[ The Dailyreckoning warned about the dot.com crash before 2000, and the coming housing bubble very early on (it is absurd that the media often says the housing bubble was unpredictable), the rank corruption of wall street and banks, detested Greenspan, and was fun to read as well, as you can see below. But I stopped reading the dailyreckoning because Bonner and Wiggin didn’t seem aware of Peak Oil and Peak everything else, Limits to Growth, and the rest of the big picture view (biodiversity loss, topsoil erosion, aquifer depletion, nuclear waste, etc.). They relentlessly advised buying gold and silver for protection. That might be good for whatever descendants of yours survive collapse 20 years down the road, but in the short run during collapse, using gold and silver will make you the target of gangsters, mafias, and paramilitaries. In past financial crashes it wasn’t long before a new currency arose, and for the short time there’s barter, cigarettes, bullets, alcohol, and other such items become “money”.
Nonetheless, Bonner is smart enough to know he needs to get out of dodge!
Alice Friedemann www.energyskeptic.com author of “When Trucks Stop Running: Energy and the Future of Transportation”, 2015, Springer and “Crunch! Whole Grain Artisan Chips and Crackers”. Podcasts: Practical Prepping, KunstlerCast 253, KunstlerCast278, Peak Prosperity , XX2 report ]
What are we doing down here in rural Argentina? Are we on the run? On the lam? Ducking, dodging, dreading the problems of the modern world?
Debt Disaster Coming!
In the 1970s, after President Nixon changed the world’s monetary system, your editor was deeply involved in a quixotic, but remarkable, effort to stop the US government from wrecking the country.
After Nixon cut the last link between the dollar and gold – the saving grace of every monetary system since Hammurabi – your editor saw the handwriting on the wall. It said: Debt Disaster Coming!
As director of the National Taxpayers Union, he worked on two major initiatives to stop this disaster from occurring.
One was an amendment to the US Constitution. The “Balanced Budget Amendment” would have blocked the feds from running deficits except in times of war or national emergency. Thirty-two states approved the amendment – two short of those needed to implement it.
The other effort was a lawsuit. On behalf of America’s children, we sued the US government in Bonner v. Baker. The “Baker” was James Baker, who at that time was the US secretary of the Treasury.
National debt was a tax on future generations, we argued. Laying on this sort of intergenerational obligation amounted to taxation without representation and should be banned.
The court threw out our suit.
How the GOP Went to the Dark Side
It was while we were thus engaged in protecting the republic that Ronald Reagan won the 1980 presidential election. We went to his inauguration and celebrated; it appeared that the battle had been won, neither in the courts nor in the states, but in the national election. Somehow, and against all odds, Reagan was a fiscal conservative. He would restore order to America’s finances.
Or so we believed…
But at that moment, the Republican Party went over to the Dark Side.
Under the influence of Dick “Deficits Don’t Matter” Cheney… and Reagan’s first secretary of the Treasury, Don Regan… the Gipper started to run up some of the biggest deficits in US history.
Reagan’s budget director from 1981 to 1985, David Stockman, documented it all from the inside in his excellent book The Triumph of Politics: Why the Reagan Revolution Failed.
That is when we decided that trying to save “the system” was a lost cause. We decided, instead, to try to save ourselves. We left the National Taxpayers Union and began building a group of independent researchers, analysts and advisers who could help folks survive and prosper in what we thought would be a difficult and dangerous world. (This group became Agora Inc., the publisher of this and many other newsletters.)
An Unchanged Message
As it turned out, the world wasn’t so dangerous at all. Instead, it appeared benign.
A stock market boom took the Dow up to 18 times its 1982 level. And the Fed’s “Great Moderation” made it appear that the good times were here to stay.
Nevertheless, we persevered…
Our message has been unchanged for 30 years: You can’t build a healthy economy on debt. And when things go wrong, you can’t fix it with more debt. That is what we’ve been saying for three decades. And for three decades, we have looked like a fool.
But to a growing readership, the analysis made sense and the advice made money. In America, our list of readers and subscribers grew. And in the 1990s, we took our message overseas – to Britain first… then to France. For 20 years, we lived overseas, where we were starting and nurturing satellite businesses.
Now, we have offices in 10 countries. We publish in Chinese, Spanish, Portuguese, French and German. And our readership continues to grow.
Currently, we have 2.4 million subscribers – more than the Wall Street Journal, the New York Times and Bloomberg put together. But apart from our readers, few people have heard of us. Your editor has never been a candidate for mayor of New York. Nor for anything else. And if by some fluke he were elected to public office, he’d claim voter fraud.
He doesn’t live in Manhattan or Malibu. His name never appears in the paper. He goes to no power lunches. He attends no board meetings. And he hobnobs with no one you’ve ever heard of.
Instead, here he is… a nobody… on the high plains of South America, with a group of gauchos, a laptop computer, an unreliable Internet connection and nothing between him and God but a $12 sombrero.
What gives? Betting Against the Consensus
Our experience inside the Beltway left us with a profound distrust of the media, the politicians and their cronies in the “private” sector.
The system is corrupt and self-serving. It turns jackasses into celebrities and makes claptrap sound respectable.
But when you are in the middle of it, you can’t help it: You start to believe what everyone else believes – mostly guff and bugaboos provided by a dumb, lackey media.
After you’ve read the 50th article about how the Fed saved America from Armageddon, for example, you may even begin to believe it!
In most of life, going along with the popular malarkey is merely pathetic; in financial life, it is fatal.
Let us explain…
If you think central banks can hold interest rates down indefinitely… or that the burden of debt doesn’t really matter… or that present stock market valuations are reasonable and sustainable, you’re probably going to lose a lot of money. Not necessarily sooner, but definitely later.
Market prices reflect delusions too – but never forever. Eventually, markets take a cold, hard look… and adjust to reality.
Our business model is simple: Every day we take a cold, hard look and try to stay ahead of the markets. Our motto: Sometimes right. Sometimes wrong. Always in doubt.
The simplest expression of our financial and business strategy is something investors call “contrarianism.
It is the recognition that you can never make more money than everyone else by believing and investing in what everybody else already knows.
When everyone comes to believe in something, it is bound to become fully priced… if not overpriced. You make real money in the markets only by investing against the consensus.
There is never any way to know what is true and what is not. But sometimes, if you can keep your wits about you, you can identify what can’t be true.
That is why you don’t make money by investing in truth. You make money by investing against what most people think is true… but isn’t.
As billionaire speculator George Soros put it, “Find the trend whose premise is false, and bet against it.
That is why it is good spending a few months here at the ranch. There is much less “noise” from the media. We have no TV. No radio. No newspapers. No telephone.
Up in the high sierra, we seek no favors. We ask for no recognition. We have no truck with popular fantasies or convenient prejudices.
Maybe we are wrong. Maybe the cronies, the central planners, the zombies and the manipulators are right after all. Maybe you can build a healthy economy on debt. And maybe you can build and secure your wealth by doing exactly what everybody else is doing. Then again, after 30 years of being wrong, maybe we will be right after all. Stranger things have happened.
In any case, we like being here. The air is thinner here. But it is also clearer.
APRIL 2006 DAILY RECKONING
In your editor’s mind, a big spread in Argentina (google earth nearest place is pucara, actual ranch near colome & 9,000 feet up) was designed not to expose him to humiliation, but to protect him from it. Way out in the foothills of the Andes, he reasoned, how much trouble could he get into?
Besides, imagine the many sad consequences that could arise from holding on to stocks or bonds: in a few weeks, your investments might be cut in half – or worse. Is the dollar not doomed? Are America’s businesses not losing ground to foreign competitors? What will happen to U.S. bonds when Asian lenders figure out that they will never be repaid? What would be the point of holding them? What pleasure could you ever get out of them?
When it comes to raw, mountain desert land – without electricity or central heating – what could possibly happen that would make the place less valuable?
And so, out here, we have gotten ourselves into the cattle business, and we give you the economics of it, lest you be forced to learn it for yourself:
The cattle are all grass fed. Hay is stacked up for the wintertime, but the hay comes from the bottomland on the ranch, too. Almost nothing is purchased, except some supplements and obligatory vaccinations, which only cost a few dollars per head.
On the other hand, you need some gauchos to mend the fences and go find the cattle, give them the required medicines, cut their ears, burn their hides with a brand, round them up and load them on trucks to be sold. From what we could get out of Francisco, a herd of 1,000 cows spread out over thousands of acres of bad land takes a crew of at least three. Each gaucho costs the farm about 1,200 pesos a month or about $400. So, setting aside taxes and other miscellaneous costs, you’ve got to spend about 60,000 pesos a year in labor (not counting the farm manager).
From a herd of 1,000 cows, you get about 500 calves a year, which you can sell for about 150 pesos each, which brings you revenue of about 75,000 pesos. But then you have to pay the farm manager and buy him a pick-up truck. So, as near as we can tell you’ll lose money forever…unless the Chinese starting eating Argentine beef for breakfast, which is what every cattleman all over the planet is counting on more than he counts on the eternal life of the soul or Social Security.
But according to Francisco, if we do it right – that is, if we invest more money in larger reservoirs to catch the summer rains and in more and better cows – we’ll be able to breakeven. At least we won’t lose money, which is all we ask from any investment.
Thus have we come to Salta Province, and thus were we taking a tour of the property we had bought – on horseback…the only way to see it. And thus, also did we end up bedding down for the night under the skies.
At high elevation, even the skies seem more open. The stars seem brighter and there seem to be many more of them. It was a delight for us just to lie in our sleeping bags and stare up at them as they came out. First, they were just a few fuzzy flickers. Then, there were hundreds of them, more distinct. Finally, there were so many that they all ran together like a kind of bright, shining dust. There was the Milky Way, of course. Below it to the south was another batch of stardust we had never seen before, and then another we did not recognize…and another.
We could barely close our eyes. Partly because of the celestial lighting, partly because we were uncomfortable in our new sleeping bag, and partly because of the day’s events, which like a rich meal, needed to be digested before we could settle into sleep.
The next morning, Francisco and Jorge had saddled up the horses even before daylight, each one of them sporting a montura padded with a sheepskin. You are comfortable in them for the first couple of hours. After that, however, you begin to squirm in the saddle, to twist and turn and try new ways of riding. You even stand up in the stirrups to avoid the bounce, which is how your author ended up spending two days in bed, unable to walk or move, with no telephone or radio, at least an hour’s drive from the nearest doctor.
Do you see, dear reader, how one decision leads to another, each of which, individually, is perfectly reasonable, but all of which, taken together, lead ineluctably to an unexpected and disagreeable result?
Jorge, on the other hand, is a man who seems settled equally in his thoughts and his saddle. He barely moves in either. When we speak to him, in Spanish of course, he looks as though he is working hard to figure out what it is we are saying, but is respectfully reluctant to believe we might be saying anything as idiotic as it sounds.
Translating our own phrases, we realize what our conversation must have sounded like:
“Buen dia,” says Jorge.
“I wait that you had a good day both,” we reply.
“Are you ready to ride out, señor?”
“We are ready to share. Let’s go with God.”
“Are you feeling okay today, patron?’
“True. I smell perfectly.”
Jorge knits his eyebrows slightly. His smile fades a bit. He must have been wondering what it would be like to work for such a madman. But, he keeps his thoughts to himself and urges his black horse down the hill and out onto the open range. The rest of us follow behind: Elizabeth sitting up straight like a real horsewoman; Edward on his mule, wearing a white hat and a tan poncho made by the same people who made one for Pope John Paul II; the rest of the family and Francisco bringing up the rear.
Spreading his pancho out so that it covers almost his whole body, Edward seems completely happy. The mornings can be chilly, even in the summertime, but warmed by the heat rising from the mule on which he trots along next to Francisco, Edward seems in his element. In London, it sometimes seems we are living with an animal that has never been fully tamed. His instincts are out of place; his energy has no way to express itself that isn’t annoying. But out here, he can run around, jump on a horse, ride for hours, and shout at the top of his lungs. In his own way, he is as much at home on the range as Francisco.
Francisco, of course, is a real gaucho, with a certificate to prove it. He even attended a gaucho school, and is currently the president of the local gaucho union.
“Gauchos have a union?” Henry turns the statement into a question by raising the pitch of the last word.
“Si. But it is not a union like other unions. We do not go on strike or ask for higher wages. We just teach people the gaucho skills. That’s why we have a school for gauchos…so the skills are not lost. We also try to preserve the history and culture of the gauchos. You know, in each part of Argentina, the gauchos are different. Here in the northwest, we are not like the gauchos of the pampas – not at all. We wear different clothes, and we do things differently, too. Down there, they barely have to ride a half an hour to find their cattle. Here, we go out for days. And here, it can be much colder. I once rode around this entire valley for 15 days, riding 14 hours a day.”
We were all duly and properly amazed. We had been riding only for a couple hours, but were already ready to stop for lunch.
——————————
It was already starting to get dark when we made it back to our camp. We had been riding for most of the day and were ready for a little rest. Not only that, Jorge and Francisco had promised to prepare a nice meal and we were beginning to know what that meant. They’d cook pieces of beef over a campfire and serve them with Maria’s bread, and wine from nearby Colome.
We were barely off our horses before the small fire was started, next to an irrigation canal. The mountains behind us were already purple and mauve, but Elizabeth decided to explore a little on foot, along the riverbank, in the last of the daylight. We followed along like an old hound.
The camp had been pitched in a green oasis, where the farmers grew alfalfa and brought the cattle down from the high range when the grass gave out.
“These are reserved pastures,” Jorge told us, which explained the tree branches and dried-out thorn bushes piled up in a long thread to fence out the cattle.
Once inside the fence, we discovered an abandoned orchard, where the grass had been closely cropped as if by sheep. Most of the trees looked like plums, but there was no fruit on them so we couldn’t be sure. There were also a few walnuts.
“I love walnuts,” Elizabeth declared. She tried one and pronounced it much better than the walnuts in Europe. We bent down to help her collect more until our pockets were bulging. Then, we set off again, continuing along the riverbank until we ran across the ruins of a stone house.
Only two walls were still standing, but we could make out the piles of stone where the rest of it had collapsed. It stood between the orchard and a large field of alfalfa, looking out over the river and the mountains on the other side. We saw that the horses we had been riding had been hobbled and turned loose in the pasture where they were greedily tearing up the green grass after a day of hard work.
“What a beautiful spot,” we thought. At the edge of the river, the gauchos had piled up hay into the shape and size of a Mongolian’s yurt and had surrounded it with more branches and thorns as an extra protection against intruding cattle. The only noise we could hear was made by the rushing water – it sounded a bit like a broken pipe.
We looked around. North, south, east and west – there was no view that was not extraordinarily pretty. And yet, the only people who lived here were a couple of aging locals, Felipe and Carmella, both in their ’70s and both notably cheerful.
“Are you the new patron?” Felipe had asked us earlier in the day, smiling broadly and taking off his hat to reveal a thick head of dark hair, grey only at the edges. When we assented, Felipe not only took our hand, but he put his arm around us.
“Welcome, patron,” he said.
Felipe’s wife is a very thin and spry woman, with a smile missing two front teeth, but she smiles almost perpetually, in a way that reminds us, vaguely, of Lauren Bacall. She must have been cute 30 or 40 years ago, we thought. Now she has a friendly, helpful demeanor. Henry had forgotten his hat when he left the ranch house. Noticing this, Carmella had asked if he would like to borrow one, then turned and sprinted back to the farmhouse to return with a black hat, similar to the one worn by the Cisco Kid, for him.
Seven hours later, here we were, looking up from the riverbank, across the field of alfalfa, and the only human habitation we could see was hers. It is the only one in that little oasis, and we saw only a small piece of it through the trees – an eroded adobe wall topped with a mud roof.
The sun is so hot and the weather so dry in this part of the world that you can build a roof out of wet clay. You just lay some beams or even cactus boards across the walls. Then, you cover the roof with bamboo or other smallish sticks, put some straw or pampas grass on top, and finally, cover the whole thing with mud.
The sun will bake the mud into a hard tile. You just have to face it up with new mud every year or so. Not a whole lot of money needs to be involved in the process, we imagine.
“Really, all this emphasis on showing off by spending money, ” Maria began. “I mean, what we see in London…people who drive down the street in those big Hummers. In central London! Can you imagine anything so ridiculous? They just do it to show how rich they are. But what’s the point? It seems to me that these people live better, in many ways, than we do.”
Any wonder, dear reader, that we are becoming more and more suspicious of the green stuff? Everywhere we look we see it attached to frauds, mountebanks, swindles, and humbugs. We might as well be in a joint session of Congress.
Dollars themselves are no less of a scam, pretending to be more valuable than they actually are. But that doesn’t stop people from wanting them. They schlep and tote, sweat and strain – eight, 10, 12 hours a day – just to get more of them. And then what happens? The dollars go back whence they came. They are spent, lost, squandered – one way or another. Sooner or later, every dollar that ever existed must go back into the ether. What is there to show for them? Gadgets, health care, education – how much of it is really worthwhile? Our guess: not much.
Felipe and Marcella are penniless. They live in a house with no running water, no electricity, and no telephone. It cost them nothing to build. They have no utility bills. They have no automobile. They have no way to buy things.
Yet, as near as we can tell, they are both happy and healthy, and enjoying life in one of the most attractive places on Earth.
By comparison, your editor is a rich man. He works for his money – if you can call writing The Daily Reckoning work – but what does he get for it? Only more choices: He can go where he wants and do what he pleases. If he wants a new pair of shoes, he can buy them.
But what does he choose to do with his money? He takes an expensive vacation in South America. Why does he do that? Because, it makes him happy. What does he do on his vacation? He goes to places were people have no money. If he likes these places so much, why doesn’t he just stay there? Because, he could not make any money there. And if he could not earn money, he would be unable to afford to take a vacation. Think how unhappy he would be if he couldn’t take a vacation!
Besides, his status depends on money. No, your editor is not fool enough to want to give up his privileged life of 12-hour workdays. His cup runneth over with frequent flyer miles. He gets invited to the Jockey Club in Buenos Aires. And, Felipe calls him ‘patron.’
But Felipe and Marcella live in a kind of paradise. They have fruit from their trees, meat and milk from their animals, and vegetables from their garden. They have sun 335 days a year. They have no trouble with neighbors.
Felipe and Marcella have no taxes to pay, no parking places to look for, no club memberships, no fancy cars, no McMansions, no mortgages and no credit cards.
Statistically, Felipe and Marcella are about as rich as the average American couple. They have no assets, it is true, but they have no debts either. They entered the world with nothing. They will take nothing out with them, nor leave behind them any bills for their children and grandchildren to reckon with.
“Patron,” said Felipe as we were mounting our horses for the ride back to the house, “we hope you will come back soon.”
We’d like to, but we can only come when we can take a vacation. So, we probably won’t be back until next year, we explained.
Felipe looked puzzled. Maybe it was our bad Spanish. Or, maybe it was the idea of ‘vacation.’ You could not tell it from looking at them, but Felipe and Marcella must be among the unhappiest people in the world; they never get a vacation. It might be that they don’t even know what a vacation is.
Some of Bonner’s other posts about Argentina:
http://bonnerandpartners.com/an-update-from-our-ranch-in-argentina/
Preface. There are two parts to Dittmar’s study. The first one concerns production, based on the most recent years of oil production. Dittmar found a strong pattern of oil decline after the plateau of 3% a year for five years, followed by a decline of 6% a year thereafter.