Everyone uses the 'road'...

Everyone uses the 'road'... The most brilliant political speech in decades wasn't given by a politician... An invisible Mr. OBAMA!... Real democracy in Howard, Pennsylvania... Readers applaud last week's Digest (yes, really)... And an update on Mr. Peak Oil...

Nobody else could hear the person in the chair speaking...

In fact, nobody else in the entire auditorium saw President OBAMA! sitting in the chair next to Clint Eastwood. But that didn't matter. Americans love Eastwood for many of the same reasons they loved Ronald Reagan…

Like Reagan, Eastwood was a handsome film star. He played many heroic roles. Like Reagan, Eastwood has "common sense" political ideas, which are deeply skeptical of the government and don't fit neatly into either political party.

But even more so than Reagan… in real life, Eastwood lived the tough image he portrayed in films. He is a fiercely independent, iconoclastic, self-made man... whose passion for women made his life pretty complicated. He has seven children from five different women. In an era of mostly anodyne male stars (many of whom are secretly gay) playing effeminate roles, Eastwood doesn't merely represent traditional masculinity... he is more like the last living cowboy.

America loves cowboys, despite their obvious flaws and contradictions. So if Eastwood said OBAMA! was sitting next to him, telling him to "shut up" and do things that are "physically impossible," who was going to argue with him? Not me. And not anyone else in the room, either.

Eastwood's speech at the Republican National Convention – which the actor said was completely extemporaneous – was rambling and filled with simple (but brilliant) observations. Eastwood understands how the vast majority of Americans relate to the mass media and the core political issues of today…

Most of us don't take the media seriously. Most of us don't want Washington telling us what to do or how to raise our kids. Most of us don't want political leaders (especially those who have never served in the military) sending our kids to foreign lands on endless "nation building" exercises. Most of us think Washington has lost its mind when it comes to fiscal matters. The government spends far too much money, and too many Americans get a free ride. Polls find vast agreement with these common sentiments... and yet... none of these concerns are addressed in the Republican platform.

"Oprah was crying," Eastwood said in a line that made the entire audience laugh. He was mocking the most iconic figure of the mainstream media, a woman who became rich and famous by pandering to the public, kissing up to anyone she perceived as powerful, and using her popularity to push the Democratic agenda.

Regarding our decade-long occupation of Afghanistan, Eastwood quipped: "We didn't check with the Russians to see how they did there for 10 years." Then he asked OBAMA!, "Why don't you just bring the troops home tomorrow morning?"

Just about every American I've spoken with has asked the same questions about our troops' continuing mission in Afghanistan. But again, you won't find this issue on the Republican platform.

Eastwood even mocked Air Force 1 – the leading symbol of the president's power. He told OBAMA! he could still use the plane if he'd simply step aside in favor of Romney… "Although maybe a smaller one. Not that big gas-guzzler you're driving when you're going around to colleges talking about student loans... No, I can't do that to myself, either."

The best line of the speech, and the only truly important thing Eastwood said, came at the end: "We own this country... Politicians are employees of ours. They're just going to come around and beg for votes every few years... It's the same old deal."

This sentiment – that the folks in Washington aren't nearly as important as they believe – was sure to set off the "chattering" class. And it did. The mainstream media pilloried Eastwood…

Andrea Mitchell – a longtime fixture at NBC News and the wife of former Fed Chairman Alan Greenspan – reacted as though she hadn't understood a word Eastwood said. "This was exceedingly strange... It just seemed like a very strange, unscripted moment," she said.

MSNBC talk-show host Rachel Maddow called it "the weirdest thing I've ever seen at a political convention in my entire life."

That's right. Eastwood's speech wasn't comically scripted. It didn't push an agenda designed to satisfy corporate backers and other special interests. It wasn't written by an overeducated, Ivy League speechwriter. It wasn't vetted by seven different planning committees. And it couldn't have doubled for a May Day speech at the Kremlin.

Eastwood's speech was plain, simple, American wisdom about the way our country would be run if it were actually run for the benefit of its owners.

The day after Eastwood's speech, I participated in a bit of real democracy, not the phony kind promoted by Washington D.C. and most of our state capitals. Real democracy is how private companies and private communities are run. Real democracy is a meeting between owners.

In this case, it was the annual meeting of a mountain community outside of Howard, Pennsylvania. I own a cabin there and a small bit of land. My place sits at the very end of the road, perched up on a hill, overlooking about 40 miles of valleys and Mt. Nittany.

A good percentage of my neighbors don't have running water in their cabins. A fair number of my neighbors don't have all their teeth... and seem to be in danger of losing more. I'd estimate roughly half suffer from weight-related diabetes. Alcoholism seems prevalent, too. None of these problems are any of my business, however, and none of my neighbors brings them up.

In fact, the community only owns one thing in common – the dirt road leading up the mountain. Each of the 40 or so lot owners must pay $50 a year to maintain the road. A few of our neighbors were refusing to pay. Thus, the main item on the agenda was whether or not to move forward with legal efforts to collect these back dues. That would require a change to the bylaws of the community… and three-fourths of the landowners present at the meeting had to agree to the change.

The process took about an hour because most people wanted to voice an opinion on the condition of the road, on the quality of the shale we're using to improve it, and so on. There was one "mountain lawyer" present – a lot owner who seems to spend all his time studying the community association's bylaws and had an opinion on every possible interpretation of what they meant.

Finally... we voted. It was unanimous. Maintaining the road wasn't free. Every lot owner should pay his fair share of the costs. It was that simple. And to mountain folks, you do what's right, even when it's not convenient.

Despite our varied backgrounds, despite the large disparities between our cabins, despite our differences in education, income, and wealth... we all use the road. The costs, therefore, ought to be divided evenly. As the mountain lawyer finally concluded: "If you don't want to help pay for the road, don't live here."

No one argued that I ought to pay more because I am wealthier than my neighbors. I'm fairly certain if anyone had expressed this idea, the meeting would have gotten very heated. My neighbors don't like anything that sounds like socialism. And they are well-armed.

Obviously, things work differently in Washington and our state capitals. Back in 1913, the idea that rich people ought to pay for the government (via progressive income taxes) came into vogue. Its popularity isn't hard to understand. Many people love the idea of a free ride.

Unfortunately, whether these policies seem to benefit you right now, they do have an important side effect in democracies. Over the long run, these "free ride" policies cause governments to become too big, too powerful, and too indebted. The majority believes it will always be able to make the minority pay all the costs of government – so it grows and grows.

No matter who is paying what, the costs are, sooner or later, carried by the economy as a whole… The costs are passed on. Prices are raised. Salaries are increased. Benefits are taken away. There's no real free lunch, as everyone ought to know. Perhaps that's why our founding fathers had the good sense to make income taxes unconstitutional. Maybe we ought to consult that original document again... We might learn something important.

Today, our country seems on the verge of some kind of radical change. Whether that's a restoration of our traditional principles or a revolution that furthers the agenda of the socialists remains to be seen. I think Eastwood's speech makes this huge divide in our culture plain to see: Most of the people in America loved it. Most of our leaders hated it. Which direction are we more likely to follow? I truly don't know.

On the other hand, a few things about our future are very clear. As my colleague Jeff Clark pointed out in a recent Growth Stock Wire essay, the federal government is now spending $12,000 per person each year. Thus, to govern a family of four in the U.S. now costs $48,000 a year. Obviously, the overwhelming majority of families in the U.S. can't afford to pay this kind of bill for governance. They can't afford this "road." So to pay for this enormous burden, we're attempting to tax the incomes of about 10% of the population.

This has proven unworkable (big surprise). So now we're borrowing more than $0.40 of every dollar we spend. How long can this go on? Remember, eventually, all these costs must be paid by our economy.

What Clint Eastwood seems to understand (although he didn't say this directly) – and what my neighbors on the mountain absolutely understand – is that we all bear the costs of government. Even if you're not paying much in the way of income tax, the enormous burden of government is squeezing the life out of our economy and greatly reducing the opportunities that are affordable to everyone. Like it or not, in some way, these costs will be passed along to everyone. Everyone uses the road.

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In the mailbag... some very hearty (and rare) praise for last Friday's Digest about the actual source of material abundance. I appreciated the notes of support many of you sent. And... for the one subscriber who brought up Byron King's backpedaling on "Peak Oil," I offer a brief review of Mr. Peak Oil's career and character.

Please... if you saw Eastwood's speech and you were impressed by how much the media and politicians hated it, let me know. I think that speech might be seen, in the future, as a turning point for our country. Send your notes to feedback@stansberryresearch.com.

"Way back in 1981, the best course that I took at the University of Illinois was taught by Julian Simon. He wrote the book, 'The Ultimate Resource,' which he identified as human ingenuity and free market pricing. Simon looked at resource pricing and availability over the last couple centuries. As wealth, usage, and demand grew for a resource, counterintuitively, the known reserves grew. He took the 'ultimately' unconventional view that population growth and free markets were the solution to scarcity.

"Our research assignment was to pick a natural resource, and go back in 10-year increments to see what was being published on that resource as the established 'truth' regarding its scarcity or abundance. I chose oil. In looking back over time at the media and published research, it consistently found that the earth was regularly running out of oil, by examining the current known reserves and consumption rate.

"Of course, 'known reserves' are a function of the price of the resource and current demand. Known reserves require investment and development. If the demand is not there, investment will not be made in development to make reserves available. Hence the counterintuitive result that as demand rises, reserves will rise. And increased prices increase the technologies that are economically feasible to be employed. But to me, the most significant part of Mr. Simon's book and class was that human ingenuity, if energized by market forces, will innovate and effectively make a resource inexhaustible. I've been grateful for being exposed to the ideas of Julian Simon, and I love seeing similar ideas in your newsletter. Keep up the good work." – Paid-up subscriber Tom Bartel

Porter comment: As I'm sure you could tell from my writing, I'm familiar with Julian Simon's work. I always chuckle at the numbskulls who talk about "sustainable" farming or a "sustainable" economy. They simply don't understand that humans, and human ingenuity, are the actual source of all sustainability.

Porter comment: On Monday, subscriber Scott Marshall mentioned the "Peak Oil" commentary of writer Byron King. I look forward to Byron's continual backpedaling. For decades, Byron proclaimed himself "Mr. Peak Oil," much to the comic relief of the staff at Stansberry Research.

"I have been a 'Peak Oil guy' for something like 30 years, starting with meeting the legendary 'father of Peak Oil,' M. King Hubbert, when he gave a rather poorly attended talk at Harvard back in 1977," Byron once claimed in an essay. He went on to say that nothing, absolutely nothing, could possibly change in the oil business over the next decade and, as a result, we were going to run out of oil…

If you want a good chuckle, you can read the whole thing here…

Not to be argumentative, but judging by his latest promotional letter, "Mr. Peak Oil for thirty years" is now Mr. Shale Oil Boom. Not only does his latest promotion not mention Peak Oil... he says the abundance of oil we now have means that America is going to boom! (If his ideas sound familiar... they are.)

I invited him to speak at our upcoming Alliance Conference. I told him I'd pay all of his expenses to attend... as long as he promised to update our audience on his dire predictions of the last 30 years. So far, he hasn't responded.

Regards,

Porter Stansberry

Baltimore, Maryland

September 7, 2012