01/05/10 Baltimore, Maryland – How was the first day of 2010? Well, most commentators would say it was a good day. The Dow rose 155 points. Oil closed over $81. The dollar fell. And gold shot up $22.
Is that a good day, or what?
‘Or what’ is probably the best answer. Stocks rose. But are they forecasting a booming economy? Or more EZ money from the feds? Are they signaling the end of the slump? Or, no end to the feds’ rescue efforts?
Here at The Daily Reckoning, we will stick with our view. We’re in a depression. It won’t end until it has done its work. And, with the feds trying to block it, prevent it, hold it off, deflect it and retard it, it could take years before this depression has finished its job.
Martin Feldstein, an expert on business cycles:
“The recession isn’t over.” In a Bloomberg Radio interview on December 17th.
David Rosenberg explains that 90% of the ‘growth’ in the third quarter came from stimulus measures. And that still only produced a 2.2% annualized GDP increase, far below the rates typical at the end of a recession.
“What is normal is that the first quarter of post-recession growth is that real GDP expands at a 7.3% annual rate; 2.2% is really nothing to get excited about – it’s actually quite worrisome.
“Never in recorded history has growth coming out of a string of declines been as weak as what we just witnessed. Considering all the government efforts to usher in a V-shaped recovery, what we saw unfold in the real economy in Q3 – admittedly quite divorced from the action in financial markets – was, in a word, sad.”
What is happening? How come so much government ‘stimulus’ produces so little real stimulation?
Well, because an economy is so heavy…you can only push it downhill!
Monetary stimulus only works when it pushes the economy in the direction it wants to go. When people want to buy, you can make them buy more by giving them more credit. But when they don’t want to buy, extra credit doesn’t help. Extra credit is what people don’t want. Offering them more of it doesn’t make it more attractive.
But government spending on the other hand – fiscal stimulus – is a more effective imposter. People see the feds spending money and they mistake it for genuine, economic activity. The government hires people. The government spends money. It looks just like the real thing!
Heck, it’s better than the real thing. Because the feds pay better. And they don’t have to worry about showing a profit either; the whole idea is to lose money…that’s what fiscal stimulus is all about. Want a fiscal stimulus program? It’s easy. Replace honest business activity with phony federal make-work. And replace honest workers with parasites!
Our friend Marc Faber writes that Congress has just voted the biggest health care initiative of all time – forcing everyone in the nation to participate, except Congress itself. The parasites have a better plan, naturally.
The number of federal employees making big money is growing fast. In the Defense Department, for example, “civilian employees earning US $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available…” writes Marc.
Marc sees the US rapidly becoming a banana republic, in which elites use positions of influence to feather their own nests. Federal employees, lobbyists, politicians, government contractors, favored groups – all of them connive to strip assets from the public and use them to cushion their own fat derrieres. Typically, the banana republics have nice weather and bad money. They borrow too much…run their printing presses when they get in a jamb…and then go broke.
The world turns, doesn’t it? While the US slips into banana-ism, the world’s biggest banana republic, Brazil, is booming. It has the number one position for stock markets in 2009 – up 145%.
The US is fast becoming the worst kind of banana republic…one with ice storms and no bananas.
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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” How was the first day of 2010? Well, most commentators would say it was a good day. The Dow rose 155 points. Oil closed over $81. The dollar fell. And gold shot up $22.
Is that a good day, or what?”
-Yes! It’s an excellent start to what will be a great year. Rosenberg is this year’s Roubini (where’d that moron disappear to?). If he thinks that 2.2% is sad coming out of what you call a “depression”, I’d say that’s excellent.
Just wait until this quarter. Did you see ISM numbers and auto numbers? How about factory orders? This is going to be a monster quarter kicking 2010 into high gear.
Your depression has faded. Gone. Poof. Actually it never existed. A bad recession, yes. But swift action by the Fed held off a depression and marched us into a strong rebound.
If people had to pay COD, like in the 30′s, lead would be trading higher then gold. Free money is keeping the economy going.
We The People should send a message to our ‘betters’ in government that if they do destroy our country and send it into banana republic status, we will be coming after them with the pitchforks and torches Thomas Jefferson style. (Said with a smile and a knowing wink of course!)
They should understand that the stakes are a little higher for them than just whether they get re-elected.
Nobody wants to destroy your country, and, it is the other way round.
Harry, you’re suffering from a complete disconnect…..from reality. Over half the folks I know are either unemployed or under employed. You most likely are either a government employee or work (steal) in the financial sector. Both parasite positions.
Bill, your dead on, the parasites have begun their takeover.
Bill,
This “parasite” is waiting for you to offer a non-gov’t employment option…
~S
In times of extreme economic distress the government is the last financier, employer and supporter of the population…..so far, we have found no other way……..We may not like it, but that’s the way it is…..under capitalism……..private capital will find the easiest way to may a buck, and the he#$ with the rest of the participants, whether willing or not.
The biggest mistake we made in 2007-8-09 was not to let the largest banks declare bankruptcy……”bust ‘em up!”
Now we are really in deeper trouble because “they” now know they are “too big to fail” and the gov will again bail them out and we will get deeper and deeper into the muck.
WW2 got us out of the Great Depression. What a price to pay!!!!
“Managed capitalism” gave us the good years after WW2; when deregulation set in, we slipped down the slippery slope of profit first, citizen second….
Too many individuals that brought on this mess are still not in the “slammer”; that goes for private and public officials.
Sierra is right on. Harry needs to learn basic 10th grade math, so he can have a better understanding of what is taking place.
Maybe Harry can set you up, Shawn.
He seems to be doing well these days.
~n-h
PRAYER FOR BILL:
O good Lord do accept
that I’m more than you adept
and you also should admit
that I’m clev’rer quite a bit.
Thou shalt praise me from now on, then.
Or I’ll come down on you. Amen.
Well my American friends something is certainly wrong in the management of your economy. Spend,spend, spend…Iraq,Afgan.,bail outs,military,big gov’t,easy money,no cash down…and on. Mr.Sprott,Faber,Bonner and like see the impending financial crisis. They ought be appointed special advisors to Obama. It’s pretty bad when even a small investor like myself is reluctant to convert canadian dollars in U.S. currency to buy some recommended stocks from my subscription to Penny Stock Fortunes…What the hell I do now?