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The Daily Reckoning | Saturday, October 15, 2011 Occupy Wall Street turns violent...who would’ve thunk it? Readers sound off on oil slaves, Texan bulls and the future of employment, Plus, all the past week’s reckonings, free of police molestation and ready for your free consumption... ------------------------------------------------------- Why the warning behind this image could... “Forever change the way you think about the stock market... Open your eyes to what you can and can’t expect from the United States government... And even change the ease at which you’re able to buy and sell things... Click the image play button to first learn the warning...and some simple ways to prepare for the uncertain times ahead. Violence on Wall Street Joel Bowman Chiming in from Buenos Aires, Argentina... Here’s a shocker for you, Fellow Reckoner. The Wall Street protests turned “predictably violent” this week, according The New York Post. One video we saw depicted protesters clashing with police in the city’s downtown financial district. Armed police on scooters were seen dragging people to the ground and cuffing them. One scooter-top cop appeared to ride right into a young protester. Then he dismounted his ride to tackle the offender for having gone to the trouble of being run over. More clashes, violence and arrests ensued. What did the crowds do when the state’s goons began picking them off, taking them to the ground one by one? Why they whipped out their iPhones, recorded it, and posted it on the web for all to see of course. (Yes, apparently big business haters have iPhones too.) “The world is watching!” They chanted, evoking feelings not dissimilar to those of the Arab Spring movement. “Shame on you!” There was plenty more going on in the background we couldn’t make out. But the big picture is clear enough. Both sides are looking for trouble. Our guess is that both sides will get it. Their goals — as far as we can gather — appear to be mutually exclusive. Irreconcilable. One side stands to protect an old, crumbling façade of a broken system...the other wants to erect a new one. The protesters are not agreed on which new system they want, exactly...they just know they don’t want what they’ve got now. And why would they? What they’ve got now is stagnant or falling wages, grim and worsening prospects in the job market, piles of student loans stinking up their parents’ basements, home prices still falling and a state bank that is Hell bent on destroying their currency. What they’ve got, to employ some schoolyard vernacular, “sucks.” These kiddies were promised the world. Instead, they got a world of hurt. Understandably, therefore, they agitate for change. They ought to be careful what they wish for. Change leads you in a different direction...but not necessarily in the direction you want to go. An Obama can look great when you’ve got a Bush in the White House. Then you get an Obama and you really begin to wonder... But what do we know? Maybe the new system will be a worker’s paradise, a utopia for card carrying Marxists and pinko commie statists alike. And maybe your next Daily Reckoning will be delivered by a magenta plumed carrier pigeon, too...sometime in the year...never. Your editor has no idea how this will all shake out. Presumably, violence will only beget more violence. But to what end? Will it simply be an end to yet another chapter in the state-authored saga of abuse and corruption? Or will it be the end of the whole book? We doubt the mob is ready for a new experiment just yet, one that eschews the state completely, one built on peaceful, voluntary exchanges and valuable idea sharing. Hopefully they’ll prove us wrong. Then again, they still think “profit” is a dirty word; an inauspicious start, to be sure. In this week’s feature column, Bill shares some of his thoughts on the Occupy Wall Street movement. Please enjoy, and feel free to send us your own thoughts at the address below... The Daily Reckoning Presents Vive La Revolution! Bill Bonner The Occupy Wall Street movement is getting a fair amount of press. The movement, as you know, dear reader, is a loose assembly of the jobless, the homeless and the shiftless. Troublemakers, every one of them, with no coherent or sensible view of what is wrong or how to fix it. But what’s wrong with that? The Occupy Wall Street protests started on Sept. 17 with a few dozen demonstrators who tried to pitch tents in front of the New York Stock Exchange. Since then, hundreds have set up camp in a park nearby and have become increasingly organized, lining up medical aid and legal help and printing their own newspaper, the Occupied Wall Street Journal. About 100 demonstrators were arrested on Sept. 24 and some were pepper-sprayed. On Saturday police arrested 700 on charges of disorderly conduct and blocking a public street as they tried to march over the Brooklyn Bridge. Police said they took five more protesters into custody on Monday, though it was unclear whether they had been charged with any crime. On Monday, the zombies stayed on the sidewalks as they wound through Manhattan’s financial district chanting, “How to fix the deficit: End the war, tax the rich!” They lurched along with their arms in front of them. Some yelled, “I smell money!” The US is probably getting ready for a revolution. Back in the Cold War days, the CIA was asked to do a portrait of a country that might have a revolution. It decided that such a country would have three characteristics: A big gap between rich and poor. A middle class that was disappearing...or one that never existed in the first place. A lot of people with a grudge. The US fits each of these criteria. And then some others the spooks hadn’t thought about. The U6 broad measure of unemployment is going up...with 16.5% of the population without work. There are 6.2 million people who have been looking for a job for more than 6 months. Americans are $7 trillion poorer, according to David Rosenberg, than they were 4 years ago — and property prices are still going down. Yes, there’s also a Great Correction in progress. It, along with the policies of the US government, grind the faces of the poor. Millions of marginally successful people think the system has failed them. Youth joblessness is at Great Depression levels. More than 45 million are on food stamps. People come to think what they must think when they must think it. So, a person who feels he has failed must come to terms with it. He must find a reason that gets himself off the hook. It must be someone else’s fault. It was not his fault he failed his chemistry exam. The ‘system’ should provide him with a good job anyway. It was not his fault his house got taken away; the system caused prices to fall...and his job got exported to Mumbai. It was not his fault he didn’t save any money; the banks took advantage of him mercilessly. He may even get a “deficiency notice” — telling him he has to pay the bank for its loss on his foreclosed house. Add insult to injury, why don’t you! The guy has a legitimate beef! It wasn’t his fault that the Nixon administration cut the link to gold in 1971. It wasn’t his fault the Chinese produced things better and cheaper. It wasn’t his fault that the feds kept stimulating the economy...and encouraging him to go deeper and deeper into debt at artificially low interest rates. And it certainly wasn’t he who caused the housing bubble to blow up...or who caused it in the first place. But one thing you can depend on. Not many people will do the hard work of connecting the kneebone of this disaster to the legbone that caused it. And he won’t want to make the sacrifices necessary to protect himself from it either. (Our advice: cut expenses to almost zero...save money...buy gold...become a bankruptcy lawyer.) Instead, he’ll join the revolution. Of course, people do not join revolutions for good reasons. They join them for bad ones. They expect miracles. One wants free money. The other wants power. One wants to see his brother-in-law, who earns big money as a currency trader at JPMorgan, brought low. Another just wants to get high. One expects his mortgage to disappear. Another wants the whole neighborhood to disappear. One hopes to see his dead wife rise from the grave...the other hopes his live wife will fall into it. One believes the bankers are rich and evil. Another believes the oil companies are rich and evil. A third thinks all rich people are evil. And a fourth believes that all people are evil, even those in the Occupy Wall Street movement. Some want to save porpoises. Some want people to use only natural deodorant. And a third thinks the world uses too much oil...and that only people who drive Priuses should be allowed on the road on Sunday. He owns a Prius dealership. It is fun to mock the protestors. That’s why we do it. They are such easy targets. But here at The Daily Reckoning we always stand with the powerless, the aimless and the witless. We are champions of the underdog...the lost cause and the diehard. So, we lock arms with the protestors and pledge our solidarity. Vive la revolution! But the poor protestors are just victims of history. When the US embraced its empire it condemned its middle classes. Why? Because that’s how empires work. They bring in cheap goods — and sometimes money itself — from outside. Whether they are taken as booty or traded for the imperial currency, the effect is about the same; they undermine local industries and local wages. Ancient Rome imported wheat from Egypt, by the boatload, and gave it to citizens (an early form of food stamps). Result: the price of wheat collapsed. Small farmers couldn’t compete with free wheat. They couldn’t earn a living. The Romans also brought in slaves. Rich, politically-connected Romans took over the small farms, consolidated them into big plantations, and ran them with slave labor. Again, the local labor was out of luck. Things got so bad for the small farmers that they sold their children into slavery...and then, themselves. Then, in alarm, an edict prohibited Roman farmers from selling themselves into slavery. They were required to remain on their farms...and at work. Spain ran a very different, short-lived empire in the 16th century. It conquered New World civilizations and imported gold and silver on a colossal scale. It was as if they were printing money! This easy money made the Spaniards rich. They used it like America uses her dollars — to buy things from overseas. Pretty soon, the Spanish neglected their own manufactures and their own farming. Prices rose. Spain’s nascent middle class was smothered in the crib. Are things so different now? The rich get rich. The middle classes get poorer; they have to compete with imperial plunder...riches coming from Asia, bought with dollars that were never earned...and never will be redeemed. America’s middle classes were happy to sell their own children into perpetual debt servitude. The kids face obligations 5 to 15 times as great as annual output. Unless they revolt, they will have to work their entire lives to pay for their parents’ excesses. But what will they do when future generations can take no more? They cannot sell themselves into slavery. They’ve already done so. Most face a lifetime of student debt, mortgage debt, and medical debt (aka Medicaid and Medicare), already. What can they do? Join the revolution! Regards, Bill Bonner, for The Daily Reckoning Joel’s Note: Bill’s bestselling co-author, Addison Wiggin, convened an emergency summit in Baltimore yesterday to discuss just what to do in these uncertain days. Attendees at the summit heard from fellow reckoner, Eric Fry, as well as Chris Mayer, Byron King, Partick Cox and a host of other independent idea-men. If you weren’t able to attend the conference, but would still like to hear the presentations in full, don’t worry. We’ve recording the lot. They won’t be available on MP3 format for a few days, but you can still reserve a copy today. First come, first served. Here’s the order form. The Secret Financial “Timebomb” Nobody’s Talking About Forget the D.C. debt circus... this secret Saudi event could double your cost of living, in more ways than one, starting as early as the end of this year. Nobody wants to talk about it... and not Obama or Congress have any idea what to do, once this event starts to unfold. Once it does, get ready to kiss your savings goodbye. Hear our shocking new warning in this special report... ALSO THIS WEEK in The Daily Reckoning... The Eight Marks of Fascist Policy, Part II By Lew Rockwell At the end of the Cold War, there was a brief reprise when the Right in this country remembered its roots in noninterventionism. But this did not last long. George Bush the First rekindled the militarist spirit with the first war on Iraq, and there has been no fundamental questioning of the American empire ever since. Even today, Republicans elicit their biggest applause by whipping up audiences about foreign threats, while never mentioning that the real threat to American well-being exists in the Beltway. Long-Haul Buys: A Pair By Chris Mayer Gaithersburg, Maryland A pair of my favorites are buys once again, for the first time in a long time. So I thought I would spend a little time fleshing out why these two stocks are such good ones to own for the long haul. The Great Crash and Beyond By Chris Mayer Gaithersburg, Maryland The worst quarter for stocks since the first quarter of 2009 sent me back to the dusty archives of finance. Amid old tomes, I searched for what I might learn from the dark markets of years past. I found a collection of articles called The Great Crash and Beyond. They date from 1979, put together on the 50th anniversary of the crash of 1929. Only a handful of years before, the market fell by half (1973- 74). Inside, I find writers reflecting on the mosaic of Wall Street history and the continuity of markets across the time. Twisted: The Curious Shape into which the Financial World has Gotten Itself By Bill Bonner Paris, France In both Europe and America the financial sector has been on the edge of disaster for the last three years. Each time a crisis flares up, the fixers rush in with a remedy. Bailouts, TARPs, TALFs, ZIRPs, QEI, QEII and now the ‘twist’. In its latest effort, the Fed announced... The Mother of All Financial Bubbles is Just Now Starting to Pop... The wild ups and downs in stocks and gold aren’t due to any single factor. Everything’s shooting up and falling down because we’re witnessing a bubble start to pop that’s been expanding for decades. It’s time you learned the truth about what’s happening. Click here. The Weekly Endnote... And now, it’s over to a few readers for some thoughts, ideas and assorted other meandering musings... First up, this one from a Reckoner who requested we keep his name out of print... Thanks Bill for your reference to the Roman Empire and the slaves that kept it going. That made me think about your earlier reference to man’s journey from hunting and foraging, to plowing and being able to store supplies of food, to the modern day oil dependent economy. Recent calculations that I came across show that one barrel of oil corresponds to 25,000 hours of manual work, or 340 manhours of work per day. That means that we in the Western world keep about 40 “oil slaves”, each doing 8 hours of work for us every day. The oil slaves are getting harder to find. A hundred years ago it took one barrel of oil to get 100 barrels out of the ground. Today it is estimated to cost about 10 barrels to get 100. The Canadian oil sands need 20 barrels to yield 100. The oil slaves hide deeper in the ground and deep under the sea, often in desolate areas. The same goes for the other raw materials that go into our modern economy, like metals, that are harder to find and more costly to mine. The oil slaves have allowed us to build complex infrastructures, technical equipment, software, institutions, organizations and dependencies, like cities, local, state, federal & cross federal bureaucracies, trading & transportation links, banks, and complex money based instruments. The complexities are now so great that they are often beyond comprehension, even among “experts”. And the structures are basically all overleveraged economically. Like the Roman Empire, we are overleveraged and running out of slaves. Deleveraging is already happening. If it will be voluntary or driven by force remains to be seen. Empires are usually not dismantled voluntarily. Thanks again, Bill, for bringing your wide knowledge and insights to The Daily Reckoning space, to allow us readers to combine your thoughts with our own and to draw conclusions about necessary action. And this, from a Reckoner chiming in from Spokane WA... This is an employment story I heard from my wife. My wife went to her massage therapist to get help with some muscles and joints. While talking with the therapist, my wife learned that the therapist and her brother run a business in the Midwest manufacturing some item. The company has 100 employees. Yet the 2 owners do not worry about payroll costs and taxes. All 100 employees are temporary. The owners pay the temp company and the temp company manages the employees, pays them and records the taxes. I wonder if the employment of the future will be through temp companies for a majority of people... And finally this week, a joke sent to us though the electronic post... A DEA officer stopped at a ranch in Texas, and talked with an old rancher. He told the rancher, “I need to inspect your ranch for illegally grown drugs.” The rancher said, “Okay, but don’t go in that field over there...” as he pointed out the location. The DEA officer verbally exploded saying, “Mister, I have the authority of the Federal Government with me!” Reaching into his rear pants pocket, he removed his badge and proudly displayed it to the rancher. “See this badge?! This badge means I am allowed to go wherever I wish... On any land! No questions asked or answers given! Have I made myself clear? Do you understand?!” The rancher nodded politely, apologized, and went about his chores. A short time later, the old rancher heard loud screams, looked up, and saw the DEA officer running for his life, being chased by the rancher’s big Santa Gertrudis bull. With every step the bull was gaining ground on the officer, and it seemed likely that he’d sure enough get gored before he reached safety. The officer was clearly terrified. The rancher threw down his tools, ran to the fence and yelled at the top of his lungs... “Your badge, show him your BADGE!” --- As always, we welcome your thoughts. Email them to the address below and... ..enjoy your weekend. Cheers, Joel Bowman Managing Editor The Daily Reckoning