| In what will be our final installment together, at least for the foreseeable future, Andy and I will look at the sole largest reason for the current circumstances in which nearly the entire Western world finds itself. We end not our friendship nor our collegial working relationship, but have mutually reached the decision that these collaborations are no longer generating benefits anywhere near the expenditures required to produce them. The title of this piece explains in some degree why this is the case. We hope the rest will fill in at least some of the blanks. While many believe that Newton’s laws only apply to physics, a powerful analogy can be drawn between them and the rest of existence as well. Of particular interest here is that a body in motion stays in motion until acted upon by an outside force. The same would certainly seem to be true of socioeconomic phenomenon. America is in debt and she’ll continue down that pathway until the pathway is acted upon by an outside force. We’ll leave it to the shock-monger folks in Baltimore and other places to tell you what those particular forces will be (for a mere $50/year along with the obligatory 5 free gifts), but the takeaway is that America isn’t going to just magically clean up its act. Neither her government, nor her people, will suddenly wake up one morning and say ‘We’ve been doing it all wrong; we need to stop this now!’ However, the only reason we pen this last piece is in the hope that one or two might read it and come to exactly that conclusion on their own. It won’t make a lick of difference in the aggregate, but a few less ruined lives are never a bad thing. America’s mind has died folks, and even more importantly than that, her will has died also. Those who do know merely shrug their shoulders and say ‘que sera sera’. They’ve largely given up. They blithely do the very things they know they shouldn’t, expect the very things they shouldn’t, then give that slack shrug when it all goes wrong just like they knew it would. Everyone knows that in the financial world there are no get rich quick schemes for the man on the street. Those perks are reserved for others. No, for the man on the street, growth takes a lifetime, but destruction and annihilation take only an instant. We saw this in grand form in 2008. The reprobate bums in the media will shrug this off saying it is an irrelevant point because the Dow has regained all the lost territory and then some. What they fail to acknowledge (as usual) is the fact that most of the Joe Average types sold at the bottom and have only been expressing a desire to get back in now that more record highs are in place. In other words, they got most if not all of the loss and very little of the subsequent ‘gain’ (sic). We say gain with sarcasm because anyone can jigger an index, yank the losers, put in winners, and then call it a gain. Yes, we’ve been there a hundred times. Nothing is what it seems. The not-so-USFed now claims it has figured out why there has been no inflation (another laugher) despite massive injections of QE monopoly money. Get this: the American consumer is hoarding money. Yet this same institution will release a report a week earlier saying that 40% of households are under financial stress. Which is it, folks? For certain, price inflation has been tame compared to the amount of QE unleashed. Exhibit One is the stock market. The money has been pent up. The ‘fed’ buys its bonds, then the banks that receive that money as primary dealers use the money to jam commodities markets, pump equities, and in general perpetrate what will go down in history as the biggest scam mankind has ever seen. A decade ago, the above might have qualified as a ‘theory’, but lately the admissions pour out in the mainstream media. You’d think such revelations would cause some concern? Not in America where the mind has died. Even in rabble-rousing Europe, the cries for reform have calmed as Cyprus fades into the background and the debt crisis slowly simmers; kept at bay by – you guessed it – massive money printing. Nobody is fazed by any of this and those who are don’t need to be told there is something wrong. Along these lines, likely the biggest economic event that has happened recently to underscore all of this is the absolute fabrication of GDP numbers. Instead of merely reporting numbers, now we have to spin them because the numbers aren’t enough to maintain the illusion anymore. So we get a stuffed shirt or three on television and blame the weather for the lack of economic activity. Over a hundred billion dollars in Q1 vaporized because it snowed. Really? Evidently it has never snowed before, but it is sure likely to from now on because snow, in addition to being a great source of fun for the young chaps, is also an excellent scapegoat for lackluster economic performance. However, the snow and cold didn’t cause people to shift dollars spent on spring and summer products to shovels, salt, snow blowers, heating oil, and warmer clothes? Nope, the quislings in the establishment tell you that you didn’t spend because it was cold and that you’re absolutely dying to break out the credit cards once it gets warmer. It’s all in the subliminals. They might have just as well trotted out Bush Junior and had him tell America to go on another vacation to Disney World. Remember that one? Personally our favorite is Fantasyland, but since we’re already there, a vacation is somewhat pointless. The situation is not much better across the pond either. While Europeans have a penchant and reputation for rioting and burning at perceived injustices, even the most battle hardened of them will admit that it is more about taking out frustrations than actually effecting change. Like America, much of Europe is drunk on excess, frivolity, sports, and the ‘me generation’. We have iPhones. Shocking that the narcissism of society would be so intense that companies would actually market to it. In true Biblical sense, the world has been turned upside down. What was abhorred is now revered. What was bad is now good and what was good is now bad. ‘Global warming’ results in extreme cold, peace talks result in more war, and ‘patriot’ acts result in the trashing of the American Constitution and the snooping on anyone who dare plug into the matrix. And, as we have tirelessly pointed out, consumer protection acts result not in the protection of consumers, but rather join them with unsecured creditors, strip them of their depositor status, and leave them wide open to further acts of robbery. But nobody pays attention. Why? It is almost for certain that many folks are just tired of hearing about it. Think about the responsible person’s quandary today. They’re responsible for supporting not only themselves, but well over a hundred million of their fellow countrymen – just in America. They’re responsible for supporting a government that is out of control with regard to spending and other excesses. And lately, they’ve become further encumbered because the two-headed hydra known as America’s political system has unleashed untold millions of illegal (not undocumented) individuals onto the various welfare rolls. Sure, some of them will work. Most will not, but it doesn’t even matter. One side wants votes and more dependence on government. The other side wants cheap labor and more dependence on government. The establishment couldn’t care less about the plight of the responsible people; they are there to be milked and bilked. What’s the common denominator here? If the school system taught history the way it ought to, this would alarm most folks. However, what do you do when people don’t even know they should be alarmed? Leave it to common core and kids graduating high school in 4 years won’t even be able to find their own country on a map let alone contemplate these and many other important matters. Too many already can’t. But nobody cares. Everything is fine. When the lawless make the laws, there are going to be problems. So we don’t hold it against you if you’re working your knuckles to the bone to do the right thing while so many others have capitulated into the dark world of government dependence and social welfare. Meanwhile, there is a whole alternative world, based on the sham of ‘reality TV’here people can drape themselves in a cocoon of nonsense and a false world while the very real world spirals out of control around them. Why do you think every little town in America wants a minor league baseball team? Or a casino? Or maybe rails to trails? Bread and circuses, but again, most don’t even know what that is thanks to the dumbing down of the generations through government education. Make no mistake here; we are not setting ourselves up as being better than anyone else. Part of our fortune lies simply in when we were born. Much of the rest of our wiring is the result of having parents who understood rules and that when you break the rules there are consequences. We’ve had the benefit of being America’s last generationo to speak. The ones after us have not only felt the full brunt of the misinformation and lack of true education, but for the most part, didn’t have parents that grew up in a generation of hardship and deprivation. Consider today, here it takes stumbling across someone who is at least 90 years old to find an individual with any recollection of the Great Depression. We can read all the books we want, but nothing portrays the story and circumstances like someone who was there. Yet instead of cherishing this rapidly declining resource, we stick it in nursing homes where it is cared for by a generation that is more concerned about Facebook than the faces of those it is charged with caring for. Harsh words, but it is the death of the American mind captured in a picture. Graham and I entitled this piece ‘Death of the American Mind’, but it is by no means exclusively an American problem. No doubt those of you who take the time to read this will think of a hundred, if not a thousand, other examples of what we pointed out above. We both went into this joint venture of sorts thinking we were going to change the world. We were wrong. The world cannot be changed because it doesn’t want to be changed. The world enjoys circumstances as they are. The world is hooked on largesse and in a way it is, in fact, hooked on its own ignorance of its perilous state. The establishment that intertwines the fabric of society is heavily invested in maintaining the status quo because that establishment’s power is at its maximum when personal responsibility, liberty, and cognitive activity are at their minimum. As someone who is responsible, it is incumbent on you to make this fight a personal one. We need to forget about saving the world and start focusing inward. Not in a selfish way, but from a preservation point of view. There will no doubt come a day when the foolishness ends and that outside force acts on the orb of insanity that drifts along on its collision course with its self-imposed destiny. Then panic will ensue and there are going to millions asking ‘what do we do now?’ It is imperative that there are those who can succinctly outline what happened, why, and how to move forward. In short, this world is going to need leaders rather than pretenders. It is going to need thinkers not stinkers. That will be the time of your opportunity. And in that time you’ll have the chance to prove this article wrong; that America’s mind wasn’t in fact dead, but was merely embroiled in a century-long daydream.
Graham Mehl is a pseudonym. He currently works for a hedge fund and is responsible for economic forecasting and modeling. He has a graduate degree with honors from The Wharton School of the University of Pennsylvania among his educational achievements. Prior to his current position, he served as an economic research associate for a G7 central bank.
Andy Sutton is the Chief Market Strategist for Sutton & Associates, LLC – a Registered Investment Adviser in Pennsylvania. His focuses are econometric modeling and risk management. The firm specializes in wealth preservation and growth and recognizes the validity of non-paper assets in achieving a balanced approach. The firm is also currently working with a growing clientele towards avoiding the risks routinely visited in this column. | |
