(Interviewed by Louis James, International Speculator)
L: Doug, you wrote in an email that you’ve been shaking your head over the latest antics of Supreme Court nomination and appointment. Care to tell us why?
Doug: Well, the whole thing is a pointless circus. The whole uproar over the “wise Latina” remark is irrelevant, and all the hours of intense scrutiny people are devoting to examining the alleged thoughts of Sotomayor are a waste of time. It serves absolutely no useful purpose whatsoever.
L: None whatsoever? Wouldn’t it matter if a justice got in who might be more harmful than another to the economy or civil liberties?
Doug: No, not at all. The kind of justice who might do some good could never make it through our highly politicized appointment process, so it’s a choice between Tweedle Dumb and Tweedle Dumber. It just doesn’t matter. But, for what it’s worth, Sotomayor seems to have all the wrong instincts.
Besides, the Supreme Court has drifted so far from what it’s supposed to do that the court itself doesn’t matter.
The Supreme Court has a very simple mission; it’s supposed to safeguard the Constitution. The U.S. Constitution and its first ten amendments (the Bill of Rights) were adopted and ratified simultaneously. Though imperfect, it’s actually a pretty clear and easy-to-understand document. All a Supreme Court justice should have to do is read the Constitution to see if the law in question is constitutional, in other words, falls within the authority spelled out in the Constitution. It’s that simple, and it doesn’t take a lawyer – in fact, a lawyer’s training, with all its emphasis on precedent and interpretation, is the exact opposite of what you want in a Supreme Court justice.
So the weight of precedent and so-called law that has built up over the years is basically junk. Most decisions reflect not what the Constitution says, or even what’s equitable, but the political views of the judges – who are all political appointees.
The vast majority of the Supreme Court’s precedent should be scrapped. They should start from scratch, and with a copy of the Constitution in hand, and strike down any law that the Constitution does not specifically authorize. Article One, Section 8, makes it absolutely clear that any powers not given to the government in the Constitution are reserved to the states and to the people. Amendments 9 and 10 of the Bill of Rights reinforce that. But they’re completely disregarded, like everything else in that document, which was made to shield the individual against the state.
L: That would eliminate most of the federal government – the SEC, the FDA, HEW, HUD, DOA, DOT, IRS, BATF, FBI, CIA, and who knows how many other agencies – leaving little besides the military and the post office.
Doug: Yes, and I would go further and say that it’s not just the Supreme Court but the entire U.S. government that no longer serves any useful purpose.
Although the U.S. Constitution is perhaps the best in the world, because a) it’s very brief, and b) other than spelling out some technicalities like the number of senators per state, or that the president must be born in the U.S., it mostly describes what the government can’t do, not what it can – and certainly not what it should. But it’s not perfect by any means.
Why, for instance, does it designate the Post Office as a function of government? In point of fact, anything that needs doing in a free society will be done by entrepreneurs, for a profit. If nobody can make a profit doing something, it’s proof the good or service isn’t wanted or needed.
The minimalist government described in the Constitution would be a vast improvement over the one we have now, which is completely counterproductive. It does the exact opposite of what is needed economically and meddles all over the world creating enemies we wouldn’t otherwise have.
But getting back to the law, the state of the law in the U.S. is ridiculous in the extreme. We have so many laws and regulations implementing them, their volumes fill entire libraries. Nobody can even read the amount churned out every day, let alone what’s been accumulated at an accelerating pace over the years. Forget about understanding the law thoroughly and being able to administer it with justice. The whole system is a farce. The saying “Ignorance of the law is no excuse” is fatuous in today’s world.
And that’s only on a practical level. More fundamentally, one must ask: What is justice?
I’ve always liked to think about it as getting what you deserve. And what do you deserve? Only what you’ve earned. All these people who think they deserve free health care, or a job, or a plasma screen TV, simply because they radiate heat at 98.6 degrees, or because they were born in a certain place, or because they have a certain skin color – it’s all bunk. There’s no such thing as a “just” wage. There’s only what you earn.
L: I agree with you about the entitlement mentality, of course, but that’s not really a matter of justice, it’s just another politically created cancer eating out the heart of what was once the most creative and prosperous society on earth. On the other hand, your idea of relating justice to earnings is new to me – and it maps very well, because, for a company, earnings can be negative. So, if you do something wrong in life, that is to say, you aggress upon others and harm them or their property, you owe them some sort of restitution in order to set things right again (or as right as can be). So, as an individual, you can deserve to pay for your crimes – it’s a negative earning on your personal income statement.
Doug: Right. Yes. Putting someone in prison does nothing to make the victim whole. Most people are in prison for victimless crimes anyway. And what happens if a company really screws up? It goes bankrupt.
L: And can ultimately be liquidated… which is what happens to people who do too much harm to others. Or it’s what should happen, in a just society.
Doug: Yes, exactly. Listen, all of this is much simpler than people make it out to be. All you really need to know about justice, you learned in kindergarten: Keep your hands to yourself and keep your promises. Those are the only two laws we really need in society: Don’t harm other people or their property, and do what you say you’re going to do.
But perhaps it’s possible to simplify things even further. Following the example of physicists, who are always trying to simplify their laws and boil them down to fewer, more all-encompassing principles, I’ve simplified these two basic laws that make profitable social interaction possible, into one. The whole of the law should be:
That’s all you really need to understand. Everyone, even a child or a dog, can understand it.
So all this hoopla over Supreme Court nominations is all a fantastic waste of time. You’d be better off watching paint dry – who knows, you might think of some valuable new idea during that quiet time.
L: I won’t disagree. But this isn’t very encouraging to investors; you’re basically saying that the U.S. is hosed, and nothing and no one can save it.
Doug: Theoretically, yes, it can be saved. But practically… I’m saying that there’s no politically feasible way to appoint a Supreme Court that would put the U.S. back on a constitutional basis of operation. That would indeed be exactly what the economy needs; it would get the government completely out of the way, allowing the market to liquidate all the accumulated mistakes of decades of mismanagement, and thus clearing the way for solid, healthy, and even sustainable growth, to use a word that’s popular today. But that’s not going to happen.
The good news, however, is that the government creates an excellent environment for speculators. The whole Supreme Court side show tells me that the trends we’re betting on are solid. And that means that the kinds of investments we recommend in The Casey Report remain on track.
We’re expecting the actions of the U.S. and other government to be highly inflationary, but that won’t show up until after price destruction from the downturn slows. Bets on rising interest rates, a weakening U.S. dollar, etc. may stress our intestinal fortitude pretty severely in the short term. That makes the futility of expecting anything useful from the U.S. Supreme Court an encouraging sign; many will suffer as the economy worsens, but smart investors who identify the underlying causes correctly need not be among them.
L: So… are you an optimist or a pessimist?
Doug: I’m a pessimistic optimist, of course.
L: Okay then – thanks for your time.
Doug: Till next week.
Recognizing, analyzing, and betting on budding trends in the economy and markets is what The Casey Report does… and what has made its subscribers handsome returns in the past. For example, in 2007, way before “subprime meltdown” was a household term, we saw trouble brewing on the horizon. We advised our subscribers to short bond insurer MBIA, a company that seemed to stand squarely in the way of the avalanche thundering downhill – and we were right, bagging a total return of 1,166%.