| Thursday, May 15, 2014 | Issue #54 | The Biggest Monetary Event... Since the Age of Jesus A historic event will soon transform the world's money supplies. Dollars... yen... euro... rubles... yuan... One event will impact more than 70 major currencies. According to scholars, it will mark the biggest monetary revolution since the time of Jesus, some 2,000 years ago. When it hits later this year, some investors stand to get very rich. Others could lose their life savings overnight. For details on how to navigate this historic event, please go here now.
Joel Bowman, checking in from Baltimore, Maryland...
We're back in the Land of Plenty, dear reader.
Plenty of what we need. Plenty of what we don't. And plenty of everything in between...
At every turn, media advertising tantalizes our senses, alerting us to products and services we hadn't even realized we were doing without. Across the radio waves... on the hotel television... outside the car window...
This morning, we drove along "the Loop" in Houston, on our way to the airport. The motorways there are lined with billboards. They go on... and on... and on. As far as the eye can see...
"If you've taken such-and-such a drug, you might be eligible for..."
"Suffered an injury while at the workplace? Call..."
"Failed to exercise common sense and/or take responsibility for your own actions? We're here to help..."
The giant signs lean in over the road, like vultures looking for a juicy eyeball to peck out. We averted our gaze as best we could, lest we accidentally find an ambulance-chaser in our immediate employ.
A short ride later, safely on the plane, we unfurled the nation's broadsheets and settled in for the flight. It wasn't long before an article in The Wall Street Journal disrupted our repose.
"Debt Use Growing Unevenly," the article fretted.
Apparently, growth in student loan debt is outpacing credit card and mortgage debt... by a large measure.
This phenomenon is probably not a good sign, but the author didn't seem to understand why. Nor did he appear to want to understand. Wasting not a second to think, he dived right in to his babbling editorial, unable to escape the first sentence without confusion taking hold.
"Americans made more progress repairing their post recession finances and have increased their overall borrowing, yet they are also showing an aversion to credit cards and new mortgages that could hinder economic recovery."
Astute readers will notice the curious contradictions here...
We are told that Americans have both improved their financial standing and simultaneously gone further into debt. "We're in a hole," he seems to say, "but at least we're still digging!"
Huh?
To be fair, the article outlines some truly worrying statistics, numbers we've covered in these very pages before. Student loans are up 361% during the past year to more than $1.1 trillion.
That student loans are at such astronomical levels is, indeed, unsettling... especially given the questionable return on investment: a college degree. But that's not what concerns the author, who appears to view any increase in borrowing as - a priori - a good thing... no matter the return.
Most troubling for the author, is the fact that mortgage debt is only up 65%, to a little more than $8 trillion. Moreover, he laments, credit card debt is actually down over the same period.
The horror!
In other words, he's not perturbed that students are on the hook for such an astronomical amount of (non-dischargeable) debt... he's bothered that mortgage and credit card holders are not walking the same plank!
The piece goes on to describe, in earnestly muddleheaded terms, grave threats to growth and prosperity... at least as the author figures it.
"The weak borrowing trends also could signal a continued lack of faith in the recovery. If Americas don't borrow and spend more, that would mean weaker economic and hiring activity, miring growth in a kind of negative feedback loop."
The message is clear, dear reader. When stuck in a hole, keep digging!
Two Wolves, One Sheep By Bill Bonner
 | | Oh my... Tim Geithner is back. The former secretary of the Treasury tells us that, thanks to him and his fellow fixers, the U.S. was able to "prevent another Great Depression."
"We put out the financial fire," he claims, "not because we wanted to protect the bankers, but because we wanted to prevent mass unemployment."
In any event, he prevented at least one person from being unemployed: Timothy Geithner. After his tour of duty at the Department of the Treasury was over, he turned up his nose and told the world he was not just another corrupt bureaucrat slipping through the revolving door to Wall Street. A few months later... whoosh!... and there he was in a private equity firm.
Our job is to connect the dots... and today we connect a few more.
The definition of democracy is this: Two wolves and one sheep decide on what to have for dinner.
The wolves, no doubt, are with Pope Francis. The pope believes governments should redistribute wealth. Many people agree with him. They want to see the lucre passed around. It is a shame the pontiff did not bother to wonder how the wealth got where it is in the first place. If he had, he may have taken a closer look at Mr. Geithner.
Maybe God - with his invisible hand - let the chips fall where he wanted them to, following the crisis of 2008. Or maybe Geithner and his Wall Street cronies got their fat mitts on the loot first.
Everyone - believers and heathens alike - believes he knows the mind of God... or claims to. Reforestation, recycling, redistribution... and economic recovery! Surely the Big Man is for them all.
Then you let it be known you favor higher marginal taxes (on someone else, of course); this puts you on the side of the angels too. But for all we know, the angels prefer strip mining and flat taxes... and drive down the highway throwing beer cans out the window.
The mind of God, like the future, is unknowable. But that doesn't seem to stop anyone. Geithner's book comes out this week. It's called Stress Test.
As the title suggests, Geithner claims he was tested by the financial crisis in 2008 to 2009. He believes he passed. Now, he's peddling his version of the story, complete with God in his pocket, and the future on the teleprompter.
In the autumn of 2008, for example, Geithner knew what was coming. As his colleague Meg McConnell put it, "There will be shantytowns and soup lines across the country."
How did she know that? Because "panics kill economies," says Geithner.
Based on the evidence, panics help bring economies to life. Like forest fires, they burn off the dead wood.
That happened twice in the early 20th century. There was a panic in 1907 and another in 1920. The stock market fell by half between June 1907 and January 1908. The economy retreated too. But by mid-1908, stocks were back to their highs and the economy was booming.
Again, between July 1920 and June 1921, the U.S. stock market lost half its value. And again, the feds did nothing. The economy went into a depression, with double-digit unemployment and 30% less smoke belching from factory chimneys.
Instead of running stimulative budget deficits, the federal government posted a surplus. No TARP. No TALF. No ZIRP. No QE. Despite, or perhaps because of, this government neglect, the fire burned hot for only a few months. By the summer of 1921, the tinder was consumed and the flames died out. Within 18 months, people were back at work.
That was the last time federal firefighters let an economic blaze have its way. Since then, every conflagration has been met with smoke jumpers and water bombs. The Panic of 1929, for example, was fought by Hoover... and then by Roosevelt. Together, they dumped so much water on the economy it was soggy for more than a decade.
More recently, Alan "Smokey" Greenspan extinguished the campfires of 1987... and 2000. Then, it was Geithner's turn.
Yes, it was "messy," he admits. And yes, there were some "collateral beneficiaries" (he doesn't mention himself by name; there was no need to do so).
"But this is the only way to ultimately protect the innocent victims of the crisis from the calamitous damage of economic depressions."
St. Timothy to the rescue. Hallelujah!
Regards,
Bill Bonner
Founder, Agora Inc. A Note From Joel: In addition to having founded Agora Publishing and authored several best-selling books, Bill is chairman of Bonner & Partners Family Office, a project dedicated to helping turn family wealth into permanent wealth. You can check out his always-insightful musings at Diary of a Rogue Economist. | Photo originally posted by Chris Fahey on Wikimedia Commons. | | |
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