Banana Republic Prices
The US has become a banana republic without the bananas. The practical importance: shouldn’t its capital assets — its stocks and bonds, primarily — be marked down to banana republic levels?
Thursday, November 13th, 2025
Bill Bonner, from Baltimore, Maryland
How many angels can dance on the head of a pin?
Gosh. We don’t know. Three? Three hundred?
Maybe the geniuses at the Bureau of Labor Statistics can tell us? Or how about one of the hundreds of Ph.D. economists who work for the Fed?
Heck, they claim to know what the interest rate should be...and what the employment rate should be...and what the inflation rate should be.
But anyone who has a family knows that there are some things you can’t know and can’t control. Forget the angels; even the closest family members can surprise you. We humans scarcely know ourselves, let alone others. That’s why the study of humans and their works is said to be ‘humanistic,’ not ‘scientific.’
And if there is anything new under the sun, the Trump bunch hasn’t found it: the practical importance of this is that our descent into fake science…$38 trillion in debt... on its way to $185 trillion by mid-century. A strongman government. Incoherent, capricious, almost whimsical, policy changes. Revenge against opponents. Tariffs. Deficits. Corruption. War. Military parades and a gilded-up presidential mansion. The US has become a banana republic without the bananas. The practical importance of this is a question: shouldn’t its capital assets — its stocks and bonds, primarily — be marked down to banana republic levels?
But we’ll get to that.
Literature...history...’moral philosophy’ — all are narrow, fogged-up windows into human life. Numbers, theories, statistics, formulae, and the Fed’s ‘dynamic stochastic general equilibrium’ model, on the other hand, are mostly frauds. From the Phillips Curve to Picketty’s ‘r is greater than v’, they are used by the ruling elite for their own ends.
The 2% inflation target, for example, is basically a license for the feds to depreciate the nation’s currency — using the proceeds however they please. The ‘full employment’ mandate too assumes the Fed would know what ‘full employment’ actually is...and then ‘stimulate’ the economy with lower interest rates, if necessary, to reach it. What actually happens is that new money is given to Wall Street where it is used to pump up the assets of the wealthiest people in the country.
The ‘wealth effects’ doctrine is more direct; the Fed thinks that making the rich richer will lead to more GDP for everyone.
But every delusion blows up.
An economy is an aggregate of what people want and what they do.Trying to measure it is like trying to make a detailed drawing of where the Atlantic meets the Irish coast. Tides, storms, wind, waves…it changes shape all the time. What are the busy-bodies to do but simplify, idealize and generalize? They don’t even get their feet wet.
Prices change minute to minute, connecting current conditions to the deep currents of raw materials, technology, the cost of capital and so forth. The price of fuel, for example, depends on millions of decisions...and countless bits of ‘information’ coming from all over the world. New discoveries, new technology, new demand, an exceptionally hot summer — the inputs are infinite.
But the elites don’t want to learn from true prices; they want to control phony ones.
In its most block-headed form, political interference can take the form of direct control of prices. Emperor Diocletian, two millennia ago, was a pioneer. Prices were rising, causing discontent throughout the empire. But rather than address the real problem — the government was spending too much money and depreciating the currency to pay for it — he set prices himself, blaming greedy businessmen...“who seek private gain and are bent upon ruinous percentages of profit — to their avarice, ye men of our provinces, regard for common humanity impels us to set a limit.”
Richard Nixon picked up the price control schtick, 1973:
‘I have decided that the time has come to take strong an effective action.. Effective immediately, therefore, I am ordering a freeze on prices.1 This freeze will hold prices at levels no higher than those charged during the first 8 days of June. It will cover all prices paid by consumers. The only prices not covered will be those of unprocessed agricultural products at the farm levels, and rents.’
And Joe Biden leaned on the ‘greedy businessmen’ hoe in 2024:
Let me be clear to any corporation that hasn’t brought their prices back down even as inflation has come down; it’s time to stop price gouging.
Prices that are controlled by the feds are false. When they are set at artificially low levels they send the wrong message to producers.
Unable to make money at the lower prices, they cut back on output.
The result: shortages and poverty.
Even the angels know better.
Regards,
Bill Bonner