Save your cookie preferences

We use cookies to remember your site preferences, record your referrer and improve the performance of our site. For more information, see our cookie policy.

Please select an option below and 'Save' your preferences.

Save

You can update your cookie preferences at any time from the 'Cookies' link in the footer.

We use cookies (including third-party cookies such as Google) to remember your site preferences and to help us understand how visitors use our sites so we can improve them. To learn more, please see our privacy policy and our cookie policy.

To agree to our use of cookies, click 'Accept' or choose 'Options' to set your preferences by cookie type.

Options Accept

  • English
  • Deutsch
  • Español
  • Français
  • Italiano
  • Polski
  • 日本語
  • 简体中文
  • 繁體中文
  • Daily audit
  • Help
  • Contact
  • Deposit
  • Login
  • Open account
  • ABOUT US
    • About BullionVault
    • In the press
    • Reviews
    BUY/SELL BULLION
    • Live order board
    • Daily Price
    • Regular Investing
    INVESTMENT GUIDE
    • Guide to gold
    • -How to buy gold
    • -Gold investment
    • -Gold investment plan
    • -Investment insurance
    • -Compare asset performance
    • Guide to silver
    • -How to buy silver
    • Guide to platinum
    • -How to buy platinum
    GOLD NEWS
    • Gold news front page
    • -Gold price news
    • -Opinion & analysis
    • -Market fundamentals
    • -Gold/Silver Investor Index
    • -Infographics
    CHARTS
    • Gold price
    • Silver price
    • Platinum price
    • Price alerts
  • Login
  • Open account
  • BUY/SELL BULLION
  • Live order board
  • Daily Price
  • Regular Investing
  • INVESTMENT GUIDE
  • Guide to gold
    • ⤷
    • How to buy gold
    • Gold investment
    • Gold investment plan
    • Investment insurance
    • Compare asset performance
  • Guide to silver
    • ⤷
    • How to buy silver
  • Guide to platinum
    • ⤷
    • How to buy platinum
  • GOLD NEWS
  • Gold news front page
    • ⤷
    • Gold price news
    • Opinion & analysis
    • Market fundamentals
    • Gold/Silver Investor Index
    • Infographics
  • CHARTS
  • Gold price
  • Silver price
  • Platinum price
  • Price alerts
  • ABOUT US
  • About BullionVault
  • In the press
  • Reviews
  • Help
  • Contact
  • Daily audit
    • English
    • Deutsch
    • Español
    • Français
    • Italiano
    • Polski
    • 日本語
    • 简体中文
    • 繁體中文

Gold News

Live support

NEED HELP? ASK US NOW

Search form

Gold News front page

Gold Price News

Gold Prices Ex-US Dollar Break Above $1450 as Italy's 'Brexit' Talk Hits Euro

More...

Gold Investing In Depth

Learn about gold bullion bars

Learn about gold bullion coins (and costs)

Gold investment: Why & how?

Gold Investment Analysis

  • Latest Gold Investor Index
  • Diversification: Gold as investment insurance
  • 40-year Asset Performance Comparison Table

Gold Articles

Opinion & Analysis

Gold Price News

Investment News

Gold in History

Gold Books

Gold Investor Index

Gold Infographics

Archive

  • February 2019 (20)
  • January 2019 (33)
  • December 2018 (28)
  • November 2018 (39)
  • October 2018 (38)
More...

List of authors

The History Buff's Stalingrad

Monday, 12/21/2009 10:39

Studying history doesn't always make you smarter...

IT MUST BE SNOWING all over Europe, writes Bill Bonner in his Daily Reckoning.

Zurich was beautiful in the snow. So is Paris. The snow seems to quiet the place down...and cover over its imperfections. And the cafes and bars...brightly lit, warm and charming...are so inviting you can barely make it home at night.

This morning, it is still snowing. We were tempted by several cafes. But we made it into the office anyway. There's reckoning to be done; someone has to do it.

Everyone is talking about the rise in the Dollar. It's up to $1.43 per Euro...a three-month high. Because "The US economy all of a sudden doesn't look so bad; the rest of the world doesn't look so good," was one explanation given in The Wall Street Journal. Investors are going back to safety, said another report.

We were puzzled as to why stock markets were doing so well. If investors were really fearful, you'd think they'd be pulling their money out of expensive stocks, especially out of the go-go 'emerging' markets. This year, the three leading performers are Brazil, Russia, and Indonesia, up 140%, 129%, and 115% respectively. Even in the US, shares are selling for far more than recent experience would seem to justify.

But maybe the sell-off in the stock market has finally begun. We'll have to wait and see. Meanwhile, over the last couple of weeks, an idea has been taking shape:

The future is like a child. It will grow into an entirely new person. One that has never existed before. But it is a product of the past too. It may have Mom's eyes...or Aunt Lou's quick temper. It lives in a house originally bought by Dad when he was working for IBM in the '80s. And it uses money that is controlled by an organization set up under the Wilson administration.

When we look ahead, we see enough elements of the past to confuse and mislead us. "Those who do not study the past are doomed to repeat it," say the schoolteachers. But what about those who DO study history? At least one of Hitler's top generals, when he was taken prisoner at Stalingrad, had in his pocket a copy of Caulaincourt's recollections of Napoleon's disastrous Russian campaign.

We are supposed to believe that investors can avoid the calamities of the past by studying what happened in previous market cycles. To some extent it is true. You read enough stories of bubbles and you begin to get an instinct for them – at least at the extremes. That is how some of us were able to foresee the dotcom blow-up in '00...and later, the blow-up in the financial sector in '08.

Part of the problem is just filtering out the noise in the system. Probably 99% of what you heard is just noise – distracting information, misunderstood phenomena, and dubious data. When you read the commentariat...the pundits...the newscasters, economists, and analysts who are telling you what is happening and what lies ahead, you have to remember that most of them had no idea what was happening two years ago. Now, they have even less of an idea of what is happening.

We don't have any idea either. Like a newborn babe, this period in our financial history bears some resemblance to past cycles. The most striking resemblance is to the depression period of the '30s in the US...and the long, slow depression in Japan since 1989. But it is different too. As you will see, below, we have far more to reckon with that we did in the '30s.

Of course, those who misunderstood the financial bubble of 2003-07 (Ben Bernanke thought it was a period of "Great Moderation" caused largely by his own superior handling of the Fed) now misunderstand the post- bubble world. They think it is a technical challenge. They imagine that if Bernanke – whose bid for another term cleared the House last week – can just make the right adjustments, everything will be hunky dory.

Alas, Bernanke will do an even worse job than we would do. We have no idea. He has a bad one. Ben Bernanke is Time's "Man of the Year". And reading the commentary, it is clear that the popular press has even less of an idea of what is going on than Bernanke himself.

The more we think about it, the more our jaw drops. In Copenhagen last week, a large group of apparatchiks and hacks got together to discuss a 'climate deal'. There, Hillary Clinton pledged US support to a plan to spend $1 trillion to try to influence the earth's climate. Governments can do many things, but can they really improve the weather? There is no evidence for it. Not even a respectable theory.

In Washington, meanwhile, Ben Bernanke is spending trillions to try to improve the economy. Can he really do that? Again, there's no evidence for it.

The depression continues. Jobless claims went up last week. And Bloomberg reports that the "shadow inventory" of houses is going up with it. In the "shadow inventory" are houses that would be for sale if owners thought they could find a buyer at a decent price. We would add in the houses of people who are about to make "strategic defaults" on their mortgages.

The WSJ reports:

"A growing number of people in Arizona, California, Florida and Nevada, where home prices have plunged, are considering what it known as a 'strategic default,' walking away from their mortgages not out of necessity but because they believe it is in their best financial interests."

Some 5.5 million people have houses that are 20% or more underwater. One of them, spotlighted in the WSJ, had a house worth $230,000 and a mortgage of $318,000.

Here is one way the problem of too much debt is solved...not by paying it off, but by writing it off. The homeowner in this situation can improve his balance sheet – wiping out $88,000 worth of debt – without lifting a finger. Logically, he could go to the lender and cut a deal. But lenders won't want to get their customers started on bad habits. So, he will just cease paying his mortgage. His credit rating will suffer. But what does he care? He's fed up with debt.

The house will be seized by the bank. Then, it will come out of the shadow inventory and into the light of the active housing market – pushing prices down.

The good ol' WSJ has noticed the big shift in attitudes. No longer able to afford spending, Americans are deciding that spending isn't cool.

"We seem to be at a cultural inflection point that we haven't seen since WWII," said one market researcher. "Their value system is shifting from aspiring to material wealth to aspiring to a better life," said another one.

Yes, dear reader, runaway consumerism has run off the road. With 6 billion people now competing for stuff, the whole idea of having a lot of stuff is being called into question. In the first place, there's not enough stuff around to permit everyone to have as much as Americans - at least not without some huge technological breakthroughs. In the second place, Americans have run out of money to buy stuff. In the third place, it takes a lot of energy to make and transport so much stuff; the US no longer has access to cheap energy. And finally, the US economic model – in which growth is a result of stimulating consumers to buy more stuff – no longer works.

What will replace consumerism? Hey...we don't know. We feel pretty proud of ourselves for just figuring out this much.

Ready to Buy  Gold...?

  • Reddit logo
  • Facebook logo
  • Twitter logo
  • Google logo
  • Yahoo logo
  • LinkedIn logo
  • Digg logo
  • StumbleUpon logo
  • Technorati logo
  • del.icio.us logo

Bill Bonner is founder and owner of Agora Inc., one of America's largest consumer newsletter publishers. Best-selling author and globe-trotting correspondent since 1999 for the Daily Reckoning email, he is chairman of family-wealth advisory Bonner & Partners, and co-author with his son Will of Family Fortunes: How to Build Family Wealth and Hold Onto It for 100 Years (Wiley, 2012).

See full archive of Bill Bonner articles

Please Note: All articles published here are to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please review our Terms & Conditions for accessing Gold News, RSS links are shown there.

Follow Us

Facebook Youtube Twitter LinkedIn

 

Mobile apps

 - live trading 24/7

 - buy & sell instantly

 - up-to-the-second charts

 

 

 

Daily news email
Go to 'communications settings' 

Get the latest daily gold price news free by email

Latest gold news by email

 

 

 

Gold Investor Index
5 February 2019

Gold Investor Index

Gold up, investing up!

 

 

 

CNBC TV-18
3 January 2019

CNBC TV-18

Gold jumps into New Year

 

 

 

Portfolio Adviser
19 October 2018

Vaulted large bar gold. Source: BullionVault

Beyond gold 'chatter'

 

 

 

Money Observer
6 August 2018

Bitcoin ain't gold

No, Bitcoin isn't "new" gold

 

 

 

  •  Email us

Market Fundamentals

  • Gold 'Set to Drive' Silver Price Gains in 2019
  • LBMA Gold Price Forecasts See Tight Range in 2019
  • Gold Mining M&A Now 'Easier' Than New Exploration
More...
  • Cost calculator
  • Cookies
  • Terms & conditions

©BullionVault Ltd 2005-

  • Twitter
  • Facebook
  • Google Plus
  • LinkedIn
  • YouTube