"This one will be no exception," we remember thinking before the carnage got underway. But, of course, it's not the certainties that make life interesting; it's the uncertainties ― the known unknowns and the unknown unknowns, as Mr. Rumsfeld said. We are all born of woman and end up where all men born of women end up ― dead. But that doesn't mean we can't have some fun between baptism and last rites.
The worldwide financial bubble we faced was both worldlier, and more financial than any in history.
And, in the summer of 2007, it was still very much alive. So much alive that the media could hardly keep up with it. Forbes magazine, for example, tried to estimate the wealth of the world's richest people. But the rich don't typically give out their balance sheets, telephone numbers, and home addresses. So, there's a fair amount of guesswork in the calculations.
When it came to guesstimating the net worth of Stephen Schwarzman, founder of Blackstone, the Forbes crew wandered off into fiction. They put his wealth at about $2 billion. Recent filings in connection with the new Blackstone IPO show he earned that much in a single year!
In that phase of the bubble, it is as if your neighbors were throwing a wild party and you weren't invited. You detest them…envy them…and want to join them, all at once. A very small part of the population is having a ball; everyone else is getting restless and wondering when the noise will stop.
Meanwhile, the experts, commentators, kibitzers, and analysts were saying that there is a whole new phase of the giant bubble about to unfold; things could get a whole lot crazier. Even many of our respected colleagues were pointing to a text by the great Austrian economist, Ludwig von Mises, for a clue. What we have here, they say, is what Mises described as a "Crack-Up Boom."
Before we go on, readers should be aware that the "Austrian school" of economics is probably the best theory about the way the world works. Like our newsletter, The Daily Reckoning, it is suspicious of efforts to control the natural workings of an economy, in general…and suspicious of central banking, in particular. The fact that it was a one-time "Austrian," Alan Greenspan, who became the most celebrated central banker in history, only increases our suspicions. He was able to master central banking, we imagine, because he understood what it really is ― a swindle.
Mises is describing the lunatic phases of a classic inflationary cycle.
At first, no one can tell the difference between a real dollar ― one that is earned, saved, invested or spent―and one that just came off the printing presses. They figure that the new dollar is as good as the old one. And then, prices rise...and people don't know what to make of it. Later, they begin to catch on...and all Hell breaks loose.
You see, if you could really get rich by printing more currency, Zimbabweans would all be as rich as Midas, since the Mugabe government runs the presses night and day.
Von Mises died in 1973 ― long before this boom really got going ― let alone cracked up. He may never have heard of a hedge fund...or even a derivative, for that matter. A world money system without gold? He probably couldn't have imagined it. People spending millions of dollars for a Warhol? Twenty million for a house in Mayfair? Chinese stocks at 40 times earnings? He would have chuckled in disbelief. He understood how national currency bubbles expand and how they pop, but he probably never would have imagined how insane things could get when you have a whole world monetary system in bubble mode.
He'd have recognized the beginning of this bubble...and he'd have recognized the end, but the middle...or the beginning of the end ― that would have dumbfounded him. During his lifetime he saw a Crack Up Boom in Germany in the '20s...and a few more here...but he never saw a worldwide Crack Up Boom.
No one, anywhere, has ever seen a worldwide Crack Up Boom. We're the first, ever. Pretty exciting, huh?
"Do not get drunk on wine, which leads to debauchery…"
I'm not sure what sort of debased lushes the Ephesians were that Paul had to be so explicit…but this remains excellent advice…the sort your editor usually takes to heart…usually…
Last night was the company social, Shooters, the one with the open bar. I managed to comport myself well enough, at least till the function was over and I was loosed upon the wide world. A couple other Agora Financial employees took flight with me. Our combined blood alcohol levels boded ill.
And here's a tidbit from Whiskey & Gunpowder founder Greg Grillot, who aims to make the discussion more empirical than dogmatic…
You can read all the details from Glenn Greenwald of the Cato Institute here. There may be quiz later.
And here's a Shooter who can commiserate with the serviceman who wrote in…
The problems with military medical care came down to four primary issues:
I can't imagine that these four factors wouldn't be huge issues in a government supported healthcare system.
Now, about letting women vote…
First, let's hear from the ladies…
Perhaps a bit surprisingly, no one seemed to take umbrage at the suggestion. Here's a sentiment that is close to my own…
Confession time. I can't vote! And I'm feeling fine!
Unlike Obama, I will allow there to be no question about my citizenship…
Your editor was born on a distant tropical shore in an old house on the family plot. At the time the tropical shore was still vaguely a British colony. Complete independence and corresponding citizenship didn't come till your editor was approaching his third year of life…
Which is also about the time that my parents dragged me to Brooklyn, New York, where I would spend my youth.
Don't worry. I'm here legally…for now…
I remain unburdened by the legal ability to vote. My perspective is one conditioned by cheerful lifelong disenfranchisement. I'm therefore less prone to fall for the notion that voting is productive and that democracy is inherently a good thing.
All the denizens of the Whiskey Room ― even those with the legal right to push knobs for their favorite smiling psychopaths in nice suits ― would uniformly urge you to just say no.
In fact, you can just say no here at our new webpage Stop the Vote.
All this talk about women voting got me to thinking about how much democracy really annoys me.
So I opened my wallet and pulled out the $198 I had earmarked for the day's supply of Maker's Mark and I bought a domain name!