Gold News

Mr.Market Calls the US Debt Deal

Gold rose with stocks, but not so much as misreading the debt deal suggested...
 
SO HOW do you like that? asks Bill Bonner in his DailyReckoning.
 
Mr Market was right all along. He knew the fix was in. This is an economy – and a society – that depends on easy credit. No way were the politicians going to stop the credit from flowing. When they threatened to cut it off, Mr Market ignored them. Stock prices kept going up. Turned out, he was right again.
 
We're back home...in good ol' Balawmer...with football season in full flower.
 
Our trip took us to Paris, London, Buenos Aires, Salta, Miami, Ft. Lauderdale and then home again. The only travel problem we had came in our last stop, Ft. Lauderdale, where the agent at check-in seemed unable to operate his own computer system.
 
While we were traveling, often out of range of modern communications, Washington was making a public spectacle of itself. Wherever we went, cab drivers, hairdressers and barkeeps kept us up-to-date:
 
WWow...what's going on in the US? Sounds like they've gone crazy..." said one.
 
"So, are they really going to shut down the government?' asked another. "That will be a first."
 
"Have Republicans lost their minds," began a third. "Who's going to vote for them?"
 
To the foreigners, the spectacle seemed sordid and stupid. To us, as little as we saw of it, it was immensely entertaining. First, because we never doubted that the pols would come through with a deal in the end. And second, because it would have been better if they hadn't.
 
But the show's over...at least for now. Congress voted only to end the impasse until January. Then the world can do it all over again.
 
News report meantime tell us "the standoff had taken '$24 billion out of the economy'."
 
People took this news as though it were a tragic fact...like the sinking of a cruise ship or a shooting at an elementary school. But how was it possible for $24 billion to be taken 'out of the economy?' Where did it go? To another planet?
 
This is what makes government so amusing. It is like barroom chatter late at night – full of things that couldn't possibly be true yet are accepted by everyone present as Gospel.
 
The $24 billion refers to the money that the feds did not spend. But did it vanish? Not at all.
 
Not that we have anything against government; on the contrary, it's always a hoot. But government at its best is a very modest affair. It puts a cop on the beat – ready to knock heads, if necessary, to maintain peace and quiet. It puts a judge on the bench, able to enforce contracts and protect property. It raises the flag on national holidays. Otherwise, it butts out.
 
But few people are content with Jefferson's kind of government. They want Hillary Clinton's kind of government. But as it grows, government quickly reaches the point of declining marginal utility...and then slips into its bad habits – that is, grand larceny.
 
The money that was supposedly taken out of the economy didn't disappear. It remained with its rightful owners...neither stolen, nor redistributed. The zombies were short $24 billion; but the productive sector was ahead.
 
And what were the feds going to do with that $24 billion? In the event, they shut down national parks – one of the few federal activities that might be a paying proposition. Otherwise, instead of driving to work, filling out forms and chatting over coffee, federal employees were sent home. There, they enjoyed their leisure...or spent time on home repairs.
 
The money that would have paid them to come on the job, was saved, spent, or invested in other ways. Who's to say that the world is a worse place as a result?

Bill Bonner has co-authored a number of New York Times Bestsellers including Financial Reckoning Day, Empire of Debt and Mobs, Markets and Messiahs. In his own opinion, Bill's most recent title, A Modest Theory of Civilization: Win-Win or Lose, is his best work yet. Bill also founded The Agora, a worldwide community for private researchers and publishers, in 1979. Financial analysts within the group have exposed and predicted some of the world's biggest shifts since that time, starting with the fall of the Soviet Union back in the late 1980s, to the collapse of the Dot Com (2000) and then mortgage finance (2008) bubbles, and more recently the election of President Trump.

See full archive of Bill Bonner articles

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