- Published on Friday, 24 August 2012 14:27
- Written by Bill Bonner, Founder and President, Agora Inc.
- Hits: 607
Yesterday, we got a little more enthusiasm in the markets... a little more spark.
Unfortunately, the juice was a little sour. The Dow fell 131 points. Gold, by contrast, rose $32 per ounce. Gold buyers seem to be anticipating more quantitative easing (QE). Stock investors, on the other hand, seem to have given up on it.
We're not going to waste our time trying to analyze a single day's movements. They're mostly meaningless. And investors don't know what to think, anyway. They're filtering back to work after a few weeks of vacation. They're catching up on their reading... finding out what has happened... trying to make sense of it... picking up the latest claptrap ideas as though they were the new fall fashions.
In these scruffy pages, we try to help. Not that we have any better idea than anyone else. But we're more suspicious and cynical than most investors. And we spend more time thinking about it. Most people have real jobs! They're too busy to waste time thinking.
"The trouble with you Americans," said a woman at last night's dinner, "is that you care only about making money... work, work, work. But the important thing is to learn how to live better. I spent a lot of time in America. People have money... but the quality of life is often not very high."
She had a point. More importantly, she had a pretty face; we wanted to listen.
"Oh, but France is full of tricks," said another new friend. "Nothing really is exactly as it is supposed to be... and certainly not as we say it is."
We're starting to like France's new Socialist president, Francois Hollande. He reminds us of the Argentines: ready to do precisely the wrong thing at precisely the wrong moment.
France's economy is not growing. The cost of living is much higher than in the U.S. -- with the minimum wage at least twice as high as in America. Unemployment among the young and the poor is high. And employers are reluctant to hire anyone. Partly because new hires are so expensive. And partly because they know they will have to spend half of their time on labor disputes.
Meanwhile, the entire country now risks sinking under the heavy burden of debt and dysfunction -- just like Greece, Spain and Portugal. In fact, our colleague Simone Wapler has just written a book showing why bankruptcy for France is now inescapable.
"Oh, we French like a challenge," our companion explained. "We work with a ball and chain around on our legs. So we have to use our heads!"
Regulations... interference... meddling -- just like in the U.S. People spend more and more time trying to comply with -- or skirt around --regulations and less time actually producing anything.
"It's much worse here, " the conversation continued. "Even petty things. Here, the police set up roadblocks late at night to catch people who've been to parties. They make you take a Breathalyzer test. If you fail, they take away your license to drive.
"The next thing on the agenda is that they are going to force us to all carry two Breathalyzer things. You know, those things you breathe into, in our own cars. We're supposed to test ourselves to determine whether or not we're fit to drive. Then, I guess if we're over the limit, maybe we're supposed to call the local gendarmerie and ask them to come arrest us!
"Of course, this is still France... so people are very reasonable, even the gendarmes, when you know them personally. I was driving with my mother when I was stopped at one of these traps. I had had a few glasses of wine so I was worried that I might have my license taken away. But when my mother saw the gendarme... she leaned across the seat...
"'Didn't I have you in my catechism class?' she asked.
"He looked at her... and he recognized her. He saluted... and he let us go.
"What people do is that they decide who's going to drink and who's going to drive. Typically, the husband does the drinking and the wife drives home. But this couple I know got to a party... and they were both having a good time. And then, when it was time to go, they realized that they had come from different directions in different cars. So no problem, they set off... with the husband following the wife in his car and she in hers.
"Well... wouldn't you know it... they were stopped. She pulled over. He pulled over behind her. But the wife, in the first car, quickly rolled down her window.
"She said to the gendarme: 'Thank God you're here... this guy behind me has been following me for the last 10 miles!'
"'Don't worry, madam,' said the gallant policeman. 'You go on your way... we'll take care of him!'"
So what does President Hollande do to try to make things better? He wants to raise taxes, especially on 'the rich.' "I hate the rich," he has been quoted as saying, proposing to put up the top rate to 75%, much higher than his European neighbors and practically guaranteeing an exodus of the most productive people in the country. And he'll raise the minimum wage even higher. That ought to help too, right?
Another reason to like the French president, in addition to the entertaining damage he does to the economy, is that his personal life is so colorful. In appearance, Hollande is a drab functionary -- middle-aged... dumpy... with narrow shoulders and a paunch.
He is surely smart and is said to have a sense of humor. But as far as we know, he has never had an original thought, built anything worth having, written anything worth reading or done anything worth doing.
"Still, he has a very rich story," the woman next to us explained. "He had three children with Segolene Royal [an attractive Socialist politician]... another child with another woman... then went back to Segolene and had another child. And now he lives with a third woman, Valerie Trierweiler. We call her the 'Rottweiler.' He has married none of them."
"That would never work in America," we said to our dinner companions.
Hollande blames capitalism for widening the gap between the rich and the poor. But it is not capitalism that did the job; it's the interferers, the meddlers... and the scammy rigged-up fixes from people like the French president and the rest of the controlling elite. And here comes more proof, from the Guardian newspaper in Britain:
The richest 10% of households in Britain have seen the value of their assets increase by up to 322,000 pounds as a result of the Bank of England's attempts to use electronic money creation to lift the economy out of its deepest post-war slump.
Threadneedle Street said that wealthy families had been the biggest beneficiaries of its 375 billion pound quantitative-easing program, under which it has been buying government gilts for cash since early 2009.
The Bank of England calculated that the value of shares and bonds had risen by 26% -- or 600 billion pounds -- as a result of the policy, equivalent to 10,000 pounds for each household in the U.K. It added, however, that 40% of the gains went to the richest 5% of households.
Although the bank said it could not come up with precise figures for the gains from QE, estimates can be produced using wealth distribution data from the Office for National Statistics. These show the average boost to the holdings of financial assets and pensions of the richest 10% of households would have been either 128,000 pounds per household or 322,000 pounds, depending on the methodology used.
However, Threadneedle Street said that QE had helped all sections of the population by sparing the country from a deeper slump. The rise in asset prices after QE was announced in early 2009 followed sharp falls in the two previous years.
"Without the bank's asset purchases, most people in the U.K. would have been worse off," it said in a paper prepared in response to queries from the Commons Treasury committee.
Wrong! People in Britain are not better off. They are worse off. The Bank of England took real resources that were owned, broadly, by the British people and gave them to a small part of the population. This prevented many of the rich... and their bankers... from going broke. But going broke is just what they should have done.
And if they had been allowed to do so, the rich wouldn't be so rich... but the British economy might be recovering now... instead of stuck in a Japan-like slump that could last another 10-20 years.
That's our story... and we're sticking with it.
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