"A Bad Bet"
By Bill Bonner
"Caesar: The Ides of March are come.
Soothsayer: Ay, Caesar, but not gone."
– "Julius Caesar," Act III, Scene I
YOUGHAL, IRELAND – "We’re having a jolly time here in Ireland. We just finished our quarantine (two weeks after arrival). But the whole country is buttoned down. We’re not permitted to go more than 3 miles (5 kilometers) from home… unless we have a good reason. Whether the lockdowns have done any good or not, we don’t know. But Ireland has only 93 deaths per 100,000 population. The U.S. is up to 163.
In any case, lockdowns are okay with us. We work from home, anyway. And there’s nowhere we especially want to go. We do need provisions, however. “Can we go into town?” we asked our handyman, Matt. “It’s a little further than 5 kilometers.” “Oh… don’t worry about it. This is the countryside. Everybody goes more than 3 miles. The roads twist around and soon, you’ve gone 3 miles and gotten nowhere. “Besides,” he added with a sly smile, “it’s three miles as the crow flies.”
As the Crow Flies: Stopped by the Gardai (the local constabulary)… in a roadblock: “You’re a bit far from home, aren’t you?” “Not as the crow flies,” we replied. “Now what kind of crows are these? You must be at least 10 miles from Youghal. Must be some American crows. Go along with you… and remember the 3-mile limit.” “Yes, sir. I’m on my way.”
Marvelous Stone Lodge: This past weekend, we took up our regular pastime – building things. Wherever we go, we usually have projects underway. And when we return, we find our tools and pick up where we left off. About a quarter mile from the house was an overgrown, abandoned gatehouse. So covered in vines was it, that we didn’t even know it was there when we bought the place. Then, when winter came, among the vines and briars, we found a marvelous little lodge, built of cut stone, with an octagonal center and two wings. “This would make a great office,” said Elizabeth. And so, we set to work.
It is a small project. And we intended to do it ourselves and had already done some clearing the year before. We intended to return to it last May. But along came the COVID-19. Trapped in Argentina, we could make no progress, so we gave the job to our friend, Mick, a local Irish builder. He tore off the old roof and put back a new one… took down the wobbly walls and rebuilt them, pointing up the joints of the others.
Mick “pints” up the joints.
This Is Ireland: And now, we are insulating, sheathing… and electrifying. While we can do these things ourselves, we are not good at them. So, we let the professionals continue and turn our attention to simpler, rougher work outside. Specifically, we are putting up a shed, where we’ll be able to stack our firewood and keep a few tools.
Normally, you build walls before you put on the roof. But this is Ireland, and it rains a lot. We need to get the space covered as soon as possible. Stonemasonry is fun to do. But it takes time. Instead, we propped the roof ridge on top of the old stone wall… and ran the rafters down to a 2x10, attached to two posts. Builders will notice that the rafters are neither on 18” centers, nor 24” centers. They’re on 1-meter (about 3-foot) centers. Ireland has gone metric. And with no snow load to worry about, and lightweight tin, roofing frames tend to be on the light side, too.
A shed in a hurry.
Thus, in a couple of days, we were able to get the roof on. Now, with some protected space available, it will be easier to go back and fill in the missing stone walls.
World of Money: Meanwhile… In the world of money, everything is possible. Everything is at play. Nothing is true. Nothing is straight or on-the-level. Everything is subject to interpretation and manipulation, lies and humbuggery. It’s
La Bubble Epoch. The best of times… and the worst of times. Grand and squalid. An information age, where nobody knows anything, and even the surest lessons of history are forgotten.
Over the weekend, the sober financial press began taking stock of Joe Biden’s remarkable $1.9 trillion boondoggle. The Wall Street Journal, for example, notes that the giveaways are likely to become permanent. It is already fretting about the taxes that will be needed to pay for them: "A group of progressive lawmakers including Sen. Elizabeth Warren (D., Mass.) recently proposed a so-called ultra-millionaire tax. The legislation would create a 2% annual tax on the net worth of households and trusts between $50 million and $1 billion and an additional 1% surtax on those above $1 billion."
The Financial Times, meanwhile, takes a more historical view. Biden is “country-building,” it says. And the whole nation is edging away from Ronald Reagan’s small government and back towards the big, fat budgets of Franklin Roosevelt and Lyndon Johnson. And why not? With so much free money available, says Maya MacGuineas, of the Committee for a Responsible Federal Budget, lawmakers are “almost numb” to fiscal restraints.
Adds Chattanooga mayor, Andy Berke: “People have been knocking on our doors asking for affordable housing, job training and enhanced transit… The public is excited to see the federal government taking action after way too many years of dysfunction.”
No Turning Around: At least The Economist notices the cliff ahead. "Yet, though today’s policymakers have a guaranteed place in economic history, they may not come to be seen as heroes. That is because America is running an unpredictable three-pronged economic experiment that features historic levels of fiscal stimulus, a more tolerant attitude at the Fed[eral Reserve] towards temporary overshoots in inflation, and huge pent-up savings which no one knows if consumers will hoard or spend. This experiment has no parallel since the second world war. The danger for America and the world is that the economy overheats…
Mr. Biden’s stimulus is a big gamble. If it pays off, America will avoid the miserable low-inflation, low-rate trap in which Japan and Europe look stuck. Other central banks may copy the Fed’s new target. Massive fiscal stimulus may become the normal response to recessions. The risk, however, is that America is left with rising debts, an inflation problem and a central bank facing a test of its credibility."
Big gamble? What are the odds?
No, there’s no theoretical reason to think that real output can be replaced with fake money.
No, there’s no example in history where money-printing has proven successful at creating sustained, real economic growth and prosperity.
No, there’s no way to stop the money-printing. Households, businesses, and the government now rely on it.
No, there’s no painless way to return to normal interest rates and normal fiscal/monetary policies.
No, there’s no plausible reason to think that this won’t end in disaster, just like every other episode of runaway money-printing in history.
But heck… this is La Bubble Epoch… everything is possible… even things that are impossible. Hand out $1.9 trillion in money you don’t have… to people who don’t need it, haven’t earned it, and don’t deserve it? No one will lend you that much, so just print it up yourself. A gamble? Perhaps. But we’ll take the other side of that bet."
