Author: John King, Quacera
Covestor model: QPM Radar
It has been demonstrated that when placed into a pot water that is slowly heated, a frog can adjust its body temperature such that even if the water reaches boiling, the creature will not recognize it and will die rather than hop out. We are not sure that all frogs would fail to remove themselves, but as this Youtube video demonstrates, a biological process makes the frog impervious to ever increasing heat.
We believe investing and even non-investing voters are being gradually and systematically anesthetized to the risks and consequences of Fed and Treasury policies. Beginning with the inflation and stagflation of the 1970s, these well intentioned plans for income redistribution and economic control have given us failed wage and price controls, inflation in the teens followed by huge increases in interest rates, several major recessions, investment bubbles in commodities, stocks and real estate, collapsing S&Ls and major banks, auto company bailouts and not a few wars.
Each episode has reached a point where our salvation arrives in the form of some government intervention that includes de facto devaluation of the currency that lowers the value of labor and savings in the name of propping up the status quo. We have become used to it and as we all know, the more pain or inconvenience we suffer the more we ignore it and adjust our behavior to divert attention and assets in a positive direction.
We generally – most of us – understand the possible consequences, but the longer we go without having to deal with those, the less likely we think they will come about. Unfortunately, like the outcome for Mr. Frog, the water will boil and those who haven’t extricated themselves in time will suffer the same fate as previous generations who were anesthetized to the economic significance of government folly.
