The Daily Reckoning PRESENTS: Money that seemingly comes with no strings attached always ends up causing the most problems...just look at lottery winners - or the US stimulus program. Bill Bonner points out, below, that without the sweat of honest toil on it, money seems to play a pernicious role in history. Read on...Romulus, Remus, Stimulus: A Brief History of Monetary Madnessby Bill BonnerVancouver, CanadaThose whom the gods would destroy are first granted stimulus. When a man wins the lottery, for example, it has a stimulating effect on everyone around him. He usually spends the money quickly - often even before he gets it. But no matter how much he wins, he is usually broke within a few years...often, even broker than he was before he bought the winning ticket.A recent example from the British press: One of the first lottery millionaires punched a plumber and ended up in court, says The Telegraph. Michael Antonucci won 2.8 million pounds in 1995. But he "blew his entire fortune," reported the paper last month. Now he's reduced to stiffing tradesmen. The amount in dispute was just 400 pounds, what he was billed for a "gigantic ceiling mirror fitted above a whirlpool Jacuzzi." He had the mirror installed when he was still flush. Now that he's broke, he can't pay...hence the altercation. The phenomenon is little different when it happens on a national or even imperial scale. Any money that you don't earn is stimulus. Without the sweat of honest toil on it, money seems to play a pernicious role in history. There are no examples - none - where it produced genuine prosperity. Instead, when a nation suddenly runs into some easy cash, it is soon spending more than it can afford...and getting into trouble.
"Without the sweat of honest toil on it, money seems to play a pernicious role in history. There are no examples – none – where it produced genuine prosperity. Instead, when a nation suddenly runs into some easy cash, it is soon spending more than it can afford...and getting into trouble."The Roman Empire is in some measure a stimulus story. It conquered. It grew. Each conquest brought more booty...gold, silver, land and slaves. And each led to more conquests, which brought forth more booty. But the stimulus of this booty stimulated only the need for more stimulus. It did not stimulate real prosperity. Instead, it undermined it. First, slaves bought by rich landowners destroyed the free labor market and ruined small farmers. And then, imported wheat from the provinces - paid as tribute - put the large-scale farmers out of business too. Italy was then dependent on foreigners for its food. In the first century AD, Roman conquests reached the point of diminishing returns; the stimulus came to an end. But borders still had to be protected. And Roman mobs, made up of displaced small landowners and out-of-work laborers, needed bread and circuses which drained the Treasury. The first financial crisis of the imperial period came early. Caesar Augustus tried to solve it...with more stimulus. Neither paper money nor the printing press had yet been invented. So, Augustus increased the money supply in the only way he could; he ordered slaves in the silver mines in Spain and France to work around the clock! This extra money did not bring prosperity; it caused price inflation. In a period of about three decades, Rome's consumer price index almost doubled. Then, when output from the mines could be increased no further, Augustus's great nephew, Nero, found a new source of stimulus; he reduced the silver content of the coins. This source of stimulus proved ineffective, but enduring. By the time barbarians took over, the silver denarius contained almost no silver at all. Of course, Rome itself was played out too.Another early and dramatic example of stimulus-in-action came in Spain in the 16th century. The conquistadors increased their supply of money in the time-honored fashion - by stealing it. Galleons brought treasure from the Americas; increasing the Spanish money supply substantially and fatally. The Spaniards had so much stimulus that they laid down their tools. Why should they work? They could buy things.The discovery of a whole mountain of silver - Potosi - in the middle of the 16th century insured a supply of stimulus that would last for nearly a century. Results? Predictable. Inflation. In the "price revolution" from 1540 to 1640 the cost of living went up throughout Europe. In England, for which we have the most reliable data, prices went up 700%. And Spain, though it covered 40% of its state budget with this easy cash, still defaulted on its debts about once every 15-20 years, from 1557 for the next 10 decades. Spain, like Rome, welcomed stimulus; it never recovered from it.Now we turn to the biggest misadventure in stimulus ever - the period after the United States 'closed the gold window' in 1971. In the 150 years before then, nations could stimulate their own economies with cash and credit, but only to a point. They could overspend; but they had to settle up in gold. After 1971, on the other hand, the sky was the limit - especially in the United States of America. The US could settle its bills in paper, which was then used by foreign central banks as monetary reserves. Since foreign banks were eager to add to their supplies of reserves, there was no effective limit on the amount of stimulus available. The Fed's adjusted monetary base grew 900% since 1985, and more than doubled this year alone. Total US debt tripled - as percent of GDP. As it did with Rome and Spain, more and more stimulus stimulated spending and speculation, but not real output. During the 2001-2007 period, for example, credit in the United States increased by $22 trillion. The nation's GDP increased only by $4 trillion. For every extra dollar of output, Americans took on $5.50 of debt.But now the bubble has blown up; the feds are on the case. What do they offer? More stimulus! Cometh a report this week that $23 trillion has already been put at risk in the various bailouts and credit guarantees. As for the US public debt, it is expected to increase until the country goes broke. Future economic historians will look at these staggering efforts with awe and wonder; they will wonder what the Hell we were thinking.Enjoy your weekend,Bill BonnerThe Daily Reckoning

Doug Casey on the Echoes of WarQ: Doug, I hear you’ve been reading the obits recently – what’s on your mind?Doug: Yes, I couldn’t help but note the long and generally favorable obits on Robert “the Strange” McNamara, at age 93. The obituaries ranged from glowingly positive to, at worst that I read, neutral. I was shocked and disgusted by these things. I considered the man to be a classic sociopath and a war criminal, among other things. He was one of the worst human beings ever to have lived.Q: Don’t pull your punches, Doug…Doug: Well, I have to say that I take his death a little personally. In life, I find that the things I regret most are not the things that I’ve done – although there are some of those – but more than that, it’s the things that I haven’t done. And one of the things I regret having not done was back in about 1995, when McNamara gave a speech at the Aspen Institute, promoting his book. I wanted very much to ask him a question. Usually, I’m pretty bold about these things, but this time, I just didn’t do it.The question I wanted to ask him was this: “Mr. McNamara, how is it that after nearly destroying the Ford Motor Corporation, then destroying Viet Nam and almost destroying the United States, and then going on to be the president of the World Bank, where you made great strides towards destroying the world economy, how is it possible that today you can be held in high regard and stand up in front of this audience without being pelted with rotten fruit and vegetables?”Q: So what happened? Did he leave before anyone could ask questions?Doug: One of the few things I can say in McNamara’s favor is that he actually took questions. I believe I could have gotten a chance to ask my question. I honestly don’t remember why I didn’t do it. It was just one of those moments in which I didn’t do what I almost always do, which is to confront these people whenever I have the opportunity.McNamara was actually an anti-libertarian in many ways. You know, he started his career as a statistical analyst evaluating the success of bombing raids in Germany and especially in Japan. He was a big promoter of raids on civilian population centers, like the carpet-bombing of Tokyo, in which 100,000 people died in one night, and it really served no useful purpose at all.Q: Do you know why he advocated that?Doug: It’s a good question, because he later said that he had a conversation with Curtis LeMay, his immediate superior, in which they discussed the fact that if the U.S. had lost the war, it would be Americans who would have been tried as war criminals, not Tojo, Goering, and those guys.So, apparently, he considered the moral implications of his criminality, but… he didn’t learn a thing. He advocated the same thing in Viet Nam – but the start of his war crimes was in World War II.He then went to the Ford Motor Company. It’s often said, especially if you read the recent obituaries, that he “saved” Ford, along with eight other wiz-kids that were in the Air Force with him. But I don’t think that was true at all. The fact that McNamara and these other number crunchers were hired by Ford is, to me, indicative of the start of the collapse of the American auto industry. Previously, American cars were generally very good. The founders were car guys. They understood the way engines work and suspensions work, etc. They liked driving them, and liked racing them, and enjoyed them as products. That’s when cars were good. But McNamara was a bean-counter.Look at it this way: he was directly responsible for the Edsel, which even today, fifty years later, is still known as the biggest disaster in American automotive history. It was his personal baby.The only reason earnings went up while he was at Ford was that he was the first of these guys to pinch pennies, fire people who weren’t efficient enough, and do accounting tricks. That sort of thing. He was a non-car guy, running a car company.To me, it’s shameful, the way people credit him with saving Ford.And then they go on to talk about Viet Nam, for which he was directly responsible for the way we conducted that war. But there were other things before that. He was behind the Bay of Pigs invasion, and he was primarily responsible for the arms race between the U.S. and the Soviet Union. He’s the one who came up with MIRV missiles, which made the Soviets believe that the U.S. was planning a first strike against them.But his record in Viet Nam, of course, was a total and complete disaster.Q: Surely the obits aren’t absolving him of that? Almost no one views the Vietnam War positively these days.Doug: Well, they all seem to point out that he had moral qualms about it. But my guess is that they weren’t moral qualms at all. Here he was, attacking a simple peasant army that was living on dried rice and had basically nothing but hand-carried weapons, mounting B-52 raids, using all kinds of the highest-tech weaponry of the day, and spending gigantic amounts of money, just to kill peasants. So it doesn’t seem to me that he had any moral qualms. I think he wanted to get out of Viet Nam because he could see how hopelessly stupid it was.Talk about stupid. Here’s a man that was highly intelligent -- he was very, very smart – but he was totally lacking in wisdom. He had no common sense at all. He was a complete fool, the type of guy that I would have loved to see confronted by Mr. T, saying, “I pity the fool!”He was a very intelligent fool.Q: So of course they made him the head of the World Bank.Doug: Yes, and when he was there, he quadrupled its size. It was him who was more responsible than anyone else for the fetish they developed for building steel mills in parts of Africa that were on opposite sides of the continent from coal supplies, etc. It was another disaster.His career is a series of unmitigated disasters, and still, he’s held in some kind of regard today.To me, this is a sign of how totally dishonest society has become. These obituaries should show that the guy was a sociopath, a criminal, and a loser, but instead they maintain a united front in speaking no ill of the dead.Q: Do you really think it’s political correctness of sorts about respecting the dead, or is it that the journalists of today, being largely products of the U.S. public education system, are simply too ignorant or too biased to see the man for what he was?Doug: That’s a very good question. It could be that the average person writing these editorials – and they are the establishment now – basically agrees with his views and methodology. So they can only nit-pick technical issues around the edges, while they should be attacking the very core of what he stood for.Anyway, I’m sorry he died… before I had a chance to ask him that question.I blame myself: I consider it one of the great omissions of my life.Q: Maybe you’ll have a chance if there’s such a thing as reincarnation.Doug: Yes, perhaps. He’d come back as a cockroach, and I might have a chance to squash him.Q: Just so. Doug: So, we’ve lost one warmonger, but there are plenty more. The U.S. is making exactly the same mistakes in Iraq and Afghanistan as it did in Viet Nam. It’s almost a cookie cutter copy. We’re using all this high-tech junk -- $200 million fighter planes, $2 billion bombers, etc. – to fight a primitive peasant army on their own ground. It’s exactly the same thing as Viet Nam. I don’t see any significant differences at all.And just as Viet Nam was a major step closer to bankruptcy for the U.S. back then, what’s happening in Afghanistan and Iraq is the same – but on steroids, because the junk we’re using is much more expensive than it was back then.Q: So, you don’t believe our savior Obama is going to pull the soldiers out?Doug: There’s not a chance in hell.Think about the gigantic bases they’ve built in Iraq. I mean outside the Green Zone. They’re huge and can only signal an intention to stay for good. And the same thing is happening in Afghanistan. This is all going to end badly.I hesitate to call myself a political handicapper, though I did predict that Obama would win, but I do think he’s going to be a one-term president. Things are going to be so bad by the time the next election comes around.Q: Can you quantify “end badly” for us?Doug: The war with Islam is going to heat up for the same reason the Cold War with the Soviet Union escalated under McNamara. The more the U.S. attacks them, the more they feel threatened and feel they have to counterattack. And when they do, the fearmongers in this country feel threatened, and it keeps escalating.I don’t see any reason for it to de-escalate at this point, though I’ve got to say that in this respect, Obama is at least marginally better than Bush. At least he doesn’t talk in such a hostile and antagonistic way.Q: And he speaks English – he can even pronounce the word “nuclear.”Doug: Yes, that’s right. But I don’t see things turning around at all. In other words, all these secretaries of defense and such will be taking lessons from McNamara, not learning from his mistakes.Q: When do you think this might really heat up?Doug: Well, for one thing, forget about Obama and his promise to win this war. The threat has metastasized; it’s not just al-Qaida anymore, but now it’s thousands of people all round the world. It only takes two or three guys to get together to hatch a plan. It’s sort of like “open source” warfare. They don’t need a commander in chief in Redmond, Washington, telling them how to design their warware; there are thousands of war entrepreneurs out there now, making their own designs, driven by what the U.S. is doing.Q: That makes sense, but again, the timing is critical. In our business, being too early is the same as being wrong.Doug: That’s correct, but at the same time, you have to diagnose the trend correctly, which I think we’re doing. That said, I think people likely to be plotting against the U.S. have a longer time frame than Americans do. Americans want things done now. Instant gratification. Those on the other side are willing to plan and take their time assuring their revenge. And they understand that the longer the U.S. keeps spending, the more it’s going to be bled to death.At some point, somebody is going to get hold of one or more nuclear devices, or maybe a biological weapon, from one source or another. There are many possible ways that could happen. Then they fly it into the U.S. on a commercial airliner and detonate on landing, or load it in a perfectly harmless-looking commercial boat and set it off as soon as the boat docks. I think that’s the way it’s likely to happen; they don’t need ICBMs nor cruise missiles to mount an effective nuclear attack. But the time, place, and means are impossible to predict. There are millions of people out there now with chips on their shoulders. A lot of them are going to be plotting stuff for all kinds of reasons. So, you can’t realistically say what will happen; all you can say is that it’s inevitable that something will happen.Q: Sounds like another good reason to move to Argentina. But what other investment implications are there?Doug: Things haven’t changed much: buy gold, buy silver, and diversify your assets internationally. That’s the basic step. After you have a firm foundation with those things, you can start looking at speculations. Use the chaos to your advantage.Q: Given how Vietnam-like wars tend to push the states that wage them towards bankruptcy (this happened to the Soviets in Afghanistan, as well), is there a particularly leveraged way to short the government’s solvency of the sort you write about in The Casey Report?Doug: Shorting the dollar and shorting long-term Treasury bonds are fantastic long-term bets. That’s especially so for shorting long-term Treasury bonds, as interest rates are still very close to their all-time lows, being artificially suppressed by Federal Reserve buying. That’s a one-way street where you can get huge leverage on your money, if you have a time frame of a couple years. That’s the best single bet I can think of.Q: Makes sense – thanks for your time, Doug.Doug: Always a pleasure. Till next week.

The Great Credit Contraction Comethby Bill BonnerLondon, England "In a fundamental shift, consumers are saving rather than spending," notes the Los Angeles Times. This is the shift we've been talking about for months. The great credit expansion of 1945-2007 is over. Now cometh the great credit contraction. During the bubble years, more and more credit produced less and less real prosperity. It was as if you were borrowing more and more, to invest in your business or merely to increase your standard of living, but your income didn't rise fast enough to keep up with the interest payments. In 2005, Americans saved nothing. Not even aluminum foil or string. Now, the savings rate is approaching 5% of disposable income – a big turnaround. We know from logic and experience that saving money – not spending it – is the key to getting wealthier. Saving money gives you capital. And it's capital accumulation – in the form of factories, roads, ships, buildings, machines...and raw savings – that gives people the ability to produce more. It may take a man with a shovel a whole day to dig a decent grave. Give him capital – in the form of a backhoe – and he can bury everyone in town. That's why capitalism works. It rewards the fellow who saves his money. Yet every yahoo economist in the year of our Lord 2009 takes news of rising savings rates like the death of Michael Jackson. If households don't consume, they reason, how can a consumer economy grow? The problem is that you can't really grow an economy by borrowing and spending. Recent history proves it. Despite the biggest splurge of borrowing and spending in history, the US consumer economy barely grew at all. "In the five years to December 2007," reports Grant's Interest Rate Observer, "America's credit market debt climbed by nearly 57%, to $18 trillion. However, in the same half-decade, nominal GDP was up by only $3.3 trillion." For every five dollars people borrowed, they only increased their incomes by $1. Imagine that the borrowing had an average effective interest rate of 10% (credit card debt can be much more expensive). At that rate half of the additional income earned between 2002 and 2007 had to be used just to pay the interest. This was not the kind of growth that was likely to last. In fact, it didn't. The whole thing came crashing down in '07 and '08. And now, the consumer has had a cup of coffee. He's looked at himself in the mirror. He's sorted through his pile of bills. And he's made up his mind: that's enough of that! "The ratio of cash held by households as compared with assets has been rising sharply," says James Saft in The New York Times. "Companies, households and banks all want to pay down debt and...prefer to hold cash rather than assets, partly because the outlook for those assets is poor and partly because after a decade of excess, everyone now looks a bit over-extended. "This is exactly what happened in Japan during its lost decade, when a balance sheet recession, one characterized by the paying down of debt and liquidations of assets, was self-reinforcing and very difficult to stem." And now this from David Rosenberg: "The ultimate question is where all this cash is going to be deployed, and we believe it will ultimately be diverted toward debt repayment." Let's see. We can figure this out from the numbers above. American consumers must have added about $7 trillion in extra debt during the Bubble Epoque, 2002-2007. Now, instead of buying things, they use their money to pay it down. The average household has about $43,000 worth of income. Let's keep the math simple by saying there are 100 million households in the United States...and that they save 5% of their income. And let's say they use every penny of savings to pay down debt. Hey...it will only take about 30 years to pay it off! Get ready for a long, long slump. To read more about the drag the lack of consumer spending will have on the US economy, see The Richebacher Letter's latest report here. More news from The 5 Min. Forecast: "Every once in a while we stumble upon a chart or table that says it all," writes Ian Mathias in today's issue of The 5. "Here's one hot off the press: "Oh my, where do we begin? This beast calls for bullet points.
Obviously, Wal-Mart is no longer No. 1. That title now goes to Royal Dutch Shell. The American consumer is out, and a global oil conglomerate is in… 'nuff said
There's a clear sea-change in American business. AIG, Lehman and Bear Stearns fell off the list from 2008-2009. Nike, Google and Amazon moved up.
The world is increasingly less Amero-centric. An American company is not No. 1 for the first time in over a decade. In the whole list for 2009, 140 companies are American, the lowest number on record
The world is increasingly more Sino-centric. Look at China National Petroleum and Sinopec. Both Chinese companies are by far the biggest movers up from 2008-2009. Sinopec, an oil and gas company, also marks China's first foray into Fortunes' Top 10. China now has 37 companies in the list of 500, its largest presence ever
Oil is still where it's at. In spite of all the price drama over the last year, seven of the top 10 firms are oil companies.
In the face of the worst global economic environment of our lifetimes, the world's biggest companies are still making lots of money. The 2008 top 25 pulled in $4.88 trillion in revenue. This year they made $5.38 trillion.
And freakin' GE… what a black box. The world's producer of everything was one of very few companies to retain the same position from 2008 to 2009. And despite the infamous GE Capital, the finance arm that apparently threatened to torpedo the whole company, GE ended up increasing revenues by nearly $7 billion.
"Hmmm…" Wanna make sure you get The 5 – in its entirety – sent to your inbox, every Monday through Friday? You can…by becoming a subscriber to one of Agora Financial's paid publications, such as Strategic Short Report. Check out their latest report, which details a strategy that uses panic on Wall Street to its advantage – to generate steady, reliable, stress-free gains. Try this strategy free for six months…but act fast. This offer is only good until midnight on Monday, June 13. Get all the details here. And back to Bill, with more thoughts: Yesterday, stocks went nowhere. Oil went nowhere. And the dollar went down as gold went up. The reason for the dollar's decline and gold's rise was given in the front-page headline of today's Financial Times. China launched a "new dig" at the dollar, it says. As near as we could tell, China merely stated the obvious – that the world is going to have to find a better monetary system. The US dollar won't be king of the hill forever. And China, which is up to its neck in dollars, would like to find a solution sooner rather than later – that is, before the dollar goes the way of all paper. The dollar will eventually give way to inflation and devaluation, but probably not soon. "I'm absolutely worried about inflation," says John B. Taylor. But here at The Daily Reckoning, it is not inflation that worries us...it's the lack of it. Making a long story short, as long as the feds see no inflation they will continue trying to create it. In the end, they will get more than they wanted. And where will investors flock when that day comes? You guessed it – to our favorite yellow metal. Beat the rush…pad your portfolio with gold now. Though, right now, instead of inflation, we have deflation. Today's New York Times tells us that deflation in Ireland has reached 5.4% — the highest since the Great Depression of the '30s. You know the reasons for deflation as well as we do. The world suddenly has too many people who borrowed too much money buy too many things they really didn't need and really couldn't afford. This caused the world's producers to greatly over-estimate the 'real' demand. Their customers began to disappear in 2007. Their factories are still standing. "Is it always so cold in July?" asked an American visitor yesterday. London has been cold, windy and rainy for the last week. It comes as a shock to American tourists, who inevitably show up in shorts and t-shirts. Europe has a milder climate than North America. Our guest comes from Ottawa, Canada. "Everybody thinks it is so cold in Canada. But it's much hotter there than it is here. A lot of houses in Ottawa have air conditioning. Here, almost no one has it. And I guess they don't need it." But in the winter, the streets of North American cities turn bitter cold and bums freeze up on the sidewalks. That doesn't happen in Europe. It rarely gets cold enough to freeze a bum here. Maybe that's why there are so many of them. Around the corner from our office is something we had never seen before. A mother-daughter team of 'street persons.' Dressed in black rags, they sit with their bags and talk. They are there when we get to the office in the morning. They are there when we leave in the evening. The daughter appears to be in her 20s or early 30s. She is a pretty girl, as near as we can tell. The mother must be in her 50s...maybe 60s. The two look very similar – like the mother/daughter combinations you see in skin cream advertisements. They dress the same. They have the same very English faces. They have the same expressions and same postures...sitting on the sidewalk with the backs to the wall. Whenever we pass, they are chatting with each other – happily, it appears. Keep reading for today's essay, below… --------------------- Special Offer --------------------------- Options Made Simple Let's face it - playing options can be tricky. But they can also be incredibly lucrative. Well, in this report, we lay it all out for you. It's quite plainly, the easiest way to play options...ever. And the gains are just as big. Keep reading here. ---------------------------------------------------------------
The Daily Reckoning PRESENTS: Why do smart people do such stupid things? Why couldn't the crème de la crème of the economic world see the runaway train that was the credit and consumption bubble racing toward them at warp speed? Bill Bonner examines these questions – and more – in today's essay, below… Bubble Deniersby Bill BonnerLondon, England "War Criminal says Sorry, Sobs," was the headline in the Nation on February 9th, 2004. Robert McNamara had just done something extraordinary for Secretaries of War: with tear in his eyes, he apologized for his role in the Vietnam War. The war made ghosts out of 58,000 American soldiers. On the Vietnamese side, the total was over a million. This week, McNamara went to meet them. Why do smart people do such stupid things? The French had already shown what Western powers were up against in Indochina. De Gaulle had warned Kennedy that it was a "rotten" country. Still, the United States sent in troops...and McNamara, to his credit, spent the last 40 years of his life regretting it. We do not disrespect the shades here on the back page. But once they are down, we can hardly wait for the autopsy report. We want to know what was wrong with them. McNamara had a brain "like a computer," say the morticians. Too bad. He needed more than that. Robert McNamara was described in the obituaries as the "architect" of the Vietnam War. This is libelous to real architects; as near as we could tell, the war went on without plans or blueprints. Instead, Robert McNamara took an economist's approach to war. His formula had only three numbers: how much damage he could inflict on the enemy; at what price; and how much pain the Vietcong/North Vietnamese could stand. Later, he discovered that the enemy wasn't even counting. Long gone are the days when economists thought deeply about how life actually works. Adam Smith, Adam Ferguson, Anne-Robert Turgot – the great "moral philosophers" – all died hundreds of years ago. Since then, the trade has gone bad. They're all numbers guys now. An economist, of the modern variety, is a statistician...an extrapolator...and a mountebank. If numbers go up two months in a row, he predicts they will go up another one. He rarely stops to ask whether his numbers really make any sense.Instead, he merely adds them up and rolls them out. Thus – at the bubbly top in 2006 – he was he able to describe the likelihood of default on a certain derivative instrument as a "Six Sigma event" without laughing. A Six Sigma event happens once every 2,500,000 days. Then again, when the Bubble of 2002-2007 popped, they happened once a week.
"Do these setbacks cause economists to stop and wonder if their theories are bogus and their numbers are nonsense? Nope, they do what McNamara did. They turn up the heat. They propose to spend more money they don’t have on more programs that don't work."
The blogs are full of chatter on the subject. What good is the economics profession, asks Paul Samuelson, if it cannot foresee the biggest single economic event in at least a quarter-century? Yet, those same economists – who had failed so miserably at diagnosis and prevention – they barely hesitated. Rather than spend months in drunken shame, contemplating their own incompetence, and wondering what a bubble really is, they denied the wild bubble side of life altogether...and tried their hands at prescription. President Obama's economics advisors went to Congress last autumn to predict that without the stimulus measure joblessness in the United States could rise to 8%! Bernanke made it seem that if the bill wasn't passed that day, the economy may cease to exist all together. How he could know the future, when he demonstrably knew so little about the recent past, was a mystery. Still, the politicians responded by enacting the biggest bank bailout boondoggle in history. What would have happened had the legislators failed to jump when economists threw them a bone? We don't know. But we know what happened after the stimulus measures were passed – they failed to stimulate. The employment numbers for June showed that economists had misjudged both the direction and the speed of the oncoming bus. Instead of shifting down, the rate of job losses increased to 9.5% in the United States. Instead of going forward, the economy was backing up! Do these setbacks cause economists to stop and wonder if their theories are bogus and their numbers are nonsense? Nope, they do what McNamara did. They turn up the heat. They propose to spend more money they don't have on more programs that don't work. Predictably, Obama advisor Laura Tyson now suggests that the stimulus thus far is "too small." Other economists too are talking about a "son of stimulus," that will offer even more credit to the debt-saturated consumer. Only trouble is, neither consumers, businesses nor banks cooperate. Despite trillions in cash and credit to the financial system, lending is still going down. Robert McNamara was as smart as any of today's number crunchers. A Harvard "whiz kid' with a 'can do' attitude, he was one of the 'brightest and the best,' the kind of American that makes you proud to be one. He was an efficiency expert. But everything has its place. Poetry is not much in demand from bridge builders. In love, war and bubbles, on the other hand, rational efficiency is at best a second tier concern.
When asked to take the job at the Defense Department, McNamara replied to John Kennedy that he was "not qualified." That was the last thing he was right about. As to everything else, he missed the point completely. Sometimes it is the brain that fails. Sometimes, it is something else. Enjoy your weekend, Bill BonnerThe Daily Reckoning

KNIFE FIGHTING POINTS
Ten Points About The Fighting Knife

1). The knife is always with you, even in places where the gun cannot go. 2). It becomes the first line of weaponry when the pistol is not available by choice, policy, inaccessibility or loss.3). If things have gotten bad enough to need the knife, the use of the knife should be aggressive, brutal and terminal, and not "defensive".4). There is a place for using a knife against the unarmed adversary if that adversary is younger, stronger or faster than you are...or more numerous.5). There is a place for keeping them away with your edge, but there is also a place for closing and stabbing.6). A knife worthy of combat carry should facilitate stabbing and be simple and instictive to use. 7). The more complicated and complex a knife is, and the more elaborate its system of use, the less desirable it is.8). Conversely, the simpler the knife and the system and more gross motor dependant it is, the better it will do in a fight. 9). A fixed blade is more desirable than a folder, but a folder may be required in some applications. If a folder is used, the lock should be robust and not technically clever.10). Learn to be violent with your knife


Ten Attributes To Select Your Fighting Knife
1). Sharp as hell and pointy as f***, you can't stab anyone or cut anyone with a dull round nosed blade. If this sounds vulgar, it is. There is nothing dainty about ramming a 3" piece of steel into a man's thrioat and tiwsting it as he fights to get it out.2). Point in line with the handle. Upswept blades may be the acme of the knifemaker artist, but they suck eggs for ramming through a clavicle.3). Long enough...but not too long. We hear that about lots of things.4). Rough handle. Either G-10 or rough designed zytel handles. When you stab another man, his juices will get all over your blade and hand.5). Solid lock. Liner locks suck. I don't care how graceful or cool they are...they suck. Axis lock as seen with benchmade or with Cold Steel is the way to go, or with an old style lockback design.6). Solid opening method. This being 2009, and the "Wave" concept being as old as the pyramids now....a combat blade should have a wave feature if it is a folder.7). Good steel. That does NOT mean stainless. I don't give an airborne fornication about stains on my knife...I WANT IT SHARP!8). Again, if a folder, it needs a movable clip so operators may carry it as desired. The more I work on this Killing-focused system, the more I am liking reverse grip - edge in. That means for a righty, you carry point up- blade forward.9). It must be cost-effective. Notice I did not say CHEAP. Cheap knives are for fags. Cost-effective means that if I decide to ditch it, I will not be heart broken to lose my special one-of-a-kind....nor will that special one-of-a-kind be tied to me. 10). There should be a boatload of them out there in society....like Glocks. Thus you cannot be identified or tied to the gear you use.If some of this stuff sounds like it comes from the world of the criminal rather than the world of the law abiding good guy, it does. One does not go to a clean shaven altar boy to learn to cut a throat.

Ten Points About Using The Knife In A Fight
1). A fighting is knife is fueled by rage and ferocity, not by cleverness and showmanship. I recall seeing CWS go ape (or was it AMOK) on a knife expert we brought in one year. The best the very clever and artistic knife expert could do was match CWS stab for stab. But that was after CWS had stabbed him three or four times.2). Learn to stab....HARD3). Learn to hold the knife in a way that you will not lose it when you STAB HARD.4). Since few of us go about with a 10" bowie, learn your targets. You may not be able to behead an attacker, but you can in fact rip out his jugular even with a 2" box cutter.5). Footwork gets you off the line of the attack, but also gets you close enough to STAB HIM HARD.6). The instant you pull steel your intent should be to stick it in his neck and rip it out a different way, and not to spar, fend, or ask him to stay back.7). The grip area of your knife MUST be rough enough to stay in your hand if your hand is covered with blood (hopefully not yours).8). The point must be in line with your stab. A Cold Steel Scimitar of a Spyderco Chinook do not have this, but a Cold Steel AK-47 and a Spyderco Endura do. 9). To train it, each knife must have an identical trainer (dulled knife) and a wooden/rubberized trainer (like Nok's). The identical trainer is used for technical and access drills. The wooden type trainer is used for attacking the heavy bag or the stabbing post.10). Contrary to the advice of others, use your fighting knife for everything. From opening letters to cutting cheese or tomatoes. Handle your knife daily, keep it sharp, keep it handy. make accessing it as natural as scratching your butt.
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Gabe SuarezOne Source TacticalSuarez International USAChristian Warrior Ministries