Editor’s Note:

Will Bonner here again, publisher of Diary of a Rogue Economist.

It’s Boxing Day. So, no regular Diary entry.

But if you’re in the mood for appreciating the nation’s bureaucrats, here’s an essay you might enjoy!



It’s been “Bureaucrat Appreciation Week.”

Just when we had lost all respect for them, we notice a countertrend. It’s time for us to get in step. So, today, we take time out from our regularly scheduled programming to thank the people who rule us…

To the TSA agents at airports… to the IRS agents who audit our tax returns… to the NSA agents who read our emails… and to zombies everywhere…

To all of you, we’d like to say a heartfelt “Go f***k yourself.”

No… no… no…

We meant to say THANK YOU!

Yes, dear reader, we’ve got to bring our thinking in line with the prevailing trend. And today, the US is developing a real affection and respect for authority!

Americans seem to like to have people rifle through their luggage and pat down their grandmothers at airports. It makes them feel safer.

The Fed’s Dirty Little Secret 

Americans want someone “in charge” of the US economy too. That’s why the new chairman of the Fed is so important.

What are the requirements for the job? It has to be someone who can keep a secret and tell a joke with a straight face.

The secret is that the Fed can’t really control the economy. It can influence it. But the influence it has is all negative. That’s the joke.

Fixing interest rates at any level other than that chosen by willing borrowers and lenders, the Fed distorts the price of credit… and the price of just about every other financial asset that is priced off interest rates.

And distorting prices always leads to problems – either shortages or surpluses.

Also, by fixing rates at ultra-low levels, the Fed is stealing from one group and giving to another. The middle class, savers and working people lose wealth. Hedge fund managers, bankers, zombies… and, of course, those lovable feds… gain.

That’s why the rich are getting richer as everyone else loses ground. They call it a “stimulus” program. And they’re right: It’s very stimulating for those who get the money.

As for the rest – well, the joke’s on us!

A Message to Obama

As you know, the best candidate to take over at the Fed, after Ben Bernanke leaves, is yours truly. But so far our phone has not rung. And the person not calling is the POTUS, Barack Obama. (We’re hoping that this very sincere note of appreciation, respect and thanks to the feds will help our candidacy.)
As the end of Bernanke’s term approaches, if things seem to be going well in the economy, President Obama will go with the safe choice: Janet Yellen.

If they are going badly – as in the scenario we’ve outlined above – he will go for the bolder candidate: the “brilliant” Larry Summers.

Alas, your Diary editor is unlikely to get the nod. The president is too busy claiming to “save the middle class” to spend any time trying to figure out what’s wrong with the middle class. Since he hasn’t figured it out, he won’t call the only candidate who could turn things around (albeit in an unpleasant way).

If Larry Summers takes over, we can expect some real excitement. He is less sure of the benefits of QE than Yellen. But he is more sure of himself. He will be more direct…

And when the sound of helicopters reaches the news media, you will wish you had taken our advice and done your gold shopping now.

We don’t know what will happen… or when. But no fiat monetary system has ever survived a full credit cycle. This will be no exception.

Charm Offensive

But enough of that. Let’s talk about something else…

Besides, it is not very civic minded of us to kvetch about our authorities this week. The feds have mounted a full-on charm offensive. From what we read, the progress of mankind depends on them.

No kidding…

From Edward Luce in the Financial Times: “Washington ain’t that bad.”

From Clyde Prestowitz in Foreign Policy: “Thank Washington for shale oil.”

And from Martin Wolf, also in the Financial Times: “The state is the real engine of innovation.”

What these headlines have in common is a breathtaking cloddishness… an appreciation of government that is so naïve you wonder about the species itself: How could the brightest people in the human race be so dull witted?

Of Martin Wolf, we would expect no less. Said to be one of the “100 most influential people” on the planet, it raises questions about the other 99.

Wolf’s influence comes from his post as chief economics commentator at the Financial Times, where he leads the “pink paper” to most of its wrongheaded ideas.

In his article this week… in the first sentence… with no hesitation nor even a qualification… he sets out in the wrong direction: “Growth in output per head determines living standards.”

He should have hesitated. Imagine an economy in which everyone is given a tiny shovel and told to turn the Earth. Then, in an effort to improve output per head, each is given a bigger shovel. Will living standards improve? Not a bit. They are all wasting their time, no matter how much dirt they turn over.

Having set out in the wrong direction, naturally, Wolf soon arrives at the wrong destination. There, he discovers a world well suited only to simpleminded intellectuals – where molecular research, Google’s search engine, the Internet itself and even hydro-fracking are the products of what he calls “state-supported innovation.”

Of course, the people who supposedly benefit from these innovations are the taxpayers.

Do they want them? Do they get their money’s worth? Is this the best way to get these benefits? Are they actually beneficial at all… and how does anyone know?

The questions never seem to occur to Wolf. Instead, he accepts the feds’ storyline without quibble or irony. And he regards the failure to appreciate the feds’ contributions as “the greatest threat to rising prosperity.”


Greater than the lack of real savings? Greater than the burden of crushing debt? Or unfunded pensions? Or overfunded, overleveraged, overhyped speculations? Or jackass economists?

Standing on the Shoulders of the State?


Meanwhile, here comes Clyde Prestowitz, an agreeable and intelligent man whom we met in Georgetown just last year.

“The truth,” says Prestowitz, “is that virtually none of America’s great inventors and entrepreneurs did it on their own. In the overwhelming majority of cases, they received taxpayer-supported federal help along the way.”

When we started our publishing business we looked around for a place to put it. At the time Baltimore was such a rundown dump that the city was giving away buildings for $1. We took two of them.

Was our business also “supported by government”? You bet.

It is almost impossible to do anything without receiving some form of taxpayer support. The feds pass out money as though they were seeking re-election.

Support the universities? Support research? Support everybody! As long as it’s not your money, why not?

But does that mean that government funding is an efficient or effective way of allocating capital resources?

With hundreds of billions of dollars’ worth of taxpayer money running in every direction, some of it is bound to rub up against something useful.

But why would public officials, with no skin in the game, do a better job of investing it than the people who earned the money in the first place?

It’s easy to piddle away money. It’s hard to get a good return on it.

Nevertheless, Edward Luce looks on Washington with favor. It is “home to some of the brightest people in the US,” he says.

Hmmm… We lived in and around Washington for many years. As we recall, the gas station attendants and bootblacks were about as clever as those in any other city. But the closer you got to the halls of power, the more you ran into real nincompoops.

Imbecilities and Indignities

Years ago, we shared a car with a member of Congress from California…

At first, we thought he was just stupid. But after a while, we began to wonder. His conversation was so mindless, it like elevator Muzak playing in a continuous loop. Soothing. Senseless.

When he turned his head, we took the opportunity to peer in his ear, thinking we might catch of glimpse of the electronic gear that made him work. (We saw nothing but a normal ear… which just goes to show what great advances in bionics the feds have made!)

But at least Washington has “the decency to apologize for itself,” says Luce.


We can’t remember getting an apology. During our lifetime, I estimate that the feds may have squandered as much as $30 trillion.

And in Vietnam, Iraq, Afghanistan and Pakistan they have gotten roughly 2 million people killed… for no apparent gain.

Over the years, we have suffered countless imbecilities and indignities, from pointless gas lines and “Whip Inflation Now” buttons in the 1970s to the TSA, NSA and a silly War on Terror today.

The war in Iraq alone cost an estimated $5 trillion (most of it still to be paid) and some 100,000 lives.

Apology? Public hangings would be more appropriate.

But respect for authority is cyclical. And presently, the authorities are enjoying an upswing.

People look to the feds to get things they can’t get on their own. Health care paid for by someone else… a retirement they can’t afford… and foolish pride they don’t deserve.

US troops patrol the streets of towns we never heard of… US drones wipe out families we never met… the NSA listens in on the world’s conversations…

Yes, thanks to the NSA, TSA, CIA, IRS, FBI and the Pentagon. No sparrow can fall anywhere in the world without it setting off alarms in America’s command centers.

Larceny, bullying, eavesdropping, assassinations – they all help us to stand a little taller and hold our heads a little higher.

Thanks, bureaucrats… really.