Author Archives: Bill Bonner

     

 

 

Exterminating Angel

LOVINGSTON, VIRGINIA – Amid all the sound and fury of the Trump news cycle, hardly anyone noticed. There is a specter haunting this economy. It is the specter of inflation…

 

See, if you want to whip inflation now, you don’t need to do any of the really difficult things, such as printing less money… or God forbid, return to honest, market-chosen money (shudder!). All you need is intelligent nutrition!

Image credit: Marshall Astor

 

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To Unleash or Not to Unleash, That is the Question…

LOVINGSTON, VIRGINIA –  Corporate earnings have been going down for nearly three years. They are now about 10% below the level set in the late summer of 2014. Why should stocks be so expensive?

 

Example of something that one should better not unleash. The probability that a win-lose proposition will develop upon meeting it seems high. It wins, because it gets to eat…

Image credit: Urs Hagen

 

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Regret and Suffering

BALTIMORE – Victoribus spolia

So far, the most satisfying thing about the Trump win has been the howls and whines coming from the establishment. Each appointment – some good, some bad from our perspective – has brought forth such heavy lamentations.

 

Oh no! Alaric the Visigoth is here! Hide the women and children! And don’t forget the vestal virgins, if you can find any…

 

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Monster or Mozart?

BALTIMORE – Investors seem to be holding their breath, like a man hiding a cigarette from his wife. It’s just a feeling, and it’s not the first time we’ve had it… but it feels as though it wouldn’t take much to send them all running.

 

Actually, they’re not going anywhere yet… but there is a lot of overconfidence by those who were very worried when prices were a lot better – click to enlarge.

 

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Swamp Critters

BALTIMORE – The Dow is back above the 20,000-point mark. Federal debt, as officially tallied, is up to nearly $20 trillion. The two go together, egging each other on. The Dow is up 20 times since 1980. So is the U.S. national debt. Debt feeds the stock market and the swamp.

What’s not up so much is real output, as measured by GDP. It’s up only 6.4 times over the same period. Debt and asset prices have been rising three times as fast as GDP for 36 years! Best bet: Sell stocks and bonds (debt). Buy GDP. How? To be addressed in due course.

 

SGG! The “something’s gotta give” chart: total US credit market debt, federal debt, the Wilshire Total Market Index an GDP. Unless something gives, we will need a microscope in a few years in order to detect GDP on this chart. Consider also that GDP has been “upgraded” numerous time in recent decades, most recently less than two years ago (these upgrades involve adding hundreds of billions of dollars to economic output no-one has ever spent or received – they are merely statistical artifacts. It is slightly different with debt; we can simply count that) – click to enlarge.

 

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A Simple Formula

MIAMI – How do we know if new programs will make the economy better… or worse? Here’s a simple formula:

 

W = rv (w-w – w-l)

 

That is, wealth is equal to the real value of win-win exchanges minus the loss from win-lose exchanges. Yes, dear reader, it’s as simple as that. Like a whittler working on a piece of wood, we’ve shaved so much off, there is nothing left of it… except the essential heartwood.

 

When devising a win-win, be careful not to let it go bad-bad.

 

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Long March

BALTIMORE – Last week, Team Trump made its triumphant march into Washington. The president-elect paid his respects at the Tomb of the Unknown Soldier, admired his new hotel in Washington, and quipped that his cabinet had the highest IQs of any on record.

 

We’re over here! Too brainy for our skulls! We don’t know whether the new cabinet’s proximity to Einstein has actually been measured, but from experience we caution that seemingly high intelligence often doesn’t keep people from being morons (there is a long  list of high IQ morons considered to be members of the intelligentsia). That said, the Donald himself is certainly a lot sharper than many people give him credit for; his judgment on the matter should probably be given the benefit of the doubt… – click to enlarge.

 

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Impossible Bills

BALTIMORE – The tweet was never sent and never received:  “Lying Otto von Bismarck set us up for bankruptcy! What was he thinking? Sad!!” Instead, Mr. Trump said last weekend that, far from trying to curb the promises and cut the costs of the welfare state, he was nearly ready to unveil a plan to replace Obamacare with something better: a plan that would provide “insurance for everybody.

 

The “iron chancellor” Otto von Bismarck, wearing the type of helmet one shouldn’t leave lying around on a chair. Bismarck was responsible for the unification of Germany, which he achieved by engineering several wars as prime minister and foreign minister of Prussia. Prussia waged war against Denmark, Austria and France, and defeated all of them. Bismarck then unified the independent German states, city-states, bishoprics and principalities partly by annexation and partly by negotiation. Once Germany was unified, he was appointed “chancellor of the empire”. It was as though he was finally promoted to a post beyond his competence, in line with the Peter principle. First he embarked on the so-called Kulturkampf, aiming to undermine the power of the Catholic Church. The Church fought back by entering into a powerful political alliance with the Center Party. Bismarck abandoned the effort when he realized that secularists were using it to attack religion in general and that he would need the Center Party’s cooperation. Shortly after Germany’s unification, Europe was struck by an economic depression (incidentally, the term “crash” was coined when stocks cratered on the Vienna stock exchange in 1873). Bismarck immediately ensured that the depression would get worse by introducing tariffs in order to “protect” German industry. As the economic downturn predictably intensified, the popularity of socialism increased markedly. Bismarck responded by banning all socialist organizations and literature in 1878, which utterly failed to quell the rise of the socialists. In a renewed effort to undermine support for them, Bismarck introduced the welfare state in the 1880s, which 140 years later is in the process of bankrupting all of Western civilization. Do we have anything good to say about the man? Yes, we do. In contrast to his time as Prussia’s prime minister, he eschewed war as chancellor of the empire. In fact, he did everything in his power to preserve peace in Europe – it was by far his greatest concern. One year before his death he darkly predicted: “One day a great European War will come out of some damned foolish thing in the Balkans.

 

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Government Sachs

BALTIMORE – Two things. One we understand. The other we don’t. First, you gotta hand it to Wall Street. The financial elite were 1,000% behind Hillary. Then, when Donald Trump won the White House, within minutes, they were in his cabinet.

 

And then they saw the sign, and it looked like a winner’s sign. And so they embraced the orange interloper without further ado…

 

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“Trade Cheaters”

It is worse than “voodoo economics,” says former Treasury Secretary Larry Summers. It is the “economic equivalent of creationism.” Wait a minute –  Larry Summers is wrong about almost everything. Could he be right about this?

 

Larry Summers, the man who is usually wrong about almost everything. As we have always argued, the economy is much safer when he sleeps, so his tendency to fall asleep on all sorts of occasions should definitely be welcomed. Believe it or not though, in very rare instances Larry is actually right about something. For example, the politically incorrect comments that got him fired from his post as Harvard president definitely shouldn’t have been dismissed out of hand. Is it possible that he is actually right about something again?

Photo credit: Chip Somodevilla

 

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Worst in Class

BALTIMORE – People can believe whatever they want. But sooner or later, real life intervenes. We just like to see the looks on their faces when it does. By that measure, 2017 may be our best year ever. Rarely have so many people believed so many impossible things.

 

Alice laughed. “There’s no use trying,” she said: “one can’t believe impossible things.” “I daresay you haven’t had much practice,” said the Queen. “When I was your age, I always did it for half-an-hour a day. Why, sometimes I’ve believed as many as six impossible things before breakfast.”

Image credit: Disney

 

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Barbarous Huns

 

Life is one long struggle in the dark.

– Lucretius

 

BALTIMORE – In January of this year, the Empire Herald reported that a “meth-addled couple” had eaten a homeless man in New York City’s Central Park. Later, Now8News reported that a can of cookie dough had “exploded in a woman’s vagina”; the woman was alleged to be shoplifting.

 

The fellows depicted above certainly mesh perfectly with the image of meth-addled cannibals conjured by our imagination… A few interesting questions regarding this event remain unanswered to this day. Did they marinate their meal? Fill it with stuffing? What were their wine and salad choices? Was their dinner roasted on a spit, cooked in a jungle wok the traditional way, or were these pale gourmets connoisseurs of wino tartare?

 

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