Bill Bonner

We’re in the airport, on our way back to Washington. Below…we’ll tell you more about one family’s economy… But first, let’s look at the whole world’s economy…

Nothing much happened in the markets yesterday anyway.

“Why jobs aren’t part of US revival,” asks a New York Times headline.

The US now has a higher unemployment rate than Russia…or Britain…or Germany…or Japan. When it comes to joblessness, the US is a world leader.

But why? Economists can’t figure it out. Harvard economist Lawrence Katz says it’s “genuinely puzzling.”

After admitting that he has no idea why there are so many people without jobs, columnist David Leonhardt goes on to tell us that “fixing the job market will take years.”

Hmmm… How does he know that? And how does he think he can fix something if he doesn’t know how it’s broken?

No point in asking questions like that… The fixers never know what is going on…but they’re always ready with a solution.

In Leonhardt’s case, he proposes a few meddles that are bound to make the situation more complicated…and generally, worse.

So, since we’ve been giving unsolicited advice lately, we won’t hold back today.

First, why are so many people unemployed? The answer is very simple. Because there is no profitable work for them to do as present labor rates. Thanks to previous meddles, the US economy focused itself on building houses and importing geegaws from overseas for people who couldn’t afford to pay for them. This was a dead-end economic model. And the end came in 2007. Now, the latest figures show an uptick in manufacturing…which is clearly the direction to go. But it will take years before the US economy has made the adjustment to a new, healthier model…making and selling things at a profit.

In the meantime, unemployment levels will remain high.

But wait…there’s more. For which the adjustment is taking place, US authorities are trying to block it. How? By taking resources from the new, unborn industries and using it to prop up the old, dying ones. Like Wall Street, for example. The financial industry grew like Topsy in the bubble years. It began to shrink in the crisis of ’07-’09, but the feds came in and pumped more than a trillion dollars into the financial sector, producing record profits for the big banks, but depriving the rest of the economy of much needed capital.

Not only that, the feds also take the pressure off labor to make adjustments. Food stamps, minimum wages, unemployment compensation, make-work, shovel-ready boondoggles – all these things cause workers to think they can continue as before…that a “recovery” of the good ol’ days is just around the corner…and that they’ll soon be earning as much as they were in 2007. Maybe more!

Want to really fix the unemployment problem? Listen up. Eliminate all bailouts, subsidies, giveaways and support systems – both to business and to labor. Abolish all employment restrictions and employment paperwork. All free labor – undocumented non-citizens – to compete equally with native-born workers. Cut taxes to a flat 10% rate for everyone. Abolish every government agency that begins with a letter of the alphabet. Then abolish the rest of them.

We confidently guarantee that the nation would be back at full employment within 30 days.

But wait…you’re not reading The Daily Reckoning to solve the nation’s problems. And we’re not delusional enough to think our advice is going to make any difference whatsoever anyway.

So, let’s turn back to our normal, dreary work…trying to figure out what is going on in the world economy.

On this trip to Europe, we visited with two of our Family Office partners…

The “Family Office” is the organization we use for investing, and preserving, our own family money.

What’s “family money”? Glad you asked. It’s money that is owned by a family, rather than by one person alone… It’s money that is expected to grow and endure…for generations, if you’re lucky.

Not many people have “family money.” It’s hard to get. And hard to hold onto. You can get money by accident. But you can’t get family money by accident.

Of course, you need some money. But that’s the easy part. You can have a family fortune of any size. It’s how you look at it…and how you manage it that matters…not how much money you have.

But it’s the family that is hard…that’s where most family wealth usually washes up. And it’s why you have to prepare the next generation…develop a family culture that lasts…and avoid conflicts that destroy both the family and its money.

It’s hard work. And it’s getting harder. And becoming more necessary too. When the European and American economies were in full expansion, each generation could make its own way. Now that growth has slowed…it will be harder to start with nothing and build a fortune. The next generation may need help…

Stay tuned.

Regards,

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. 

Recent Articles

The US Debt Crisis that Will Never Happen

Chris Mayer

One of the most heated political battles raging across the western world is debt versus austerity. In the U.S. this debate reached it's apex in 2011 when the U.S. credit rating was downgraded by Standard and Poor's. In today's essay, however, Chris Mayer throws the debate out the window, explaining why he thinks a U.S. debt crisis will never happen...


3 Tips to Finding Small Companies With Huge Potential

Matthew Milner

Believe it or not, more capital for a company doesn't necessarily mean better returns for investors. In fact, in a recent study that dug through data from more than 200 acquisitions going back to 2006, they found a "sweet spot" for the most likely acquisition targets. And it's lower than you think. Matthew Milner explains...


Disruptive Innovation Will Change How You View Obamacare

Greg Beato

The Affordable Care Act dumped 2,000 pages of regulations into the health care sector, stifling any innovation that could have brought about real cost savings. But even with these obstacles, there are still people looking for ways to do things better and at a lower cost. These new technologies could be the key to fixing health care in America...


Why Old-School Tech Stocks Are Beating Social Media

Greg Guenthner

While many of the newer social media stocks struggle for gains this year, old-school tech stocks have become some of the best trades on the market. With the rare exception (Facebook is doing well—shares are up 26% year-to-date) the social stocks are in the gutter. They got off to a fast start in January and Februray, but ran out of steam in the spring. Aside from a few feeble attempts, few have posted anything close to a noteworthy comeback. Twitter, LinkedIn, and Groupon are all down double-digits year-to-date. Groupon—the worst performer on this short list—is down 47%. On the other had, the biggest of the big tech stocks on the market are helping traders pile up even larger gains right now. Greg Guenthner explains…


Video
Creditism and the Threat of a New Depression

Richard Duncan

In the 1960s, total credit in the U.S. broke the one trillion dollar mark...and since then, it has expanded over 50 times. But now, as Richard Duncan explains, the explosion of credit that's made America prosperous, threatens to take the entire economy down. And that could mean the return of another depression...