US on autopilot, coasting on a river of debt
03/05/10 Baltimore, Maryland 鈥� As I was floating down impassible rivers鈥↖ no longer felt myself steered by the haulers鈥�
鈥� Arthur Rimbaud, 鈥淭he Drunken Boat鈥�
The news yesterday pushed against us like a gentle wind. Pending house sales were bad. Consumer spending was good. Unemployment was bad. Manufacturing was good.
The Dow rose 47 points. It has moved without much conviction for several weeks. It can鈥檛 seem to make up its mind. We thought it had headed down decisively a few weeks ago鈥nd then, it stabilized鈥nd wandered about鈥�
Gold has more sense of destiny about it. It鈥檚 been in a bull market for the last 10 years鈥nd shows no sign of wanting to do anything else. It lost $11 yesterday, but still trades at $1,132鈥ot that far from its all-time high.
Gold is in a real bull market. As near as we can tell it is still in the developing stages. There are a few old gold bugs around. But the public is not yet talking about gold. Investors are not yet adding major positions in gold to their portfolios. Ordinary people are not yet expecting gold to go to $5,000 or $10,000 an ounce.
But the news keeps coming鈥he opinions鈥he rants鈥he data鈥nd the theories鈥�
This way and that鈥e begin to feel like a 鈥渄runken boat.鈥� That was the title to a poem written by a 17-year-old Frenchman named Arthur Rimbaud. It describes how we meander. We are driven by the winds鈥nd pushed by the back-eddies鈥� Turning our bow this way 鈥nd then that way鈥�
Never quite sure what direction we鈥檙e going鈥r what to think鈥� No one is in control鈥�
And still, the current continues鈥nd we keep heading downstream鈥arried by the great river鈥lways moving along.
One day we鈥檙e fascinated by what is going on in Japan. The next day it鈥檚 China. Some days we think we might somehow muddle through鈥n others, we鈥檙e sure something is going to blow up any minute.
But that river just keeps rolling along鈥nd we鈥檙e on it.
Where does it lead? Well, that鈥檚 the point. We鈥檙e not sure鈥�
All we鈥檙e sure about is that it doesn鈥檛 lead where most people think. They think they see a 鈥榬ecovery.鈥� Forget it. Won鈥檛 happen. We could have another speculative period鈥ut it won鈥檛 be like the Bubble Epoch of 2005-2007. Houses would have to go up 20% just to get homeowners鈥� heads above the water. Then, maybe they could borrow and spend like it was 2005 again鈥ut that鈥檚 not going to happen. People don鈥檛 have the incomes鈥r the credit鈥o bid up house prices again.
Here鈥檚 a headline from The Wall Street Journal: 鈥淓mployment of Adult Males at Record Low.鈥�
Where does that lead? We鈥檙e not sure鈥ut we don鈥檛 think it leads to 鈥榞rowth鈥� in the US economy. Instead, it leads to bankruptcy, deflation鈥nd maybe insurrection.
And what about the Chinese economy? Isn鈥檛 that growing at breakneck speed 鈥� over 10% per year?
The trouble with breakneck speeds is that you do break your neck. China should slow down鈥r it鈥檚 going have an accident. And if it slows down, the whole world slows down with it鈥�
And as to that 鈥榞rowth鈥� 鈥� it鈥檚 counterfeit anyway. It鈥檚 not real growth鈥t鈥檚 ersatz growth, caused by greater and greater government involvement and spending. The feds (the haulers) pretend to be in control. They want us to believe they are in control. But they are out of control themselves!
Can increasing government spending really make people more prosperous?
Show us an example!
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