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 You Should Be Prepared for Both Inflation and Deflation

James Rickards

Today's investment climate is the most challenging one you have ever faced. This is because both inflation and deflation are possibilities in the near term. Most investors prepare for one or the other. But today Jim Rickards explains why preparing for both inflation and deflation is absolutely necessary. Read on...


The Real Black Friday: When Oil Prices Begin to Climb

Byron King

Byron King observes the real Black Friday. It actually happens tomorrow... the day OPEC meets in Vienna. With wisdom on their side it will be the day they turn the corner to profits in a big way. The outcome of their meeting could be great news for US based oil producers. Either way, the energy revolution in the US rolls on...


Tip of the Day
3 Travel Secrets that Will Make Any Trip More Pleasant

Chris Campbell

Chris Campbell is going home for the holiday. With a storm ready to hit Baltimore, his flight might get cancelled. Inside today's Tip of the Day, he shares his best-kept travel secrets for beating the herd, getting compensated, and upping your chances of getting bumped up to First Class. Read on...


How Retail Investors Could Double Your Money In 14 Months

Greg Guenthner

Stocks keep rising - and people are finally starting to believe this bull market is for real. That means one thing: a lot of ill-informed, rookie investors (AKA retail investors) are starting to come back into the market. And that's creating a unique profit opportunity. Greg Guenthner explains...