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Limbic Medals



By: Bill Bonner & The Daily Reckoning Crew


-- Posted Friday, 13 April 2007 | Digg This ArticleDigg It!

Estancia Gualfin, Argentina

Friday, 13 April 2007

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

*** Ay yi yi…the United States government just can't stop spending…

*** Problems that should have been tackled ten years ago…not much being done to cure our "fiscal cancer"…

*** The rumors of the Mogambo's death have been greatly exaggerated… a marvelous way to enjoy the benefits of modern civilization far from the power grid…and more!

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

Ay yi yi…

The Treasury Department released a report on Wednesday showing that U.S. federal government spent more money in March than in any other month, ever. Ever. This spending pushed the federal deficit up 13%, to $96 billion.

Let's see. What have we been spending all this money on? The report shows:

"Defense spending: $67.8 billion in March and $268.3 billion for the year so far, up 7%."

Oh, it gets better, dear reader. This is just a drop in the bucket…

"Social Security: $55.5 billion in March and $306.8 billion for the year, up around 6%.

"Medicare and Medicaid: $83.4 billion in March and $418.4 billion for the year, up 15.6%. Spending on the Medicare drug benefit is up 144%."

This is what U.S. Comptroller David Walker likes to call our country's "fiscal cancer." Walker thinks that while it is important to think about and make strides in Social Security reform, what scares the beejeezus out of him are the rising health care costs.

The United States spends 50% more of its economy on health care than any other country. Walker points out that Medicare is already underwater by $32 trillion - five times the imbalance in Social Security.

Helicopter Ben, over at the helm of the Federal Reserve, has already admitted that the best time to have taken on these problems would have been (sigh) ten years ago.

Great. No help there. And it gets even better: John Fortier of the American Enterprise Institute says that with our political situation is uncertain, with a "lame-duck president, a new Democratic majority in Congress and the 2008 presidential race up for grabs. That doesn't bode well for tackling the problems anytime soon.

"It's not the atmosphere to really do anything," he said. How reassuring…but, unfortunately, this attitude is not all that surprising:

"Deficits Don't Matter"…and Other Lies

This is a pretty widely held opinion that not much is going to get done regarding these unfunded liabilities. Thomas Mann at the Brookings Institute echoes this sentiment saying, "This is a problem future presidents and Congresses will be forced to reckon with, but don't expect any action on it in this Congress."

 So…things aren't looking very promising for any sort of immediate action on these issues, despite the fact that all parties involved agree that the health care system is a huge problem - and one that threatens our entire economy.

As Budget Committee member Judd Gregg puts it: "At what point does the cost of the retired generation get so high that the younger generation can no longer afford to have the quality of life that our generation had?"

Now, for more news…

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

Chuck Butler, reporting from the EverBank world currency trading desk in St. Louis:

"Trichet didn't use the 'vigilant' word, so that probably means no rate hike in May, as I suspected earlier - waiting, for June. But he did tells us that rates were still 'accommodative' and that growth in the Eurozone will continue to run hot."

For the rest of this story, see today's issue of

The Daily Pfennig

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

Short Fuse, back in Baltimore…

*** Attention Mogambo Guru lovers!

The rumors of the Mogambo's death have been greatly exaggerated…

We have no intention of discontinuing his, as one of you put it, "witty, irreverent, but highly informative articles." We would never do that to our (and his) dedicated readers. You can still find the Mogambo - in its entirety - every Wednesday, right here:

The Mogambo Lives!

Or, if you rather, you can have the Mogambo delivered directly to you with his RSS feed - you can subscribe to this free service here:

The Mogambo Coming Straight Atcha!

*** Bill Bonner, reporting from Argentina…

Jorge and Maria, the couple who look after the ranch…and the foreman, Francisco, had waited up for us.

"Oh yes…the airplanes are never reliable in Argentina. So we figured you might be late," Francisco explained.

We were delighted to find the house transformed. New windows had been installed in the solid granite walls. New tiles had been laid down to cover the concrete. There were bathrooms, bedrooms…a dining room - all done in an old Argentina ranch style that made them look like they had been that way forever. There were doors and windows made from dark local wood. The walls were white washed, and on the floors were the red "San Carlos" tiles you find all over the area.

Most amazing, however, were the lights. They were electric, with a cold, eerie glow about them.

"The engineers came from Buenos Aires two weeks ago," Jorge told us. "They put in the solar electric system. It's incredible. We never thought we would live to see something so sophisticated here."

Oh, dear reader. We are way ahead of the Peak Oil problem. Here in the middle of nowhere, we have installed a power system that uses not a drop of fossil fuel.

The lights are LED lights…a low-intensity form of light that uses only half the pulse of AC current. That is what makes them look so strange. The current is supplied by a bank of solar panels, which then charge a bank of huge batteries, placed in what used to be an old, adobe tool-shop next to the house. The system doesn't provide enough power for an iron or a dishwasher - for that, you would have to use a generator - but it powers the lights, computers, small appliances and the pumps.

As near as we can tell, the electrical system works just fine - but we also use the sun for heat. In front of the row of solar panels behind the house are two rows of solar powered water heaters. They are banks of glass tubes with black tubes in side, set up vertically, at about a 45 degree angle, and facing the north. This is the Southern Hemisphere, so the sun makes its transit across the northern sky.

Jorge explained the system to us.

"The water comes down from the mountains. It runs into this cistern up the hill. Then, this little pump, powered by the solar panels, pumps the water up to the water tower above the solar collectors. From there, it runs down to the solar hot water heaters. One pipe - this one that is covered with insulation - takes it to this group of heaters, and then into this storage tank. Another little pump then circulates the water from the solar heaters into the tank all day long so the temperature in the tank goes up. That way, we have a whole tank of hot water for the night.

"This other bank of hot water heaters is for the heating system for the house. This pipe brings the water down from the tank and then circulates it through these heaters. Then, this water goes to the house, where it circulates through pipes that were placed in the concrete underneath the floor. It just circulates all day long and heats up the concrete. Then, at night, the floor heats the house.

"As I said, this is something we never thought we would see here. It is so complicated and modern."

In fact, it is much more complicated that we anticipated. There are valves, pipes, and wires running all over the place. Of course, if it were to fail, we wouldn't be able to do much about it. But, in theory, it won't fail, because the component parts are fairly simple. And in theory, this system, though we paid $75,000 for it, will pay for itself over time. In theory, it is a marvelous way to enjoy the benefits of modern civilization far from the power grid.

But, in practice, it has one major flaw: The hot water is as cold as ice.

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

The Daily Reckoning PRESENTS: Research shows that the brain has two centers for decision-making. This data has been said to explain why Americans save so little - one part of the brain told them they should put their paycheck in the bank, but the other insisted on buying a new wide-screen TV. In this DR Classique, first run in April of 2005, Bill Bonner takes a look into these parts of the brain…

LIMBIC MEDALS
by Bill Bonner

A new piece of research from Princeton's Center for the study of the brain came out last week. While poking around, the scientists thought they found something new.

Decisions are made in two parts of the brain, the researchers told us. The first part is the lateral prefrontal cortex. This is where advanced, logical thinking is supposed to happen, such as when a person decides which investment to make or which automobile offers the most value for the money. Deeper down in the grey matter is another decision center, the more primitive limbic system, which is where the real thinking takes place. Researchers describe this part of the brain as deciding our likes and dislikes…and telling us how to react to immediate stimuli. When a dump truck cuts you off in traffic, for example, the limbic system practically has your right arm and middle finger cocked in the traditional salute before your lateral prefrontal cortex has time to weigh out the pros and cons.

The research was said to explain why Americans save so little. One part of the brain told them they should, but the other insisted on buying a new wide-screen TV. Though the report was circulated in the media as though it meant something, it left us only more puzzled than before. When did Americans acquire this limbic system, we wondered? Up until 1980, American savings rates were around 10% of incomes. Was there some kind of evolutionary mutation that occurred in the early years of the Reagan Administration?

And why don't the Chinese seem to have the same problem? They are said to save 25% of their incomes, while we save less than 1%. Someone ought to pry open a Chinese skull and take a peek to verify this, but our guess is that the Chinese have limbic systems too.

At least the scientists were wise enough to realize that not every thought that passes through the human brain makes any real sense. The most powerful thoughts - strong enough to put the average American's retirement in jeopardy - are not logical at all, but instinctive, atavistic, primordial…and often practically insane.

When Woodrow Wilson stood before Congress and asked for a declaration of war against Germany, the words came out of the advanced part of his brain. They were nice, multi-syllabic, Latinate words, the kind of words you'd expect from a former professor of government. But they were greasy and meaningless, also just what you'd expect. The kind of bosh you find on a typical high-minded editorial page. It was as if what came out of the president's mouth were brightly colored bubbles…that floated, airily…lightly…above the crowds. His talk of "making the world safe for democracy" was nothing more than gas. He was proposing to go into the war on the side of the English - who were at that very moment making sure there was no popular democracy in the Empire. The Irish…the Indians…the Egyptians…the American president didn't even mention them. Had the upper brain been allowed to do its work, surely it would have told him that if he wanted to make the world safe for democracy he ought to go to war with the nation who suppressed it most widely; he might just as well have entered the war on the side of Germany against England.

But deeper down in Wilson's limbic system were idealized pictures of the Magna Carta…the robes and wigs of English courts…High Tea…Dickens and Thackeray…and all the trappings of the English upper classes as they were imagined by a naïve and admiring college professor from Princeton, New Jersey. The president, his advisors, his cabinet, and his leading allies had such bad cases of anglophilia they practically stuttered and drooled. And when they stirred the mob, the gaudy balloons they sent aloft meant nothing more than a signal that the fight had begun. The poor schmucks' blood was up already. Wilson's big words merely unleashed them.

We are not rehashing the history of WWI, dear reader. Instead, we are reaching for another, sharper point. One moment of reasonable thought would have shown what a losing proposition the European War would likely be, but the thinking was taking place in the limbic system, not the lateral prefrontal cortex.

Wilson's limbic system had already made his decision. And the public, too, was soon engaged. The cannon were being drawn up for war. Medals were being readied. They looked up at Wilson's empty words and must have thought they saw the image of the Virgin Mary. In no time at all, they were on their knees…pledging all they had to the war effort, giving up their purses, their sons, and their integrity. The super-patriots were drilling holes through their walls so they could spy on neighbors with names like Bauer and Feldgenhauer. In Tulsa, a Bulgarian was hung when a mob mistook him for a German. In Baltimore, a former mayor blew his brains out after being charged with being a German sympathizer. And woe to anyone who dared to laugh or cry.

"War is the health of the state," said Bismarck. War appeals to the limbic system even more than a new pair of shoes. Connoisseurs of Big Macs and reality TV see the bright shine of polished brass, and bombs exploding in air and they are drawn to it like sinners to the sparkling gates of Hell. Politicians feel the need to explain it, to justify it, to dress it up in respectable clothes to hide the jackboots and to slosh on perfume to cover the stench of death. But the words mean nothing. The common man is often as ready for war as he is for an extension of his line of credit.

WWI turned out to be a catastrophe as meaningless and senseless as Wilson's words. But the limbic system still functions. Could it be setting us up for another catastrophe? Once again, the yahoos cheer a new group of "Wilsonian" officials. Once again, they think they are making the world safe for democracy. And for the first time ever, their leading economists hold out cheap credit like a waiter offering free piece of apple pie to a fat man.

The brain may have two centers of decision-making. But only one of them makes the important decisions. The other is merely a lackey and a stooge; he does what he is told.

Regards,

Bill Bonner
The Daily Reckoning

Editor's Note: Don't forget - you can hear Bill (along with all of your favorite DR editors) speak at this year's Agora Financial Investment Symposium in Vancouver, British Columbia. This year's theme is "Rim of Fire: Crisis & Opportunity in the New Asian Era" - and it's your first look at investment opportunities, global market concerns, and the best investment bets across the globe.

The Symposium takes place July 24th and July 27th, 2007…but tickets are sure to sell out, so secure your spot today by calling Agora Travel at 800-926-6575 to be added to the list right away.

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:

Empire of Debt


-- Posted Friday, 13 April 2007 | Digg This Article



We'd like to offer you The Daily Reckoning, a FREE daily e-mail service written by entrepreneur and master financial newsletter publisher Bill Bonner. It offers a 'refreshingly witty, erudite... sensible' look at the day's stock news. One reader says The Daily Reckoning offers 'more sense in one e-mail than a month of CNBC.'

You can begin your free subscription by clicking here, entering your email into the box, and clicking 'Subscribe'.



 



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