Good Riddance to 2011
Stock-Markets / Financial Markets 2011 Jan 04, 2012 - 06:57 AM GMTBy: Bill_Bonner
Before we say goodbye to 2011, let us pause to remember it…briefly. We spent 365 days with it – 365 days in a row. We can’t just move on to 2012 without at least a backward glance. What kind of a year was it? In what direction did it take the world, dear reader? Should we cheer that it is gone…or merely dry our eyes and hope for the best in 2013?
We are writing this little retrospective from memory. We’re not going to consult the news reports…or the magazine recollections. Instead, we base this only on what we recall, not on the basis of what actually happened…
Why? This way is more accurate.
Not that we remember things more accurately, but that what we remember is more important. History is always bunkum. Facts are remembered imperfectly, to suit a narrative, not to give us a full picture of what went on. That’s why contemporary or recent history is so contentious. Different people remember it differently. Each one recalls some facts and forgets others, depending on the angle from which he saw the events…and what story he is trying to tell about them. Then, over time, these thousands or even millions of different honest and fairly accurate historical experiences are fermented into one rich brew…a fiction that is accepted as history, often with little connection to what actually went down.
So, we will tell our version of 2011 events. From memory. Besides, we’re too worn out from the holidays to do any real research.
So, what do we remember? Hmmm…
Ben Bernanke’s plan to goose up spending by printing extra money began in January. That was a big deal. QEII it was called. It was expected to lower bond yields and get the economy going by putting more money in more pockets…
Wrong on all counts. Bond yields rose. No new jobs were created. The economy didn’t expand. And the money stayed in the pockets of the bankers.
But the new cash – or the thought of it – was enough to drive up the price of oil and food. This didn’t do much for America’s middle class consumers. Their cost of living rose while their incomes and net worth fell. Houses kept going down, month after month, quarter after quarter.
Gold soared…from somewhere in the $1,400 range…to over $1,900, before falling back into the $1,500 range by year end. Another solid year for our friend, gold, in other words. Up about 10%. Who can complain about that?
Meanwhile, the price of oil surprised us. It was as if it didn’t know there was a Great Correction going on. The price was pushed up by the feds’ money printing…and something else. Speculators were afraid that freedom and democracy might catch on in the Mideast. The US government supported practically all the old “strong men” of the region. It slipped them a twenty from time to time…along with a few US surplus handguns and torture equipment. Then, when the winds of “Arab Spring” shifted direction, the feds went over to the other side. Mubarak and Gaddafi were out of luck.
The old tyrants disappeared. Nobody cared. And oil stayed around $100.
QEII expired in June. Then, a different crisis took over the headlines. Despite all their rescue efforts, Europe’s little boats kept sinking. First the Irish went down. Then, the Greeks began to go under. France and Germany, on Europe’s only dry ground, kept throwing them lifelines. But just as soon as they had one little boat in tow, another one started to ship water.
The Greeks groused because they wanted more money. And the Germans fussed because they didn’t want to give them any more. Investors thought that was all there was to it. But then the Spaniards…and the Italians began to sink too. And then speculators began to wonder about the French. If you studied the numbers, you saw that there wasn’t that much difference between the Spaniards, the Italians and the French. All the Latins were deep in debt. And none seemed to have a serious plan for getting out of it.
It was one thing to toss a line to the Greeks…but who had enough money for the Italians? They were the third largest debtor in the world. And the French? Forget it.
Silvio Berlusconi was a special case. The Italian president didn’t seem to want to play along; he just wanted to play around. The banks wanted him to put on a good show…to pretend to cut spending…to pretend to implement a serious austerity program. Berlusconi wouldn’t do it. Italian bond yields continued to rise. Whether it was speculators…or the Euro insiders themselves…we don’t know. But someone wanted Italy’s elected chief out of the way. Berlusconi stepped aside when Italian bond yields approached 7%, making room for a guy named Monti.
The papers reported that the ‘technocrats’ were taking over. Monti used to work for the Boston Fed, if we recall correctly. And then there was Mr. Draghi over at the European Central Bank, who used to work at Goldman Sachs. Not only that, he was head of the Bank of Italy at the very time Italy was getting itself in financial trouble. The top job in Greece turned over too. Papandreou stepped aside to make room for Papademos. Something like that. Papademos was a banker too.
All of which recalled for us the famous remark of Mayer Amschel Rothschild, “Give me control of a nation’s money; I care not who makes its laws.”
Now, the bankers were in charge. They made the laws…and its money too. The term “technocrat” was completely misleading. “Technocrats” makes it sound like they had some useful technical training that they could use in the service of others… Not at all. They were in it for themselves, desperately and recklessly trying to hold the system together – so lenders (banks) got their money.
There was a little mystery in the summer when the President of the United States sent a hit squad to carry out the premeditated murder of Osama bin Laden. If the US ever wanted anyone for questioning, you’d think Osama bin Laden was that man. But instead of capturing him and torturing him, to see what they could get out of him, the feds said they killed him and dumped his body in the Indian Ocean. It was as if they really didn’t want to hear what he had to say. There were many different tellings of the tale. The official version was completely unbelievable. But so were all the others. Some thought the man killed was not Osama bin Laden. Others believed it was bin Laden, but that he was still alive. Still others claimed the whole thing was staged…phony from the beginning to the end.
Another mystery appeared when Occupy Wall Street became a nationwide sensation. Who were these people? What did they want? Even they didn’t seem to know.
Otherwise, the European crisis dominated the financial news for the rest of the year. Finally, in November, the merde was approached the fan. Vague promises weren’t enough to hold it off. The bond market was in sell mode. Italy was less than 100 basis points from bankruptcy. France was beginning to wobble too. And Germany had no intention of saving them all. Besides, it didn’t have that much money.
This time the technocrats came to the rescue. The European Central Bank gave the banks more than $600 billion. The bankers happily took the money. Stocks soared. Nobody seemed to know or care where the ECB got its money.
In the last quarter of the year, the public’s interest shifted from finance to politics. Not that voters were suddenly attracted to the issues. But the candidates themselves drew a crowd. People listened carefully; they were sure they would say or do something delightfully stupid. One would forget that North America was a continent. Another would be unable to remember his position on abortion. And a third would be caught in flagrante delicto with a household pet.
Only one candidate had a coherent program and consistent views. Alone in the field, he had a plan for avoiding national bankruptcy. He also seemed to be a decent, sensible man. For these reasons, he was judged unelectable.
Bill Bonner
The Daily Reckoning
Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007).
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