海角大神

鈥淚 can鈥檛 stand it anymore. I have to say something. You act like you actually want a depression. What鈥檚 wrong with you?鈥�

The above letter came from a dear reader who has missed the point. We are as generous and warm鈥�as caring and sharing鈥�as anyone outside a mental institution. We only want the best for our fellow countrymen鈥�really.

But what is best? What鈥檚 best for the fellow who bought a house he can鈥檛 afford? Isn鈥檛 it to get out the house as soon as possible? What鈥檚 best for the fellow who didn鈥檛 save enough for his retirement? Shouldn鈥檛 he start saving as much as possible as soon as possible? And how about the banker who lent money to people who couldn鈥檛 pay it back鈥�or the investor who put his money into projects that weren鈥檛 really very good investments? Shouldn鈥檛 they take their losses as soon as possible鈥�and more on?

The period of time in which mistakes are recognized and corrected is called a depression. Best to get it over with.

You see, dear reader, we do not believe in the perfectibility of man and his institutions. Instead, we see material progress. Man鈥檚 machines and inventions get better. But man himself? He is what he always has been鈥�prey to sin and folly鈥�prone to error鈥�and ready for a good time.

If he makes mistakes, he must correct them. If he spends more than he earns in the present, he must spend less than he earns in the future.

The Dow rose 78 points yesterday, but is still more than 200 points below its high for this rally. The euro is at $1.35 鈥� down substantially, from its high鈥�but still 50% above where it started. Immediately after the euro was introduced, it fell. It dropped to 88 cents. People thought it was weak and irresolute. They called it the 鈥淓speranto currency鈥� 鈥� referring to the artificial language invented in the 19th century and designed to unite the world. Esperanto never really caught on. People feared that the euro would never really catch on either.

But it seems to work as well as any other paper currency鈥�at least for now. So, you see, some innovations work. Some don鈥檛. But behind them is the old rag and bone shop of the heart鈥� As far as we can tell, either progress of the human race is glacially slow鈥�or there is none at all.

Even real material progress is slow. Over the last two centuries, real increases in human wealth 鈥� in the west 鈥� average out to only about 2% per year. That doesn鈥檛 leave a lot of room for error. Make a few big mistakes鈥�such as those caused by miscues from the central banks鈥�and you鈥檙e actually going backwards.

Are bankers really smarter, better, shrewder than they were 100 or 1,000 years ago? How about investors? Don鈥檛 they make exactly the same mistakes they always made鈥�?

Not many humans have the luxury that we have. Here at The Daily Reckoning聽headquarters, we鈥檙e paid to keep our eyes open鈥�and to try to figure out what is going on.

Of course, we鈥檙e not paid very well. Still, what a luxury it is to be able to watch鈥� Economists on Wall Street have to answer to the big banks that employ them. Naturally, they want to show that the world is always getting better. They want their customers to buy more stocks and bonds鈥�which will become more and more valuable, forever and ever.

And then, there are the economists working for the government. They want to prove that they can control the economy鈥�and improve it! Otherwise, why bother to hire them?

There are other economists working for universities and colleges. What do they want to do? They want to show that they are part of the elite classes鈥�capable of leading the country鈥�capable of making decisions. Capable of running things. You don鈥檛 get important posts in academia by being 鈥渘egative.鈥� You don鈥檛 win the Nobel Prize in economics by saying 鈥渉ey鈥�this is all very entertaining鈥�this economics鈥�but there鈥檚 not really very much you can do about it.鈥�

Here at The Daily Reckoning, on the other hand, we have no hope of getting tenure鈥�a Nobel鈥�or even a raise. We have no boss and no one to flatter or mislead. We answer to no one but our Dear Readers. And we don鈥檛 even pay any attention to them!

Do we want a depression? Well鈥�yes鈥�bring it on! But not because we enjoy seeing people lose their houses and stand in bread lines. It鈥檚 only because we know that a lot of mistakes were made during the bubble years 鈥� thanks largely to the government鈥檚 mishandling of the economy. While real, underlying wealth only grew at maybe 2% per year, people spent an extra 5% to 10%. This spending gap grew during the bubble years, effectively consuming wealth that had not been earned yet鈥�and leading to so many capital investment mistakes that there is no way to avoid a bit of backtracking 鈥� which we recognize as a depression.

Here at The Daily Reckoning, we love depression like we love mid-winter. It clears the air鈥�and prepares the earth for spring.

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