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 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. 

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