09/11/09 London, England
Edward Gibbon described the happiest age of mankind as the period of the “five good emperors” between AD98 and AD180, when Marcus Aurelius died.
What was America’s Golden Age?
It is much too soon to write the history of America’s decline and fall. Still, that doesn’t stop us from guessing.
We would name the period between the fall of the Berlin Wall and the fall of Lehman Bros – a period of only 19 years – as the peak of US power and wealth. Of course, Americans were dreaming during those years. The dreams were the usual imperial sort – that the US Empire was such a benefit to the rest of the world that the foreigners would support it indefinitely. Rome didn’t take any chances; it forced its conquered nations to render tribute…slaves…gold…and wheat. The American empire depended on trade…and the dollar. As long as the United States had a commercial advantage, the empire was profitable. But as the 20th century aged, so did the US economy. Its competitors – notably Germany and Japan – had a big advantage. They had been bombed out in the ’40s. They could build anew. America’s trade advantage slipped away…and then its trade balance went negative in the mid-’80s. It has been getting more negative almost every year.
The trade losses shrank after the fall of the House of Lehman. Americans cut back. But today we get news that the trade deficit has just grown more than in any month in the last 10 years. Have Americans suddenly become big spenders again? Probably not. But we’ll have to wait for another explanation; we don’t have one.
No account of America’s glory years – roughly the period between the reign of George Bush I and that of his son, George Bush II – would be complete without mention of the events that happened on this day eight years ago. A small group of terrorists pulled off an amazing coup – bringing down two of America’s iconic buildings, right in the heart of New York City…and on primetime TV! Historians might be tempted to use this event as a milestone, marking the end of the period of maximum happiness in the United States of America. We caution against it. It was only later that it became apparent that the US reaction to the terrorist incident was suicidal. The nation desperately needed to bring its ambitions back in line with its means. It needed to save and invest in new factories and new infrastructure. Instead, it wasted trillions fighting phantoms and nobodies. But as far as anyone knew, US influence, prestige and power remained near its zenith throughout the wars on terror and Iraq.
The fall of Lehman changed things. Then it was obvious that not only was America vulnerable, she was an enemy to herself. She had diddle-daddled during the glory years, dawdling with the lion cubs that would grow up and maul her. Now, in the period we are living through, she attempts to go back to sleep and rerun her balmy dreams. That is what “recovery” is all about – a return to the land of nod and nonsense…in which people think they can actually become wealthier by squandering money they don’t have on things they don’t need.
Fortunately, as near as we can tell, most private citizens are now awake. A report at the beginning of this week showed that they repaid debt at a rate four times faster than economists projected. Savings rates are rising. Spending is falling. People are doing what they should do – they’re cutting back.
But the feds continue their efforts to sabotage the correction and destroy the empire. They have already blown-up the budget – with $9 trillion in deficits expected over the next 10 years. Now, they’re working on the dollar.
Yesterday, the dollar fell to $1.45 per euro. Gold remained just below the $1,000 an ounce mark. And the Dow rose 80 points.
Stock market investors seem to be looking forward to another big bull market. But with the economy deteriorating, they are probably just dreaming, too. Median household income fell 3.6% over the last 12 months. Of course, that’s just what you’d expect in a correction. But it’s not what the feds were hoping for. So, they’re pulling out all the stops to try to turn it around. Most important, they’re pulling out the stop that keeps the dollar from rolling down the hill.
The empire sinks into the mud. Yes, this is the downhill period…the slide into corruption…the period in which Juvenal complained that Romans were only interested in ‘bread and circuses.’
When you are on the board of a decent corporation, for example, if you have a direct financial interest in a matter under consideration you’re expected to ‘declare an interest’ and absent yourself from the vote. But in a mature democracy, the most self-interested citizens are those most likely to vote. Currently, about 20 million people work for government. About 45 million receive Social Security benefits. About 34 million depend on food stamps.
(People who count on the government to feed them, warned Jefferson, “will soon want bread.” That doesn’t seem to worry many people. But at least the state of Maryland has an Orwellian sense of humor about it. People who depend on government for food are given “Independence” cards.)
That’s 99 million people who have a direct interest in expanding government outlays…with some overlap, of course. And it doesn’t mean that every person receiving a Social Security check is going to back the feds. But it doesn’t count all the millions more who get subsidies, bailouts, welfare payments (often masquerading as tax credits), government contracts, and so forth, either.
Well, how many people does it take to win a national election? Obama won with 63 million votes.
The dollar’s weakness hasn’t been missed by it biggest foreign holder – China.
Reported earlier this week in the Telegraph:
“‘We hope there will be a change in monetary policy as soon as they have positive growth again,’ said Cheng Siwei…talking about America.
“‘If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies,’ he said.
“China’s reserves are more than – $2 trillion, the world’s largest.
“Mr. Siwei continued: ‘Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets,’ he added.”
Then, two days ago, in came a report that China is going to issue bonds of its own – in yuan.
This news is a shot across the bow of America’s imperial currency. It signals that China is moving into position to eventually challenge the greenback. Investors will have another alternative to the dollar…another bond issued by another government and backed by another economy…maybe one that is on the way up, rather than on the way down.
Meanwhile, Americans grow poorer. Bloomberg reports:
“‘The decline in incomes we’re seeing certainly has implications for consumer spending, particularly post-housing bubble when families can’t tap into home equity through loans,’ said Heather Boushey, a senior economist at the Center for American Progress, a research organization headed by John Podesta, a leader of the Obama administration transition team.
“The poverty rate is likely to keep rising through 2012, even after the recession ends, adding to pressure on the Obama administration to enact a second economic stimulus package, said Isabel Sawhill, a senior fellow at the Brookings Institution in Washington, a policy research group.
“‘We will likely have not only a jobless recovery but also a poverty-ridden recovery,’ Sawhill said. ‘The stimulus money is going to go away long before the poverty rate peaks.’”
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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I’m confused: “….spending is down and “savings” are up”
But in all the articles that use that phrase, I haven’t seen any $$$$ figures of actual savings in “savings accounts” tabulated by banks, credit unions, etc.
“Savings” re=invested in stocks are not really savings but a gamble on the future….
I’m talking about actual, boring, mundane, lousy interest rate bearing, SAVINGS accounts?
Anybody got an answer??
Or is this just more “smoke and mirrors?”
10 Minutes to Wapner…
You are headed in the right direction. Our corporate and political leadership is working overtime to return U.S. society to the status quo ante. Sorry, that horse has left the barn. And the aging population, deleveraging enormous levels of debt, hollowed out industrial base, and spread of government dependency will not allow us to corral it again. So what are the options? Option 1 is that we as a people recognize the need for and begin discussions of what will constitute a stable and prosperous “New Normal.” Because we have made the Imperial Federal Government so all powerful, the Grand Canyon-size divide between the partisans of the two major political parties make the likelihood of consensus building almost nil. “Bi-partisanship” right now seems to mean you have the right to your opinion, as long as it’s the same as mine. Thus, we are left with option 2, a situation that involves the virtual or actual collapse of national institutions and domestic conflict which will involve something like the “Night of the Long Knives.” Hopefully, figuratively rather than literally. But, under this scenario, one side will have to “conquer” the other before calm can be reestablished. I vote for option 1 but I don’t have much hope right now.
RE: “… Have Americans suddenly become big spenders again? Probably not. But we’ll have to wait for another explanation; we don’t have one.”
I think the broad view here is likely overlooked by many. Consider what happens when you dump $2Billion in one month into the car industry and what is bought..? Most people seemed to be trading in for fuel efficient Toyotas…
Peter Schiff may have it closest to the truth. To paraphrase Peter, “…cash for clunkers, Americans bought a lot of imported cars, and American car companies had to buy a lot of imported parts to make cars here.”
As all things the government does… there are unintended consequences that are often the exact opposite of what they say they want.
“The slope of the economic recovery, Jeff says, mirrors the slope of the economic drop. We had a sharp collapse. So we’re going to have a sharp recovery. ”
Couldn’t agree more with that statement. Sorry BB, you’re on the wrong side of this….still.
just to be contrary ornery I reckon americas peak was circa 1964/65′ish.
…..the Chevy Impala SS….the Ford Mustang….The Beach Boys’n'The Byrds’n'Motown…real gangsters….rampant CIA belligerance..knocking off yer own pres….yeah…great times for the USA….Veitnam WAS the turning point.
Where is the positive mountain .We must remember this country is unique, that`s why we will recover and swim out of this sea of negativity ,climb the mountain of hope and once again shine the becon of freedom to a world in need.
Positive Mountain is probably somewhere in China. The growing number of gov dependents will ensure that we drown in the sea of negativity and many will do so with a zombie smile on their face holding a book titled Becon of Positivity. Gov dependency will grow as what is left of our productive sector goes overseas, or is bleed dry by upcoming tax increases to pay for more Gov spending. I received word today more of my area’s industrial jobs now have a future in Mexico. The company doing this is a large employer here who pays well. Where these folks find employment that pays the same as the job they are losing? They won’t, at least not around here. All the slogans and political rhetoric in the world are not going to save us from catastrophe.
JOE MEANEY said “We must remember this country is unique, that`s why we will recover ……..”
Say what? my country is unique, all countries are unique. What’s your point?
Do you mean special, invincible?
If that’s what you intended you are a fool.
Do recommend reading BB’s latest book the New Empire of Debt.
The Empire is hanging between a rock and a cliff these days. But it is a spot it chose.
Is America going to tip over? It is listed at 30 deg now, and will surely hit 45 degree next year. Not tipping over defies the laws of physics. But since when America think she must obey the laws of physics. It is exempt, invincible, right?
Young America, stay debt free and invest in new technology stocks. Buy the smallest tickets you can buy in different companies without paying too much brokerage commission.
Young America can change the county’s future.
VIVA AMERICA!
i wanna change this america to a place of low taxes – less government tit suckers (a lot less)- lower prices – less yuppies that think there sh%t doesn’t stink – more common sense – keeping my earned wealth -owning a gun as a tool (like a hammer) -dictating whats good for me (not you, or us)- everyman for himself means everyman thinks for himself – do it yourself or it wont be done right has always worked – call the fire dept or learn how to put the fire out yourself – show some damn respect – get off the couch and get into reality – build a house with less restriction and constraints – make things yourself – teach yourself what you yearn – learn how to ration everything – you are not perfect – make friends – don’t judge a soul – give people a hand – stop being selfish – eat to survive – stop drinking so much booze – legalize just about everything – no 1 is king – No 1 is the best – Ok, were all here involuntary breathing (not our choice) so we can count on that and thats it… from this on you should know what you have to do for yourself, that is if you understand you are the only one with the choice to be here…. might as well make the best of it.. I know this system is broken and I for one want to see an appropriate, fare replacement that no one can dispute
“What was America’s Golden Age?” When we could walk down the middle of the street and shoot someone we didn’t like.
The Federal Reserve was the end of America – it was the day we all became slaves.
America was the greatest when it was one nation under God.
America is called, “The Land of the Free” – but what is freedom? Freely pursuing your desires is not freedom if your desires are determined by inherited and learned conditioning! 60% of westerners are overweight to the point where their health is affected – they fulfill their desires every day – are they free? They are slaves to their desires.
Politicians promise security, but submitting to the dumb, instinctive urge for security is slavery. Being free of the urge for security IS security! Freedom is a personal responsibility, governments can’t help you with it.
The ironic thing is that terrorists flew planes into buildings in the heart of the USA’s financial district to cripple & destroy the main earnings engine of the US economy. So, what does Wall Street do after it’s reprieve? They blow up the US economy for the terrorists. Imbeciles.
“The Federal Reserve was the end of America – it was the day we all became slaves.”
With all the background noise creating a nice diversion, I noticed no one bothered to comment on this…..america this is your REAL problem.
The ultimate danger for the United States is the manipulation of the economic system by the unscrupulous and the greedy. This is what caused the financial crisis of today, the savings and loan scandal of the late 80′s, the dotcom bubble of the late 90′s and, a perfect example of the raping of America by greedy lowlifes…the Enron fiasco.
The worst case scenario is extinction. Quite a price for the wrong mix of technology, testosterone, and creative financing, built on leverage, a finite fuel supply & infinite optimism… Now in the endgame: Kleptocracy
i.e, now USA is FAKE as in…
F* American Kleptocratic Empire
F* = [Federal|Fascist|Failed|Former]
A wise person once told me what you expect will happen usually does but it just takes longer to happen than you expect. I expect the worlds economy will recover and I think it will truely collapse at some point and I’m sure the DOW and the gold price will cross again and yes we will become extict.
In which order these things happen I have no idea but I think I’m safe in saying extinction will be the last of them to happen.
Something else I was told by another wise person. Optimists have more fun but pesimists are more often right. Harry you are such a optimist.