As the quality of government declines – from Jefferson and Adams… to Dubya and The Donald – the observer needs a broader sense of humor.
Where he used to titter over a bon mot… or smile wryly at a double entendre, now he can only give a hoarse laugh, like a half-wit watching The Three Stooges.
For now, there’s not even a single entendre. It’s just mud wrestling and pie throwing.
Conservatives held their big jamboree last weekend. We sent our own eyes and ears.
“There was hardly a conservative in sight,” he reported. “There were no Ron Pauls here. No Eisenhowers. No Howard Buffetts. Certainly no Thomas Jeffersons.”
The essence of traditional conservatism is humility, doubt, and cynicism about what government can achieve.
Activists, on the other hand, think they can use the feds’ muscle like a ball-peen hammer, to knock the country into whatever shape they want.
But conservatives doubt that civil society is so malleable. In nearly every proposal, they see ugly dents, not a smooth and elegant new shape.
“Balance the budget… and mind your own business,” said the old-timers.
But there was no mention of either at the CPAC (Conservative Political Action Conference) shindig.
The importance of this observation from our financial standpoint is that the country needs conservatives. It used to count on them to keep the books in balance.
Conservatives were wet blankets, reliably voting “no” to expensive schemes and deficit spending.
“There was some talk about smaller government,” said our informant.
“But nobody wanted to touch the reality of it – challenging The Swamp by cutting back government spending. And while people seemed to be in favor of bringing the troops home, nobody really wanted to confront the military arm of the Deep State. I heard no proposals that the Deep State wouldn’t like.”
Disappearance of the Conservative
Recently, we set out to discover how much today is not like the yesterday, 77 years ago when Warren Buffett went “all in” on U.S. stocks.
Surely, that is one of the big differences – the disappearance of conservatives.
America was still a republic in 1942, ruled by a still functional legislature, more or less subject to the Constitution, and guided by the basic principles of a free, decent society.
There were drugs, but no war on drugs. There was poverty, but no war on poverty. There were terrorists, but no war on terrorists.
America’s economy was still mostly honest… with interest rates and prices set by free markets.
The dollar was still real money – backed by gold.
America’s military was small; it mostly minded its own business and only responded when provoked.
You could buy all the Dow stocks for less than 4 ounces of gold.
There was a Great Depression, too. During a 10-year period, following the crash of 1929, the economy added just 20% to the GDP.
And while the government was going deeply into debt to finance WWII, it ran surpluses after the war was over, and began paying off its debts – with interest at market rates.
Today, it is a different story.
Ten Thousand Commandments
And as Warren Buffett noted, the feds have 40,000 times as much debt. They have accumulated $22 trillion worth of it – $14 trillion more in the last 10 years – and are adding to it at the rate of $100 billion per month.
And neither Republicans nor Democrats… neither conservatives nor liberals… plan to reduce borrowing, let alone pay back debt.
The rest of the society is deep in hock too – with a total of about $48 trillion more debt.
The government is still the same on paper. But now, Congress has become little more than a blab-fest. America is now an empire, with the important decisions made by the insiders – for the insiders – of the Deep State.
The insiders rule largely through regulations. Those too have exploded. In 1960, the Code of Federal Regulations – the document that contains all federal rules and regulations – already contained 22,000 pages. Obamacare alone added 10,000 more – eight times more than the Bible – bringing the total to more than 178,000.
In 2018, the 20th anniversary edition of Ten Thousand Commandments, from the Competitive Enterprise Institute, appeared.
It documented 81,883 new regulations during the two decades that had passed since the first edition.
On average, a new regulation – often with criminal or civil penalties attached – appeared at the rate of one every 2 hours and 9 minutes.
By then, the total annual burden on the economy was estimated at $1.9 trillion, an amount that has surely jumped over the $2 trillion mark by today.
The military no longer even pretends merely to defend the U.S. Instead, it seeks “full spectrum dominance,” which can be translated as “keep sending us the money; we’ll find a use for it.”
The most important price in capitalism (the interest rate) is now largely determined – as it was in the old Soviet Union – by technocrats at the Federal Reserve.
And the rich are far richer than the working class, and the insiders aim to keep it that way.
In short, it is a very different world.
But the same rules, at least the important ones, still apply. Markets go boom… and then go bust. Borrow too much, and you still go broke. Governments grow old, corrupt, and incompetent.
But wait. Word came out last week that the economy is growing “faster than expected.”
The pseudo-conservatives at CPAC took heart as Donald Trump said he had a “blazing” economy.
Then, what did it matter if they were less free, they asked each other, as long as unemployment was low?
What did it matter if U.S. debt was headed to $40 trillion by 2028, if GDP was still growing?
What difference did it make if the Fed fiddled interest rates, as long as the Dow stayed over 23,000?
We may be about to find out…
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