Old Growth Government

What happens to the state when the cycle turns...and the rot sets in...

(Source: Getty Images)

Bill Bonner, reckoning today from Poitou, France...

It is that time of year.

We have just spent the summer with children and grandchildren.

Young children are cute. Teenagers are more challenging. And thus are parents prepared…for this time of the year.

A faint tear forms in mother’s eye as she helps the freshman unpack in his new dorm room, knowing that an important chapter in her life has come to a close. But there’s a feeling of relief too…and satisfaction. She has done her best. Now, life itself…the outer world…must take over. Her child will be bent by it, just as we all are, but maybe into a better shape.  

The heat dome over the south of France cracked last Friday. It was 100 degrees here on Thursday. So, we waited in Normandy.

Since then, the temperatures have fallen to seasonally normal levels. There was a high of 72 yesterday. Today’s high will be only 68.

Summer’s over. The children have gone home. The grandchildren are packing their books and heading back to school. A misty rain comes down. And the leaves hang sadly on the trees; they’ve all been given the death sentence.  

Love Thy Fate

We do not regret these things. ‘Amor Fati’ is our motto. We accept that there are booms and busts…births and deaths…ups and downs. Were there no downs, there would be no ups. It is only the relative motion that gives it meaning; it is the looming grave that makes life above ground so jolly.  

There seem to be cycles to just about everything.

Last week, we looked at MMT, Modern Monetary Theory. The idea of it is looney, that ‘money’ comes from the government, which can ‘print’ as much as it wants.  This money can be used to stall, delay and prevent the downswings – in markets…in economies…and even in our lives. 

Two eminences of the MMT genre, Tymoigne and Wray, tell us that a government that can borrow in its own currency:

…has an unlimited capacity to pay for the things it wishes to purchase and to fulfill promised future payments, and has an unlimited ability to provide funds to the other sectors. … monetarily sovereign governments are always solvent, and can afford to buy anything for sale in their domestic unit of account even though they may face inflationary and political constraints.

Yes. That’s right. They can ‘print’ all the damned money they want.

Until they can’t.

Spend, Spend, Spend…

That is, they can spend, spend, spend…until they “face inflationary constraints” and have to stop. Which is to say, the whole scam comes to an end, just like all flim-flams and bezzles.  

Yes, bamboozles have life cycles too. They emerge like lion cubs, cute and cuddly.  But as they age they grow fangs and claws – don’t try to keep one as a pet.  

There is a well-known cycle in business. A company begins by looking outward…towards the customer. It develops a product. It sells the product. It looks to the customer to make sure the product is well received.

It checks the sales figures, the profit margins, the customer feedback. It cuts costs – aiming to deliver the product at the lowest possible price. It checks out the competition, too, trying to stay ahead.

As it ages, however, its eyes turn inward. The chief engineer has photos of his grandchildren on the cubicle wall. He wonders if his daughter-in-law is giving them the attention they need. The manager of the sales team, meanwhile, has hired a data specialist…who has turned to a computer whiz to develop new algorithms for studying the figures. They’re scheduling a meeting now, once a week – via zoom – to track the development of this new software.  

The legal and recruiting offices, meanwhile, have their hands full. The company implemented a policy of mandatory diversity training for all its managers, but there has been some pushback. Some employees feel the company is becoming too ‘woke.’ It was bad enough, they believe, to hand the rainbow flag out in front of the headquarters on “Pride Day.” But now, a group of lesbians with orange hair has taken over in the ‘human resource’ office and “the new people have ‘diversity hire’ stamped all over them.”

Old Growth Government

The CEO has his eyes stuck on the stock price. Some wonder what will happen when he retires. Others think he should have retired years ago; ‘he doesn’t understand how times have changed,’ they say.

In the way of the world, huge old trees get worn down by age, worms, bugs, bores, drought, and storms. They fall. And the new trees flourish.

So too, like a holy man preceded by a street sweeper, the death of a business is foretold by disability. The old company’s employees – so concerned with their own hurts and status – forget to notice the customer; a rival steals a march on them.  

But what happens to an old government? Does it not look inward? Do its deciders and managers not suffer the decrepitude of age? What about the rich men north of Richmond? Do they not forget all about the common people…the taxpayers…the citizens?

What is the life-cycle of a government? Into what shape is it bent?

More to come…

Regards,

Bill Bonner