Democrats now outwardly control the House, Senate, presidency, media, academia, cartoon casting and so on. Perversely you would think they would be beside themselves with joy that only genuine hypocrisy permits. In addition, they likely don’t miss Rush Limbaugh. From what I observe, when I pay them attention, which is rare, they come across as angry as ever. Almost as though former President Trump lives rent free in their collective heads — it must be awful for them.
The view from your humble correspondent’s foxhole is that the nation faces two distinct threats to our way of life. One is our standard of living and the other is whether the nation at large is governable at this point in history. Put another way: on the one hand, a house divided cannot stand, and on the other, without more debt and destroying the value of money, the economy hits the wall, big time.
As written in Cato’s Letters, “The only secret ... In forming a free government is to make the interest of the governors and of the governed the same.” So much for the free government idea. The recent election, contested as it was, is illustrative, in that there are fact-based allegations of malfeasance and funny business that suggest an investigation is warranted. Man, if we could only find an impartial arbiter. The election outcome in a nutshell has half of voters believing President Biden, with his long-proven leadership skills and magnetic charm, received 11 million-plus more votes than former President Obama. The other half doesn’t believe it.
The U.S. economy is widely expected to “return to normal” this summer due to vaccines and clever crowd control. Such talk ought to cause people to dwell upon what “normal” actually is. Since the 2008 financial crisis in America, and most of the world for that matter, normal has consisted of mediocre output levels driven by multi-trillions of dollars in various Federal Reserve/government subsidies, debt and various programs. These tactics got a boost in September 2019 after a hand grenade went off in the repo financing markets. In March 2020, thanks to the lockdown, the Federal Reserve turned on the afterburners with massive liquidity injections which remain. I believe there’s a word for economies driven by government programs, and free market capitalism isn’t the word. Ironically, recent stimulus checks to Americans cause some economists to be bullish, when in fact the extent in which money is spent buying Chinese goods simply ends up in China.
Is there another way? As pointed out by Murray Rothbard in his book “America’s Great Depression” (published in 1963), and valid today, there are several dos and don’ts for what ails the American economy. The do list: allow liquidation of bad investments, let deflation run its course, augment savings, curtail government spending, cut taxes, let wage rates fall. The don’t list: the opposite, the results of which are in the financial headlines daily if you bother to interpret them.
A contrast in the comparison with the early days of the Great Depression is noteworthy, as America then had sound money. Over the past 50 years of fiat money, attempting to save wealth in the U.S. dollars has been an uphill battle. The challenge has been to have wages, interest earned and asset dollar prices keep up with the steady depletion of money’s value. Over the past 25 or so years, wages and interest have failed to keep up, leaving assets the only game in town. A reminder: the dollar leakage is upwards of 85 percent to 90 percent over the period.
As to the governability side of things, my “cancel cancel culture” or “what matters matters” bumper stickers haven’t caught on yet. Perhaps for California’s part we could attempt a trade of Gov. Newsom to Florida for DeSantis, with a few million players to be named later; the French Laundry for the French Laundromat. On the national level, how will we explain open borders, free money and cancel culture to the Founding Fathers, or for that matter, a surviving veteran of Omaha Beach?
Andy Wahrenbrock is an independent investment adviser from Bakersfield. He can be reached at email@example.com.