"Nobody knows anything"...they say in Hollywood. Because no one can predict which film will be a hit...and which will be a flop.
But people know even less in politics, finance, investment, or economics.
Economists pretend to project next year's GDP...or estimate pension fund requirements 20 years ahead. But they cannot even tell you the price of oil tomorrow...or next week...let alone 5 years in the future.
At what rate will a man be able to refinance his house...what price will he pay for a gallon of gasoline? No one can say. And without these critical components, the rest of the future is as mysterious as a George Bush campaign speech. "Taking up the tasks of history...we live in a time apart..." he told us. We have no more idea what he meant that what the price of gold will do tomorrow.
Today's economists know less than zero about everything. Because what they think they know about the present is as full of falsehood and flattery as a seducer's promise.
All the numbers an economist has to work with are bound into the soft mud of dollars. He can feel the mire squish up between his toes. He can sling it around...but he cannot get it to stand still long enough to use it as a reliable measure. What is a dollar? No one can say. In 1971, it took 41 of them to buy an ounce of gold. Now it takes ten times as many - even though gold went into a bear market in 1980 and still has not recovered.
One day a man can take a few dollars and buy a share of stock; the next day he will need twice as many. Oddly, the stockholder feels richer...while his purchasing power has been cut in half!
When the dollar price of doughnuts or dishwashers rise... consumers become agitated. They call upon the Fed to 'do something' about this inflation which cuts into their family budgets. But let housing prices go up, and the same people are delighted. The less house they get for their dollars...the more eager they are to make the trade.
If the dollar were a mistress, she would be the source of heartache. For she is fickle, unreliable, uncertain and inconstant. Still, this is the same sweetheart after whom so many people lust; they can't seem to get enough of her. They've been warned; she's a harlot...a phony...a jezebel...a painted woman with a sleazy past...who will break their hearts and steal their wallets. Still, they take her into their homes and hearts and ask no questions.
The dollar has become a universal hussy. She wooed and won over consumers, investors, and central bankers the world over. And everywhere she goes, she makes a scene: Foreign nations run huge trade surpluses with the U.S., then end up with surplus dollars...that enter their banking systems. Thus, America's Fed becomes central bank to the entire world, dictating monetary policy for all the world's economies. China's money supply (M2), for example, rose at a nearly 20% rate in December - mostly as a consequence of absorbing U.S. dollars. Is it any wonder that China is enjoying a boom? Is there any doubt about how it will end?
A fool and his money are soon parted, it is said. But before they split up, they are invited everywhere. For the present, Americans and their dollars are invited to every party.
Nobody knows anything...but so what? Let the good times roll!
Bill Bonner, DAILY RECKONING, 01-28-04 |
