Think of this as Volume 11, Number 4 of A-Clue.com, the online newsletter I've written since 1997. Enjoy.
Not Alec. Alex. The father.
When I knew him, I was a toffee-nosed rat-faced git of 15, and he was running the summer camp program for the Massapequa Schools. The rest of the year he was a gym teacher at McKenna Jr. High.
We were coming back from some camp trip on a yellow school bus. (I think we'd harassed the gays on Fire Island or something.) We were full of brio (or our own youthful bullshit) and talking up doing a fundraiser. We had lots of ideas to raise money -- car washes, product sales, babysitting.
Mr. Baldwin brought up the question of what we were raising the money for. "Are you going to give Hershey Bars to all the rich kids in Harbour Green?" he asked. He wanted us to think of those less fortunate, rather than other privileged people, who he assumed could get their own Hershey Bars.
I thought this hysterical at the time, and I still get a chuckle out of it. But these days the joke's on us.
Hershey Bars for the rich kids in Harbour Green has become the default U.S. economic policy. The only difference between the parties these days on economic policy seems to be that Democrats also want to hand out Kisses to the kids in Seaford and Wantagh.
How else do you explain this absurd "stimulus" package? It's the Smoot-Hawley Tariff Act of our time. It's the precise opposite of what we must do to regain economic health. It's a cocaine addict's last snort.
The whole idea behind the "stimulus," as with the Fed's rate cuts, is to make the market more liquid, and stimulate domestic demand for goods and services. Over this decade the world has become addicted to American demand. China couldn't grow without it, so addiction is precisely the right word.
The problem right now isn't a lack of demand. The problem is demand is not being unleashed where it in fact exists. The people who are gathering in all the money, in China and the Middle East, aren't letting their own people spend it. The Chinese are hoarding it, and the Sheiks are recycling it. Tap that cash and you get a gusher of demand for all sorts of things.
The problem is a lack of supply. Specifically, a lack of non-carbon energy. We're strangling on our energy bills today just as we did in the 1970s, creating the same stagflation we did then.
The Smoot-Hawley comparison is also more than apt. The present program is based on assumptions which are just as erroneous as those which led to higher tariffs in 1930. Back then the ridiculous belief was that if we protected local production we would have growth, when in fact the opposite was the case. Today the assumption is that liquidity is endless, that we can print money electronically and solve our problems.
Fact is, we're broke. As individuals and as a people, we're flat busted. We're taking out loans, tossing the money in the air, then taking out new loans to pay off the old.
Eventually bankers catch on, and when they do they stop trusting the stuff you're proposing to pay off the loans with. Namely dollars. They start insisting on money instead.
We think the U.S. dollar is a permanent get out of jail free card because it's a reserve currency. It's not, and it doesn't have to be. The Euro is getting stronger every day, in terms of its ability to stand as a store of value. So, for that matter, is the Chinese Yuan. Our financial "enemies" have the ability to destroy our economy in a heartbeat, simply by selling off (or trying to sell off) the dollars they already have.
The answer to too much debt, too many dollars, and not enough hydrogen energy is not to borrow more money and throw a party for your friends, whether on 5th Avenue or at the local Wal-Mart. It's to transform incentives in favor of hydrogen, and the non-carbon energy sources which create hydrogen, it's to start reducing our need for debt and making stuff here we can sell to other people.
But no one is even proposing that. Which means the recession we're entering will be longer, deeper and scarier than any now imagined. And if the present party does give a short-term lift to stocks and consumer spending, the hangover is going to be that much worse.
Whatever you buy, try not to hold it in dollars.