06/11/10 Baltimore, Maryland – Time alone, yes time will tell
You think you’re in Heaven but you’re really in hell
– Bob Marley
Yes, dear reader, time alone will tell.
Are we really in the heaven of a recovery…or the hell of a Great Correction?
Well, actually, we think we know the answer already. It’s a Great Correction. That’s what we thought when it began in ’07. Everything that has happened since merely confirms it.
Subprime mortgages blew up in April of ’08. That set off the powder in the financial industry. In a matter of minutes the feds were on the scene too. Since then, they’ve put at risk as much as $12 trillion in the fight against the downturn.
And what has it wrought?
If this had been a normal recession, we would have seen a big up-tick in employment by now. Instead, 8.2 million jobs have been lost. NONE HAVE BEEN RECOVERED. Not since the troops were sent home after WWII have we seen anything like it.
We should also be seeing some signs of inflation by now. When people get back to work they also go back to spending. This puts pressure on recession-diminished supplies, leading to price hikes. Instead, we’re seeing the weakest pricing since Lyndon Johnson was in the White House and the Beatles were on TV. If they did the numbers properly, they’d show that prices were actually falling, for the first time since the Great Depression.
If this had been a normal recession, we’d also see the money supply increasing. By this point in the cycle, people should be spending, borrowing and investing, increasing the velocity of money. Instead, the money supply and private sector credit continue to fall.
We also should be seeing a relief in the housing sector. But noooo…
If this is a ‘recovery,’ you can keep it.
But if it’s not a recovery, what is it? It’s a Great Correction. It’s hell, in other words, not heaven.
But wait a minute. Hell is not so bad. And we’re not sure we’d like heaven very much anyway. Not if it meant returning to the bubble years. Not if it meant pretending Bernanke, Obama, Summers et al really know what they’re doing. And not if it meant going even further into debt.
The feds are trying to engineer a ‘recovery,’ a return to an economy that was not only unsustainable, but downright diabolical. It made people poorer and poorer. And now the feds are making them even poorer – spending trillions of dollars at taxpayers (or bondholders) expense – to try to stop the correction.
Why would they do such a thing?
The short answer: because they’re morons.
But you probably want a better answer, don’t you? Well, you’re not going to get it from us. As far as we’re concerned, the authorities are doing something so blockheaded you’d have to be retarded to do it.
When we think of what they’re up to we can still hardly believe it. They’re so afraid of a correction that they’re willing to bankrupt the nation to prevent it. It’s like a teenager who burns down his school so he won’t have to turn in his English homework. He might have been in trouble before; now he’s in worse trouble.
The Obama team has added $4 trillion to the nation’s debt in the last 3 years, fighting the downturn. Martin Wolf in The Financial Times and Paul Krugman in The New York Times argue that we have to spend even more to stop this devilish correction.
They’re terrified of hell. What they’re going to get is going to be worse.
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 Reckoning. Dice 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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It’s really not what they get. It’s what we get.
I love your writing and your opinions Bill. But, 3 years? Is this a typo?…….
“The Obama team has added $4 trillion to the nation’s debt in the last 3 years,….”
Obama was inaugurated on January 12, 2009.
I just enjoy reading the newspaper’s explanation every morning of why the Dow is dropping or rising: whether it’s European debt, an unexpected drop in consumer spending, a stronger than expected jobs report, a drop in unemployment claims, a disappointing earnings report–every day a new reason that the Dow has swung one way or the other.
for businesses, this is like having your head held under a bath… It may be horrible but anyone who has been responsible with their finances will survive a short shock. However, if everyone’s head is held under for long enough, they will all drown.
Stephen – unfortunately even those who have been responsible will still drown due to our governments effors to fight the correction.
It is probably, as so often in life, good intention that leads to real desaster. On the other hand, you must see that governments have long ceded to think on their own. Instead they are bullied by the interest groups which whom they have a cozy relationship. So sometimes corruption works, sometimes it’s stupidity and lazyness.
Should have read “with whom”, of course.