11/26/09 London, England – One turkey turns to the other…
“Things were pretty rough there for a while…what with the recession and all. But now there’s a recovery. Business is picking up.”
“Yeah, this is great…no more hanging around this place waiting…finally, the boss says we’re all shipping out today…”
“I wonder what we’re going to be doing…”
“I don’t know…I’m going to some place called ‘Butterball Birds’…”
“Hey, sounds like it might be fun…maybe it’s some kind of theme park. I’m going to work for a fellow named Frank Perdue…”
As our friend Nassim Taleb says, a turkey’s life is very agreeable…until the very last day. Until then, his whole life is a bull market. Everything looks good. Good food. A roof over his head. Plenty of company. Even free health care. The MPT guys would look at his history. They’d see no volatility. Every day, the turkey gains weight. Every day things get better. They’d see all reward and no risk. They’d say ‘every investor should have turkeys in his portfolio.’
The chartists, too. They’d look at the turkey’s life and see a line moving steadily up. ‘Is this a winner or what,” they’d say to each other.
And what about the economists? Well, the old-timers would be suspicious. ‘There’s no such thing as all upside…there’s no boom without a bust,’ they’d grumble. But the young fellows wouldn’t listen. They’d plump for the turkeys without hesitation, confident that if anything were to go wrong, Ben Bernanke and Tim Geithner would set it right lickety-split.
And now, they think the Bernanke-Geithner team has just pulled off a save. Thanks to them, the turkeys who ran Wall Street – and invested in it – have been spared. America is getting back to work.
But what kind of work?
Alas, it’s the work of a DEPRESSION – de-leveraging, busting up, working out loans, defaulting on debt…going chapters 11 and 7.
Yes, dear reader, the recession is over. Welcome back to the Depression. The number crunchers reported a positive GDP growth figure for the last quarter of 3.5%. Everyone cheered. Now, the crunchers admit that they were a little too optimistic. The real number is only 2.8%. But it’s still positive. So the recovery is still on…
Sort of. If you deconstruct the numbers, and pull out all the feds’ hot money effects, you’ll probably find that the economy is not growing at all. How could it be? It’s a consumer economy. Consumers aren’t consuming…
The Wall Street Journal reports that “One in four borrowers underwater.”
Mortgage delinquencies at a record high, adds The New York Times.
Real joblessness is at 17.5%, reports CNBC.
Insiders are selling 17 of their own shares for every one that they buy.
“Consumers lose appetite for dining out,” says The Los Angeles Times.
The National Retail Federation thinks holiday sales will be 1% lower than last year. And last year they were depressed.
But The New York Times is worried about us over here in England. “Lost decade feared for British economy,” says a headline.
As we pointed out on Tuesday, the US economy has already suffered a lost decade. No employment growth in the last ten years. No gains in the stock market. No household income growth. As near as we can tell, the whole nation is just another decade older and deeper in debt.
But that’s the way it works, isn’t it? A bull market on Wall Street…or a boom in the economy…they’re just like a turkey’s life. It’s all fine…until it ain’t fine any more.
And now, we’re going to let you in on the secret. You can pass this on to the White House and the Fed if you like.
How can you really get an economy out of a depression? Well, you have to get into a depression first. Then, you can get out.
The cure for a depression, in other words, is a depression. Nothing else will do. Mistakes need to be addressed and corrected. Losses need to be recognized and written off. Bad decisions need to be put right.
So, bring on the depression! Get it on. Get it over with.
Too bad the feds don’t get it at all.
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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Excellent stuff Bill, as always ! No doubt you can put your trust in governments to turn a depression that would take a few years to the Great Depression of a decade or so.
Cheers.
Let’s talk turkey, one helping yesterday and a couple of weeks of leftovers.
Let’s talk turkeys, almost too many to mention, Ben Bernanke, The Fed, Congress (except Ron Paul), Goldman, AIG, GM, Chrysler, B of A, Citi, economists, the list goes on and on. Too many helpings of these turkeys already and the leftovers are going to be more like hangovers.
Why are we surprised that unemployment continues to rise? Why do we expect the GOVERNMENT to do something about it?
We’ve spent the last 200 years mechanizing and automating everything possible. Substituting fossil fuels for human labor and computer circuits for contemplation. “Labor-saving” has become “labor-destroying”. Yet it never occurs to us that there could be any such thing as too much productivity.
As James Howard Kunstler say, “It’s all good”…as long as the economy keeps growing every year. But planet Earth ain’t getting any bigger. The highest-quality, most easily extracted resources are gone, and now we’re strip-mining an Arizona-sized chunk of Canadian forest for goo, and even thinking about scraping the barrel at 25,000 feet. How do you spell “desperation”?
Plus there are limits to how much credit you can vacuum out of the future to jack up present consumption. So when people get frugal, when hundreds of millions of Americans finally realize we don’t really need all the junk we’re getting, unemployment skyrockets. People are terrified that no one else needs them. With good reason. Decade after decade, our economy has “decided” that more and more of the essential jobs should be done by machines.
As citizens, we sure as the devil don’t ACT like we want other Americans to have jobs. Except we’re not citizens anymore – we’re cogs in the economy. As consumers our fidelity is to the lowest prices – getting as much as possible for as little as possible – flaunting our wealth – dying with the most toys. As investors we want the highest rate of return. If these things are incompatible with living wages, health care, honoring pension obligations, supporting local communities…well to hell with them. We’re rational, after all.
But what about good-old-fashioned self-reliance? Right. We don’t even want to employ our own legs anymore to get from “a” to “b”. Of course it doesn’t help that 50+years of Happy Motoring has undermined, destroyed, and prevented the formation of pedestrian-oriented, transit-supportive communities.
Yes, Greenspan and his disciples are clueless. But so are people who think that with a dose of hard reality; and if only the government stops “interfering”; the economy will turn around and grow and everything will be OK again.
We ain’t in Kansas anymore.
Ok Hans if you’re looking to do work for the sake of it, just join an Amish community. They don’t pay much but you’ll enjoy your laboring and toiling. Personally I prefer technology and relying on my creativity to generate income.