The US Constitution put limits in place. The peoples’ representatives in the House were to be held responsible for the budget. And ‘only gold and silver’ were to be used as money. What could go wrong?
 

Democracy... "nothing better than an Utopian theory, a splendid chimera, descriptive of a state of society that never did, and never could exist; a republic not of men, but of angels."

—Alexander Fraser Tyler

In the 1970s a young man walked into our office at the National Taxpayers Union in Washington. Grover Norquist was his name. Fresh out of Harvard, bright eyed and bushy tailed, he came to work for us.

'Little did either of us realize; it would be a hopeless battle. The primary political trend was running against us.

To make a long story short, small-ish groups control governments. Their main aim is to transfer power and money from ‘The People’ to themselves. They do so until they run out of other peoples’ money. In the 1970s, they were barely getting started.

It was clear, even from the writings of the early Greeks, that democracies need restraint. Like sugar, debt, alcohol... or the Devil himself... they need limits. When you can vote to spend other people’s money — even money they haven’t earned yet — the danger is that you will spend too much. And then, your over-indebted democracy will tumble into bankruptcy, inflation and dictatorship.

The US Constitution put limits in place. The peoples’ representatives in the House were to be held responsible for the budget. And ‘only gold and silver’ were to be used as money. What could go wrong?

But seat belts and airbags could not compensate for bad drivers. US debt increased 100 times since 1969. And the dollar has lost 85% of its value.

In the 1970s, we were still in our 20s. And our naïve approach to avoiding this catastrophe, led by a state senator from Maryland, James Clark, was to ask the states to approve a balanced budget amendment, forcing the feds to spend only what they could raise in taxes. Had we succeeded, the US would have avoided $35 trillion in debt... along with the mischief it paid for.

But the effort fell short and was abandoned when Ronald Reagan was elected.

Young Grover Norquist, exceptionally smart and energetic, had another idea. It was to ‘starve the beast.’ Grover asked members of Congress to sign on to a Taxpayer Protection Pledge, wherein they swore on their mothers’ graves that they would under no circumstances raise taxes.

Back then Republicans still had a residual respect for balanced budgets. Restricting tax revenue looked like a reasonable way to restrain the grasp of government.

That effort failed too. Republicans soon realized that — thanks to fake money and the Fed’s low rates — they could cut taxes and still increase spending.

Today, Grover is still at it... trying to turn off the feds’ taps. But we moved on. We became cynicalists (our word). We are not merely ‘cynical,’ about the man coming into the White House... nor about his ability to MAGA the country. We just don’t believe that is the way it works. Even if he were smart, earnest, and competent, he couldn’t overcome the Primary Political Trend.

Government is a taker, not a maker. It takes and takes... as much as it can get away with.

People are not angels. They are not devils either. But they are subject to influence, and when they realize that they can use the government to vote themselves ‘benefits’ that someone else, sometime in the future, will have to pay... they are happy to do so.

These facts are not really in dispute. But many people believe that Donald Trump is an exceptional leader. Or they think a DOGE led by billionaire geniuses will turn things around.

Today, it almost seems possible. The Wall Street Journal:
 

Musk Draws First Blood With Spending Bill Bombshell

With a 4:15 a.m. ET social-media post on Wednesday, Elon Musk declared that a must-do spending bill “should not pass.” By early evening, the bill was dead, leaving the government barreling toward a weekend shutdown just before Christmas. Lawmakers who might have underestimated Musk’s ability to shake up Washington were suddenly having second thoughts.

This is one for the record books. Mr. Musk, not Mr. Trump, seems to be in control of US spending.

“Stop the steal,” said Elon’s post.

But stealing is what governments do. Most likely, Donald Trump and the elites will have to bring Mr. Musk to heel...and the stealing can continue.

And while there is never any guarantee that day will follow night... or that prices will fall when they are super high... or rise when they are super-low — that’s still the best way to bet.

Regards,

Bill Bonner

Research Note, By Dan Denning

Nearly every expected the Fed’s ‘hawkish pivot’ rate cut of .25 basis points yesterday. So why was the price action on markets so bad? Two reasons. First, the Federal Open Market Committee (FOMC) now expects to cut interest rates only two times in 2025 (not three times). Second, the committee raised its forecast for PCE inflation (based on the Personal Consumption Expenditures index) from 2.1% to 2.5%. They expect both interest rates and inflation to stay ‘higher for longer’. The Dow reacted by falling for the tenth consecutive trading day, something it last did in 1974. And the Volatility Index, pictured above, spiked 75%.

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