PORTLAW, IRELAND – The Dow fell another 600 points on Wednesday. Look for a rebound. But here’s a helpful trading hint: Don’t buy the dip.
Bloomberg tells us why the pros are getting out:
Stocks in the S&P 500 have dropped in 18 of the 23 days since peaking in September, roughly twice the frequency of the last three corrections.
It’s been such a grind that one of the longest-term technical indicators, the 200-day moving average on the S&P 500, just fell for the first time in 2 1/2 years.
Instead of the pattern traders are used to – one or two nerve-shattering plunges followed by a V-shaped surge – the selling that began three weeks ago has been slower and steadier. One moderately bad day follows another, with fewer breaks. The S&P 500 has declined in 12 of the last 14 days, something that hasn’t happened since March 2009.
Fake money may be unlimited. Technology may be unlimited. Information may be unlimited. But time is not.
And now, time is running out. Time always runs out. For bubbles… booms… technology… and debt. For life itself. Everything.
Cooperation or Force
At the Legacy Investment Summit in Bermuda last week, John Stossel pointed out that there are really only two ways people get along with one another – cooperation or force.
Either they do win-win deals in the private sector… or they are forced into win-lose deals by the public sector. It’s either freedom or slavery.
The two impulses are always present in our traditions and in our DNA. Which one dominates? When does a society become freer? And when do people let themselves get pushed around?
You may say that the choice is ours. But it is not a matter of choice, desire, or moral clarity. Instead, it depends more on technology than on conscious decision. We will see how shortly…
In every society at every point in history, there are always some people who get the upper hand.
They are Vilfredo Pareto’s “foxes,” who control “government” – that is, they have the guns. In the past, they were usually part of a military caste who took power by force.
Today, they prefer fraud, backed by gendarmes. In both cases, they are an elite, useful… and maybe even necessary… but always prone to corruption and parasitism.
Democrat… Republican… Socialist… Liberal… Monarchist… It doesn’t matter what they call themselves, they get away with whatever they can. And what they can get away with is not a matter of choice…
It’s a matter of firepower.
Damned Good Shot
We’ve lived in France, England, Argentina, and… for short periods, Nicaragua. And guess what? We haven’t felt any freer in America than we did in any of the other countries.
There are exceptions and local nuances, of course. But academic studies show the same thing: Between Europe and America, at least (we will leave Argentina and Nicaragua out of it), the level of personal liberty is about the same.
It wasn’t always so. At the founding of the Republic, Americans were appreciably freer than Europeans. Their government was smaller. And it had less authority over them. Why?
This might have been the result of Enlightenment ideas (self-determination, respect for reason and innate liberties, etc.), taking vigorous root in the virgin soil of the New World.
But more likely, it was because the colonists were hardy, financially independent, heavily armed, and dispersed over a vast semi-wilderness. It was very hard for a central government to control them.
Every technology has the potential for bad consequences as well as good ones. Some weigh in on the win-win side. Others are more suitable to win-lose and the Deep State.
The Kentucky long rifle, for example, gave real meaning to the “all men are created equal” promise. Short or tall, dumb or smart, a man armed with a Kentucky (or Pennsylvania) long rifle could easily bring down a tax collector at 200 yards or more.
That’s why an Englishman, returning home after a visit to America on the eve of the American Revolution, warned his countrymen to “settle their affairs” before leaving for the colonies to put down the insurrection. The colonists, he warned, were armed… and they were damned good shots!
But the cannon was a different kind of weapon, more suitable for governors than for the governed. Until the invention of the cannon, a local, independent strongman could hole up in his castle, almost untouchable by the central authorities.
Then, with the development of artillery – which was too heavy and too expensive for private owners – the walls came down and governments grew larger.
The airplane, too, was invented early in the 20th century. By 1917, German airplanes were bombing Britain. And just 30 years later, an airplane – much too expensive for ordinary people – was used to commit the single-biggest war crime of all time… when it dropped atomic bombs on two Japanese cities.
Grim Reality
And now… there are computers.
At first, it was believed that information technology would be a liberating influence. But now, we see a grim reality… big data from Google and Facebook is becoming a tool for the elite to monitor, manipulate, and control people.
Technology – and the economic conditions it creates – gives rise to popular morality, not the other way around.
We can see how this works more clearly by looking back at slavery. The practice had been around for thousands of years when suddenly, in the space of a few decades, it was outlawed all over the civilized world.
How come? Was there a sudden burst of virtue? Maybe.
But look at the U.S. The light of moral clarity seems to have gone on only in the northern states, where they had no slaves… and where abolitionism came cheap.
The South, where field hands were still a paying proposition, remained benighted. And isn’t it at least coincidental that slavery went out of fashion in the 19th century, rather than the 17th or 18th centuries?
In earlier times, slave labor was economically competitive with free labor. But after the Industrial Revolution, slave labor was uneconomic. Factories required skilled, motivated workers.
And the more skilled workers became, the harder it was to keep them shackled. Frederick Douglass, for example, was born into slavery in Maryland. To escape, he just hopped on a train bound for Delaware, a free state.
The War Between the States made it very clear which side history was on. The slaves in the South could produce sweet potatoes and cotton by the ton. But the factory workers of the North could make railways, cannon, and repeater rifles!
The Industrial Revolution raised the relative cost of slavery. From then on, unless you were willing to live in poverty and backwardness – like in North Korea – it was better to pay people slave wages than to keep them as chattel slaves.
But what about the Information Revolution?
Does it shift the balance of power towards freedom or slavery? And how do Google and Facebook figure in this story?
Tune in next time!
Regards,
Bill
Category: Economics