Thoughts from the Frontline

Like everyone else, I am weary of this pandemic mess. I want to travel freely, enjoy dinner with friends, hug, and shake hands.

"There is no means of avoiding the final collapse of a boom brought about by credit expansion." —Ludwig von Mises

Amid all 2020’s new problems, it’s easy to overlook the old ones. Yet they are still there and, like a silently spreading virus, silently getting worse.

When Cornwallis surrendered to George Washington at Yorktown in 1781, tradition has it that the British band played an old English children’s folk tune, “The World Turned Upside Down.”

Simply discussing COVID-19 will undoubtedly make this letter controversial and, in some circles, political. That is not my intent. I truly believe that something affecting all of us so deeply should be kept in the scientific realm to the extent possible, not the political. Sadly, that is not the case today in many countries.

One little-noted aspect of central bank policy is how rarely “policy” happens. Officials at the Federal Reserve and elsewhere long ago learned how to achieve their goals without actually doing anything. Creating perceptions is often enough to modify people’s behavior.

If you ever think you just can’t win, I know how you feel. I’m labeled both a doomsayer and a Pollyanna—sometimes in reaction to the same letter.

I write this introduction from an all-too-short vacation in Montana (more below). This week I have asked my longtime associate Patrick Watson to step in and write Thoughts from the Frontline, offering his perspective as a small business owner.

"It's a recession when your neighbor loses his job; it's a depression when you lose yours." —Harry S. Truman, 33rd US President

As I file this letter Friday morning, people are reacting to the July jobs report. My own reaction: The headline report is absurd. I will explain further at the end of this letter. But first, I have another topic.

One of COVID-19’s many less-than-obvious consequences is the way it makes us look inward. Facing mortality has always done that, of course. West Texas Judge Roy Bean reportedly said, “Nothing focuses the mind like a good hanging.” For the vulnerable and those of us of a certain age (ahem), this virus goes beyond the normal daily risks.

    “In the short run, the market is a voting machine but in the long run, it is a weighing machine.”             —Benjamin Graham