Bill Bonner

Let’s throw out a few numbers. Numbers lie. The 5 is crooked. The 8 goes nowhere. The 0 is nothing, whatever that is.

So, let’s throw them out.

15, 34, 92, 98888, 21…

Throw them all out.

Or, how about this…?

$14. That’s how much gold fell yesterday. Why is gold going down? As expected, the Great Correction continues. Domestic consumer price inflation is still subdued. Speculators are getting worried. They bought gold at high prices. What if there really is a recovery; who will need gold? Now prices threaten to go down.

It wouldn’t surprise us to see gold under $1,300. Or under $1,200. Or even under $1,000.

But don’t mistake a dip for a change of direction. The bull market in gold won’t end until the financial crisis is over. And that’s not going to happen soon. Here’s another number we can throw out to prove our point:


What the heck is that?

That’s the number of dollars that the US government is supposed to need this year to fill the gap between what it collects in taxes and what it spends.

It’s the deficit, in other words. And it’s a lot of money.

But remember, it’s just a number. And you can’t trust numbers. Because it was just a few months ago that we were told the budget deficit would be much, much lower. Remember those numbers? Less than $1 trillion? Then, $1.2 trillion.

Numbers, numbers…1,2,3,4,5,6,7,8,9 – we’ve seen them all!

But the important thing is not the number itself… It’s like a Christmas present; it’s the spirit behind it that counts. And behind every number in the federal budget is the Spirit of Christmas…well, it would be the Spirit of Christmas if Santa was a kleptomaniac and he gave all the loot to himself and his friends.

We’re not complaining about it. It’s just what happens in an advanced, degenerate economy. More people spend their time trying to figure out how to redistribute wealth than trying to create it.

In the event, the Obama team is going to redistribute $1.5 trillion more than it can collect in taxes. Let’s throw out some more numbers. That’s $5,000 per person…$20,000 for a family of four. And we’re talking spending IN EXCESS of tax receipts. This is just the deficit. That’s in addition to the $8,000 or so per person that is taken from one taxpayer and given to others.

Okay… So the feds spend $1.5 trillion more than they take in. Or $4 dollars in spending for every $2.50 they get in taxes. Big deal?

Yes… You can imagine how long you could do that. It’s like earning $100,000 and spending $160,000. Do that once…maybe you could get away with it. Do that every year…?

And the feds are doing this when the economy is supposed to be growing at 3% to 4%. If it grows more slowly, or not at all, the deficit gets worse.

You’ll notice also that $1.5 trillion is about 10% of GDP. You’ll notice also – since we’re having such a good time with numbers – that if you keep adding 10% of GDP to the debt that pretty soon you have a lot more of it than you want.

That’s why we were so disappointed with Mr. Obama’s State of the Union address. He gave a false impression. He talked about “winning the future” and made it sound like it was just a matter of doing things better. Not so. Americans have to do things differently. They’ll never win the future this way.

They have to change the numbers. You can’t borrow 10% of GDP, year after year, with no end in sight, and still hope to have a healthy economy. You can’t expect to win the future that way. Let’s face it, that’s the way to be a big loser…

Bill Bonner
for The Daily Reckoning

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success in numerous industries. His unique writing style, philanthropic undertakings and preservationist activities have been recognized by some of America's most respected authorities. With his friend and colleague Addison Wiggin, he co-founded The Daily Reckoning in 1999, and together they co-wrote the New York Times best-selling books Financial Reckoning Day and Empire of Debt. His other works include Mobs, Messiahs and Markets (with Lila Rajiva), Dice Have No Memory, and most recently, Hormegeddon: How Too Much of a Good Thing Leads to Disaster. His most recent project is The Bill Bonner Letter.

  • Dave

    “It’s like earning $100,000 and spending $160,000. Do that once…maybe you could get away with it. Do that every year…?”

    And then they tell us we need to cut back, but to do is “responsibly”. I give people the same example you did above and ask “if you spent far more than you earned, what exactly would be “responsible” about slowly cutting back, or merely “freezing” your current overblown spending/”

  • Dean

    I like these numbers: 10 and 3.
    10% is the jobless rate in America. It’s also the Gdp growth rate in China.
    3% is the Gdp growth rate in America. Coincidentally it’s also the jobless rate in China.

  • steverino

    i like 4 and 7.
    can’t say why.

  • The Investorsfriend

    Was it Buffett or Bonner or maybe Charlie Munger who has often observed: “If something can’t go on for ever, it won’t”?

    What remains to see is how the deficit will be stopped. Massive spending cuts? Massive tax increase? Massive increase in GDP?

    Or, print money to pay off the debt until the currency collapses?

    Or, some combination of all of the above? Especially the first two.

    Or, as I mentioned before, the U.S. could sell hard assets including chunks of itself to pay off the whole deficit.

    Russian might want Alaska back.

    Can the French afford to buy back Louisiana?

    There would be lots of takers for Hawai, I suspect.

    Canada would probaly bid on some of the Northern States.

    Perhaps the North American Indians could buy a state.

    Certainly China would be interested.

    What about palistinians? A new homeland? The possibilities abound.

    The people in those states would stay and keep their property but the government, and all State assets and liabilities would be turned over to the new owner. Perhaps the current people living there could be dual citizens.

    What about Peurto Rico (sorry about the spelling). Most Americans would not object to that.

    This is what happens when you are broke, you need to sell anything you can.

  • phelps who cant swim

    I heard a football coach once state that it is a copycat game. I believe the same applies to some businesses and the workforce as well. The true innovators like Bill Walsh didn’t follow the herd. He took another direction in spite of the critizism and then everyone followed him.

    Become a teacher the Big O tells us. Great stuff. He would make a great character for the sitcom the Office. Many college students since the late ’90s were already attempting this. Now there are too many and not enough jobs for them. They didn’t really want to teach. Just wanted the benefits that come with the job. Many would have been better off spending that college tuitition money elsewhere.

    Nancy Pelosi informed the public that the Big O’s speech solved the nations problems. She would also make a great character for the Office as well.

    Bill, you and I should create our own Whitehouse/Office type sitcom. We could star in it. Nah I’m too ugly for TV, but I could play an idiot like Joe Biden.

  • steverino

    lol—i don’t think anyone could play an idiot as well as our veepee!

  • steverino

    he might give idiots a ‘bad’ name!

  • Scottyboy!

    How closely do think our Masters are watching the Egyptian situation wondering what they’re going to have to do to keep us from doing the same to Them?

    I’m sure they’re placing orders for more of those those high frequency sound thingies right now…

    Chertov is probably an investor in the Company!

  • Bruce Walker

    Tunisia, Albania, Egypt… Can Saudi Arabia be far behind? It’s always the unexpected that seems to move markets most violently. Here, all the focus has been on deficit spending. What if none of that matters as the Saudi royal family gets their heads paraded through the streets or Riyadh on pikes?

  • steverino

    nice one w/ the chertoff, S. lol

    i haven’t heard of a lot of deaths, bruce.
    but i don’t pay attention to MSM.

    there have been some rumors of CIA ops, along w/ the “reflation”, which seems to = food INflation, esp. in developing countries, where so much % income is needed for food. who knows?

    anyhow, this is gonna be bad enuf w/out folks, anywhere, trying to get blood flowing in the gutters. throughout history, gov’t and/or political operatives have instigated riots and bloodshed, stirring up the “pawns” against the “masters”. so they can be or control the new “masters”, usually. and, of course, there has always been the financial side, the business end, of the of the conflicts.
    like in the “derivatives” markets, people play both sides.

    in the US election of 1912, the banksters backed all three candidates! when Wilson won (46%) they pushed thru the already-secretly-planned Federal Reserve Act of 1913.

    we still seem to be caught in this illusion, ourselves, while the propagandists play us like puppets.

    i think people have a right to assemble and DEMAND change and justice. and, hopefully, peace, too, …someday …somehow…

    it’s very difficult for people to approach conflict/fear without aggression, psychologically. when i was younger, people tried to burn down whole cities; rodney king is the latest coming to mind right now–LA.
    so, it’s tough to keep #1 in control, sometimes, when those instincts and emotions take over.

    still: make love, not war.


  • Boris

    “What if none of that matters as the Saudi royal family gets their heads paraded through the streets or Riyadh on pikes”

    Perhaps Mobaruk would have been wise to follow the US Government’s example by building a mock city in the desert where the military is trained in urban warfare.

  • A little thought

    What is the defination of Great Correction.
    Maybe it is just superficially shifting or adjusting figures here and there. Or, trying to renovate a castle built of numbers and figures in the air.

    Since the birth of capitalism, we haven’t heard of any realistic fundamental correction of fualt that subsists below the surface. The root cause. Or, more precisely the fatal structural defeat of capitalism. You can’t find perfect competition, the vital engine of healthy growth for capitalism. What normally one discovers is appropriation of fund from the top for the survival of entities that are considered can’t afford to fail. Or, the assumption, maybe, possibly, through fund siphoned from some sorts of irregular economic procedures that generate gigantic cash that incur at ultra low or virtually zero cost, for nourishing the enterprises at large.

    Capitalism, in fact, has never with a free hand to run on itself. If it is, therefore, the basic requirement to suceed is one must possess the best knowledge, info, skill and last but not least, one must be daring and treacherous in excecuting his professional task. One probably one has to zombielise himself inorder to be on the same edge. Imperfect competition. Can you visualise in a soccer game, one side has only a goalie whereas the opposite has two?

    In the absence of any concrete and substantive remedial actions taken, the entirety will only be a building block of number games, till it crumbles, effectively placing capitalism in museum.

  • The InvestorsFriend

    Bill says U.S. federal government deficit is $1.5 trillion this year while its revenues are $2.5 trillion. So the federal government is spending 60% more than it takes in.

    A wise person has said “If something can’t go on forever, it won’t”.

    It will be interesting to see exactly how it ends.

  • steverino

    somebody hits the lottery, but the state can’t pay.

    nobody can afford a war or even a decent revolution. all the banks (except WFC) are closed, so there goes the financing for both sides.

    due to deflationary collapse, everyone downsizes to paintball gear for WWIII.
    it’s the honor system, with the UN providing observers.

    so, everybody cheats, except the chinese, who don’t need to cheat. they are kicking global butt when, due to global warming and waaaay too much lead, all their paint dries up.

    the japs take em out with subtle pastels and centuries of artistic differences.

    the US is forced to disarm and accept the global hegemony of the japanese.

    things seem a bit overly ritualistic for a few years, and everybody grows topknots and tries to look bow-legged, but eventually, everything comes up roses, and would you believe: the 20 billionth person in the earth’s population is the grandchild of the lucky bus driver who hit the lottery and couldn’t get paid.

  • Doubt Ober Skepticism

    Hi Steve,
    How is the lottery drawing system in US. Computer system generated numbers subject to stringent audit??? Or, as the computer wishes to throw out whatever numbers it has in its mind?????? How much fund the lottery could generate in a single draw? On what ground or merit or strategy the authority granting fabulous licenses to potential operators? Apart from the airborne avalance of cash from the sky, is lottery procedure a supplementary economic tool of the capitalistic system?????????

  • steverino

    what audit? they went broke!
    what mind? the computer has none. i’m biting my tongue, now.
    what ground or strategy? habit, of course.
    supplementary econ. tool? of course! it IS a form of gambling, n’est ce pas?

    at least it WAS, until the casino went tits up in a field of yellow mustard.


  • Skeptical

    Hi Steve,
    At least there is a distinct disparity between a professional gambler who has a set of respected professional code of ethics and a pure cheat.

    Don’t you think load of cost free money when injected into capitalistic production would eventually wreck the whole thing outperforming what we envisage of the immediate effortless return? Throwing the whole human civilisation in disarray???

  • steverino

    it really doesn’t matter what i think.
    the hardest part of any fin. independence is probably managing the business/money/bankroll.

    some things are not a matter of absolutes, but of degree. sometimes “capitalism” NEEDS liquidity. but, if a company is bankrupt, it doesn’t make too much sense, to me, at least, for the government to loan it money, OR for the gov’t to “take it over and fix it”.

    people seem to have become conditioned to thinking this MUST be the role of government. things get confused. and the government needs evermore money.

    capital formation and development are not, theoretically, dependent on government. government can develop standards and enforce contracts and laws provide for the common defense; licenses, limited stuff. not involved in every transaction, every phone call, every email.

    please re-read mr. bonner’s article.
    this is now my 6th posting. i have not, at any point, disagreed with his theme or thesis.

    i have advocated neither gambling nor cheating, simply that gambling can be considered business activity under many circumstances.

    i postulated cheating in a humorous vein around trying to beat china in a paintball war for world domination.

    if we DO go into high inflation or deflationary collapse, or both, we are gonna have some wreckage and some disarray, possibly orders of magnitude higher than what folks have experienced so far.

    the Fed has been trying to address the “economy” by REFLATION and MONETARY STIMULUS—adding “liquidity” to a “system” which is INSOLVENT—broke, bankrupt; keeping “zombies” alive.

    mr bonner is suggesting that the legislative and executive branches of our government start doing their jobs, for a freaking change, i would opine. this is called FISCAL management as contrasted with MONETARY policy (BORROWING $1.5 Tril.), and it is done through the Federal BUDGET process.
    as we know, if we budget and don’t spend ALL our money and then some, we do NOT need to borrow any.

    so yes, what you say IS his concern and mine. all of ours, i would hope.

    put the google on “slewie the pi-rat”, maybe. he blogs on another site, but shares many of these same ideas.

  • skeptic

    Thanks Steve. I was reflecting some truth that I hope would have shed some light to everyone. The concern is not only confined to within US and China, but more to the entire world. You have at least partly given me some answer. Thanks and have a happy and prosperous new lunar year.

  • steverino

    yw. the idea that the US is “reflating” is a bit dubious in the first place, to some. me. mr bonner, too, perhaps.

    with the “financial crisis of ’08”, so much “paper wealth” was destroyed by the collapse of a couple of big financial houses, and the real estate “dip” (the wealth ‘deflated’ when the values fell) that the political decision was made to try to “fix” it, rather than just let the gamblers take the losses.

    the glass-steagall act of 1932, was repealed near the end of clinton’s 2nd term. this act was the structural guarantee that this would NOT happen again, as in ’29 and the 30’s.

    so, first they “fixed” that, so the big banks and insurance companies could be “more competitive, internationally”. but, so much fraud and criminality was involved in the mortgage games, the securitization games, the “value” games, the “AAA”-rated games, the “insure against risk” games, and the “we’ll pay you, later” games, that
    the house of cards began to collapse.
    so, the political decision was made to protect the “wealth” of the “haves” in a variety of ways, some of which are no longer secret.
    the money to try this is/was NOT cost free. repeat: your premise is INcorrect. the People of the US are on the hook, via US Treasury DEBT to the banksters for pushing the “create money” button.
    the money may have been free to the central bank and their cronies who got it so very cheaply, or in return for their worthless mortgage-based hoohah “assets”.
    the paper wealth of the wealthy was “preserved”.
    unfortunately, the nation is now more or less bankrupt, instead of the banks, their stockholders, and clients. the losses were transferred to the Treasury.

    you write: “I was reflecting some truth…”

    i am steverino, not Steve. i am ALWAYS steverino on this site.

    you are, apparently: Skeptical, skeptic, and possibly Doubt Ober Skepticism, also.

    i know who i am and what i am talking about, even tho this subject is so vast, secretive and esoteric that i KNOW my “truth” is tentative.

    mr. bonner seems to me to know who he is and what he is talking about.

    i started studying economics at the graduate level in 1967. most of what i learned about macro-economics, then, i no longer believe to be valid, now.

    mr bonner has written and published extensively in this field, often along with mr. wiggin, as on this site.

    if you find this helpful, thank you!

  • Skeptical

    Mr Steverino,
    If habitual economics is allowed we will be backwashed, retrace 10 thousand years to the stone age. Where tribesman habitually dropped off heads for festive feast.
    I am neutral, neither supporting nor retracting as regard lottery economics.
    To determine if there ever is cost free money, it all rest on one’s sense and how far one’s imagination could carry his thought. Or, dig slightly underground if there is truth. Absolutely, no further controversy. It is at the mercy of one’s conscience. If there is. I mean if there is cost free money, modern economics would no longer be relevant. Appropriation would effectively supersede such terms like production cost, cashflow problem, marginal cost and all related gadgets. Rendering these no more than high-flying economic jargons that an expert use to prop up his ego.

    I agree the subject is vast and esoteric.
    Meddling is not a matter of concern, but to be praised, provided it is positive of certain degree. What makes the difference is when we hear free-flowing words “We support” or “We condemn” from a statesman or stateswoman. I wish that no genuine or productive one would be dwarfed and
    equivalently no crooks and cheats would be emboldened. Else, all of us or the
    world will sink deeper..deeper. Well, it may or may not be a good idea to beat a crook or cheat back with the exact copy of “crookery method”.

    It is not a matter of absolute, more often than not, degree in celsius is often missed read as fahrenheit.

    Have a nice day. Thanks for the story.

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