Give Collapse a Chance

A big sell-off yesterday. The Dow down 283 points. The 10-year T- note yields only 1.87%. And the price of gold barely budged.

In our opinion all three should be going down. Because the world is edging towards a global depression…

..with the US consumer unable to spend…

..the Chinese economy slowing down…

..and Europe preparing for defaults…

Assets should be going down. Except for US Treasury debt…which should be going up. That’s what happens in a depression.

All of which is making our “solution” to the financial pile up of ’08-’09 look better and better all the time. You’ll recall that we promised to tell you how you could fix the problem in our last exciting installment. This must have left you on the edge of your chair. It sure left us on the edge of our chair; we had to think of a solution overnight!

But it is really very simple: give collapse a chance.

Remember how desperate officialdom was to “prevent a catastrophic collapse?” Both in Europe and America. The European banks bailed out their speculators. Then the governments bailed out their banks. Then, they bailed out the countries that had bailed out their banks.

In America, the government bailed out the banks…the insurance companies…the automakers… About the only industry that wasn’t bailed out was the financial publishing industry. Guess we didn’t send them enough campaign contributions…

Then, the Europeans and the Americans bailed out each other.

And they’re still bailing. The US is running a budget deficit so large that we’ve lost track of it…was it $1.5 trillion? $1.8 trillion?

And the Europeans are preparing another big bailout for Greece…Italy…and who knows who else.

And every bailout makes the world poorer. Because it’s clearly bad money after good. Greece does not suddenly become a good credit risk just because you lend it more money. And Americans won’t be made richer because the feds offer them more debt at an even cheaper rate!

The problem is that doing more of something that doesn’t work is not a good idea. When you lose money on every sale you can’t make it up on volume! Nor is it a good idea to put more money into an investment that isn’t paying off….or to allocate more resources to an industry that stopped producing real benefits a generation ago.

Yes, that’s when the education industry turned sour — in the 1970s. Since then, it’s gotten sourer and sourer…with more and more money spent on education but not a bit of progress to show for it. The youngsters are as dumb as ever.

And the oldsters are even dumber. They want to continue to bailout, subsidize, give credit where it isn’t due, and otherwise funnel huge amounts of money to worn out, unproductive institutions. And for what? So they can avoid “a catastrophic collapse.”

Well, here at Markets and Money we say ‘bring it on.’ Let’s have that catastrophic collapse and get it over with. Better now than later. It will only be worse if it is postponed.

And more thoughts…

But seriously, how would we ‘fix’ the situation? Well…that is how we’d fix the situation. We were being serious. We’re always serious. And earnest. And trying to do our best to help.

But that’s not all we would do. The problem really has two parts to it.

One part is natural, inevitable…it can’t be fixed. When you borrow too much money, you have to pay it back. Or default. Better to do it as soon as possible.

Likewise, if your company isn’t profitable…if your industry can’t take resources and add value to them…then you should go broke. Again, the sooner the better.

In these cases, the ‘fix’ is obvious. Bite the bullet.

But there’s more. There is also the zombie factor. This is something that can be fixed easily. As institutions age — including private industries — they attract parasites. The next thing you know you’re meeting with lawyers and working with regulators. There’s an agency hounding you about one thing…and a department on your tail for another.

And there are taxes up the kazoo. And debt. And extra costs.

You pay for stamps and handicapped parking places. You pay for well- meaning kids to offer advice to hardened heroin addicts…and lobbyists can get a break in the next tax bill. You pay for goons to frisk you are airports and hit squads to take out “insurgents” in cities you never heard of.

Oh, and don’t forget the kid who takes out loans so he can get a degree in the Emotional Life of Fruit Trees…and then defaults on his student debt. And the slob who uses Medicaid and disability to avoid having to go to work.

It’s all part of the picture of a society in need of a revolution…or a kick in the pants.

We propose one or the other.

How? Easy peasy. First, allow businesses and nations to go broke. No subsidies. No bailouts. No below-market loans. Just let them crash and burn. It will be fun to watch.

Second, cut taxes to 10%. That’s all. Just 10%. Like a tithe. With no deductions. No ifs…ands…or buts. Russia already has a tax like this. And it is booming.

And prohibit borrowing. Or money printing. These measures would solve the US debt problem overnight. They would protect the dollar. They would reassure investors, businessmen and householders.

They would also reduce the total US budget from about $3.6 trillion today down to less than $1 trillion. We don’t much care what the feds do with the money. They will surely waste most of it. But so what? A flat 10% tax rate would cut out most of the zombies. Freed from the dead hand of zombidom the private sector could get back to work.

Give it a whirl. Let us know how it works out.


Bill Bonner,
for Markets and Money

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail Markets and Money.
Bill Bonner

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8 Comments on "Give Collapse a Chance"

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The celebration of mediocrity (and deceitful incompetence) has to end. ‘Shawn of the Dead’ was on the right track – kill em all and remove the resources that keep them alive.
Unfortunately I believe the majority of the worlds population are vacuous and lack real intelligence (education doesn’t fix this sadly) and that is why the so called ‘elite’ have been able to manipulate the world for so long, repeating the same devices and atrocities.
Take responsibility for you own actions at any given time… this is the definition of spirituality, something the world sorely lacks.

I just got your ‘Kill the Banks’ newsletter that mirrors the above; I raised the same issue almost two months ago when there was a brief bear run on the ASX. I cannot understand why the consensus earlier did not point to the obvious: shoot the bad sled dog or we will all perish in this tundra. All this guys being paid 200K plus p.a. kept silent. Today the market seems to be full of overpaid surfer gypsies with crystal balls, not investors. ‘Rome will never burn’ seems to be the unequivocal opinion on Capitol Hill and the wall street… Read more »

Who are the two boozo’s that ‘down thumbed’ this article ?

Ned S

Russia is NOT actually “booming” Bill! (Though I agree with you that a simpler and lower tax rate is a good thing generally.)

“Let’s have that catastrophic collapse and get it over with” –
I think you are being too optimistic saying “get it over with” (if by that you are implying it might be sorted out within a year or three?; Rather than within a decade – Or four! :))

How’s the “Buy Japanese stocks Trade of the Decade” been faring mate? (Oh well, not especially better or worse than most tips maybe?)

I enjoy your stuff as always … Ta!


Bill you cannot give borrowing a bad rap under a general equilibrium theory. Borrowing at the moment may be horrific for the borrowing West but for the lending East it isn’t entirely a bad idea.


Less Govt budget = less money to pay for welfare.

Unfortunately, with businesses crashing and burning, you’ll have more people unemployed.

What to do? Let them starve?


Will the message be received before the stones cry out?


The solution is so easy when you are just a publisher siphoning off cash for a few pieces of poorly formed advice and opinion.

Luckily being a publisher means when you get it wrong there is no redress from your subscribers.

However, I do agree that propping up failed companies or countries is just delaying the inevitable. But there is no valuable insight here. Everyone knows it is a bad idea.

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