DELRAY BEACH, Florida – The markets continue to dawdle. Not much conviction in either direction.
We’ve already looked at the War on Poverty, the War on Drugs and the War on Terror.
So let’s move on… using our new lens to look at another of the feds’ fake wars.
No war was ever officially declared against the markets.
But for four decades the feds conducted covert operations… a dirty war in which they’ve tried to mislead, obstruct, and suppress market forces.
They used fake money, fake savings, and fake interest rates to confuse investors, businesses, and consumers.
They didn’t say so directly, but their purpose was to give out false signals so that people would change their behavior.
“Demand” was too weak, they said. What to do about it?
They flooded the system with phony savings (credit).
Price signals were distorted. Credit limits seemed to disappear. Debt limits were eased.
Then, in 2008, the war turned hot… with the feds actively and overtly holding down interest rates to push up stock and bond prices.
In response to the crisis they caused – by encouraging too much debt in the housing sector – they claimed that the “free market” had failed.
They were just responding to the “emergency,” they said.
Soon, everybody got in on the act – expressing an opinion about how high (or low) interest rates should be.
Believe it or not, an activist group called “Fed Up” argues that raising rates is… you guessed it… racist!
Institutional Investor magazine reports that a group funded by 32-year-old Facebook cofounder Dustin Moskovitz is lobbying against rate increases on the grounds that higher rates are bad for U.S. workers. From the website:
The truth about the economy is obvious to most of us: not enough jobs, not enough hours, and not enough pay — particularly in communities of color and among young workers.
Some members of the Federal Reserve think that the economy has recovered. They want to raise interest rates to slow down job growth and prevent wages from rising faster. That’s a terrible idea.
We stand with millions of workers and their families in calling on the Federal Reserve to adopt pro-worker policies for the rest of us. The Fed can keep interest rates low, give the economy a fair chance to recover, and prioritize full employment and rising wages.
What? Who are these people? Do they have tails? Horns?
They’re right about one thing: When the Fed tries to control the economy, it is politics, not markets, at work.
Markets work by persuasion and voluntary exchange. Politics works on force and fraud. Fed Up is a political organization trying to influence how the force and fraud is applied.
But let’s look at the feds’ War on Markets through our now-familiar scope.
First, is this a war the feds can win?
No. Of course not.
Markets can be suppressed, delayed, and denied… but never eliminated.
Markets do not stop working just because you try to bend, distort, and even outlaw them. Victory is impossible.
The market for drugs does not stop just because the feds make them illegal. Instead, they re-price illegal drugs, taking into account the increased cost of doing business.
Nor does poverty disappear just because the feds make war on it.
“The poor will always be with you,” said Jesus wisely.
Wealth and poverty are relative; there will always be some rich and some poor. Passing laws will not change that.
Those who do not have access to conventional armies always resort to unorthodox attacks.
That’s what American colonists did when they launched their war against the British in 1775.
It’s what the Jews did when they launched their “insurgency” against the British in Palestine in 1939.
And it’s what the Maquis did during the occupation of France by the Nazis during World War II.
Terror won’t stop any time soon. Nor will markets cease to function.
Second, does the enemy gain strength from the “war” against it?
Well, yes and no.
Markets work perfectly well whether you make war on them or not. Governments can put any price on anything they want. But only markets can tell you what they are worth.
Just look at what happened in the Soviet Union. Or China, pre-1979. Or Venezuela.
Who bought anything from China when the communists were setting prices?
Who goes to Venezuela to do his shopping today?
We visited Russia soon after the Soviet Union was disbanded. Markets were just opening up. But after 70 years of price fixing, there was almost nothing to buy. Almost everything that was being sold had been pilfered from the army. We bought a pair of boots for $1. We still have them. The soles are so stiff they barely bend.
There are really only two types of economies – command economies and market economies. The latter work for everyone – but you never know who the real winners will be. The former work only for the commanders. Then, when they have stolen everything there was to steal, markets reassert themselves.
Economies are price-discovering, information-generating learning systems. On the world market, every economy has access to the same resources, more or less. It’s what you do with them that counts.
Dictating prices is like teaching students that Japan won World War II… or saying that two plus two equals five… or rounding off pi to three just to make it easier to remember.
But the more fake information you give out, the more valuable real information becomes.
Third, did it create a new, corrupt Deep State industry? And fourth, do the combatants on both sides gain as the public loses?
This is different from other “wars” announced by the Deep State. This is how the insiders fund their other wars… and how they shift trillions of dollars from the public to themselves.
The War on Markets distorted almost all industries and corrupted the entire economy.
As reported here many times, suppressed interest rates alone probably cost savers as much as $10 trillion since 2008. Goosing up asset prices probably shifted another $10 trillion or so to the people who own them (typically, the elite).
As in all of these fake wars, the casus belli is phony.
Markets do not hurt people; they help them. Price signals, set by markets, are essential. Otherwise, you don’t know whether you’re adding wealth or subtracting it.
Trying to suppress free markets or abolish them always leads to confusion, bubbles, bankruptcies, and misery. Economies weaken; people grow poorer.
Since 2008, wages have been stagnant or falling for most people… GDP growth has declined and is now probably negative… productivity growth has declined more than any time in the last 40 years… world trade levels are back to 2009 levels… and the bounce-back from the Great Recession was the weakest on record.
For now, the war serves its real purpose: to increase the power and wealth of the Deep State insiders.
But it is a war that the feds will ultimately lose.
Trying to suppress markets is like putting a giant cork in the mouth of a volcano. It doesn’t stop the eruption; it just makes it more violent.
By Doug Casey, Founder, Casey Research
The European Union evolved, devolved actually, from basically a free trade pact among a few countries to a giant, dysfunctional, overreaching bureaucracy. Free trade is an excellent idea. However, you don’t need to legislate free trade; that’s almost a contradiction in terms. A free trade pact between different governments is unnecessary for free trade. An individual country interested in prosperity and freedom only needs to eliminate all import and export duties, and all import and export quotas. When a country has duties or quotas, it’s essentially putting itself under embargo, shooting its economy in the foot. Businesses should trade with whoever they want for their own advantage.
But that wasn’t the way the Europeans did it. The Eurocrats, instead, created a treaty the size of a New York telephone book, regulating everything. This is the problem with the European Union. They say it is about free trade, but really it’s about somebody’s arbitrary idea of “fair trade,” which amounts to regulating everything. In addition to its disastrous economic consequences, it creates misunderstandings and confusion in the mind of the average person. Brussels has become another layer of bureaucracy on top of all the national layers and local layers for the average European to deal with.
The European Union in Brussels is composed of a class of bureaucrats that are extremely well paid, have tremendous benefits, and have their own self-referencing little culture. They’re exactly the same kind of people that live within the Washington, D.C., beltway.
The EU was built upon a foundation of sand, doomed to failure from the very start. The idea was ill-fated because the Swedes and the Sicilians are as different from each other as the Poles and the Irish. There are linguistic, religious, and cultural differences, and big differences in the standard of living. Artificial political constructs never last. The EU is great for the “elites” in Brussels; not so much for the average citizen.
Meanwhile, there’s a centrifugal force even within these European countries. In Spain, the Basques and the Catalans want to split off, and in the UK, the Scots want to make the United Kingdom quite a bit less united. You’ve got to remember that before Garibaldi, Italy was scores of little dukedoms and principalities that all spoke their own variations of the Italian language. And the same was true in what’s now Germany before Bismarck in 1871.
In Italy, 89% of the Venetians voted to separate a couple of years ago. The Italian South Tyrol region, where 70% of the people speak German, has a strong independence movement. There are movements in Corsica and a half dozen other departments in France. Even in Belgium, the home of the EU, the chances are excellent that Flanders will separate at some point.
The chances are better in the future that the remaining countries in Europe are going to fall apart as opposed to being compressed together artificially.
And from strictly a philosophical point of view, the ideal should not be one world government, which the “elite” would prefer, but about seven billion small, individual governments. That would be much better from the point of view of freedom and prosperity.
Editor’s Note: Doug just released an urgent video with all the details about what’s going on in Europe right now. In it, he reveals how these events could ultimately touch off a financial shock in America far greater than 2008. And it could begin as early as December 4th, 2016.
But as Doug has shown throughout his storied career, the worst crises offer the biggest opportunities for gain. That’s why our video describes specific ways to profit… as well as which stocks to avoid before the crucial December date.
You can get a first look at this video here.
Gold Just Got Shellacked
Yesterday, gold prices fell below $1,300 an ounce for the first time in 15 weeks. Silver prices also tumbled. The culprit? The market now appears to be pricing in a Fed rate hike in December.
Can You Tell the Difference Between Skill and Luck?
Investing, like poker, is a mix of skill and luck. Here’s how to tell the two apart… and how to use an understanding of the roles of skill and luck to make better investment decisions.
Don’t Focus on the Market!
One of the best stock pickers in the business pays little attention to Mr. Market. In fact, he says, “when people start talking about the overall market, it just doesn’t have much meaning to me.”
A controversial piece of feedback today on the latest issue of Bill’s monthly publication, The Bill Bonner Letter, titled “Evil Is the Root of All Money.” (Paid-up subscribers can access it here.)
This is a wonderful title! I believe it is a more thoroughly true statement than you even intend.
Please let me be clear that I am an advocate of labor, production, wealth, and property. However, I am staunchly against money, because I believe your title is exactly correct. Evil is the root of all money. Money is a system of plunder. Always.
Where we disagree is in the idea that gold or silver are money. These are atoms, which is about as precise as anything can be in this world. Money on the other hand is so loosely defined as to mean anything.
There is much more to say to support these concepts. But I believe there is a compelling argument that cannot be refuted: that gold is gold, silver is silver, and they can be used as a standard in a system of exchange. They are not now, nor were they ever, money.
– Shane C.
Meanwhile, more feedback about the recent Grand Opening of Agora’s new international headquarters in County Waterford, Ireland…
Can’t we get a few more pictures of the new Irish office? Staircases are nice, but not nearly enough to satisfy the curiosity of many readers, I’m sure.[Bill’s wife] Elizabeth is a lovely lady. Glad to see she is out and about after the equestrian episode.
– Patrick D.
What a beautiful restoration. The entrance hall is reminiscent as seen in movies of the 1930s and 1940s.
Also, Bill, you have stated your age in past Diary issues. You must have robbed the cradle in marrying Elizabeth. How lovely she is.
– Richard S.
The worst crises offer the biggest opportunities. And, right now, there are events unfolding in Italy that could ultimately set off a financial shock in America far greater than what we saw in 2008.
That’s exactly why Casey Research founder Doug Casey and his team just released this urgent video. In it, you will learn how to protect yourself in this coming financial storm, and specific ways to profit from it.