Lipstick
I got one of those good ones in the e-mail yesterday. It was pithy and on target, which is the key to effective humor. It was a list of common terms from the market, revised to meet the new reality. The one that left me gasping was this new definition:
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
I was tempted to look at the 401k this morning, since the market went up 936 points yesterday. It was a record performance after an equally disastrous week. I thought it would be interesting to calculate the proceeds of the rebound, based on what I used to have, but it is gone so what’s the point?
MARKET CORRECTION -- The day after you buy stocks.
Keep your eyes on the horizon and keep moving, that’s the key. The candidates are throwing money and promises around, and in all the words there might be a little truth, carefully concealed.
It is worth considering what is about to happen, beyond the immediate crisis. I am not smart enough to properly assess the fundamental changes that are already occurring in the way the nations of the West operate, but some th ings are so plain that you cannot ignore them.
The governments of Europe and the United States are becoming majority partners in the banking business, the most intimate relationship we have with the fruits of our labor.
The governments are also getting used to throwing hundreds of billions around with little accountability, each day bringing something new that would have been astonishing a year ago and now passes with little comment and less amazement. Speaker of the House Pelosi is talking about another direct cash payment to the electorate- this one about $250 billion dollars. The fact that the last modest one did not work is not being discussed in any depth.
Of the $80 billion that President Bush mailed out to us, the experts say that only a quarter wound up in circulation- people rightly tucked the rest under their mattresses for the rainy day we all knew was coming.
This is just a taste of what is next. The lurch to the left is going to be as profound as the one that veered right in the Republican Revolution that seized control of the Congress in 1992. There was a thing called the “Contract with America,” at the time. I recall it vividly. It was a set of principals laid out short and sweet so that everyone could see them. It was a sort of warranty on government.
It turned out to be worth exactly the electrons on which it was typed, which is to say, not much. You will note that no one is talking about anything like=2 0it in this election. This will be an election of rejection, and a once-in-a-lifetime chance for the Liberal wing of the Democratic party to impose its vision on the nation.
There will be a big Democratic majority in the House, and possibly a veto-proof majority in the Senate. President Obama will have an opportunity to set the agenda, to be sure, though his inexperience will empower the Chairs of the Committees. The unifying principal will be to spread the Federal largess among those who are hurting.
That is not so bad. We can print some money to provide them, and tax those that are not doing so badly. Then there is the “clean energy plan.” It sounds great- I mean, how could you object to something so virtuous? It could as accurately be termed a federal jobs plan with an eerie echo of FDR’s Works Progress Administration.
That ties into programs for rebuilding infrastructure with Federal Workers, which sounds a lot like the Civilian Conservation Corps. Those two programs alone are worth quarter trillion dollars. Add the health care initiative and you are talking about something so big and with so many moving parts that it will be impossible for Warren Buffett, T. Boone Pickens and H. Ross Perot put together to figure out, much less operate efficiently.
And of course none of the really smart people will be operating it, any more than they are now. That is how this disaster came to pass.
The stimulus doesn’t stop there, of course. Tax credits for college tuition, energy efficient vehicles, and personal bailouts for unwise mortgages will drain the Treasury’s income, even as the outflow becomes a torrent. Something has to give, somewhere.
By the way, this is all after we have contributed a trillion dollars to the Treasury Secretary for walking-around money.
I don’t claim to know much about how things work, but I suspect it is a lot simpler than the smart guys let on. We are about to try to spend our way out of a collapse, and take on the simultaneous restructuring of the largest civilian component of the economy.
You only have to look at history to see how it works. Legendary British economist John Maynard Keynes provided the ideas of deficit budgeting and the Reflationary Cycle, which is how FDR financed the New Deal. It had some real benefit, in that it detached policy and lawmakers from the old notion that revenue and spending were linked.
Spending imaginary money permitted many farmers in the deep Depression to keep their farms. That was a good thing, as were many of the projects funded by deficit spending.
Winston Churchill was a contemporary of Lord Keynes. He once said in frustration with contradictory advice, that "If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three."
Keynes was a bundle of contradictions. He knew there was danger in printing money to meet requirements. "Lenin was certain ly right,” he said, late in life. “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens."
We won’t be recalling that part of his wisdom over the next few months, and we are going to go ahead and elect a government committed to the principals of socialism.
Maybe that is a good thing. The times are desperate. But with all the talk about lipstick on pigs, I think we ought to call things what they are.
There is an alternative, of course, but we are not going to do it. It is like dieting. There is no miracle plan. You eat less and exercise more, simple as that. We have been gorging at the table so long that we somehow have got used to the idea that we are entitled to it.
Go figure. You know Lord Keynes said about the long run, don’t you?
Copyright 2008 Vic Socotra
www.vicsocotra.com