We’re going to take a break this week from our usual fare of industry insight for metals and mining investors, pulling back for a look at the big picture. The biggest picture, in fact: the current human condition, within the context of all of history—and even prehistory.
This is the subject of our friend and fellow contrarian investor Bill Bonner’s new book, Hormegeddon.
The cryptic title, I must admit, is my second greatest disagreement with what I think is clearly one of the best and most important books written in many years.
It’s a clever combination of hormesis (the biological phenomenon of small doses of something being good for an organism while large doses are damaging or fatal) and Armageddon. The meaning being that our civilization suffers from too much of many good things and is headed for a catastrophic correction, if not complete collapse.
Whether one agrees with that conclusion or not, it certainly poses a question every thinking person should consider, and then plan to act accordingly—which dovetails perfectly with our views of gold for prudence and gold stocks for speculative profits.
But there’s an immediate benefit to reading the book as well: despite the rather sobering—if not horrifying—line of reasoning, the text is brilliant and very, very funny. If H. L. Mencken has an heir in our day, it may well be Bill Bonner.
Long ago, a friend suggested that I should start a daily email letter and build a huge mailing list, “like Bill Bonner’s Daily Reckoning.” My reply was that while I might have plenty to say, and have great confidence in my analytical skills and ability to deliver valuable information, I didn’t think I could deliver entertaining copy on a daily basis, as Bill has done for so many years.
In Hormegeddon, Bill continues that amazing track record, delivering page after page of informed, insightful, frequently challenging, and very humorous writing.
Let me share a few of my favorites:
Bonner’s Law: In the hands of economists, the more precise the number, the bigger the lie.
But there are those who believe they can make the right decision more right, or the poet more poetic. And while many of these snake oil salesmen content themselves with a quick buck and the next train out of town, some of them go for the long con. These are the central planners.
Constructing a public policy out of public thinking is like building a skyscraper out of marshmallows. The higher you go, the squishier it gets. Because the information blocks themselves are not solid. Instead, they are combinations of theory, interpretation, guesswork, spin, hunch and prejudice.
The trouble with The Economist, The Financial Times, the US Congress and most mainstream economists is not that they don’t know what is going on, but that they don’t want to know. It would be counterproductive. Nobody gets elected by promising to do nothing. Nobody gets a Nobel Prize for letting the chips fall where they may. Nobody attracts readers or speaking fees by telling the world there is nothing that can be done. Instead, they meddle. They plan. They tinker. Usually, the economy is robust enough to thrive despite their efforts. But not always.
Imagine that Warren Buffett moves to a city with 50,000 starving, penniless beggars. This is what economists would say about that city: “Stop whining...the average person in the city is a millionaire.”
In other words, there was so much fudge in the GDP figures that you could get tooth decay just looking at them.
Enough. I don’t want to spoil your fun.
It’s not all pointed levity, of course; there are charts and tables and many cogent arguments. Among the most striking of these was a chart on page 256, showing Zero Hour—the point beyond which every incremental dollar of US debt has no impact on GDP. That’s due to arrive next year. (Maybe the Mayans just missed it by three years.)
And Bill’s bottom line, while agreeing 100% with Doug Casey’s view, is anything but funny:
A blow-up in the US money will be felt around the globe. It will probably be the biggest public policy disaster of our lifetimes. What exactly will happen, and when it will happen, we will have to wait to find out. But it will be bad, that much is certain. We will hit rock bottom.
What about my other disagreement, besides the inscrutable title? With all due respect, I think Bill misjudges the economic (never mind social) impact of the Internet.
The Internet. A time waster, like television. Not a wealth booster, like the internal combustion engine.
What data supports this conclusion? Lackluster GDP growth since the Internet began its explosive growth. Aside from Bill’s own arguments that GDP numbers are meaningless, I would say that real economic growth, whatever it is, would have been much, much less than it has been since the advent of the Internet, were it not for this technology and the game-changing efficiencies it has, is, and will bring.
Which is not to say that the signal-to-noise ratio is not distressingly high, which I think is his real point.
At any rate, if we do differ on this matter, it is a small thing compared to the long-overdue and necessarily merciless analysis of the current human condition Bill has given us.
It’s a bonus that—at least for independent thinkers—the book is as fun as it is important.
I, at least, found it much more gripping than any novel I’ve read for years. Frankly, I had only intended to glance at it, but it sucked me right in.
So I do highly recommend Hormegeddon to all our readers. Just be sure you’re sitting in a comfortable chair, maybe with a drink and a snack at hand.
And fear not: We’ll be back next week with more coverage and analysis of metals and mining investments today. This week’s message is that Bill Bonner’s book provides ample support for our investment strategies.