See me, feel me

Touch me, heal me

‘See Me, Feel Me,’ The Who

Now, we come to the bang!

But first, let’s check the headlines…

Oh my…there’s somebody in the White House casting doubt on the president’s competence.

 

White House resistance

An anonymous editorial in The New York Times claims there is ‘resistance’ in the White House to an ‘amoral’ president.

That is, there are, apparently, people who are trying to block the president from doing what he wants to do, so they can do what they want to do.

From The New York Times:

President Trump is facing a test to his presidency unlike any faced by a modern American leader. […]

The dilemma — which he does not fully grasp — is that many of the senior officials in his own administration are working diligently from within to frustrate parts of his agenda and his worst inclinations.

I would know. I am one of them.

‘Treason,’ says Trump, demanding that The New York Times hand over the traitor on national security grounds.

Here at the Diary, we hope The New York Times reveals its source.

If not, we have a suggestion: decimation.

It worked for the Roman army. And military historian Antony Beevor claims the Soviets used it, too, to stiffen the resistance at Stalingrad.

The idea for the Romans was simple: When punishing entire cohorts (military units), they’d line up all the soldiers…and every tenth man would get the sword.

Here’s how the Trump team could use it now: Simply line up the entire White House staff — the head of the National Security Agency…the guards at the front gate…secretaries…top officials…everyone. If no one confesses to having told the truth to The New York Times, shoot every tenth person.

We don’t know if that would solve Mr Trump’s morale issue, but it would be good for the morale of the rest of the nation.

 

Countercyclical policy

While the political circus draws crowds in Washington, the important news is left unwatched and unnoticed. And no decimation will cure it.

As we wrote last week, America’s long road to bankruptcy will start with a whimper…but end with a bang.

Yes, the whimper will come — as it always does — in response to a debt crisis. Falling stock and bond prices, rising unemployment, debt defaults, foreclosures — the collapse will cause people to moan, whine, and cry for relief.

People should have learned their lessons in the crisis of 2008–2009. But the Fed burned down the school, setting interest rates so low that saving money made no sense.

So instead of saving, people borrowed more…and now, they are more vulnerable than ever.

What will they do when the next crisis comes? When their stocks are cut in half? When their jobs are lost? When the federal deficit hits $2 trillion?

They will expect the feds to come to the rescue — just as they did after the last three crises in 1987, 2000, and 2008.

That should mean another round of emergency low interest rates (Mistake #3) and a new program of ‘shovel-ready’, deficit-boosting boondoggles (aka ‘fiscal stimulus’), both designed to counterbalance the deflationary economy.

That was always the idea, by the way. Countercyclical policy, it was called. When the business cycle was running hot, the feds would cool it down. Monetary policy would switch to being ‘tight’ — with higher lending rates. Fiscal policy would tighten, too — with less spending and bigger surpluses.

Then, when the business cycle turned down, the feds would be ready; they could cut interest rates and spend some of the surplus they had accumulated.

Bible scholars will recognise the idea’s ancient provenance. Pharaoh, aided by his Jewish advisor, Joseph, ran a countercyclical economic policy thousands of years ago.

In the seven fat years, he stored up grain. In the seven lean years, he made it available to the people.

 

Granaries gone dry

The trouble with the feds is that they could never get it together enough to store any grain at all. The last time the feds ran a real surplus was during the waning years of the Clinton administration, nearly 20 years ago.

Since then, they’ve drained the granaries dry…and borrowed $21 trillion to pay for the grain they forgot to store up.

So what do they do? They fake it.

They give away fake grain — savings that were never earned or saved…and money that is nothing more than claim tickets on wealth that doesn’t exist. These claim tickets are then added to the federal debt.

And then the feds, too, are more vulnerable. They have to borrow more money just to keep up with the payments on the money they’ve already borrowed.

This puts pressure on the debt market…drives up interest rates…and makes the economy even weaker, thereby lowering tax receipts.

This is just a classic, textbook debt deflation. It happens every time, without exception — interest rates rise and debt becomes too heavy to carry.

And then what? All the poor, the rich, the cronies, and the zombies…with their eyes full of tears and their wallets empty…turn their faces to the feds.

Help me. Feel me. Touch me. Heal me.

Can the feds pull off another ‘save’ as they did after 1987, 2000, and 2008?

With no interest rates to cut (the federal funds rate, in real terms, is still negative)…and no surplus to draw on (we are in the tenth fat year…and still adding debt at the rate of more than $1 trillion a year)…what can the feds do?

Bang!

Stay tuned.

 

Regards,
Bill Bonner