by Bill Bonner: The
Day QE2 Ended
take my car cause its never been beat.
And we aint missed yet with the girls we meet.
~ The Beach
We are sitting
in our favorite café in Paris
listening to the Beach
Boys and reflecting on the decline of the US Empire. Back in the
60s, the Beach Boys celebrated a country that was young, growing,
and a winner. Now, what we see is the whole kit-and-kaboodle
of life in the US giving way to desperation, delusion and an irresistible
impulse to commit imperial suicide. The economy turns sour. The
military becomes malignant. Households are corrupt, bankrupt and
dependent. Even the churches sing their hallelujahs to Caesar now.
imperial suicide? Its what empires do. If no other
empire arises to kill them
they kill themselves. China will
probably eventually crush the US militarily. But that is far in
the future. The US cant wait. It lets the zombies run wild.
At home, Congress
debates a debt ceiling measure, as if it made any difference.
Theyve raised the ceiling 93 times since they first imposed
a debt ceiling 94 years ago. What are the odds that they will hold
the line this time?
theyll continue borrowing and spending until the nation goes
broke. Count on it.
The US economy
was a free-market success story for a hundred years
end of the US War Between the States to the end of the Vietnam War.
It was the richest, fastest-growing, most innovative, most competitive,
and most admired economy in the world. But then, in 1971, Richard
Nixon replaced a more-or-less solid dollar, vaguely backed by gold,
with a pure paper dollar, backed by nothing but the good intentions
of government employees.
As the money
went, so went the nation. Our friend and colleague Byron
with the US over the last 40 or 50 years is that theres
too much free money
three generations of population who are untied from the basics
of monetary education millions of minds poisoned by Economics
101 in universities across the land. Elastic currency,
courtesy of the Fed.
political classes are no smarter than the dummies who walk the
land, so they make policy based on free money from
Deficits dont matter.
circulates and inflates the general price levels
learn to live with it. Even make a virtue of it, doing things
like buy as much house as you can afford; the market will
rise and youll make money. That kind of idiocy.
all this excess currency sloshing around the economy, leading
to people doing stupid things like drugs, too much alcohol, divorce
(Cherchez les femmes), food (obesity), theft, etc
cost much silver, wrote Sun Tzu. [Lack of money] kept a
lot of nations out of a lot of trouble over the years. Not any
more. Who needs silver when you can just print up bricks of paper
cash and fly it over to Iraq and such.
Kind of gives
a whole new meaning to the term American Exceptionalism
yep, were exceptional. Thats for sure. More prisoners
in jail than anywhere else. We fight longer wars than anyone else
dont win. We give more welfare to more idle people than
anywhere else on earth
and were proud of it.
so much money that we dont know how to say no. No limits.
Just raise the debt ceiling
spend until you cant spend
any more. Then spend some more.
are no limits until there are limits. Per Ayn Rand
can avoid reality. But you cannot avoid the consequences of avoiding
In the space
of 40 years the US lost its winning ways. Real, hourly wages stopped
growing in 1973. Stock prices, in real terms, peaked out in 99
the same time that real, per capita private sector growth came to
a halt. The number of full time jobs topped out about two years
and housing hit its peak in 2007.
armed forces continue to squander the most magnificent advantage
that a military has ever had. The Pentagon spends 7 times as much
as the next biggest spender. And it doesnt even have a worthy
opponent. Where does it get the money? It borrows from the Chinese!
And what does
it do with all that money? It engages in pointless, blood sucking
zombie wars. Its three current engagements alone are expected to
cost $4 trillion, according to the latest independent estimates
about as much as its trade deficit over the last 10 years.
Ask your neighbors.
What strategic advantage does the US gain from fighting in Afghanistan,
Iraq or Libya? They will have no good answer. Probably some claptrap
about fighting terrorism is the best they will be able
to do; thats what they were told on TV.
retired Army colonel came over to our house for the 4th of July
festivities. A Silver Star winner in WWII, veteran of the Korean
we asked what he thought of the Pentagons strategy
in North Africa and the Middle East.
disgusted, he replied. Those guys just dont know
what theyre doing. We have no business getting involved in
especially in Libya. Theyre just traps.
I have arguments about it when I go into the VA hospital. The young
guys you know, theyre in their 80s are
in favor of these wars. Wave the flag. Rah rah
in and do the job. Teach them a lesson
That sort of thing.
war is not a football game. And nobody learns anything
not to do it again.
with the exception of a 94-year-old veteran objects to squandering
the national treasure, blood and honor on these wars? Almost no
one. Why not? Because theyve all drunk deeply from the intoxicating
cup of imperial power. An ordinary nation fights wars to protect
itself. An empire fights wars because that is what an empire does.
And it continues fighting until it finally beats itself.
Rome pull back its troops from the Rhine or Anatolia or North Africa
order to protect its homeland from the barbarians? Why didnt
Alexander retire to Macedonia, while he still had breath? Why didnt
the Germans retreat to the banks of the Oder when they still had
the means to resist the Soviet onslaught?
the US bring home its troops, cut its spending, balance its budget
and protect its future? Ha
you know the answer. Because
the system has been taken over by zombies
people who want to
see the spending continue, no matter what the cost. Zombie wars.
Zombie social spending. And zombie finance.
And every time
we look at it, we see more evidence. California, the West Coast
Greece, is going broke. Any guess why? From Bloomberg:
Prison Psychiatrist Paid $838,706, Data Shows
July 5 (Bloomberg)
A chief psychiatrist for Californias overcrowded
prison system was paid $838,706 in 2010, more than any other state
employee that year, according to payroll figures released today.
whose name wasnt released, had a salary range of $261,408
to $308,640, according to data released by Controller John Chiang.
The total compensation was raised either by bonuses or payout
of unused vacation time or sick days, according to the controllers
The 10 highest-paid
state employees each earned more than $500,000 in the 2010 calendar
year, for a total of $6.2 million, the figures show. All except
three were a prison doctor or dentist. The most-populous US state
runs the nations largest correctional system, with about
163,000 inmates, and is at 175 percent of capacity, according
to the Corrections and Rehabilitation Department.
a headline from The Financial Times:
state is now the dominant force in US capital markets.
goes on to explain that American capitalism is now dominated by
credit provided by the US government. For the first time ever, the
feds are the biggest source of outstanding home mortgage and
consumer credit loans in the US.
What do you
call a free market economy where the major source of financing comes
from the government?
how about this headline from The International Herald Tribune:
Mexicans, home is now an option.
The point of
the article is that Mexicans no longer see the US as the land of
opportunity. They see more opportunity in Mexico. According to some
estimates, there are now more of them sneaking across the Rio Grande
to go home than there are coming to the US.
immigration to the US sputters, continues the headline.
the US is in greater danger than we thought. Illegal immigrants
were the last real Americans. They came to work. Like
the first real Americans. In the Washington area, theyre the
ones who do the real work. Almost everyone else is a zombie
on the government payroll, in one way or another.
an item from the website Gawker that helps understand
how the zombies operate:
The White House released its annual salary report last
week, and as usual, its nice to work for Barack Obama: Most
staffers who were there for more than a year got a salary bump.
A bigger one than you did.
time we checked in on White House salaries, we found that an astonishing
75% of continuing staffers got raises from 2009 to 2010
a huge number given the fact that, according to compensation experts,
most companies had skipped routine raises that year in reaction
to the economic crisis that the White House was busy failing to
solve. This time around from 2010 to 2011 the ratio
is a little less dramatic. Of the 270 White House staffers who
have been there for more than a year, 146 or 54%
received raises. The average salary increase was 8%. If you look
at only staffers who got raises, the average increase was twice
a much bigger raise than the average white-collar worker got.
According to a survey conducted last year by the human resources
consulting firm Mercer, most firms were projecting a 3% increase
in base pay for executives. White House workers did nearly three
times as well.
One of Obamas
first acts as president was to freeze the salaries of all White
House officials earning more than $100,000 because during
this period of economic emergency, families are tightening their
belts, and so should Washington. Two years later, he extended
that policy to all federal workers, using the same logic: Small
businesses and families are tightening their belts. Their government
should too. But the across-the-board freeze didnt
take effect until January 1, 2011, so the most recent report (which
goes back to July 2010) features some eye-opening raises, like
special assistant to the president for economic policy Matthew
Vogels $59,000, 82% raise to an annual salary of $130,500,
or director of African American media Kevin Lewis $36,000,
86% pay hike.
How about that
director of African American media? On the White House
payroll. Just what the country needs.
with permission from the Daily
Bonner is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
The New Empire of Debt: The Rise Of An Epic Financial Crisis
and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets (Wiley, 2007). His
latest book is Dice
Have No Memory.
Since 1999, Bill has been a daily contributor and the driving force
behind The Daily Reckoning.
© 2011 Daily Reckoning
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