The Real Purpose of Government
In the logic of democracy (combined with the magic of a fake currency) political parties compete for power by promising voters more of other peoples’ money. It leads them into debt and inflation.
The larger the size of the state, the more freedom and property are curtailed.
Javier Milei
Friday, December 13th, 2024
Bill Bonner, writing today from Baltimore, Maryland
Why is the risk of a major bear market greater than most people think?
Why will Musk and Ramaswamy fail to halt US deficits?
And when will the US be ready for a genuine change of direction?
First, Fortune tells us that the captains of industry are looking for good times ahead:
Fortune 500 CEOs are brimming with confidence following swift and decisive Trump victory
Porter Stansberry warns that ‘The People’ too have lost their fear:
46% of mom-and-pop investors in the U.S. think there’s less than a 10% chance of a market crash over the next six months... the most optimistic outlook since June 2006.
And the New York Post reports on the Palm Beach real estate market:
In the wake of the 2024 presidential election, the Palm Beach “Trump bump” is real, according to brokers. Take this West Palm Beach waterfront penthouse at Forté on Flagler, which just sold for its full $33.5 million ask. The all-cash, off-market deal at 1309 S Flagler Drive closed within six weeks, brokers said.
Rich and poor... on the factory floor as well as in the boardroom... people are ebullient; they believe the Trump victory will take assets to even dizzier heights.
That’s not how it usually works.
The stock market is now so expensive that a sell-off should be expected... and feared. Buying property in Palm Beach? Maybe wait ‘til the ‘Trump Bump’ deflates a little? Bitcoin? Why not wait for the next pullback? Prices go up... and down, right? Nobody knows what will happen, but it is definitely wise to be in Maximum Safety Mode, until we find out.
But wait... with Mr. Trump in office... maybe ‘usually’ no longer applies. Maybe we don’t have to worry... maybe it is a New Era?
To help figure it out, let’s look at how the old era works.
Governments only really accomplish one sure thing: they redistribute wealth and power, from the disfavored masses to special groups of clients, insiders and elites. They do so under many different banners — freeing the Holy Land, healing the sick, or protecting the earth from CO2. Even MAGA.
They do so under Republicans, Democrats, Communists and Theocrats. No matter, the only reliable result is that wealth and power that used to be controlled by ‘The (undifferentiated) People’ become the property of selected groups.
Here’s the basic calculus. In a democracy, if elites take too little, they leave money on the table to be seized by rivals. Other political groups will promise voters more benefits... and win elections. This was, approximately, the whole strategy of the Democrats for many years, promising more spending, until the Republicans discovered that ‘deficits don’t matter’ and matched their giveaways.
In the logic of democracy (combined with the magic of a fake currency) political parties compete for power by promising voters more of other peoples’ money. It leads them into debt and inflation, which they use to get more of The People’s wealth, without increasing current levels of taxation.
But if they take too much, like any parasite, they weaken the host and end up with less for themselves. That is the problem almost all major governments now face. They have taken too much. Native populations are falling. GDP growth is punkish. And more and more of current revenue has to be applied to paying off past claims (debt service.)
And then, if they continue, a ‘bad thing’ happens... war, hyperinflation, revolution, depression... followed by a change of direction (the Soviet Union, 1991; Argentina 2023.)
So, can Team Trump prevent the bad thing by operating more efficiently?
Imagine an efficient welfare state. It collects money and then redistributes all of it to the taxpayers in pension and medical benefits. The elites have power; they control the disbursements. But no politician ever got rich by operating efficiently. In order to gain wealth, there must be grease... some fat that will stick.
A warfare state is more easily corrupted. Taxpayers do not stand in line to get missiles from the Pentagon. They have no idea how efficiently their money is spent. The Pentagon doesn’t even submit to a proper audit... so they don’t know where it went.
The warfare state can buy toilet seats for $3,000... or fighter jets for $182 million — leaving a much greater percentage of gross revenues available for redistribution to elites... and lobbying for more spending.
Efficiency defeats the real purpose, which is to extract wealth, not to create it. As Milei tells us, it’s the size of the government — its gross revenues — that must be reduced. Because the leech doesn’t stop sucking just because the host joins a health club; it only stops when it has to stop... after the host dies.
That’s when you get a genuine New Era.
It took inflation at 3,700% to stop the bloodsuckers on the Pampas... The US is nowhere near there.
Regards,
Bill Bonner
Doom and gloom, Bill, doom and gloom. We are screwed and all the election did was trade one group of elites for another. You may be correct although your perpetual predictions for economic ruin in America have yet to come true. Your faithful followers, like me, watched as the optimists have reaped the profits of a prosperous stock market. I know, Bill, you have the benefit of history on your side and, frankly, I feel the odds of the flimflam are in your favor in some regards. However, America’s greatest offering to itself is “hope.” All those illegals and the much-smaller set of legal immigrants are coming here because they have hope in their hearts that their lives will be much better in America than anywhere else. Your diatribe aims to destroy that hope. I have yet to read any solutions to your doom and gloom other than don’t do what we are presently doing. So, Bill, put your money where your mouth is. Take a deep dive into all areas of government and tell us what you think solutions are. Be specific with not one word of criticism. The critic who never has anything to offer but criticism soon evolves into a harpy and becomes irrelevant. Start sowing some hope, Bill.
"it only stops when it has to stop... after the host dies" Reminds me of Ayn Rand's conclusions in Atlas Shrugged, where the producers had to be convinced to stop feed the beast in order for it to fail and open the way for a new era.