Short-Term Palliatives And The 5 Terrible Tendencies Of Government

Tyler Durden's picture




 

Excerpted from Seth Klarman's Baupost 2012 Letter to investors,

Absent an immediate crisis - and sometimes in the face of one - governments will often struggle to meet great challenges. Michael Boskin, former chairman of George H. W. Bush’s Council of Economic Advisors, recently described five tendencies of governments that should sound familiar. They include:

(1) Waiting until forced to act, often too late and with great harm;

(2) Systematically ignoring long-run costs to provide short-term benefits;

(3) Trying unsuccessfully to circumvent the laws of economics;

(4) Ignoring the laws of arithmetic, selectively counting some effects while excluding others; and

(5) Enacting programs or spending money in a crisis or boom where especially large unintended consequences become apparent only when the economy returns to normal.

This is a truly damning indictment of government arrogance, ineptitude, and overreach in the economy and beyond.

The short-term palliatives we are currently pursuing go against everything a long-term oriented society should aspire to achieve. Today’s policies encourage spending over saving, reward the profligate over the prudent, and support the failing at the expense of the successful. The antidote now being dispensed puts us squarely in uncharted territory in which the risks are outside the range of historical experience. There is no obvious exit and no path to normalcy.

Growing entitlements are popular with voters and with those whom they elect, for obvious reasons: because the bill never seems to come due. But come due it will. According to the law of economics named after the late economist and author Herbert Stein, if something cannot go on forever, it will stop. The result, which we are beginning to see already, is an acrimonious debate that divides rather than unites. Instead of efforts to expand the national pie through large investments in scientific and medical research and repair or replacement of our crumbling infrastructure, for example, we waste our breath bickering over the fairness of how we will share a flat-to-shrinking one.

Our spending is completely out of control, and, as of now, it seems as if the situation will have to become calamitous before we act. Let’s hope that it won’t then be too late.

0
Your rating: None
 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Thu, 01/31/2013 - 14:30 | 3203218 unrulian
unrulian's picture

(6) Enriching themselves and their families

Thu, 01/31/2013 - 14:39 | 3203277 Ahmeexnal
Thu, 01/31/2013 - 14:54 | 3203343 ACP
ACP's picture

(7) What's that? A photo depicting the destruction of the White House? Looks like a terrorist threat to me!!!

Thu, 01/31/2013 - 20:58 | 3204616 mightycluck
mightycluck's picture

I was reading the IRS opinion on Bronze insurance premiums costing $20,000 for a family of 5. And found this acidic opinion. The links look real, so I assume it is accurate.

http://confoundedinterest.wordpress.com/2013/01/31/the-costly-bronze-pol...

Thu, 01/31/2013 - 16:18 | 3203470 Solon the Destroyer
Solon the Destroyer's picture

The one thing Government will plan long term for is its continued existence, if not growth...

Professor Fekete has a new article up this week providing an alternate explanation as to why Germany is repatriating its gold.  He also asks why the US still has bases in Germany and speculates that the bullion is so slowly heading back not because of their own citizens' demands... but at the urging of the USA!

http://www.professorfekete.com/articles/AEFAmericanBasesGermanyGoldBasis.pdf

 

Thu, 01/31/2013 - 22:27 | 3204859 EscapingProgress
EscapingProgress's picture

"When a self-governing people confer upon their government the power to take money from some and give it to others, the process will not stop until the last bone of the last taxpayer is picked bare." - Kershner's First Law

"Throughout history periods of sound money have been marked by moral advance and prosperity. Conversely, periods of unsound money have been accompanied by moral decline." - Kershner's Second Law

Mon, 02/04/2013 - 01:14 | 3212592 jonjon831983
jonjon831983's picture

Just read it... interesting view.

 

The US wants the gold to go back to Germany as a final line of defence to have Germany sell off the gold and keep the gold prices lower.

The flip side in the article is if Germany decides to do a Gold DM against the wishes of US.  a la the unannounced creation of the DM post-WW2.

Thu, 01/31/2013 - 14:30 | 3203224 PSEUDOLOGOI
PSEUDOLOGOI's picture

(0) Enriching themselves and their families

fixed it for ya!

Thu, 01/31/2013 - 14:42 | 3203272 francis_sawyer
francis_sawyer's picture

EXTREMELY operative word... 'families'... [Hardly anyone on ZH quite 'grasps' that concept because they're too busy fulfilling their FIRST life ambition of wanting to TEACH THE WORLD TO SING]...

~~~

http://www.youtube.com/watch?v=ib-Qiyklq-Q

Thu, 01/31/2013 - 14:59 | 3203351 otto skorzeny
otto skorzeny's picture

we're still living with the results of the "do whatever it takes to makes you feel good" 70's

Thu, 01/31/2013 - 15:25 | 3203475 francis_sawyer
francis_sawyer's picture

youda thought the'd have died from COKE INHALATION by now...

Thu, 01/31/2013 - 16:50 | 3203854 zebrasquid
zebrasquid's picture

Right ohhnn..

Thu, 01/31/2013 - 14:30 | 3203226 JustPrintMoreDuh
JustPrintMoreDuh's picture

Silly ... it is already too late.  Enjoy the freak show.

Thu, 01/31/2013 - 15:00 | 3203366 kralizec
kralizec's picture

Popcorn ready.

Thu, 01/31/2013 - 14:32 | 3203227 Chupacabra-322
Chupacabra-322's picture

(1) Existing

Thu, 01/31/2013 - 14:32 | 3203229 q99x2
q99x2's picture

This is not the time or place for hope.

Thu, 01/31/2013 - 14:31 | 3203237 traderjoe
traderjoe's picture

It's already too late. We have passed the event horizon.

Thu, 01/31/2013 - 14:40 | 3203248 ebworthen
ebworthen's picture

"Let’s hope that it won’t then be too late."

Too late.

The U.S.S.A has been on this path since 1913, and FDR.

Reduce entitltments?  Not a chance.  Sorry, you taxed me for over 30 years, you can't move the goal posts or pull the rug out from under me - especially not after bailing out Wall Street.  No way.

And, try and reduce food stamps and welfare and medicare and see what happens when millions upon millions of youth and their families are hungry, cold, and sick or dying. 

Crossed the Rubicon we have; sold out to China for the sake of mammon lusters in Wall Street and professional Mandarins in Washington D.C.

TOO LATE.

Thu, 01/31/2013 - 16:37 | 3203793 Totentänzerlied
Totentänzerlied's picture

"Reduce entitltments?  Not a chance.  Sorry, you taxed me for over 30 years, you can't move the goal posts or pull the rug out from under me - especially not after bailing out Wall Street.  No way."

When it comes to government, the concept of "fairness" only works one way, from you to it. When the government disburses "benefits" it is giving you a gift. It can, and will, stop this gift-giving, whenever the incremental benefit to state power no longer justifies the cost of buying off the plebs. You don't get to tell the state what to do.

Thu, 01/31/2013 - 16:43 | 3203817 ebworthen
ebworthen's picture

Until the corrupt state collapses in on itself; that's the point.

Thu, 01/31/2013 - 14:36 | 3203258 Manthong
Manthong's picture

One of my favorite sci-fi movie scenes.

Thu, 01/31/2013 - 14:38 | 3203262 unrulian
unrulian's picture

I have a love/hate relationship with the ZH targeted ads...love the hot chicks, gold/silver, tactical gear ads....but damn, they know me better than i know myself.

Thu, 01/31/2013 - 14:46 | 3203304 CommunityStandard
CommunityStandard's picture

Your browsing and shopping history determines your ads.  I have climbing gear ads right now since I go rock climbing and was looking up hangboards the other day.

Thu, 01/31/2013 - 15:02 | 3203377 Handyman
Handyman's picture

Firefox ad blocker plugin.

Makes it easier to check ZH at work without the babes on the screen.

Thu, 01/31/2013 - 15:05 | 3203390 Dr. Richard Head
Dr. Richard Head's picture

And I have guitar tuners that allow for calibration of Hertz to 432Hz as opposed to 440Hz. 

Thu, 01/31/2013 - 14:53 | 3203327 otto skorzeny
otto skorzeny's picture

mine are identical-doppelganger?

Thu, 01/31/2013 - 16:13 | 3203687 flattrader
flattrader's picture

Firefox Add On Ghostery stops the ad crap and tracking effectively.

Thu, 01/31/2013 - 16:39 | 3203798 eaglerock
eaglerock's picture

Must be why I get the ads for Low T pills!

Thu, 01/31/2013 - 20:40 | 3204581 Bohm Squad
Bohm Squad's picture

Don't ever shop for hardwood flooring...lookin' into that adblocker thing.

Thu, 01/31/2013 - 14:38 | 3203265 Whiner
Whiner's picture

A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ensuing, always to be followed by a dictatorship, then a monarchy.
Alexander Fraser Tytler
What's the disappointing surprise? Invest with history. It rhymes and repeats. The 5000 year currency is a good start. Shorting bond for a time will work. Big pantry. Firearms. AG stocks. A little pile of UTES.

Thu, 01/31/2013 - 15:46 | 3203567 TotalCarp
TotalCarp's picture

Spot on. Democracy turned out to be impediment to liberty! Who would have thunk?!?

In all seriousness it is almost comical how the events are unfolding, as you point out history certainly rhymes. You been reading armstrongeconomics lately?

Thu, 01/31/2013 - 16:40 | 3203804 Totentänzerlied
Totentänzerlied's picture

"Spot on. Democracy turned out to be impediment to liberty! Who would have thunk?!?"

/////////SARC/////////

Thu, 01/31/2013 - 19:57 | 3204447 falak pema
falak pema's picture

the best form of liberty in that mindframe is : Julius Caesar; super efficient and VERY free; but just HE! 

No place for other man's freedom there. Your mindset represents the type of person who will learn history the hard way...

Thu, 01/31/2013 - 14:40 | 3203271 hawk nation
hawk nation's picture

That the great thing about prepping and properly hedging with pm's there's no reason to fear the future

I personally am looking forward to going back to our founding principals

 

all these fucking beurorats and politicians wont show up when there is no money to plunder

 

Thu, 01/31/2013 - 14:44 | 3203300 Joe Davola
Joe Davola's picture

The landscape (literally and figuratively) will look much different before we can return to our founding principals.

Thu, 01/31/2013 - 14:57 | 3203353 A Lunatic
A Lunatic's picture

There's nothing stopping you from "going back to the founding principles" right now. In fact if more people were to do so, perhaps there could be some form of resolution, rather than the revolution we are facing.

Thu, 01/31/2013 - 15:05 | 3203396 CH1
CH1's picture

the great thing about prepping and properly hedging with pm's...

Yes, but never leave "good friends and neighbors" off your list. Or good communications.

Really.

Thu, 01/31/2013 - 14:52 | 3203322 Dr. Engali
Dr. Engali's picture

6) Causing a crisis so that they can later solve.

Thu, 01/31/2013 - 14:54 | 3203335 otto skorzeny
otto skorzeny's picture

until they can't solve it-humans are a fickle tribe

Thu, 01/31/2013 - 14:56 | 3203345 otto skorzeny
otto skorzeny's picture

I prefer  a variation in German "Abrecht Macht Frei"- will be seen as you enter FEMA camps

Thu, 01/31/2013 - 15:04 | 3203380 Poetic injustice
Poetic injustice's picture

"Arbeit macht frei".

Untershrift: Grammarnazi.

Thu, 01/31/2013 - 15:12 | 3203415 otto skorzeny
otto skorzeny's picture

sorry about the typo Adolf

Thu, 01/31/2013 - 15:21 | 3203457 Joe Davola
Joe Davola's picture

Didn't there used to be a commenter named "Arbitrage Macht Frei"

Thu, 01/31/2013 - 15:01 | 3203362 Kalki
Kalki's picture

(1) Waiting until forced to act, often too late and with great harm;

(2) Systematically ignoring long-run costs to provide short-term benefits;

(3) Trying unsuccessfully to circumvent the laws of economics;

(4) Ignoring the laws of arithmetic, selectively counting some effects while excluding others; and

 

1+2+3+4 can be sumarized with: Going against natural law.

 

Kalki

Thu, 01/31/2013 - 15:00 | 3203368 davidsmith
davidsmith's picture

Uh, isn't this the very blah blah blah causing people to stop reading ZH?  Post RESEARCH, not POLEMICS!!!!!!!!!!!!!!!

Thu, 01/31/2013 - 15:03 | 3203373 Dr. Richard Head
Dr. Richard Head's picture

The conclusion at the end is a statist argument at its best.  "Instead of efforts to expand the national pie through large investments in scientific and medical research and repair or replacement of our crumbling infrastructure, for example, we waste our breath bickering over the fairness of how we will share a flat-to-shrinking one."  This is a misnomer and slight of hand trick statists tend to play.  They state the problems with outright authority and then stick in the idea that government somehow has the answer.  If the government would just invest their stolen loot the right way is the common refrain. 

I call bullshit.

The main core problem of this country is the idea that a collective group of boobs in some big fucking pretty building has the ability to allocate debt in the right areas of the economy instead of letting individual choices prevail.  The government is in the business of finding the most profitable areas of the economy and stripping resources off of it in order to give it to their friends.  The platitutdes that are devoted to the reasoning behind this investment and that investment misses the core problem of central planning and allows for the plebes to fight amongst themselves as to where the stolen loot should go. 

Divide and conquer, along with the "look over here" argument.

Thu, 01/31/2013 - 15:09 | 3203402 CH1
CH1's picture

Well said, Doc.

Thanks.

Thu, 01/31/2013 - 15:14 | 3203422 Joe Davola
Joe Davola's picture

Where's this building with the group of pretty boobs in it?

Oh, damn dyslexia acting up again.

Do NOT follow this link or you will be banned from the site!