BALTIMORE – The Dow is back below the 20,000-point mark.
Federal debt, as officially tallied, is up to nearly $20 trillion.
The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp.
What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period.
Debt and asset prices have been rising three times as fast as GDP for 36 years! Best bet: Sell stocks and bonds (debt). Buy GDP. How? To be addressed in due course.
But let’s not get distracted. We’re applying a revolutionary new formula, S = rv (w-w – w-l), that will tell us whether President Trump is making America great… or not.
[Satisfaction (S) equals the real value (rv) of win-win deals (w-w) minus win-lose deals (w-l).]
As you can see, in order to do the job, the president must follow through on his vow to “drain the swamp.” Because that’s where the win-lose deals come from.
The swamp is home to the Deep State swamp critters – the major beneficiaries of regulations, wars, politics, government spending, bureaucracy, deficits, debt… and, importantly, the Fed’s fake money.
The bigger, deeper, and thicker the swamp… the less real wealth and satisfaction for everyone else.
Swamp critters – in Lower Manhattan or the upper Potomac – do not add wealth; they live at others’ expense.
They are always on the win side of win-lose deals. If you’re not one of them, you’re on the other side.
And if President Trump is really looking out for you… he must cut those win-lose deals.
We’ve gotten a lot of mail on the subject already. (See below for today’s batch.) Not all of it flatters your editor’s inflated ego or his fragile opinion of himself. But he reads all the mail with interest and curiosity before going into the bathroom to cry.
Now, back to the subject at hand…
People don’t willingly enter win-lose deals. That’s why they need the government – to force people to take the other side of the bad trade.
Most people instinctively know that if you’re forced to do something, it’s a losing proposition. But they think we live in a Super Bowl world, where one side always wins and another must lose.
That is, more or less, the way the pre-civilized world worked for thousands of years. Competition was a zero-sum game: One group won at another’s expense.
But since the invention of money, property rights, and the “do unto others as you would have them do unto you” code, capitalistic win-win deals have made the world richer.
People hustle. They produce. They trade. Everyone is better off.
We’ve also seen that the only way you can identify real value is by looking at what people really want.
Some choose gold. Some choose leisure. Some choose illegal drugs or Elvis outfits. People don’t necessarily get what they want, but they get what they deserve.
Government evolved in the pre-civilized era. It doesn’t trade. It insists. It doesn’t take “no, thanks” for an answer.
Government is not a seducer, not a sweet talker; it is a rapist.
(And here we draw a veil over the psychological perversities of the human race – the Patty Hearsts who fall in love with their kidnappers… the Soviet Gulag inmates who cried when Stalin died.)
This is not to say that the government produces nothing of value. There are a lot of good people working for the feds. Many do good work: Teachers. Doctors. Police and judges.
If the fire department gets your cat out of a tree, for example, that is a win for you.
But wait… Nothing the feds produce is subject to the discipline of price and quality competition or the need to satisfy a customer.
So, how do you know that more resources weren’t consumed getting the animal out of the tree than it was really worth?
And why should your neighbors – whose taxes support the firefighters – pay to get your mangy pet out of your damned tree?
Nothing is ever as neat and clear as we would like. There is always some ambiguity… and much doubt.
Here at the Diary, we take it as a fact of life that nobody really knows anything. Including us. We see through the glass darkly, along with everyone else. But at least our new formula wipes off some of the dust.
“War is the health of the state,” wrote American journalist Randolph Bourne. Swamp critters love it. Everyone else loses.
But if a foreign army is invading your country, you accept the cost of defending yourself.
You’re going to lose something… The question is: “How much?” And you’re happy to have the government take the lead in protecting you.
Since the War of 1812, there has been only one invasion of the continental U.S. Then, the enemy burned down whole cities and shot everyone who stood in its way.
Naturally, Americans did what they could to defend themselves. But it was lose, lose, lose… all the way.
The most recent estimates put the number of losers (the death toll) as high as a million, not to mention the economic loss, which was catastrophic.
And the invader, of course, was the U.S. feds themselves, invading Virginia in 1861. The South was crushed. The swamp grew.
Which brings us, finally, to three of Mr. Trump’s proposals: a “border tax” to force the Mexicans to pay for the wall… beefing up the “defense” budget… and funding more infrastructure programs with deficit spending.
Win-win? Or win-lose? Making America richer… or poorer? Draining the swamp… or adding more water?
Let’s see… tomorrow.
BY CHRIS LOWE, EDITOR AT LARGE
There’s a lot of talk these days about the “Trump rally.”
Between Election Day and Inauguration Day, the S&P 500 rose nearly 6%.
That’s the biggest such rally since Bill Clinton’s win over Bob Dole in 1996.
But what goes up can come down.
Today’s chart tracks the five worst peak-to-trough falls – or “drawdowns” – for the S&P 500 since President Hoover.
And as you can see, they have been pretty hairy.
As you can see, the worst drawdown – an 86% drop – happened under President Hoover.
The next worst – a 54% fall – happened under Hoover’s successor, President Franklin D. Roosevelt.
And the next worse – a roughly 52% fall – happened on President George W. Bush’s watch.
– Chris Lowe
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Another bumper Mailbag today. This time in response to the question Bill put on the table yesterday: “Does Trump’s Travel Ban Make Sense?”
I receive your emails with regard, for the most part, for the bits on the financial world. I do not give a damn about “your take on Donald Trump” or the actions my president takes to protect me and my family. After all, me and my family helped build this damn nation.
– Carl W.
About your Trump travel ban piece – it is a win-win. Trump is trying to do the best for America. Some nice words from you are appreciated!
– Clarence C.
Unlike how citizens are supposed to be treated, I firmly believe that all politicians are guilty until proven innocent! From that viewpoint, I consider your sniping at Trump perfectly reasonable and your occasional kudo maybe a bit fulsome.
For those who don’t like your style, I really wonder why they aren’t complaining to the RNC for nominating a horse’s ass and to the DNC for nominating a horse thief!
– Steve M.
As a “dear reader” of Bill Bonner going on 14 years (gasp!), I find his commentary critical, brave, non-political, mainly pragmatic, and thankfully devoid of emotional folderol.
Perhaps one day there will be “Bonner Suppers,” as there are now “Burns Suppers,” commemorating, reciting, and honoring the life, mind, and pen of Robert Burns.
– Laurie F.
You remind me of Will Rogers. He had a way of saying things with few words but with great meaning. His comments, like yours, always made you laugh because the humor made things so much clearer.
If Trump is such a great businessman, he would know that the best deals are the ones that give satisfaction to all parties sitting at the table.
– James B.
I think that Bill is really on to something with his equation S = rv (w-w – w-l). This could perhaps even be Nobel Prize material if we could develop quantitative measures for satisfaction, real value, and win-win versus win-lose deals!
I need to point out a mathematical flaw in Bill’s equation, however, because I am an engineering nerd at heart. The equation needs to include more sets of parentheses so the order of operations is correct. The equation should also include lose-lose deals. The equation should read: S = rv ( (w-w) – (w-l) – (l-l) ).
– Peter A.
I’m new to your Diary… and to studying economics and politics in general. I find myself anxiously awaiting your email each day. Your take on things is refreshingly different. I don’t always agree with – or even understand – some of your ideas. But I enjoy mulling them over.
Dear Bill, I hate you! Had a perfectly good keyboard, which is now ruined thanks to you.
Your line, “You shoot your neighbor’s cow and roast it for dinner. The neighbor complains; you shoot him, too,” tickled my funny bone to the point that coffee came pouring out my mouth and nose all over my keyboard.
Funny, insightful stuff. Keep up the good work. P.S. You will be receiving my invoice for a new keyboard shortly.
As Bill has been saying, President Trump has a long and difficult battle ahead as he faces his greatest threat… the Deep State.
The Deep State already controls just about every aspect of American life. In his latest warning, Bill exposes how the cronies behind the Deep State have pushed the world to the brink of an irreversible disaster.
Learn more here as Bill reveals how it could all unfold… and, more importantly, how it could change your life forever.