Great Corrections Part Deux

Prepare yourself for The Great Correction. The period in which errors are corrected. What errors?

Oh…we were afraid you’d ask.

That’s what we don’t know. It seems obvious that it is correcting the excess debt built up over the last 50 years. In America, the private sector probably has about twice as much debt as it “ought” to have. People need to stop spending…save…and get rid of debt. It will take time — about 10 more years, by our reckoning.

But it’s not just that. There’s all the zombie build-out that the debt paid for too. That is, it’s not just debt that has to go bye- bye… Jobs, businesses, assets, and whole industries have to be greatly corrected too. Cheap finance…and all that goes with it…led people to spend more than they could afford. They caused an economy to evolve in a direction that makes little sense. How many people do you need who install granite countertops? How many electricians? How many subprime lenders?

How many foreign wars could you afford if you had to actually pay for them? How much health care? How many pensions?

Can middle-class people really afford to live in big middle-class houses 40 miles from their work? Can you really afford to make a salad in California and eat it in New York? Maybe when oil was $50 a barrel. But how about when it is $100?

The great correction could be aiming for a lot more than just the economic mistakes of the last 10 years. Americans’ standard of living is too high. It needs to be corrected downward.

And the rich…the 1%, God bless ’em, aren’t they asking for a great correction too? Aren’t they set up now for a double-whammy…?

The first whammy hits them when their assets go down. The rich wouldn’t have this public relations problem if the feds had listened to us. The rich own stocks and other financial assets. And the feds stopped the stock market/banking crash that would have taken them down a notch. But the feds can’t hold up asset prices forever. When the bear market is over, the rich will not be half as rich as they are today.

The second whammy will come from the feds…or the mobs. They’ll be hit with big tax hikes. We wouldn’t be surprised to see them whammed by a wealth tax. That will be Plan Z of the alphabet soup economy…to take money directly from the rich in order to fund the federal government’s latest giveaway programs. The politician who comes up with it is almost certain to be offered a seat in Congress.

The rich will moan and whine…but they’ll be lucky to escape with their lives.


Bill Bonner
for Markets and Money

Markets and Money offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, Markets and Money delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, Markets and Money is published in 7 countries with a worldwide readership of almost 1 million people.

Leave a Reply

Be the First to Comment!

Notify of
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