You Didn't Build That

Posted On Jul 18, 2012 By Dave Gonigam

Dave Gonigam – July 18, 2012

  • “Absolutely chilling”: Jeffrey Tucker on why the president’s “you didn’t build that” speech is even worse in context
  • “Not following the same rules”: President tries to backtrack, but the headlines betray two sets of rules… and the ones that apply to you are much tougher…
  • Happy housing numbers: Doug French on why home builders are being led down the primrose path
  • A headache-inducing rally… Readers relate their experiences signing up for the Hard Assets Alliance… An announcement years in the making… and more!

   “Surely, I thought his words were being taken out of context,” said Laissez Faire Books executive editor Jeffrey Tucker.

Mr. Tucker takes part in a morning conference call with us via Skype. We were discussing the president’s now-infamous words: “If you’ve got a business — you didn’t build that. Somebody else made that happen.”

So Jeffrey sought out the text of the speech.

“You know what?” he said. “It is far worse in context. If an American president has ever before said something so insulting and disparaging toward an essential American idea (free enterprise), I’ve not heard it. It’s an absolutely chilling speech.”

“No matter what you have done in life, the president thinks the government should get the credit. And why? Because the government built the Hoover Dam (in 1935!), the Golden Gate Bridge (in 1937, built and funded by private funds!), went to the moon (43 years ago!) and invented the Internet (it was privatized in 1995, and only then became mainstream!).”

“To say the government is the source of prosperity is like saying that the ticks are keeping the dog alive.”

   The president delivered his speech last weekend in Roanoke, Va. Aside from the political tempest it set off, it has also inspired an Internet meme.

At the website, you find brilliant and devastating takes like this:

… and this editor’s personal favorite:

   About one of the alleged accomplishments the president cited, the Hoover Dam “provided a few thousand jobs 80 years ago, but has spurred migration, farming and development that is likely unsustainable,” says Laissez Faire Books senior editor Doug French.

“The dam’s water promise gunned the growth of Southern California cities and attracted farmers to the West to grow water-intensive crops like cotton, despite the lack of normal rainfall required to support this kind of agriculture,” Mr. French writes in a can’t-miss essay at Laissez Faire Today.

Longtime readers of The 5 know well about the chronically low levels at Lake Mead, which carries the Herculean task of supplying water for more than 8 million people in Las Vegas, Los Angeles and San Diego.

“Now that millions have migrated to the Southwest and private industry has invested millions of dollars,” writes Mr. French, “Hoover’s and FDR’s promises have confined those living and doing business in the West ‘in the straitjacket of an ever-intensifying water shortage,’” to draw on the words of author Michael Hiltzik.

Heckuva job, Herbie…

   To be sure, the president knows he stepped in it. So in the parlance of our times, inflicted on us by Beltway journalists, he’s “walked back” his remarks.

“God bless folks who are doing successful — who are successful and doing well,” he said at a rally in Cincinnati. “ The only thing that Michelle’s parents, my mom, my grandparents, the only thing they didn’t like is when you felt like folks at the top were taking advantage of their position and not following the same rules as everybody else and keeping other folks down.”

   You mean, Mr. President, like HSBC?

A Senate subcommittee has found that Europe’s biggest bank “enabled drug lords to launder money in Mexico, did business with firms linked to terrorism and concealed transactions that bypassed U.S. sanctions against Iran,” as a Bloomberg story put it.

“HSBC’s Mexican bank shipped $7 billion in bulk cash to the firm’s U.S. bank in 2007 and 2008,” the story goes on. “That was more than all HSBC affiliates and other banks in Mexico.”

Washington is suitably scandalized. Senators are tut-tutting. But we can forecast the outcome now: A slap-on-the-wrist fine that will amount to a fraction of HSBC’s market cap, which the execs can chalk up to the cost of doing business.

There’s precedent: Before Wachovia succumbed to the 2008 crisis, it laundered money for Mexican drug gangs — channeling $378 billion through Mexican currency exchanges. Of that total, $4.7 was in bulk cash. Wachovia’s new parent, Wells Fargo, settled the case for $160 million in fines and penalties.

   Meanwhile, if you carry bulk cash, you run a significant risk it will all be confiscated, thanks to “civil forfeiture” laws.

“Unlike criminal forfeiture, in which property is taken after its owner has been found guilty in a court of law,” explains the Institute for Justice, “with civil forfeiture, owners need not be charged with or convicted of a crime to lose homes, cars, cash or other property.”

Thus did New Jersey resident George Reby nearly lose $20,000, with which he planned to buy a car. He was stopped for speeding along Interstate 40 near Nashville. Reby foolishly consented to a search, whereupon Officer Larry Bates of the Monterey, Tenn., police confiscated the cash on the theory it might have been drug money.

“Why didn’t you arrest him?” a reporter from WTVF-TV asked Bates.

“Because he hadn’t committed a criminal law,” he answered.

“But it’s not illegal to carry cash,” said the reporter.

“No, it’s not illegal to carry cash,” Bates said. “Again, it’s what the cash is being used for to facilitate or what it is being utilized for.”

The burden of proof was on Mr. Reby to demonstrate he obtained the cash legally. He managed to get his money back… but only after four months, and only after the TV station started looking into the case. And he had to come back from New Jersey at his own expense to claim it.

   “If you listen to what the president said,” Jeffrey Tucker goes on, “he can’t conceive of cooperative human relations apart from ridiculous government projects.”

“What about the business firm? Here we have a beautiful example of cooperative action. And no business can get anywhere in a market economy without the cooperation of consumers. As for entrepreneurs themselves, there is no class of people with a broader gaze on the public interest. They are hungry for information about what people want. They are the ultimate servants of the people, extracting all the information they can get and acting on it in service of their fellow human beings.”

“The whole world as we know it is built by human hands operating in a market, working together, yet this guy can’t see it.”

[Ed. note: There’s an insight about the president’s speech you won’t read at partisan political sites like RedState or The Daily Caller. But insights like these come in torrents to members of the Laissez Faire Club, with the able guidance of Mr. Tucker and Mr. French.

Every new Club member gets bound copies of a four-volume set we’ve come to call “Economics in One Library”:

  • Frederic Bastiat’s The Law
  • Garet Garrett’s A Bubble That Broke the World
  • Henry Hazlitt’s Economics in One Lesson
  • Friedrich Hayek’s A Tiger by the Tail.

Every Friday, members receive a new e-book. This week, it’s a Laissez Faire exclusive: Wendy McElroy’s new release, The Art of Being Free. Of course, access to the archive of previously released e-books is also part of the package. For a full rundown of membership benefits, follow this link.]

   Stocks are rallying modestly today. The S&P pushed past 1,370 when Fed chief Ben Bernanke told Congress he doesn’t expect a double-dip recession.

Huh? Only yesterday did the market tank, however briefly, because Bernanke refused to drop any hints about QE3. Now we have a rally because he said, in so many words, that QE3 isn’t necessary?

[Reaching for an Advil. OK, moving on…]

   Helping along the rally today: A silly good number on housing starts from the Commerce Department.

After a 4.8% drop in May, June brought a 6.9% increase to the highest level since October 2008. The year-over-year rise works out to 23.6%.

What gives, when unemployment remains stuck at 8.2% and 15% of Americans are on food stamps? “The simple answer,” writes a prolific Doug French this morning, “is that there is a lack of home inventory for buyers looking to take advantage of historically low mortgage rates.

“Millions of homeowners who would love to sell are not because their lender will not approve a short sale. Many of these same millions are not making payments and essentially squatting in these homes, and have been for the last two-three years.”

Then there’s the hangover from the “fraudclosure” scandal: “As mortgages were sliced, diced and bundled into securities for Wall Street to sell during the boom, the traditional mortgage assignment paper-and-ink trail was scrapped for an electronic version through MERS (Mortgage Electronic Registration Systems). This was all well and good when most were making their payments and housing prices were still believed to never decline. In the aftermath of the housing crash, judges like to see actual documented proof that the entity foreclosing actually owns the mortgage. And robo-signed versions will not do, either.”

“Hopeful home builders,” concludes Mr. French, “are reading distorted economic tea leaves through rose-colored glasses.”

Doug, by the way, will be a first-time participant in the Whiskey Bar — the “no holds barred” round table that’s an annual hit at the Agora Financial Investment Symposium. There’s serious potential for a knockdown drag-out fight over the housing market’s prospects, only one week from tonight. Whiskey Bar veterans Barry Ritholtz and Doug Casey will also take part.

We’re pleased to announce the recordings of this year’s Symposium are now available for presale. In years past, the audio CDs and MP3s have flown out the door. This year, we’re adding a new component to the package. Details here. Please note: By signing up now, you lock in the best available price.

   Gold is getting its bearings after getting knocked down a bit yesterday. At last check, the spot price was $1580. Silver’s down to $27.25.

   “It took less than five minutes to open an account,” writes a reader relating his experience signing up for the Hard Assets Alliance — the new and simple way to buy, store, sell or take delivery of precious metals.

“I simply had to enter in my address and a few personal pieces of information. After that, I accepted the terms and conditions. Hard Assets Alliance sent me an email less than 10 minutes later announcing that my account was created and ready for funding. I’m in the process of funding.”

“It couldn’t have been easier.”

The 5: Thanks for sharing your experiences. We’re pleased to know the sign-up process is as easy as it looks. And the interface on the website is super simple too. Commissions and storage fees, you wonder? Very reasonable.

The Hard Assets Alliance is now up and running. If you missed the announcement on Monday, all the details and a comprehensive FAQ are at this link.

   “Looks as if,” says a reader who caught our item about melting Canadian bank notes, “our neighbors have found a way to beat the U.S. at shrinking the actual dollar, rather than just the value like Big Ben.”

The 5: The new bills have been issued in C$20 denominations… which means a lot of them are going to be left in pockets and go through the laundry. Will they hold up to a dryer’s high-heat setting?


Dave Gonigam
The 5 Min. Forecast

P.S. “In some sense, of course, everything we do is dependent on the foundation built by those who came before us,” writes Breakthrough Technology Alert’s Patrick Cox with his own thoughts about the you-didn’t-build-that speech.

“We also depend on those around us at times. The inference that the president makes, that successful people therefore owe more in taxes, is troubling.”

“Successful businesses have been built all over the world, often in locations where government is synonymous with organized crime. Government in America today is far more of an impedance than it is a benefit to startups, especially in the medical fields. Moreover, the difficult business conditions startups are enduring were caused the failure of politicians and government to deal with the debt crisis — which we’ve all known was coming for decades. Still, the current administration’s solution is to give more control to a bloated, overpaid government sector and take even more resources from the struggling private sector.”

“We’ve seen this philosophy implemented more fully in the states of Illinois, California, New York, as well as the countries of Greece and Portugal. It doesn’t work. It never has. We are in the process now of returning power and resources to individuals and businesses, but the Mandarin classes will fight every step of the way. Since they are, in the main, incapable of creating successful businesses, it’s not surprising. They will, however, lose.”

Patrick is one of the most eagerly awaited speakers every year at the Agora Financial Investment Symposium. If you can’t make it, there’s always the next best thing — high-quality recordings of the event, made available as little as a week after the close of the conference.

This year, we’re doing something different, in response to popular demand. Check it out here.

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