Rendezvous with Catastrophe

A debt-funded stimmie is a hollow deception; it will just increase prices. Because the chicken is barren; there is no real output to justify the expense. Real earnings must be earned.

Source: Getty Images

Monday, February 24^th, 2025

Bill Bonner, writing from Baltimore, Maryland

“You are a traitor and a fool,” wrote a Dear Reader.

The ‘traitor’ charge has no sting. But as for the ‘fool’? He may be on to something.

Is it traitorous to notice that the US is being pulled down by its own Deep State scalawags, its jacked-up world improvers and its over-stretched empire? We don’t think so.

But it is probably foolish to say so. Like noticing your wife’s first gray hairs, it might be best to keep it to yourself. So, let’s look at today’s confusing, chaotic, nonsensical dots.

How about a $5,000 stimmie check? MarketWatch:

Trump Adds Support For DOGE Dividend

Donald Trump loves putting his name on things — buildings, steaks, and even stimulus checks. Now, he’s added fuel to the idea of a $5,000 DOGE Dividend stimulus check to taxpayers, courtesy of the Department of Government Efficiency. At a speech in Miami on Wednesday, Trump said his administration is considering a plan to give 20% of DOGE’s savings back to the public.

Giving money ‘back to the public’ is spending it. Not saving it. A $5,000 stimmie will be welcomed by many people… but so were ancient Rome’s bread and circuses.

Last month, the US ran a deficit of $127 billion, which brought the total to $838 billion in debt for the first four months of the fiscal year. At this rate, the annual deficit could top $2.5 trillion. As long as there is any deficit at all, the money being passed out to buy support from voters is financed by debt — bringing America’s rendezvous with catastrophe closer.

Even the most pro-American of old-timers are beginning to wonder. For more than half a century, Warren Buffett has advised investors to ‘never bet against America.’ Well, now the traitor is betting against America’s businesses.

MarketWatch:

It surely says nothing cheerful that Warren Buffett, the world’s most famous and successful investor, now holds more than half of his company’s net assets in cash and Treasury bills. Or that in his latest annual letter to investors, the 94-year-old has taken a break from his usual patriotic boosterism, and instead is warning about the risks to America from “fiscal folly” and from “scoundrels and promoters” who “take advantage of those who mistakenly trust them.”

Sen. Rand Paul explains how the scoundrels operate. MSNBC:

“Things are not as they appear to be in Washington,” Paul declared. “While Elon Musk and the Department for Government Efficiency (DOGE) are trimming the fat, finding billions—if not trillions—in waste, fraud, and abuse, the Senate is rushing to pass a budget that increases spending. What gives?” Paul pointed to the Senate’s proposed budget, which includes a $150 billion increase in military spending, $175 billion for border security, and $20 billion for the Coast Guard. 

Last week, we were describing chickens and eggs — that is, the elegant way in which the key elements of a real economy are connected. No chickens, no eggs; no eggs, no chickens.

If sales are to go up, consumers must have more money to spend. But a debt-funded stimmie is a hollow deception; it will just increase prices. Because the chicken is barren; there is no real output to justify the expense. Real earnings must be earned. Businesses pay their employees for their output.

But the expense depresses their earnings. So, they can only afford to pay for things that are actually productive. A business can cut costs and thereby increase its earnings. It can innovate and add wealth to the whole society. But if its sales grow faster than GDP, it must be taking them from other enterprises.

And yes, of course, the whole economy can grow — thanks to Progress! We enjoy painless dentistry, self-driving cars, and movies streamed into our houses; we believe we are better off. But we can’t all enjoy above average wealth. And as a society, we would not be one penny richer — even if the feds were to give us each a check for $1 million.

But what about asset prices?

Can the chickens (producers) ever be worth more than the eggs they produce? Can they go up and up forever, making stock owners richer and richer?

We’ve seen that US stocks rose 366 times over the last 100 years. How much of that was real? And what is likely in the next 100 years?

Tomorrow… more un-patriotic treachery… and more foolish observations.

Regards,

Bill Bonner