The Daily Reckoning November 7th


Full Steam Ahead

Don’t look now, Fellow Reckoner. It’s the market’s turn to vote!

Stocks fell this morning. Hard. Last we checked, the Dow was down by more than 300 points. Gold dipped too, shaving $20 off the previous session’s $45 per ounce gain. And energy prices were down across the board, with a barrel of oil trading just a touch above $85.


What’s happening, Johns and Janes want to know? What’s going on in the vast, gaping, chasm separating the realm of lofty electioneering pomp and the honest, workaday reality in which the rest of us reside? Nobody knows for certain. We can only guess…

Maybe investors thought Mitt was their man, that he would carry forward real change…the kind Obama promised but never delivered. Maybe they thought the spending would stop under a Republican president, that finally some semblance of sanity would return to the budget numbers. Perhaps they envisioned another “Morning in America” moment, where the country would, united once again, march boldly, bravely and stupidly into the future.

Mitt certainly talked the talk. In fact, he talked whatever talk was required of him. A man of thoroughly independent non-thinking, he seemed to be both for and against whatever it was his audience told him they wanted on the day, as if he would be able to deliver all their wants and needs. Hey, what’s not to like? In the battle of ideas, Obama clearly came with all the wrong ones. Mitt, however, arrived empty handed, but ready to accept donations. Maybe investors saw this as a good thing, something about which to get excited?

If so, it could be that these folk are a tad sore today. Could be that they’re selling their stocks and cashing out of the American Dream. Maybe they’ll take their money elsewhere, to other, more promising markets around the world.

That’s one possible explanation for today’s market selloff. One version. You can construct whatever narrative you so wish. It’s all guesswork in the end. More than that, it’s storytelling. We take moments in time, moments we believe to be pivotal — elections, declarations of war, signs from the gods — and arrange them to suite our own version of events. Humans are, after all, pattern-seeking creatures. We enjoy a good yarn, something to help us make sense of the terminal mystery that surrounds us. Then we wrap ourselves in our little story and, comforted by its supposed truth, its claim on impossible knowledge, we get on with our lives.

Today, America embarks on the next Olympiad in her journey. We have no clue where these four years will take her, over rough seas or calm. But we’re fairly certain last night’s victor — regardless of who had won — will be of any real consequence to the voyage. In the end, all ships must sink. And for every Titanic, there’s a sea of deep, blue icebergs.

It’s not that we’re fatalists, mind you. Ahead of any nation there lies virtually infinite possibilities, including, but not limited to, outright extinction. Who in China’s Qing Dynasty, which lasted until 1911, could have known the Middle Kingdom would later that same century run crimson with the blood of a Cultural Revolution or a Great Leap Forward? Which Prussian peasant, upon hearing the news, in 1871, of the creation of a new, invincible German Empire, could have foreseen anything like the madness of The Final Solution? And which common blacksmith, when hearing the words of the Founding Father’s noble experiment, might have ventured a guess that the United States would one day wage undeclared wars on a dozen foreign borders while standing as the world’s largest debtor?

Just as no one person can really know the future of complex societies, neither can any one, single person direct it. To suppose as much is to imagine the cart pushing the horse, or the bobbing life raft guiding carefully the course of the great ship in front of it.

Still, every good story needs a protagonist…and an antagonist. Some people will blame today’s market selloff — and whatever comes afterward — on the result of the presidential election. Others will imagine alternative scenarios, the “what ifs” of a Romney victory. But it matters not. The needle of time is pointed at “Full Steam Ahead”…wherever that may take us.

Joel Bowman
for The Daily Reckoning

Full Steam Ahead appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Why You Should Remember the Fifth of November

As soon as the noose settled around his neck, Guy Fawkes broke free from the hangman and jumped off the scaffolding — guaranteeing a quick drop with a stop sharp enough to break his neck cleanly.


Sudden death seems like an odd goal for a man to reach in a hurry. Until you consider the alternative…

(Ironically, in a way, it’s an early example of government not being able to get anything right. Not even a hanging.)

Guy had just watched his fellow English-Catholic conspirators hanged until nearly dead (with emphasis on nearly.) Then they were cut down. Their most private parts and entrails were removed and burned before their eyes. Finally, they were beheaded.

This all would have happened to Guy Fawkes, too…except wily Guy made sure he was too dead to notice.

What offense warranted this extreme torture and dismemberment?

Guy and his co-conspirators felt that the crown made life miserable for the Catholic minority in England. In truth, the crown was doing exactly that.

So on the 5th of November, 1605, Guy and his buddies planned to ignite the three-dozen barrels of gunpowder they’d packed under Parliament. Their plan was… simply enough… to blow up the king.

Known as a man “highly skilled in matters of war,” Guy’s job was to light the match. Afterwards, he planned to escape across the Thames. But an anonymous letter warning of the plot was sent to the King.

When the Master at Arms went to check out the dwelling beneath Parliament, he discovered Guy, a set of matches, and a whole lot of gunpowder.

The conspiracy was uncovered and thwarted. Torture, confessions and painful executions followed. This was the end of the now-famous Gunpowder Plot. And the end of Guy Fawkes.

For centuries afterward, Londoners have organized a curious bonfire on the Nov. 5th anniversary of Guy’s bust. They even gave it a catchy phrase…

“Remember, remember the fifth of November,” they chant.

Today we’re putting together our own celebration… with a very special offer to you. Before we get to that offer, let me first give you some backstory. This, I hope, will give you context for the special offer.

As you know, our goal at Laissez Faire books is to provide you with the much needed tools to control your own life. To have the confidence to make your own decisions, rather than being barked at by the political class. And to walk the road of riches, while others continue to morph into government feeding zombies.

These “tools” come in many forms: classic texts that help you guide your decision making, research services that aim to give you financial freedom, and conferences that aim to help you develop your own network of like-minded problem solvers.

Today we’re celebrating with a way to save hundreds off the cost of claiming that financial and personal freedom. And it couldn’t come at a better time…

This election season, like the many before it, remind us that the politicos are more concerned about sucking as much as they can from the system before the whole thing collapses.

They’re more concerned about bailing out fellow friends and CEOs than they are about creating a friendly environment for entrepreneurs to thrive.

Take our currency, the U.S. dollar, for example…

It’s been 40 years now since the dollar had even the slightest connection to gold. Our money is backed by nothing but empty promises. The government holds the power to print itself out of any problem.


That “power” the government holds has corrupted the system. Banks and well-connected businesses know they are very likely to be backstopped by the feds.

So they can still pocket the profits… while you and I shoulder the risks of their bad decisions.

Or take interest rates. In an effort to create more liquidity — and, subsequently, higher profits for banks as they pay less interest to depositors – the Feds pushed interest rates to historic lows.

Their perverted economic policies encourage Americans to SPEND, rather than SAVE, their money.

Back in Guy Fawkes’ day, the government was punishing Catholics. Nowadays, it’s not about religion.

It’s about the government telling us what we should and shouldn’t eat… forcing us to wear seat belts and helmets for nearly everything… and, most importantly, for punishing the hardworking savers and entrepreneurs that create growth.

In short, it’s the idea people and middle class that are getting squeezed. Actually, hanged is more like it.

Now, none of this is our fault. We didn’t ask for these policies. But the reality of the situation is that they’re here. And, it looks like they’re here to stay for quite a while.

Moaning and groaning about FEDs policies isn’t going to change a thing. But personal action can…

That’s why it’s our responsibly to take our lives back into our own hands. To develop the confidence to play the hand that’s been dealt to us… and figure out a way to win. And we’re here to help.

For the first time ever in Laissez Faire Books history… we’ve put together a very special fifth of November offer for you…

How You Can “Remember, Remember the Fifth of November”Don’t worry…we’re not organizing a protest…we’re not aligning ourselves with any of the moments… and we’re NOT suggesting violence in any way.

We’re definitely not suggesting you stock up on gunpowder, like our friend Guy did.

Instead, we’re making it easy (and VERY cheap) to arm yourself with something much more dangerous to the Federal Government — the ideas you need to live a more personally and financially free life.

With these ideas you’ll be able to quit worrying about the election. You’ll be able to sleep easy at night, knowing you’re prepared for whatever choppy waters come your way.

In short, you’ll have your own way to “fight back” on this 5th of November. Best of all, you’ll do so with intellectual firepower, rather than Guy’s gunpowder.

Here’s what I propose…

As you may know, for the last few months the Laissez Faire Club has been stockpiling new and “classic” e-book titles for our members. And for the first time ever, non-club members can view the entire list here.

As you can see, we’re up to 31 titles now. And if member e-mails are any indication, these books seem to be changing people lives already…

“I want to thank you for inspiring me to the excitement of reading something else besides the latest Clive Cussler novel. It has been a great experience to actually think and discuss philosophical and economic issues with various people from around the globe… I think I have learned more in the past month then I had learned in the past 10 years. It is fun to actually think again. Keep it coming!” ~ Rob Olivier, Jr.

“The little “law” book is worth the cost of admission” ~ Jim Grasson

“I’d like to call some of them “drop of the dime”-moments; when ideas are grasped in an instant, when concepts become foundational in one’s thinking, when your understanding takes a leap forward or when you’re ready to delve into more detailed knowledge about subjects or how the world works.

… it feels as if I am slowly uncovering a treasure chest of information, providing the possibility for life and mind altering action. Thanks to you, I can finally say that I’m becoming more and more optimistic about my own future. ~ John Dehanes

Until today, these books have been reserved for paid Club Members, or listed at $9 each on our website.

Considering how much the ideas in the books can change your life, $9 is pretty cheap, wouldn’t you agree?

But in celebration of Guy Fawkes remembrance day, we’re going one step further…

Today you can claim HALF-OFF of any eBooks in our growing collection of radical ideas. (There’s no limit or “cap” to your savings.)

That means instead of paying full price, you’ll pay just $4.50.

Think, for a moment, about all the trivial things we’ve all spent $4.50 for in the past: Dunkin Donut lattes, a movie rental, or a shot or two of whiskey (not like we’d know.)


Point is: none of those trivial things changed our lives. But the ideas you’ll find in these eBooks will.

Would you pay just $4.50 for a “treasure chest of information, providing the possibility for life and mind altering action,” as the reader above put it?

I hope so. That’s why we’ve put together this offer for you.

Several of our titles would no-doubt make Guy proud…

In The Conscience of an Anarchist you’ll discover how today’s political problems are not limited to any one party. The problem is the state itself creating opportunities for plunder and abuse.

In The Great Fiction you’ll be alerted to be single biggest lie in economics. Armed with the knowledge, you’ll be able to instantly improve your own life, all outside of government control.

And the best part, you can stock up on as many titles you like and still get the 50% discount. Remember, there’s no limit to how much you can save.

The only catch is this offer is only good through Tuesday Nov. 6… just long enough to give you a diversion from the political “puppet-show” that would drive Guy to treason.

Doug Hill

Original article posted on Laissez-Faire Today

Why You Should Remember the Fifth of November appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Defending Free Markets: Is Anyone Up to the Challenge?

“I was going to vote for Ron Paul,” one Virginian told our local news station here in Baltimore, “I guess now it’ll be Barack Obama.”

He makes about as much sense as anyone during this election.

As you might imagine, we don’t have much to say about it. Except maybe to look in the mirror and chastise ourselves a bit.

With Obama’s win, we’ll have to endure at least three months of his team preening. They’ve already claimed the victory a “referendum” on the president’s progressive agenda… higher taxes, stifling regulation, nationalized health care, drone wars overseas…. what’s not to like?

The results are a bit surprising, we will say that much. Obama has won 303 of the electoral votes tallied as of this writing. Romney only cajoled 206 out of mostly rural areas. Nationally, that’s a thumping by any means. In the popular vote, 2.5 million more people — so far — have voted for the incumbent than those casting a ballot for his challenger.

Still, over 50 million people voted for Mitt Romney.

“The sooner Obama’s policies fail completely,” we said on Sept. 28, “(which a quick tour of history tells us they will)… the sooner we can get back to the core principles of private enterprise, capital accumulation, investment and cooperation…”

This morning, we look around and ask: Who’s left to make that argument?

“The white portion of the electorate dropped to 72%,” say analysts on NBC. “The president won just 39% of that vote. But he carried a whopping 93% of black voters (representing 13% of the electorate), 71% of Latinos (representing 10%) and also 73% of Asians (3%). What’s more, despite all the predictions that youth turnout would be down, voters 18-29 made up 19% of last night’s voting population — up from 18% four years ago — and President Obama took 60% from that group.

“Obama’s demographic edge creates this dilemma for the Republican Party: It can no longer rely on white voters to win national elections, especially in presidential cycles. Indeed, according to the exit poll, 89% of all votes Mitt Romney won last night came from whites, compared with 56% for Obama… Come 2016, the white portion of the electorate will probably drop another couple of points, to 70%…”

To remain even tangentially relevant, the Republican Party will have to ditch its exclusive appeal to white males… and make the pitch for free markets and civil liberties to a broader audience.

We don’t think they’re up to the challenge. Not with their current leaders, anyway.

Addison Wiggin

The preceding article was excerpted from Agora Finacial’s 5 Min. Forecast. To read the entire episode, please feel free to do so here.

Defending Free Markets: Is Anyone Up to the Challenge? appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Elections of Destiny: Reagan in 1980 and Gladstone in 1880

Elections matter, but some matter more than others. In 1880, the triumph of William Gladstone’s Liberals over Benjamin Disraeli’s Tories set in motion the long, slow decline of British industry, which left the country dangerously vulnerable. Remarkably, writes Martin Sieff, a century later the election of Ronald Reagan in the United States set in motion a similar decline.

“It’s morning again in America,” began the famous television ad for President Ronald Reagan’s successful re-election campaign in 1984.

Yet while Reagan’s approach to governing has lost none of its appeal to today’s Republicans, it is clear that, three decades after decisively winning his first term in 1980, Reagan launched the United States on a long period of industrial decline and growing indebtedness to the rest of the world.

It was also no coincidence that during those same three decades, America’s annual trade deficit grew to become the biggest of any nation in modern history.

Reagan’s epochal election led also to the progressive abandonment of federal government regulation over the banks and financial institutions of Wall Street.

An age of reckless financial speculation followed on a scale that dwarfed the notorious era of the Roaring Twenties that led straight to the Great Depression. The reckoning for this era only started to come due with the Wall Street meltdown of September 2008.

From today’s perspective, therefore, it is clear that the election of Ronald Reagan over incumbent Jimmy Carter in 1980 marked a historic choice by the American people.


Under Reagan’s stewardship, America’s old industrial base, on which the country’s unprecedented economic expansion and prosperity had been centered since the end of the Civil War in 1865, was allowed to collapse and die — without any effort being made to renew it. The nation ultimately became totally dependent on a huge flow of manufactured imports from China instead.

Coincidentally, on the other side of the Atlantic Ocean and exactly a century before Reagan’s first national victory in 1980, William Ewart Gladstone, the greatest of all Liberal Party leaders, won re-election as prime minister of Britain.

And he then made exactly the same fateful choice to abandon any serious engagement with industrial renewal that Reagan did a century later. Like Reagan, Gladstone bet his country’s future on a policy of unregulated financial speculation and overseas investment instead.

And also like Reagan, Gladstone was a charismatic political tribal leader whose policies, principles and faith were slavishly followed by his successors for decades.

The results were exactly the same. For 200 years, Britain had been the most advanced industrial nation in the world. The growth of its empire and its unparalleled surge in population, per capita prosperity and global power were all based on that industrial supremacy.

But in the next 30 years, as Lord Correlli Barnett documented in his classic book The Collapse of British Power, British industry fell, fatefully and permanently, behind the United States and Germany. It became deeply dependent on continued technology transfusions from both countries.

Like the Reagan-inspired policy of unregulated financial activity, Gladstone’s lasted just around 30 years. The Reagan-induced financial bubble — with a strong helping hand from the Clinton Administration! — finally popped in September 2008.

Gladstone’s dream dissolved with the onset of World War I in 1914. Bereft of sufficient industrial capacity by itself to meet the demands of war with Imperial Germany, the British progressively had to sell off most of the vast swathes of overseas investments they had accumulated since 1880.

Like Jimmy Carter in 1980, Britain’s defeated Prime Minister in 1880, Benjamin Disraeli, recognized the scale of the problems facing his industrialized society. And like Carter he didn’t have any real answers for them. But at least he recognized the problem.

Gladstone, like Reagan (and much of the rest of today’s Republican Party), was an economic naïf and a prophetic Candide. Like Voltaire’s hero, he imagined that everything was for the best in the best of all possible worlds.

Gladstone and Reagan simply refused to acknowledge the existence of any facts or trends that contradicted their simplistic, rosy vision of the way things ought to be.

After 1880, British wealth — rather than being invested in the modernization and revival of the home industrial base — flowed out of the country for cheap profit and financial speculation. But this proved unsustainable after 30 years.

After 1980, America’s new leaders followed the same path as Gladstone and his Liberals. After 30 years, the bankruptcy of that policy is becoming apparent too. How about that for a circular theory of history that keeps repeating itself?

Martin Sieff,
for The Daily Reckoning

Elections of Destiny: Reagan in 1980 and Gladstone in 1880 appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

Did You Vote For “Money and Energy?”

With yesterday’s election results flooding the market, let’s take a refreshing break from the action and see what’s happening in the real, “money and energy” world.

Let’s start with my two all-purpose investment barometers, gold and oil.

The price of each is among the first things I check every day (even today!) As far as I’m concerned, gold and oil are the embodiment of money and energy….

“Money makes the world go around,” sang Liza Minnelli and Joel Grey in the movie and Broadway show Cabaret. Truer words have not been spoken. And I like the lyrics about energy later in that song:

“When you haven’t any coal in the stove

And you freeze in the winter

And you curse to the wind at your fate…”

Yes indeed, the songwriters nailed the idea of money and energy.

We live in a world where it’s good to have money and it’s good to have energy. If you don’t believe it, just watch scenes of people scrambling and waiting in lines for gasoline in New York and New Jersey. Really, are you sure that you want to live that “low carbon” footprint? Be careful about how you get there.

Prices for gold and oil have drifted down in the last two weeks. After yesterday’s “election” rally, gold is trading above $1,700, while U.S. oil prices rallied around $88 per barrel. Part of the short-term price decline involves a general strengthening in value of the dollar, which pushes down the nominal price for yellow metal and black crude.

Another angle — more pertinent to the oil price slide — is ongoing weakness in foreign economies. Indeed, even with the hoopla around yesterday’s election, there’s a bigger, global picture with which to be concerned.

Oil demand is weak. It has certainly slacked off in Europe, Japan, China and many other developing nations. No, it’s not a world of “zombie” economies, let alone anything like The Walking Dead. But across the globe, the economic pulse in many nations remains weak.

Unpayable Debt Levels

Why can’t economies across the globe get moving? There are many reasons — monetary, fiscal, and structural.

In my view, the biggest, most widespread issue is debt levels. Everywhere you look, national, regional and local governments are overly indebted. Businesses and households are also, in many cases, too deep in debt. There’s so much debt that the business cycle is having difficulty gaining traction.

So how do you get rid of debt? Well, you can pay it, if you have the money — which most debtors don’t. Or the debtor can go to the creditor and compromise obligations, by paying part and convincing the creditor to forgive the balance — which sometimes happens, but not often enough.

A debtor can discharge debt through legal process, such as bankruptcy — which, surprisingly, is NOT happening nearly as frequently as one might think. The worldwide trend toward long-term low interest rates has permitted borrowers to wallpaper over the problems of old debt. People roll up old debt into new debt and pretend that there’s a businesslike process of repayment at work.

Rolling over debt is usually just a shell game. How long can it last? And what happens when interest rates go up? Stand by for a tsunami of bankruptcy actions, eventually.

In some places, people still come right out and just repudiate debt. They simply say, “Too bad, but I’m not paying this.” At some points in history, we’ve called those people Argentineans. But we may also hear something like that “I’m not paying” line from Greece, Italy, Spain and Portugal, as well.


Whither the Euro?

This last point is another way of saying that the eurozone has profound problems. It’s still problematic whether or not the “One Big Europe” crowd in Brussels can keep everything together, despite the centripetal forces that are acting to tear the economic union apart.

Looking ahead, the euro could continue to weaken, as the southern countries simply cannot get their economies into gear. With a weaker euro, the dollar should strengthen. If the dollar strengthens, gold prices could come down some more.

Of course, the Germans could also decide to bite the strategic monetary bullet and revert to a much more Germanic form of euro. I believe that the new product would resemble an ancient currency called the deutsche mark.

Note too that the Germans are making noises like they want their gold back from the Federal Reserve bank vault in New York — rehypothecation. When the formal request hits the wires, gold prices will rise. If the gold isn’t there, deep inside the Fed vault, gold prices will explode upward.

Long term, I foresee a very strong “Northern European” currency — deutsche mark redux — backed at least in part by a fortress full of gold. Come to think of it, that’s sort of how Germany looked 100 years ago, just before World War I.

Back then, the Germans had a fortress full of gold at Spandau, near Berlin. The gold was literally their “war chest,” accumulated over time to pay the costs of any conflict. The Germans quickly burned through the Spandau gold in the first months of World War I.

Much later, after World War II, Spandau became the Allied prison for German war criminals, including Karl Donitz, Albert Speer and Rudolf Hess.

Remember the Fifth of November 

Let’s visit some more history. This past Monday, Nov. 5, was Guy Fawkes Day, celebrated mostly in Great Britain (or not-so-great Britain, depending on your perspective). Guy Fawkes plotted to blow up the House of Lords in 1605, a mere 407 years ago.

Objecting to the established order, a group of conspirators planted barrels of gunpowder beneath the legislative chamber in London. Guy Fawkes was guarding the barrels when authorities arrested him. He was promptly tried and executed, because we can’t go around blowing up legislators, right?

Despite the treasonous angle of the underlying event, the British still commemorate Guy Fawkes and his “Gunpowder Plot.” The day holds different significance to different groups, of course, in our very confused modern era. That is, any number of organized groups work to hijack almost any event for their own purposes. (Think of how Christmas is now the “Sparkle Season.”)

I don’t endorse blowing up Parliament. But in an abstract way, recalling Guy Fawkes serves to remind the political class (a list of who appeared yesterday on ballots across the nation) that life isn’t all about them, their whims, desires and fads. Guy Fawkes Day signifies to political authorities that their power comes from the people.

The Guy Fawkes Gunpowder Plot holds added significance to me. Back in 2004, I started writing freelance for Agora Financial and contributing articles to a publication called Whiskey & Gunpowder. The idea was to publish an e-letter with an editorial slant toward free market “Austrian economics.”

Along those lines, Dan Denning, Greg Grillot, Jim Amrhein and I decided to focus W&G on broad themes in history, strategy and contrarian investing. We wanted to attract a certain kind of reader who’d appreciate the style and substance of how Agora Financial looks at the world. And do you know what? It worked. One year later, by late 2005, W&G had nearly 100,000 readers.

Just so you know — and because people always ask about it — the “Gunpowder” part of the W&G e-letter name was from the Guy Fawkes side of history and the Gunpowder Plot.

The “Whiskey” part of the name was from the Whiskey Rebellion in western Pennsylvania, back in the early 1790s. Indeed, I live just a few miles from where it all started, in the hills south of Pittsburgh.

Time will tell when the next W&G-esque revolution will strike. But in the meantime, keep your eyes on gold and oil….you should do just fine.

That’s all for now.

Thanks for reading.

Byron W. King

Original article posted on Daily Resource Hunter

Did You Vote For “Money and Energy?” appeared in the Daily Reckoning. Subscribe to The Daily Reckoning by visiting signup for an Agora Financial newsletter.

avatarThe Daily Reckoning - The Daily Reckoning posted Wednesday, November 7th, 2012.

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