Roadside Slaughter and Railway Robbery

America lurches from Japan-like slump to the Pampas playbook...

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

And as for fortune, and as for fame
I never invited them in
Though it seemed to the world they were all I desired
They are illusions
They're not the solutions they promised to be

~ Don’t Cry for Me Argentina by Andrew Lloyd Webber

Twenty years ago we predicted America’s long trajectory ahead: “Tokyo… then Buenos Aires.”

We might have been holding the map upside down. But today, we return to our travel planning. Where are we headed? How should we pack? 

In 1999, we figured that the dot.com bubble was bound to pop and that the US economy would likely turn into a Japan-like slump. Stocks would go down, we thought. The economy would sink. It would take many years to ‘fix’ the problem… we imagined. And it would only be done in the worst possible way – by inflating, a la Argentina.

In the event, the dot.com bubble did pop and the economy did sink. In the first two decades of the 21st century, per-capita GDP growth rates were only half of those of the previous century.  

And stocks did try to follow in Japan’s footsteps. Not once, but three times – the  dot.com crash itself in 2000… then again, in the mortgage finance crisis of 2008-2009… and finally, in the Covid Crisis of 2020.  

Each time the feds came to Wall Street’s rescue with more money – so much so that two decades into the 21st century the Fed has added $8 trillion to its balance sheet (a rough measure of money supply footings) and the US ‘national’ debt has increased by $23 trillion.

Wall Street’s gamblers and high rollers rejoice. The Dow rose from 11,000 in 1999 to 36,000 in 2021. And the rich – the top 10% who own more than 80% of America’s stocks and bonds – got much richer. They gratefully returned the favor, generously providing funds for political campaigns and lobbying outfits.   

But Main Street slumped… manufacturing, a main source of high-wage jobs, continued to move overseas… real investment per capita (essential for real economic growth) fell… and flyover America grew surly and restless.    

Thieving Hordes

In 2008, a new president promised “Change.” But no change of direction was forthcoming. And then, in 2016, another new president promised to Make America Great Again. But he turned out to be more in the bogus Latin American strongman tradition than a genuine reformer.   

And now, the Japan visit, as imperfect as it was, is over. Buenos Aires, here we come!

A news item a few months ago caught our eye. A truck was carrying beef cattle through a poor neighborhood in Buenos Aires, on its way to the abattoir. The local people stopped the truck, unloaded a cow… and slaughtered it right on the street.

Last week, from California, came news that hordes of thieves had broken into boxcars and stolen whatever they could find. From Bloomberg:

CBS footage shows lines of packages from carriers including UPS and  Amazon.com Inc., many of which arrived from Asia through the nation’s largest ports of Los Angeles and Long Beach, stretching along the railways. The looters raided packages that contained all sorts of consumer goods, while abandoning those seen as not valuable enough, including Covid-19 tests and EpiPens, devices used in emergencies to treat severe allergic reactions.

People are growing desperate, lawless, and dependent. They no longer count on decent jobs where they can earn money. Instead, they look for opportunities for larceny, grift, and welfare. ‘Transfer payments’… money that the government takes from the people who earn it in order to hand it over to the people who didn’t… were only 5% of GDP in 1970. Today, they’re more than 20%.  

And while the lower classes commit petty crimes, the upper classes go for grand larceny.  

Also in the news last week, Fed governor Richard Clarida resigned. He is the third resignation in recent months, as it comes to light that Fed honchos have been front-running their own decisions for years.  

The Pampas Playbook

But even their millions are small change compared to the trillions skimmed by the elite over the last 20 years. Were it not for the conniving and fiddling by the Fed, their stock market fortunes – now about $48 trillion – would probably be worth less than half as much as they are today.

Along with the corruption – paying for things you don’t need with money you don’t have – has come inflation. At the official rate, US inflation is now at 7%... the largest 12-month increase since 1982. 

But wait, in the 1990s, the feds changed the way they calculate inflation. If it were toted up the way they did in 1982, today’s rate would be above 15%.  

Even at its peak in the 1970s, US inflation never got that high. To get today’s inflation you have to go back 96 years – to 1917 – when the rate rose over 17%.

And lies! In Argentina, inflation has always been blamed on big business, capitalism, the US…you name it. And now in the US, the Biden team, along with demagogues such as Elizabeth Warren, are following the Pampas Playbook, trying to shift the blame away from their own malign policies.

As Lincoln put it, you can fool some of the people all of the time and all of the people some of the time – and, as the Argentine government has proven over the last 70 years, that’s plenty!  

To be continued, tomorrow...

Regards,

Bill Bonner