Bill Bonner

“When you visit India…and I suppose it is true when you visit China or Brazil too…you don’t even notice at first…it’s not so much a thought…but more like a feeling…”

We were explaining to colleagues why it’s the end of the world as we have known it.

Back to that in a minute…

The Dow rose 102 points yesterday. If this keeps up we’re going to have to amend our view.

In our way of looking at things…we are still in a prolonged bounce following the big drop of ’08-’09. Stocks have yet to realize that the economy is in a depression. Yes, we know it doesn’t seem much like a depression. Even we have stopped using the term…

Now we’re calling it “The Great Correction”…in which we’re expecting a number of things to get sorted out – including the stock market boom from ’82-’07…the post-’71 dollar-backed monetary system…and the huge credit expansion that goes all the way back to 1946.

But that’s not all. It could be that this period will correct the whole, extraordinary surge in Anglo-Saxon power that began in the 17th century. English speakers have been on a roll since Sir Francis Drake defeated the combined armada of Spain and France in 1588. Soon after England began putting together her empire…and then, the industrial revolution turned Britain and America into economic powerhouses.

In addition to reducing asset prices and de-leveraging the economy, The Great Correction could be reducing the relative power and influence of the English speaking peoples. We don’t know…but that’s the way it looks now…

Returning to our conversation…

“Of course, things are a mess in Mumbai…I mean, the traffic is terrible…the heat is appalling…there are people who look like they haven’t eaten in a month…

“But you can’t help but notice that India is moving forward. It’s chaotic; it’s uncomfortable; it’s unpredictable…but it is going ahead. People are young. Buildings are new. There are new cars on the road…and new shops opening up.

We saw a couple of Tata Motors’ new Nano cars – cute little cars that sell for only $2,500. But there were dozens of car varieties we never see on American or European roads.

“You can’t help yourself…you begin looking into the future…and imagining what it will be like when they finish a bridge or complete a road…or demolish a slum…or find new ways to do things…new ways to get along with one another…and new ways to run the country…

“Then, when you come back to France or America, you’re suddenly back in the past. It’s a relief, because everything seems familiar and orderly. Like a museum. But it’s a let-down too…because you’re back to dealing with old problems…old people…and old institutions. While the emerging economies look ahead…the developed ones look back.”

What is this health care bill? Is it a new way of making the future better? Or is it an old solution to an old problem? The feds first considered a takeover of the health care industry during the Roosevelt administration. They’ve been working, planning, plotting their way towards the same objective ever since – for 80 years.

And what they’ve finally gotten is yesterday’s bad solution to yesterday’s problem.

The nation state was invented by the French at the beginning of the 19th century. By the middle of the 19th century, Otto von Bismarck added the refinements that we know today as the modern welfare state.

And now…as every welfare state in the world faces decline and bankruptcy…America has completed its collection of welfare state essentials – with a national health care system.

Why are the old welfare states going broke? Because the payoffs to the past have become too great. There are too many old people who expect pensions and health care. There are too many old industries that, like patients in a mental hospital, need to be cared for. There are too many bailouts…too many subsidies…too many protections…too many safety nets.

Every society is a pact between the future and the past. A new society looks to the future. An old one looks back at the past. As a successful economy matures it owes more and more for things that have already happened. China builds new high-speed railways, for example, while in the US we’re still paying Amtrak’s losses of the last 40 years.

Over time, more and more special interests, anglers, parasites, leeches and lobbyists get a grip on a financial system. They find ways to take advantage of it…to exploit the system for their own ends. Trade unions, business groups, the rich, the poor, the middle classes – everybody wants a benefit.

The health care act is not a bold new initiative that will lead the country forward into a new era. It is 2,400 pages of payoffs to old interests – payoffs to senators and congressmen for supporting the bill, payoffs to the pharmaceutical industry, payoffs to organized labor and insurance companies…payoffs to groups that were set up many years ago.

The benefits go to the past; the costs go to the future. Even if the economy were running at normal speeds, the deficits of the world’s leading welfare states would still be increasing. Only 10% of current deficits are related to “stimulus” efforts. The rest is payoffs… To organized interests representing the past.

In the US, Federal debt is expected to reach 140% of GDP by 2014. In the G7 countries as a whole, debt-to-GDP will go over 100% just two years from now.

The welfare state model is no longer the model for the future. It’s a model for the past…that will soon be defunct.


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.

  • Anti-Yarrh

    “Stocks have yet to realize that the economy is in a depression”

    Stocks aren’t the only things to realize yet that we’re currently in a depression.

    I think there’s a certain person stalking these comment boards that is as delusional as stocks!

    Those nano cars may be cute, but with such a small mass, your chances of survival in an accident over thirty miles an hour can be measured on the nano scale.

  • david

    1,000,000 percent dead on.

  • Rick Halsen

    Gads where are the nads? It’s not a Depression any longer because it doesn’t resemble 1930 so now it’s something else? A Great Correction all of a sudden? What kind of couching one’s original stance tripe is this?

    First off, there were numerous instances during GDI where it ‘looked’ like things were improving. Of course in the longer run we know they weren’t. But no one that I know of goes back to that period and states….”Well, from August of 1934 to December of the same year it really wasn’t a Depression but more of a Correction so in reality the Great Depression as we prefer to coin it today was in fact intermittent in scope and thus accurately can’t be called a true Depression in retrospect. More like a Great Corrective Depression.”

    C’mon, Bill. You know dam well increasing unemployment and other leading trend indicators today point this being at minimum a Depression equal to and quite possibly greater than what compares to “1930” – and certainly equal to and greater than the Great Recession’s or Great Correction’s from 1945 thru 1980. Great Correction or Great Recession this situation can’t be called either because it can’t. The math won’t allow it. It’s a burgeoning collapse of fiat currency economies within a global-wide immense credit contraction underpinned by enormous debt burdens, both private and public, of monumental structural proportions which has never been seen in the history of modern civilization AND which has just STARTED in motion and has YET to cascade into it’s full momentum.

    Cut with the CYA couch crap so you can look more right when wrong and simultaneously less wrong when right. Stick to your original guns which called it right from the get go. We’re in the beginning stage of a Great Depression. Make that a Great Global Depression. No two dam ways about it.

    Great Correction?. Oh brother. What next? Great Milder Correction?

    Grow a better pair. You’re better than this.


  • richard largepants

    i nominate you as the successor to BB – this post was a literary castration by BB and you called him on his backpedaling true and straight!

    Keep up the good work RH!

    BB – cmon! this is the weakest post ever!

  • Harry

    Wow! This is awesome! I called BB out on this last week for moonwalking on his original “depression” talk and hedging with this “correction” nonsense. It’s great to see others finally seeing through this guy’s crap.

    I also chuckle at the “crash flag is flying” for several weeks reduced now to “The Dow rose 102 points yesterday. If this keeps up we’re going to have to amend our view.” Really?! LOL!

    You’ve missed one of the best opportunities in your lifetime to invest and make a killing. But no, you clung to your doomsday scenario until finally starting to see the light.

    And people pay you for advice/consultation? If they aren’t really pissed off and suing you for lousy management, you’re extremely fortunate.

    Now will some of you start listening to what I’ve been saying her for weeks? We’ve established who BB really is, isn’t it time to wise up?

  • Gian

    Indian growth was fueled by US credit expansion plus Indian Govt is itself committed to Welfare State and infact has drastically introduced all new kinds of Welfare and Subsidy in last five years, plus much higher wages for Public Sector and Universities.

    So India is headed to the Correction at a quick pace.

  • CommonCents

    “Great Correction”, what is that? It makes it sound like the powers the be are doing something right. It should be…..The Great Destruction.

  • Nick

    Where is the ‘National Health Care System’ in regulated private health insurance? OPM has been running health exchanges for decades for 8 million people and only a 2% administrative overhead. This guy forecasts the Fall of Western Civilization in a set of regulations that protects the health care consumer. The fearful and faithless cry ‘slippery slope’ whenever the world changes and they feel they are not in control. Move over dinosaurs….

  • Teresa

    we are witnessing nothing less than Great Global Depression!
    Look around the world!

  • CousinBoudreaux


    To quote Homer Simpson “I am intrigued by your ideas and would like to subscribe to your newsletter.”

    I was ready to call Bill out for his new found fawning over India which didn’t start until he visited and some shoe-shine boy asked him for his autograph.

  • Mike

    Good morning. Our politicians don’t have a clue, as we all know. And worse, majority no longer rules in America. The recent “vandalism” the media calls it concerns me. The politicians say we should vote and debate, but not aggressively protest. We all know how well that is working. Our country, the people, have a history of fighting to liberate folks. Started with a tea party and so on. I think the “vandalism” is the beginning of more not less aggressive protesting. If our country doesn’t find a way to quickly introduce a third political party, with $$ and clout, revolution is the only answer. We need more competition in politics, now.

  • Mike

    As far as BB waffling, who in the world knows what to expect next. I’ve often heard the stock market hates uncertainity. So much for that saying. How about, “short time gain, long term pain?”

  • Bill Bonner’s Biggest Fan

    this essay from the peerless BB may very well be the best essay/blog post/commentary on our current place in history and could be BB’s best DR essay that I have read

    as for the nit-picking commentors – you don’t get it…. hopefully you will get it when you tell stories to your grand-kids about how you used to live in a “country” called “the United States of America” and how it was the greatest country the world had ever seen, that is, until it wasn’t…

  • Lost & Found

    Good luck, Bill. You’ll need it. As some of the rest of us do.

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