"Has America Lost Its Groove?"
by Bill Bonner
Youghal, Ireland - "The wind came in such gusts, it nearly knocked the young woman from Pennsylvania off her feet. And the rain…driving at us like an attack of drones…forced us to take cover behind stone walls. We’re touring a fascinating corner of Ireland called the Burren. “No one comes here for the beautiful weather,” said a shopkeeper. More tomorrow…
Hotter than Expected: Meanwhile, between theory and practice is, alas, real life. And in real life, in America circa 2024, things are not at all as bright as Joe Biden might believe. First, the latest inflation data shows price increases are not disappearing. Here’s yesterday’s Wall Street Journal: "The latest reading of US inflation was hotter than economists expected…prices rose 3.2% in February from a year earlier, the latest installment in a string of recent data suggesting that inflation remains stubbornly high."
Higher prices mean lower real income. Breitbart: "Record Number Plunder Their 401(k)s in Biden’s America." “A record share of 401(k) account holders took early withdrawals from their accounts last year for financial emergencies,” reports the Wall Street Journal. “Overall, 3.6% of its plan participants did so last year, up from 2.8% in 2022 and a pre-pandemic average of about 2%.”
The whole point of a 401(k) is to keep that money out of reach until you reach age 59 ½ or above. Removing that money earlier is about the worst financial move anyone can make. The beauty of these retirement accounts is that 1) you defer your income tax on your contribution, and 2) you invest long-term and watch your money grow and grow over the decades.
The Price of Redemption: Yesterday, we allowed ourselves a little daydream. It was about what Mr. Biden might have said, if he were a decent man, with a reasonable intelligence, who wanted to make a lasting, important difference for The People he is meant to represent.
It is still ‘theoretically’ possible to reverse America’s slide into debt and chaos. But it’s not easy. Drug addicts ‘hit bottom’ before they reform. Alcoholics too. Sinners repent. Even former Defense Secretaries may shed tears and regret the misery they caused (Robert MacNamara is the only one we’ve ever heard of who did so). Redemption comes at a price.
In theory, a man might be ‘reborn’ at 90…but in practice, he dies. So too, like a grand old tree, cut into pieces to make common chipboard, an empire must be crushed and humiliated. It must hit some kind of bottom before it can be reconstituted as a law-abiding Republic.
But where does the ‘bottom’ lie? We keep an eye on Argentina, looking for a clue. If the gaucho republic has not actually found its bottom, it must be close. Sixty percent of the people in the country live in poverty. Compared to the rest of the world, it has been going downhill for 75 years. Doing business is such a challenge – with constantly-shifting financial lanes – that most people either crack up…or give up. GDP slumps. Ambitious people leave the country. And those who remain – including our own kith and kin – develop extraordinary financial survival skills.
Less Groovy: And now, from Argentina, comes a bit of hope. Milei says what Joe Biden doesn’t. He’s identified the real problem – the ‘political caste,’ with all its cons, tricks, and grifts. And he has a plan to correct things. He failed to win the support he needed in the Argentine parliament, so he’s gone to state governors and The People with something he calls the "25th of May pact". It’s a plan, with several key elements, inter alia – 1) the inviolability of private property. 2) a non-negotiable balanced budget. 3) government spending must be kept under 25% of GDP and 4) free trade.
In the US today, federal budgets haven’t been balanced in 50 years. The US balance of trade has been negative, too, for half a century. And the cost of government – including taxes, regulation and inflation – must be running over 30% of GDP. Things are becoming less groovy all the time.
But let us not despair. So far, no pompous, gold-braided military numbskull has seized power. No gangs of brownshirts or blackshirts ‘disappear’ their opponents at night. Shops are still full. The stock market is still near a top, not a bottom. And somewhere ahead, perhaps far ahead, lies the bottom. Sooner or later, we will find it."
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