars, the god of war.
Generals still swagger. Soldiers relish their firepower. And from their La-Z-Boys, middle-aged citizens in Dubuque or Anaheim boast that they can kick butt anywhere in the world.
But the gods of war fail most miserably of all. For 16 years… the longest war in U.S. history… the Pentagon, assisted by profit-seeking cronies, has been unable to win in Afghanistan.
More broadly, they’ve been romping around the Mideast for nearly the entire century with nothing to show for it.
Except the obvious things: more than 5,000 dead soldiers… more than 1,500 missing legs… and some $7 trillion hustled from the Main Street economy to the Deep State’s enforcement arm.
More to come…
P.S. Recently, we introduced you to our newest colleague, Jeff Clark. Unlike your editor – an old fuddy-duddy when it comes to investing – Jeff is a trader. And very different from our Diary’s “big-picture” view, Jeff believes you can spot short-term trading opportunities by studying the numbers alone.
It’s not our usual fare here at the Diary. But it’s a good counterbalance to the public spectacle we discussed above.
BY JEFF CLARK, EDITOR, Jeff Clark’s Market Minute
The junk bond market broke down last week.
I won’t get into all the technicals, but suffice it to say there’s a high probability that high-yield bonds are headed lower from here over the intermediate- and long-term timeframes.
No matter how you look at it, this is a major warning sign for the U.S. stock market over the next several weeks.
The action in high-yield bonds tends to lead the action in stocks. It’s the whole “risk-on, risk-off” relationship.
When investors are hungry for yield and willing to take a risk on junk bonds in order to capture a slightly higher yield, they’re also willing to aggressively buy stocks. When investors turn away from risk and start selling junk bonds, they’re also quite likely to start selling their stocks.
This is the first major breach of the high-yield market uptrend since the decline last October. Back then, HYG fell 4% in about three weeks. The S&P 500 matched the decline over the same timeframe.
If HYG does pull back towards its 50-week moving average (MA) line over the next few months, that will equal another loss of about 4%. That doesn’t sound too bad.
But if last week’s modest 1% drop seemed stressful, think about what a 4% drop will feel like. Then, adjust (or not) your trading plan accordingly.
– Jeff Clark
P.S. Every trading day, my free Market Minute newsletter tells readers where the action is headed for the day… including which sectors to watch and which to avoid. And it’s easy to join. You can sign up with just one click.
Click right here to subscribe to the Market Minute, and you’ll receive your next issue at 7:30 a.m. ET tomorrow.
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In today’s mailbag, Monday’s Diary, “Where the Old Gods Went,” has gotten some readers thinking…
I enjoy your essays immensely, usually leaves a smile on my face. We are the same age and similar experiences. Your recent Diary on all the dead deities from Egypt leaves out the only GOD that is still worshiped from that time, the one Moses worshiped, JEHOVAH. The Bible calls him the only true GOD. That would explain why he is still worshiped by millions of people in every country worldwide. Look forward to your next Diary.
– Anton E.
I liked the old-school skilled craftsmanship lesson and your tilework, but your exigencies on the “gods” made me throw up in my mouth. Check out the First Commandment. Catholics and Protestants both agree on the Big Ten.
I presume your intent was to point out how men of antiquity followed the “Crypto gods” of their day? But it came off as a touch ecumenical. As if we might after death meet any of those gods or the lost souls who knew no better. The words of Herod sprang to mind when he asked, “What is truth?” And he was looking right at Him.
– Louis S.
Meanwhile, the debate on cryptocurrencies continues…
Is bitcoin a speculative investment or an international currency? Seems to me if any fiat currency had the volatility of bitcoin, you would be all over them as unstable; but you continue to “educate” us on this new world currency as a hedge against government control of currencies. Do we buy when it is hated, cheap, and finally gaining momentum, or just buy at any price?
– Craig C.
I have to laugh. I see all the people concerned about what happens to bitcoin when the power fails. Hello! When the power fails, how much money do you think you will be able to get out of your bank? What happens to your ATM? And how will you make your car payment and mortgage and, oh yeah, buy groceries? With all that cash you will have stashed? How much you got? How long will that last?
Worrying about what happens to cryptocurrencies in that scenario seems awfully shortsighted to me.
Cryptocurrencies, gold, silver, cash. They all have their place. None are currently perfect. But due to the faults in all of them, it only makes sense to have all of them. And since cryptos are going ballistic, it seems like a pretty good idea to be invested partially in them. Personally I’m all in. We’ll see how long it lasts, but for now it is creating incredible returns.
– Scott S.
For your readers that are not aware of the many diverse cryptos and just don’t get how this changes finance in so many ways, it might behoove them to know there actually is one coin “backed” by some physical resource. PinkCoin is backed by diamonds… So there. Take that all you naysayers…
– Gary K.
If you were born before 1969, our colleagues at the Palm Beach Research Group just released a book you’ll want to read…
Buried in President Reagan’s Tax Reform Act of 1986 is a little-known government program. And if you qualify, you could retire with an extra $2,194 per month, tax-free. This book explains what this program is and how you can qualify today. Read on right here.