02/16/10 London, England – Let’s focus on the good news. Well, our first item is good news if you were fool enough to follow our “Trade of the Decade.”
We suggested that buying Japanese stocks could be the best investment you can make in the next 10 years. We immediately heard from dozens of friends and enemies. The friends were concerned because they thought we’d made a bad bet. Enemies were delighted that we’d lost our grip completely. After all, they remarked, who in his right mind would buy Japanese stocks?
Well hardee, har, har… Guess what market is leading the world so far this year? That’s right… Japan. (Here, colleague Alex Green explains why Japan hasn’t been such a bad bet after all.)
We’re six weeks into the new decade, we’ll claim victory now…and change the subject. Who knows what will happen in the next 514 weeks.
Meanwhile, here comes more good news: the US federal government may not go broke after all. Rep. Paul Ryan, who hails from the sovereign state of Wisconsin, has come up with a solution.
Before we get to the solution, however, let us take a minute to describe the problem. In short, the feds are spending too much money they don’t have. The Obama administration says it doesn’t see any balanced budgets anywhere in America’s future. The Congressional Budget Office, a far-sighted group if ever there was one, looks all the way to 2080. It sees no hint of fiscal equilibrium either. Just deficits and debt. By its estimate the US budget grows to 50% of GDP and the official US debt rises to 7 times GDP.
This exercise by the CBO is not a forecast. It is merely an extrapolation. If present trends continue, that is where we would end up by the time your author is 131 years old. Of course, there is no way present trends could continue that long. Even at 2 times GDP…debt cannot be sustained. It would cost more than half of all America’s tax revenues to the pay the interest on such a large debt. Already, depending on how things go in the economy, as much as 30% of the money borrowed by the US could soon be necessary just to pay the cost of past borrowing.
Fortunately, Mr. Ryan has a solution. He calls it a “Roadmap for America’s Future.” After studying it for all of 30 seconds, we’re convinced that Mr. Ryan should get a GPS. His roadmap is a series of squiggles, dodges and twists to US tax laws…along with a few torques to the spending side too… that leads the country to a dead end. Most of his effort has been concentrated on bringing health care outlays under control. No effort is made, on the other hand, to cut military spending. Typical. Weak, limp, pusillanimous. The benefits now; the costs later. That’s why America’s residual respect for Congress is just about exhausted. The institution is incapable of correcting its own mistakes. Instead, it just makes them worse. Even with Mr. Ryan’s roadmap, America drives in the wrong direction for the next half a century. It is only sometime after 2050 that the federal budget deficits finally stop.
Any solution that doesn’t pay off until we’re all dead is no solution at all. It’s a way of avoiding a solution…which is what Congress desperately wants to do. A real solution will come. But not from Congress. Instead, it will come unbidden. And unwelcome. Like the plague.
At least, that’s our reading of history. Once the system tips out of control it stays out of control until it finally blows itself up.
It would be fairly easy to get the budget under control…that is, if there were no political system to prevent you. The US government shouldn’t be in the business of giving out drugs or regulating heart transplants. It also shouldn’t be in the business of telling the rest of the world what to do. The solution is simple: abandon the imperial agenda…let people take care of themselves, both at home and abroad…and downsize the federal government.
But that is not going to happen. We may be on the road to ruin…but too many people are enjoying the ride. We’re not going to stop any time soon. More than 40 million people on food stamps…thousands of military contractors…millions of government employees… People who want the government (other citizens) to pay for their gall bladder operations. People who pay no taxes. GM executives. AIG bondholders. University administrators. Lobbyists.
It is a wholly rational and completely foreseeable trend. People always seek to improve their wealth and status in the easiest way possible. What’s the easiest way? Take wealth from someone else. That’s why criminals are still in business…after thousands of years of trying to stop them.
But common criminals lack status – except in the ghetto. So, the smarter, better connected and better educated of their ilk go into government. Or they use government for their own ends. That way, they get other peoples’ money. But they also get respectability…even an elevated social status.
Congress is supposed to confront the problems of the nation…and solve them. But with more people getting something from the government than supporting it, Congress is not likely to change course. It responds to the perverse will of the people…and to its own corrupt predilections. We are all victims of democracy now…
The government grows…deficits become unstoppable…and the empire sinks under the weight of so many parasites.
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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Fed Reserve to Harry: Drop Dead.
Minneapolis Fed Head Kocherlakota: US debt “can only be paid by tax collections or by the Federal Reserve’s debt monetization.” Worked for Weimar, right Harry?
U.S. government must act to prevent high public debt from sparking the next economic crisis, Kansas City Fed Head President Thomas Hoenig said. INSPIRING!! Eh, Harry?
Meanwhile, back at the ‘recovering’ ‘economy’…
Eur/Jpy enable a carry trade to masquerade as a meat, er..stock market “rally”.
Stores have seen sales slow so much (because people are over-employed and spending more that ever, right? :-/) that they are dumping duplicate brands. Technically, that brings us closer to a monopoly on each product, so Harry may actually rationalize it that way…
China dumps US Treasuries. Nuff said.
Capital One January annualized net charge offs hit a record 10.41% and I can’t help feel that an idiot such as Harry will tell us this is a good thing.
Still no Greece bailout. When Greece collapses and withdraws from the EMU, the EMU goes down to ashes. No big deal. Right, Harold?
Glad I bought another half ounce of gold this weekend. Already up 1.68% and my silver almost 4%. Both handily beating Tuesday’s “Monday Rally”.
IT strikes me that as the dollar’s slide increases the stock market, it does the same to gold.
However, at the end of the day, I will still have gold forever and the stock market will join the ash heap of history.
Hee Hee. I could do this all day.
In fact, I might!
Harry is getting nervous. He never used to post more than once per thread.
Either that or the GS PR department asked for more productivity for their buck.
Lmao ! Feel free to do so. I like that new Harry much more than the old one
!
The DJA is up 170 dollars today! Recovery is on. Earnings are good. Nobody is nervous about Greece anymore. DJA will be at 11,000 by the end of the month probably. 18,000 by the end of the year
Jason, I am sick and tired of doom & gloomers like you!
The Dow Jones Harry Harry will be 1.097X10^14 by March 1.
AAPL!!!!!!!!!!!!AAPL!!!!!!
At least jason shows some reason around here. Although 18,000 is a bit high – I’m thinking DOW more in the 13,000-14,000 range. Which it should hit the lower end of the range Autumn.
The “other Harry” above forgot to mention:
-Improving employment
-Empire manufacturing was a homerun
-S&P earnings season has been phenomenal
-Greece is not the “huge” deal everyone here and in the media made it out to be
-Home builders are more confident, seeing increased orders
-Mini stock correction is officially over and on to the next leg up
-California is getting is house in order, much better than thought.
I could go on if you’d like. You people here have to stop listening to the media nonsense. One day it’s Greece, another Dubai, another something else. When, in fact, those are very containable issues.
Concerning the Fed speak, why is it you guys are so quick to jump on Bernanke when he says the slightest bit contrary to your views yet will embrace anyone that slightly agrees? it’s silly. They’re all wrong unless they agree with BB and you. LOL!
I do agree, buy Japanese stocks and US stocks. This is going to be a great year and decade of prosperity. Good luck!
Mr. Bonner, I will apologize for the fool who is using my handle. We come here to have educated dialogue, which we have for some time now, and then the juvenile behaviour shows up.
He’ll go away, as they all do, when they turn out to be incorrect in their views and outlook.
Yes Harry California is just hunky dory in La la land
Last year, California furloughed state workers, froze spending on public works projects and issued IOUs to state contractors, becoming the poster child for fiscal disasters undercutting state budgets across the country.
This year’s forecast: more of the same.
California is falling $6 billion short of the revenue it needs to fund basic programs in the current fiscal year and is projected to be short by another $14 billion in the fiscal year that starts July 1.
The emergency budget session, called by Schwarzenegger, will not tackle the entire $20 billion deficit that is projected over the next year and a half
Well said Mr. Bonner………well said.
Or, we could turn into a real Roman Imperium, whereby we invade other countries, steal their wealth, and kill off as many of their citizens as possible to control the remaining population.
I think we should bring back the Triumphs.
Harry gets his happy outlook at ‘Good News Economist’. If you want to feel better too you can go here:
http://mast-economy.blogspot.com/
And then I went to the NYT and found ‘Judging a Stimulus by the Job Data Reveals Success’.
They are right about one thing in there, yes I am spending every penny of my Fed unemployment benefit extension. That’s stimulus money I would otherwise not have spent. I would have had to spend out of my own savings if I hadn’t gotten that ‘stimulus’. But this way I get to stimulate the economy with other peoples money and keep mine to buy gold with!
Why is it the real Harry thinks he is having an intelligent conversation with Bill Bonner. From the comments of his that I have read he makes it quite apparent that his whole purpose is to be diametrically opposed to Bill’s point of view.
His responses have been on the order that Bill is either ignorant of economic conditions or is patently obtuse about the world around him, while Harry sees a rainbow every time the stock market rises 35 points. But, yet he hides in his troll cave everytime the market corrects or we have a hiccup, in his estimation, in states like Greece and Dubai.
But, just because the market rose 160+ points today doesn’t mean that it won’t drop 270+ points tomorrow.
A great many large companies may be able to start making profits again after downsizing, think layoffs, and shipping manufacturing overseas, but this does not mean the US economy will be turning around anytime soon.
I also think Harry has created extra pseudonyms to make it look as if there are more people posting comments that agree with his point of view about the economy.
Eh tu, Jason?
Japan, the trade of the decade? Well you almost had me, and since I’ve done fairly well following your previous suggestions, I was all set to jump on this one. Then, I realized the weakness. It is your arbitrary selection not only of a ten year period, but of a decade corresponding to the 0 to 9 years. Perhaps gold wasn’t the trade of the decade. Perhaps it is the trade of the 16 years, 242 days from gold’s $258 low. Perhaps Japan will rebound for the next 3 years, then give up all those gains over the next 7, then take off. I’m sticking with gold and silver for a while longer, thanks. No use changing something that’s working just for the sake of change
OK, just kidding up to this point, guys. No day is ever completely wasted when you get a rise out of someone. Actually, I’m scared spitless that we are all living in a fool’s paradise as the world slowly collapses around us like an earthquake in slow motion. The only thing that saves me from insanity is a philosophy that if rape is inevitable, relax and enjoy it.
are we having fun yet?
I didn’t know what pusillanimous meant so I looked it up and also found this quote:
Wizard of Oz: Why, anybody can have a brain. That’s a very mediocre commodity. Every pusillanimous creature that crawls on the Earth or slinks through slimy seas has a brain. Back where I come from, we have universities, seats of great learning, where men go to become great thinkers. And when they come out, they think deep thoughts and with no more brains than you have. But they have one thing you haven’t got: a diploma.
Scarecrow: The sum of the square roots of any two sides of an isosceles triangle is equal to the square root of the remaining side. Oh joy! Rapture! I got a brain! How can I ever thank you enough?
Wizard of Oz: You can’t.
__________________________
Please accept this quote as a gesture of my appreciation of you giving me a new word.
said never barry harry–no I’m only one person not a sock puppet of Harry. But I kind of agree w/ Harry that the stock market will hover in the range of 9,000K –11,000K for a while and then start heading upward. It may be a good idea to buy when the market takes a drop on a particular day.
Pusillanimous, that was good.
I had to look up ‘distaff’ from Bill’s column yesterday. And it was well used. I know better than to put my trust in anyone’s economic forecasts but I do appreciate Bill’s writing skills.
Ic we’ve got a real luv-fest going on here. Kinda like a Wolf-pack getting ready 2 circle its prey! Hey BB, can i purchase CD Swaps on Harry? Cuz,like i say.A man alone,is ez prey. “Welcome 2 the Jungle,”every1!!! Live long and prosper,all… W0o!!! *S*
Better better, it better start getting better. Too many people can’t find jobs. Really… seriously. They can’t pay their house taxes and they can’t find jobs that will allow them to do so.
Harry… where are the jobs? People need jobs.
It used to be you could just sell your house and move to FL or NC and set up shop down there… but you can’t find jobs there either. And your formerly expensive NJ/NY/VA house can’t be sold to buy a nice house in the south. So now what? Harry keep saying things improving… but where? How?