The trip on the ferry passed agreeably. The sea was still and smooth…almost like a glass tabletop. We sailed along nicely, not noticing any motion.
Arriving in France yesterday morning, we drove down to the Pays d’Auge to spend the night with friends.
‘You’ve come at a bad time,’ said Jean-Paul.
‘France is finished. Over. The country is run by criminal morons…it’s a disaster.
‘I think they [he was talking about France’s political class…but his comments could easily be applied in the US as well] just want to control everything. They don’t want us to go anywhere or do anything. Everything is either prohibited or compulsory.
‘And they think they can make up for the loss of revenue with money from Brussels [from the European Central Bank].’
‘And this “Sanitary Pass” is the worst yet. It’s scheduled to go into effect in September. You’ll need to show the pass to do anything. And if you don’t want to be vaccinated…or just don’t want to get the pass…you’ll be completely isolated.
‘In France, tourism is a major industry. It’s important, and not just for the money. It’s part of what we are…what we do. But tourism is dead.’
Jean-Paul owns a hotel in Paris.
‘The hotel has been closed now for 18 months. That’s a whole year and a half of revenue that is gone forever.
‘People say “You can make it up later.” But that’s crazy. I only have so many rooms. There’s no way to make up lost revenue. At best, I’ll be able to go back to earning a normal amount of revenue. But I’ll never get back what was lost.
‘And the hotel is going to stay closed until next April. There’s no point in opening now. The Americans aren’t coming.
‘I’m lucky. I’ve owned the hotel for many years. I don’t owe money on it. I can just hunker down. A lot of the old hotels in Paris are like that.
‘But anyone who bought a hotel recently…or owes money on it…he’s dead. Broke.
‘Same for the restaurants. There are thousands of restaurants in Paris. They depend on tourists. Without tourists, they have no business.
‘Those who have been around for a long time can afford just to close the doors. But the young guys…who had to borrow money…or pay rent…they’re in big trouble. The government gives them money now…but how long will that last?’
‘I’m glad I’m retiring…I just don’t want to deal with it anymore. I hate the face masks.
‘And, you know, it all just seems like a scam. I got the coronavirus last year. I’ve got high blood pressure and diabetes. I’m 65. And I’m overweight. But it just felt like the flu. My wife had it, too, and didn’t even know she had it.
‘And look, tuberculosis, malaria, auto accidents — they kill millions of people every year…and they’re all preventable. But nobody says we should stop everything because of them.’
Jean-Paul gave a weary, gallic shrug. He lives well in the Normandy countryside, but worries about how his children and grandchildren will make out.
‘I know I complain about everything…but the real problems haven’t even begun. Just wait until all this money printing catches up to us.
‘I’m old enough to remember the “old franc” when I was a child. Then, the new franc. And then, the euro. That’ll go away, too.
‘But I don’t know if I’ll still be around to see it.’
Meanwhile…back in the US…MarketWatch announces with great relief, ‘Dow ends up more than 500 points, recovers from slump Monday’:
‘S&P index sees largest one day percentage gain since March 26, 2021.’
Explaining what had gone wrong on Monday was Art Hogan, a ‘chief market strategist’ at B Riley National:
‘Markets have a way, particularly in the middle of the summer, to price in the worst-case scenario pretty quickly.’
Hmmm…does Mr Hogan really think a 725-point Dow sell-off was the worst-case scenario?
By our reckoning, we would need to sell off 10,000 points to get stock prices back to a ‘normal’ price range. In a crash, 15,000 or 20,000 Dow points might disappear.
But investors must have realised that there is no way the Federal Reserve will permit a genuine sell-off. Not if it can help it.
So, at least for now, tomorrow’s trouble is still today’s fun.
Delta variant? Don’t worry about it.
Debt? Who cares?
Inflation? Hey…it’s just ‘supply chain disruptions’.
High stock prices are no virtue. And keeping them inflated is no great achievement, it merely puts off the day on which they are properly priced.
But a sell-off would end the fun, wouldn’t it? And isn’t that the one and only purpose of Fed policy today — to delay the inevitable reckoning? To inflate now…and die later…and laissez les bons temps rouler in the meantime?
And here, we turn to economist Ken Rogoff for an explanation of why even higher inflation rates should not stop the party:
‘Because the US Treasury and the Fed stepped in so quickly and proactively, there were actually fewer corporate bankruptcies in 2020 than in 2019.’
Mr Rogoff notes that bankruptcies usually rise during a recession.
Last year was the worst economic setback for the US economy since the Great Depression. Businesses that couldn’t pay their way should have closed shop.
Instead, they got money from the Fed…and are still losing money!
In an honest economy, stocks go up and down…and businesses come and go. Some people get lucky. Some get smart. And all get more or less what they deserve.
In today’s economy, the zombies get infusions…households get stimmy cheques…the stock market gets pumped up…
…real losses are papered over with fake money…
…and the party continues…until it ends.
For The Rum Rebellion
PS: The Rum Rebellion is a fantastic place to start your investment journey. We talk about the big trends driving the Australian Economy. Learn all about it here.