Britannia Radio

Sugar Daddy God
Ouzilly, France
Friday, August 15, 2008

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*** Takeover of U.S. industries to be piecemeal and disorganized...money from our competitors for world power...

*** A momentary turn from sin and wickedness...wearing black and blue in honor of Wall Street...

*** Inflation: a “tearless” way to cut workers’ wages...vacation season in Europe...and more!



Burn After Reading...

The Feast of the Assumption of the Blessed Virgin

It’s “an empire ending problem,” says Robert Zubrin.

He’s referring to the outflow of capital from the United States of America to the oil exporting countries. OPEC now takes in more cash than the U.S. government.

Oil fell a dollar yesterday – bringing the price per barrel down to $114. It’s sold as low as $112 this week. We expected it to sink below $100. So far, it hasn’t happened. But this correction could last much longer and take the price down a bit more.

Americans are responding. The latest numbers show them driving nearly 5% fewer miles this year. And the Arizona Republic opines that the price of gasoline is not likely to fall much further.

OPEC’s revenues add up to more than a $1.1 trillion per year – more than the U.S. government gets in tax receipts. If OPEC were to save its money, in just three years it could buy nearly the entire Dow – taking control of America’s most important industries.

Of course, if the foreigners got together and pooled all those dollars they’ve been collecting over the years they could already buy control of every public company listed on the NYSE.

But don’t worry about it, dear reader; they’re not going to do it. Yesterday, we got word that Russians were getting a foothold in the U.S. steel industry, buying the John Maneely Company, a steel pipe maker in Ohio, for $3.5 billion. Sure, there will be a lot more foreigners picking through the rubble of once-great U.S. manufacturing businesses. With the dollar down...and U.S. wages falling (more below...)...the foreigners are finding that the United States can be a good place to outsource work. But the takeover of key U.S. industries will be piecemeal and disorganized. Besides, the empire is giving way anyway. You can’t run an empire on credit – not for long. And not when you have to borrow from your rivals. A real empire needs to be able to control its money. And a borrower is never in control. As it says in the Bible, he is “slave to the lender.”

Americans forged their chains over the last three decades. Now, the homeowner is slave to the mortgage lender (the typical house is majority owned by the mortgage holder)...the mortgage lender is slave to the Wall Street banks that lent it money...and Wall Street is now slave to the U.S. government. When the big financial institutions need money today – they turn to the feds, not to short-term money markets. Yes, the Fed has become the bank of first, middle and last resort. It advertises to Wall Street: Need cash? Bad credit? No problem!

But where do the feds get any money? The U.S. government now spends about half a trillion more than it takes in. Where does that money come from? From U.S. citizens? Nope, they don’t save a dime. Directly and indirectly, it comes from those nice people who speak Chinese, or Russian, or Arabic – you know, the same people who are jockeying to replace the United States as the world’s leading imperial power.

*** And now, more rambling thoughts...on how the empire ends, how the feds duck the blame, and how wage-earners get whacked...

Today marks the anniversary of the Assumption of the Virgin, so we turn away from sin and wickedness, just for a moment. Elizabeth is always trying to improve us. If she isn’t informing us about medieval church history, she is tugging the family to a concert or staging a dinner party. True, we could use some improvement...there’s room for it. But, often, it’s an uphill battle.

Today, she took the family to mass at the “collegiale” in Le Dorat. And tonight, we are going to a party; we are supposed to wear white in honor of the Virgin. We will come back better for it, we’re sure...

But today, we wear black – in honor of Wall Street. Or maybe we should wear black and blue?

Yes, the financial news should be reported in the crime section of the paper – along with the perps, pimps, and pushy panhandlers. It is all a giant fraud, as near as we can tell. After pumping up a huge credit-bubble over a period of more than 30 years, everyone is hoping the globalized economy gets off with only a slap on the hands...

U.S. homeowners are getting paddled; yesterday’s news brought forth new evidence. The National Association of REALTORS reported a 7.6% drop in house prices nationwide during the second quarter. One third of all sales are now of foreclosed houses – on which the lenders lose money. Repossessions are running three times what they were a year ago, with the largest inventory of unsold houses on record.

Sacramento, California, seems to be the epicenter of the housing quake. Places there are down 36%, according to the NAR. On the other side of the country, the housing-price tornadoes touched down in Cape Coral and Ft. Myers, both in Florida, where prices are down 33%.

House sales are at a 10-year low. And houses take three times as long to sell as they did two years ago. While they are waiting to sell their houses, people default on their mortgage payments. Default notices are running 53% ahead of a year ago. And analysts from Credit Suisse estimate that 8.4% of ALL homeowners will lose their houses to default and foreclosure before this downturn is over.

The poor homeowner is having trouble keeping up with his payments because he doesn’t earn enough money. Wages have only kept up with inflation – barely – for the last 40 years, as spending has increased. And now, jobs and overtime are becoming harder to get. The unemployment rate rose to 5.7% last month. In Michigan, where they used to make cars at a profit, 8.5% of the workforce is unemployed.

Someone did somebody wrong. But will a few whacks on the derriere – for homeowners and Wall Street – be enough to put the whole episode behind us? Meanwhile, the feds are trying to rescue the homeowners – very publicly. And they’re trying to rescue Wall Street too – furtively.

U.S. workers are competing with the whole rest of the world. They are not necessarily better educated. Nor do they have newer and better factories to work with. Unfortunately for them, the playing field has been leveled. And so, their wages must fall into line with wages in the rest of the world.

Jacques Rueff described how to cut the worker’s wages – “without tears,” no less. Inflate the money supply! Inflation decreases the relative value of wage earnings.

We read in the news that the official inflation rate in the United States has jumped to 5.6% – a 17-year high. Consumer price inflation rose 0.8% in July, more than economists expected. Which just goes to show what a herd of me-too thinkers economists are. Bloomberg had polled 78 of them. Their estimates for July ran from 0.1% to 0.7%. Not a one of them dared to guess the right number.

Multiply 0.8% times twelve and you get an annualized rate of inflation close to 10%. But the same economists who didn’t expect 0.8% also don’t expect inflation to increase. They think the feds have inflation under control; that they’ve managed to pull a fast one on U.S. labor. In today’s globalized economy – especially now that it is slowing down – workers have no bargaining power. And since they can’t expect higher wages, there will be no “wage-price spiral” such as there was in the ’70s. No wage-price spiral, no serious inflation. No serious inflation, no need to raise rates. And with no need to raise rates to fight inflation, the Fed can continue to bailout Wall Street...pump up the money supply...and allow modest rates of inflation to undermine workers’ wages.

It sounds almost too good to be true. Nobody gets punished too severely. The world economy falls – but softly. And those who take the most whacks – the wage slaves – don’t know what’s happening to them anyway.

Will it happen that way? We doubt it.

*** It is vacation season here in Europe. The workers have walked off the job across the road. They were replacing the roof of a 17th-century cottage. But when August came, they put a piece of plastic over the unfinished section and left.

The roads are crowded with people on vacation. Driving can be annoying this time of year. Typically, a car with two bicycles strapped on the back is followed by two cars towing small holiday trailers, followed by a slow-moving delivery truck.

And don’t bother to try to get anything done. Call an office; nobody answers the phone. Look for a plumber...a pastry-maker? Wait until September.

But it is a myth that Europeans don’t work hard. We noticed in our office in Paris that people seem to get about as much done – or maybe even more – than they do in the United States. And even though Europeans don’t put in as much time on the job, they actually work about the same number of hours, says a report in Fortune Magazine .

Germans and Americans work about the same amount of time, says Fortune . The difference is that America has a huge service industry – hamburger flippers, baby-sitters, pet groomers, retailers – doing things that Germans do for themselves – at home. America’s service industry is also largely responsible for the nation’s low wages. In Europe, there are few low wage jobs, higher rates of unemployment, higher earnings for those who do work, and much longer vacations.

More below...

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The Daily Reckoning PRESENTS: Evangelicals preach the word of God from a pulpit made of pocketbooks...and lately, it seems like a lot of people are buying. Of course, this might be just another part of the baroque spectacle that makes America such an amusing place. Bill Bonner explains...

SUGAR DADDY GOD
by Bill Bonner

“Daddy God,” is how Victoria Osteen refers to Him. Honestly. We’re not making this up. When Mr. Joel Osteen took a wife, it was Victoria that he got, for better or for worse. And now the two of them preside over a mega-church in a suburb of Houston. Mr. Osteen is the author of a super bestselling book, Your Best Life Now . God wants us to be prosperous, he argues, in front of thousands of worshippers. How does he know what God wants? He speaks “face to face” with God, says his wife, making him the first person ever to do so. (What did He look like? Has anyone asked?)

Over in Atlanta, the Rev. Creflo Dollar Jr., seems to be doing even better. He and his wife, Taffi, entertain at another huge church, drive around in a Rolls Royce, and have a private $5 million jet to move them from one speaking engagement to another.

Mr. Dollar, like Mr. Osteen, believes in the power of God to move mountains, but they trust in the Almighty Dollar to smooth out the little foothills in their way. Last year, for example, Mr. Dollar sent 100 of the local Fulton County police officers checks for $1,000 each – a month after two traffic tickets the Reverend Dollar had received had been downgraded to warnings.

And back in the Lone Star State, Kenneth Copeland and his main squeeze, Gloria, have done even better – with 4 jets at their disposal. Mr. Copeland, the subject of a MoneyWeek article last month, is also said to have a parsonage the “size of a hotel,” probably more like a huge Motel 6 than a Crillon.

This might be just another part of the baroque spectacle that makes America such an amusing place. But there is more to the story, which is – as you might guess – the subject of today’s column.

Gibbon blamed the fall of Rome at least in part, on Christianity; it encouraged a retreat from the battle for money and power, he said. Now, Kevin Phillips, in a new book, Bad Money, charges the pentecostal wing of American Christianity with undermining the U.S. empire in the opposite way. He argues that the evangelicals pushed the Republicans down-market. There, the yahoo voters brought them temporal power – 30% of Republican voters identify themselves with an evangelical sect. But they also hollowed out Republicans’ traditional respect for sensible finances.

Among the many frauds of the Reagan-Bush II period, few were gaudier than the “prosperity gospel.” Preached in America’s gamy religious outposts, the concept does for religion what the neo-conservatives did to conservatism, what modern portfolio theory did for Wall Street, and what Keynesianism did to the economics profession – it a made a monkey of it.

In politics, the neos turned conservatism inside out. The old conservatives were wet blankets, do-nothings and naysayers. When news spread of Calvin Coolidge’s death, for example, people asked, “How could they tell?” But the new conservatives are the life of the party. It is said that George W. Bush “doesn’t even know the meaning of the word can’t.” (Of course, there may be other words he doesn’t know the meaning of.) And the neocons’ idea of political economy was similarly liberated from any residual notions of conservatism and common sense. “Deficits don’t matter,” said Dick Cheney, speaking for every wishful thinker since Caligula.

On Wall Street and the City, the old conservative doctrines were put away with top hats and spats. In place of prudence came derring-do. In the place of reasonable salaries came breathtaking bonuses. Mortgage lenders no longer studied a borrower’s finances to make sure he was a good credit risk; they didn’t even take his pulse. And they no longer seemed to care whether their takeovers, triple-A paper, and structured products made any real financial sense; it was enough that they paid a fee.

In economics, too, somehow, the world’s leading economists bent the figures into a preposterous new shape so appealing that even a teenager could love it. An economy can get richer by living it up, they said; and the purpose of central banking was to encourage consumption rather than capital formation.

Was it any wonder that the pulpits sank into the honey too? Along came Jim and Tammy Faye Baker with a sexy new religion – spreading the get-rich gospel over the TV waves. Then, poor Jim got sent to prison for fraud, and when he came out he renounced the new doctrine. But other couples – for some reason these preachers seem to work in husband and wife teams, like Juan and Eva Peron – picked up the tablets. Soon, they had convinced millions to give up the hard-benches of the old Calvinists and sink their plump derrieres into some of the cushiest seats in Christendom.

Churchgoers at Mr. Dollar’s World Changers church services wave envelopes full of cash, reports the Atlanta paper. On the big screen, they offer testimonial proof of the ‘financial blessings’ that came their way after they began sending the preacher 10% of their pre-tax earnings: “The congregants...yell in joy as ushers pass the white buckets down the row to collect the envelopes. After more singing, Dollar preaches... He relentlessly attacks the idea that Christians should limit material possessions. Christians have for too long let the ‘devil’s crowd’ get all the money, power and real estate, he says. Then he tells congregants to say, ‘I want my stuff.’”

“I want my stuff,” they repeat, laughing.

Politics, money, religion – the flim flam was the same everywhere. It was the promise of something for nothing, gain without pain, Easter without Good Friday. But with America’s housing prices falling and unemployment rising, the Pentecostals will find it harder to get their stuff than ever. Maybe God didn’t want them to be wealthy after all. On the evidence, maybe He just likes a good laugh, like the rest of us.