The Trouble with Freedom

Stocks were up again yesterday — 120 points on the Dow.


Hold on just a cotton-picking minute. Honest investors are getting out of the stock market. There have been net withdrawals of $80 billion from US equity funds so far this year.

Who’s buying?

Speculator’s market

This is a speculator’s market. And the No. 1 gambler is playing with an infinite amount of chips.

We’re talking about central banks — who create money on demand.

Now, alarmed by Brexit and the worldwide slowdown, they’re buying assets at the fastest pace since 2013.

Just look at the chart below from Citi Research. As you can see, central bank-issued liquidity tracks the stock market almost perfectly.

central bank liquidity vs Global Stocks

Source: Bonner and Partners; Citi Research
[Click to enlarge]

We have our answer: Central bank stimulus, more than any other factor, is responsible for pushing up stock prices.

So, let’s get this straight…

Central banks are using counterfeit ‘money’ that no one ever earned or saved…to buy stocks at record high prices…while real investors head for the exits.

Does this sound like a winning program, or what?

We’ll have to go with the ‘or what’ on that one. But exactly how or when it comes to an end, we don’t know.

Theoretically, central banks can continue indefinitely buying stocks and bonds with fake money. And stocks and bonds can continue to go up in price even as the economy goes down.

Delusions, demons, and dementia

We’ve come out to the West Coast to see our daughter in Los Angeles.

Then we will drive to Las Vegas to join Mark Skousen’s Freedom Fest, where we will be participating in a couple of panel discussions.

We explained to Mark that we were not really fans of ‘freedom’. We are all prisoners of our own myths, delusions, demons, and dementia. Without them, we’d be lost…with nothing more than our brains to guide us.

As GK Chesterton said of a crazy man, he had ‘nothing left but his sense of reason.’ We trudge happily in our own chains; we just don’t want to submit to someone else’s.

Nevertheless, Mark asked us to take part in a panel of ‘libertarian CEOs’, along with Steve Forbes and John Mackey of Whole Foods. (Readers who would like to attend can register here.)

We haven’t confessed this to Mark yet, but we join the panel as an imposter…

Counterfeit libertarian

As a libertarian we are a complete counterfeit. We don’t really believe in the creed; we merely practice it when it suits us.

And as a CEO, we are an even bigger fraud. We are not, nor have we ever been, a real businessman. That would take far more organisational skill and force of personality than we have at hand.

Instead, we might more accurately be described as a ‘clumsy entrepreneur who was lucky en ough to find real business people to help build a company’.

But the libertarian CEO stretches the truth even further.

Steve Forbes, John Mackey, and Charles Koch are the Real McCoys. They apply the principles of libertarianism to business management in a serious and organised way.

We do not. We realised long ago that we were far too incompetent to try to tell anyone what to do, let alone undertake any serious central planning.

Laissez-faire is what you get when you shirk your responsibilities and fail at management.

But we left off yesterday with a promise. We said we would explore that den of foxes in Lower Manhattan: Wall Street…

Three-ring circus

We were describing how cronies and zombies — Republicans and Democrats — work together and use government for their own purposes.

They are the insiders…the elite…the Establishment — represented by Hillary Rodham Clinton in this upcoming election.

To bring new readers more fully into the picture, public policy is not directed by our elected representatives…who wisely and prudently debate the issues as they arise.

Congress is more like a three-ring circus than a real legislative institution. You will find freaks and grotesqueries aplenty. (Many members of Congress have hidden tails; we’re sure of it.)

You also see stunts, legerdemain, and bombast — all gaudy and solemnly fraudulent.

The tourists who come to visit are impressed by the marble, the smoke, and the mirrors. But they have no more idea of what is really going on than members of Congress do.

They’re too busy raising money from cronies…or glad-handing their constituents…to seriously consider the bills they vote on; they rely on staff (more or less permanent inside-the-Beltway apparatchiks) to tell them how to vote…and what to say.

And don’t bother to get into a deep discussion of the Fed’s zero-interest-rate policy…or central bank asset buying (QE)…with your congressman.

More often than not, he will have only the slimmest, most superficial, and self-serving grasp of the details…and no idea whatsoever of the theories.

He will understand — barely — only the myths of modern central banking, based on a few ‘talking points’ provided to him by his aides.

More to come…


Bill Bonner,
For Markets and Money, Australia

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

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