When Can We Expect Things To Go Back to Normal?

Week 13 of quarantine

SAN MARTIN, ARGENTINA — What a delight it is to be an American! What a spectacle!

No matter how stupid, malignant, ignorant, or evil you are…there’s always someone — a member of Congress, a Nobel Prize-winning economist, or the president himself — who is an even bigger jackass than you are.

And no matter how dumb any idea you may have…there’s always a large part of the public that will believe it.

Knucklehead ideas

Human history is largely a story of myths, lies, and delusions. They made possible some of our greatest achievements…and our biggest disasters.

The Egyptian pyramids wouldn’t exist, for example, if large groups of people had not believed something that was untrue. They thought the pharaoh was divine…and that they should build monuments to him.

As it happened, they devoted nearly the entire economic surplus of the rich Nile Delta to putting up huge piles of stone in his honour.

And would civilisation ever have reached such giddy heights as it did before the French Revolution…had not the masses accepted ‘aristocratic privilege’ as a fact of life?

Then again, the Second World War wouldn’t have happened without Hitler’s ‘Übermensch’ delusion. It proved to be great fodder for the History Channel, but resulted in a world war with 60 million dead. And it left Germany in cinders…and the master race crushed under the heel of Untermensch foreigners.

We are always asked to believe what isn’t true. Though rarely have we been asked to believe so many knucklehead ideas all at once.

But here at the Diary, money is our beat…so let’s stick with that.

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Feds on the case

In response to the hysteria over the coronavirus, the authorities shut down the economy. And now, they say they can ‘throw the switch’ and turn it back on again…and things will go back to ‘normal’ in a matter of weeks…

Stocks were already at all-time highs in January 2020, when the virus arrived on the scene. In the panic that ensued when the virus spread around the world, they sold off. And for good reason — companies are not worth as much when the revenues stop coming in.

But then, the feds were on the case…with a $2.2 trillion bailout bill…nearly $3 trillion in new money printing…a $4 trillion national debt increase…and, coming soon — another $1 trillion in ‘stimulus’ spending.

The stock market soared, rising 45% from its bottom in March. Investors said they were ‘looking through’ the horrible news — 20% unemployment…a federal deficit at 20% of GDP…20,000 business failures…rents unpaid…mortgages in default — to the bright future on the other side.

A V-shaped comeback is on the way, or so they say. It will be like a ‘rocket ship’, says POTUS.

In other words, they were buying the dip based on the idea — obviously fraudulent — that Federal Reserve governors can deftly guide the economy to a prompt, full recovery…and that printing press money will make assets more valuable.

The trick, of course, is to keep a clear head about it. Some myths are useful. Some are sinister, even lethal.

And some myths, no matter how absurd, can be played for profit. Some people must have prospered from building the pyramids, for example, even if it meant a lifetime of hard labour for the common man.

And many people made money in the Second World War, too, even while millions of common soldiers were shot to bits when they went ‘over the top’.

A good strategy

Today, a shrewd speculator might think he is one of the lucky ones. He might anticipate the flood of money coming into the stock market from the Federal Reserve. He might figure he can catch the rising tide.

But watch out. Yesterday, the water level dropped suddenly. This morning, the sell-off has reversed. Tomorrow, who knows?

But some things are more predictable than others. As the situation on Main Street worsens (bankruptcy filings are becoming more frequent than new COVID-19 cases), the Federal Reserve will surely double down on its hallucinations.

The gambler might confidently expect the Fed to open its floodgates once more — with even more trillions of fake money. Here’s Reuters:

The U.S. Federal Reserve on Wednesday signaled it plans years of extraordinary support for an economy facing a torturous slog back from the coronavirus pandemic, with policymakers projecting the economy to shrink 6.5% in 2020 and the unemployment rate to be 9.3% at year’s end.

Stocks go down; the Fed prints more money. Simple enough.

‘Buying the dip’, could turn out to be a good strategy.

Gigantic fraud

But…our hypothesis is that the myth of money printing is ruining the US economy, undermining its social stability, and corrupting its government. Today, people in the Wall Street economy have the Federal Reserve to thank for much of their wealth. Like French aristocrats before the Revolution, they’re happy with the two-system system.

And while quick-witted speculators might be able to turn a profit by gaming the system and front running the Fed, we urge caution.

Eventually, if we’re right…there will be hell to pay. There will be no monuments — like Cheops or the Sphinx — for tourists to admire 1,000 years from now.

Instead, there will just be the sordid, sorry history of a gigantic fraud…

…the chaos, destruction, and poverty…

…and the sad stories of the speculators who forgot to leave town before the tumbrils started to roll.


Bill Bonner,
For The Rum Rebellion

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries.

A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally.

With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance.

Bill has been a weekly contributor to The Rum Rebellion.

The Rum Rebellion