How to Purge the Rot From American Finance
How to Purge the Rot From American Finance by Bill Bonner – Bonner and Partners
CHERBOURG, FRANCE – We’re on the ferry that will take us to Ireland. It is foggy outside. We can see nothing.
This is just the beginning of a long trip that will take us to South America (where we get to see a financial crisis underway in Argentina)… Germany (where we hope to find out more about how Germans are preparing to tighten up at the European Central Bank)… and Bermuda, where we are scheduled to give a speech to a group of dear readers at the Legacy Investment Summit. (If you’d like to be one of those dear readers, go here.)
Whimper and Bang
Last week, we wrote about the Whimper and the Bang. The Whimper – a credit deflation… with falling stock prices and a recession – is inevitable. Every credit-fueled boom eventually runs out of gas… and then turns into a bust.
As for Making America Great Again… you can forget about it until this debt bubble issue is resolved.
And you’re not going to do that by increasing the military budget, cutting taxes (unless you’re willing to cut spending, too), or getting into pointless trade wars with everyone from Canada to China.
All of the blather about “more than full employment”… 4% growth… and the tax cut “paying for itself”… is just a distraction. Look at the numbers more carefully – they are almost all misleading or irrelevant.
So are the endless feuds and fantasies coming out of Washington. Soon, it won’t matter who ratted out the president in The New York Times.
It won’t matter, either, whether the Russians tried to influence the 2016 presidential election. (Who didn’t?) Or, whether or not POTUS really is a moron.
These things won’t matter because people will have other things to worry about.
Goldman Sachs’ bear market indicator, for example, is at a 50-year high… Most likely, we won’t see asset prices this high again – in real terms – in our lifetimes.
In a Whimper, prices go down… money disappears… and the economy goes into depression. What happens after that is less sure. But our guess is that the Whimper will be followed by a Bang.