| WHAT COMES AFTER DEMOCRACY? BALTIMORE, MARYLAND TUESDAY, DECEMBER 14, 1999
*** Techs up again...so what's new?
*** Nobel Laureate frets about the bubble *** Men have babies
*** It was all Lucy in the Sky with Diamonds yesterday.
The Dow was down 32 points. Most stocks fell. There were
438 new lows...and only 86 new highs.
*** But the Nasdaq and the Internet average, the IIX,
both hit new highs. This is the tippy point of the tech
needle...getting vanishingly small. *** The bear market has been going on for 20 months
now...with most stocks down and most people, presumably,
losing money. But the hype in the tech and Net sector is
deafening. The mob has gone mad. *** Which makes it an exciting time to watch the
markets. This period will certainly be recalled in the
financial history books. *** Nobel Laureate Paul Samuelson says the major danger
facing the U.S. economy is the bursting of the stock
bubble. He urges Greenspan to raise rates again. *** But while the Fed discusses interest rates,
employees at the Bureau of Printing and Engraving must
be collecting a lot of overtime. A Reuter's report says
the money supply increased at its greatest rate ever,
over the last 13 weeks. *** They're working overtime on Wall Street, too. "It's
a tech frenzy," said a communications director for
Charles Schwab. His staff is working long hours trying
to keep up with the volume of business. Christmas
usually slows things down. But this is Mammon's
Christmas...not the Nazarine's. *** The Internet itself adds to the frenzy. New
investors discover the "mutter from the gutter" on chat
lines. They think they are getting an inside track. The
"Financial Times" reports that a new form of investor
has been created...almost a day trader, but with a real
job, too. He gets on the Internet in the morning and
evening...picks up the buzz...and places his bets. *** "On to Moscow!" That was the slogan of Napoleon's
army and then Hitler's a century and a half later. And
now Manuel Schiffler, on Kiplinger.com, argues that the
Dow will go to 25,000 by 2010. And why not! "If the last
decade has taught you anything," he suggests, "it is
that there are always lots of worries...and yet the
earnings roll in...and stock prices, ultimately, keep
rising." Hmmm...maybe 10 years is not long enough to gain a
historical perspective. *** The dollar rose against the yen and euro yesterday.
For what it is worth, I'm making a major shift out of
the dollar this week. I have big obligations (for me) in
French francs...and this seems like a top to me. *** The dollar hit a 10-year high against the Swiss
franc last week. Remember when the Swiss franc was a
store of value? It was a long time ago. *** In Louisville, Ky., a 150-year-old giant gingko tree
has a limb that is bearing fruit. Odd, because the tree,
like a gay porno site, is all-male. It is only the
seventh of its species in the world to do so. *** But if a tree can do it...so can humans! Two British
guys have gotten together and had a pair of
twins...posing a challenge to biology as well as
tradition. This story rated a minor note in "USA TODAY,"
but it was front-page in the conservative "Le Figaro."
"For some children, parents of the same sex are the best
thing that could happen to them," declared Elizabeth
Butler-Sloss, family court judge, perhaps overstating
her position. *** "Tell the world what is happening in Alkan Yourt,"
pleaded one resident of the Chechen city. Russian
soldiers are not always nice. Especially when they are
drunk. At best, they steal everything. One man, confined
to a wheelchair in his house, protested. They burned the
house...and him alive.
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
AFTER DEMOCRACY You may be wondering where I am going. I do not know
myself. Each day, I try to push a little
further...connecting the dots. I go where they lead me. But I can tell you where we've been. The bubble in tech
and Net stocks cannot be understood in logical financial
terms. So, we wandered... "down where all ladders start,
that old rag and bone shop of the heart" That led us to look at the difference between the
personal and the political...and at group thinking, mob
thinking, and political thinking, which stand as close
together as passengers on the Paris Metro at rush hour. We considered how political thinking releases a person
from individual responsibility...and how the crowd
becomes convinced that nothing should stand in its way.
On to Moscow! Dow at 36,000! Tippiecanoe and Tyler, too! Crowds are guided by neither reason nor virtue. In
extreme manias, they become unbelievably barbaric...as
we saw in yesterday's letter about Nanking. It is a feature of the human condition that crowds tend
to amplify base instincts, such as fear and greed.
Crowds push aside the restraints of civil society as
though they were police barricades. All politics is to some degree based on group thinking
and mob violence. Mobs love to be lied to...it is what
animates them. Hitler and Mussolini were expert liars.
There is a marvelous photo of Hitler practicing his
gestures in front of a mirror...in order to get just the
right rhetorical flair as he promised the Germans a "new
order" of pride and prosperity. He and Mussolini were
both elected. Politics is the means by which violence is controlled
and directed in a society. This definition will shock
readers whose views have been formed by watching
Crossfire or reading Hillary Clinton's "It Takes a
Village." They make it look so wholesome, so harmless.
Men and women in tasteful clothes argue over which
policy would be best for the country. Universal health
care. Save Social Security. Protect the children. It doesn't sound like the Rape of Nanking or the
liquidation of the kulaks. But what makes it politics, rather than a civil
conversation, is the hidden threat. Politicians pack
heat. If you resist even the most innocuous of their
edicts -- they will punish you. They will take your
money, your freedom or your life. People can chatter all they want down at the Elks Lodge,
too. The churches often have their own programs to help
the needy. Families have protected children since the
days of Lucy. But none of these civil institutions
threatens to use violence against you. The government not only uses violence regularly to
enforce its rules, it claims a monopoly on the right to
do so. Anyone attempting to use violence other than the
government will be punished. In the United States, the
government's competitors are many...petty criminals,
mostly. But they are disorganized, freelance and small
time. They pose no threat to the government's income. In Russia, though, they government monopoly is less
secure. Mafia, local political bosses and financial
barons all compete for the right to use violence to get
what they want. The Chechens are battling it out right
now to determine who will have the franchise on violence
in Chechnya. In a democracy, politics involves a great number of
people. Group think, lies and mob psychology are
elevated to Clintonian levels. Thus the poor citizen is
doubly assaulted...first by lies and empty slogans...and
then by taxes and regulations. His good sense is
battered by the lies...his balance sheet and freedom by
the legislature. Jim Davidson points out that democracy, which had been
out of fashion for many centuries, was particularly
well-suited to the demands of the industrial era. "Democracy invites a popular game of wish-fulfillment,"
he writes. "It tells voters to dream of a world where
anything is possible; where someone else educated their
children, pays their medical bills, and, yes, the ATM
machines are free. Is it any surprise when politicians
come along promising something for nothing to everyone?" Democracy invites participation in politics. This is
what gave it a competitive advantage over communism.
Rather than take 100% of their money, as the Soviets
did, western democracies took about 50%. And they
allowed people a say in how the loot was to be spent. That's why politicos and the mass media (which should be
regarded as an arm of the political class) always
supporter greater participation in politics. Get out and
vote. Get involved. Lower the voting age. Encourage
minorities to vote. This involvement reached a zenith during the `60s. John
Kennedy told voters to "ask not what your country can do
for you...but what you can do for your country"...and
nobody laughed. Tax rates exceeded 100% in Britain.
Stokely Carmichael said, "If you're not part of the
solution, you're part of the problem." Left otherwise free to earn and spend, the citizens of
the western democracies innovated, worked hard and built
wealth. The Soviets couldn't match them. As a business
model, democracy was surely superior. In biological
terms, government is a monopolistic parasite, and
democracies were better adapted to the conditions of the
industrial age. They did not weaken their hosts as much
as the communists did. But we are leaving the industrial age. "The question,"
Davidson asks, "is what new or revived system of
governance will emerge with the Information Age?" More on that...as it emerges... Bill Bonner P.S. Visit "Strategic Investment" at
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