-- Posted Sunday, 2 April 2006 | Digg This Article

London, England

Friday, March 31, 2006

---------------------

*** "Dark Matter" and other goofball efforts to disguise the facts... the
U.S. drops to 16th in broadband access...

*** Monetary astronomers..."the ETFs are coming!"...history
grinds...democracy as a tree...U.S. comptroller general continues to
sound the alarm...

*** "Was it really wrong to stop Hitler?"...E.M. Forester's take on
Florence...extraordinary headlines...and so much more, more, more - it
hurts!

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Dark matters...

Today, we have some advice. It is no different from the advice we have
given many times before, but today we give it with special urgency. 

We have been reading reports of "Dark Matter" in the world economy. We
ignore them; Dark Matter seems to us to be just another goofball effort to
disguise the facts, like coming into the office without shaving so the
boss will think you've been at work all night. That is what happens when
people get desperate; they invent fantastic stories and far-fetched
explanations.

"Dark Matter" comes from the hypothesis of astronomer Kristian Birkeland,
who, in 1913, noticed that there seemed to be a gravitational pull exerted
by objects he couldn't detect. He called it "dark matter." Now, the
expression is being used to label various intangible assets - Yankee
ingenuity, American brands, management skills - that are said to bring the
U.S. investment income from overseas, even while the assets held by
Americans overseas, compared to those held in the U.S. by foreigners,
continue to go down.

In other words, while the net international investment position of the
United States slipped to $2.5 trillion, for a while at least, the income
derived from its foreign investments was greater than the money it was
paying out to foreigners. It didn't seem to make sense. Investment income
should have turned negative, too. Economists scanned the heavens to try to
make sense of it, but they couldn't see anything that would readily
explain this investment inflow. Even in the areas where the United States
might have had a big and growing intangible advantage - technology, for
example - the evidence showed the opposite. The United States was number
one in broadband access in 2000; now it is 16th. In 2000, the United
States made 40% of world's telecom equipment, now it makes only 21%. And,
the United States has fewer people with cellular phones - in percentage
terms - than 41 other countries.

Nevertheless, in 2004, in the accounts of international investment income,
the United States registered a $30.4 billion surplus. The Wall Street
Journal, among others, pounced on "Dark Matter" as the explanation; we
were making money on things of intangible value that didn't show up on
list of externally held assets.  

Since this is so, deduced the Wall Street Journal, when you take dark
matter into account, "America is a net creditor, not a net debtor."

Gosh and golly! But, now cometh the tally for 2005, and all that dark
matter has suddenly gone dark! Gone is the massive gravitational pull of
$30.4 billion surplus - in its place is a paltry little refrigerator
magnet of $1.6 billion.

Willem Buiter, a monetary astronomer at Goldman Sachs, comments:

"I expect that in the years to come, the paradox of the US being both a
net debtor and a recipient of positive net foreign investment income, will
be resolved by net foreign investment income turning negative.

"With the US trade gap in October 2005 widening to a new record US$68.9bn,
the US current account deficit is unsustainable. Its correction will
require a large depreciation of the real effective US Dollar exchange
rate, on reasonable estimates by no less than 30%, and quite possibly by
more."

The Asian Development Bank warned readers last week to "prepare for a
collapse of the dollar."

Yesterday, the dollar fell. We suspect that more is coming. Sell the
dollar; buy gold.

More news from The Rude Awakening...

--------------

Justice Litle reporting from Colorado:

"If Paul Revere were living today, and if he were a passionate investor,
he might well ride through the corridors of Wall Street, shouting: 'The
ETFs are Coming! The ETFs are Coming!'"

Read today's Rude Awakening for more on the ETFs and what's going down on
Wall Street:

http://www.the-rude-awakening.com/RAissues/2006/march/RA033106.html

--------------

Back with Bill Bonner for more views...

*** Everything decays, degenerates, grows old and dies. History grinds us
all down. We wish it weren't so - suppose you could stay young forever, dear reader?
But what kind of world would that be?  We don't know, but we'd be willing
to give it a try.

A democracy...an economy...an institution...a bull market - everything
crumbles, breaks up, and goes away. 

Think of it as a tree. In its sapling years, it is young, fresh, and
supple. Then it matures.  As it grows old, a lot of things begin to take
advantage of it. Moss grows on the north side, balls of mistletoe lodge in
its branches. Worms and bugs eat away at its insides, and squirrels,
birds, mice, and snakes burrow into its cracks and crevices. 

As a democracy ages, likewise, a burgeoning world of parasites comes to
depend on it. The leeches get bids, jobs, checks, subsidies, power,
housing, drugs, status, free parking, no-bid contracts, and wars to order.
This gives more and more people an interest in preserving the old
thing...resisting change...propping up its withering limbs. But, like an
old tree shading the ground around it, the longer it stays up - the longer
new saplings are prevented from growing. 

That is what is happing in the United States and in France. On both sides
of the Atlantic people know they have major problems. Decadent governments
have made promises that can't be kept. In France, the young resist any
change to their cushy employment laws. In the United States, the old
resist any change to their cushy retirement benefits. 

Democracy is supposed to make change easy, but history didn't stop when
democracy was invented. Instead, as time goes by, more and more parasites
find ways to take advantage of the old institutions - eating away at the
heartwood, nesting in the little nooks, sapping the strength of the
society through subsidies, sinecures, and swindles.  Finally, what can the
thing do but come crashing down?

*** You may recall, the day we sent 537 copies of our book to Washington,
David Walker, the comptroller general of the United States gave a press
conference in which he likened the finances of the U.S. to Rome right
before the fall of the Empire. At best, the timing was fortuitous. We
captured it all in this article/promotion for the book:

"The Most Feared Book in Washington"
http://www1.youreletters.com/t/348543/4459110/786120/0/ 

Today we have a treat: video of Walker, said numbers wonk, uttering
similar disparaging remarks about the finances of the empire...this time
to a BBC program called Hard Talk. Take a look:

The U.S. Faces Economic Crisis
http://www.bbc.co.uk/newsa/n5ctrl/progs/06/hardtalk/walker27mar.ram

*** And speaking of Empire of Debt, a dear reader asks a very good
question:

"I found reading 'Empire of Debt' fascinating! I had not considered the
United States of America in that light, even though I was aware of some of
the alarming statistics quoted.  You have significantly added to my
knowledge of history and raised my concerns considerably - I thank you!

"I have one question, which has haunted me throughout the book and I fear
your cutting, sarcastic response will not satisfy me. So, please - would
you consider my question seriously?

"Accepting your theory of 'it's not my business' and 'why get involved,
it's not our fight' - do not leading countries (empires or not) have some
responsibility to mankind in a general sense? You said frequently
throughout the book that we don't know the outcome and invariably
America's (imperial) interference may have made the situation worse.  Was
it really wrong to stop Hitler? Was it really wrong to try and contain the
tyranny and bloodshed that Iraq, under Saddam Hussein, was displaying?"

Here is our non-cutting, non-sarcastic, and probably nonetheless
unsatisfying reply. 

We read in the paper about a do-gooder who is apparently actually doing
good - Jimmy Carter. According to the press reports, Carter's efforts are
eliminating a nasty worm that lives in drinking water and then becomes a
parasite in the body, from many parts of Africa. Bravo for him. If he
didn't rob anyone to do it, more power to him. 

But there's a big difference between trying to exterminate a harmful worm
and trying to build a democracy in Mesopotamia. One is an example of an
ambitious, but sensible, effort to do good; the other is an arrogant, vain
and foolhardy effort to remake the world, in one's own image, of course.

The gods do not smile on such efforts. They didn't smile on Napoleon when
he invaded Spain and Russia. They didn't smile on Hitler when he invaded
Russia. They didn't smile on Japan when it bombed Pearl Harbor. The
lesson:  If you are going to try to do good, you are best advised to be
careful and modest about it. Don't attack anybody. Don't steal anyone's
money. Say 'please' and 'thank you.' Remember that you are a fool, too -
along with everyone else.

Try to stop Hitler? No one tried to stop Hitler in World War II. Hitler
attacked, forcing them to fight back. Should they have "tried to stop
him?" We cannot know, neither the future, nor what the present would be
like if the past was different.

*** "It was pleasant to wake up in Florence," wrote E.M. Forster of his
room with a view, "to open the eyes upon a bright bare room, with a floor
of red tiles which look clean though they are not; with a painted ceiling
whereon pink griffins and blue amorini sport in a forest of yellow violins
and bassoons."

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---------------------

The Daily Reckoning PRESENTS: In school, we remember being encouraged to
watch the news on television so we'd be able to discuss current events.
Our teachers were doing their jobs, indoctrinating another crop of world
improvers. Today's issue finds Bill Bonner exploring whether the news
sells papers, or if the papers sell news. Enjoy...

Extraordinary Popular Headlines
By Bill Bonner

"In America," said Gore Vidal, "half the population doesn't read the
paper. Clearly, they are the intelligent half."

Here in London, the newspapers are robust and shameless. We recall the
greatest headline ever written in the tabloid press, after a minor figure
in the Tory Party, Boris Johnson, was caught in a lurid peccadillo. The
headline - over a photo of the woman - ran:

"Bonking Boris Made Me Pregnant."

Bonking Boris is still around, and still editing the influential
"Spectator," which, in the interests of full disclosure and partial
disparagement, recently published an article by your editor. Still around
too, are the newspaper headlines that shout the latest "news" as though
they were announcing the next match at a World Wide Wrasslin' hoedown. We
look through yesterday's newspaper headlines at random to share them with
you:

"NHS CUTS PUT YOUR CHILDREN IN DANGER," says the front page of the Daily
Express.

"Why, why, why does Sir [Sex Bomb] Tom [Jones] have darker hair than his
son?" readers apparently want to know on page three. 

Turn the page - and read about the "Bully chef [who] ran around the
kitchen in his underpants." Accompanying the headline is not only a photo
of the chef with his pants on, but the waitress who got 124,000 pounds in
a sexual harassment settlement.

The Sun, meanwhile, takes the high road, with its lead: "NO PEACE..."
Child killers Ian Huntley and Roy Whiting were quizzed in jail yesterday
after sick 'sorry' notes and roses were left on their victims' graves. The
stunt brought new torment to the families...etc. 

"What sick individual would want to desecrate the graves of our girls?" 

We turn the page and...whoa! Nicola, 22, from Croydon, seems to have lost
her shirt...and her mind. She likes to go to Madame Tussaud's new wax
museum, we are told, because there's a statue of Prince Harry there "and
now I can go and see him whenever I like," she says. Lucky Prince Harry.

Further on in the paper, we find this jewel: "I SHOT HUBBY DEAD IN SEXY
SHANIA DANCE." 

The Sun felt it was important to tell readers about the bully chef too,
but took a different angle: "124,000 Pounds for Bar Girl's Sex Hell."

Over at the Daily Mirror is the tale of the "SCHOOLBOY VICTIM OF SICK
CYBERBULLIES." "A heartbroken schoolboy told last night of the misery he
endured as cruel yobs [English for hoodlums] taunted and insulted him on a
vile website."
Then, on page seven, is timely and important news: "Victoria [formerly
Posh Spice] to reveal her fashion secrets in glossy beauty bible."

Of course, you say...this is just the scurrilous tabloid press. What about
the serious papers? So, we pick up the Times and find bigger words, true,
but also the front-page story "Betrayal of justice," as rapists walk free.
Hundreds of rapists are escaping justice because of the continuing
confusion over the issue of consent and a court environment hostile to
victims." 

The story continues on page seven with: "What I went through in court was
worse than the crime itself."

And on page 11, the venerable Times took up the same sorry story of the
bully cook. The Times thinks the important detail is not that he ran
around in his underwear, but the clientele for whom he baked his soufflés:
"Chef to the stars unmasked as sex-obsessed bully." 

Even in the responsible English press, the reader gets a heavy wallop of
sex, class envy, celebrities, and murder, which is why the English have so
many newspapers. They are entertaining. "It's show business," says an
English journalist friend.

But in the United States, France, and Spain, journalists guard their
estate more carefully and take their trade more pretentiously. Every one
of them believes himself practically a public servant, helping to inform
the citizenry on the important matters that affect their lives. What they
are really doing, of course, is little different from what the protesting,
middle-class French students are doing - trying to inflate and protect
their own status. But self-awareness is not a trait taught in journalism
school. 

People feel the need to be "informed." They read the paper as if it were a
kind of daily hygiene - like brushing their teeth or dumping out the
ashtray. Good citizens must keep up with things, they tell themselves. In
school, we remember being encouraged to watch the news on television so
we'd be able to discuss current events. Our teachers were doing their
jobs, indoctrinating another crop of world improvers. 

Even the word "newspaper" is a conceit, if not a fraud. It pretends that
the news industry is a clean pane of glass through which we look out at
the spectacle of the world's events. But it is not a pane of glass at all;
it is a microscope in which particular events are magnified and distorted.
"News" that neither encourages journalistic prejudices nor inflates the
journal's profits, is invisible. 

The British press focuses on "events" that are tawdry and puerile. The
press lords must think the typical reader is a lout - if not before he
begins reading the newspapers, soon after.

The American press, alas, is more earnest. That is why hardly a day passes
without a story about Israel on the front page of the International Herald
Tribune, no matter how trivial or irrelevant. "Israelis fail to find
strong center," was the International Herald Tribune's front-page news
yesterday. We have no reason to think that events in Israel are always
more important than those in Indonesia or Argentina. But, the paper seems
to have a rule: Israel gets a cover story almost each and every day. 

We are not so naïve as to fail to understand why: the New York Times,
owner of the International Herald Tribune, knows its market. They are in
showbiz, too. In their theatre, Israel plays a central role. Maybe what
happens to Israel is important to New Yorkers, as say, what happens to
Ireland might be important to Bostonians. We don't know, but news, like
sausage, is not news until it is run through the grinder and is mixed with
the media's magical herbs, preservatives, and special seasonings. Like
sausages, you can only take the papers seriously when you don't know what
is in them.

This story from the London Times was nowhere to be found in the
International Herald Tribune:  "Expose on Jewish role in US policy is
disowned."

"After a furious outcry from prominent American Jews," the report tells
us, Harvard has withdrawn its support from a study done by one of its own
professors showing how Jews affect U.S. foreign policy. The poor man who
wrote the report, Professor Stephen Walt, must feel like he's picked up a
hand grenade. He was carefully examining the U.S. political scene to see
how it worked, when the thing went off in his face. According to the Times
report, he's been kicked off the job as academic dean of the John F.
Kennedy School of Government as a result:

"No one disputes that the Jewish lobby is an influential force in U.S.
politics and that the American Israel Public Affairs Committee (AIPAC) is
one of the most powerful organizations in Washington. AIPAC is described
in the report as 'a de factor agent of a foreign government [that] has a
stranglehold on the U.S. Congress.'

"Pressure from Israel and the [Jewish] lobby," the report continues, "was
not only a factor behind the decision to attack Iraq in March 2003, but it
was critical...the war was motivated in good part by a desire to make
Israel more secure."

At any given moment, people are committing murder, mayhem, and elections
all over the globe, but it is the "news" from Israel that is the news that
counts - in the New York Times and the International Herald Tribune at any
rate. After a lifetime of reading about it, even non-Jews begin to care -
which is fine by us. We only point it out to mock the "news" itself. It is
not "news" that sells papers, but papers that sell news. Every headline is
written by a hack with his own dog in the fight. 

Sometimes the papers sell news that is so far removed from the actual
events that even they are eventually embarrassed. 

"Network of pedophiles: Searchers at Outreau look for the body of a little
girl," was the headline in Le Monde. "The police began searching,
Thursday, the 10th of January, in the gardens of the working class section
of Outreau, near Boulogne-sur-Mer, for the body of a young victim of a
Franco-Belgian pedophile network."

At least Le Monde was fairly reserved about it. The rest of the press was
howling in all caps about the gruesome details. Not only was the poor
little girl tortured, raped, and murdered, it seemed like half the town
was in on it.

Sexual orgies...bizarre rituals...confessions...breakdowns...first there
are a couple of adults charged and then, the papers and the local
prosecutor got their blood up. Then, a taxi driver...a baker and his
wife...a priest! Boy have we got a story now.  Five, 10 - the list of
pedophiles was beginning to look like the phonebook.

And why not? The child shrinks were on the case, too. They couldn't
believe the kids didn't know or wouldn't say what was really going on.
They encouraged the kids to rat out their parents, their neighbors, their
priests, and their guardians. They cajoled them. They pressured them. They
wanted them to remember - to think hard. "Is it possible that someone put
his hand on you? Wouldn't you like to tell us something? No? Try
harder..."

Finally, the kids played along.

"You say a 'grand'[tall] man did something to you?" Believe it or not, the
investigators went to the phone book, found a man whose name was "LeGrand"
and had him arrested.
The prosecutor was a fool. But behind him was such a strong, foul wind
from the news media, he could barely keep his feet on the ground. Every
day brought fresh gusts:  "Pedophile Films Found in Belgium," "Pedophile
Ring Arrested," "New Arrests of Leading Citizens." The headlines alone
practically had the accused dangling from the gallows, even before any
formal charges were filed. 

The media wallowed on with new, dazzling details: "18 children...now it is
certain...have been the victims of sexual abuse, by their parents, by
their neighbors, and by their friends...The children's testimony was
sufficiently precise and detailed as to sweep away all doubt and eliminate
any possibility of manipulation." Prominent figures were "recognized in
the photos," averred the scribes confidently. 

Over and over again, the press referred to the "pedophile ring" as if it
were a fact as established as gravity. The pedophiles raped and murdered.
Hadn't practically every paper in the country said so? Pretty soon, people
began to believe that not only it was true...it was ubiquitous. "Things
like that, it happens all the time," said a lawyer to the TV cameras,
gravely.

In fact, it never happened...even once.

That didn't stop the criminal justice system. Like Janet Reno, the
prosecutor became a stooge for the press - and the mob. Someone - anyone -
had to go to jail for such a crime. In this case, 18 people did. Many of
them served years in jail; three of them attempted suicide...one
succeeded. 

And then, the entire Affaire Outreau imploded: the main accusers recanted.
They admitted that they had made the whole thing up. There was no
pedophile ring. There was no little girl who had been murdered. There was
no orgy of rape and murder. It was all a lie. The accused were innocent.

The government opened the cells, apologized, and gave each of the wrongly
accused inmates over $1 million in indemnity.

But the hacks? From them, hardly a word of contrition or regret was heard.
As far as their own role was concerned, they seemed to have been afflicted
suddenly with a case of collective amnesia. Instead, out came new
headlines: "Judicial Scandal," announced Le Monde. "Lives Ruined,"
pronounced another. And then, Le Monde deigned to bend its head: "A Media
Tempest Turns into a Judicial Shipwreck," it noted.

The gusts keep coming...

Bill Bonner
The Daily Reckoning

Editor's Note: Bill Bonner is the founder and editor of The Daily
Reckoning. He is also the author, with Addison Wiggin, of The Wall Street
Journal best seller Financial Reckoning Day: Surviving the Soft Depression
of the 21st Century (John Wiley & Sons).

In Bonner and Wiggin's follow-up book, Empire of Debt: The Rise of an Epic
Financial Crisis, they wield their sardonic brand of humor to expose the
nation for what it really is - an empire built on delusions. Daily
Reckoning readers can buy their copy of Empire of Debt at a discount -
just click on the link below:

"Now Perhaps Someone Will Listen!"
http://dailyreckoning.com/EmpireDebt.html
-- Posted Sunday, 2 April 2006 | Digg This Article

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