Bill Bonner on the Failing US Bond Market, the Coming Hyperinflation and the End of the Dollar Reserve System
The Daily Bell is pleased to present another exclusive interview with Bill Bonner (left).
Introduction: 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 3rd New York Times best-selling book, Mobs, Messiahs and Markets, offering 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 The Daily Reckoning.
Daily Bell: Let's get an update from one of our favorite hard-money mavens. Where is the world today? Recovering?
Bill Bonner: No, there is no recovery possible or desirable. That is, the world is not going back to the naive bubble of the '05 – '07 years. And no one should or would want it to. It's moving on – to a new bubble. The US consumer sector is de-leveraging. Household debt is at its lowest level in 6 years – thanks largely to mortgage defaults.
But at the same time, the feds are desperately trying to releverage the whole economy. They're having success in two areas. Business loans are still down from 2009, but they're moving up. Corporations are able to borrow money merely in order to make payouts to shareholders. In other words, capital is changing hands ... from the fools to the knaves. Typically, private equity hotshots are borrowing money at low rates so they can pay themselves off. The underlying business is weakened with debt; but nobody seems to care.
Daily Bell: Any other areas of growth?
Bill Bonner: The other sector of the economy that is leveraging up in a big, and I mean in a really big way, is government. Here again, the money goes from the fools to the knaves. Government squanders the money in all the usual ways, while the lenders believe they will get it back. Both can't be right. My guess is that the lenders will be wrong. They are making a bad bet. There is no recovery. They will not be repaid.
Daily Bell: How about the particulars. Will the EU hold together?
Bill Bonner: Yes, the EU will probably hold together. It could always shuck off the periphery states if it had to do so.
Daily Bell: Where is Germany headed?
Bill Bonner: I have no opinion on Germany. Except that it is a relatively solid economy, selling things to people who want to buy them. Not a very original business model, but not a bad one.
Daily Bell: How about the PIGS?
Bill Bonner: Eventually, someone, somewhere, somehow must suffer the PIGS debt. They cannot repay it. So, someone else must – either the bondholders or the taxpayers or the whole society. Most likely it will be all of the above.
Daily Bell: Will the Greeks will devalue eventually?
Bill Bonner: They will eventually default and restructure.
Daily Bell: Even the Irish?
Bill Bonner: Yes.
Daily Bell: There is a lot of anger against the EU. Was it anticipated?
Bill Bonner: Everyone believes that some combination of political will and technical competence can make these problems go away. They can't. Debt does not disappear. It can be hidden. It can be delayed. However, it can be put onto someone else. But it is still there. The EU has tried desperately to make the debt vanish. People are disappointed that it hasn't.
Daily Bell: They believed an economic crisis would force a political union. That doesn't seem to be the case. Why?
Bill Bonner: Different countries have different interests. They can get together in the upswing of a credit expansion because they all seem to do better as a result. But in the downswing each tries to grab a bigger share of a diminishing pie. It is a fight for survival, not a love-in.
Daily Bell: The Germans won't stand for an EU bailout of British and French banks. Will the British and French taxpayers provide the bailout?
Bill Bonner: Probably. German banks have a lot of exposure to periphery state debt too. And everyone in a position of authority has the same interest – to slip the losses onto the taxpayers, without them realizing it. The losses won't go away. They won't disappear. They can't be paid. So someone must suffer them. The idea will be to manage and "share the pain." There will be some restructuring ... some write offs ... and a lot of obfuscation. As long as interest rates can be held at such low levels, the problem can be put off because it costs so little to service the debt. Meanwhile, inflation even at fairly low rates wears away at the real weight of the debt. Problem delayed, problem solved. That's what they have in mind.
Daily Bell: What if these banks flounder? Double dip? Won't that split the union asunder as well?
Bill Bonner: If the banks go down (and they should) it will trigger a short panic. In crisis mode, politicians will look for scapegoats and miracle cures. But letting the banks go down would strengthen, not weaken, the euro. It would ultimately probably strengthen the EU too.
Daily Bell: What will they do to try to save the union? How do you negotiate when the German and PIG positions are so polarized?
Bill Bonner: This might be a good thing. They may not be able to work out a coordinated fraud at taxpayers' expense.
Daily Bell: Let's move on the Chinese miracle. The Chinese have been throwing the kitchen sink at price inflation with little or no result. What can they do to damp it? We think it's futile.
Bill Bonner: The Chinese only have the illusion of control. The Chinese economy will blow up.
Daily Bell: They've even been trying price controls. Who's running the show? Are they really that economically illiterate?
Bill Bonner: No ... no ... they're not economically illiterate. That's the problem. They're economically sophisticated. They've learned all the claptrap of the economics profession in the last 50 years. They think they can use it to control the economy. So did Japan, by the way. It was only a quarter century ago that people thought Japan had the magic. Back then Japan's economy was not so much managed as guided by MITI, its centralized industrial planning board. Foreign economists so admired the work of the planners that they urged the US, Britain and other nations to follow the Japanese example. They were unaware the biggest successes in Japan came in industries where entrepreneurs and businessmen had been able to ignore MITI. In the auto industry, for example, MITI told Honda and Toyota to stay out of the US market. It was too competitive, said the planners. But Japanese automakers went in anyway – with spectacular results.
Daily Bell: What happened?
Bill Bonner: When the Japanese economy blew up in 1989, the planners were on the case immediately. Instead of allowing the crisis to wash out excess capacity and the bad debt that accompanied it, they propped up the whole system with zero interest rates and huge deficits. Companies that should have de-leveraged or gone broke, were allowed to stay in business – indefinitely. Banks that carried the debt of zombie businesses were never forced to clean their cupboards. Why should they, when the cost of storage was so low? These policies effectively meant that the correction was stymied. The private sector was never purged of its mistakes. Instead, the errors were refinanced at ultra-low rates.
Daily Bell: And the public sector?
Bill Bonner: The public sector in Japan is also feeble and zombified. Japan owes twice its GDP in central government debt. At the current rate, the total will be three times GDP by 2020. Already, the debt dwarfs Japan's ability to pay; it is 20 times tax revenues. At least, in heading towards debt equal to 300% of GDP, Japan won't go broke; it can't ... it's already broke. Japan is trapped by its own central planning in an endgame that threatens to be even more punishing and upsetting than the nation's 21-year on-again, off-again slump.
Daily Bell: Similarities to China?
Bill Bonner: China is not Japan. But its economic model is very similar – export your way to prosperity. And where Japan's central planners merely gave bad advice, up until the blow-up in '89, China's central planners have more authority. They continue to direct massive amounts of cash and credit into expanding China's export capacity, apparently unaware that their number one customer is having a hard time paying its bills.
US interest rates have been trending down for at least 28 years, while US debt and deficits grow rapidly. An uptick in US inflation and interest rates could be disastrous for China's pile of dollar reserves, while an intensifying correction in the US and Europe would be disastrous for its export industries. The only thing that will work for China is a continuation of the status quo ,which is extremely unlikely. Rates are near zero in the US and Japan, while sovereign debt soars. This can't continue forever ... though Japan shows that it can go on long enough to drive short-sellers crazy. Nations can remain insolvent longer than you can remain rational.
In short, the Chinese economy depends on the health of the economies of Japan, Europe and the US – all of which, with the possible exception of parts of Europe – are following unsustainable financial models.
Daily Bell: Eventually they'll hit a wall, won't they? Either they freeze the monetary velocity with high rates or they end up with sky-high real estate and food prices. Either way it's not good for the Chicoms is it?
Bill Bonner: Look out! We're going to find out if central planners really can run an economy. Of course, we already know the answer. FA Hayek explained it theoretically in his book "The Fatal Conceit." And then, the Soviet Union very generously ran a 7-decade real-world experiment that proved he was right.
The problem, if I may simplify, is that you can never know what anything is worth unless you allow people to buy and sell freely. And if you can't know what something is worth, you can't make sensible investment decisions. You end up allocating capital to the wrong places, which leads inevitably to massive bust-ups.
Daily Bell: Is that what they've been doing?
Bill Bonner: As might have been predicted, the authorities' efforts to smooth out the business cycle has led to some of the most violent ups and downs ever experienced. One year, oil is worth $150 a barrel. Next year, it is worth $35 a barrel. Two years later, it is back to $100. How can businessmen make intelligent decisions when the price of energy whips around so much? They can't. Instead, they make mistakes.
Most central planners acknowledge that they can't improve on the price mechanism as a source of information. But they nevertheless maintain that they can improve the performance of an economy by controlling the price of short-term credit. They use their control of interest rates – not to mention fiscal policy – to block the downside of the business cycle. Sharp discounting of asset values and deflation are counteracted quickly. The only acceptable price movements were to the upside. Corrections are suppressed ... the problems are amplified. Eventually, markets always have their way. It is just a matter of time until China's compounding mistakes catch up to her.
Daily Bell: Let's move on to the Middle East. What's going on there in your view? Are these revolutions spontaneous?
Bill Bonner: They seem to be.
Daily Bell: There's a lot of evidence that the US – State Dept, CIA etc. – is helping organize these youth movements around the world. Why would that be?
Bill Bonner: Unlikely. The US is extremely conservative.
Daily Bell: We believe the US is trying to generate a series of Islamic republics so as to further the phony war on terror. Al Qaeda isn't doing the job anymore. Comment?
Bill Bonner: That is giving the US State Department and the CIA a lot of credit for strategic thinking. It is unlikely that they are that focused. They are bureaucrats with many different views ... most of them misguided and wrong.
Daily Bell: Is America headed for a recovery or another recession?
Bill Bonner: Neither. It is in a Great Correction of the credit expansion that began after WWII. This will continue for many years to come and probably lead to enough excess money-printing by the feds to create a hyperinflationary blow-up. This will be the end of the monetary system that was set up – almost unwittingly – in August 1971. More than that, hyperinflation will shake the foundations of modern political, social and economic institutions, and probably bring many of them down. The social welfare state, for example, was invented by Germany's Iron Chancellor Otto von Bismarck more than a century and a half ago. In their late, degenerate form, they depend on delivering benefits in the present while pushing the costs – in the form of national debt – onto future generations. A bout of hyperinflation will make this model inoperable, because governments will be unable to finance further huge deficits at low rates. It will also mark the end of Keynesian interventionism, as it will be obvious that central financial planning doesn't work.
Daily Bell: Why has Bernanke been so relentless about money pumping?
Bill Bonner: He believes he has to fight the Great Correction.
Daily Bell: Putting everything together it is as if the powers that be are pushing and shoving toward maximum chaos. Can it all be coincidence or is there a purpose behind it? Out of chaos a new world order and a single currency?
Bill Bonner: Hm-mm. Again, this presumes more of a grand design and more control than the 'powers that be' actually have.
Daily Bell: Given all the uncertainty where would you be investing now?
Bill Bonner: In gold and silver. Both remain good investments.
Daily Bell: Give us your best peek into the crystal ball. Where will the world's economy be in a year? Better? Worse?
Bill Bonner: Impossible to say. But the risks are greater than the potential rewards. There is too much debt in the system. It makes the whole system vulnerable to a breakdown. There's more downside, in other words, than upside. That said, tomorrow is usually like today. So, most likely, the world economy will stumble forward, with low growth, bubbles in some sectors, and pockets of prosperity as well. Keep in mind though that you don't make any money by betting on what is likely to happen. You make money by betting on things that may even be unlikely, but underappreciated.
Daily Bell: What might be underappreciated?
Bill Bonner: What is underappreciated now is the risk in the US bond market. Investors are lending at less than four percent interest, for 10 years, while the real rate of consumer price inflation – including fuel and food – is probably around eight percent. They're losing money already. And a move back to "normal" interest rates would be devastating to bondholders. Sooner or later, the bond market is going to collapse. Will it happen this year? I can't say. But it is best to be prepared.
Daily Bell: Great stuff. Thank you again for your time and insights.
If we have any differences with one of the most insightful minds in the hard-money investment business, it would have to be on the issue of premeditation. Mr. Bonner sees the "big picture" and believes it is too big for meaningful power elite manipulations. We look at what is taking place and wonder how it can be other than deliberate.
Of course, this does NOT mean that each gambit attempted by the Anglosphere – each war, each fear-based promotion, each dominant social theme – has the requisite effect. In the 20th century many of them did. In the 21st century, many of these attempted manipulations are failing and floundering.
Global warming had a good run of almost 50 years. But a year ago, thanks to "Climategate," the dishonesty of the numbers was exposed and the public consensus fell apart and has never been put back together. The elite renamed the promotion; it's called climate change now, and is lurching ahead without much success. But as we have often pointed out, a hallmark of elite promotions is that the Anglosphere won't let them die, even if they have actually ceased breathing. The elites animate the corpse, prop it up, and insist it is alive. This is another problem – for them, not for us.
The Afghanistan war is not going well. The Pashtun–Taliban should have been pacified by now, instead they continue to gain safe-haven within Pakistan's borders; try as it might, the US cannot prevail on Pakistan's military and intelligence leaders to route them out. Tensions continually rise. Pakistan is not even attending the upcoming US/Afghan summit, though it has been invited. The current distrust was brought about by the capture and subsequent release of a CIA contractor who gunned down two Pakistanis on the street. On the heels of this incident came the subsequent drone killings of some 40 elders on the Pakistan border. Pakistan and Pashtuns alike claim the meeting in which the elders were participating had to do with a local business dispute; Pentagon drone handlers say the meeting was a terrorist gathering.
The European Union, another long-term power elite project, is having the same credibility problems as the Afghan war. The EU leaders meet and meet and announce solution after solution but the bond market doesn't agree, and the Sovereign Debt crisis rolls on. Lately, the EU has pinned its hopes on a closer political union between the EU's various nation states. In practice, this means the EU will be keeping a close eye on Southern PIGS budgets and expenditures. While this may seem to be an inevitable trend, the entire process may grind to a halt if the Irish eventually vote on the process – as their Constitution seems to demand. This time round, one would have to think that the Irish will not be bullied into changing a "no" vote into a "yes" vote through the convenient if questionable gambit of holding an additional referendum.
There is more, much more; we write about it regularly. Who knows what the future holds? Bill Bonner seems to believe it will be a rocky ride; we tend to agree. Our take however is that one reason things may get a lot worse before they get better is because the powers-that-be are attempting to sustain a growing amount of failed promotions. The elite in our view seeks chaos, but not so much chaos that the events cannot be guided and smoothed into shape. When chaos overwhelms the system even elites lose control. That may be happening now.
Posted by Gordon Sceptic on 03/20/11 04:52 AM
Excellent interview with Bill Bonner, he talks so much sense its a pity that the corrupt and biased mainstream media won,t give him exposure. If they did the average joe could really understand whats afoot in the world of big ben and his cronies.
Reply from The Daily Bell
Posted by Memehunter on 03/20/11 05:46 AM
Daily Bell: Let's move on to the Middle East. What's going on there in your view? Are these revolutions spontaneous?
Bill Bonner: They seem to be.
I like Bill Bonner and I understand that not everyone shares the views expressed here at DB, but I have a hard time understanding how any intelligent, well-informed individual can come to that conclusion. His reply to that particular question and a few other questions on related topics left me with a strange impression. Perhaps Bonner wants to preserve his mainstream credentials and avoid being associated with "conspiracy theorists".
Posted by Wayne on 03/20/11 06:12 AM
Thank you for allowing Bonner to discuss many banned topics.
His honesty in not predicting an immediate crash is refreshing.
Regarding the future of the Bond market, he described it well.
Someone is going to get pasted here, whether it's the debtor, or the creditor. And no one knows who is going to take the fall.
Yes, he disagrees with DB on the elites power, but Bonner always adjusts his thinking for human stupidity, and the PE may have boxed themselves in the new reality of the internet.
One can always hope that the PE are trapped!
The futile attempt to override the contraction of the most massive
credit expansion in history does indicate a certain amount of extreme hubris, or a failure to understand that it's over.
The current diversion of Libya shows just how desperate they are keep their image of a freedom enhancing government, even while they treat American travelers as convicts, or untrustworthy.
Bonner's point about the Chinese being sophisticated in Western Economic theory is interesting. We already know where that will take China!
Bonner's basic message is correct. Economic planning is impossible in this environment, so avoid big risks now, and be very opportunistic in your investing.
Posted by Wayne on 03/20/11 06:34 AM
"Daily Bell: Let's move on to the Middle East. What's going on there in your view? Are these revolutions spontaneous?
Bill Bonner: They seem to be.
I like Bill Bonner and I understand that not everyone shares the views expressed here at DB, but I have a hard time understanding how any intelligent, well-informed individual can come to that conclusion. His reply to that particular question and a few other questions on related topics left me with a strange impression. Perhaps Bonner wants to preserve his mainstream credentials and avoid being associated with "conspiracy theorists". "
Your description of Bonner's motive on downplaying the issue of the PE controlling most events is worth thinking about. It might impair his credibility with some of the more conventional thinkers.
Posted by Dietrich Luther on 03/20/11 06:35 AM
Society should be able to discern the difference between good and evil, and then act on it. What prevents those who know what is right from doing right? Faith in Christ acknowledges evil's existence. Reality might give them pause to reconsider their assumption that evil doesn't exist, but I doubt it. The power of deception is most often disproved.
Posted by Puck T. Smith on 03/20/11 07:05 AM
Thanks, DB, for a very good interview. Bill Bonner is a very articulate man. It's a shame more people aren't hearing him.
Posted by AmanfromMars on 03/20/11 07:31 AM
"I like Bill Bonner and I understand that not everyone shares the views expressed here at DB, but I have a hard time understanding how any intelligent, well-informed individual can come to that conclusion. His reply to that particular question and a few other questions on related topics left me with a strange impression. Perhaps Bonner wants to preserve his mainstream credentials and avoid being associated with "conspiracy theorists". " ..... Posted by Memehunter on 3/20/2011 5:46:45 AM
That is the distinct impression I also received, Memehunter. So ... Mr Bonner is not so much a pathfinder as a scavenger ..... of crumbs from PE Meme Play?
That is not to say that it is not very necessary but in the big picture scheme of things is it nothing of any great note, methinks, whenever the system is melting down around everyone. It's a mad, mad, mad, crazy world indeed.
Posted by Alan on 03/20/11 08:02 AM
Always have time for Bill Bonner. He shows that history is a subject that can educate and guide us in the present. Love the comment about F A Hayek and his book 'The Fatal Deceit' exposing central planning: "And then, the Soviet Union very generously ran a 7-decade real-world experiment that proved he was right."
Posted by Walter Calahan on 03/20/11 09:06 AM
The Professional Poliicians have created the "City State", Washington DC, as the vehicle for them to take over the Country after the coming financial collapse, a deliberate financial collapse engineered by them.
The sovereignty of the 50 States will be destroyed along with the citizen's rights. We have only our selves to blame for allowing this to happen by turning to the Federal Government to solve local problems instead of solving them our selves.
The financing of these national mandates through a program of unchecked deficites gave the appearance of positive results while actually it enabled the professional politicians to begin their quest of total control. And we also gave these SOB's their own Army, Navy, and Airforce to make war where ever they see fit (or contrive) plus a military/industrial complex to produce the weapons!
Hey, am I describing something that might take place, or the China now developing on the world stage ?
Posted by James M on 03/20/11 09:14 AM
I agree with Mr Bonner on 99% of it but I agree with the DB that this is being orchestrated on purpose. There are just to many coincidences to overlook. I think that someone in the PE general planning department made an incredible blunder on the power of the internet to spread real information in real time across the world. They probably thought they could control the content at first. Whether this is being done on purpose or not, it is still happening and Mr Bonners advice is still good as gold. Thanks
Posted by Ryan on 03/20/11 09:30 AM
An economic crash IS coming, you need to be prepared, which road will you take...go to Click to view link
Posted by Agent Heggle on 03/20/11 09:31 AM
Geez, Bill Bonner . . .
"from the fools to the knaves . . . " George Villiers, 2nd Duke of Buckingham, had something to say about that phrase . . .
Click to view link,_2nd_Duke_of_Buckingham
I can't believe you said this:
"No ... no ... they're [the Chinese are] not economically illiterate. That's the problem. They're economically sophisticated. They've learned all the claptrap of the economics profession in the last 50 years. They think they can use it to control the economy."
Huh? What about the Song Dynasty? Forgotten about them?
The annual output of minted copper currency in 1085 alone reached roughly six billion coins. The most notable advancement in the Song economy was the establishment of the world's first government issued paper-printed money, known as Jiaozi (see also Huizi). For the printing of paper money alone, the Song court established several government-run factories in the cities of Huizhou, Chengdu, Hangzhou, and Anqi. The size of the workforce employed in paper money factories was large; it was recorded in 1175 that the factory at Hangzhou employed more than a thousand workers a day
You also said: "The social welfare state, for example, was invented by Germany's Iron Chancellor Otto von Bismarck more than a century and a half ago."
Huh? What about the Song Dynasty? Forgotten about them?
The Song government supported multiple forms of social welfare programs, including the establishment of retirement homes, public clinics, and pauper's graveyards. The Song Dynasty supported a widespread postal service that was modeled on the earlier Han Dynasty (202 BC ' AD 220) postal system to provide swift communication throughout the empire. The central government employed thousands of postal workers of various ranks and responsibilities to provide service for post offices and larger postal stations. In rural areas, farming peasants either owned their own plots of land, paid rents as tenant farmers, or were serfs on large estates.
Click to view link
Funny really . . . not many seem to people know that the Chinese are honourable, proud people. They do not collect welfare if they are able bodied. They are looked down upon if they suck on the collective teat.
Lastly, you said: "The Chinese only have the illusion of control."
Isn't that the name of the game, Bill Bonner?
Posted by Jack Maxey on 03/20/11 09:32 AM
Mr. Bonner's observations are always a good read and I agree with most of them. However, I do not agree that everything taking place on the global stage is mere hapstance and that the PE's are not involved in controlling events. Beyond the contolled meltdown in several parts of the world the PE's keep pushing their global warming meme almost oblivious to it being a non sequitur.
Posted by Victor Barney on 03/20/11 09:56 AM
I wore out trying to understand this article. Simply put, what happened to England, who we bailed out in 1945 from unsustainable debt caused by their entry into Marxism, was the mandated Marxist manifesto's collapse of their country through debt, which actually was an Anti-Messiah system of governing people! With past American Presidents, such as Teddy Roosevelt, Wilson, FDR, Carter, etc., etc., etc., our people, lead by our women have elected the endtime Marxist or Anti-Christ of the endtime of man's history as the leader of the real "Israel" a name only given to the seed of Joseph, not Judah(i.e., only promised grace, as more thoroughly explained in detail in the New Testament. Now, I understand that it is the first that will be last and the last that will be first to be resurrected. Watch!
Posted by Kenn on 03/20/11 10:02 AM
"That is giving the US State Department and the CIA a lot of credit for strategic thinking. It is unlikely that they are that focused. They are bureaucrats with many different views ... most of them misguided and wrong."
I agree with the US State Department but the CIA is another ball game. Remember Iran in the early 1950's, Vietnam, Iraq. All CIA. Not sure about Afghanistan but I am confident their up to their spyglasses in the Arab uprisings especially Libya.
Bill doesn't mention it much but Japan is his investment pick of the decade. He could still turn out to be right but Japan is going to have to do a lot of changes before that happens.
Bill also seems military spending enthusiast. My assumption there is that he always,,, I mean always,,, comments on grandma and grandpa being zombies/freeloaders where social security is concerned. He never mentions that all grandma's life, she was forced to pay the tax. But more importantly he rarely if ever ( I have never witnesses it) mentions the military industrial complex over spending.
Most of Bills economical ideas seem on target. His book is great but on the US Military/CIA he is usually evasive mostly neutral or even defends them in a offbeat manner. Maybe he's smarter than the rest of us and just wants to stay off the NO FLY LIST!
An excellent writer though!
Posted by Tsunami on 03/20/11 10:27 AM
Interesting read and I agree with most of it.
I am nowhere near his knowledge nor research capabilities but where I differ with him is in the China hoard of US cash.
Most of the places I now look and resource companies I look at have somewhere a Chinese connection. It is my firm belief that they see the writing on the wall and are divesting themselves of the US dollars as fast as they can through buying and stockpiling materials they need for their inducstires, rare earth, iron ore, potash, uranuum, cobalt and a large number of other materials.
They also are buying huge amounts of gold and silver and encouraging their citizens to buy these also of course in USDs. and once again divesting the USD.
In addition to this they are feverishly trying to develop their domestic markets and also those of India and other Asian countries.
I do think Bill needs to re examine his China position. They are improving their position daily and trying to move as far away from the US as their prime market as quickly as possible.
You only have to look at the junior mining companies to see their influence and their increasing membership on various boards of directors.
Posted by Onebornfreeatyahoodotcom on 03/20/11 10:48 AM
Daily Bell said: "Give us your best peek into the crystal ball. Where will the world's economy be in a year? Better? Worse?"
Bill Bonner said: "Impossible to say." ... "Keep in mind though that you don't make any money by betting on what is likely to happen. You make money by betting on things that may even be unlikely, but underappreciated."
Exactly Mr Bonner, there is no "crystal ball" with which to conveniently peer into our economic future, like some wise, all-knowing sage.
No one can know with absolute certainty what will happen economically tomorrow, next year, or 5 years or more from now. Mr Bonner appears to be astute enough to understand this.
Fact:no-one can possibly know that the hyper-inflationary [gold-friendly, bond unfriendly!] scenario Mr Bonner assumes _must_ occur sooner or later, _will_ occur within the period of their own lifetime, even if one assumes that it _is_ an absolute certainty.
Fact: The economic future always must remain unknown. Which means that Mr Bonner's take on gold/US bonds could be right, or it could be completely wrong.
Although we might know "for certain" economically speaking, that when interest rates rise dramatically [matching or perhaps exceeding the peaks previously reached in the early 1980's], that US t-bond valuations must inevitably collapse as a result, there is still no way of knowing with absolute certainty exactly when that event [i.e.hyper-inflation and collapse of bond prices etc.], might occur; it could start next month, next year, 5 years from now-or it might _not_ occur within any of our own [readers ] lifetimes;there is simply no way of telling in advance.
All of which leaves the individual long-term saver in something of a dilemma: if the economic future is unknowable [as I contend], how can the individual saver protect their long-term savings from events such as those foreseen by Mr Bonner and others like him, and at the same time protect their precious savings from events that Mr Bonner and others like him have _not_ foreseen [i.e.unexpected economic recovery, persistent low inflation, new revolutionary technologies etc.etc.] and even make money from those unforeseen events; for as Mr Bonner himself observes:"Keep in mind though that you don't make any money by betting on what is likely to happen. You make money by betting on things that may even be unlikely..".
Fortunately, there is a simple way for the concerned individual to protect their long term savings, without the need for them to resort to predicting the unpredictable, and which at the same time allows the individual saver a way to safely make speculations by, as Mr Bonner says:" betting on things that may even be unlikely".
"Financial Safety Rule #1" says: "despite many claims to the contrary, no one, not even your favorite economist or investment advisor, can reliably, and consistently, predict future economic events".See "Financial Safety Rule #1:
Click to view link
Reply from The Daily Bell
You are wrong as we have often (repetitively) pointed out. The Austrians have a great track record of predicting the various stumbles of fiat money and continue to make accurate predictions of what is to come. Business cycle analysis is an invaluable tool as is marginal utility and the analytical application of the Misesian concept of "human action." You can denigrate these tools all you want but that doesn't make them any less useful or valid.
Posted by Ol' Grey Ghost on 03/20/11 10:49 AM
"Mr. Bonner sees the "big picture" and believes it is too big for meaningful power elite manipulations. We look at what is taking place and wonder how it can be other than deliberate."
I have always been one not to attribute a series of tragic events to an evil conspiracy that cannot be better explained by a "Comedy of Errors" but I must admit to the increasing number of alternate intelligence reports that suggest a number of surfers out there riding their boards on man-made waves.
Maybe one day we can throw a monkey-wrench into their wave-making machine and gum up the whole works. Oh wait, there's the alternate intelligence reports on the Internet. Why didn't I think of that?
Posted by Patrick McDonald on 03/20/11 10:55 AM
Baron von Nothaus challenged authority and was beaten by The Authority in court in Statesville North Carolina.
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web site taken down by court authority. The old dollar sign not the one being used by the U.S. MInt was on the LIberty Silver and Gold dollar medallion coins. The jury did a short deliberation.
In short order Baron von Nothaus was found guilty of counterfieting because the old out of date dollar sign on the numerical amount had been interpreted as a current U.S. dollar sign.
All of the assets; the gold silver etc were confiscated. Baron von Nothaus used to be the minter for The Hawaiian mint. Had the dollar sign not been on the Liberty dollar; The FBI would have not ever had the case tried.
Nationalisation of private 401k's could be in the works and have been under discussion. More surprises are in store as the future moves forward. Some places of the world are bleeding in debt. They will come up with new and miraculous ways of ingenituity to resolve their debts by forageing for revenues.
Even the thoughts of confiscation are under consideration for the funeral pyres of government smothered in debt. Those who believe they can walk away from the bail out debts and super debts of a country may be in for startling exit taxation of their aquired wealth.
Some countries of the world do not have a food stamp program to feed their people. Fortunately; American folks are blessed with a food stamp program to help supplement their income. Food
Stamps are non taxable and the food brought is tax free. Hyperinflation is the ghost some people are betting on to get rich. Others fear the extreme consequences of hyperinflation. The possible break down of civility; A declaration of Marshall Law; The reduction in benefits; The reduction of essential government services; the emptying of risky dangerous prisoners from the prisons;Whole sale lay offs of people from work....;And the spiraling costs of food,fuel and other essentials to basically exist.
All is not lost. Look at the miracle of Brazil. Not one barrel of oil has been imported by Brazil for over 10 years. Brazil is one of the major bread baskets of the world. The USD is a major petro dollar currency of the world. Some predict it will be a major currency player for the next 25 years.
When all looks lost;something is going to come up out of the sleeve and redeem the value of the USD. Chase have heavy investments in copper. They offer extra cash instead of having to deliver the precious metals of gold and silver. Chase is aware of the true value of hard assets. These hard assets are coveted as long as possible.
During times of hyperinflation in 1920's Germany; goods and services were exchanged for a preferable form of other stronger more stable currencies. Some areas in America accept Canadian currency and even Euros or species of silver and other precious metals in lieu of accepting American USD.
Baron Rothchild escaped the war in Europe sailed into New York with a valaise of precious jewels. There are other forms of currency in the world that are a hedge against inflation. 20% of Europe's wealthy invest in art. A picture or even a rare stamp can be treated as or be converted into currency.
The financial problems of governments are not by intelligent design prepared and executed by the Anglo American West. Countries around the world are deep in red ink. The world's countries are interdependent and codependent upon each other. China may have more millionaires than America. Russia is honored with more millionaires in the Duma than America's has millionaires in Congress.
Inflation is a tiger for China. It is a tiger of Japan and it is a tiger for the rest of the world to handle. The idea that countries can inflate their way out of debt is a curiousity. The new concept of doing bail outs and passing on the bail out debts to the national debt and to the citizen is seemingly unfair.
Falling magazines subsciptions and failing news papers will be wanting bail outs. The cost will be passed onto the citizens and onto the country. Anti business laws encourage businesses and industries to seek fair weather more business friendly countries to do business in. When the inflation is horrible wrong and is to be changed; America may like Argentina and Brazil practice debt forgivness. The national debt could be rolled over by the U.S. Treasury.
A new currency could be used to reboot the economy. The BANCOR or AMERO or whatever it is called could rise up in value as the country had rid itself of debt and ride itself of expensive imports.
Boone PIckens is telling the truth when he says..."trillions in wealth are transferred out of America to pay for foreign oil". it doesn't have to be that way. When the breaks are put on inflationary government debt machines; the value of a currency will resurge. America uses 7% less imported oil than it did a few years ago. The trend may be on track.
Putting government spending under control could slow inflation. An elastic monetary system can help stimulate and pay for many projects. The raising of interest bearing bonds help to sell debt. When the interest of the bonds get near or do not supercede the profit value of debt purchased;Countries may back off and not buy U.S. debt.
Reply from The Daily Bell
Exactly what your peroration amounts to we are not sure. But if you are suggesting that the world's current state merely "evolved" coincidentally we disagree. Every part of the current evolution can be shown to be in some sense deliberate via pattern analysis, anyway, and the epicenter is the good, old City of London.
Posted by Jdb on 03/20/11 10:59 AM
I am with Bill Bonner. As stated several times , I believe corruption and manipulation is either by intent , or opportunity. Painfully aware the majority of politicians , bureaucrats and so called "elite " are bungling idiots; consequently corruption and manipulation is seldom by intent but moreover by opportunity. Kindergarten mentality is incapable of building a one world government.
Familiar with Agora , moreover Mr. Bonner's books....all I can say is hats off. Great interview.
Reply from The Daily Bell
Thanks. We disagree on this point as we noted in the After Thoughts.