Going to Tokyo

Another week gone by! Another week closer to Tokyo!

The Dow dropped another 145 points yesterday. Gold rose $11.

Will stocks recover today? Or will they just keep going down?

We’re not a soothsayer. We can’t read the stars…or interpret the charts. Still, we don’t mind taking a guess about the future from time to time. And don’t bet on it, by the way…

But we have a hunch that this market is headed down. Because now even the Fed can see that this recovery ain’t happening. The Fed announced that it was keeping its ultra-low interest rates ultra-low for an ultra-long time. That is, it extended its extension one more time.

Readers with even a faint recollection of recent financial history will remember that this is what Alan Greenspan did when he was still the smartest man in the world. He kept extending the period of emergency low rates after the mini-recession of ’01. The Fed kept lending money at less than the rate of inflation – for 4 years, as we recall. The result was the huge bubble of ’05-’07…and then came the blow-up of ’08-’09.

But times have changed. Now, the economy is no longer bubbling up. There’s no fire under it. Instead, it is cold. Shrinking. Contracting. Like a possum that has been hit by a truck but isn’t dead yet.

And even Tim Geithner must realize that all those trillions spent on ‘stimulus’ were largely wasted.

He’d argue that at least they saved the world from a dreadful meltdown. But none of us knows what would have happened. He’s got his opinions. We’ve got ours…

But it looks more and more like our opinions were right all along. We can scarcely believe it. We don’t take any forecasts seriously. Especially not our own. But what do you know….

Yes, dear reader…it’s Bonsai! Or whatever they say in Japan…

Years ago, we wrote a book, along with Addison Wiggin, predicting that the US would follow Japan down that long, lonely road…

..where people get older…sales go down…prices fall…

..where they save for their retirements, rather than spend, spend, spend…

..where real estate loses as much as 80% of its value over a period of 15-20 years…

..where stocks go down, down, down and don’t get up for two decades…

..where the government pumps money into arteries and veins but it can’t revive the economy…

It’s been three years since this slump began. We’ve seen the biggest stimulus effort ever mounted; and the economy is well, not dead…but it’s beginning to smell funny.

The roof fell in on the housing market this week. But you already know that…

What don’t you know?

Oh never mind, you know everything we know. Probably more.

What can we add? Just that maybe we’re right about this Japan thing after all.

When the crisis hit, we recall wondering where the surprise would come from. There’s always a surprise, isn’t there? Everyone expected a quick recovery. But there was no recovery. Neither quick nor slow. But that was too obvious.

It was taken almost for granted that if the feds pumped in enough adrenaline, they’d be able to get this beast upon on its feet and walking around again – just as they did after the ’01 downturn. Worst case, they’d cause an inflationary blow-off.

But what if the downturn lasted much longer than people expected? What if it dragged on year after year, despite the feds? What if it acted just like Japan, in other words?

We seemed 10,000 miles from Tokyo back then. Now, we’re much closer.


A letter to the editor of The Financial Times:

I am a pensioner and a shareholder in BP.

I understand that the board of BP is handing over to the US government $20 billion with no conditions, though the company has no legal obligations to do so. I also understand [that the] representative of the US government who has [the] responsibility for disbursing has said he will “err on the side of the claimant,” an invitation to every conman in the southern USA to get his spoon into the pot at my expense.

This action by the board of BP is so financially irresponsible that I think not only chief executive Tony Hayward but every other member of the BP board needs to consider his position.

Now we will deconstruct this letter following our new Zombie Theory of History. BP is a producer. It is alive. Its flesh is solid. The blood of profits runs through its veins. The zombies are after it.

The company was doing fine. But it tripped up in the Gulf of Mexico. The zombies saw an opportunity. In order to buy time…and perhaps save itself…the company paid an enormous ransom…bribe…or tribute to the federal government.

Now, ‘political risk’ – more properly known as ‘zombie risk’ – is higher in the US than it is in emerging markets.

– The zombies are gathering outside our window. No kidding. Busloads of them.

There’s a rally by a group called “The Heart of Baltimore.” Someone is spending a lot of money on it. Danny Glover is supposed to be out there. Poor man. It’s about 100 degrees in the shade.

What’s going on?

“Free & Fair Union Elections” is the order of the day. Ah ha…zombies! One of five Baltimore workers is allegedly working in the health care business. According to the pamphlet, they are struggling to “survive on poverty wages,” because they are “without a union.”

Dear readers may wonder how having a union makes what they do more valuable. We wondered too, for about 2 seconds. Of course, it doesn’t. The only way the health care providers could pay higher wages would be if a) the workers were more productive or b) they raised the cost of health care. Health care is already through-the-roof expensive in the US – far more than it is in other countries. Why? Because the zombies have control of it. The US claims to have a free market in health care. It’s not true. The whole system is rigged by unions, pharmacy companies, insurance companies, tort lawyers – and regulations, regulations, regulations.

We will ask you a simple question. Suppose a group of doctors set up a “McDonald’s of Health Care – lowest prices in town.” They said: ‘We’ll treat you. But only if you sign this paper saying you won’t sue us.’ Without the tort lawyers breathing down their necks they could eliminate their malpractice insurance and cut out all the unnecessary tests.

And then…suppose a drug company decided to launch a brand of Free Market Drugs. They offered customers ‘unapproved drugs…neither tested nor reviewed by the FDA or anyone else…take them at your own risk!’

How long would these companies last? About 24 hours. Too many zombies.


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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4 Comments on "Going to Tokyo"

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“Like a possum that has been hit by a truck but isn’t dead yet”

Awesome, thats made me laugh.


If I may summarize what I think I am reading goes something like this: organize a nation on corporatist perspectives, values, and systems. Ummmmmm… I have read most of your books and I have found your analysis to be sound, with a little humor too, but I am not sure where you are headed with this…

Tony Hansen

Zombies and healthcare and unions….
Does the death rate increase or decrease when the doctors go on strike?


Hmmm, Free Market Companies.

The Free Market Drug Company – “We cure the common cold.”

But the cure makes your willy drop off!

The Free Market Pesticide Company – “One drop of Pexapamoid kills everything for three square miles!

But Pexapamoid makes your hair fall out and your willy drop off!

The Free Market Baby Milk Company – “Our formula has 50% less melanine than other brands!”

Regulation may have become overbearing, but it was probably a Free Market Law Company that created the first zombies.

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