08/31/09 Bedford Springs, Pennsylvania
Actually, we haven’t gotten to Bedford Springs yet. We’re still sitting in the airport lounge in Paris. Summer is over. It’s back to work…12 hours a day…just like we’ve worked for the past 39 years.
When we were in college we had no money. In the summer we had to work two jobs to try to save enough cash to continue. One summer, we worked in a boatyard in Annapolis early in the morning…then, we did an evening shift painting television towers. Painting the towers was such dangerous work our poor mother begged us to quit. But the money was good – $5.25 an hour – so we had to keep at it. More about that in a minute…
We’ve only got a minute before they call our flight, so we’ll make this short. Nothing much happened in the markets on Friday…except that the price of gold rose $11. Gold seems ready for another attack on the $1,000 level. Will it get there? Maybe…maybe not.
Humility! Humility!
We have to remember that the world economy has never, ever been in a fix like this. We don’t know where it will lead.
The big picture is that the credit cycle – expanding since the end of WWII – seems to be contracting.
“The joy of buying falls victim to recession,” says a headline in today’s International Herald Tribune. The article tells us how people are planting gardens again…saving money…making do.
This is likely to be a fundamental shift, not a transient one. But – humility! – what do we know?
What we suspect is that the upward trends of the last half a century have now reversed. We’re in a period when the excesses and mistakes of the boom/bubble period must be corrected. A new model for the world economy must be found – because China can’t continue to sell products to Americans if Americans can’t continue to buy them.
But there’s more to this big picture. Never before in history have so many government officials been so sure they could stop a correction. And never before have they had more ammunition at their disposal. The numbers are all over the place. And they’re huge. The Obama administration, for example, expects to run $9 trillion in deficits over the next 10 years – and that number is based on a recovery! Imagine what will happen if the economy doesn’t recover?
Here at The Daily Reckoning, we don’t expect a recovery, not now…not never. Because the old model no longer works. Debt got too big…too expensive…too risky. Something had to give.
But what gives now? What happens when a world economy of $50 trillion per year tries to correct and governments try to stop it? What gives when the world’s largest debtor borrows $9 trillion trying to prevent nature from taking her course?
Until tomorrow,
Bill Bonner
The Daily Reckoning
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Bill, you make economics absolutely thrilling to follow. Such drama unfolding before our eyes! I’m now reading your archives and am up to Feb 2000. So fascinating to see your predictions of the tech bubble to burst, and how gov’t/investors doing then what they are doing now – simply overlooking the big picture and basic economic fundamentals. Thanks for you columns.
Yeah, isn’t it weird that Bonner isn’t like a famous economist or something?
In the new economy that’s ahead, money will become far less important. People who can, will grow their own food, and in the beginning of the new era, life will be like a jungle…so take measures to be safe…back to the tribes haha!!
Humility is the key. There IS a correction afoot. BUT…the correction is not monochromatic, one size fits all. In some sectors there is a real recovery. In others a depression. Same with regions, national and international.
In addition there can never be a correction for human nature, animal spirits. There are so many yet to taste from the trough of excess. They will do it too! See it really, generally evident as soon as 2012 or 2013.
Overindulgence in our economy for endless debt/repayment/bubble/crash is like being an alcoholic…..the patient (American public) must “hit bottom” before restitution.
Have we hit bottom? “Only the Shadow knows!”
But, our system is terribly dysfunctional.
With the government contributing to an estimated 1%+ to the economy, how in the world do “economists” think we can climb our of this hole…somewhere we will “….have to run out of supporting funds.”
BB is not in the realm of the “important economic advisors” because most Americans are in an “alcoholic binge” and are experiencing a terrible hangover….
Now comes the “cure” which will not be neat and pretty.
Keep writing, Bill B
LaGirl,
Bill IS an important and famous economist, such as many austrian followers. Ha authored a amazon and NYT best seller, he made milions (some say billions) by being the front man in internet based financial publishing, back qhen Inet was a question mark. The thing is he is a contrarian, and contrarian usually piss off the stablishment, thus his lack of “mainstrean media” credit. But do not fool yourselves: he`s filthy (sory bill) rich an famous in various circles that really matter.
Well, he basically took his wealth from the poor suckers and the lunatic fringe, fascist morons and so forth. Of course, he made one or two of them rich, too. But there is lots of hate mongering going on in the DR publications which I personally dislike. I would say he maybe is a contrarian but he is at the same time very, very much part of the establishment. It was just the price of him getting rich the way he did that no one can “officially” acknowledge him. As I said, hate mongering and on the purses of the poor and lunatic.