02/16/09 Los Perros de San Jose, Nicaragua Remember our dictum: the force of a correction is equal and opposite to the deception that preceded it. As we looked out over the absurd hallucinations, delusions and lies of the Bubble Years – oh, those happy days! – we warned that the coming correction “would be a doozy.”
And a doozy it is.
‘Doozy’ is a technical term we feral economists use. “Depression” is what most people call it.
“Slump worst for 50 years,” is the big headline in the Financial Times over the weekend.
“Data reveal recession worst than feared.”
And the full weight of it has yet to fall upon the economy. A correction takes times…especially when it is not merely a cyclical recession, but a structural depression. The whole structure of the world’s economy is being reshaped. The banking system is insolvent. Thousands of businesses are broke. Millions of households are upside down financially. Joblessness is rising into the tens of millions and may reach 100 million worldwide.
“One of the severest downturns in generations,” said U.K. Chancellor Alistair Darling.
The downturn is going to be tough for almost everyone, almost everywhere. The French have to learn to live with fewer tourists at home and fewer bottles of champagne exported abroad. The English have to learn to with less revenue from financial services. The Chinese – and Asians generally – have to figure out what to do with all those TV sets that junk Americans aren’t buying anymore. Arabs wonder what to do with their oil.
Americans, meanwhile, have to figure out how to get by in a world where strangers aren’t so kind. You’ll remember what made the world go round this last quarter century. Those nice strangers made things and shipped them to Americans. The Americans paid for them with I.O.Us. The foreigners were so accommodating, they never asked for payment. Instead, the I.O.U.s just piled up in their vaults.
All that has come to an end. Trade is collapsing. And now it’s every man for himself. Sauve qui peut. Americans aren’t buying. Chinese aren’t selling. So far, the strangers are still being nice about America’s I.O.U.s. They’re politely holding onto their Treasury bonds and not insisting on payment. But they’ve made it clear that they’re not exactly looking for a lot more of them…not when the value of America’s collateral is falling so sharply. And they’ve made it clear that if the United States lets these I.O.U.s go down anymore, they won’t be very happy about it.
But what we’re wondering is whether we should add a corollary to our dictum: Yes, the force of a correction is equal and opposite to the deception that preceded it. And the measures taken to stop the correction will be just as absurd as the crackpot ideas that got the economy into trouble in the first place.
We don’t know what particular good this insight does for us. But it just shows that the show isn’t over. One hallucination may have run its course, but there are plenty more. And they have consequences too.
What the world waits to see is how long it takes these consequences to reveal themselves. No one doubts, broadly, what the consequences will be. Governments are doing their level best to create inflation. Sooner or later, they’ll get the hang of it. But when? How?
That’s the thing…no one knows. The depression is taking the stuffing out of prices. Trillions in nominal purchasing power have disappeared. Workers have been laid off by the millions. There are too many Starbucks…too many malls…too many factories. All these things are dragging down prices…even while the feds inflate the money supply. Where will the turnaround come? When will prices stop going down and begin going up?
No one knows…
*** We have come back to Nicaragua – for the first time in three years. It’s the kids’ winter vacation. But now, we only have one kid with us – Edward, 15 years old. All the others aren’t kids anymore. They’re away at college…or working.
Even Elizabeth is away at college. She is studying at the Sorbonne and can’t join us until next week. Until next week, it is just us…the sea…the sun…the tropics…and all that goes with it.
Right now, we are sitting on the veranda of the Rancho Santana clubhouse. The sun is bright and hot over the ocean…a sea breeze cools the air…the palm trees sway…the waves crash onto the shore, spinning the surfer’s head over heels.
Eat your hearts out, dear readers…
“What’s this?” Edward was pointing at a strange animal that looked like a giant cockroach.
“It’s a bug,” his father, the naturalist, answered.
Darwin seemed to have no natural enemies last week. It was the 200th anniversary of Darwin’s birth. His theory was blessed in every account we saw. Everyone was on his side. As a result his ideas reproduced and multiplied until they were in practically every newspaper.
Commentators saw Darwinism at work everywhere. In the current worldwide financial meltdown, for example, they thought they saw not the beneficent ‘invisible hand’ of Adam Smith, but the bloody claw of natural selection. “It’s the survival of the fittest at work,” said one opinionist.
Ideas, like rats, need predators. Otherwise, they get out of hand. Seeing none to cull the weak parts of Darwin’s pensee, we will do it ourselves.
There are two parts to Darwinism as it is popularly understood. One part is based on observation – at which Darwin was a master. The other is extrapolation – not so much on Darwin’s part, but his followers. The problem is that the part that is probably correct is child-like and obvious. And the part that is more grown up is nothing more than empty guesswork. He notes that some animals are better suited to their environments than others. If a polar bear were suddenly born to a hog here in Nicaragua, it probably wouldn’t last long. On the other hand, if a mutation produced a naked polar bear at the North Pole, it wouldn’t stand much of a chance either. Both would probably perish, leaving no heirs or assigns…and thus removing from the gene pool whatever crazy aberration that created them. Some things survive and reproduce; some don’t. The essence of Darwinism is nothing more than that simple-minded observation, as near as we can tell.
But the application of this notion far and wide is a threat to the intellectual eco-system. Because of it, people think they know a lot more than they actually know. To the question, why is the polar bear white, rather than black, they have a ready answer: because evolution made him white. But this is no answer at all…it just postpones thinking until the next question: why did evolution make him that way?
Then, the guesses begin: because he can blend into the snowy background and sneak up on seals. Oh. They tell us, for example, that he covers his nose – which is black – with his paw, so he can get closer without being spotted.
Smart bear. But you’d think if evolution could turn his whole body black it could whitewash his nose too. And what about the seals? Are they morons? You’d think those that couldn’t tell the difference between a bear with his paw over his nose and an iceberg would have been weeded out by now. Besides, why aren’t seals white?
Of course, the biologists and know-it-alls have their answers, but they are just putting 2 and 2 together in the clumsiest way. They really don’t know why polar bears are white. All they know is that nature hasn’t exterminated the white polar bears – yet.
Many of these deep thinkers also believe that Darwin proved that God didn’t create man. Instead, man arose by the process of evolution, they say, one accidental step at a time. Man is the product of pure chance, they claim. As if God couldn’t make it look like an accident, if He wanted!
Enjoy your President’s Day,
Bill Bonner
The Daily Reckoning
Sign Up for The Daily Reckoning e-letter and receive a copy of Bill Bonner's The Trade of The Decade report… at NO CHARGE.
We Value Your Privacy.
Stick to financials, evolutionary biology is clearly not your forte. Polar bears appear white because the clear fur transmits heat to their body. It’s a heat thing, not a camouflage thing.
I think polar bear bankers are having a hard time covering there nose.
I enjoy your financial commentary, but your god is a deceptive jerk!
http://www.youtube.com/watch?v=U5WzBxCUIuY
Polar bears are black. They have black skin. The “white” fur is really clear hair that channels sunlight to the skin.
Bonner’s God is now in the process of totally destroying the United States, Canada, South Africa, England and Australia. One third of all peoples in those nations will starve to death or die from the Diseases that follow starvation.
Say Bye-Bye.
LOL! The person who commented at the top is one of the people the author is writing about.
His commentary on evolution is accurate. After all, evolution is more of a religion than a science, and not a very good one at that. Look at the evidence you say? I agree. Go to the Creation Museum near Cincinnati. It all points to creation. Hands down. And I never get good answers to two questions. First, what evolved first, the male or the female (and what did it do while it was waiting for the other)? If both at the same time, it destroys the “chance” foundation to evolution. Second, how do reproductive systems evolve, and how do babies get born before they evolve? So many questions, so many holes. Mr. Bonner has been dead-on on other things, why not take him at his word on this?
andy said
<>
Not at all, read it again. Let’s leave the value systems out of it shall we? And let the scientists get on with their work. It’s not guesswork at all.
And to J Kersjes, these are elementary questions easily answered by a simple Google query. Biology 101 covers them. Of course, you have to go to a science based class.
Mr Bonner’s expertise is in finance and economics. He appears to be very good at it. Asking us to take him at his word on evolution is called “argumentum ad verecundiam”, a logical fallacy commonly associated with creationists, and as useful as asking Richard Dawkins to comment on TARP.
Case closed folks.
I normally love your column Bill, but I must agree with Fred – Stick to the financials!
Roger C. in Studio City, CA
After all, evolution is more of a religion than a science, and not a very good one at that.
You say that as if it were a bad thing. I have always found this particular tactic to be…. interesting, coming from religionists. It’s wrong, but still revealing.
Bonner has not been dead-on about all other things; he, for example, sees the bankers as the strong-arms in the current debacle, instead of the government.
So many questions, so many holes.
And yet you point to the Creation Museum in Cincinnati, and blithely assert that it’s all there?
Evidently you, sir, aren’t.
Believers in imaginary friends in the sky have no business faulting evolutionary theory — or science in general — for “not having all the answers”.
Your scaring me bill!
I value your financial instincts but I’m afraid nature would teach you a painfull lesson if you were a white seal trying to survive in an ocean full of sharks, killer whales and homosapien seal hunters.
Its a timeless balancing act and our cute cuddly polar bears are all but a tiny piece of this beautiful living breathing planet.
P.S. I fear to contemplate the world we’d be living in today if those crusading christian ever wore white with a big bulls eye painted on their chests instead of that cross into every battle.
but white reflects light so why not black hair…ah, always more than anyone thinks so let no one be too confident or arrogant.
but white reflects light so why not black hair…ah, always more than anyone thinks so let no one be too confident or arrogant.
Well Bill, I’ve enjoyed your commentary in the past, but you’ve just earned a place in my mail client’s “fundie filter.”
@Fred
I think Bill was trying to say that the one thing we can be certain of with polar bears is that they have a successful genetic make-up for their environment, not why polar bears are 37 shades of awesome.
And in an an environment with no natural macro-sized predators, the only thing to wipe us out is ourselves.
I was thinking since my IRA lost 90% of it’s value, I laid 9 employees and my wife wants me to sleep in a separate bed because I wake up constantly from fear and worry might I be better off hunting polar bears for a living at least the end would come quickly
That evolution results in complex organisms via “pure chance” is a common misconception. Sure, the ‘engine’ of evolution is random mutation of the organism’s dna, but evolution consists of two distinct processes. The second, the ‘intelligent driver’, is termed natural selection; only those mutations that bestow a genetic advantage (suitability to environment, ability to reproduce, etc) are likely to be propagated onwards through the organism’s descendents. Simple really.
Bill,
I hope your references to god are only more of your clever irreverence. Having read your inspirations for years now, I would hate to suddenly learn you are a deity apologist. Anyway why would god make the advent of man look like an accident, or for that matter engage in any of the stupid behavior reserved for humans?
Dear Mr. Bonner
On behalf of your atheist readers I challenge you to listen to
James Lovelock describing the Gaia theory
and decide if these are the musings of a simpleton or pure human brilliance.
http://podcast.cbc.ca/mp3/thinkaboutscience_20080103_4325.mp3
But the jobs and the homes and the malls shouldn’t have been created to begin with! If what we’re seeing is a downsizing of the economy to the level where it never should have rose above, the only way we should call this a depression is if it burrows below that line. We have to face the fact that with our service economy, we could only imitate the wages and standard of living of an industrial economy by having our citizens leverage a lot of credit with a small income: this was the only way to create jobs and keep the post WWII boom going after 1970, when the US started losing its industrial base, en force. The government and financiers thought they were doing us a big favor and we all didn’t question it. This recession is the only one to my memory where the middle class was the most culpable; it wasn’t as much even in 1929. And look at that Congressional hearing with those bankers! The politicians are pissed that the game is over–of getting their coffers filled by the bankers and the bankers won’t mention on the air that they contributed. Such admissions would cause blood to flow, which is what the government and the Fed are trying to prevent if they allowed everything to crash and begin over. Face it: we’ll never be an industrial economy again! To begin over as a service economy will do nothing but get us all back to here eventually, maybe worse if they can come up with new bad ideas with credit and ways to get around laws and regulations; the regulators will never be their problem.
Touch of Grey
Must be getting early
Clocks are running late
Paint by number morning sky
Looks so phony
Dawn is breaking everywhere
Light a candle, curse the glare
Draw the curtains
I don’t care ’cause
It’s all right
I will get by / I will get by
I will get by / I will survive
I see you’ve got your list out
Say your piece and get out
Yes I get the gist of it
but it’s all right
Sorry that you feel that way
The only thing there is to say
Every silver lining’s got a
Touch of grey
I will get by / I will get by
I will get by / I will survive
It’s a lesson to me
The Ables and the Bakers and the C’s
The ABC’s we all must face
And try to keep a little grace
It’s a lesson to me
The deltas and the east and the freeze
The ABC’s we all think of
Try to give a little love.
I know the rent is in arrears
The dog has not been fed in years
It’s even worse than it appears
but it’s all right.
Cows giving kerosene
Kid can’t read at seventeen
The words he knows are all obscene
but it’s all right
I will get by / I will get by
I will get by / I will survive
The shoe is on the hand it fits
There’s really nothing much to it
Whistle through your teeth and spit
causeit’s all right.
Oh well a Touch Of Grey
Kind of suits you anyway.
That was all I had to say
It’s all right.
I will get by / I will get by
I will get by / I will survive
We will get by / We will get by
We will get by / We will survive
–Robert Hunter
Polar bears actually have transparent, hollow hairs. These are called “guard hairs.” These air-filled guard hairs help transmit heat from the sunlight to their black skin as a solar heat collector. Their guard hairs are waterproof, so they also function as effective buoys. Reflection of the sunlight makes polar bears appear white, in the same way as reflection of the sunlight makes (transparent) snow and ice look white.
So, no, it isn’t the COLOUR of a polar bear that is intrinsic to its evolutionary make up, but the TYPE of hair it has…
Darwinian evolution is SUBTLE – those that claim it is open to question or ridicule do not understand its nuances.
Polar bears were black skinned with white fur and a black nose, but they did a fixed for floating NYMEX seal availability swap and entered a weather derivative global warming fur swap at 2 degrees basis, and now that Lehman (the counterparty) went broke they are blushing all red.
J. Kersjes said
“His commentary on evolution is accurate. After all, evolution is more of a religion than a science, and not a very good one at that.”
You, my freind, need an education. A couple of plaster props set up by a devout christian does not in any way constitute “science”. It represents whoever aid for the plaster’s opinion. The earth, on the other hand, provides an overwhelming and every day increasing amount of it’s own evidence. That you can’t understand why there are males and females doesn’t mean nature can’t. And that separation happened long, long ago.
Just look at the giant squid. No intellegent desinger is going to make one of these monsters from a snail on purpose! But that is what it is: a 1000 pound snail with no shell preying on fish 2000 feet below sea level. And being eaten by whales who see it only by sonar.
I think God could have had the whales eat the fish directly without this inexpliciple monster.
Well, perhaps I am one of the opinionists that Mr Bonner was referring to, as my (un-replied to) comments on “Darwinism” to the DR article 02/12/2009 http://www.dailyreckoning.com/the-economic-panic-of-2009/ – at least seems to have opened a debate.
What I meant by “a form of Darwinism” in relation to peak oil & oil prices, (not polar bears and squid..) was that a low oil price is not inconsistent with the peak oil theory being repudiated.
The low oil price maybe akin to an “admission” of peak oil. Time to slow down. And politically important. Man is being forced into retreating into survival mode. It’s an instinct consistent with evolution, and the economic confidence cycle. And as a necessity – a replacement of oil and lifestyle changes will evolve. Oil will still run out and prices will go higher – just not yet.
Whether consciously or not – natural resources are being preserved, buying time to find replacements and adjust to peak oil. Oil today at $80 is not politically correct. The saudis may not be happy, but they’ve been given a temporarily stronger dollar instead and other concessions (the trade-off..)
Call it what you like, Darwinism, Fear, Manipulation, Adam-Smithism – the invisible hand of self-interest is a form of economic evolution and survival instinct. Politically and socially. And that instinct is to survive, protect, re-invent, re-structure, move on…
As for natural selection etc.. I defer to those more wise above.
I think it was Zeus who created men…or wait, maybe it was Allah….or maybe it was just men who created the God concept.
Glad to be a Buddhist who does not believe in all those fairy tales and dogmas
Stay away from your religious superstitions and write about others economic superstitions.
It is interesting that someone so good at pointing out the deception and absurd hallucinations in the world of finance seems to believe in the greatest delusion and absurd hallucination of all – God. I guess we all have our blindspots.
I agree with Bill’s comment about evolution. Scientists – just like economists, politicans, and financial advisors – suffer from 2 major flaws: 1) they don’t know as much as they think they do, and 2) what they do know is clouded by major ideological biases. That’s why citizens like you and me should never be afraid to challenge the conventional wisdom and reach our own conclusions.
please never bring your delusional thoughts to this site again, you sound like an idiot Bill!!! WHAT GOD DO YOU BELIEVE IN BILL?.. LET ME GUESS, JEBUS RIGHT!, FUNNY HOW GEOGRAPHY MAKES THAT ANY EASY ONE EH!!
What a disappointment. An otherwise erudite and intelligent man still needs to cling to the supernatural to explain things for him. To twist reason, the one bright light in human history, to fit around a book written by barely literate nomads a few thousand years ago is pathetic. Bill, you’ve finally made a public spectacle of yourself, and it’s not a pretty sight.
Evolution is imperfect and so should not be expected to perfect each and every trait. The genes that make a polar bear’s nose black are the same that make his skin black. It would be exremely unlikely for a mutation to random cause a white nose while keeping the skin black. However, if there existed an omnipotent and perfect creator god, then we would expect perfection in nature. I am in agreement with Alexander, above.
Evolution is imperfect and so should not be expected to perfect each and every trait. The genes that make a polar bear’s nose black are the same that make his skin black. It would be extremely unlikely for a mutation to randomly cause a white nose while also keeping the skin black. However, if there existed an omnipotent and perfect creator god, then we would expect perfection in nature. I am in agreement with Alexander, above.
Please, never again try to discuss evolutions be or not to be. Today, only the elite among believers still think that all on earth and in the universe was made by God, it’s like that small percentage of the population that deny mans role in the global climate change.
Bonner: “Man is the product of pure chance, they claim.”
That simply isn’t true, Bill.
Darwin’s chief contribution to science was to describe the MECHANISM of evolution (natural selection), and not evolution itself, which at least one of his ancestors and many of his contemporaries were already aware of. Sorry, Bill, but natural selection is quite explicitly NON-random. That’s why Darwin called it “natural SELECTION.” Evolution is impossible without non-random selection, and Darwin was the one who first pointed this out. If you want to pass judgment on Darwin, it helps to read him first.
“God” is a feeble notion backed by no evidence that survives solely because it has hysterical defenders who shout down scientists (when they aren’t actually putting scientists to death for disagreeing with them). Poor God! Evidently, “He” needs all the help he can get!
Oh, lookie there! I think He’s shown me His likeness – - in the way I spread my jam on my toast! Sorry, that was a cheap shot. Tit-for-tat. Next time head further south to the Galapagos, Bill, and discover how genuinely amazing your origins – and Darwin’s contributions – really were.