Bill Bonner on More Fed Folly and His Brand New Pickup Truck

“It’s amazing…I love it!”

Elizabeth is rediscovering life in the USA. After 15 years, most of it
in Paris, we are now living in the suburbs of Washington, DC…more

First, the financial goings-on.

How was the first day of 2010? Well, most commentators would say it was
a good day. The Dow rose 155 points. Oil closed over $81. The dollar
fell. And gold shot up $22.

Is that a good day, or what?

‘Or what’ is probably the best answer. Stocks rose. But are they
forecasting a booming economy? Or more EZ money from the feds? Are they
signaling the end of the slump? Or, no end to the feds’ rescue efforts?

Here at Markets and Money, we will stick with our view. We’re in a
depression. It won’t end until it has done its work. And, with the feds
trying to block it, prevent it, hold it off, deflect it and retard it,
it could take years before this depression has finished its job.

Martin Feldstein, an expert on business cycles:

“The recession isn’t over.” In a Bloomberg Radio interview on December

David Rosenberg explains that 90% of the ‘growth’ in the third quarter
came from stimulus measures. And that still only produced a 2.2%
annualized GDP increase, far below the rates typical at the end of a

“What is normal is that the first quarter of post-recession growth is
that real GDP expands at a 7.3% annual rate; 2.2% is really nothing to
get excited about – it’s actually quite worrisome.

“Never in recorded history has growth coming out of a string of
declines been as weak as what we just witnessed. Considering all the
government efforts to usher in a V-shaped recovery, what we saw unfold
in the real economy in Q3 – admittedly quite divorced from the action
in financial markets – was, in a word, sad.”

What is happening? How come so much government ‘stimulus’ produces so
little real stimulation?

Well, because an economy is so heavy…you can only push it downhill!

Monetary stimulus only works when it pushes the economy in the
direction it wants to go. When people want to buy, you can make them
buy more by giving them more credit. But when they don’t want to buy,
extra credit doesn’t help. Extra credit is what people don’t want.
Offering them more of it doesn’t make it more attractive.

But government spending on the other hand – fiscal stimulus – is a more
effective imposter. People see the feds spending money and they mistake
it for genuine, economic activity. The government hires people. The
government spends money. It looks just like the real thing!

Heck, it’s better than the real thing. Because the feds pay better. And
they don’t have to worry about showing a profit either; the whole idea
is to lose money…that’s what fiscal stimulus is all about. Want a
fiscal stimulus program? It’s easy. Replace honest business activity
with phony federal make-work. And replace honest workers with

Our friend Marc Faber writes that Congress has just voted the biggest
health care initiative of all time – forcing everyone in the nation to
participate, except Congress itself. The parasites have a better plan,

The number of federal employees making big money is growing fast. In
the Defense Department, for example, “civilian employees earning US
$150,000 or more increased from 1,868 in December 2007 to 10,100 in
June 2009, the most recent figure available…” writes Marc.

Marc sees the US rapidly becoming a banana republic, in which elites
use positions of influence to feather their own nests. Federal
employees, lobbyists, politicians, government contractors, favored
groups – all of them connive to strip assets from the public and use
them to cushion their own fat derrieres. Typically, the banana
republics have nice weather and bad money. They borrow too much…run
their printing presses when they get in a jamb…and then go broke.

The world turns, doesn’t it? While the US slips into banana-ism, the
world’s biggest banana republic, Brazil, is booming. It has the number
one position for stock markets in 2009 – up 145%.

The US is fast becoming the worst kind of banana republic…one with
ice storms and no bananas.

And more thoughts…

“You can buy practically anything at practically any time of the day or
night. In France, shopping can be a major effort. The salespeople have
no interest in selling you things. The stores aren’t open. And they
don’t have what you want.

“But I just got back from Tyson’s Corner. Look at this…I bought a
television screen for $99. And a printer for the computer. And a whole
set of sheets and towels. Everything is made in China or Vietnam, of
course. But you can buy anything you need at that mall. Anything. I
went into one store and there were 4 clerks waiting to help me. In
France, you never find a clerk…and when you do they don’t want to
help you. These guys kept asking how they could help me. And then I
went to Fresh Foods. First, it is amazing how much they have…the
variety of things…and all of it looks so good… And then, when you
go to check out, they have people who pack your bags for you…and take
them to your car.

“It really is wonderful.”

This morning, we hitched a ride into town with our daughter. Then, we
needed to buy a vehicle to get home. We could live perfectly happily in
Paris without a car, but you have to have wheels if you’re going to
live in the suburbs.

Not wanting to spend time looking, we asked an assistant to call
around, find the best deal on a Ford F-150 pickup and buy it.

“I just don’t have much time,” we told her. “So try to make it as
smooth as possible…”

She set to work at 10AM. At 3:25PM a young man appeared in our office
with car keys in his hand.

“Mr. Bonner? Here are the keys to your new truck.”

Sure enough, he was the low bidder. He got the sale and brought the
truck to our door. Silver, with a bench behind the driver’s seat. A
full bed. Perfect for farm work on the weekends…and for Elizabeth to
pull her horse van.

“Thanks for your business,” he continued. “It’s hard to find any
customer these days. Business is very slow. At least, that’s how it
looks to me. A customer with a check in his hands is a real pleasure.
Here’s my home number. You call me if you have any questions or
problems. Oh…and I filled it up with gas for you.”

What a great country! It’s probably easier to part with cash in the USA
than any nation in the world.

Bill Bonner
for Markets and Money

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 Money.
Bill Bonner

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