The Real Heroes
The problem with government spending is not the form; it’s the substance. It’s not that the money is spent inefficiently; it’s that it is spent at all.
Tuesday, February 25th, 2025
Bill Bonner, writing from Baltimore, Maryland
We wonder how many federal employees complied with the DOGE demand?
Midnight last night was the deadline. CBS News:
DOGE's Elon Musk says federal employees must document their work or resign; some agencies push back
Federal workers received an email on Saturday instructing them to document five things they accomplished in the past week, and Elon Musk said those who don't reply would risk losing their jobs.
The email from the Office of Personnel Management, or OPM, had the subject line, "What did you do last week?" It instructed recipients to reply with five examples of what they got done last week, excluding any classified information, and asked workers to include their supervisor in their response.
They either presented some evidence to show that they were gainfully employed… or else…the President explained:
‘If you don’t answer, like, you're sort of semi-fired or you're fired, because a lot of people aren’t answering because they don’t even exist.’
The DOGE assault troops believe they can ferret out ‘waste’ and ‘corruption’ and save trillions of dollars. But they may be firing the wrong people.
The problem with government spending is not the form; it’s the substance. It’s not that the money is spent inefficiently; it’s that it is spent at all. And for many programs, the phantom employee, who doesn’t do anything, is the best of the lot. He does no harm… never complains, and never needs an expensive triple by-pass.
Imagine the emails DOGE might have gotten from the feds who were enforcing, say, Prohibition.
“I put in a very productive week,” one might have replied. “I destroyed three stills, arrested 49 moonshiners, and broke 1,450 bottles of whiskey.”
Or…
“I went to a speakeasy to study the illegal distribution of alcohol. I had a drink, just to verify that they were really serving demon rum. Then, I went home.”
Who shoulda been fired?
Imagine that they put the DOGE test to Iraq warfighters…or to the grunts in the war against drugs…or anti-poverty bureaucrats or DEI honchos?
The malingerers were the real heroes…they were the ones who did the least damage. The last thing we would want is a group of earnest federales diligently and energetically pursuing their malignant policies.
And the best way to deal with them is to cut their budgets and eliminate their programs. Anything less than that is mere window-dressing.
So back to our line of thought from last week. We’ll come right to the point, before we forget it:
Wages, GDP, sales and profits should never get too far out of line — one with another. There is no reason for stocks to spin out of orbit either. Chickens cannot be separated from eggs and corporations cannot be de-connected from the value of the output they produce. If they get too pricey, they can be expected to fall. If they get too cheap, the best bet is that they will rise.
And overall…compared to the value of the ‘stuff’ in our lives…stocks should not increase by a single penny…not even in 100 years. (More on this counter-intuitive assertion tomorrow.)
How could that be?
Stocks rose 366 times since 1925. But against what? Of course, the answer is against the dollar. And therein hangs a tale. It is a tale with a twist. And a spin. The funny money distorted the whole system…as we will see. Not just prices, but sales, profits, and GDP too.
In dollar terms, the S&P 500 gained 2.7% in January after a 23% boost in 2024. The economy in which these remarkable gains were recorded, however, only grew 2.8% for all of 2024.
Shouldna… oughtna… done that.
Same eggs. Why would the chickens be so much more valuable? As we will see, they are not really more ‘valuable’ at all. They have just been bid up in the speculative frenzy of what Tom calls the ‘greatest financial experiment in history’.
That experiment will sooner or later be shown to be a failure. Worldwide, there may be $100 — $150 trillion worth of barren chickens…asset values with no corresponding real output. And as this becomes more obvious, over the next 10… 20…or 100 years, the real return on US investment assets may be negative.
Stay tuned.
Regards,
Bill Bonner
[The BDI chart in the original email was replaced with this chart of the BDI divided by gold in the on-line version].
Market Note, by Tom Dyson
This chart shows the cost of moving important raw materials by sea over the last 25 years. It’s called the Baltic Dry Index. It comes from the Baltic Exchange in London, which reports the index level every day at 1 pm London time.
The Baltic Dry Index takes into account 23 different shipping routes, across three different vessel sizes, carrying coal, iron ore, grains and many other commodities. It’s one of the purest leading indicators of economic activity. If freight rates start rising fast, you know big orders for raw materials are coming in. But if rates are torpid, then you know there are more than enough ships to meet demand.
(Just watch out for the seasonality in the index. Dry bulk rates have a tendency to be weak in January /February and high through September/October. When the market ignores these seasonal tendencies, that is the time to pay attention.)
This year, for example, the BDI took a brutal dip. On January 30 the index reached 715. This was among the BDI’s lowest points this century. But it WAS the offseason, and it's already back above 1,000 now.
Lastly, the BDI is not adjusted for inflation. So I’m presenting this chart in terms of gold. You can see the total collapse of freight rates in gold terms, which is to say, the cost of moving materials like coal and iron ore by sea has gotten very cheap over the years.
It makes me wonder…if the BDI is so weak, what does that say about prospects for next year’s economic activity and growth?
I could write for hours about all the fraud waste and abuse I saw working as an engineer in the DoD, it was sickening. What was the hardest to take was when I tried to fix it and was punished or told to shut up especially after obama forced DEI on us.
I continue to believe that the first goal of DOGE, the strategic reason for its existence, is to expose the level of waste, fraud and abuse in government spending to the American people. And the waste, fraud and abuse is, well, it’s 100%. It’s every single budget line item in the entire Federal budget. There isn’t a single honest dollar. Not one. Where to begin? There was never going to be a successful “drain the swamp” objective, as we so often heard in Trump’s first term, by any kind of conventional, frontal attack, however you might think of what conventional means. It was going to have to be a kind of Trojan Horse operation, it was going to have to be a surprise attack, oblique and full of lightning moves that caught the enemy off guard and put them back on their heels. But even this was going to be a long shot, a kind of Hail Mary pass, or maybe a series of them. Success, if it ever comes, may come the same way that success in the German economy came after 1945. Said another way, weeds cannot be coaxed into becoming beautiful plants. And if they’ve choked the entire garden, well then, what is needed would seem obvious. But it is not obvious in America primarily because a very substantial portion of the American people love the weeds. They actually benefit from them or have figured out how to get rich off of them. A different kind of garden indeed.