World Economics: The Greatest Financial Train Wreck the World Has Ever Seen – Bill Bonner’s Diary

Bill Bonner’s Diary

BALTIMORE — Last week, stocks finished at an all-time high. But guess what? In terms of real money — gold-linked, pre-1971 dollars — stocks have been losing ground since the start of the millennium.

We are looking at one of the most remarkable episodes in financial history. Investors think they are making money… when they’re actually getting poorer.

Donald J. Trump tells the international Deep Staters at Davos that the U.S. economy is “spectacular”, but most of its countries have never recovered from the crisis of ’08-’09.

What a jolly time to be alive… to be conscious… with a few dollars saved up and a sense of humor. And coming up… a financial Demolition Derby on a global scale…             

Financial Train Wreck

Yes, we have seen plenty of little sh*thole countries go broke. They spend too much. They steal too much. And then, what do they do to cover the corruption and waste? Then, they print money. 

So, this will be fun to watch. Only because we have never seen a country with the world’s reserve currency and a $20 trillion economy do it.

And on this TV you cannot touch that dial. You cannot turn it off. 

Does not matter how smart our Federal Reserve governors are. Does not matter what stable genius is in the White House. Does not matter what any of us think or do.

You don’t even need a “bad guy” or a monetary monster. Milton Friedman is practically a saint in some circles; but it was he who invented the new money in 1971… and he will be largely to blame for the destruction ahead.

Yes, Dear Reader, even smart people make such jackass mistakes as to cause the gods to chuckle, and the dead to laugh out loud.

They have seen this all before. They know how it turns out.

So let us look more closely at why it is inevitable, even as they do everything “right” .…

Do the Right Thing

The Fed clearly made the right choice when it chose to pump up the repo market with hundreds of billions in new money. Otherwise, the world economy, the stock market… the whole shebang would have gone to Hell.

The Fed will surely do the right thing next week and the week after, too. The feds have $6 trillion of short-term loans to “roll” in the next six months. That is the cost of overspending – wars, boondoggles, giveaways, waste — by the U.S. government.

Oh… and it is not going away. No candidate — Democrat or Republican — is proposing to cut U.S. spending. And no president could survive in office if the Deep State connivers completely turned against him. 

That is why they will all do the “right” thing.

And who could blame Obama and then-Fed chief Bernanke for pushing the panic button in ’08? They did the right thing, adding $10 trillion in deficits and $3.6 trillion in Fed quantitative easing (QE).

Bernanke had the “courage to act” and saved the nation from a dreadful recession; he said so himself.

And didn’t Mr. Trump do the right thing when he cut taxes… and increased spending… too?

Isn’t that why the Dow is at 29,000… unemployment is below 5%… and he can brag at Davos? Trump thinks so.

Mr. Obama had allowed for a modest decline in military spending as the wars in the Mideast wound down. Then, not only did the “conservative” Trump increase military spending, he boosted domestic entitlements, too.

Domestic, social spending rose 3.2% annually under Obama. Under Trump, it is going up at a 5.4% annual rate.

Overall, spending is increasing more than twice as fast as it did during the Obama years.

And who doesn’t like it? Who doesn’t want more money? Widows? Veterans? Cronies? Lobbyists? The Swamp? Everybody is in favor. At least, at the beginning.

Hyperinflation Legend

Our old friend Doug Casey had the once-in-a-lifetime opportunity to meet a real central bank legend. It was Gideon Gono, who — as the governor of Zimbabwe’s central bank — had printed trillion-Zimbabwe dollar notes by the gazillion… and destroyed the country’s economy.

But Doug reported that Gono seemed like a nice, intelligent guy. He actually wrote a report to his boss, “Comrade Mugabe” (that’s what Zimbabwe’s head man liked to be called), in which he proposed a gold-backed dollar. And he only resorted to the printing press, he said, because he needed a way to pay the army. 

Wasn’t that the right choice? Had he not paid the army, the soldiers might have gone on the rampage… or taken over the government.

And what about Rudolf von Havenstein? It was he who presided over one of the most notorious episodes in hyperinflation history, in Germany in the early 1920s.

Wasn’t he in almost the same situation as America’s current Fed chief, Jerome Powell?

And didn’t he do the “right” thing, too? Liaquat Ahamed explains, in Lords of Finance:

Von Havenstein faced a real dilemma. Were he to refuse to print the money necessary to finance the deficit, he risked causing a sharp rise in interest rates as the government scrambled to borrow from every source. The mass unemployment that would ensue, he believed, would bring on a domestic economic and political crisis.

Was von Havenstein stupid? Evil? No more than the rest of us. Perhaps he made the right choice. But the results were disastrous.

Printing new money cheats people who have worked, saved, and trusted the old money.

Stefan Zweig wrote that the money-printers had…:

Cheated the mothers who had sacrificed their children, cheated the soldiers who came home as beggars, cheated those who had subscribed patriotically to war loans, cheated all who had placed any faith in any promise of the state, cheated those of us who had dreamed of a new and better ordered world and who perceived that the same old gamblers were turning the same old trick in which our existence, our happiness, our time, our fortunes were at stake.

One of those who felt cheated was a young, Austrian house painter named Adolf. He made plans to get even… 

Regards,

Bill

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Comments

  • Clyde Duncan  On January 27, 2020 at 12:14 am

    Bill Bonner wrote:

    Mr. Obama had allowed for a modest decline in military spending as the wars in the Mideast wound down. Then, not only did the “conservative” Trump increase military spending, he boosted domestic entitlements, too.

    Domestic, social spending rose 3.2% annually under Obama. Under Trump, it is going up at a 5.4% annual rate.

    Overall, spending is increasing more than twice as fast as it did during the Obama years.

    **Believe Mister Bonner – Mister Bonner is NOT a SOCIALIST or LEFT-WINGER

  • Clyde Duncan  On January 27, 2020 at 12:29 am

    This guy at the USA Border was claiming political asylum and seeking refugee status. Border Services asked how could he sustain himself – He said he was a Comedian.

    Border Services said: ‘Okay, give me your best shot – Show me some of your material!’

    The Comedian said that he was told that Donald Trump is the most divisive president in USA history.

    He has the country so divided the population is split into two camps:

    On the one hand, there are those who support Donald Trump; and on the other, there are those who can read, write, and reach logical conclusions.

    Border Services informed the man he must leave the country immediately – ACCESS DENIED.

    The Comedian said: “BUT, it is only a JOKE, Sir!”

  • Clyde Duncan  On January 27, 2020 at 12:53 am

    TRUMP WRONG ON EUROPEAN AID TO UKRAINE

    By Lori Robertson | FactCheck.org

    PRESIDENT DONALD TRUMP WRONGLY SAID THAT “EUROPE AND OTHER NATIONS” WERE “NOT” CONTRIBUTING TO UKRAINE, specifically calling for Germany and France to “put up money”.

    IN FACT, THE EUROPEAN UNION AND EUROPEAN FINANCIAL INSTITUTIONS HAVE CONTRIBUTED MORE THAN $16.4 BILLION IN GRANTS AND LOANS TO UKRAINE SINCE 2014.

    EUROPEAN COUNTRIES HAVE CONTRIBUTED AN ESTIMATED TWO-THIRDS OF ALL OF THE AID TO UKRAINE SINCE RUSSIA ANNEXED CRIMEA IN 2014 and launched a conflict in the Donbas region in eastern Ukraine, according to Iain King, a visiting fellow at the Center for Strategic and International Studies.

    At the United Nations on Sept. 24, Trump told reporters that he had withheld U.S. assistance to Ukraine this summer because he wanted European countries to contribute.

    An intelligence community whistleblower complaint says that the White House Office of Management and Budget on July 18 notified other departments and agencies that the money was being withheld. THE U.S. RELEASED THE NEARLY $400 MILLION IN FISCAL 2019 AID ON SEPT. 11.

    “I’d withhold again and I’ll continue to withhold until such time as Europe and other nations contribute to Ukraine because they’re not doing it,” Trump said. “Everybody in the administration knows that what I want, and I insist on it, is that Europe has to put up money for Ukraine also. Why is it only the United States putting up the money? — Germany, France, other countries should put up money.”

    AT ONE POINT, TRUMP SAID THE UNITED STATES WAS CONTRIBUTING “THE BULK OF THE MONEY”, BUT ALSO SAID IT WAS “ONLY” THE U.S. CONTRIBUTING AND THAT OTHER COUNTRIES WERE “NOT DOING IT”.

    BUT OTHER COUNTRIES ARE DOING IT, AND THE U.S. IS NOT EVEN THE MAJORITY CONTRIBUTOR OF TOTAL OFFICIAL DEVELOPMENT ASSISTANCE.

    The Organisation for Economic Co-operation and Development [OECD] is an intergovernmental economic organisation with 36 member countries, founded in 1961 to stimulate economic progress and world trade.

    ACCORDING TO THE ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENT, EU INSTITUTIONS TOP THE OECD LIST OF THE TOP 10 DONORS OF OFFICIAL DEVELOPMENT ASSISTANCE TO UKRAINE, WITH $425.2 MILLION CONTRIBUTED ON AVERAGE FOR 2016-2017.

    THE U.S. WAS SECOND WITH $204.4 MILLION IN ASSISTANCE, closely followed by Germany, which contributed $189.8 million on its own, in addition to contributions it would have made through the European Union.

  • wally n  On January 27, 2020 at 11:29 am

    holy cow DID NOT know Blankets were so expensive………. taking it all back

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