Empire of Delusion
A conversation between Bill Bonner and Porter Stansberry
Joel Bowman, taking refuge at an undisclosed location somewhere in Buenos Aires, Argentina...
Runaway peso inflation... crushing, dollar-denominated debt... looming currency default... a series of intensifying political crises... scandal and corruption at the highest levels...
None of that matters. Not here. Not now.
Indeed, the president could fall out a window. The national congress could spontaneously combust. Argentina’s entire economy could burn to the ground. As long as Lionel Messi does not stumble at the final moment... as long as the national football team clinches la tercera (their third world cup) a couple of weeks from now, nothing else matters...
An Argentine friend sent us a frantic voice message after yesterday’s game...
“If everything goes as God intended, and Messi brings home the trophy, to be remembered as the G.O.A.T., and we win the world cup... you’re really gonna see some crazy celebrations...
“But if we lose... you’re gonna witness something else entirely. If we get kicked out by England, or Brazil... you better prepare yourself. You’re gonna see civil war.”
Now, what your editor doesn’t know about football (or soccer, as it’s known in the US and Australia) could fill a stadium. We see latins waving flags from their balconies and we look around to see if maybe the pope is in town. Or there’s a state funeral parade. Or both...
But there is one salient detail about this year’s “world game” that did not escape our attention. After a series of upsets and surprises, Argentina advanced to the elimination round this Saturday, where they will play... Australia.
Well-meaning friends have advised us to go into hiding, in case Australia “does a Saudi” and pulls off a lucky upset. That we care nothing for the game will be no defense against the mob. They will be out for blood.
So we keep our head down... we affect our best American-gringo accent... and we say a quiet prayer for Messi and his Albicelestes.
Meanwhile, back in the shady world of finance and politics, the hubris and folly are likewise running at fever pitch. Whether the topic be the “Green Transition” or the “Great Reset,” the elites have mapped out a future for mankind that is likely to come at enormous costs, both in terms of capital and real, human lives.
To discuss all this and more, Bill recently caught up with his old friend and business associate, Porter Stansberry. Over the course of an unhurried hour or so, the pair talked about the post-1971 world of funny money, the dangerous idea that the green energy transition can somehow deliver 8 billion people into a miraculous, carbon-free utopia and what might happen when the whole empire of delusions comes crashing down, Argentina style...
Please enjoy Part I of a transcript from that conversation, lightly edited for clarity, below. And to hear Porter’s full presentation ‘The Boston Blackout of 2023’ scenario this winter, click this link now. It’s an informative presentation investors will want to see.
Empire of Delusion
A conversation between Bill Bonner and Porter Stansberry
Porter Stansberry:
Bill, thanks for joining me here today. For those who have never met him, this is Bill Bonner. He is my oldest mentor and the founder of Agora Inc. One of the foundations of the Global Investment Newsletter community.
Bill Bonner:
Thank you, Porter.
Porter Stansberry:
For those of you who don't know me, I'm Porter Stansberry, the founder of MarketWise, which as of late has been one of the largest providers of independent financial research. And I got my start working for Bill almost 30 years ago.
Bill Bonner:
Yes, I remember meeting you down in Florida. You drove up in a car and I thought the bumper was falling off or something like that.
Porter Stansberry:
That's probably what happened. And I recall meeting you and at the time you were very bearish and you had been bearish since about 1974.
Bill Bonner:
Not particularly bearish on the stock market, exactly. Bearish on the world in general. I think we've gone in the wrong direction since they changed the money system in 1971. So it's been a long time.
Porter Stansberry:
And we definitely agree about that. This is back in the '90s, I was more convinced that the positive pressures of changes to telecom and other kinds of technologies would be bullish, at least in the short term. And I think that we were both right at different times.
Bill Bonner:
Different times. Well, certainly that is one subject which I'd like to discuss at length sometime with somebody, but not necessarily today. But it's the way in which technology was thought, in the end of the '90s, to change our lives forever. I didn't think so, but most people thought that the technology would boost our productivity so much that we wouldn't need capital anymore. You wouldn't need to save because information was said to be capital. And with the new internet, you could get all the information you wanted. Well, that whole idea was a fraud. It did not work. We have all the technology in the world right now. Everybody's connected to all the information in the world...and yet, growth rates have been going down that whole time.
Porter Stansberry:
All right. Okay. So here's what's very interesting about that. For some people, information was capital; namely us. We used the information very effectively to lower our operating costs, to greatly increase the productivity of publishing and to change our profit margins permanently.
Bill Bonner:
Yes, it was a big deal.
Porter Stansberry:
So for some people it was a very big deal...
Bill Bonner:
Overall it was not.
Porter Stansberry:
And I will tell you the differences between our thinking on this are very, very, very subtle. I think there's a larger point that Bill is missing, or at least not talking about in this so far, which is that productivity gains were substantial between the mid-90s and the twenty-teens. And if you look around and you go to something like, let's say a gas station, where before there would've been three or four pumps and there would've been four or five people working there. Now you go to a gas station and there's 24 pumps and there's a huge store and there's two people working there.
Bill Bonner:
Yeah.
Porter Stansberry:
Technology has allowed gains and productivity and gains in public safety. Nobody carries cash anymore because they've got ATM cards, people can buy things on their phones and lots of other ways that telecommunications technology have made the world safer and more efficient. But hang on, there's a big catch to it, which was that while productivity was increasing over the last 25 years, the money printing and the credit boom was going even faster.
Bill Bonner:
Yeah, that's right.
Porter Stansberry:
And so if you look at real after tax wages, they haven't changed at all. In fact, they've gone down, and this is in one of the most important ways that the middle class has been gutted because wages have not kept pace with productivity gains during the information boom.
Bill Bonner:
Yeah, that's right.
Porter Stansberry:
And so in that way, I agree completely with Bill.
Bill Bonner:
Well, economics is a dismal science, as we all know. And public policy is even more dismal because you never know anything. And in this instance where we had this huge increase in connectivity and information flow, you actually saw GDP growth rates go down, which seemed impossible. It's like the Industrial Revolution happened and yet people got poor. It didn't happen after the Industrial Revolution, but it did happen after the communications revolution. And you have to wonder what part of that was the fact that the communications revolution itself was a flop, and what part was caused by the fact that at the same time governments were growing in power, in the money they spent and so on, in an amazing way so that they offset the gains that might have occurred otherwise from this information revolution?
Porter Stansberry:
Well, I agree with the latter point. I mean, completely. And you have seen that in our businesses. Our businesses and many other businesses have done very well because of changes to technology. But we haven't been able to outpace increases to taxes...
Bill Bonner:
No.
Porter Stansberry:
… We haven't been able to outpace the soaring rates of inflation, and we haven't been able to outpace the enormous growth of violence because of governments. Big wars that people seem to have forgotten about.
Bill Bonner:
Yeah, yeah.
Porter Stansberry:But how much money did we spend in 20 years in Afghanistan? And what was it for, again?
Bill Bonner:
Nobody knows.
Porter Stansberry:
No one still knows.
Bill Bonner:
That's right.
Porter Stansberry:
And it's so funny, everyone was condemning the current president for leaving Afghanistan, but I didn't hear anybody really complaining about us going there.
Bill Bonner:
No, no. That's right. The way I look at it, it looked to me as though you could argue that the progress in America continued up until 1999 with the rollover, it happened to coincide with the information revolution. With that rollover at the end of the century, things started to go downhill. And we had a series of very bad presidents making very bad decisions. We had the war on terror...
Porter Stansberry:
"Mission accomplished."
Bill Bonner:
... Which cost $8 trillion, "Mission accomplished," and all that. Then we had the Wall Street bailout. That was another four trillion mistake, which also had the bad effect of corroding our capitalist system, which has very bad consequences to it. And then we had the covid come along...
Porter Stansberry:
Which made everything else look small in comparison.
Bill Bonner:
... And they did another huge bailout. Yes, it did.
Porter Stansberry:
So these bailouts tend to grow by tenfold. And I would go back and I would say the real beginning of the end of America, as I have written a documentary called that, was with the bailout of long term capital management.
Bill Bonner:
Yeah. You could argue that point.
Porter Stansberry:
So the bailout of long term capital management was about a trillion dollars. It was 800 million, something like that. So the mortgage bailout was then 10 trillion.
Bill Bonner:
Right, right.
Porter Stansberry:
And then the covid bailout was who knows how many trillion?
Bill Bonner:
Yeah, who knows much? Yeah, that's right.
Porter Stansberry:
Globally.
Bill Bonner:
But here we are.
Porter Stansberry:
Here we are.
Bill Bonner:
After these huge mistakes in public policy, mistakes that resulted in the huge losses we have, declining productivity, declining GDP growth, we have accelerating debt growth. And this is not going to end well.
Porter Stansberry:
No, it's not. And going back to a firm measure of this, if you look at the production of electricity per capita in the United States, it peaks in the late-90s. And energy consumption and energy production are the hallmarks of greater lifespans, of increases to productivity, of increases to per capita GDP. You can very, very accurately define the wealth of a society by how electrified it is and how productive it is at creating electricity. And that brings us to something that really we came here to discuss today, which is this oncoming car crash between two separate delusions that have pretty much ruled the media and the public debate, if you will, over the last decade. And the one delusion was that we could treat almost any social ill, whether it was a collapsing mortgage market or a health crisis, with vast increases to poorly allocated government spending financed by debt.
Bill Bonner:
Loosely speaking, that we could treat any problem with money, but... it was fake money.
Porter Stansberry:
Right. By the way, think of the school systems in the United States. The spending per student continues to go up and up and up and the test scores keep going down and down and down. Well, in our economy, government spending keeps going up and up and up, and the quality of public healthcare keeps going down.
Bill Bonner:
Yeah.
Porter Stansberry:
The quality of public safety keeps going down. So more money isn't the solution, but the delusion has been that it would cure all ills. And the other delusion, that seems very obvious now for the last 10 years, is that if economies spent heavily on renewable energy sources, that they would end up being cheaper and cleaner than fossil fuels and lead to a bright, happy Greta Thunberg future where everyone's Bambis and butterflies.
Bill Bonner:
And we don't know the outcome of that yet because that is just the beginning. And whether the science of it is right or wrong, we don't know that either. Nobody knows.
Porter Stansberry:
But what we do know is that globally we have spent trillions on renewables and the countries and people who have invested the most in them have had the least reliable power grids and the highest cost for electricity. And that has led to a crisis now where even in the United States we're running out of diesel fuel. And in Europe, of course, they're completely out of natural gas. And they're very concerned about people freezing this winter.
Bill Bonner:
Well, when you tell everybody that they're not going to be able to buy internal combustion automobiles, then the people who make fuel for internal combustion engines all of a sudden don't want to invest in new plants or equipment. And pretty soon you don't have enough fuel for them.
Porter Stansberry:
And you've seen this ridiculous farce where President Biden on one side of his mouth keeps saying that we're going to lower prices for gasoline, and the other side of his mouth keeps saying, "There's never going to be any more drilling." Well, which one is it? And that is leading to a lot of instability and uncertainty in the most important market in the world, which is the market for power.
Bill Bonner:
Right. Well, the thing is that everybody would like to protect the planet if it were possible. But right now we have 8 billion people, 8 billion people who rely on old fashioned energy. And were it not for those old fashioned energy drillers, diggers-
Porter Stansberry:
A lot of people would die.
Bill Bonner:
Well, they would die because they need that to survive. Now we get around 15% of our world power from alternative or renewable sources. So that leaves 85% of the world's population, which is something like 6.5 billion people, depending on traditional energy sources. And by the way, it's not just you turn off the tap, you raise the price. There are something like 3.5 billion people in the world who live on $5 a day. So $5 a day brings them enough calories, enough food, to survive. And if you raise the price, they don't get enough calories, they get a fewer calories than they need and they don't live as long or become susceptible diseases or something. So it's all very well for people who fly around in private jets to talk about reducing the amount of fuel available and raising the price of energy in order to protect the planet, but it doesn't help... Most of the people in the world depend upon that fuel.
Porter Stansberry:
There's a logic here that most people don't get. And that is, it's one thing to be in favor of cleaner sources of energy, but it's another thing to be anti-human.
Bill Bonner:
Oh yeah.
Porter Stansberry:
And if you tell people you're never allowed to use coal anymore, for example, if you did that overnight, there's no question that billions of people would die. You can't simply mandate that people stop using reliable energy sources, because human beings have to have it. And it's a very ugly underlying theme in the environmental movement that humans might not have the right to be here, that the earth might be more important than the people.
Bill Bonner:
Well, that there are too many people anyway, they say. And nobody would come out and say, "Well we got to get rid of some people." But that is kind of, as you say, a subtle underlying theme.
Porter Stansberry:
It's a very dangerous idea.
Bill Bonner:
Very dangerous. It reminds me most of The Great Leap Forward in China because there you see that same sort of play, of fantasy, connecting to unblocked political power. Just like the green revolution wants to move us quickly into the future…
You can watch Porter’s full presentation on the ‘Boston Blackout’ scenario by clicking this link. Please note there is no commercial relationship between Bonner Private Research and Porter’s new enterprise. We’re passing along the presentation because we think it’s excellent and worth your time.
Great discussion.
Had a college professor way back in the 1970s that redefined GNP(now GDP) for his students. He said the official definition of GNP is that it represents the total value of goods and services produced by an economy(country) in one year. He said that is not what the statistic released by the government and called Gross National Product represents. He said a much more accurate definition of GNP is that it represents the “total value of money produced by an economy” in one year. He then described the disconnect between money and goods and services and the dangers to a national economy that occur when that disconnect grows too large. This was in 1978.
To add a bit to your discussion of productivity gains produced by technology starting in the early 1990s. They were real, but they ended up being part of the great wealth transfer from the lower and especially the middle class to the elite and to Wall Street. What became the upper middle class did benefit in terms of the rapid growth in the value of their 401Ks, IRAs, etc., but they didn’t benefit like the 1% or the 3% did, not even close. The average wage earner did not participate in the money harvest and the blue collar manufacturing worker was effectively eliminated. Recall that the technology revolution happened at the same time that America’s industrial base was gutted and manufacturing jobs sent to China. This was all part of the strategy, part of the great “productivity” push by large corporations, that, along with technology deployment, pushed profits and stock price gains to historic levels, and convinced Wall Street that things were so fantastic that the old valuation models no longer applied.
It all would seemed to have come to abrupt end in 2008 but Ben Bernanke found a way to cover up all the sins(there were many) with money printing and bailouts, and it was off to the races again. Here we are at the end of 2022 with the Dow at 34,000. It makes no logical sense, but perhaps the piper will have to be paid in full in 2023. Time will tell
There's a simple solution here. Every environmentalist who sees human beings as a threat to the planet has a moral obligation to commit suicide...