Monty Pelerin's World

Economics, Finance and Politics Through The Prism of Classical Liberalism

January 2010 - Posts

Osama Parrots the Left

It looks like Al Gore has a new follower.

Osama bin Laden is apparently modifying his image and adopting the role of elder statesman for the world. Here as reported in the NY Times is his recent advice:

“Talk about climate change is not an ideological luxury but a reality,” Mr. bin Laden was quoted as saying in a report on Al Jazeera’s English-language Web site. “All of the industrialized countries, especially the big ones, bear responsibility for the global warming crisis.”

How long before some left loonie suggests pardoning bin Laden of past transgressions so that he might step forward and help solve the world’s problems? Certainly his position on climate change is consistent with theirs and might have been able to convert Copenhagen into the success that President Obama could not.  This type of wisdom is too important to allow minor past offenses to stand in the way of valuable contributions to noble causes. Besides, it appears as though bin Laden has turned over a new leaf:

In the message broadcast on Friday, Mr. bin Laden veered away from his traditional vows to inflict death and destruction on the United States, and instead discussed climate change, globalization and monetary policy in a message that he said was directed to “the whole world.”

Apparently, in an effort to ingratiate himself further with the loonie left, he invoked one of their heroes:

“Noam Chomsky was correct when he compared the U.S. policies to those of the Mafia,” Al Jazeera quoted Mr. bin Laden as saying. “They are the true terrorists and therefore we should refrain from dealing in the U.S. dollar and should try to get rid of this currency as early as possible.”

Bin Laden’s wisdom is too important to withhold from the world. Just think how much good could be achieved if we were able to tap his knowledge regarding global warming, world hunger, etc. Are we not hurting ourselves by forcing this intelligence to remain in hiding?
How long will it be before some fool proposes that this mass murderer has too much to offer to not be pardoned?

A similar post by this author appeared on American Thinker

Bonner on Money

Bonner on Money

For those who want to understand more about money and inflation, the following piece by Bill Bonner of the Daily Reckoning is good reading.
The Descent of Money
By Bill Bonner
Paris, Fance

Science and technology have produced many wondrous breakthroughs. But there are some things it cannot improve. A kiss from natural lips is still the lover’s choice. Baby formula proved no match for the real thing. Ersatz money is a flop too. That last item is not so much a fact as a prediction.

The first modern competition between gold and paper money ended like the pre-modern ones. Gold won. Herewith, a short summary:

A rogue, John Law, was the protagonist of the story. He killed Beau Wilson in a duel. Then, he went on the lam…first to Scotland…then to Amsterdam…and finally to Paris. Like Alan Greenspan or Ben Bernanke, he made himself useful to people in high places – in this case the Duke d’Orleans, who needed money. Law had a way to get it:

“I have discovered the secret of the philosophers’ stone,” he is said to have remarked, “it is to make gold out of paper.”
Continue reading Bonner on Money

Investment Ideas

Investment Ideas

For those who are interested in getting a lot of investing ideas for 2010 and beyond, check out the collection at The Kirk Report. A variety of different viewpoints that might help you think through what may happen in the next year. Some might even be correct.

Massachusetts from a Seinfeld Perspective

Massachusetts from a Seinfeld Perspective

In a post on November 19 entitled Another Failed Presidency, I stated:

At this point they [politicians] are trying to decide what is least dangerous for their individual careers. For the Republicans that probably means pouring gasoline on ship Obama. For the Democrats, it is a more difficult problem. Ultimately, I believe they will abandon the rotting ship. Politicians of both parties are like rats; they are survivors. All politicians will take that course which they believe gives them the best chance for individual survival. Loyalty be damned.

The comedy show Seinfeld becomes popular.

The Massachusetts’ election was the bell for the rats to abandon ship.

Massachusetts and its aftermath might have been the worst political nightmare for Larry David and other writers of the Seinfeld show. It was probably unimaginable, yet they managed to write what might be a near- perfect allegory for the event. It involved George Costanza at a children’s birthday party.

The key scenes, which can be viewed here, provide a humorous parallel to Democrat reactions to Massachusetts.

The preliminary conversation between Costanza (Democrats) and the Clown (Republicans) is indicative of the lack of communication and cooperation between the two parties. When smoke is discovered, George bolts for the exit, knocking down children, mothers and the elderly as he tries to save himself.  The allegory only becomes richer when Costanza lies and rationalizes his behavior to the police, a process that Democrats now face when explaining their change of course.

The ultimate irony is that few associated with the Seinfeld show would appreciate the humor. Yet, once again, the show forces us to recognize our own foibles through its absurd scenes and characters. To me, it is the perfect microcosm for what our political class (or lack of class) has devolved into.

It is now apparent that this President has failed, superbly and unequivocally. Even Democrat epigones know it. Before the evacuation of Obama’s ship is complete, it is likely that we will see Democrat behavior that makes George Costanza appear heroic.

The only happy Democrat today is Jimmy Carter. He probably senses the chance to pass his heavy mantle of “worst President in my lifetime” on to “The One.”
Also posted on American Thinker

Pathological Prez Fights For Survival

Pathological Prez Fights For Survival

There has always been a bit of uneasiness regarding President Obama and his self-obsession. Some have suggested that it is extreme narcissism, severe enough to be a pathological problem.

According to CBS News, there were only 21 days in his first year where Obama did not make at least one public appearance. The statistics from CBS were amazing: 411 speeches comments and remarks of which 52 were on healthcare, 158 interviews, visits to 58 US cities and 21 foreign nations, 160 flights on Air Force One, 193 flights on Marine One, etc. etc. In short, it was Obama time, all the time.

The following post from American Thinker highlights the concern regarding President Obama’s self-absorption:

Not too full of himself, is he?

January 25, 2010

Rick Moran

I really feel the need to apologize to our president. In the past I have called him a pathological narcissist. I was mistaken in that and should probably bake a cake and send it to the White House as my act of contrition.I never dreamed he was worse than that:

Berry recounted meetings with White House officials, reminiscent of some during the Clinton days, where he and others urged them not to force Blue Dogs “off into that swamp” of supporting bills that would be unpopular with voters back home.“I’ve been doing that with this White House, and they just don’t seem to give it any credibility at all,” Berry said. “They just kept telling us how good it was going to be. The president himself, when that was brought up in one group, said, ‘Well, the big difference here and in ‘94 was you’ve got me.’ We’re going to see how much difference that makes now.”

That quote comes to us via Glenn Thrush’s blog in Politico where he details what retiring rep Marion Berry told the Arkansas Democrat-Gazette.

Do the Democrats realize yet that this self puffery is the product of a delusional mind and that following him means almost certain destruction for their careers and perhaps their party?

If I were a Democrat, I would be afraid. Very afraid.

Whether the Dems believe that “this self puffery is the product of a delusional mind” is irrelevant. They have seen his toxicity in polls and recent elections. What appeared to be an attractive young upstart, capable of passing legislation dreamed about by older Dems for decades, is now seen as a threat to their very existence. The old bulls are not ready to cede their place in Washington so that some young, delusional dreamer can pursue his fantasies and destroy their gravy train.

Fantasy has been confronted by reality. In such contests, reality always triumphs, at least eventually. It will be interesting to see how this President reacts. He is not used to being questioned. Nor is he used to being treated with anything other than cult-like admiration. If indeed his condition is pathological, we could be in store for a very painful (and dangerous) national soap opera.

When Obama was useful, he was the hit of the party. Exposed, he is nothing more than a liability that threatens the rest of the party. Survival trumps loyalty, ideology and psychology. Regardless of Obama’s psychological condition, he is about to be destroyed by his own tribe.

Messiahs are not used to such treatment. How this plays out will be interesting and potentially very dangerous.

Healthcare Vaporizes Obama Presidency

Healthcare Vaporizes Obama Presidency

Healthcare destroys a presidency and jeopardizes a political party.

In the fledgling days of the personal computer industry, software vendors frequently announced products that were not yet ready for release. The term “vaporware” was coined to describe such software. Most of these products never reached the marketplace. Some that did should not have.

The recent health-care reform effort was nothing more than a modern-day, political version of vaporware or, more aptly, VaporCare. The VaporCare bill never reached a point where it was ready for “release.” In software terminology, the legislation was nothing but “spaghetti code.” It was written by dozens, all of whom brought their own coding styles, wants and objectives. There was no guiding objective to the legislation other than “we must pass something, quickly.”

No one, including the various writers of the bill, the Congress or President Obama, had a comprehensive understanding of the legislation. The bill was a “moving target,” changing whenever criticisms arose, decision-makers met or vote-buying was required. Few of the ad hoc changes had anything to do with improving the quality of health care. As stated in The Legend of Bagger Obama:

At the end, there was no discernible logic behind the plan. Inconsistencies, deals, falsified data and outright lies were evident to anyone willing to look. Despite the problems and unpopularity, healthcare moved forward not unlike an ancient pagan ritual. Congressional Democrats [were willing to sacrifice] the best healthcare system in the world and the American taxpayer to their God, Bagger Obama.

No one in the political class knew what was in the final bill or whether their Frankenstein monster would work. Few seemed to care.

Vaporware or “sausage-making” might be foreign to voters, but their health care is not. The public quickly realized that they did not matter, at least in the eyes of the political class. Passage of a bill, any bill, was more important than the quality or quantity of health care. Monument-building was too important for normal folks to have input. The political elites knew what was best for the common folks and were intent on providing it, “good and hard.”

Blinded by ambition, Democrats believed they could ignore the electorate. Despite rising public discontent, the political class plowed ahead. Why not? They had a filibuster-proof majority. They had designed (and continued to modify) a great VaporCare plan. Their President had messianic powers that would enable him to sell any program they designed. It was a sure thing. Full speed ahead!

Democrats clearly misjudged. The largest ratings agency in the country, the voting public, rated the product defective, yet the Dems moved toward passage. Congress came across as imperial, and President Obama ultimately fared even worse.

President Obama’s ego and self-absorption apparently required him to be public all the time. According to CBS News, there were only 21 days in his first year where Obama did not make at least one public appearance. The statistics from CBS were amazing: 411 speeches comments and remarks of which 52 were on Vaporcare, 158 interviews, visits to 58 US cities and 21 foreign nations, 160 flights on Air Force One, 193 flights on Marine One, etc. etc. In short, it was Obama time, all the time.

While familiarity doesn’t always breed contempt, it appeared to be in play with President Obama, especially after a series of disappointments. Campaign promises were broken, promised transparency became a joke, foreign policy was seen wanting if not embarrassing, terror defenses seemed diminished, Chicago-type deals were worked, and other real-world inconveniences intruded on “The One’s” plan for his Camelot. These disappointments diminished the Obama mystique, but would not have killed his Presidency.

Obama’s continued hard sell, including obvious lies regarding the bill, revealed him to be little more than an unethical salesman attempting to foist off a defective product on a stupid group of customers. In Obama Wins Oscar, where his style was compared to the motley sales force from the movie Glengary Glen Ross, it was observed:

Quite the performance, just not something most would expect from the President of the United States. The exchange seemed more appropriate for used car salesmen or “boiler-room” stock scams.  In short, the performance seemed both desperate and dishonest. My thought was, “Would I buy aluminum siding from this man?”

VaporCare cost Obama whatever credibility he had left. His campaign guise of nobility and omnipotence was revealed as fraudulent when he used the approach of an unethical used-car salesman. Messiahs don’t sell snake oil. Anointed Ones don’t engage in fraud. The high hopes and dreams that accompanied Obama’s ascendancy to the Presidency (and ultimately Mount Rushmore) came crashing down when he lowered himself to selling the VaporCare lie. His image changed from The Exalted Leader to just another Used Car Salesman from Chicago.

Obama jokingly referred to the ending of the movie Thelma and Louise, saying health care would not end that way. But VaporCare did go over the cliff (or Freudian slip, “precipice”). With it went what remained of Obama’s reputation, image and Presidency.

VaporCare tarnished all its proponents. The Democrats felt the voter wrath in several elections, none of which should have been close. All turned into spectacular, seemingly inexplicable, losses. VaporCare appears out of reach for now.  The Left is angry, the Right is angry and voting results show that Independents are running from the Democrats in droves.

Polls portend bad results ahead for Democrats. That spells major problems for President Obama. A political animal’s first instinct is survival. When re-election is jeopardized, watch out! Already one can see the Democrats distancing themselves themselves from their President. As the 2010 elections approach, their feelings toward their own President are likely to be described by the , the following passage from The Legend of Bagger Vance:

“You know you can just go ahead and creep off somewhere I’ll tell folk you took sick… Truth be told, ain’t nobody gonna really object… In fact, they’d probably be happy as bugs in a bake shop to see you pack up and go home…”

This President was likely doomed to failure without the Vaporcare debacle, but realization would not have come so soon. All style and no substance can fool some of the people only some of the time. Form and flair work in a campaign, but they are no substitute for governance. VaporCare was the tipping point. Visions of Obama’s greatness were replaced with a tawdry picture of political opportunism and corruptness, self aggrandizement and Chicago-style gutter politics.

Stripped of his veneer, Obama was found to have no substance. Many feared this outcome from the beginning, but foolishly hoped that charisma, myth and sizzle would be enough to succeed. Obama quickly transformed from public celebrity to public nuisance. Talented people will be tolerated for self-absorption and arrogance. For incompetents, these traits are massive liabilities.

Obama’s Presidency has been reduced from the Messianic to the tawdry, all as a result of VaporCare.  When his image died, so did his Presidency. Stick a fork in the Obama Presidency. It is over.

The political excitement, however, is just beginning. The 2010 elections will not be pretty. Dems will be fighting for their political lives and running away from Obama. This will be cruel, much like a Mexican bullfight with Obama as the bull and his own party as the matadors. Like the bull, Obama will not comprehend what is happening. His self-image and former cult-like status will add to his confusion. His propensity toward anger and intolerance towards anyone in his way will make for a glorious, bloody fight. But the matadors have both numbers and experience. They will finally overwhelm and kill the bull, but not without substantial losses in their own ranks.

Bullfights are never pretty. Especially ones that drag on for three years.

President Hoover's State of the Union

President Hoover's State of the Union

Herbert Hoover

I don’t know what President Obama will try to sell tonight in his State of The Union speech. I do know that what he says will have no relation to reality. But that could be said of any President in recent years with respect to this occasion. This particular President has speech-making skills that few of his predecessors had. He has an unusual ability to turn nothing into a great sounding speech.

Tonight will be little different. Talking heads, still in his camp, will rave about the speech after it is delivered. You will hear how he has regained his mojo and is now going to solve the economic problems. That, of course, will be nonsense. As any number of people have observed, what sounds like a great speech from this President does not read like one. Once removed from the pomp and circumstances associated with his stylistic delivery, his words wobble and usually collapse. That is why reading, as opposed to listening, is the better way to understand what has been proposed.

To put tonight’s speech into perspective, there is only one question that should be asked: “Why Mr. President did you squander an entire year on your fraudulent health care reform at the expense of dealing with the problems of Main Street?” That question should be crawling across every television screen in this country while he speaks.

The real State of the Union, as opposed to what you will hear, is captured by Michael Ledeen:

Banks are not lending, companies are not hiring, because they are afraid of what Obama will do next.  Both are afraid of onerous taxes, including new health care burdens, and the banks fear new regulations and the consequences of the recently declared war on evil bankers by the president.  Seniors are afraid they will be deprived of medical treatment.  Juniors are afraid they are going to be forced to buy health insurance they don’t think they need.  Across the board, Americans are afraid they’re not going to find work, and won’t be able to afford a house.  And, as the Massachusetts vote showed, Americans are worried about threats from abroad, worried about Iran, afraid of terrorist attacks, and afraid the Obama Administration doesn’t take all this seriously enough.  As Scott Brown put it, most Americans think our tax dollars should go to fighting terrorists, not to pay lawyers to defend terrorists.

Rhetoric, no matter how majestic, cannot alter this reality. There is nothing that Obama can say (or is willing to do) to change the conditions outlined above. Virtually everything he has done or tried to do has made things worse. For one year, his policies resulted in producing a deeper hole. These problems are now intractable.

There is one unexpected thing that might occur. It is possible that the rhetorical magician has spent all his magic. As described in Healthcare Vaporizes Obama Presidency, Obama’s used-car-salesman approach to selling health care greatly damaged his “Messiah” image, at least amongst the non Kool Aid drinkers. It will not reflect in the media post-speech analysis, because most of them are still imbibing. It may show up in polling data a few days after the speech.

Regardless of the post analysis, the irony is that Obama rode into office as the new Roosevelt. He will be driven out as the new Hoover. His most vigorous pursuers and critics will likely be irate Democrats. He may escape the tar, feathers and rope of his pursuers. He will not do as well with the historians.

A shorter version of this post appeared on American Thinker

Obama Denied Parole

Obama Denied Parole

As expected, the State of the Union (SOTU) speech was delivered with the usual élan from the gifted orator, President Obama. Unexpected, for most, was the content of the speech.  President Obama “doubled down” on policies soundly rejected by the American people.

For a candidate who was so politically adept, his tone deafness in office is startling. From Jonah Goldberg:

Since taking office, Obama has continued to see the presidency as the perfect perch from which to campaign for a job he already has. The solution to every problem the White House runs into is “more Obama.” Much of this stems from Obama’s own arrogance. When people disagree with his health-care proposals, it is because they don’t really understand them or because they are misdirecting their anger at him. When Rep. Marion Berry, D-Ark., warned the president that the 2010 midterms were shaping up to be a replay of the 1994 Republican tsunami, Obama reportedly told him that there was one important difference between then and now: “Me.”

Voters soundly rejected Obama’s programs in Virginia, New Jersey and Massachusetts. Additional support for this verdict continues in the form of declining poll numbers for both the President and Democrats in general. Yet, “like a drunk in a bowling shirt at the craps table who insists his losses don’t disprove his ‘system’ for winning, Obama stands behind his bet.”

The State of the Union was a chance for Obama to regain his mojo and demonstrate the political savvy he showed during his campaign. Instead, we got a surreal performance replete with inconsistencies and outright distortions, if not lies. For an out-of-touch ideologue, the speech might have made sense. For a political leader, however, it was a disaster.

Perhaps the best way of understanding the political foolishness of the State of the Union speech is to view it in terms of a Parole Board Hearing. In this setting, convicts usually come in to apologize for their past actions in the hope of early release. They express contrition, state how much they have changed and how they will become solid citizens if only given the chance.

In a way, the SOTU speech was Obama’s Parole Board hearing. The American public had “convicted” him. Now Obama had his chance to make a case for his “release.” Instead of providing a mea culpa and promising to adjust policies, Obama, in effect, defiantly announced that he was proud of his “crimes.” Furthermore, if released, he intended to recommit them. This performance was political insanity. It was the performance of a hard-core ideologue (“hardened criminal” that showed no understanding or remorse for his crimes). It revealed that he believed in what he had done, and public opinion be damned.

One has to wonder what or whether this Administration was thinking. The approach was not one that made sense in either a parole hearing or a political setting. Were they so arrogant to believe that the court of public opinion did not matter? Apparently they were.

The decision returned from the Parole Board read as follows:

“This person is self-consumed, arrogant and out-of-touch. His condition may be pathological. He is unable or unwilling to accept reality or advice. He has no intention of reforming his behavior. His idea of changing direction is to substitute the somewhat obscure Smoke and Mirrors for his previous shady modus operandi of Hope and Change.  There is no evidence of remorse. There is no recognition that he understands that what he has done is wrong. Based on a full analysis of the relevant information, there can be no basis for assuming that he has been rehabilitated. On these grounds, the Parole Board of the American Public has no choice but to reject his request for release. Next earliest review date will be November 2010.”

Free Healthcare


Free Healthcare

One of the simplest economic concepts to understand is the theory of demand. As the price of a good to users decreases, demand or use of that good will increase. As the price of a good approaches zero, theoretically the demand or use of the good will approach infinity. Nowhere is this principle better demonstrated than healthcare.

Here are some simple anecdotes from my past. In the 1950s, doctors made house-calls and charged nominal amounts for their services ($10 seems about right).

In 1962 I dislocated my shoulder in a charity alumni football game and was whisked to the hospital by ambulance. X-rays and re-positioning the shoulder were required. My father paid all the fees out of pocket. I am not sure what the cost was, but my father did not carry around great amounts of money. My guess would be in the $40 – $50 range.

In 1976, our four-year old son was awake all night with an ear problem, which ended with bleeding from the ear. My wife and I were panicked, especially because we had located to a new city only that week. The next morning (Sunday), we called a neighbor and received a recommendation for a pediatric practice. The doctor made a special visit to the office at 2:00 that afternoon and saw our child. The cost was $15.00.

So, what happened to our healthcare system?  Medicare and Medicaid were instituted and that separated the price from the actual cost of the service. Government involvement soon expanded to the point that the market for healthcare ceased to be a free market. While prices to consumers were driven down via Medicare and other third-party payers, costs were not. Demand increased dramatically, as the services were almost “free,” at least to the user.

The following information, posted by Glenn Reynolds, shows what happened over time:

VERONIQUE DE RUGY: The High Cost of No Price: A simple chart will help you understand why healthcare spending has gone out of control. “Economists have shown that if a good’s price is zero or decreasing, then the demand for this good will likely increase. In 2008, consumers were only directly responsible for 11.9 percent of total national healthcare expenditures, down from 43 percent in 1965, according to new data from the U.S. Department of Health and Human Services. This means that someone other than consumers pays roughly 88 percent of all healthcare costs, giving consumers little incentive to mind costs and much incentive to over-consume.”

Now we are on the verge of making the problem worse with the implementation of so-called health care reform. Believing that the price we pay is the same as the cost of a product is a common economic fallacy. P.J. O’Rourke colorfully described the problem:

If you think health care is expensive now, wait until you see what it costs when it’s free.

O’Rourke, based solely on this observation, should be inducted into the quote Hall of Fame.

This post originally appeared on American Thinker.



Wonderful Collection of Forecasts

Below is a link to a wonderful collection of forecasts for the New Year from The Big Picture.

It includes forecasts/commentary from Wall Street Banks, Hedge Funds, Investment Advisors, as well as investment ideas and potential problems. International is also dealt with.

You can get the information by clicking on Guide to 2010 Outlooks

The Legend Of Bagger Obama

The Legend Of Bagger Obama

“… you don’t ever know where he comes from or where he’s going.”

It is 2008. An unknown figure steps from the mist. No one knows his background. There is no birth certificate. No college transcripts or other records. No known friends. No apparent experience. A virtual blank slate stares at you. Are you watching a remake of the eponymous “Legend of Bagger Vance?” No, you are witnessing the emergence of Barack Obama on his march to power.

“The Legend of Bagger Vance” was a Robert Redford directed movie made in 2000. The principal actors were Will Smith, Matt Damon, Charlize Theron and Jack Lemmon (his last movie). The film was about a fictional golf event in 1931, held in Georgia. Smith played the central role of Bagger Vance, a mystical and mysterious caddy. Damon played Rannulph Junuh, whose life, golf game and love interest Bagger magically rejuvenated. The story was set against an epic golf match Junuh played against Walter Hagen and Bobby Jones. provided the following background for the film:

As Steven Pressfield (author of The Legend of Bagger Vance) has acknowledged, Bagger Vance, and the story of his legend, are based on the Hindu epic and scriptural poem, the Bhagavad-Gita. … In the epic, Bhagavan is the “Supreme Personality” who helps his follower, Arjuna, understand much about war and about life.

In a review of the film, the following observations were offered:

…  co-producer Michael Nozik has described Bagger as a “Native American coyote trickster,” and costar [Charlize] Theron has expressed her fascination with how “you don’t ever know where he comes from or where he’s going.”

The Legend of Bagger Obama started with a masterfully crafted and executed  presidential campaign. It was a campaign of personality, centered on a young, unknown, but messianic figure. The Clinton machine, the most feared force in politics, was taken out first. Then an inept Senator McCain was easily defeated.

Visions of Camelot redux filled the media. Millions supported the shadowy and charismatic man. A groundswell of popular support, hope and goodwill ushered him into office. Marvin Olasky captured much of the excitement in a recent post, especially that of the media:

Tom Brokaw compared Obama’s inauguration to the overthrow of Communism in 1989: “I was in Prague when that happened. . . . The streets were filled with joy.” CBS Early Show co-anchor Maggie Rodriguez rhapsodized, “A new day is dawning here in the nation’s capital. . . . Does it get any better, or more beautiful, or more spectacular, than this?”

The International community was just as infatuated. Obama was awarded the Nobel Peace Prize, ostensibly based on nothing more than imagery and expectations.

The trappings of office added additional majesty. He was a rock star who had assumed the highest office in the land. His presence dominated the airwaves and newspapers. Exaggerations became truth if he uttered them.

This “Supreme Personality” seemed to believe his mere presence and pronouncements constituted governance. Management and decision-making seemed beneath him. In many ways, it was as if Bagger Vance, himself, had ascended to the White House. It was just how Bagger might govern. Mere pronouncements, filled with mystical wisdom, would solve the world’s problems. Presence and image would replace actual decisions. That was what Bagger knew and did.

Movies are easier to script than real-life. Bagger Obama’s “legend” soon began to falter. A teleprompter malfunction exposed oratory skills that appeared to be no better than his ridiculed, illiterate predecessor. Campaign promises were quickly abandoned. Numerous embarrassments abroad developed, as did a pattern of waffling on issues.

Unlike a movie, real-life has angles never intended to be filmed. Campaigns can be orchestrated. After election, all camera angles are in play. The young emperor soon began to be viewed as without clothes and without crown. Some of his biggest supporters in the media began criticizing, even satirizing Bagger. Olasky described:

Jon Stewart’s The Daily Show on Comedy Central is often a leading indicator of sentiment among younger voters. Stewart last month waxed sarcastic regarding not only Democratic spending and deficit-creation, but also about Obama’s personal style of implying frankness and then serving up bromides.

Maureen Dowd’s New York Times column is often a leading indicator of sentiment among older liberal voters. She wrote recently, “The animating spirit that electrified his political movement has sputtered out. If we could see a Reduced Shakespeare summary of Obama’s presidency so far, it would read: Dither, dither, speech. Foreign trip, bow, reassure. Seminar, summit. Shoot a jump shot with the guys, throw out the first pitch in mom jeans. Compromise, concede, close the deal. Dither, dither, water down, news conference.”

Stripped of his aura, Bagger Obama was reduced to an ordinary man, subject to ordinary judgment and scrutiny. He was seen as just another politician. “The One” had morphed into “Just Another One” (ordinary politician, that is).

Without his halo, Bagger Obama’s campaign phrases sounded sophomoric and empty.  “Yes we can!” had no meaning. “Hope and Change,” conveniently imprecise and effective in a campaign, was useless for governing. The public passed judgment now in terms of effectiveness rather than awe. Warts and blemishes were apparent with the Messiah lens removed.

The prolonged Afghanistan troop decision, scripted as the measured consideration of a wise leader, did not play well. It was merely another politician stalling while he searched for a political strategy. The “correct” war of the campaign was now just a political problem. Geopolitics or troop safety seemed irrelevant.

The Gitmo base closing represented another campaign-promise fiasco. The decision was postponed for more than a year, and the base may never be closed. Attempts to transfer prisoners to other places were clumsy and replete with political bribes.

Health-care reform morphed through endless iterations. At the end, there was no discernible logic behind the plan. Inconsistencies, deals, falsified data and outright lies were evident to anyone willing to look. Despite the problems and unpopularity, healthcare moved forward not unlike an ancient pagan ritual. Congressional Democrats sacrificed the best healthcare system in the world and the American taxpayer to their God, Bagger Obama.

Nowhere was the lack of leadership more apparent than in the economic sphere. Promises and forecasts were consistently wrong. The vaunted stimulus package was little more than large-scale looting, cronyism and vote-buying. Increasingly non-government economists agreed that economic policies were harmful.

In response, the Administration maintained that a recovery was under way. But citizens knew that stocks were lower than they were in 1999, no net job creation occurred this century and foreclosures and bankruptcies were increasing. No alternative, credible plan was offered.

Bagger Vance was able to rehabilitate Junah’s golf game to the point that Junah could compete with Hagen and Jones. If Junah had lost the tournament by 17 strokes, there would have been no story and no legend. Bagger Vance’s magic was “real” in the sense that he could mystically create outcomes.

Bagger Obama strode onto the stage selling the same magic. His “game” was our economy and geopolitical role in the world. Since his arrival, conditions in both areas have worsened. Bagger’s magic did not work. He is losing his game by much more than 17 strokes.

Obama sold a product he could not deliver. Image and reality collided, and reality won. The unfolding tragedy is that everyone but Bagger Obama seems to realize this. What was once viewed by people as confidence, control and wisdom is now seen as narcissism, naiveté and self-absorption. Competence is no longer presumed, it is doubted. Yet, Bagger continues playing his role.

We are at a dangerous point in both the Presidency of Barack Obama and the country. Does the Administration have any idea of what to do? Do they believe they can continue to use Hollywood imagery in lieu of real, hard decisions? Hype, rhetoric and Greek columns are irrelevant. Markets and enemies are immune to dramaturgy. The President, his minions and the country are apt to find that out shortly.

For Bagger Obama, it is difficult to visualize how this ends. It is unlikely that he can rehabilitate his presidency, because there is no way to rehabilitate the phony image. A different image might work, but it is doubtful that people would fall for such a marketing ruse. Americans are forgiving people, but they have never been kind to con men. The most likely scenario is that Bagger Obama is a one-term embarrassment to the country, the world and the Democrat party.

Obama’s fiction was great. He was a wonderful actor who was able to effectively play a President on TV, for awhile. The performance was all form and no substance, fine for a movie but not real life. The Fall sweeps have come and gone, and the Obama show did not pass muster. Unlike TV, mercilessly this show cannot be cancelled for three more years.

Somewhere from beyond the mist the real Bagger must be chuckling as he watches. Perhaps he would provide the following advice:

“You know you can just go ahead and creep off somewhere I’ll tell folk you took sick… Truth be told, ain’t nobody gonna really object… In fact, they’d probably be happy as bugs in a bake shop to see you pack up and go home…”

For Bagger Vance this may be humorous. For most of us, however, the next three years will seem like a dangerous eternity.

Monty Pelerin

2010 Will Be Worse

2010 Will Be Worse

Four Horsemen of the Apocalypse

Despite the rising stock market, virtually everything else continues to deteriorate in the economy. An earlier post dealt with this anomaly.

There literally is not one thing that can be claimed as a positive. And that includes the phony GDP third quarter “improvement” and presumably a better (preliminary) number for the fourth quarter. Here is a quick (not all inclusive) list as to why things will get worse rather than better:

  • Bankruptcies and unemployment continue to increase.
  • Foreclosures are increasing and will get worse.
  • The Housing market will worsen as a result of more foreclosures and more mortgage resets in 2010
  • The Federal Government’s deficits continue to grow
  • Foreigner financing, necessary to support our deficits, is decreasing
  • The private sector continues to decline as evidenced by state income and sales tax collections
  • Private and state pensions continue to fall further behind actuarial soundness putting special pressures on local and state governments
  • States continue to spend beyond sustainable levels
  • Consumers will underspend for several years because of too much debt
  • Health care “reform” adds costs and problems to the out-years
  • Legislation passed and proposed causes small business to hunker down and refrain from expanding or hiring
  • The banking system continues to deteriorate
  • Credit is being increasingly withheld from small business and commercial real estate
  • The FDIC is out of money
  • Bailouts, promised to produce returns for taxpayers, are turning sour
  • Fannie and Freddie are now completely guaranteed by taxpayers
  • The FHA is repeating the same mistakes as Fannie and Freddie
  • There is no private mortgage market left; much of existing mortgage and all new mortgages are underwritten by taxpayers
  • Raising taxes is not feasible because it will kill the economy
  • Rising interest rates will do the same
  • The Fed will not be able to remove excess liquidity from the system
  • The Federal government is unable (unwilling) to cut spending
  • Unless the Fed continues QE, the Federal Government will be unable to pay its bills
  • The Commercial Real Estate problem has just started to be felt

A summary of some of these items was included in a short slide presentation by David Rosenberg.

A perspective on one state’s budget woes (yes, it goes way beyond California, Michigan and New York) can be obtained from this Mish article.

Free Markets Don’t End Like This

Free Markets Don’t End Like This

“My long view for the US is high inflation which will not show up in the government’s fraudulent statistics, along with a declining standard of living, increasing decay and ultimately leading to chaos, societal and government collapse in the US within a decade or two, maybe sooner.” Craig Harris

The following article will seem extreme to some. The above quote especially will shock many. My view is that this quote is a reasonable estimate of where we are heading. No one can predict the future with precise accuracy. Even if a prediction is correct, estimating the timing is even tougher.

Many, including myself, will argue that the future is not deterministic. Actions and policies can change and alter outcomes. Clearly, that is true. Yet, it is likely that the tipping point for changing policies necessary to avoid Harris’ prediction was past years ago. In that sense, his forecast may be deterministic, i.e., independent of any actions that are subsequently taken.

Future actions can certainly influence the timing, but I believe Harris has covered that possibility with his “within a decade or two, maybe sooner.” My personal guess would be within a decade.


Dec 27, 2009
Craig Harris
For a contact email address go to Craig’s website:

“I would buy every three months some gold and not worry so much about the price because the weight stays the same.” -Marc Faber

“Fantastic article that captures the true nature of what has happened in the last year and what is likely to happen in the coming years. Have you benefited in any way from the actions taken by the government and Federal Reserve in the last year? Are 0% interest rates helping you? How much stimulus money have you received? Did you get bailed out? Did you get a bonus this year?” James Quinn

An Introspective Look at the Future of America

Craig Harris
Dec 27, 2009

As we close out 2009 and look forward into 2010 and beyond, this has been a year of near financial catastrophe and monumental change, none of which benefited America or ordinary Americans. Late in 2008 and throughout 2009, events have happened in the US which would have been labeled unfathomable just a few short years ago, and yet already these monumental changes are expected to be filed into the memory hole and Americans are expected to believe nothing has changed.

As we exit the year, we are told the US is a laissez-faire free market economy and yet the US government is now the largest owner of housing in the US as well as the owner of last resort for some of the largest and completely insolvent US corporations. The Federal Reserve, a privately and anonymously owned and controlled corporation chartered with issuing the nations currency, were given the green light by themselves to transfer to themselves and their shareholders the people’s wealth in the form of their future labor. The FED balance sheet has ballooned to become a junk bond warehouse as they overtly and covertly buy their own debt, immune from any sort of oversight, regulation or auditing and operating above the law. Along with that, increasingly coercive brute force measures are now routinely necessary to manage and manipulate so called “free market” asset prices which are cheerled by so called “financial news media” whose board members and management are all the same people who transferred the people’s wealth to themselves. The corporate media party line idea of a “free market US economy” now seems like a distant memory and it all feels like systemic fraud, corruption, malfeasance and organized crime at the very highest levels.

Continue reading Free Markets Don’t End Like This

Rosenberg is Right-On, Again

Rosenberg is Right-On, Again

Uncle Sam with empty treasury, 1920, by James ...

Rosenberg is Right-On. Here is his daily email with links to the full piece. The only part that I might take issue with is his contrarian play on T-bonds.

The emboldening was added by me.

Breakfast with Dave

Read full article (PDF 902KB)
Read summary (PDF 427KB)

January 4, 2010


Everyone is pre-occupied with the Fed’s exit strategy this year. But there is no such strategy because it is evident that the economy will never be able to recover without sustained doses of government stimulus. Interest rates are either going to be in a trading range or trend lower. We had mentioned emphatically a month ago that the Treasury market was at near-term risk, but looking ahead, bull flatteners in bonds are very likely going to be the best strategy, if for any other reason that the consensus is positioned the other way.

We had also warned that the bearish stance on the U.S. dollar was too broad and that we could see a near-term countertrend rally that would cause a reversal in commodity prices and gold, which would open up a nice buying opportunity; that time has come.


Quote of the month goes to … the former National Bureau of Economic Research (NBER) dean of dating business cycles, Martin Feldstein:

“The recession isn’t over.” In a Bloomberg Radio interview on December 17th.

That seems pretty blunt, doesn’t it? But he may be right.

Imagine that the best we could do with the gargantuan fiscal and monetary stimulus was a 2.2% annualized growth in real GDP in the third quarter (real Gross Domestic Income (GDI) was closer to a 1% annual rate!). This result must be put into three perspectives:

1. It came in the face of $100 billion of real stimulus out of Washington. This means that 90% of the growth in Q3 came courtesy of Uncle Sam’s generosity. In other words, the economy basically stagnated in the third quarter when GDP is measured “organically”.

2. What is normal is that the first quarter of post-recession growth is that real GDP expands at a 7.3% annual rate; 2.2% is really nothing to get excited about — it’s actually quite worrisome.

3. Never in recorded history has growth coming out of a string of declines been as weak as what we just witnessed. Considering all the government efforts to usher in a V-shaped recovery, what we saw unfold in the real economy in Q3 – admittedly quite divorced from the action in financial markets – was, in a word, sad.

U.S. Government’s Road to Perdition

U.S. Government’s Road to Perdition

Washington Capitol, DC
Image by Francisco Diez via Flickr

James Quinn has posted another very informative piece.

It is especially useful for those who don’t comprehend the degrees of financial chicanery and deceit to which our politicians have resorted . The article will also enable you to understand the mathematical impossibility of the Federal Government honoring its social promises and debt obligations. There will be major defaults!

Understanding the criminal irresponsibility of our politicians might also provide you with your own Howard Beale moment: See Here

The article is highly recommended. While I would propose a somewhat different solution to altering the situation (not tar, feathers and rope, although they are deserved), Quinn’s proposal would be a vast improvement over what we currently have. READ THE ENTIRE ARTICLE

Christmas is a time when kids tell Santa what they want and adults pay for it. Deficits are when adults tell the government what they want – and their kids pay for it.

Richard Lamm

Decade after decade, Americans have voted for intellectually and morally bankrupt dullards that promise them more goodies under the tree. Every day is Christmas in Washington DC. Long-term means the next election cycle to these traitors of the Republic. I have written ad nauseum about the impending financial cataclysm that awaits our nation. I have spent countless hours documenting the unsustainable path of our politicians’ financial decisions and lack of courage in addressing the forthcoming tragedy that grows closer by the day. Our political system is so corrupt and dysfunctional that there is absolutely no chance that our path will be altered at the voting booth. Government programs are fashioned, but never finished. The IRS tax code consists of 3.4 million words covering 7,500 pages of payoffs to business lobbyists. Simplicity is a virtue. The politicians who are bought and sold by corporate interests prefer complexity and obscuring the truth. Everyone knows that the government cannot fulfill the fiscal promises they have already made. Instead of dealing with this reality using intelligence, courage and conviction, the weak kneed politicians that slither the halls of Congress have chosen to add a brand new bloated entitlement program guaranteed to detonate in our faces. This is the existing reality. There is nothing I can do that will change this reality. Instead, I will propose a new model.

Road to Perdition Scenario

‘Government help’ to business is just as disastrous as government persecution… the only way a government can be of service to national prosperity is by keeping its hands off.
Ayn Rand

Politicians do not care about budgets, inflation, or the value of the U.S. dollar. They care about power, personal enrichment and being re-elected. In fiscal 2000, the US government had $1.545 trillion of receipts and $1.458 trillion of expenses, resulting in a surplus of $87 billion that year. A mindless government bureaucrat doesn’t conclude that the surge in receipts was due to the internet bubble resulting in billions of one time capital gains revenues. They should have expected reduced revenues in future years. Nine years later government receipts were $1.51 trillion, while expenditures had reached $3.5 trillion. Total government outlays never go down. Obama’s FY10 budget projects $1.649 trillion of receipts and $3.042 trillion of expenditures, resulting in a deficit of $1.393 trillion. Deficits in the range of $1 trillion per year are projected for the next 10 years. Instead of addressing this budget gap that will absolutely lead to economic disintegration, politicians add new entitlements, expand our interventionist foreign wars, and dole out pork to their corporate backers.

Year On-Budget
Receipts Outlays Surplus or Deficit(−)
2000 $1,544,873 $1,458,451 $86,422
2001 $1,483,907 $1,516,352 -$32,445
2002 $1,338,074 $1,655,491 -$317,417
2003 $1,258,690 $1,797,108 -$538,418
2004 $1,345,534 $1,913,495 -$567,961
2005 $1,576,383 $2,069,994 -$493,611
2006 $1,798,872 $2,233,366 -$434,494
2007 $1,933,150 $2,275,303 -$342,153
2008 $1,866,280 $2,508,130 -$641,850
2009 estimate $1,501,784 $3,479,621 -$1,977,837
2010 estimate $1,649,422 $3,041,947 -$1,392,525

In the early 1980s, before the three decade long debt induced frat party, the National Debt was between $900 billion and $1.6 trillion. Today, the National Debt is $12.3 trillion, up 1,250% in three decades. Continue reading U.S. Government’s Road to Perdition

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