As I predicted, the president lifted the funding ban on embryonic stem cells. First, though, please indulge a rant...
"It's not the lie. It's the coverup" is the old political adage.
Usually, in politics, it's much better to admit a mistake and move on. I wish to heaven we could learn that lesson in regard to economic downturns.
Downturns are not inevitable forces of nature. They are created, and usually by bad economic policies. This one is no exception.
Most of you have been Agora Financial readers for many years, so you knew this was coming. There is no question that Fed monetary policies, combined with congressional mandates that made easy mortgage loans a virtual entitlement, caused our current economic affliction. I suspect even the people behind these mistakes know this. There's darned little confession going on, though.
Instead, we're watching the financial equivalent of a coverup. The politicians who defended and promoted the practice of handing out and then bundling bad loans are blaming the financial institutions that did their bidding.
I'm not saying, by the way, that financial institutions are without blame. We know that because some resisted the lure of commissions that flowed like water from the affordable housing Ponzi scheme.
I've told you several times about Jeff Scott, the Austrian economist whose unwelcomed Jeremiah-like lamentations kept Wells Fargo from diving into the subprime river. W.F., as a result, is the healthiest bank in the country. My guess, by the way, is that Scott, like Jeremiah, will pay the price for having been right. You know the old saying about prophets in their own land.
Regardless, my point is that this recession was caused by meddling in the market. The solution to our current distress, therefore, would be to stop meddling.
Unfortunately, our government is in full coverup mode. Those responsible are not only pointing fingers elsewhere, they've increased the magnitude of their meddling. Now they are propping up institutions that made bad investments.
The term for these bad investments, in the jargon of Austrian economics, is "malinvestment." These mistakes take resources out of the self-perpetuating economy, slowing economic growth. When enough malinvestment is eliminated, our economy will grow again. This is a natural process that Austrian economist Joseph Schumpeter called "creative destruction."
Delaying that process will not help. The healthiest thing we could do now is to let institutions that mishandled resources fail. Most would be bought by better firms. Many individuals would need help during an intense period of creative destruction, and we should probably give it. The bankers who did the bidding of Congress, however, could sell their Manhattan townhouses and weather the storm well.
On the stem cell front, at least, there's really good news. Transformational technologies will always overcome downturns in the long run. Some countercyclicals will even do well during a downturn. Once again, however, the media are getting the stem cell story wrong. This change will have little impact on companies working on SC therapies. As I've said many times, the ability to create induced pluripotent stem (iPS) cells from adult cells has changed everything. The use of embryonic cells in future therapies is now unnecessary, if not foolish.
This is not to say, though, that lifting the ban on the use of federal funding will not produce winners. The reason is that stem cells have important uses beyond therapies that were stifled by the funding ban.
Theoretically, it was possible to privately fund research on unapproved eSC lines under the Bush ban. To do so, though, researchers would have had to cut themselves off from any other work involving federal grant monies. In most cases, disconnecting from the intricate network of federally funded research was a practical impossibility. You would be hard pressed to find a university or big pharmaceutical company that does not accept government grants in some form. The impact of the ban was, therefore, enormous.
The field of research that suffered most was genetic disease drug discovery. Specifically, it was research aimed at finding cures for the inherited genetic diseases that afflict millions of Americans alone. What scientists have long wanted is access to stem cells that carry the diseases they want to treat. With an unlimited number of disease-carrying cells, potential treatments could be tested and analyzed with far greater efficiency.
It is ironic, by the way, that the availability of these cells will actually lead to fewer abortions. Researchers will use stem cells carrying cystic fibrosis, breast cancer, muscular dystrophy and other diseases to produce effective therapies for those conditions. This means that parents who carry those genes will be less likely to screen and reject embryos that have those DNA markers. Obviously, those therapies are also going to make smart investors fortunes. And they will deserve them.
Now, let's move to the thorium front…
The Thorium Energy Independence and Security Act of 2008 is sponsored by Senate Majority Leader Harry Reid and Republican Sen. Orrin Hatch, and is designed in large part to produce an alternative solution to the problem of nuclear wastes. Thorium reactor technologies fit that bill for two reasons. Not only do they produce fewer byproducts, they can be used to burn the wastes produced by other nuclear technologies.
A couple of weeks ago, President Obama dramatically moved the thorium industry forward. He announced that he would kill the Yucca Mountain nuclear waste depository project. This is despite the $9 billion already spent on the project.
Reid, of course, is bragging about his role in the decision. So where does this leave us? The Yucca Mountain project, located in Reid's home state of Nevada, was considered critical to the future of nuclear power generation in America. Since Obama, Reid and Pelosi all promote nuclear power, this significantly increases the likelihood that thorium reactor technologies will be fast-tracked.
A lot of Shooters are outraged that we would suggest profiting on science that cannibalizes very young and tiny humans…
"This bill is going to kill human beings not yet allowed to be born. I don't think it is right to kill one human to maybe cure another. Why not human adult stem cells, they have already show signs of working? I don't want to make money off of the unborn human being."
Another reader agrees…and says good-bye: "I can not be a part of any group of persons that advocates murder as a way to make money. The lack of your morals is the straw that breaks the bank."
Good news! We weren't advocating infanticide. Just listen here to get the details.
"What you call a key move including modern science with health innovation is the single biggest mistake President Obama has made thus far. He is choosing to sacrifice young lives for science, if that is the case than perhaps we should absolve the Nazis of what they were attempting to do during the war because it is the exact same thing."
Again, I direct you to take a listen here…and to tune in tomorrow…
It seems I'm forced again to address an issue I thought I'd put to bed…
"When I subscribed to W&G I could count on reading information about how best to invest money…I am tired of all this he-said, she-said political bullshit…Obama this-liberal-that, conservative-this ― on and on ad nauseam. History will deal the facts. Gold now is a far better issue from Agora Financial…or is your parent establishment just a damn farm club for Fox News commentator wannabes??? Now rear back and shoot that…or lose me and many others like me."
Once more: Free e-letter…called "Whiskey & Gunpowder" in homage to a tax revolt and attempted regicide.
I don't know how to make it any clearer. Your Whiskey Room editors believe firmly that the little conversations we have with you each business day will help you make sound financial decisions. Plus we really like your company.
But this isn't just "Gold and Commodities"; it's a consideration if history and human nature, a longing for liberty, a healthy mistrust of the state and a good dose or moral philosophy…and investment without a good dose of moral philosophy is what MSNBC is for. So you could tune in there…or you could take our suggestion and click here.
Another reader, however, points out: "You seem excited about Obama allowing federal funding for stem cell research. I thought the Whiskey Room wouldn't be happy about any sort of government interference."
And you would be right. But this science is going forward (without butchering little babies) and part of our mission here is to help you all navigate the investment world while keeping an eye on what the state is up to.
In a perfect world, President Obama wouldn't be interfering with anything (because there would be a President Paul instead), but President Obama's recent actions are going to make investors in certain biotech companies very wealthy. For more details, click here.
And here's a pointed observation about yesterday's Whiskey…
"Financial newsletters of late are beginning to play what I will term the 'Karl Marx or socialism card' in much the same manner that the Hitler Card is often employed in debates across a variety of subjects. When used it can be taken as a sign that one has lost the debate.
"In almost every heated debate, one side or the other ― often both ― plays the 'Hitler card', that is, criticizes their opponent's position by associating it in some way with Adolf Hitler or the Nazis in general. This move is so common that it led Mike Godwin to develop the well-known 'Godwin's Law of Nazi Analogies': 'As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches one.'
"Why raise the specter of Marx to demonize policies of the current administration that you disagree with as did David Galland in a recent Whiskey and Gunpowder rant? Should not well stated argument and facts sufffice? Anything else drifts eventually into hyperbole and weakens one's arguments."
"A Karl Marx or socialism card"? Well, Shooter, if the shoe fits…
I'm sure Mr. Godwin has a point. Let people argue long enough and they eventually just start calling each other idiots and devils…and the most vivid examples of idiotic devilry are national socialists and communists.
But communists and national socialists are just different flavors of statists, of people who believe that mobs and the narcissists they elect and the armed thugs they in turn empower possess a magical wisdom and benevolence…that the needs of both society and the individual can best be met by coercion and collectivism.
If you long to hand over sovereignty, the fruits of your labor and your arms to a bunch of greedy strangers in nice suits, then you are a statist. Sorry if that sounds like name-calling…but if it looks like a statist and talks like a statist…
If it makes you feel any better, when we cry "statist" or "Nazi" or "commie," feel free to call us a bunch of gun-loving anarchists and irrationally pessimistic gold bugs. We promise we won't mind.
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