The Dow Gives Up the Post-ZIRP (Zero interest rate policy) Gains

It seems simple enough to us. Almost too simple.

Birds gotta fly. Fish gotta swim. The feds gotta print money. Why? Because there isn’t any other good way for them to get it. And because the economy is getting worse…not better. The feds feel they have to “do something” to fix the situation. That is the depth of their simpleton machine philosophy – a correction is a “problem”…problems need to be fixed.

The problem as they see it is that Americans don’t have enough money. And since they don’t have enough they don’t spend enough. And because they don’t spend enough, the whole consumer economy sinks.

Yesterday, the Dow lost another 219 points – it has given up almost all the post-ZIRP gains. You remember ZIRP? Zero interest rate policy. The Japanese tried it; it didn’t work. So, now it’s America’s turn. After the Fed announced its ZIRP, the Dow shot up more than 300 points. Now, the Fed has used up its last 100 basis points…and the Dow is back to where it started.

We’ll give you the rest of our market update and then return to our point:

The Washington Post suggests that hedge funds might go extinct as a result of this downturn. That would be a shame; they are such a convenient way to separate fools from their money.

We didn’t notice it when we were in LA last week, but California has been especially hard hit. House prices in many areas are down 40%. Towns are going bankrupt. And the state has had to stop billions of dollars’ worth of new projects in order to protect its remaining cash. Bankruptcy…drought…fire and brimstone – our California Babylon seems to be getting an almost Biblical judgment.

And now we’re seeing the Revenge of the Dustbowl. You remember, during the ’30s, there was a drought in Oklahoma, Kansas, and parts of Texas. The rich earth turned to dust and practically blew away. The poor farmers couldn’t pay their mortgages…and couldn’t raise crops. So, they loaded what they could salvage onto their Tin Lizzies and drove to California, where they tried to get jobs picking fruit.

The natives weren’t always friendly. Californians had their own problems. They didn’t want any more Oakies on the job market. So, they tried to turn them back at the border.

Now, 75 years later, it’s the Californians who are pulling up stakes. For the first time in history, more people are leaving the Golden State than entering it.

And pity the poor old folks in Palm Beach. The island was one of Bernie Madoff’s favorite haunts. And the island’s rich retirees and trust fund heirs were his among his favorite prey. He bilked them out of billions. And now, the Chicago Tribune reports that the pawn shops in Palm Beach are doing a jolly business…

Gold fell $7.90 yesterday…the price is now $860, still well above where it began the year. Gold is the only thing we know that has resisted this bear market. Why so? Because investors suspect that this drama has another act or two. Which brings us back to our point.

The outlook is too simple…too obvious.

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 "The Dow Gives Up the Post-ZIRP (Zero interest rate policy) Gains"

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Jon Bain

Thats an interesting twist. The U.S. becoming a bunch of un-united states?

“And you shall count…seven times seven years…forty-nine years. Then you shall cause the trumpet of the Jubilee to sound on the tenth day of the seventh month; on the day of Atonement [Yom Kippur] you shall make the trumpet to sound throughout all your land. For the fiftieth year shall be holy, a time to proclaim liberty throughout the land to all enslaved debtors, and a time for cancelling of all public and private debts. It shall be a year when all the family estates sold to others shall be returned to the original owners or their heirs” (Leviticus 25:8-10,… Read more »
Anthony Teamson

Jon Bain,
I do not know if you have really taken a good look at the USA, but it is not an Anglo-Saxon nation. It is more a Judo-Greek culture sans any honor.

One key that would contribute to the defeat and occupation of the United States would be if it were to balkanise. This is a possible outcome when the world’s largest debtor nation struggles with debt deflation in the next Great Depression; especially when considering its national suicide – Could, in a reverse of history, a Republican South cede from the Union? * Harold Meyerson, The Big Bailout Lessons,, December 31, 2008: “In matters economic, the Civil War isn’t really over. “If Abraham Lincoln were still among the living as he prepared to turn 200 six weeks from now,… Read more »
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