Plot To Overthrow the US Dollar
by Bill Bonner: Lower
Lows in the Cat-Like Real Estate Market
The Dow got
a boost Thursday up 143 points.
where it was about $1,617.
know what we think.
The Great Correction
has a lot of work to do there are so many things that need
correction. And it will take time to do it. Meanwhile, your goal
as an investor is to lose less money than everyone else. He who
loses least wins!
go down. Real estate should go down. Even gold should go down
the dollar goes up!
Cash will be
What kind of
youre asking a lot from a free service!
But what the
Were happy to tell you what we think. We just hope
its worth at least what you paid for it.
the way we see it. Cash is king in a de-leveraging, dis-inflationary,
depressing slump. The king should reign for a long time
it will take a long time to squeeze the excess debt out of the US
But as you
know, theres a lot more going on. While the private sector
reduces its debt the public sector adds debt. And the people who
run the public sector are activists
determined to de-throne
the king. They are plotting treacherous acts of insurrection
They are looking for the Bastille!
Ben Bernanke, stirring up the mob. Bloomberg reports:
Chairman Ben S. Bernanke said the US is facing a crisis with a
jobless rate at or above 9 percent since April 2009, and that
fiscal discipline would help spur the economic recovery.
unemployment situation we have, the jobs situation, is really
a national crisis, Bernanke said in response to questions
after a speech yesterday in Cleveland. Weve had close
to 10 percent unemployment now for a number of years and, of the
people who are unemployed, about 45 percent have been unemployed
for six months or more. This is unheard of.
is preparing the crowd. He wants to take action to topple his royal
highness, king dollar. He wants to bring cash down
figures that the way to do it is to drop him out of a helicopter.
see so much cash fluttering in the air theyll want to get
and get rid of it
as soon as possible. That will get
the economy rolling again and convince people that he, Ben Bernanke,
actually knows what hes talking about
and that he, Ben
Shalom Bernanke, should be in charge. He should be the real monarch
But Mr. Bernankes
hour has not come round yet. He is faced with opposition in Congress
in his own central bank. He will have to wait before it is time
to slouch to Bethlehem
hell have to wait for things to
then, hell be able to start up the helicopters.
make things worse? When? Keep reading
more bad news for the world economy. Again, Bloomberg is
on the case:
Growth Seen Less Than 5% by 2016: Poll
investors predict Chinese growth will slow to less than half the
pace sustained since the government began dismantling Mao Zedongs
communist economy three decades ago, a Bloomberg poll indicated.
percent of respondents said Chinas gross domestic product,
which rose 9.5 percent last quarter, will gain less than 5 percent
annually by 2016. Twelve percent see such a slowdown within a
year, and 47 percent said it will occur in two to five years,
the quarterly Bloomberg Global Poll of investors, analysts and
traders who are Bloomberg subscribers showed.
saw its exports tumble the most since at least 1979 amid the 2008-09
global crisis, may not be able to rely on trade in any prolonged
demand slump in Europe and the US, now battling to avoid returning
to a recession. Managing the economic downshift would fall to
the Communist Partys next leaders, as President Hu Jintao
and Premier Wen Jiabao begin their transition from power late
were not buying things, theyre not making them,
said Charles Doraine, Chief Executive Officer of Doraine Wealth
Management in Corpus Christi, Texas, and a respondent in the poll
of 1,031 investors, analysts and traders taken Sept. 26.
dont buy, Chinese dont make. That leaves both of them
feeling a little poorer.
what happens when people get poor.
(CBS) Thousands of Philadelphia residents gathered in long
lines, citywide, waiting hours outside of 12 County Assistance
Offices, hoping to apply for relief following Hurricane Irene.
many confused and lacking official information, hoped to receive
a month of food stamps for food ruined by floods and power problems
caused by the hurricane.
called Disaster SNAP (Supplemental Nutrition Assistance Program),
was created by the federal government and is administered by the
State Department of Public Welfare.
unexpectedly large turnouts, the application process was moved
from Disaster Recovery Centers in Philadelphia to the 12 state
offices in neighborhoods citywide.
based on income, household size and proof of flood-damage can
receive up to a months worth of food stamps.
receiving food stamps are eligible for partial relief, to the
extent that their prior months food supply was damaged.
the day Monday, and beginning early Tuesday morning, many state
offices had lines stretching for blocks with confused residents,
many alerted by other neighbors that relief was available.
any guidance was available at offices in the early going, although
later in the day, officials did permit applicants to fill out
forms outside the building instead of waiting for hours in line.
A thought keeps
coming to mind. This correction is bigger, meaner and longer lasting
than even we imagined. Its not just taking us through a normal
and not even through a normal credit contraction.
have so little experience with credit contractions that we dont
know what normal is. Like the US in the 30s? Like Japan in
At least we
know how, in theory, credit contractions work. People cut back spending
until they have rebuilt their balance sheets. Thats why they
are also called balance sheet recessions. We can also
make some estimates about how long they will last, based on how
long it should take to pay down debt. When the correction began
we calculated that it would last 7 to 10 years. Thats how
long it would take to pay down debt to 80s levels, assuming
savings rates went back to where they had been at the beginning
of the 80s.
Now, it looks
like it will take longer. Maybe forever. At least, it will seem
This is partly
because the feds interfered. They panicked when it looked like the
process of de-leveraging was out of control. People were going broke
even people who made large campaign contributions! Even people
who were members of that privileged fraternity bankers! So,
they came in
and locked up the economy in its depressed state,
keeping zombie institutions alive indefinitely.
not all. It will also take longer because it is a more serious correction.
It has a lot of work to do. What exactly?
Well, we dont
know exactly. But many of the governments of the developed countries
are not likely to survive.
Bill, have you lost your mind?
take anything for granted. And we know that we are sometimes right
and sometimes wrong. And always in doubt. Still, the social welfare
governments of the modern world are not equipped to deal with this
challenge. They were designed for growing economies, not stagnant
ones. They were all created in a period of growth made possible
by the widespread introduction of cheap fossil fuels. That period
is over. Temporarily or permanently. And the dinosaurs of the growth
era are unable to adapt to the colder climate of the new age of
Here in France,
for example, theyve already taxed the rich about as much as
the rich can stand. And theyve robbed future generations as
much as they could get away with. What else can they do?
In the US,
they can probably tax the rich harder
but it will yield peanuts,
perhaps even reducing the feds take. Americas providential
state is less generous and less ambitious socially than the French
model. On the other hand, the US is far more ambitious militarily.
For every layabout chiseler the French supports, the US supports
two soldiers and one Pentagon contractor. The cost is staggering
and probably even more irreducible than Europes social
Europeans social welfare states
nor the Americans
are likely to survive in their present
with permission from the Daily
Bonner is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
The New Empire of Debt: The Rise Of An Epic Financial Crisis
and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets (Wiley, 2007). His
latest book is Dice
Have No Memory.
Since 1999, Bill has been a daily contributor and the driving force
behind The Daily Reckoning.
© 2011 Daily Reckoning
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