Bill Bonner

Last weekend, we journeyed to Boston to attend a college graduation. Thousands of callow scholars were on display. Each was handed his papers…and then marched out of the hockey stadium. To the tune of ‘Pomp & Circumstance,’ wearing a long, red robe, he entered the outside world solemnly…like a patsy joining a poker game.

So far, not a single major university has asked us to make the commencement address. Nor a minor college. Not even a school of cosmetology or taxidermy. But here at the Daily Reckoning headquarters in London, protected by a broad ocean and a narrow reading of the First Amendment, we will give them – and UK graduates too – advice no one asked for.

“Plastics,” was the advice given to college graduates in Mike Nichols’ ’67 film. But that was when there was still hope for America’s manufacturing sector. Even then, it was too late. The percentage of GDP from the manufacturing sector fell for the next four decades, from over 20% in the last ’60s to barely 12% last year. Better advice would have been ‘derivatives.’ They stank just as bad, but they were much more profitable. While only 8% of GDP, finance accounted for 40% of corporate profits in 2007. And derivatives grew from nothing to a face value of 16 times the GDP of the entire planet.

But your elders are always giving you bum advice.

“You cannot decline the burdens of empire and still expect to share its honors,” said Pericles to the class of 430BC. He lived during a time not unlike your parents’ era in the USA – when Athens was on top of the world. But vanity got the better of him. He launched an attack on Sparta that backfired badly. He soon died of plague and Athens was not only ruined, but enslaved. Athens’ ‘golden age’ turned to lead. Young Athenians should have shrugged off the burden rather than accept it. You should do the same.

When you were born 20-some years ago, the nation’s total debt per person was less than $90,000 – adjusted to ’09 dollars, of course. While that was a lot of money, it was nothing compared to what was coming. Now it’s $186,717 per person – more than twice as much, in real terms. Fortunately, private debt is not inheritable. But it comes to you as a lien against property. Instead of paying off their mortgages and leaving you a house, free and clear, the baby boomer generation spent the ‘equity’ in their houses even faster than they got it. House prices rose. But mortgage debt rose faster. While your grandparents owned 80% of their houses, by 2007, the typical homeowner only really owned 4 rooms of an 8-room house. And then, when house prices fell, so did his remaining equity…to the point where one out of six homeowners in America is now underwater. You could still eventually inherit a house, but you may have to scrape the barnacles off the front porch.

But that’s not even the half of it. While your parents had control of the US government they allowed themselves a little larceny. Add the unfunded retirement and healthcare benefits they voted for themselves to the official national debt, and together they are scheduled to cost your generation 4 times the total annual output of the US. This is over and above the private debt they accumulated.

Some of this debt can be carried. Some will have to paid down. But as it stands, as much as $77 trillion of post-’09 earnings must be stolen from the future in order to pay for the liquor your parents drank…the bombs they dropped on god-forsaken foreigners…and the interest on their debts. So, forget about saving for a European vacation or a house of your own. Even if every penny of your savings – and every other American’s savings – are put to the task you will still be paying for your parents’ expenses all your life.

But wait, there’s more! The burden is getting heavier. Federal budget projections show an additional $7 trillion in deficits over the next 10 years. Described as the cost of fighting recession, the present generation buries its own mistakes under cash that the next generation hasn’t even earned yet. Today’s bankers, businessmen and speculators are being bankrolled by you – tomorrow’s bankers, businessmen and speculators. Today’s homeowners get a helping hand…from whom? Tomorrow’s homeowners – you. Today’s employees get a boost too. Same story. Where do you think the money came from to pay Wall Street bonuses this year? How do you think GM stays in business…and Fannie Mae…and AIG… Who pays those salaries? Who pays to keep troops all over the world and keep old people supplied with new drugs? Who pays for hundreds of billions’ worth of ‘shovel ready’ boondoggles? You will. At least, that’s the plan.

The luck of one generation is the curse of the next. Like Pericles, your parents inherited a dollar; they leave you a peso. They took over the strongest, richest, most competitive nation in the world. And like Pericles they minded everyone’s business but their own. Now, not only does the US owe money all over town, its government puts out trillions more in IOUs every year – each one with your name on it. You’re not even out in the real world yet, and you’re getting the bill for 50 cents of every dollar the feds spend – almost none of it earmarked for you. But that is the thing about the real world your teachers probably forgot to tell you about. It is more unreal and fantastical than anything you studied.

Here’s what’s real: You’ve been dealt a bad hand. From the bottom of the deck…your parents have slipped you some nasty cards. Our advice? Fold ’em. Get up from the table before they clean you out.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily ReckoningDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

  • Andrew Wang

    Guess I should renew my passport… I assume that you meant moving to another country when you said “Get up from the table.” Which ones would you recommend?

    Singapore looks interesting. So does NZ. And it looks like you’ve settled in Argentina…

  • adam

    I want out of this game. Is expatriating the only way?

  • StingingNettle

    Time to make a dubree hut and eat squirrel.

  • badScooter

    I’m working on my spaceship in my spare time. It is not going especially well.

  • jordan

    i’ve been reading bonner for a couple of years now and this is really one of the best.

  • JaneAgatha

    Thanks Bill. That was a hoot! Glad that me and my family live in Australia.

  • JMR bayou bobby

    all said like a true Southern patrician

    no wonder you guys lost the war

    not good advice, nowhere close to a nuclear detonation away from honorable or righteous

    you must be a banker

  • Jim

    I have read your articles for years and have bought GOLD! thank you… I wish I would have bumped into you at the BU graduation event. My daughter graduated from BU that weekend too…Went from Deans list BU student to another unemployed kid in one day!

  • AlanH

    So where is this safe haven I should be relocating to? Im not sure any other country is inflicting any less pain on future generations.

    So Im planning to slash my wrists: then they’ll be sorry. Ah, the final frontier. Ha !!!! Can’t catch me.

  • http://nowwhat roger Calk

    Bill surely means you need to seek employment from the government. Preferable a senate seat.

  • Golly Gosh

    Bill needs to write another article detailing exactly how we can get up from the table and walk away. I was never very good at gambling and I would really like to walk away before I become a complete patsy instead of just half a patsy so far!

  • Roger That

    …a govt. job, a senate seat.. But for us civilians, this senario reminds me of a comment made by someone from the old U.S.S.R., “we pretended to work, and they pretended to pay us.”

  • Jim Lorenz

    Pretty soon it will be every man for himself and his family. With hyperinflation we will be on the edge of anarchy; rule by the most powerful warlords and the very young and the very old die off as resources thin out. I’m too old to run and too sick to fight, so I’ll make sure that my family is prepared.
    I’d appreciate suggestions for us still at the table. WTSHTF it will be very sudden. Every moment we have to prepare is golden. Time not to be wasted.

  • Evan

    Folding, as Bill suggests, is accomplished by openly and frequently speaking of succession from the Union and repudiating its debts. Spread the word!

  • Mark

    I live in Bulgaria with barn land and independent water supply and gold in Switzerland. I pray a lot cant help it.

    The people are skilled at producing food and preserving it they have to be because they dont have much cash many have a horse and cart.

    Of course political and social instability is a worry. Most people here have guns but they dont shoot each other.

  • G

    Good article, as usual, but as usual… too smug. The author strikes me as someone who’s made enough money to insulate themselves from events. As such, his advice is of dubious worth.

    Some insight to any who think they can “fold’em” and relocate. You can’t. The world no longer welcomes refugees. Just try showing up in Oz, NZ or Costa Rica thinking you’re going to put down roots and legally work. Fat chance.

    Nope, you’re stuck here … in the good old US of A. Yep, there’s a s***load of problems more or less created by folks before you who were looking for the quick,easy way out. The politicians they elected were oh so quick to offer them that easy way out.

    The straits we now find ourselves in is the result.

    If Bill Bonner can offer unsolicited advice, so can I.
    Here goes:
    1) Consider the Gov as one party getting their finger on the trigger and turning it on all the others…. always consider Gov in that regard.
    2) All those movies about the U.S. being righteous and god fearing (you know, those John Wayne and Clint Eastwood movies your parents grew up on)… forget them. They were a Hollywood illusion. The US was never that pure.
    3) The future isn’t predetermined. In fact it belongs to those who can show “grace under pressure”, be innovative, flexible,responsive.

    SEEK the overturn of the status quo. (that includes OBAMA). Yeah, it seemed he was a new dawn, only now it’s apparent he was bought by the true powers-that-be.
    Thus, seek to over throw the powers that be. They are the true enemy (and they’re our countryman), imagine that…the enemy is local, not Muslims, not Communists, not Aliens, nope, just plain old americans. Greedy bastards for whom … “too much is never enough”. They are the true enemy. Hint…. as starters, investigate the FED and question why it should even exist.

    –term limits on government officials
    –public financed elections
    –a radical revamp of the tax code (I suggest ditching ALL deductions as that’s where the lions share of avoidance and unfairness occur.

    Basically, you’re screwed unless you can precipitate these major changes in the US.

    Gods speed & Good luck.

  • DRB

    I have watched as all kinds of “decent” folk availed themselves of largess, just because it was legal. It is mind-boggling to see the staggering debts pile up and they don’t care, because it’s the kids who’ll have to pay, not them. Very dishonest. My prediction: The kids ain’t gonna pay and I don’t blame ‘em. Excellent article, Bill.

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