Bill Bonner

Nothing much happened on Wall Street Friday. Gold…stocks…held more or less where they were. So, we take up another week…wondering…waiting…trying to puzzle out what is going on.

Just like every other week!

Economists are finally beginning to ask questions. How come the economy isn’t doing better? Why aren’t consumers spending? Why aren’t businesses hiring?

They thought they were dealing with a typical recession – just one that was worse than most. But now, they’re scratching their heads. It sure doesn’t act like a typical recession. Maybe this isn’t a cyclical problem at all, they’re beginning to say to themselves. Maybe it’s structural. Maybe something will have to change. But what? How? When?

Whatever is going on, it ain’t a ‘recovery.’ It ain’t a depression either – at least, not yet. So far, our Great Correction hypothesis seems as good as an explanation as any.

Here’s the latest from Bloomberg:

Prospects for US economic growth took a hit this week after reports showed the trade deficit swelled and consumers reined in spending.

Consumer spending, which makes up 70 percent of the economy, is being held back by an unemployment rate close to a 26-year high. An Aug. 12 Labor Department report showing more Americans than estimated filed applications for unemployment benefits last week pointed to further weakness in the job market.

The US trade deficit widened by $7.9 billion in June, the most since record-keeping began in 1992, to $49.9 billion, a report from the Commerce Department showed. Exports posted the biggest decline since April 2009.

Investors should prepare for “major structural changes” as the global economy shifts to slower growth, Mohamed A. El- Erian, chief executive officer at Pacific Investment Management Co. said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene.

Consumers are spending less – no surprise there. That’s just what you’d expect in a correction. The bad news is the trade deficit. It tells us that the little consumers are spending is not going to US producers. It’s going overseas.

Which means, the US continues to ruin itself so that others may have prosperity, and have it more abundantly. Jobs will be created in foreign countries – not in the US. Profits will be earned by foreign firms – or US firms doing business overseas. Capital/skills/expertise/technology – all the ingredients necessary for success in the modern economy – will continue to accumulate outside the US.

Yes, dear reader, the Great Correction continues. It will surely correct the credit bubble…the housing bubble…and the stock market bubble. It may correct far more than that – including the dollar…the US bond market…America’s bubble of power…and outsized living standards in the US.

Bill Bonner

for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

Recent Articles

Why the Fed Will Launch Another Round of QE

Richard Duncan

Ben Bernanke introduced the world to the concept of "quantitative easing" back in 2002. It was an "unorthodox plan" to save the economy from the horrors of deflation. But the monstrous economy it has actually created is in some ways far worse. And as Richard Duncan explains, it's not going to end any time soon. Read on..


How to Safeguard Your Digital Currency

Dominic Frisby

While the technical details of Bitcoin may intimidate the novice, they shouldn’t keep him from getting in on a digital currency revolution that -- while taking different forms -- isn’t going away. How do you get the simplest, easiest-to-act-on tips about how to invest, safeguard and grow your digital wealth? Dominic Frisby has more…


Solar to Save the World, Ebola to Maim it

Chris Campbell

The duality is stark. In one hand, we have an energy renaissance underway, in the other, a virus is threatening to wreak havoc on the markets and, potentially, your life. Nothing we’re currently doing to fight the Ebola virus will work in 2014, say the researchers. Nothing we’re currently doing will beat it in 2015, either. We need a new game-plan. Read on…


How to Profit From the “Cycle of Hype”

Greg Guenthner

Lose your shirt in 3D printing stocks this year? Don’t kick yourself. You’re not alone. (Okay, kick yourself a little if it’ll make you feel better.) You need to make sure you don’t lose your 3D-printed shirt in the next tech craze. Because there will be a next time. Look, it’s really not your fault if you got taken for a ride on 3D stocks. Greg Guenthner has more...