The Daily Reckoning - The Rise Of The Demopublican

verfasst von Firmian, 15.09.2003, 19:31

-->The Rise Of The Demopublican

The Daily Reckoning

On the way to London

Monday, 15 September 2003

--------------------

*** The international press: revenge of the desert
tribesmen v. Britain's First Lady's (and her husband's)
guru's memoir...

*** Our favorite drama,"The Jobless Recovery!"... and other
stories...

*** The absence of trend..."Emotional
Acupuncture"... Mogambo on Monday... and more!

--------------------

We are on the train, en route to London. Temporarily cut
off from our usually unreliable Internet sources, we are
forced to turn to the French and English press for the
latest news...

French newspapers are much like those in America: they take
themselves seriously. Headlines are sober and ominous,
photos are leaden, and the barren words of politicians are
passed along as if they were important.

On the front page of the Figaro is a large photo of Colin
Powell giving a speech. Behind him is what appears to be an
official seal of Iraq, where the nation's qualities are
presented in both English as well as the local language,
whatever that is. We find that the government of Iraq, what
that is, is committed to Liberty, Security, Equality and
Justice; free people always live with insecurity and
inequality, but that does not seemed to have occurred to
either the Iraqis or the Americans.

The people who write these slogans must moonlight as
newspaper reporters; the news in French and American papers
is as puerile as a state seal.

While Powell promised to look into the shooting deaths of
Iraqi policemen, a photo on page 2 shows a group of them,
still very much alive, waving automatic weapons and vowing
revenge. What the desert tribesmen don't know about revenge
is probably not worth knowing, the Figaro did not observe.

We only mention it here, because the English press, which
is much more shameless and entertaining, reports that
America has suffered 6,000 casualties in Iraq so far.
Casualties are described as events requiring evacuation for
medical reasons. In both the English and French press, the
number is expected to rise.

The English papers know what's important. The cover story
in today's Daily Mail is this:

"Nightmare in Downing Street as Caplin plants 1 million
pound timebomb under Blairs."

An explanation: Prime Minister Tony Blair is America's
foremost and only major ally in the Iraq war. Carole Caplin
is a sort of guru to his wife. She helps the first lady of
Britain release her pent-up sexual energy, according to the
paper, by various methods, including rubbing her down in
the shower. A former topless model, she is also said to rub
down the Prime Minister, giving him weekly massages to ease
his tensions.

But, exactly what she does or doesn't do may soon become
much better known to the average voter."The friendship
between Ms. Caplin and the Blairs is teetering on the
precipice," says the Daily Mail,"and now it is quite
possible that a final - and cataclysmic - split will
occur." Why? Because Ms. Caplin is reportedly entertaining
an offer of a million pounds - about $1.6 million - to
write her memoirs.

"This could finish off the Blairs," says one analyst.

While we're waiting for this cataclysmic event, we turn to
Addison Wiggin for the latest market news:

-------------

Addison Wiggin in Paris...

-"Rapid Growth Seen For The U.S. Economy," says the front
page of the NYTimes..."Doubts Rise on Strength of U.S.
Recovery," opines the Financial Times... Reading the
headlines this morning is a bit like trying to decipher the
letters my 3-year old son says he's writing on scratch
paper. This morning he insisted a figure that looked
remarkably like a backwards 'p' was, in fact, a 'w'... the
first initial of his last name.

- Mr. Market, for his part, provided no help. Friday, late
in the day, the Dow inched its way into positive
territory... up a measly 11 points to close at 9471. The
Nasdaq scrimped 8 points to 1855... the S&P added 2 to 1018.

- The market... gold... bonds... the dollar... traders,
brokers, financial analysts, lumps, economists... like a
writhing harem of unrequited mistresses, the whole
financial world appears to be biding its time, waiting for
a wink, nod or double take... something, anything... to let
them know a kiss is on its way. Or that the fix is in and
another lover has been chosen...

-"We waited for years for productivity to accelerate,"
laments a piece in the NYTimes Economic Review section this
morning, for example. It continues (mysteriously akin to a
Kurt Richebächer analogy we ran on August 21):"And now,
like Godot, who never showed up, that day never arrived.
Productivity is soaring, holding out the promise of rising
prosperity. Unfortunately, now we're waiting for the
prosperity to kick in." The vaunted productivity miracle
appears to have nabbed the starring role in one of our
favorite dramas here at the Daily Reckoning:"The Jobless
Recovery".

- Despite predictions of GDP growth in the 4-plus range,
for example, monthly payrolls plummeted by 93,000 in August
-"far worse than expected," reports the FT - while weekly
jobless claims rose unexpectedly."The biggest risk facing
the U.S. economy," Moody's John Lonski told the paper,
tipping his hand to the real danger:"You cannot
indefinitely sustain a brisk pace of consumer spending
without job creation."

- Consumer sentiment numbers for September appear to
concur. The University of Michigan survey came in nearly 3
points below initial predictions. But the figure is not
sluggish enough define a trend...

-"Inflation Rates Fall Worldwide," reports an otherwise
promising headline in the Washington Post. According to the
IMF's top economist Kenneth Rogoff, who was speaking at a
Federal Reserve of KC conference,"inflation has dropped to
the 'moral equivalent of zero' in the U.S. and other
industrial nations... by the end of the decade or even
earlier, inflation will be tamed if not virtually
eradicated throughout most of developing world."

- Yet here, too, we get the acrid aroma of a promise
unfulfilled. When asked if inflation stood any chance of a
resurgence in the decade to come, Rogoff suggested two
hypothetical threats: war and skyrocketing deficits.
(Hmmmnnn... )

-"If events forced sharp cutbacks in global trade for a
sustained period," Rogoff told the (one imagines) eager
crowd in Kansas City,"a likely result would be a partial
resurgence of domestic monopoly power for firms and unions
in many countries, again leading to greater price
inflexibility and greater pressures on central banks to
inflate"... as if they hadn't already taken their cues on
this one already.

- The absence of trend was never more clear than on Friday,
when Strategic Investment's Dan Denning and I had the
occasion to lunch with Jim Bianco and the Arbor Research
crew at Arbor's London HQ in the City. When asked what his
clients' appetite for risk was, Neill Tritton, director of
Arbor Research's London bureau, said flatly:"it's very
small." Traders are basically sitting on their hands right
now, waiting for a clue.

- Jim Bianco - who, by the way, is a heckuva lot younger
than you might expect - identified the source of the market
tension as"the biggest mistake of Greenspan's tenure" at
the Fed.

- Holding up his right fist, he said:"The market is way
over here," then holding up his left:"The Fed is way over
here. The market is perceiving - indicated by a clear rise
in 'real' rates since June - that a renewal of inflation is
imminent," he continued."The Fed, for its part, having
adopted the Bernanke strategy, is too busy fighting
deflation to recognize what the market's message may be.

-"We believe that Greenspan's speech at Jackson Hole on
August 29Th was possibly the worst speech he has delivered
in his 16 years as Fed Chairman. In essence, he had the
arrogance to say that the Fed is never wrong. If the market
reacts badly to its policy, it is because the market is
dumb - not that the Fed is wrong. Therefore, the Fed must
better communicate its policy. When trying to explain what
that policy is, the Fed essentially said 'we make it up as
we go along.'

-"Now look at it from the market's perspective. The Fed is
worried about deflation... they are telling anyone who will
listen they intend to stimulate the economy, rather than
fight inflation... so the market has correctly concluded the
inflation rate is going to rise and it also needs to build
in more 'risk premium' - higher real rates. When the market
asks the Fed how much inflation it is willing to create,
[Greenspan] said the economy is too complicated for rules,
we have no rules, trust us..."

-"The problem is not communication," concludes Bianco,
"the problem is the market thinks [the Fed is following]
the wrong policy."

- The market is on one end of the spectrum (right fist),
and the Fed is on the other (left fist). Until the twain
shall meet, there will be no clear trend. But there will be
clearly building tension... the bond market will remain in
the line of fire... and we will have wait for a break to one
side or the other in the stock market.

-------------

Bill Bonner, back on the Eurostar...

*** We love the British newspapers. On page 3 of the Daily
Mail is a huge photo of Madonna reading to her two
daughters. The Material Girl has written a children's book,
we learn.

*** Over on page five, we find the sad tale of a man who
had a secret family. It is a sad story because the man's
un-secret wife found out about it. Just seeing the photos
of the two women makes us sad. Being raveled up with one of
them would be a bad enough; two would be a nightmare.

*** On page 11 is another sad story. A TV presenter was so
distraught she wanted to commit suicide. Her husband left
her with one child. Then, her boyfriend left her with
another. Well... at least she wasn't having an affair with
one of the women on page 5!

*** On page 15 we learn that 10% of newly married women are
depressed. But our favorite is on page 44 where we discover
that depression can be treated by"Emotional Acupuncture."

"Dr. Callahan [the quack who came up with this idea]
believes that when we think of a particular problem, we
generate a thought field around ourselves - in much the
same way as electrical equipment generates an electrical
field.

"But by tapping certain points on the body - the same as
those used in acupuncture - we can unblock repetitive and
damaging thought patterns and so heal our pain."

If only all those unhappy people had met Dr Callahan. They
might have punctured their emotions long ago.

---------------------

The Daily Reckoning PRESENTS: The Mogambo Guru increasingly
distracted from his leisure pursuits by an overwhelming
concern for his country...


THE RISE OF THE DEMOPUBLICAN
by The Mogambo Guru

Flipping through the channels on TV looking for a Bewitched
episode, hopefully starring Serena, Samantha's highly
attractive vixen cousin, I happened to alight on a talking-
head show interviewing a Democrat who is a California state
senator, who shall remain nameless, and who is the poster
child for everything that is wrong with politicians in
general and Californian politicians in particular. He says
things like"We can solve the budget crisis if we sit down
and talk." He kept saying it with that aggravating smug
sincerity that characterizes politicians, as if problems
with money, or anything, can be solved by talking.

They can't.

They are always CAUSED by talking, almost always by guys
like him who talk of nothing but how big their hearts are,
and how much they feel everyone's pain, and how they want
to help everybody, but they can only be solved by
government reducing somebody's income in order to increase
somebody else's income.

Let me make this one point extremely clear, and it seems
impossible to overemphasize this point, although in typical
Mogambo fashion I will happily beat it into the ground for
so long, and so loudly, and with so many crude obscenities,
that perhaps it WILL be possible to overemphasize this
point. But anyway, as a way of providing initial emphasis,
I will enclose it in quotation marks, even though it is
obviously not a quote, but is merely, as I said, a way of
providing an indication of emphasis."Budget problems can
only be solved by reducing somebody's income." And that
will always cause other problems, so it seems to be perhaps
true that budget deficits cannot be solved at all, ever.
And now, thinking about it for a minute, I can't think of a
government budget problem that was ever solved, so maybe
government budget problems ARE insoluble!

Ain't that a kick in the head!

But getting back to the point, there are only two things
you can do to address a budget problem. You can cut
spending or you can raise taxes. But, and I note for the
record, both of them have the exact same end result:
somebody's income is cut. If you cut spending, then you
directly cut somebody's income. If you raise taxes, then
you take money away from somebody, and therefore you,
again, reduce somebody's income.

And, genius little economists that you are, I know the
reason you are all waving your hands excitedly in the air,
wanting me to call on you so you can show me how smart you
are. You are dying to make the point that raising taxes
will, as I said, reduce somebody's income, but it will also
increase somebody else's income, namely the recipient of
the taxes when the money is spent as part of some
government program. So, in the final analysis, one income
is cut and one income is increased. And therefore, you say,
mathematically, it is a wash. And now you are wondering how
I am going to get out of this apparent quandary.

Well, I am not, as all of that is true. The only difference
is WHERE the money is going. If you spend it on things that
you want, then the economy grows along those lines. If the
government spends the money, then the economy grows along
those lines. Now, all you have to do is figure out which is
healthier in the long run.

And for that, all we have to do is trudge forlornly down to
the library and look at a few books in the history section.
Doing so, we look at the whole of human history, and we
will immediately notice that there is no example of a
successful economy where the government did all the
spending, but that there are lots and lots of examples of
successful economies where the people directed the spending
of their money. THAT is the big difference.

Now I don't know how YOU define"big difference," but for
me I mean the difference between blissful economic success
where happy people whistled happy tunes and happy puppies
cavorted in the happy sun-dappled streets, and abysmal
failure where the angry, miserable people spent most of
their days praying for an early death, which they perceived
would be vast improvement.

As if to add fuel to my fire, a guy named Christopher Mayer
wrote an essay on the Mises.org website entitled"Sumner's
Forgotten Classic." He starts out the essay with one nice
quote from William Graham Sumner, which is"History is only
a tiresome repetition of one story."

And what is this tiresome repetition? Let's let Mr. Mayer
tell us:"Sumner was referring to the seemingly endless
attempts to harness the power of the State to further one's
own ends at the expense of other people. The desire to live
at the expense of other men is a constant theme that runs
through all of human history."

And that means taxing one set of people to give the
proceeds to another set of people, which is the whole point
of the Democrat agenda, from whence sprang this ridiculous
idea. And this brings us back to another point which seems
to have escaped the Democrats, for whom no pejorative term
that impugns their intelligence is too inflammatory, since
every time they open their mouths they embarrass themselves
with something even more stupid than something they said
just ten minutes ago. I will enclose it in quotes to
provide that hint of emphasis.

"You cannot tax a business, as the business will merely
pass along the tax by raising the price of the goods and
services that the business produces." In the final
analysis, the final customer pays all of the taxes that are
levied on businesses, and so the only effect of taxing
businesses is to force prices higher, which hurts the
customers, who are the taxpayers, and to enable the growth
of a bigger and more crippling government through the
attendant higher taxation, which also hurts the taxpayers
in the end.

So taxing businesses is suicidal, in the long run.

And, continuing on in that regard, there is increasing
agitation for an increase in the minimum wage, at least
around these parts, as I gather from the Letters to the
Editor in the paper. The consensus is that wages ought to
be at least about, oh, say, a dollar an hour or so higher.
This increase in wages will, so the loony Leftists declare,
alleviate all the problems of the poor and the not-so-poor-
but-still-deserving-of-government-help. If only that were
true.

So, let's look at it from the side of us money-grubbing
capitalist swine who actually own and run the businesses,
which we manage to do when we aren't too busy sucking the
blood out of the proletariat workers and terrorizing
miscellaneous groups of minorities, because you know what
kind of people we are if you've ever read one of the
Leftist newspapers in this country, and those are about the
only kind of newspapers and reporters that there are
anymore.

But since turnabout is fair play, I will now dishonestly
characterize us grasping, rapacious Republican bloodsuckers
as pathetic widows and orphans who have invested our last
precious few pennies of our meager savings into businesses,
so we can hopefully afford an income stream that will
provide enough to buy cold gruel and a lump of coal or two
to keep from freezing in our drafty little hovels.

Now, when the greedy, grubby proletariat workers get
government to step in and force us business-owning widows
and orphans to pay more money to the workers, they are
directly taking money right out of our pockets, and thus
taking the meager crust of day-old bread out of our mouths.
So, in order to put bread back into our mouths, and the
mouths of our pathetic ragamuffin children, we have to
raise prices.

When we do that, we get some of our money back, and
therefore we get some of that missing bread back in our
mouths, and in the mouths of our children whose screams of
starvation are allayed for yet another little while. But
not all of it, because we poor pathetic widows and orphans
also have to pay the higher prices that OTHER businesses
are now charging, since they also had to raise prices to
cover their higher payroll costs. And the tax bite is also
higher, thanks to the progressivity of the tax tables. So
we running-dog capitalist vampires, oops, I mean us widows
and orphans, and the nasty, grasping workers, and everybody
else, is a net-net loser.

And so I am calling on all the other widows and orphans who
own the stock of businesses to rise up and expose the
workers as the overpaid gluttons that they are. These
shiftless lazy peasants only have to pay the costs of
getting to work, and in return they make something like
$35,000?

My God!

These losers say that they want a raise, when already their
expenses to get to work run to a few lousy thousands of
dollars, maybe $5,000 a year, and that investment yields
$35,000? Wow! What a return on investment! We widows and
orphans should be so lucky!

Now let's look at it from the perspective of us poor widows
and orphans who own the businesses. We have everything on
the line, as everything we have in this world is invested
in these businesses. And for that gigantic risk we are
barely turning a profit, and now the workers want to take
even that little bit of money away?

Well, I say it is time that us widows and orphans wise up
against the tyranny of the workers! And the first thing we
need to do it to recall all the Leftist politicians, à la
this whole Gray Davis thing.


Warm regards,

The Mogambo Guru,
for The Daily Reckoning

P.S. For those of you who do not recognize the word
"Demopublican," it is, at least in the way I use it, a
highly pejorative term that indicates that both the
Democratic Party, traditionally a clueless and relentlessly
socialist and communist-inspired bunch of touchy-feely
jackasses who actually believe, against the weight of
thousands of years of actual experience, that large and
intrusive governments are good for a society and economy,
and the Republican Party, who are newcomers to that
particular idiocy but rapidly making up for lost time, are
now evil twins who are going to destroy the USA with their
shared loathsome agenda.

Just like such an agenda has ruined every other economy
where it has been tried. Nowadays, there is very little
difference between the two political parties, although, I
am sorry to say, the Republicans have a distinct police-
state viciousness about them. Ergo, Demopublicans.


Mogambo Sez: The S&P 500 is nearing a P/E of 34. This is
historically even outside of the range normally referred to
as"preposterous," and will almost certainly be regarded in
the future as the last, dying blow-off rally of the
ridiculous equity-cult, which is, I am profoundly sorry to
say, only one of many bizarre and incestuous cults
operating in the USA and the world.

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gesamter Thread:

• The Daily Reckoning - The Rise Of The Demopublican - Firmian, 15.09.2003, 19:31