Washington Is "The New Rome"

Tyler Durden's picture

Authored by James Rickards via The Daily Reckoning,

I just got back from a trip to Washington, or what I call “New Rome” because Washington’s relationship to the rest of America is the same as Rome’s relations with the agrarian and plebeian citizens of its vast domains in late antiquity.

Washington is a parasite that sucks the rest of the country dry. The counties surrounding Washington, D.C., have the highest per capita income of any metropolitan area in the country including New York, Hollywood and Silicon Valley. The unemployment rate is also the lowest of any large region in the country.

At least New York, Silicon Valley and Hollywood all produce something we need or enjoy. Washington produces red tape, taxes and new ways to handicap innovation on a daily basis.

While America staggers after its first lost decade (2007–17) and with a new lost decade set to begin (Japan, anyone?), Washington grows fat and rich. Trust me, the hotels and restaurants in town are jammed. No depression here.

This is an important observation because it has to do with how great powers decline and fall.

The conventional view of the fall of the Roman Empire is that they succumbed to barbarian invaders. That’s only half the story. In fact, barbarians had invaded for centuries and been repeatedly repulsed by Roman citizens who valued their citizenship and were loyal to the emperor and senate in Rome.

Yet as Rome grew corrupt and decadent, it increased taxes and offered less safety in return. There came a time when barbarian rule looked better to frontier agrarians than rule from the corrupt cosmopolitan center.

When the barbarians invaded for the last time, citizens welcomed them. The barbarian policy was 10% taxes in exchange for order. Rome offered 20% taxation and disorder. Citizens went with the barbarians, and the rest is history.

Rome was not destroyed from the outside; it collapsed from the center. I see something similar happening today.

So why was I in Washington?

Well, for better or worse, this is where critical decisions are made that affect war and peace, decline or prosperity and the success or failure of enterprise. If you want to provide forward-leaning analysis to readers, it’s important to interact both with decision makers and the policy experts who advise them.

I’m always happy to share what I learn with my readers, unless it’s highly sensitive material I can’t divulge for national security reasons.

Here’s the latest readout:

There won’t be any tax cut this year. As we say in New York, “fuggedaboudit.” Maybe next year, but even that’s not clear. The stock market has “priced in” a tax cut four or five times since last November. Wall Street loves a good story. So a tax cut policy failure, similar to the failure to repeal Obamacare, could be catalyst for a 10% stock market correction in coming months.

We’ve had four stock market corrections of 10–15% in each of the past eight years, or one every two years on average. The last one was January 2016, almost two years ago. So we’re due.

A 10% stock market correction is not the end of the world. Still, a quick 2,300-point drop in the Dow Jones industrial average might get some attention. This looks like a good time to decrease your equity exposure and allocate more to cash.

Another potential catalyst to watch for is a possible government shutdown on Dec. 8. That’s the day the congressional authorization to keep the government open expires. Unlike the tax bill and some other issues, you need 60 Senate votes to keep the government running. That means Democrats have to go along.

The issues on which Democrats and Republicans disagree include funding for Trump’s border wall, Planned Parenthood, Obamacare insurance bailouts, sanctuary cities and “Dreamer” immigration status. You get the point. There’s no middle ground.

We’ve had several government shutdowns in the past seven years. Again, this is not the end of the world. But it does not inspire confidence in U.S. governance at a time when China is taking center stage and war drums are beating in North Korea. There’s nothing the stock market likes less than uncertainty. This could be a catalyst for the overdue stock market correction.

Finally, I met with President Trump’s national security adviser, Gen. H. R. McMaster, and CIA director Mike Pompeo Thursday afternoon.

It was a small group, invitation-only gathering. Most of my colleagues wanted to drill down on the Iranian portfolio, but my personal brief was all about North Korea. I’ll let my readers know what I learned in the coming days.

My rule on visits to Washington is not to stay more than two days. I don’t want to be captured by any swamp creatures.

So I’ve addressed some of the potentially negative catalysts coming out of Washington. But of course there are other catalysts from the purely market side…

Bull markets in stocks seem unstoppable right up until the moment they stop. Then comes a rapid crash and burn phase.

Is there any warning besides those I mentioned that a collapse is about to happen?

Of course there is. Analysts warn about it all the time and provide mountains of data and historical evidence to back up their analysis. The problem is that everyone ignores them!

You can talk about the dangers represented by CAPE ratios, margin levels, computerized trading, persistent low volatility, and complacency all you want — which I’ve done — but nothing seems to slow down this bull market.

Yet, there is one thing that can stop a bull market in its tracks, and that’s corporate earnings. The simplest form of stock market valuation is to project earnings, apply a multiple, and voilà, you have a valuation.

Multiples are already near record highs, so there’s not much room for expansion there. The only variable left is projected earnings and that’s where Wall Street analysts are having a field day ramping up stock prices.

Earnings did grow significantly in 2017 on a year-over-year basis, but that’s mainly because earnings were weak in 2016 so the year-over-year growth was relatively easy. Now comes the hard part.

How do you expand earnings again in 2018 when 2017 was such a strong year?

Wall Street just uses a simple extrapolation and says next year will be like this year only better. But there is every reason to doubt that extrapolation. Earnings are likely to fall short of expectations, which can lead to a correction. Once that happens, multiples can shrink as well.

Soon you’re in a full-scale bear market with stock prices down 20% or more. That’s without even considering a war with North Korea and all the dangers others I’ve already mentioned.

This may be your last clear chance to lighten up on listed equity exposure before the bubble bursts.

If you haven’t already, I recommend you move a portion of your portfolio into cash, physical gold and select gold mining stocks, plus other hard assets like real estate and fine art.

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wisehiney's picture

Better tune up your fiddles nero zero's.

The Barbarians are at the gate.

Go Trump!

beemasters's picture

"The world will not be destroyed by those who do evil, but by those who watch them without doing anything" ? Albert Einstein

two hoots's picture


Washington, is an autonomous controlling unit.  It is not responsive to the will of the people.  We are here to support and pay for two +of the three branches of government to exist, in order: Legislative, Justice, and some agencies, for their own sake. WH is transitional.  It has become painfully obvious and there is no turning it back. 


HRH Feant2's picture

Sure there is! Nuke DC during the SOTU!

cossack55's picture

At least Rome allowed horses to serve in the Senate. We just get the horseshit.

Giant Meteor's picture

Calligula it is said, told the good senators of that time that he was going to name his prized horse Incitatus, consul of Rome. Apparently the horse never served, although was reported to be sometime honored guest at swell parties, allowed to eat from the table alongside honored guests, and digitaries...

It is speculated that Calligula wished to humiliate, and cow the senate in his quest and bid for absolute power over Rome. Other's have merely thought him completely insane, which is likely why he was murdered in early AD 41 ..

Obsidian Samctum's picture

I welcome you to the list. Everything about you and everyone you know will be investigated without you knowing. Your phone/computer has been hacked and they can see you as we speak.

nmewn's picture

They have learned too late...

"Spurred by a fear that red and blue America were drifting irrevocably apart, (Edit: Or that the Blue side is losing, badly.) I decided to venture out from my overwhelmingly Democratic neighborhood and engage Republicans where they live, work and pray. For an entire year, I embedded myself with the other side..." - Ken Stern, former CEO of NPR


He embedded himself with..."the other side"...everyone catch that? 

Mr.Stern, you took money from taxpayers as NPR has public funding. You USED public funding to promote YOUR views at the expense of the..."other side".

Furthermore, you lied about your motivations, you were never neutral as I always knew you were not. You are a thief and you're damned lucky you didn't run into me on your little dalliance with my fellow deplorables in the hinterlands here, beyond your taxpayer funded ivory tower walls.


JRobby's picture

NPR abandoned journalism a long, long time ago.

Rusty Shorts's picture

Washington DC was originally called Rome.  1663

Lumberjack's picture

“Justice will not be served until those who are unaffected are as outraged as those who are.”

Benjamin Franklin

SickDollar's picture

"Finally, I met with President Trump’s national security adviser, Gen. H. R. McMaster, and CIA director Mike Pompeo Thursday afternoon.

It was a small group, invitation-only gathering."


wow the dude reputation is true he is shill

HRClinton's picture

Hang lawyers, Pharisees, money changers, lobbyists, and politicians!

Feed them to the lions, or crucify them!

"Please form 2 lines: Lions to the left, Crucifixion to the right." 

Life's a piece of shit, when you look at it.
Life's a laugh and death's a joke, it's true.
You'll see it's all a show.
Keep 'em laughing as you go.
Just remember that the last laugh is on you.

Post script: What have the Romans ever done for us!?  Romans go home!  Romani ite domum!

chunga's picture

Yup, a nuclear armed ponzi scheme.

DC is such a shit hole normal, decent people can't survive there and thats why there are none.

Proctologist's picture

Trump is the Republican version of what Obama was to the Dems: All hope and no change. Being better than Hillary Is like saying meningitis is better than the Black Plague.

The only way the barbarians are winning this battle is if they starve Rome into submission. While I might wish for it, I don’t see it happening.

Brazen Heist's picture

No shit....there are many similarities with the Roman empire. An empire of depravity, bombaste, engineering, money worship and war.

apike3137's picture

and if you think a guy who lives in a gold plated apartment is acting in YOUR best interest, you are part of the problem...



sparksmass's picture

Right, a guy who lives in a shack would be able to get the job done a lot better.

DennisR's picture

...Rome had more class. 

runswithscissors's picture

Washington DC is "The New Mordor"

Arkadin's picture

If by Rome you mean Constantinople, yes, it had class. 

If by Rome you mean the city of Rome on the Italian penninsula, it did not aquire claas or beauty until it was Catholicized and untl Michaelanglo and Bernini and their papal patrons beautified it.  That, of course, occured some three centuries after the Roman Empire had fallen.

Evelyn Waugh has a good book on this subject called Helena.  She was the mother of Constantine, found the True Cross, and is a saint of the church east and west.

Lost in translation's picture

Old news.

Behold the Fasces in the US House of Representatives, and the MAA’s Mace.

The United States provides the Vatican’s Armed Forces and has, for over half a century.

ted41776's picture

making red tape and digital 0s is hard work

XBroker1's picture

"Trust me, the hotels and restaurants in town are jammed. No depression here."


And legal weed, while they tell us the rest of the country shouldn't have it.

shovelhead's picture

Lol. So I'm not the only one who noticed that bit of legal prestidigitation.

HRH Feant2's picture

Rickards is smart. More than 2 days in DC and I have heard you turn into a pervert. Or a whore. Or both.

Heroic Couplet's picture

Virginia counties around DC are Republican and employed by the defense industry.

TuPhat's picture

There are no real republicans anywhere around DC.  There are only Oligarchs and Oligarch supporters.

Endgame Napoleon's picture

How about all the six-figure lobbyists?

HRClinton's picture

Old news. The original payers was the JEB camp. They sold it to the Dems, and leaked tidbits to McCain.

MoreFreedom's picture

DC is like a leech sucking the blood of producers in the US.  And the reason Americans aren't getting ahead is because the leech has been growing and sucking more blood.  

Unfortunately, Trump blamed foreign trade and illegal immigrants (who actually generate demand for goods/services in the US by living here - not that I agree illegals should be here).   And a lot of people are beating the trade war drum, instead of asking to shrink the leech.   That last time we had a trade war (thanks to the Smoot Hawley Tariff Act), the US GDP fell by half within 3 short years and was repealed.  And now Jeff Flake, who's taken a lot of heat in spite of voting with Trump and for all his nominees, is quiting.   That's a loss for producers in the US - he's always gotten an A rating from the National Taxpayers' Union.

TuPhat's picture

If Flake is a good guy then his farewell statement is poorly worded and disingenous at best.  He talks about things that have been the norm for decades and says we should not let them become the norm.  What has he been smokin?

SgtShaftoe's picture

It's all for optics and soundbites, nothing more.  He is a corrupt-to-the-core swamp creature thinking he's covering his ass.  

MisterMousePotato's picture

Consider, Mr. Freedom (if you can), the possibility that DC is a lifeblood sucking leech AND immigrants and foreign trade policies ALSO are lifeblood sucking leeches.

I don't see them as mutually exclusive. Why do you?

If you had a mind to, you could spend the next two weeks doing nothing but reading study after study on the massive economic drain that is immigration, both 'legal' and illegal.

As to current foreign trade policies, only an imbecile would think that these have worked in America's interests.

SgtShaftoe's picture

I see the Hunger Games as a brilliant vision of the reality of the US extrapolated.  The Capitol city is full of freaks and narcissistic wierdos if not just plain demonic.  Except in reality, the government doesn't have the deep technology that the Hunger Games government had.  Just as in the Hunger Games the population had a Bastille day moment ransacking the place, as did Rome.  So will the USA.  I refuse to step back in the District willingly for the rest of my life.  Fuck that place and the people.  I wouldn't piss on them if they were on fire.  


I've posted this series of paintings over the years here: https://en.wikipedia.org/wiki/The_Course_of_Empire_(paintings)

These series of paintings I keep coming back to as a brilliant illustration of cycles of empire.  Take a look and I hope you enjoy them as I have.  


First freedom and then Glory – when that fails,

Wealth, vice, corruption...

RichardParker's picture

Take a guess what comes after democracy in Plato's Regimes (which compliments those paintings so well).


SgtShaftoe's picture

yes, but tyranny nationwide would be untenable.  It's too much ground to cover.  I figure the coasts will live in tyranny and the difficult physical and social terrain will be left alone out of self preservation.  Though I could be wrong, so it's best to have contingency plans A through F at minimum.  

Stu Elsample's picture

Don't give up the 2nd Amendment, period.

Hugh Mann's picture
"Washington Is "The New Rome""

The District of Columbia sits on a piece of real estate called Rome Maryland. 

RichardParker's picture

Washington, or what I call “New Rome


Washington was known as Rome back in the 17th century.



Singelguy's picture

The only reason "earnings" grew is because of massive stock buybacks. Let's just compare top line revenue over the past 5 years. It has either remained stagnant or declined, especially when adjusted for inflation. However, the question of how to increase "earnings" in 2018 is a valid one. More share buybacks and more debt? Maybe. What if interest rates rise? That could ruin the party.

MK ULTRA Alpha's picture

It's true, there was a large trend of buybacks but that doesn't explain this market. The market is a supply and demand equation. Once stocks were held, there was a great demand for a limited number of stocks. The market moves higher and higher bidding up available shares. Demand was caused by a dramatic increase in liquidity. Once liquidity drys up, demand slows, meaning, when there are less buyers because of less capital, there will be a higher volatility. Once volatility is the norm, only then will factors like a firms earnings, price to earnings ratios, geopolitical risk, economic measures like velocity of money, labor, interest rates, etc. will be priced into markets. Buybacks were just one input, now the question will be, will Fed reduction in liquidity growth strangle the market or will off shore liquidity of 2 trillion coming home from tax cut drive demand. Again, it has been a supply and demand equation driven by Fed monetary expansion, the greatest monetary expansion in history. Even the buybacks were made possible, because of zero interest rate loans to firms allowing buybacks.

roccman's picture

Astana is the next Rome.

whatsupdoc's picture

The advice to 'invest' in real estate is flawed.  There is plenty of it and it cannot be sold off in bits.  Buying real estate is a huge bet on prices, economy and public opinion remaining stable.  

You have to sell it to someone who is more of a goose than you are !! (with respect to all geese)


Better to invest in things that are internationally recognised and are available in small quantities in my opinion.  Another option for loaded people is to buy a small business that is stable and generating an income.

Real estate is a huge bet as is the stock market.

MK ULTRA Alpha's picture

Where did you get your business degree. Rental property, urban real estate ie land in a growing city, farm and ranch development for later resale are viable tangible options. There is a high failure rate in small business. A small business must be competitive. A small business with no barriers to entry can be crushed. It is difficult to find a niche market with barriers to entry. Real Estate produces most millionaires. The millionaires in my family have substantial real estate portfolios. If you're in the stock market, I suggest, it would be a good idea to limit risk by selling and buying rental property for a good long term cash stream.

whatsupdoc's picture

Just looking at  http://www.zerohedge.com/news/2017-10-25/stagnation-nation-middle-class-...

Big assets have to be sold sometime.  They are worth what the new owners think they can pay off.  Generally, real estate is non-productive and is obviously part of the 'landlord' mentality.  We can't all be landords.

NZ has just banned all foreign buyers from property I believe.  Other countries also do the same (India, Russia, and others) Houses are not something you should encourage speculation on.  You will create a bust.  At a national level the federal politicians are responsible for the overall health of the nation.  Those nations who are linked historically and ethnically to the bandit countries UK, US etc. see nothing wrong in creating huge wealth disparities with speculative markets.

I stand by my thoughts.