POITOU, FRANCE – A young man drove up yesterday. Shaved head. Earring. Nice car. Sad look.

“Monsieur Bonner?”

After the introductions, he got down to business.

“Damien [our gardener] told me you were looking for chickens. I’ve got about 10 of them I’d like to get rid of.”

“Why do you want to get rid of them?”

“My girlfriend was cheating on me. You know what that’s like. So I kicked her out. Now I’m getting rid of her chickens.

“You know what it’s like. I don’t want to take care of her animals anymore.”

We agreed to buy his chickens, bringing our flock up to 16… from which we get a few eggs every day.

Later, we said to Elizabeth, “He kept saying, ‘You know what it’s like.’ He was talking about his girlfriend stepping out on him. But I don’t know what it’s like. And I don’t want to know…”

“Of course not, honey…”

Warning Labels

Girlfriends, world improvers, and candidates for public office should all come with warning labels. Like prescription drugs, people should know what they’re getting themselves into.

Imagine how much grief could have been avoided if Hitler had announced:

“I’m going to go to war with the rest of Europe. This may mean diverting at least half of total GDP to weapons production and support of the army; consumers may struggle to find basic necessities.

“And it may put Germany in a two-front war that it may not win. Millions could die, our cities could be destroyed, and our country could be occupied by foreign armies for the next 40 years.”

“Okay, then,” the voters might say… “Sure, why not?”

A shrewd and honest Joseph Stalin could have given a heads-up, too:

“We’re going to organize the whole economy like the military. The insiders, like generals, will control everything and get the best food, lodgings, work assignments, and so forth.

“The plain people will be assigned cells… oops… I mean houses. There will be no unemployment. Everybody will have work to do… a lot of it.

“Malcontents and people I don’t like will be sent to special camps in Siberia for retraining or extermination, whichever comes first.

“Then, we all may get poorer every year for the next half-century… until our children and grandchildren finally come to their senses.”

Again, citizens would have a chance to look at the program carefully and decide if they still want to take the medicine:

“Sure… Sounds good to us…”

Invitation to Surprises

Of course, no one can see into the future. And who knows what will happen?

Still, there are some basic propositions that can provide guidance. If you do what others have done, for example, you will probably get similar results.

Imagine this warning label from former Venezuelan President Hugo Chávez:

“I’m going to put into place the programs that worked so well for Russia and Cuba. You know, nationalizing major industries. Price controls. Trade restrictions. Spending money we don’t have.

“Then, when the price of oil goes down and the bills come due, there may not be any food on the shelves. Inflation could hit more than 1,000%. Crime might soar. The government could crack down. That sort of thing.”

Just being alive is an invitation to surprises. But live-in girlfriends and public policies have predictable risks… and almost predictable results.

Mass murder is never a good idea. Neither is starting a war. Or restricting trade.

Bird Watchers

The future is our subject. Unpredictable. Full of slipups. Nevertheless, there are two things we know about it.

First, tomorrow deeply affects today. Second, it probably won’t be that different after all.

As we explained yesterday, the future casts its shadow backward on the present. We anticipate what will happen. And we adjust for it. Today changes depending on what we expect for tomorrow.

That’s why the old economists eschewed activism. They were like bird watchers, not zookeepers.

It is one thing to keep your eyes open and watch what people do. It is quite another to tell them what to do.

Once you begin trying to control the future, you become a part of the thing you’re trying to understand.

And now, standing in his own shadow, dark and benighted like the bottom of a well, is economic activist Peter Navarro.

Previously, he had been a bit of a local celebrity in the San Diego area where, after failing in four campaigns for public office, he was regarded as a hopeless loser. He was known in the economics community, too, but mostly as a crackpot.

Then, all of a sudden, national fame came to the Harvard PhD. He was named director of something that hadn’t existed until “The Donald” created it: the White House National Trade Council.

The National Association for Business Economics sat politely through one of his speeches. And in March, The Wall Street Journal published an op-ed from him.

The Journal did us a favor. Navarro laid out his basic ideas for all the world to see…

And there he is, egging on the president to do more of what never works – to block win-win deals with trade restrictions… to raise prices for consumers (leaving them less money to spend)… to contradict the principle of comparative advantage… and to make Americans poorer.

He writes:

Reducing a trade deficit through tough, smart negotiations is a way to increase net exports — and boost the rate of economic growth.

Where’s the warning label, we wonder?

More to come…

Next week, we will be writing from Switzerland and concluding our meditation on the future: why Peter Navarro is wrong, how trade increased productivity by 3,000% in the last half-century, and why the principle of comparative advantage still works.

Stay tuned.

Regards,

Signature

Bill

 

Economic Insight: America Hits New Debt Record


BY CHRIS LOWE, EDITOR AT LARGE, Bonner & partners


Chris Lowe

Americans are more addicted to credit than ever before…

That’s the message of today’s chart, which tracks total U.S. credit as a percentage of GDP.

As you can see, total consumer credit is around 20% of annual GDP.

That’s almost five times the level of consumer credit relative to the size of the economy that Americans had at the start of the 1950s.

Chris Lowe

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Mailbag

In today’s mailbag, readers ponder what the future holds

Regarding the future… while our Republic started with great intentions, it has mutated into a government for the “few.” We started with citizen legislators; it has mutated in a “ruling class.”

All our legislators will do anything to retain their seats – at the cost of providing service to the citizens. Instead, our legislators really work for major corporations (and that includes “nonprofits”). I would like our country to go back to citizen legislators that serve no more than 12 years, no retirement compensation, and prohibited from acting as a lobbyist. Also, the public and private debt is completely out of control.

– Joe R.

You talk about the future. Let’s summarize what the future looks like. We have a president who apparently is so deep in debt to the Russian State, he will do whatever Putin wants; we have a pharmaceutical industry that is no longer under the control of the government or even of free trade; we have a military-industrial complex that is soaking up all our extra wealth; we have transferred much of our manufacturing to other countries or to the robots.

Consequently, we have a population that must be supported by so-called entitlements; we have unsustainable national and personal debt. We continue to contribute to climate change and show little awareness that this problem even exists; we have a population that is undereducated and unable to elect effective leaders; we have a national infrastructure that is woefully old and decaying; and our leaders, including people like yourself, seem to have no ability to make a change.

To make matters worse, you, as a student of history, predict an economic collapse of biblical proportions. Moving to another country looks increasingly attractive, does it not? Too bad the rest of us cannot leave.

– Edmund S.

Finally, one reader drops a note to Bill, from one rancher to another.

I read with interest your experiences of agriculture at your ranch in Argentina via MoneyWeek magazine here in the U.K. I too have a similar venture with identical woes and experiences, a 7,500 ha farm in Brazil. There were 5 of us from the U.K., all similar age, school friends, farmers who met one Sunday lunch 8 years ago. I had too much to drink and ended up agreeing to buy a farm in Brazil some months later.

From a financial perspective, this was a dreadful decision, buying property in a foreign jurisdiction should not be undertaken lightly. We bought cheap, exchange rates have ebbed and flowed, bureaucracy strangled ambition, we have had land grab attempts, been let down by opportunist merchants and struggled with penal labor laws.

But… we are still there… learning.

We have had fun visits learning about different cultures, language, politics, and life in remote areas. Will it ever come to anything good? Not sure. There are amazing opportunities but until macroeconomic issues such as labor laws, protectionism, and infrastructure are overcome I grow ever more pessimistic about the future.

– Peter H.

In Case You Missed It…

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