Dr. Bernankenstein Created a Monster, Not a Normal Economy

When a man is up to no good, it doesn’t help that he gets lucky.

A fellow goes to rob your house. He finds the door unlocked. He enters without breaking. He steals everything. Mission accomplished.

Later on, he is arrested for robbing a bank. He gets 10 years in the slammer.

He would have been better off if he had found the door locked tight… and gave up!

So the latest news from the Congressional Budget Office is not good, either.

Now the politicians can stop worrying about deficits…and continue to rob the future. Good news is bad news. From The New York Times:

Since the recession ended four years ago, the federal budget deficit has topped $1 trillion every year. But now the government’s annual deficit is shrinking far faster than anyone in Washington expected, and perhaps even faster than many economists think is advisable for the health of the economy.

That is the thrust of a new report released Tuesday by the nonpartisan Congressional Budget Office, estimating that the deficit for this fiscal year, which ends on September 30, will fall to about $642 billion, or 4% of the nation’s annual economic output, about $200 billion lower than the agency estimated just three months ago.

Even dumbbell economists believe lower deficits are bad news…but for an entirely different reason. They believe lower deficits will reduce GDP and jobs. They think the only reason the economy is doing so well is that the feds have been willing to spend money they didn’t have on things they didn’t need.

And that’s another reason the budget news is bad news: It makes people think the Great Experiment is a success! Here’s US Trust bank with analysis:

We believe the policy response we call the Great Experiment is appropriate and has helped the economy heal and normalize. As gun-shy investors see the policies working they are returning to the risk markets and a secular bull market is beginning. Other countries have responded to this success by trying these bold initiatives with the Bank of Japan now the most prominent example…

Whoa! Did we hear that right? The Great Experiment helped the economy normalise?

Something funny about that. ‘Normal’ is what you get when you don’t experiment. Normal comes from…well…normal. If you want a normal outcome, you have to make sure you’re not doing anything too extraordinary, no?

So how can you get to normal from a Great Experiment?

We will leave that for the philosophers of tomorrow. Today, we’ll merely suggest that maybe this economy isn’t so normal. What’s normal about an economy in which the major financial institutions can borrow money at negative real interest rates?

What’s normal about an economy in which people who have run their businesses so recklessly that they had to be bailed out by the government are still running their businesses…and can now borrow at lower rates than good businesses?

And what’s normal about an economy in which the feds still spend $1.60 for every dollar they get in tax receipts…and make up most of the difference by printing money?

This is not a normal economy at all…but a strange and grotesque one…with wires going into its brains and tubes feeding into its veins. The Great Experiment in monetary policy has produced an experimental economy — just as you’d imagine.

The word ‘normal’ refers to what eventually happens to an economy no matter how hard the Federal Reserve try to stop it. It’s where you end up after the Great Experiment fails…and you realize that Dr. Bernankenstein has produced a monster…not a normal economy.


Bill Bonner
for Markets and Money

Join Markets and Money on Google+

for Markets and Money

From the Archives…

Multinationals vs. the Nation State
17-05-13 – Sam Volkering

The Federal Reserve Will Panic and Climb Even Higher
16-05-13 – Bill Bonner

Survival of the Most Capital Efficient
15-05-13 ­– Dan Denning

New Australian Home Buyers Aren’t Convinced
14-05-13 – Dan Denning

What Happens When Everyone in the World has Zero Interest Rates?
13-05-13 – Dan Denning

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities.

Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and MoneyDice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010. 

To have Bill's reckonings delivered straight to your inbox subscribe to Markets and Money for free here.

Read more

Bill Bonner

Latest posts by Bill Bonner (see all)

Leave a Reply

5 Comments on "Dr. Bernankenstein Created a Monster, Not a Normal Economy"

newest oldest most voted
Notify of

Don’t worry about those matrix economists Bill. We have a transitional economy. Pack your bags for nirvana dude.


Just another step closer to the Second Great Depression. Won’t be too long now.


This is not a normal economy at all…but a strange and grotesque one…

Yeh, thanks to the paper shufflers om Wall St who at their peak brought the US to within 24 hours of bankruptcy.

Normal, forget it .. indeed, it might take a decade or more to unravel the mess. Meanwhile the, do this, do that commentary rolls on, as if somehow the current managers are misfits. Clearly they are not, given the mess they inherited.

truth and integrity
Great article. Who wants their money first! When people realize there is no return on equity in the stocks that are escalating, it will be too late to withdraw. Everyone in the stocks will lose. The Australian stock market has only 100 stocks out of 2500 that show a 20% return on equity required for sustainability and this is declining rapidly. The US must be twice as bad with the level of the DOW. There are no indexes or indicators that reflect any growth. The Baltic dry index is traveling at the bottom from the last ten years. US liabilities… Read more »

Well said ‘truth’, there are no ‘statesmen’ around any more, at least not in a position of authority. Someone is needed to put things right but I am afraid that the mess is too far gone to remedy quickly. Politician’s are to scared to do the right thing. So we are left to muddle along till the next crisis, and the next, ad nauseum. (Ad nausem, A technical term meaning ‘screwed’)

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@marketsandmoney.com.au