‘Praying for Nicaragua when you live in Tunbridge Wells is the first sign of madness.‘
– Evelyn Waugh
‘Three more cows died,‘ Jorge, our Argentine ranch manager, reported yesterday.
We had reacted as fast as we could. Still, the disease – whatever it is – moved faster.
Jorge and his crew of five gauchos worked for three days – including a Sunday and a national holiday – almost without rest. From first light until after dark they rounded up the cattle and ran them through the stocks.
It was hard work. But there were no complaints. They all knew it had to be done. All the animals have now been given an injection. Whether that stops the epidemic, or not, we wait to find out…
We are beginning to ruminate on the strange, wide and unappreciated gulf between Nicaragua and Tunbridge Wells…
A stock character of show-business (less so now than 50 years ago) was the ‘hick’. Recently fallen from the turnip truck, he knew his bucolic world. He knew his cows and his bottom 40…but the larger, outside world was a mystery.
Confronted with a public policy issue (for these men were often elected to the House or the Senate), he resorted to folk wisdom and practical experience.
‘Well, if you give money to lazy people, it won’t make them any less lazy,’ he might have opined on a welfare program.
Or: ‘I don’t know why we need to put fancy theatres and basketball courts in public high schools. I went to a one-room school house. And I can guarantee you it didn’t have air-conditioning.’
This down-home outlook made the hick a laughingstock to urbane policymakers. And he was often a fool. But it endeared him to the bumpkins who elected him.
President Johnson was one of the last major politicians who used this rube charm to good effect. When the occasion called for it he wore his cowboy hat. And he had many colourful expressions to substitute for real thinking. One of his favourites was: ‘The time to kill a snake is when you have a hoe in your hand.‘
The expression brought back the reality of country life. When you saw a snake with your own eyes you knew what to do…especially if you had a hoe in your hands. But a hoe is one thing; a Huey helicopter is another.
Here on the ranch, we find a dead cow. We make decisions that put the whole farm into motion, costing us a few thousand dollars that we can ill afford. Either we are right, or we are wrong. But at least we operate on facts, as best we can. And we suffer the consequences as we must.
We are six hours from the nearest city. Things happen here that we see, feel…and within the limits of our own senses and sensibilities…understand.
But the markets are a different animal. At our Bonner & Partners Family Office research department, a question has been preoccupying us: Does QE transmit inflation to consumer prices?
Much time was spent researching how the banking system works in a fiat money world. More time was spent wondering how and when the velocity of money might increase.
Experts disagree on major points. Can banks use their excess reserves to increase lending? Even this simple question throws up so many different viewpoints…and so many footnotes and nuances…that we regard it as beyond meaningful understanding.
On what facts does Janet Yellen operate? How connected is she to the real world? Does she understand the connections between QE and consumer price inflation better than we do? Or does she mistake the US Army for a hoe and the Viet Cong for a snake, as Lyndon Johnson did?
You can judge for yourself. Our old friend John Mauldin is quoted in a film about how the Bank of Yellen operates. As you will see, Yellen has no real facts. She has no hoe. And she wouldn’t know a dead cow if it bit her on the derriere.
Since the beginning of time until today, there is no evidence that activist central bankers – like activist politicians – have ever done anything but cause mischief. Yet the entire market is depending on them, as though they knew what they were doing. We repeat our warning: A distorted market is a dangerous one.
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