Richard RUSSELL Says. . .: Now And Then

» Normxxx - Now And Then

BEST OF RICHARD RUSSELL | 30 October 2005
http://www.dowtheoryletters.com

NOW: An article in yesterday's Financial Times talks about today's youth, and what they want. To put it bluntly, they want money, they want to show off their wealth ("bling, bling"), and they want it now. "Waiting sucks," is their current motto.

THEN: My generation, the generation that grew up during the Depression and World War II, grew up in hard times. We were basically savers, while the children of the Baby Boomers are spenders. My generation wanted to give our kids a lot of the things we never had— namely a good, secure life and if possible, money to start out life with.

[Normxxx Here:  That's my generation. Richard is only a few years older than me. ]

Our kids were the "Baby Boomers," the children who never knew hard times— the children who never lacked for very much. But the children of the Baby Boomers seem to going into some sort of climactic phase. They want the most expensive watches, they want million-dollar condos as soon as they get married, they want to eat at the best and most expensive restaurants, they wanted the hottest exotic foreign cars (sure I'm exaggerating just a bit, but not that much).

[Normxxx Here:  We taught our kids that each generation's kids had it better than the last. I guess the 'boomers' taught it to their kids too. ]

When my generation bought a house, we wanted to buy it for cash. And if we had to take out a mortgage, our dream was to get rid of that mortgage as soon as possible.

[Normxxx Here:  In fact, any major debt, even a car loan, was considered like a 'millstone around the neck.' ]

The attitude towards housing is one of the biggest changes I've seen. And I think to myself, "Buy it today, and see it foreclosed tomorrow." But what the heck, this is the 21st century, and why think about risk, because as the old song goes— "It ain't goin' rain no more."

Last night I was thinking that I'm sort of unique. I've lived through three of the greatest events in the history of mankind. Here's how I see these events— events that all took place in my lifetime. I saw the Great Depression, I saw the beginning of cars for everyone, I saw the beginning of radios for everyone, I was there when nuclear energy was born. But below are the three that I believe are the most important events of my lifetime.

World War II. Many historians consider this the greatest event, the seminal event, in the history of mankind. During the war almost every nation was involved, and 56 million people died. I was there before the war and I was there after the war.

[Normxxx Here:  I just missed WW II, but caught the next one, the Korean 'Police' Action— the first of the 'undeclared' wars. ]

[ASIDE: Recently, we celebrated the 60th anniversary of the dropping of the atomic bomb drop on Hiroshima. The bomb resulted in 140,000 Japanese dead. And the belated arguments go on as to whether the US should have dropped the bomb. At the time, the war was over in Europe. The US had suffered massive casualties and with tens of thousands dead. The war in the Pacific continued, and it was horrendous. The US had taken 27,000 casualties in seizing the 8 square miles of Iwo Jima from a garrison of 21,000 Japanese troops. The US learned that the Japanese don't surrender, they were willing to die almost to the last man. Roughly 6,000 Japanese stood ready (all volunteers) to fly the certain-death Kamikaze missions. The US had taken 49,000 casualties to capture Okinawa during three unbelievable months of fighting. Supporting the Okinawa battle, the US navy lost or suffered damage to 350 ships, while 10,000 US sailors had been wounded or killed.

Meanwhile, the US military was working on plans to attack Japan itself. At the time Japan had 4 million well-trained soldiers, 2.4 million of them stationed in Japan. The US military believed an attack on Japan could cost as many as 250,000 casualties with at least 60,000 US dead. Some estimated a lot more, possibly as many as a million US casualties and dead.

I had just returned from combat in Europe and was scheduled to transfer from the B-25 Mitchell bomber to the faster Douglas A-26 "Invader" bomber. I was on a 30-day leave, following which I would be heading for the Pacific. My thought was— "I got through Europe, but is it possible that I could get out alive from the Pacific too? Could any bombardier be that lucky?" I consoled my frightened parents by telling them what a great plane the A-26 was, "much faster and safer" than the B-25 (I loved the B-25, it could take a fearful beating and return home).

And then the news of Hiroshima and Nagasaki came out and shocked the world, including the US military, who had no hint of the atomic bomb. Against the wishes of the Japanese military (who would have fought to the bitter end, they didn't believe in surrender), Japan's emperor announced that Japan would surrender.

Every guy in the military that I knew was elated. And millions of American mothers and fathers looked to the heavens and thanked God that their kids were still alive. I went down to Time Square, and it was a total mad house. People were kissing each other, hugging each other, kissing strangers— some were crying, others were drinking, hysteria reigned. I doubt if anything like that had ever been seen in New York before or since.

A few weeks later I got my discharge papers. Next day I went down to Washington Square and registered at NYU under the GI Bill.

Should we have dropped the bomb, or should we have invaded Japan the hard way? Don't even ask me that question. When I hear young people or academics arguing that to drop the bomb was inhuman and immoral I simply ask them where they were in 1945. I didn't know where they were, but I damn well knew where they weren't. They weren't in the military in that fateful year 1945.

[Normxxx Here:  Nor were they facing the immanent death of loved ones. Moreover, I was in Japan in the late 1950s, and I never met a single Japanese then that thought that dropping the bomb was somehow 'inhumane.' To a man and woman, they were all grateful we had managed to end the war without another year or more of fighting and starving and (conventional, e.g., 'fire') bombing. ]]

I can tell you that after WW II everything was different, everything changed. It was an incredible new world that emerged after the War. One post-War item was phenomenal— America's GI Bill. I went through college under the GI Bill.

[Normxxx Here:  So did I, the first time. ]

The GI Bill has been called the greatest single event in the history of education. Millions of Americans who never even thought of going to college did so under the GI Bill. The GI Bill changed the nation.

A few weeks ago while rummaging through some old trunks, I came across some fragile type-written papers written by my mother right after the War. My mother was an excellent writer— she had published four novels. Evidently, my mom had been working on her remembrances. One chapter was entitled, "The War Years." I had never seen these papers before. At the end of this "diary" my mother had written, "The children's good friends dropped in now and then, but things were different. And strangely enough, Dick never mentioned the war, never spoke of his experiences.

"Friends asked me if he had changed much in the Army. It was a question I couldn't answer. War or no war, young people change a lot during those formative years. Dick left home a kid of eighteen. He came back a young man of twenty-two." And I guess that's the way my mom saw me. But she was lucky and she knew it. My youth was gone, but at least, after four years, I had returned.

Antibiotics. I went through a life-endangering disease and operation prior to antibiotics (it was a severe mastoid infection from which I almost died)...

[Normxxx Here:  I merely suffered an eardrum abscess (which eventually left me with a perforated left ear drum— didn't keep me from Korea, though), but I had to attend the same "charity clinic" where they treated the post-mastoidectomy kids (I believe they "scraped" the mastoid bone, or some such, and applied antiseptics) and had to listen to the agonized howls of those kids. It sounded like all of the tortures of hell!  ]

I can tell you that medicine changed completely after antibiotics. Before antibiotics, there was no such thing as a "minor infection." After antibiotics, the dread of an infection was reduced to the point where people today take infections as everyday events. "Have a Levaquin and call me in the morning."

The Internet— the Net has changed the world. Now anybody can know what everybody else is doing. Now the world of information is at everybody's fingertips. The internet will be the greatest force for freedom the world has ever seen. Knowledge and information equal freedom— I believe freedom throughout the world is only a matter of time— maybe ten years, maybe 50 years or more,— but I know now that it's only a matter of time.

The world, our world, will now be subject to rapid change. I've said all along that it's impossible for one-third of the world (Asia) that is willing to work for a fifth of less of what we work for— it's impossible that all those billions of people will not see their standard of living improving. At the same time, I believe we'll see the American standard of living decline.

[Normxxx Here:  Boomers, Gen-Xers, and Gen-Yers, take heed! ]

In my opinion, America has already "spent it." This nation is insanely in debt. The debt will be reneged on, the promises of the future will be diluted— and/or the debt will be inflated away. Any way you look at it, the future will be more difficult. Already we see some of the results of our wild spending, our massive military spending, our periodic undeclared wars, our almost mindless build up of debt.

Wages in the US are not keeping up with expenses. Over the last ten years people in the US have had to work harder to keep up their standard of living. In most families both parents now work. Families are smaller today because it costs so much to raise children.

[Normxxx Here:  Over $40 grand just for tuition at a State college; in my day such tuition was free, or nearly free. ]

Half the people in the US are heavily in debt. I believe we're moving steadily toward what I call "difficult times." The auto workers found that out last week. We'll all find that out in future years. In the meantime, the dollar is temporarily strong. Enjoy it. Now go out and spend.

[Normxxx Here:  While the dollar still has some value. ]

Is all paper money basically junk? Of course it is, and in due time, as the old saying goes, it will be reduced to its intrinsic value. This is the dreaded secret that the central banks of the world don't want you to think or recognize. But slowly, ever so slowly, the "dreaded secret" will emerge, and it will be recognized and acted on by the masses.

We are now in the early part of the second phase of the great gold bull market. This is the phase where gold starts to make the news. And when an item makes the news, the great unwashed public notices and begins asking questions. They don't do anything about it in this early stage— they simply ask questions. And the question that a few curious people ask is, "Hey, why is gold going up? I read somewhere that it's at a 17 year high." And so it starts. The next question they ask is— "What's wrong with the dollar. It's taking more and more of them to buy gasoline and heating oil and college tuition and rent. Is there something wrong with the dollar?"

These questions may sound innocent, but they scare hell out of the Fed. So every week or so some fool Fed governor comes out and announces that "Inflation looks to be a little high at two percent, so we better raise Fed Funds another quarter of a percent. You see, we're just as scared of inflation as you good people are."

Of course, the one thing the Fed will never do is compare the purchasing power of the dollar with it's purchasing power 25 years ago or 10 years ago or even five years ago. That's a no-no, because the comparisons are sickening. You see, they have to keep that lie going to the effect that the Fed, like your dog, Rover, is man's best friend.

Here's my idea for a Fed motto— "Keep it slow, and they'll never know." The "it", of course, is the decaying purchasing power of the fiat dollar.

[Normxxx Here:  But 'slow' inflation also keeps us from that dread alternative, which occured often enough until 1939; those dreaded "panics" or depressions, which periodically wiped out everyone except the very wealthy and Government workers. ]

On every dollar bill we read the words, "In God We Trust." Of course, they'd never put the words, "In the Fed We Trust" on the dollar— because there's a limit to how big a lie the Fed thinks it can get away with.

The US government is now on a spending binge that boggles the mind, but I'm not going to recite the statistics on all the debt and deficits and liabilities again.

[Normxxx Here:  But, didn't the boomer Cheney famously say, "deficits don't matter?" ]

Let me just put it this way— the facts are horrendous. The question is, "How are we going to pay for them?" There are only two possibilities— The government will default on them or the government will simply inflate them away. And the winner (but you already knew this) is— inflation.

The ironic fact is that today we have "faith-based" money. Yeah, faith in the Fed. Economically speaking, could anything be more frightening— or bearish?

______________


The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx