We're Living Through the Best of Times

What's a Fed to do? We get talk about tightening and taking away the easy credit, but we got the fourth largest monetization on record last week. This week we examine the elements of deflation, look at some banking statistics that are not optimistic, and then I write a reply to my great friend Bill Bonner about why it's the best of times to be young. I think you will get a few thought-provoking ideas here and there.

But before we get to the main material, I want to recommend a book to you. I am on a 17-day, 12-city speaking tour. It is rather brutal, but I did it to myself. However, one of the upsides of traveling is that I get quiet time on airplanes to read books. I am working my way through a very large stack of books on my desk. One that caught my eye - and I'm glad it did - is a book by Tom Hayes called Jump Point: How Network Culture is Revolutionizing Business. Hayes writes about how we are getting ready to experience a cultural change every bit as profound as the Industrial Revolution. He argues that as the 3 billionth person gets online sometime in 2011, it will shift the dynamic of how we interact as businesses and consumers. We get to 5 billion by 2015. The mind boggles.

Clearly, it is already changing things, and I am not sure if I buy Hayes' thesis that 3 billion is a magical number, though it is great marketing. That being said, I found something on almost every page that I underlined or highlighted. This book made me think about the future in ways that my kids already get but Dad doesn't.

I like to read books about "important stuff" by people who have done a lot of thinking about their subjects, and who can write easily and fluidly and communicate their thoughts without weighing me down with unnecessary verbiage. Hayes has done that. (I am sure some of you, my patient readers, wish I could be better at that!)

No long review here. Go to Amazon and read the reviews. One reviewer wrote:

I gave the book 5 stars not because it was perfect -- I think Hayes's enthusiasm sometimes makes him jump to conclusions - but because there are so many ideas and observations here that it would take ages to put something like this together from other sources.

I agree. If you are in business, any business, you need to read this. As an aside, I will insist that all my partners worldwide get this book and read it. And Tom, if you get this (and I bet one of your friends will forward it to you), call me.

The Elements of Deflation

One of the advantages of travel is that it gives you time away from the tyranny of the computer to think. (Am I the only one who feels like I am drinking information through a fire hose?) But getting the information is important too, as it gives you something to think about. And I have been thinking a lot lately about deflation.

I get asked at almost every venue where I stop, whether I think we will see inflation, or deflation. And I answer, "Yes." And I am not trying to be funny. I think the primary forces in the developed world now are deflationary. When asked if I don't think that the Fed monetizing debt of all kinds won't eventually be inflationary, I answer, "We better hope so!"

Let's quickly summarize some of the ideas I've put forth over the last few months. Just as water is made up of two parts hydrogen to one part oxygen, so deflation has its own elemental structure.

The first element is Rising Unemployment. There has never been a sustained inflationary period without wage inflation. Wages are basically flat and falling. With 9.8% unemployment, 7% underemployed (temporary), and another 3-4% off the radar screen because they are so discouraged they are not even looking for jobs, and thus are not counted as unemployed (who made up these rules?), it is hard to see how wage inflation is in our near future.

Think about this. Only a few years ago, less than 1 in 16 Americans was unemployed or underemployed. Today it is 1 in 5. That is a staggering, overwhelming statistic. Mind-numbing.

Keynes said that you should stimulate the economy in recessions in order to bring back consumer spending. That is not going to happen this time. As my friends at GaveKal point out, this time we will have to have an Austrian (economic) recovery, or a business-spending recovery. My argument will be, when I am with them in Dallas in December at their conference, "Where are we going to get business-investment spending when banks aren't lending and capacity utilization is at an all-time low?" This, of course, leads the Keynesians to jump in and say, "The government has to step up and jump-start consumption!" Which means more debt. Wash. Rinse. Repeat.

The next element of deflation is massive Wealth Destruction. Two bear markets and a housing market collapse have put the American consumer on the ropes. And the next bear market will bring him to the canvas.

Then we have Reduced Borrowing and Lending, as consumers are paying down debt and banks are reducing their lending. Both are necessary in a credit crisis-caused recession. Bank lending is basically back to where it was two years ago, and shows no sign of rebounding. Banks, as I have written, are buying US government debt in an effort to shore up their balance sheets. Lending to small business, the real engine of job creation, is sadly decreasing each month. (See graph below, click to enlarge).)

Next up in our elemental list we have Decreased Final Demand and its counterpart Increased Savings. Although the savings rate has come back down to 3% from 6% a few months ago, almost every expectation is that it will rise over the next 3-5 years back up to the 9% level where it was only 20 years ago. The psyche of the American consumer has been permanently seared. Consumption and savings habits are being changed as I write.

And of course we must address the element of Low Capacity Utilization. While capacity utilization is rebounding, it is still lower than at any time since the data has been collected, other than the last few months. It is hard to see where businesses are going to get pricing power, when not only US but world capacity utilization is still extremely low. The chart below (click to enlarge) is not the stuff that inflation is made of.

And let's just quickly throw in Massive Deleveraging and $2 trillion in Bank Losses and a Very Weak Housing Market. Which brings us to a Slowing Velocity of Money.

As I have written on several occasions, prices are a function of the amount of money times the velocity of money. If the velocity of money is slowing, the amount of money can rise without bringing about inflation. It is a delicate balance, but nonetheless the hyperventilation in some circles about the coming hyperinflation is, well, overinflated. Simplistic. Economically naive.

The Fed is going to do what it takes to bring about inflation (in my opinion). But they will not monetize US government debt beyond what they have already agreed to. If they need to "print money" to fight deflation, they can buy mortgage or credit-card or other forms of private debt, which have the convenience of being self-liquidating. Read the speeches of the Fed presidents and governors. I can't imagine these people will recklessly monetize US debt. You don't get to their level without having a stiff backbone. (Yes, I know the gold bugs will call me terminally naive. We will have to wait to see who is right. Peter Schiff, care to make a bet on this one?)

Bernanke warned Congress again last week about rising deficits. Watch the deficit rhetoric coming from the Fed after the next two governors are appointed next year, side by side with Bernanke's reappointment. There will be a line drawn in the sand. Some in Congress will not be happy, but my bet is that the Fed will maintain its independence. If they do not, then my recent letters will prove far too optimistic (and many of you protest my rather less-than-positive suggestion of a double-dip recession). But I must admit I cannot imagine that happening. And there are not enough votes in Congress to change that independent status. There is a day of reckoning coming with the US debt. And thank God for that.

Bottom line: The Fed will do what it takes to keep us from deflation. They will deal with the problems of the ensuing inflation. I wrote six years ago that the best outcome from all the easy monetary policy and budget deficits would be stagflation. I see no need to change that assessment. I am not happy with stagflation, but as I came into my young adult life in the '70s (see below), I know that we can deal with that. The far more worrisome prospect is continued trillion-dollar deficits.

It Is the Best of Times

Now let's change the topic. My friend Bill Bonner, of Daily Reckoning and Agora Publishing fame, recently wrote about his mother. Bill also turned 60 recently. I wrote to him about the similarities between our mothers. Both were born in hard circumstances, on farms that had no indoor plumbing. They joined the WACs and met their husbands. They struggled raising families. Bill and I both grew up in rather humble circumstances (to put a mild spin on it).

That exchange caused Bill to write about the future our kids face. He has six kids and I have seven. He has graciously allowed all my kids to invade his chateau in rural France (where they mingle with his kids), and has invited us back next summer. I think Bill is the best writer, the best "turner of a phrase," in the business. I often feel like a house painter standing in front of a Rembrandt when I read his work.

But Bill is a tad pessimistic. He makes me look like Larry Kudlow. He wrote (among other books) Financial Reckoning Day, which has just been updated and is now titled Financial Reckoning Day Fallout: Surviving Today's Global Depression. It makes for some interesting reading.

Now to the point. As I said, Bill wrote about the future our kids face. I will repeat what he said and then respond. Bill's thoughts:

We sat in a cab yesterday, stuck in traffic in central London. We watched people walk by and wondered. What are they thinking about? What do they want out of life? What do they think of themselves?

There were hundreds of them...different shapes...different sizes. A businessman in a pin-striped suit, briefcase in hand, concentrating on his sales report; he almost stepped in front of a motorcycle. A salesgirl, grotesquely overweight...yellow hair streaked with brown...wishing she hadn't had so much to drink the night before. A lawyer daydreaming about his secretary. A man who would have rather been fishing...still in his waxed coat. A woman annoyed about something. A heavy construction worker, his legs splayed outward as he walked. A tense young woman who dared not look up. A woman worrying about her son. A man thinking about buying a new car. One man trying to remember a line from a song he learned 30 years ago. Another talking to herself. One looked like a doctor taking an afternoon stroll. Another was stark raving mad.

All of them walking along...from one place to another...shuffling along...the living towards the dead.

We were thinking of our children. What a different world they grow up in. And yet, it is still the same too. A man might have been stuck on a London street 50 years ago...and hundreds of years ago he might have watched the same shopkeepers and carpenters walk by, each caught in his own thoughts like a fly in a spider's web.

Our old friend John Mauldin wrote to say that his mother's experience was not much different than ours. She joined the WACs during the war...met John's father...and then nature took her course.

But both John and your editor had a big advantage in life. We both caught the upswing.

Not so with our children. They inherit a different world. America was the world's leading nation in the '50s and '60s. And it was growing in power and wealth - rapidly. We grew up with it. Things were getting better and better...we were sure we'd live much grander, richer, and more exciting lives than our parents. The sky was always the limit!

Now, America is in decline. China's economy grows while hers declines. The Far East has savings, while she has none. The Asia nations are net exporters, making huge profits...while American industries are judged too old, too expensive, and too highly regulated to compete. Americans have debt up the kazoo, while their competitors have little. A young person in America has to look forward to supporting 70 million retired baby boomers...and paying for their drugs, their food, their wars, and their bailouts.

For our children - ours and John's - the situation on a personal level is different too. Coming from poor families, we could look forward to much more wealth and material success than our parents ever knew.

We came back to Ireland this week for a reason that our parents would never have dreamed of. Your editor has set up a family office. It is a very modest affair by family office standards. The typical family office manages a fortune of $100 million, according to The New York Times. We may not even be on the same planet with these rich families; but we are in the same universe. That is, we try to think about...and manage...our wealth as rich people do...as a family legacy or an endowment, not as a retirement fund.

What wealth we have accumulated - even if it is paltry - will be held by a family-owned corporation. Then, the corporation, run largely by the adult children, manages the assets - from our base in Ireland.

Your editor, freed from the responsibility of managing his own money, will be free to wander and think...like a vagabond, a gypsy, a refugee, an itinerant mendicant...forced to sup on whatever is at hand and take lodging wherever he can find it - but favoring the Four Seasons and Chateau Margot when they are available.

Whatever else this does, it puts the children in a very different situation from their parents. Instead of starting out with nothing, they're starting out with something. While this would seem to be a big advantage to them, it has huge hidden disadvantages. Like America itself, they are in danger of finding themselves slipping downhill. Instead of expecting things to get better, they may find it hard even to hold onto what they've got. Instead of the "Morning in America" that Ronald Reagan promised, they may find that it seems more like evening, both in their personal as well as their national lives.

'From shirtsleeves to shirtsleeves in three generations,' say the French. The grandfather begins without a coat. His grandson ends that way.

"But what to do? Spend it all now...so the children begin with the same clean slate we had? Move to Brazil or India - countries with more obvious upside?

In the deep, cosmic end, it probably doesn't matter. The advantage to starting out on an upper rung of the ladder may be about equal to the disadvantage of having to worry about falling off. Who can know?

Every man has to play the cards he's been dealt. What else can he do? He may have a humpback or a beautiful voice. He may have had a hard upbringing or a soft head. He may have a fortune worth of poetry in his soul but not a dime in his pocket. As far as we can tell, every young man starts out even. Each one begins life in the same place - where he is. And every generation takes what it is given, and makes the best of it.

The real advantage in life is having the gumption to get on with it; no one knows where that comes from.

It's More Than Half Full

Ok, Bill, let's review those wonderful days from whence we sprang, so fraught with the advantages of having nothing. So potent with opportunity. It was the middle of the '70s when we started our careers. Inflation was high and rising. The Soviets were seen as a major threat. Japan was beating our brains out and buying everything, even if nailed down (like Pebble Beach and New York skyscrapers). I had to borrow money at 15% (or more) to buy paper in order to meet customer demands for printing. And guess what? The banks got into trouble and called loans willy-nilly. (My bank even called my mother and threatened her to pay off my loan - against written agreements - and she did. Evil sons of bitches. The more things change... And that bank did fail, I report delightedly! Not that I hold a grudge.)

There were multiple successive and ever-deeper recessions. Gold was rising and the dollar was seen as a joke. Howard Ruff (a good friend to both of us when we were starting out!) and almost every newsletter writer were telling people to buy gold and freeze-dried food to protect themselves against a near-certain economic, if not apocalyptic, catastrophe. Unemployment was high and rising for a decade.

The correct answer to the question, "Where will the jobs come from?" back then was, "I don't know, but they will." And that is the correct answer today.

In 20 years, no one will want to come back to the halcyon days of 2005. Our kids (all 13 of them) are getting ready to live through what will be the most exciting period in human history. There will be a century's worth of change, measured by the standard of the 20^th century, just in the next ten years, and then we will double that pace in the next ten after that. Medical miracles will mean our kids and grandkids will live a lot longer than their dads, although I intend to be writing well into my 80s, like our mutual hero Richard Russell.

There will be whole new industries developed in the US. How do I know that? Follow the money. The rest of the world spends a fraction of what we do on research and development. Where do you go if you are looking for venture capital?

Do I care if the Chinese and the "developing" world are far better off, relatively speaking, than the US in 20 years? Not a whit. Good on them. I hope they make discoveries and inventions and grow new businesses that benefit us all. But we are not going into some long dark night. We, and our kids, get to choose how we respond to what is the reality of the day.

Our nation had to almost hit the wall in 1980 before a Volker could come along and force us to take the pain of recession to beat back inflation. And we will have to come perilously close to the wall this time before we take action as a nation. Way too close for comfort. Maybe you are right, and we have a soft depression. I hope not; but even so, the world will be better, far better, in 20 years, with far more opportunities than today.

It was not fun starting new businesses in the '70s and early '80s. But we did. I remember coming to Baltimore and being (literally) afraid to get out of the car to visit your offices in the slums. But that was what you could afford. A far cry from the chateau in Ouzilly.

I lived in a small mobile home. Tiffani was born there, and we converted part of the kitchen to be her bedroom. (Yes, I was white "trailer trash.") But I got up every morning just like you did and killed as many alligators as I could. The rest had to wait 'til the next day.

And that is the legacy our kids have. They know what it is to wade into the swamp every morning. Never quitting. In thinking about this, you may be the father I respect the most. You have raised your kids to be multilingual children of the world. What a work ethic. How did you get them to scrape window shutters at your chateaus? (I actually saw this, and my kids marveled. Thereafter I threatened to make them go live with you when they didn't behave!)

You have given your kids the opportunity to follow their dreams, even demanded that they do so. And such dreams they (and mine) have. Will they succeed? Who knows? But they will go at it with gusto, in a world with more opportunities than you and I ever imagined 40 years ago. And, oh boy, were we optimists back then. How else could we have done what we did? If we believed the rhetoric that the world was coming to an end, would we have dared to venture out?

You cannot have raised your kids to be such bold adventurers without instilling in them a certain high level of optimism. I am going to out you, Mr. Bonner. You present yourself to your readers as a bona fide end-of-the-world pessimist. But you are a really and truly a closet optimist. Your whole business empire (and what an empire it has become!) is based on finding people who are optimists, in the sense that they think they can actually get people to send them money for what they write. Which they do! Even if it is to read why the world will come to an end, which thankfully it never does.

You are right in this: it is personal gumption that makes or breaks us. There are those who started out with less than we did (hard to imagine but true) and made a lot more. And there are those who started out with far more and made less. But there are very few who are happier than either of us. Or luckier.

Our kids? It is not the times that dictate the man (or daughter!), but the response of the man which dictates his own time. Today promises a brighter future for someone young than any other time in history, whether they are in the US or Brazil or China. They just have to seize it.

And as our kids do just that, and as the millions of kids of those who read us do so, and the billions of kids who are just now getting ready to bust loose all work to achieve their dreams, the world is going to be a far more fantastic place. Smooth ride? Not a chance. We didn't get one; and in thinking through history, there have not been many smooth rides. Why should we think that will get any better? Our kids will just have to live with our generational (and individual) iniquities, government debt and all, and figure out how to master their own fates. But if I had a choice to take the '70s or today? In less than a heartbeat I would choose today. And I bet you would too!

Disclaimer: John Mauldin is president of Millennium Wave Advisors, LLC, a registered investment advisor. All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors before making any investment decisions.

Opinions expressed in these reports may change without prior notice. John Mauldin and/or the staffs at Millennium Wave Advisors, LLC and InvestorsInsight Publishing, Inc. (InvestorsInsight) may or may not have investments in any funds, programs or companies cited above.

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Comments

[logicalthought:]

>>But if I had a choice to take the '70s or today? In less than a heartbeat I would choose today. And I bet you would too!<<

Yes, the tie-breaker would be "leisure suits".

Oct 25 09:17 AM

[Commies are...:]

The 70's were grosse

Oct 25 09:46 AM

[bottoms-up:]

So...

The point of this is what Mr. Mauldin?

To sell books on Amazon.com? To sell Amazon.com? To sell your speaking tour?

There are some major points you've missed my friend... First of all in the 1970's statistics were manipulated (unemployment, etc.) by the government, but not to the extent they are now. Unemployment now, by the same yardstick used during the Great Depression, would be close to 25 percent and then, throw on top of that, "underemployment."

There was not and had not been the abuse of credit for decades prior to that downturn.

Finally, the U.S. economy in the 1970's was "balanced" by sectors. In other words we had a larger production sector and a smaller that was based on consumer spending-service sector.

Current computer models used by BLS and others, as are the approaches to this problem, outdated as they do not take into account some real "truths" in the structural differences in our economy 1970's-now, or 1920's-30's-now, for that matter.

I can see a horrific "feedback loop" developing in the United States... As unemployment rises, the ability to perpetuate an economy based on consumer spending diminishes; government revenues also diminish. The ability of consumers to spend is cut and the ability of the government, at all levels, to provide social and economic parachutes to individuals decreases. In turn, the lack of spending is forcing companies, in order to show "profits," to cut costs and that includes their human resources. On and on it goes...

I feel the US economy is like a jet flying over the Pacific and to keep it rising above crashing into the ocean the crew is throwing everything out the door, even the passengers. To keep the charade going they'll start dumping fuel to keep it rising, of course the ultimate consequences will be the same. If they would have attempted a "ditch" in the ocean in 2008, some or all may have been saved, but when you run out of fuel at 35,000...

Oct 25 09:51 AM

[John Petersen:]

I was happy to see you touch on the impact of rapid industrial development in what used to be called the third-world. We have 500 million in North America and Western Europe and 6 billion in far poorer locales. As these countries industrialize and their former subsistence farmers become even low level consumers, global demand for everything will skyrocket. So while there are any number of ways we can criticize the mistakes of our recent past, we also need to recognize that 6 billion new consumers will go a long way toward saving us from the punishment we so richly deserve.

Oct 25 10:02 AM

[FloridaBoy2:]

Thanks for the article. Today is no different that the 70's or 80's. We are still slaves to, or worship, a now defunct economic theory. We have a sticky unpopular war that no one cares about any more.

I'm your age and see plenty of opportunity. The world is changing...not ending.

Oct 25 10:07 AM

[Dave Wrixon:]

Read the title. My interest in your book ended there!

Oct 25 10:16 AM

[Mad Hedge F...:]

ind Wow! Dow 10,000! It is definitely the year of the bungee cord. Of course, the GDP is now 40% higher, and the national debt, at $12 trillion, is more than double the first time the index crossed this magic number in 1999. Some are saying this is an indication of how cheap the market is. Some, but not all- including me. We have a “V” shaped stock market recovery discounting an “L” shaped economic recovery, a match made in Hell, which will come back to haunt us all. Bond fund subscriptions are outpacing stock fund subscriptions by 13 to one. Humongous amounts of cash prefer to sit on the sidelines in money market funds and short term Treasury bills yielding nothing. Insider buying is nonexistent. Only 85% of the population is participating in the economy now, if you use the broader unemployment statistics, and only 75% of you take out the “black” economy. It seems like much of the investing public has taken up the attitude of fool me once, shame on you. Fool me twice, shame on me. Sure you could strap on a long here and make a few bucks. Could you conceivably get away with it? Maybe. Is it a good idea? No. Making 10% on the upside at the risk of a 50% loss is not how great fortunes are wrested from the market. There is a time to play and a time to sit, and I vote for the latter. There is no law that says that you always have to trade, despite what your broker might say.

Oct 25 10:32 AM

[opinionated:]

"The real advantage in life is having the gumption to get on with it; no one knows where that comes from."

I think it comes from God and is available to everyone who chooses...

Oct 25 12:02 PM

[Alphameister:]

It was a delight to read your thoughts, John, and those of Bill Bonner. I was briefly a part of Bill's publishing empire, and I share your awe of his intellect and writing skills. Your take on the economy is identical to mine, stagflation being the best of possible outcomes and the most probable (I also tend to be an optimist among realists).

When I am tempted to despair of current political trends, I remind myself that America survived a generation of "Progressives" extending from Wilson to FDR. When I reflect on the vulnerability of our open society to terrorist attacks as we pursue a strategy of "peace through mutual weakness," I remind myself of a time when people were building bomb shelters.

My personal story is a lot like yours and Bill's. My children and their children enjoy a better standard of living than my wife and I did when we were their ages. But I'm not at all confident that situation won't reverse as time moves forward. I'm glad I grew up when I did. I'm glad I began my career in the 70s rather than now. I'm glad that, at least for now, I have the opportunity to live in America while adding to my wealth through investment in China. I'm happy for the world at large that freedom and prosperity are increasing in countries whose leaders seem to know more about the writings of Adam Smith and James Madison than our US leaders do.

Robust R&D efforts are not a given in the US. We've all seen what happens when political powers decide to redistribute the wealth.

Empires don't last forever, and I see a US well along the path of decline both in political philosophy and economically. If and when Bill Bonner opts to play the role of John Galt, I want to be a part of his new world based on freedom.

Oct 25 12:31 PM

[Leftfield:]

Dave Wrixon opined accurately in another comment today that the Americans of today aren't those who rose to past challenges. I will add that the government of today, voted in by these Americans, is an enormous threat also, far larger and more intrusive than in past challenging times.
Since your first loss is your best loss, the refusal to face reality during the '08 meltdown, rather, to add public debt to cure the problems brought on by excessive debt and leverage, for favored recipients threatens to lock in rule by a small upper class.
Freedom is precious and I wouldn't take what's left of it for granted nor assume benevolence by our leaders (trust them). Toiling as a slave for the plantation owner takes "the gumption to get on with it" without much reward in this life.

Oct 25 01:07 PM

[MoneyTalk1:]

About deflation: It is NOT just about FED's actions! Mistake was to inflate the bank credit non-stop for 50 years. America has borrowed and spent and inflated the prices with it. Today, for each unit of GDP increase, we need exponentially more debt. When borrowing slows down, money supply can shrink. Even though FED prints money, or makes credit available, this is not a sure shot fix. Here is why:

1. Banks do not lend because they think they may not get their money back.

2. Borrowers do not want to borrow because they think they may not be able to pay it back.

These physchological forces can make FED efforts go to waste, at least on the short term. When FED panics and prints even more money, then it may cause hyper inflation later on. But, when lenders realize FED may even go there, they will freeze lending, until borrowers are willing to pay much higher interest rates. That disconnect between borrowers capacity and lenders desire for higher rates (just because they are afraid) will cause immediate deflation of credit. Rates will go up, and borrowing will go down! Treasury rates will go up, yet nobody will lend money to the government! Why would anybody lend money for the long term if they think the money they get back will be worthless!? This is why FED cannot print money that easily.

So far, FED has inflated credit non-stop. They got help from housing to do this. When we borrow to buy a home, banks create new money, they do not lend existing money. This new money makes the economy feel good.

This is why they have mortgage interest deduction form income, this is why there is 8K tax credit, this is why affordable housing means "higher home prices, and lower mortgage" to them. They do not want cheaper housing even though that is affordable for people. They want people to buy more expensive homes, so that more money gets created. There is no recovery! There is no sound economy! There is only inflated money supply that makes people feel economy is good. This is why they allowed sub-prime, so that more borrowers could step up into the ponzi scheme. But nothing lasts forever.

About our kids, and the future: We have borrowed and spent. This money needs to be paid back. There is no free lunch. Someone will actually earn it and pay it back. Whether it is deflation or whether it is inflation, it does not matter. It will be paid back either in valuable dollars that are hard to earn, or with worthless dollars that are easy to earn. And our kids' life will suck big time.

We have not seend the bottom yet! Look how over valued the stocks have been for decades! This is the mother of all bubbles. It does not go away with a small crash in few months. If last year did not bring these stocks to normal valuations that is seen in typical market bottoms, imagine how big coming crash will be.

Prepare yourself for the coming crash. The mistake was to inflate the money supply for decades. The cause is in place. The effect will follow. This is not about what Obama, or Bernanke will do. There are no good choices for them. This is why Obama cannot fix job market. The crash will be worse than Great Depression!

Oct 25 01:15 PM

[ebworthen:]

I wish I had that optimism.

I see a decline in the societal fabric, especially the natural family.

Perhaps morality and ethics were always in the sad state they are now, I don't know, but I don't believe so.

The house of cards we have built is we have moved from an agrarian populace with burgeoning and innovative industrial centers, to a service and consumer populace with declining industry - other than gaming and defense (or space). Somehow, I don't see a mission to Mars improving our moral fabric.

The majority of our inner-city and suburban population are completely dependent upon the government, the grocery store, and the microwave.

Physically, emotionally, spiritually...we are so far separated from Huck Finn, Lincoln, and Washington, even JFK...that our ethics and morals relate to the compassion of politicians, government appointees, news anchors and bank presidents rather than the accomplishments of individuals. The generations one or two steps ahead of me don't seem to see it, or want to.

I don't think the current generations would survive WWII, a true Depression, Civil War, or War for Independence. They would embrace the taxes and servitude for the security of allegiance to the King.

Oct 25 01:26 PM

[sako shooter:]

"...but nonetheless the hyperventilation in some circles about the coming hyperinflation is, well, overinflated. Simplistic. Economically naive." I don't think the Austrians would agree that the non-linear increase in the money supply will not cause hyper-inflation or that the idea that the expansion of the money supply as the cause of inflation is simplistic or economically naive; but rather, the expansion of the money supply is the cause of inflation. I am not familiar with one instance where a government went on a money printing spree as significant as our current government without causing inflation. Give me deflation and let rational behavior direct resources rather than the government inflating us out of deflation. No politician can deftly balance this, they will always err on the side of the printing press. We need a little deflation to let the air out of the series of bubbles that have been convulsing our economy. More free money will only produce more bubbles.

Oct 25 01:53 PM

[taxpro:]

A nice change from all the doom and gloom articles I have been seeing lately. We have plenty of problems in this country, but that has always been true. Pick any decade and you can find plenty of contemporary articles predicting economic and/or social collapse. Doom and gloom articles do serve a purpose in that they point out problems and weaknesses that need to be addressed. However, their track record as predictors of the future leave a lot to be desired.

Oct 25 02:25 PM

[Smarty_Pants:]

"My argument will be, when I am with them in Dallas in December at their conference, "Where are we going to get business-investment spending when banks aren't lending and capacity utilization is at an all-time low?""

It's called SAVINGS. We won't be seeing sizeable amounts of it for quite some time as the public needs to pay down their personal debt first, as the article notes.

Which leads to:
"Lending to small business, the real engine of job creation, is sadly decreasing each month."

At what point in recent history did growth of small business become dependent on borrowing?

There are other options for growing your business, like using profits or selling a piece of the business to someone with savings. These are the businesses forming the backbone of the economy. Profitable and debt free. Any business which REQUIRES borrowing to operate is probably going to have a tough row to hoe for quite some time.

"The psyche of the American consumer has been permanently seared. Consumption and savings habits are being changed as I write."

Or stated another way, 'sanity returns'.


"I can't imagine these people will recklessly monetize US debt."

And thus, the author undermines his own basis of authority. Did you ever imagine that they would run a $1.42 Trillion annual Federal deficit at any time before 2007 with an estimated additional $7.6 Trillion in deficits to follow over the next decade? Probably not.


"even so, the world will be better, far better, in 20 years, with far more opportunities than today."

I'll bet Roman Emperor Arcadius thought along similar lines in 390 AD., a mere 20 years before the Visigoths sacked Rome in 410 AD. After that things were so 'good' that the next 1100 years (ie. the Middle Ages) are widely known for their improved standard of living compared to the Romans (NOT).

Read history. Whenever the ruling class abandons equality before the law and respect for individual rights in order to sustain their rule, you can bet that it won't be long before society's standard of living starts slumping.

The last decade has seen America's rule of law dismantled piece by piece. Until that fact is reversed, the decline will continue.

Oct 25 02:52 PM

[Bob Beamer:]

Very well said for such a short time on the soapbox, John...

We often forget to look outside the Great Society into the future to see how our decades of work helping developing nations become like us has succeeded...sometimes to our shock at how, in the process, we have given up some control over who manufactures what for whom...

As I told my son when he graduated from high school many years ago and could not see what direction his life should take -- All you need to do is develop a product that every Mandarin speaking person wants to buy...and has a net profit margin of one penny...and you'll be an incredibly wealthy man!


On Oct 25 10:02 AM John Petersen wrote:

> I was happy to see you touch on the impact of rapid industrial development in what used to be called the third-world. We have 500 million in North America and Western Europe and 6 billion in far poorer locales. As these countries industrialize and their former subsistence farmers become even low level consumers, global demand for everything will skyrocket. So while there are any number of ways we can criticize the mistakes of our recent past, we also need to recognize that 6 billion new consumers will go a long way toward saving us from the punishment we so richly deserve.

Oct 25 03:27 PM

[cdur:]

sorry, but : "Stop smoking the carpet.... you're stone..!!"

and read more about what will happens:
www.silverbearcafe.com...

best regards from France

Oct 25 03:33 PM

[curious cat:]

dear ebworthen, your pessimism stems largely from the fact that we only hear negativity in our media. the stories of our brightest heirs are shared intrafamily, rather than across the nation. every generation has had doubts about the next, always thinking that their children could not handle the dangers ahead. so, let me share with you the reason i believe in the future.

my son is very humble, but talented. he speaks both german and french fluently. he played the french horn and the piano when he was younger. he's recently taught himself to play the guitar. he has a black belt in karate, can ride a unicycle and juggle. he was a high school and college cheerleader. he ran track and field, was a decathlete in high school and winner of the iron man competition in college. he made perfect scores on his sat exam. he was a presidential scholar, excelling in both math and science and he earned a fulbright. at age 24, he is currently in boston college's m.b.a. program, a renaissance man. naturallly, his mother and i are proud of his values, his talents and accomplishments.

how has he performed in the face of adversity? over the years, he's had some injuries, broken fingers and nose. he endured braces. in high school, he rowed crew for a year, with a broken collar bone. later, while doing stunts, he shattered his atlas bone, (the one at the top of your spinal column which holds your head up). his doctor said he'd never seen anyone walking with this type of injury. (until that time, he was diving under cheerleaders to make sure they didn't hit the ground.) subsequently, he wore a neck brace for a year, following doctor's orders to stay within himself and quit cheering.

all the while, we stayed positive, searching for ways to help him, with therapies and supplements, etc. we prayed every day that he would not be paralyzed. miraculously, the completely fractured and separate pieces came together again. if you watch a boston college game, today, you can see him stunting with the other cheerleaders. he loves cheerleading and went back to it, as soon as he could.

our son never gives up, never quits until he reaches his goal. he sees adversity as a challenge. he trains and prepares for an undetermined future, keeping all his options open. he's taken wilderness training and cpr courses. he finishes everything he starts. he always has a plan and always has a backup plan. we didn't teach him what to think. we taught him how to think. sometimes, when i hear him playing rap music i question his taste, but i know that he also loves the songs i grew up with and music from other cultures and generations. my point is this. our son is one of many.

we do not always hear about the children of tomorrow,... until their time comes. have faith and do your part to make your little corner of the world a better place. when all those corners come together, our world will be healed.

Oct 25 03:33 PM

[RSAAKKS:]

I wish I couyld agree with the optimism of the author. The reason is, America today is in fact quite different from what it was in the 70

Oct 25 04:12 PM

[bobbybutte:]

Fact is poor peopel today live better than their employed Grandparents lived 50 years ago

Society is only as strong as its weakest link and for that reason alone America will continue to dominate

Are the Chinese controlling us more ach day?sure but we have a parasitic symbiotic relationship with us like it or not

Oct 25 04:42 PM

[Albertarocks:]

On Oct 25 10:16 AM Dave Wrixon wrote:

> Read the title. My interest in your book ended there!<

Isn't it interesting how you're take on the title and my take on the title were so different?

When I read the title, my first reaction was to finish the sentence in my head. And it wasn't difficult to come up with a few different endings. I'm not a negative person but a realist, and I couldn't help that these thoughts popped into my head when I read this title:

We're living in the best of times, and this is as good as it's gonna get.
We're living in the best of times, enjoy it while you still can.
We're living in the best of times, of the criminal bankers' lives.

Go ahead, look at what's happening with the dollar, think about why it's happening, and then finish the title yourself:

We're living in the best of times,________________...

Oct 25 05:51 PM

[aussiereader4:]

People who have little and gain a lot feel good about themselves. Those that have a lot and then suffer a little are depressed and angry. Even though those that gain are less well off than those that lose. As humans we fear loss more than gain. This is how we are hardwired as humans. It causes us to be irrational and creates greater risk taking behaviour.

We do live in the best of times but due to the recent loss in power prestige and economic success we are depressed.

Oct 25 06:43 PM

[Albertarocks:]

On Oct 25 06:43 PM aussiereader4 wrote:

> People who have little and gain a lot feel good about themselves.
> Those that have a lot and then suffer a little are depressed and
> angry. Even though those that gain are less well off than those that
> lose. As humans we fear loss more than gain. This is how we are hardwired
> as humans. It causes us to be irrational and creates greater risk
> taking behaviour.<

Isn't that the truth. There's an old adage about investing in the markets that says the same thing. I can't remember exactly how it's worded but it's to the affect that: losses and the accompanying fear and pain, are 3 times as bad as was the joy in achieving them.

Oct 25 07:34 PM

[Liz:]

Oh, I think it'll come sooner than you think.


Millions of Americans are now defaulting on their credit cards (The $200/month they were paying Visa and MC has to go SOMEWHERE, right?)


On Oct 25 02:52 PM Smarty_Pants wrote:

> "My argument will be, when I am with them in Dallas in December at
> their conference, "Where are we going to get business-investment
> spending when banks aren't lending and capacity utilization is at
> an all-time low?""
>
> It's called SAVINGS. We won't be seeing sizeable amounts of it for
> quite some time as the public needs to pay down their personal debt
> first, as the article notes.
>

Oct 26 01:46 AM

[Michael Clark:]

Great article, as always. That capacity utilization chart shows that we've been downtrending in CU and still are.

The good thing about the late 1970's with all the problems we had...we were closing in on a bottom, 1983. Today we are at 1973 in relative seventies terms. We still have quite a way to go before we hit out bottom: 2019.

Oct 26 02:32 AM

[steve graves:]

John,

You two should write a book - sort of a Socratic dialogue. Maybe you could even throw in a wacky Keynesian (Krugman?) for balance (not to mention comic relief).

Bottom line is the future is very likely somewhere in the gray areas between your two insightful visions. The U.S. has obviously been living on borrowed time (i.e., steadily rising debt) since the 70s and we are in the midst of the inevitable reckoning. Will everything crash down around us and go up in flames? Probably not; on the other hand, our Phoenix act - if indeed there is one - will be arduous and excruciatingly drawn out. When half your economy is derived from military spending, health care and finance your best days may very well be behind you. Time, as always, will tell.

At any rate, thanks for all of your great contributions over the years, John. It's folks like you who make free speech actually mean something.

SG

Oct 26 05:06 AM

[TeresaE:]

Only if they let our products in.

And they don't, nor do they show any inclination to do so.

They are buying their own products, produced in their own factories, just like we used to.

If reality matched theory, then this would be great.

Sadly, it doesn't.


On Oct 25 10:02 AM John Petersen wrote:

> I was happy to see you touch on the impact of rapid industrial development
> in what used to be called the third-world. We have 500 million in
> North America and Western Europe and 6 billion in far poorer locales.
> As these countries industrialize and their former subsistence farmers
> become even low level consumers, global demand for everything will
> skyrocket. So while there are any number of ways we can criticize
> the mistakes of our recent past, we also need to recognize that 6
> billion new consumers will go a long way toward saving us from the
> punishment we so richly deserve.

Oct 26 09:15 AM

[TeresaE:]

Your son sounds awesome, you should be proud.

Thinking that he is in the majority is a mistake.

Go to your local (non-uber upscale) mall, or WalMart, and see reality of the masses.

It isn't so hard-working and pretty. In fact, for the majority, of which your son (and mine) will have to support, are 180 degrees away from your child.

Your hard-working, stick to it son, will be supporting dozens that do nothing, contribute nothing and wait for their government dole.

Someone will have to pay for all these programs, promises, debt and laziness.

It will be those that do.

Those most like your son.


On Oct 25 03:33 PM curious cat wrote:

> dear ebworthen, your pessimism stems largely from the fact that we
> only hear negativity in our media. the stories of our brightest heirs
> are shared intrafamily, rather than across the nation. every generation
> has had doubts about the next, always thinking that their children
> could not handle the dangers ahead. so, let me share with you the
> reason i believe in the future.
>
> my son is very humble, but talented. he speaks both german and french
> fluently. he played the french horn and the piano when he was younger.
> he's recently taught himself to play the guitar. he has a black belt
> in karate, can ride a unicycle and juggle. he was a high school and
> college cheerleader. he ran track and field, was a decathlete in
> high school and winner of the iron man competition in college.
> he made perfect scores on his sat exam. he was a presidential scholar,
> excelling in both math and science and he earned a fulbright. at
> age 24, he is currently in boston college's m.b.a. program, a renaissance
> man. naturallly, his mother and i are proud of his values, his talents
> and accomplishments.
>
> how has he performed in the face of adversity? over the years, he's
> had some injuries, broken fingers and nose. he endured braces. in
> high school, he rowed crew for a year, with a broken collar bone.
> later, while doing stunts, he shattered his atlas bone, (the one
> at the top of your spinal column which holds your head up). his doctor
> said he'd never seen anyone walking with this type of injury. (until
> that time, he was diving under cheerleaders to make sure they didn't
> hit the ground.) subsequently, he wore a neck brace for a year, following
> doctor's orders to stay within himself and quit cheering.
>
> all the while, we stayed positive, searching for ways to help him,
> with therapies and supplements, etc. we prayed every day that he
> would not be paralyzed. miraculously, the completely fractured and
> separate pieces came together again. if you watch a boston college
> game, today, you can see him stunting with the other cheerleaders.
> he loves cheerleading and went back to it, as soon as he could.<br/>
>
> our son never gives up, never quits until he reaches his goal. he
> sees adversity as a challenge. he trains and prepares for an undetermined
> future, keeping all his options open. he's taken wilderness training
> and cpr courses. he finishes everything he starts. he always has
> a plan and always has a backup plan. we didn't teach him what to
> think. we taught him how to think. sometimes, when i hear him playing
> rap music i question his taste, but i know that he also loves the
> songs i grew up with and music from other cultures and generations.
> my point is this. our son is one of many.
>
> we do not always hear about the children of tomorrow,... until their
> time comes. have faith and do your part to make your little corner
> of the world a better place. when all those corners come together,
> our world will be healed.

Oct 26 09:21 AM

[a. palmer jr.:]

You could have mentioned that the reason third world is rising and unemployment here is rising is because we, as a country, allowed our jobs to be given away to China, India and others. You could have mentioned the non-patriotism of big corporate America that would see our people go hungry just so they could make a few extra bucks on their products. You could have mentioned that stores like Wal-Mart used to have a rule that they would make every effort to buy American goods when now it is virtually impossible to find almost anything Made in America at any store. You made it sound like that it's the natural rotation of things and that it's the other countries turn for all the prosperity....it's not the case at all, it's people in the higher up jobs in corporations and government selling out their country for a few measley dollars!

Oct 26 09:32 AM

[Geezer Bela...:]

We have a rerun of the Great Depression, except we know what is going on and a Leftist Press can no longer hide the facts. The Socialists are deliberately bankrupting industry after industry by using 'mark to market' rules. Then they issue monopoly money to grab control of industry after industry. Our assets are dwindling, while the FED is printing more paper money. Inflation is already under way, just not at the grocery store. Inflation shows up as a drop in the value of the dollar, the increase in the price of gold and oil, even in the face of lessening demand.
We could be optimistic if there were just one country that made Socialism work, just one country that became rich by printing money. Will there be another Ronald Reagan who defeats the ventricolist's dummy at the polls? Stagflation is the best we can hope for under the current regime - true, true. And will we last long enough? The answers will come in Time, but only the Potentate of Time knows them now.

Oct 26 09:33 AM

[Fanatical Y...:]

"Whence" means "From Where"

Hence: "From Whence" is an HIDEOUS redundancy.

I'm BEGGING you.

Oct 26 09:34 AM

[Garland Pol...:]

Fascinating stuff, and I don't see nearly enough folks talking about the velocity of money.

Technology is quickly making vast numbers of local businesses obsolete; in my newspaper business this change is frequently discussed but it is also happening in other areas. Most towns used to have numerous machine shops, printing shops and all sorts of businesses that are getting downsized.

We will just have to invent new things to do, and not go the way of the Candlemaker's Petition.

Oct 26 09:35 AM

[Fanatical Y...:]

An altogether rich, textured, informative, and deliciously inspiring article! My thanks, and my congratulations!

Oct 26 09:39 AM

[Gem Hudson:]

But print money is nothing but paper money until earned and paper money is nothing but print money. Capital money is to produce and to sell what you have produced. Capital money is earned money and to print and spend is to monetize the stock market with our version of a carry trade. The more the money pay out. The less the money buy. The money that pay out less and buy more is appreciating money and you got an economic recovery.

Oct 26 10:19 AM

[LoveShorting:]

catchy title but as you say "we are all drinking information through a fire hose" so if your next submission has a few less paragraphs I might read all of it. but I will buy that book, thanks.

Oct 26 10:44 AM

[The Dark Years:]

No matter inflation, deflation or stagflation our economic well being is firmly fixed on a continued source of cheap oil. If the worldwide peak is upon us as I believe that source more than likely will be disrupted.in the near future, say over the next five years. As we use about twenty percent of the 85 million barrels per day produced in the world for our 300 million souls, what do you think will happen to our economy?

A shortfall of even say 2 or 3 million barrels per day would likely be a great calamity politically and economically. This is not about the availability of the remaining oil in the world, but about it's price and our ability to pay what the worldwide market sets it at. Your thoughts do not touch on this elephant in room. Very few pundits, commentators, economic thinkers, nor even prognosticators of the future even consider this issue as relevant, important, or material to considerations about the shape of the future. Certainly our "friends" on Wall Street would not dare mention it as it could disrupt profits. I choose to wallow in pessimism until those esteemed members of the informed media, and our collective political leaders recognize the magnitude of this problem we and the world face. There is no simple fix for it, like throwing billions of newly created dollars at energy independence projects because the implementation time lines are too long. I voted for the President in the hope that we would end the "wars of choice". I expected he would devote those resources (dollars saved) to a massive alternative energy and fuel efficient transportation system. That did not, and is not likely to happen, but the hope I retain, and for which I do have optimism is that one day we will have a leader, either party would be fine, who will just tell us the truth that if we do not take the necessary steps to deal with the impending reality of Peak Cheap Oil we are, just sc57982.

Oct 26 11:03 AM

[diogeron:]

So, the people who brought us "mark to market" are socialists? Please. Also, speaking of Reagan, while he was a good president in many ways, I think it's interesting that he was lauded for helping to drop the top marginal tax rate from 70% (on earnings over about $161K) in 1980 to "only" 50% in 1982. Meanwhile, Obama is being called a "socialist" for wanting to raise the marginal tax rate on the 5% richest Americans from 36% to 39%. Something's wrong with this picture.


On Oct 26 09:33 AM Geezer Bela in Exile wrote:

> We have a rerun of the Great Depression, except we know what is going
> on and a Leftist Press can no longer hide the facts. The Socialists
> are deliberately bankrupting industry after industry by using 'mark
> to market' rules. Then they issue monopoly money to grab control
> of industry after industry. Our assets are dwindling, while the FED
> is printing more paper money. Inflation is already under way, just
> not at the grocery store. Inflation shows up as a drop in the value
> of the dollar, the increase in the price of gold and oil, even in
> the face of lessening demand.
> We could be optimistic if there were just one country that made Socialism
> work, just one country that became rich by printing money. Will there
> be another Ronald Reagan who defeats the ventricolist's dummy at
> the polls? Stagflation is the best we can hope for under the current
> regime - true, true. And will we last long enough? The answers will
> come in Time, but only the Potentate of Time knows them now.

Oct 26 11:42 AM

[Midas1:]

Greed is most assuredly killing our country faster than any bomb. We think we have a healthcare crisis--we do thanks to heath insurance execs taking multimillion dollar bonuses. WellPoint's CEO is one of these lovely people and it's from PREMIUM DOLLARS that he takes from the bonus trough! Twenty (YES 20) million dollars buys a lot of health care, but we must make sure the greedy lot at the top siphon us dry. Healthcare for the benefit of a few. Oh, what a system. Those at the top hear this: when the masses are suffering, fences and expensive mansions will not prevent the angry and hopeless from converging on your paradigm!


On Oct 26 09:32 AM a. palmer jr. wrote:

> You could have mentioned that the reason third world is rising and
> unemployment here is rising is because we, as a country, allowed
> our jobs to be given away to China, India and others. You could have
> mentioned the non-patriotism of big corporate America that would
> see our people go hungry just so they could make a few extra bucks
> on their products. You could have mentioned that stores like Wal-Mart
> used to have a rule that they would make every effort to buy American
> goods when now it is virtually impossible to find almost anything
> Made in America at any store. You made it sound like that it's the
> natural rotation of things and that it's the other countries turn
> for all the prosperity....it's not the case at all, it's people in
> the higher up jobs in corporations and government selling out their
> country for a few measley dollars!

Oct 26 11:46 AM

[curious cat:]

thank you, teresa. however, my point was not that our children are in the majority. it is that there are as many of them as there were in any previous generation. better still, the productivity of these hard workers will be magnified far beyond their number, as technology continues to improve. in fact, our species does not need a nation of einsteins.

it took only one person to invent the wheel, the assembly line, a better yielding crop, etc. when no one believed there would be a demand for more than a few computers world-wide, one motivated individual in a garage went another way. beyond our own fears and expectations, those of us who struggle from day to day must keep it together, supporting an environment where those special few can lead us into a better tomorrow.

i believe in the individual, in bringing out the best in everyone. i'm encouraged that so many people have strong opinions about government policies and programs, but i'm not too concerned about those policies or programs. government can smooth the road or put up road blocks, but individuals decide which roads to take. individuals will not be stopped.

imagine a world where one person invents room temperature superconductors, inexpensive and safe fusion power, cheap water reclamation, super seeds, methusalah drugs, virtual travel, nano-targeted machines, human brain to computer thought, etc. that future is not far away and dwarfs the discoveries we've made so far, but each previous discovery gave suceeding generations more free time to pursue their interests. some seeds fell on hard rock and some precious few fell on rich soil. we all need to make our little corner of the world a better place, with richer soil.


On Oct 26 09:21 AM TeresaE wrote:

> Your son sounds awesome, you should be proud.
>
> Thinking that he is in the majority is a mistake.
>
> Go to your local (non-uber upscale) mall, or WalMart, and see reality
> of the masses.
>
> It isn't so hard-working and pretty. In fact, for the majority, of
> which your son (and mine) will have to support, are 180 degrees away
> from your child.
>
> Your hard-working, stick to it son, will be supporting dozens that
> do nothing, contribute nothing and wait for their government dole.
>
>
> Someone will have to pay for all these programs, promises, debt and
> laziness.
>
> It will be those that do.
>
> Those most like your son.

Oct 26 01:23 PM

[User 494951:]

I applaud your ultimate optimism, through the twists and turns which every generation must navigate. However, if this downturn has proven anything to me as a Real Estate Developer, it is that the Market is stronger than any Gumption. The benefit of being white, middle class and educated in a rising Super-Power has allowed us fleas to ride that wave. The wave of that Super-Power has crested and is surely falling. What comes of the new fleas to inherit the wave? The wave is like the market. Have you ever witnessed a Salmon swimming upstream? Such will be the fate of the new generation. Some will make it. More won't. One last thing to contemplate. Terrorists never had hopes of having Nuclear Weapons in our day, nor any other. They do now and they will use it in our childrens' lifetime. The shocks to the world of that new reality may be harsher than you, or any of us, are capable of envisioning. Gumption, yes. Survival of the fittest will rule as always.

Oct 26 05:27 PM

[dragonpaw:]

"it was the best of times; it was the worst of times."
"It was the age of prosperity (for the schills and scammers on Wall Street); it was the age of greatest poverty ( the un- and under-employed, the bailout-ees, the entitled)
"It was the age of bi-partisanship; it was the age rancorous party loyalty."
"It was the age of transparency; it was the age of closed-door conspicacy and lock-outs."
"It was the age of hope and change; it was the age despair and same-old-sh--."
"It was the age of a new US in the world; it was an age for just another GS-20 flunky waiting in line with a tin cup in hand."
'It was an age where things could never get better; and indeed this has come to pass.
For our children and our children's children, we have let the wealth and heritage of a great nation pass from our hands. Indeed we have not "earned" this legacy; but our children will rue our arrogance and audacity for having lost it without the least of a struggle.

Oct 26 05:48 PM

[Curious Bys...:]

Picking any decade will not work for the unrealistic this time. This is not any decade. We essentially have leadership that is incompetent, 12 trillion dollars of debt, raging unemployment that is hovering around 23%, banking systems that are continuing to collapse, a population entirely dependent on the government tit, and NO industrial or agricultural base. All coupled with a swell of Option ARM and Alt-A defaults in our future and politicians who refuse to get out of the way and who continue to use '20's monetary policy despite its previous failure.

Oct 26 05:49 PM

[Jason Rines...:]

Very insightful Leftfield. The producers in the US market have been pretty much beat on for eight years with little or no reward. Slaves will work for a roof and food for a time, until they decide it isn't worth it and stop producing. IE: Soviet Union, Cuba etc. Each government type has it's own fatality sequence, Democracy being 200 years, Despotism 20 and Communism 40.

About the article. One observation I have noticed recently is a visible increase in near-retired individuals whom have parked some cash and have begun a bit of roving soul searching. Meaning your not alone John. Perhaps such sabbaticals will reveal some answers.

As to this being an adventure, money is not happiness but does provide this sort of freedom of mobility. The Gen X'ers and Millenials will not have this kind of mobility for soul searching, more like an adventure in austerity and fight for God given rights such as freedom of speech and to not be looted at will, hopefully not having to literally fight the enemy within but near certainly will be fighting the enemy without. No, I prefer to have started my career in the 1970s but a good argument can be made about refinement by fire or that which doesn't kill us makes us stronger.

As for being an eternal optimist and how great life will be in 20 years, I agree. But the long dark night WILL get longer. The reason is evolution and those who resist believing they will live forever vs. those who eventual evolve past them.

The book referenced as an important read sounds like a decent recommendation. For those who want the net-out, it is called a climactic end to current centralization, a big decentralization process. What emerges afterward is the era of holographic thinking vs. current 2D or 3D thinking. It will be the era of quantum computing, the ability to assign septillions of historic data points with real-time data points and forecast the weather 50 years out at 97% accuracy. Large human beaurocracies will not be needed nor appreciated as all people on earth will represent themselves individually and vote collectively. That would mean slower advances but far more stable advances. Oh how the current lords of the universe must hate that thought!

So, I am an eternal optimist, but a realist when it comes to the heavy lifting, blood, sweat and tears the next twelve years will bring. Unlike the guy in London staring at thralls of people whisking by, the probable outcome is a guy rebuilding a new city ten miles from London or any other capitol in the world. The former being leveled by a final destructive world war. Makes sense outside of fear mongering or data analytics of geopolitical scenerios. First there was villages, then city states, nations, blocs of nations now down to East and West. Nothing refined ever occurs in this universe without some form of violent collision. It is not some fanciful hope of anarchy, but realism that propels my thinking.


On Oct 25 01:07 PM Leftfield wrote:

> Dave Wrixon opined accurately in another comment today that the Americans
> of today aren't those who rose to past challenges. I will add that
> the government of today, voted in by these Americans, is an enormous
> threat also, far larger and more intrusive than in past challenging
> times.
> Since your first loss is your best loss, the refusal to face reality
> during the '08 meltdown, rather, to add public debt to cure the problems
> brought on by excessive debt and leverage, for favored recipients
> threatens to lock in rule by a small upper class.
> Freedom is precious and I wouldn't take what's left of it for granted
> nor assume benevolence by our leaders (trust them). Toiling as a
> slave for the plantation owner takes "the gumption to get on with
> it" without much reward in this life.

Oct 26 06:26 PM

[Shannon Melton:]

Are you joking?

seekingalpha.com/artic...

Oct 26 06:33 PM

[Bolton Peck:]

@Geezer, the Socialists are not taking everything away. Look at France, a largely Socialist country that seems to be working just fine. The difference? The PEOPLE own the government, as opposed to the corporations like here.

But we

Oct 26 06:51 PM

[Jason Rines...:]

I voted up "for it is better to have it and not need it then need it and not have it" - Ben Franklin

The situation this man was kind enough to take his time and write, is reflective of the Ruble crashing in 1998. America will get through it but it is common for people to think such things could never happen to them. The odds are, they will happen to you and if not you then your kids.

On Oct 25 03:33 PM cdur wrote:

> sorry, but : "Stop smoking the carpet.... you're stone..!!"
>
> and read more about what will happens:
> www.silverbearcafe.com...
>
> best regards from France

Oct 26 07:09 PM

[Jason Rines...:]

Oh I can't help it. 'It was the best of times, it was the worst of times.'


On Oct 25 05:51 PM Albertarocks wrote:

> On Oct 25 10:16 AM Dave Wrixon wrote:

Oct 26 07:13 PM

[rennert:]

The Best of Times are when we do our own thinking. The latest CoolAid is unemployment. I see no unemployment here. I tried to get people to do handy man work and other jobs like pluming and tree trimming. No one has time. Everyone is so busy with work here on the West Coast of Florida.
Last year it was different but this year everyone on my street is working. There are no houses for sale on my street either. I think they are trying to make us think things are so bad so no one has the nerve to raise interest rates. At least 1% would sure help the dollar but that is exactly what those Greedy Financiers do not want,. They want to play Casino with a week dollar. While Inflation is already everywhere. Have you ben to the Doctor lately or taken Fido to the Vet??? Milk and Food also climbing Mount Everest.

Oct 26 08:35 PM

[realist len:]

Man you really must be smoking crack when you wrote this!

Oct 26 11:30 PM

[Geezer Bela...:]

This article refers to the Money Velocity as a factor in holding back Ibflation. We then should cite the entire equation: QxV = GNPxP; where Q is the money, V is Money Velocity, GNP is the sum of the economy and P is prices. It is readily evident that the economy (GNP) can be wrecked either by reducing Q ot by reducing V. In early September of 2008, there was an attempt to drain Money Market funds and a total of 500 Billion dollars were drawn out in two hours. The authorities stepped in and stopped the attempt to reduce Q. On September 15, 2008, the 'mark to market' accounting was adopted. This changed how banks could use their resources. If an asset was declared a "troubled asset" then it could be only counted at zero value and the banks had to increase deposits to cover that value. This move dropped V instanteneously and made the GNP fall precipiteously. I have collected the relevant graphs from the St Louis FED and republished them on my own blog (geezerbinexile.blogspo..., How the FED manipulates the economy). That was what elected Obama. The FED continues to tinker with 'mark to market' in order to keep prices from escalating, even though Q is being inflated. The result is that GNP is languishing and the dollar is losing value and gold and oil are going up. Thus, the FED is ruining the dollar so the govt can run up huge deficits to get control of companies.
Diogeron: your recollection of facts is incomplete. The Economic Recovery Tax Act of 1980 (under Reagan) reduced income taxes by 25% across the board. The demagoging that this was a "tax cut for the rich" ignores the fact that the taxes the rich paid actually went up. The Tax Return Act of 1986 set up three levels of income tax: 15%, 28% and 33%. This ushered in almost two decades of prosperity.
This was not the only time taxes were cut to improve the economy. In 1920 the Depression was cured by cutting government spending and reducing taxes. This ignited the roaring twenties. In 1960, JFK cut tax rates and the economy flourished. Russia has fixed its economy by adopting a modified (and low) flat tax. And the Chinese had abolished taxes on capital gaines. All but our Sociaists understand that low taxes lead to more work and prosperity.
Bolton Peck: You state re France that 'people own the government as opposed to the corporations like here.' The corporations are owned by people in France as here. We just have more corporate wealth. Remeber! Business = jobs and taxes that run a lot of things. Reduce business activity and we all suffer.

Oct 27 12:15 AM

[John Bowman:]

I guess if you want to bring up your kid to be a czar or a mini-czar in the federal government, he/she may have a bright future.

I read the brief version of "The Fourth Turning" which John Mauldin recently referenced and totally disagree with the forecast that the teeny-boppers of today will transform society. Instead, I see a bunch of pampered hyper-conformists with not an original thought in their collective minds.

Listen to their music. It speaks volumes of their despair and their lack of individualism.

Oct 27 08:55 AM

[Albertarocks:]

On Oct 26 11:30 PM realist len wrote:

> Man you really must be smoking crack when you wrote this!<

Look who's talking!

Oct 27 11:14 PM

[Johnny Oxygen:]

People! People! Simmer down now!

C'mon! Sheesh

Oct 28 10:19 PM