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

Buy the Dips: Why the Pullback in US Shale is Only Temporary

Matt Insley

Since early July, there's been a sharp pullback in the prices of most major U.S. shale players. Is this the start of a long-term meltdown, or is this simply a great opportunity to "buy the dips"? Matt Insely explores, and offers four specific ways to play the trend. Read on...


A Federal Program that Could Turn Your Town into a Warzone

Chris Campbell

Media coverage of the situation in Ferguson, Missouri has documented a very disturbing trend in local law enforcement... namely, why is a small town police force armed to the teeth with military equipment? Well, as Chris Campbell explains, it's all thanks to a little-known Pentagon agenda called the "1033 Program." Read on...


The New Bitcoin Trend that Could Make You $100,000 Per Month

Josh Grasmick

Few investments have yielded better returns for early investors than Bitcoin. But now that the price has stabilized, are there any gains left to be made? Today, Josh Grasmick details one investable Bitcoin service coming online that could still lead early investors to massive profits... and with less speculation and risk. Read on...


Maestro
Preserve Your Wealth in the Face of Financial War

James Rickards

The Cold War introduced the world to a terrifying new phrase: mutually assured destruction. Thankfully the cold war ended without ever realizing this outcome. But the remnants of that "balance of terror" between the US and Russia still exist... and are beginning to surface in the financial sector. Jim Rickards explains...


How to Use Market Forecasts to Your Advantage

Greg Guenthner

'Tis the season for fall market predictions. But don't dust off that crystal ball just yet. Good traders don't try to predict when an important price move is going to happen - they just react when it does. However, as Greg Guenthner explains, forecasts can help you manage your risk/reward, as well as your non-trading portfolio. Read on...