An object in motion tends to remain in motion…

— Isaac Newton

bill bonner

BUENOS AIRES – Day by day, the dots connect… the picture becomes clearer. And now we believe:

The Fed will never voluntarily return to “normal” interest rates.

Congress will never voluntarily cut spending more than a trifle.

The empire will never voluntarily back up.

There will be no renaissance of the U.S. economy.

The system will continue in the direction it is going… until the whole shebang blows up.

Fake Money

These conclusions are all the results of something Professor Mancur Olson observed in his classic book The Logic of Collective Action.

Even though all the members of a group can see the boat is sinking, none of them will want to be the one who jumps into the water.

The group we are talking about is the Deep State. It controls the government and uses it to shift resources from the Main Street economy to itself, along with its zombie supporters and crony friends.

Democracies are supposed to correct their errors. But the voters vote for change – and nobody cares.

We’ve also seen that there are two kinds of deals: win-win and win-lose.  The Deep State insists on win-lose deals. It wins. You lose.

Win-lose deals can be good for the winners. But not for an economy. 

Win-win deals are the ones that tell us what things are worth. Without them, the wealth of the world – as expressed in the millions of decisions made by free consumers – declines.

Only win-win deals give us honest price signals. And only these honest prices can guide us to produce more of what people want – that is, more “wealth.”

Which brings us to money itself…

As we saw with our description of the parking garage’s claim tickets, the post-1971 dollar is phony.

It pretends to tell you something that isn’t true: that there are resources – goods and services – somewhere with your name on them.

Like a counterfeit claim ticket, it gives the bearer the right to take a car. But it doesn’t add to the number of cars available.

The Fed’s “wealth effect,” too, is fake.

Giving out phony claim tickets to the financial industry may make some people feel richer. But it doesn’t create more wealth. It simply shifts it from the people who earned it to the Deep State insiders.

You park your car; some jerk from Wall Street drives away in it… and orders a pizza with your credit card.

Basic Fairness

Fake money? Real money? What’s the difference?

If it looks like real money… and spends like real money… and saves like real money… isn’t it real enough?

Glad you asked.

Money is more than just a medium of exchange or a store of value.

Sometimes a rich person is maligned, as in “he only cares about money.” Or money is dissed, as in “it’s only money.”

But money is more than “just money.” It helps us maintain a sense of basic fairness… and keeps us grounded in the world of resources, skills, information, and, most importantly: time.

Money is not something apart from us. It represents who we are… what we’ve done… what we know… how much we’ve done for others… how we’ve gotten along in the world so far… and what we hope to do in the future.

It is choice. It is liberty, independence, and, at times, survival.

Just Money?

Imagine you spend your entire career working and saving money for your retirement.

Is that saved-up money “just money”?

It is much of your life. It represents the time you’ve spent working. And all the times you decided not to spend your money… but to save it for the future.

Now, imagine that you were robbed on the street. Or that you were scammed out of your money. 

You would be indignant. You’d want to see the criminal brought to justice.

But what if the money itself were the scam?

What if inflation turned your $1,000 worth of savings into just $100… or only $10?

Or imagine that someone else… perhaps someone who has never worked a day in his life… gets $1,000 for nothing?

Or imagine that someone is able to borrow $1,000… at no interest? How does that make you feel?

What does that make of all those years of working, saving, and scraping by? Were they worth nothing?

Does it feel like someone cut in line ahead of you?

Honest Economy

In an honest economy, people give and get in more or less equal measure.

You get paid for a day’s work. Time matters. If you work more, you get more.

If you are able to invent something that helps people save time… or build a business – like Wal-Mart – that helps them save money… you deserve to earn more. As you gave, so do you get.

Henry Ford revolutionized the auto industry, making cars available to ordinary working people. He made a fortune.

John D. Rockefeller made his fortune by helping to bring people the fuel they needed to run their cars and heat their homes.

And who resents Bill Gates or Steve Jobs, who brought personal computing to the masses?

Money was one of the most important innovations of all time; like the wheel, it made the modern world possible.

You could trade with people you didn’t know, from different cultures, speaking different languages.

And it allowed you to move wealth across space and time. If you were a farmer in the Roman Empire and you had a ton of wheat that you wanted to exchange for a ton of tea from India, it would have been almost impossible – and extremely expensive – to transport your wheat to the Indus Valley and make the exchange.

But with the invention of money, commerce got easier. You traded your wheat for a few gold coins… which you could then trade for tea in India.

The seller didn’t have to know what color eyes you had… or how good your wheat was. All he had to know was that your money was good.

Permanent Wealth

Or imagine you were a farmer in ancient Rome, and you raised a crop of tomatoes…

It represented years of preparation, learning, and skill… along with thousands of hours of field work.

But ripe tomatoes will last only a few days. That “wealth” disappears fast.

Money allowed you to convert your tomato wealth into currency wealth. This allowed you to enjoy your tomato crop from A.D. 59… even after your retirement in A.D. 71.

Or if you’d put your gold coin in the ground, a descendant might find it… and enjoy it 2,000 years later.

But the money had to be real. It had to be honest.

Otherwise, you could be cheated.

More to come…




Further Reading: Bill’s travels have brought him to Argentina. Today, he wanted to share this picture he snapped while walking the streets of Buenos Aires.

Street art from Buenos Aires


Investing Insight


Editor’s Note: Today, Bill’s friend and President Reagan’s former budget chief David Stockman warns why we’re headed for the biggest real estate crisis since 2008. David now edits the investment advisory Bubble Finance Trader, which helps readers profit as financial bubbles go “pop.”


We are at a huge pivot point in financial history when the false and unsustainable era of Bubble Finance launched by [former Fed chief] Alan Greenspan in October 1987 is coming to an end.

As it collapses, there will be a dramatic downward reset of the vastly inflated financial asset prices that have resulted from endless monetary and fiscal stimulus.

Although no corner of the financial system will escape the reckoning, some businesses and sectors will be clobbered far more severely than the average, owing to heavy dependency on cheap debt, financial engineering, and a momentum-driven following in the stock market.

And our proprietary approach to macro and sector analysis at Bubble Finance Trader – along with our “Bubble Score System” for picking stocks – is exactly what allows us to identify these especially lucrative opportunities.

Dark Days for Retail

Our thesis is that there will be an enormous implosion of stock market value in the retail sector – specifically in the shopping mall industry.

The U.S. is massively overstored – even before taking into account Amazon’s scorched-earth campaign in the world of brick-and-mortar retailing.

Since 1995, for example, more than 300 new shopping centers have opened in the U.S. That expanded GLA (gross leasable area – the amount of floor space available to be rented in a commercial property) by almost 30%.

But that happened after the U.S. retail sector already had vast excess capacity. It was also during a period when the population grew by less than 14% and households were steaming toward the dead end of Peak Debt.

Needless to say, the laws of supply and demand ultimately rule.

When the consumer went into low gear after the crisis and the supply of new capacity failed to abate, the inevitable happened.

“Retail productivity” — or sales per square foot — started heading south, causing the whole mall economic model to be fundamentally challenged.

The NEXT Real Estate Crisis

Initially, that manifested itself in a reduction of cash flows from “percentage rents” — the percentage of their gross sales to the property owners.

Then it generated the business viability crisis that has now devastated the half-dozen large anchor store chains on which the malls depend for customer traffic.

In the case of J.C. Penney, for instance, sales productivity dropped from $250 per square foot at the 2007 bubble peak to just $150 per square foot when the chain hit the skids in 2014.

Consequently, large-scale anchor store closings are now the order of the day. Those closings fundamentally disrupt the cash flow and debt models on which the shopping mall REITs (companies that own and operate real estate) are based.

One recent analysis showed that the Big Six anchors — Macy’s, J.C. Penney, Sears, Nordstrom, Dillard’s, and Bon-Ton — would have to close more than 800 stores just to get back to the sales productivity levels of 2006. In fact, J.C. Penney, Sears, and Macy’s have announced nearly that many closings during the last few months.

Take a look at today’s chart below. It shows projected store closings for the largest brick-and-mortar retailers in 2017.

The only significant retail spending growth since the crisis has occurred among the top 20% of households. But history proves beyond a shadow of a doubt that when the stock market collapses, the credit cards go back into the wallet.

In fact, there is some pretty stunning evidence that this is already happening – the tail end of the Trump-O-Mania rally notwithstanding…

In February, sales at department stores plunged by 15% versus the prior year.

That’s the largest decline ever recorded.

David Stockman

Editor’s Note: There is only a handful of people who are true Wall Street AND Washington insiders. As Reagan’s former top economic adviser and an original partner at the world’s largest alternative investment firm, David Stockman is one of them. That’s why the Trump team asked him for economic advice during its campaign.

But David’s most important advice isn’t for Team Trump… It’s for Diary readers like you.

David and his team of researchers uncovered an unmistakable market pattern. And it could mean the next economic collapse is just a few weeks away. That’s why they just put together a special report that shows you how to survive – and even profit from – the coming crash. To find out how you can get a copy of David’s report, read this “Urgent Warning From the Desk of David Stockman.”

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Today, readers rally to Bill’s side in response to some of the negative feedback published in yesterday’s Diary, “This Indicator Says Recession Dead Ahead.”

You must find the comments by your readers rather depressing. Two kinds of people are revealed. Many comments are sane, knowledgeable, insightful, and the writers would be fun to know.

Unfortunately, an increasing number are angry, hateful, and ignorant without the writers having any ability to learn from you or anyone else. We always had this mixture in society, but now a spokesman for the latter group is the president.

– E. Storms

My response to some of the negative feedback you have shared in your Diary: I’m sure glad your detractors know everything about you, including the supposed changes in your inner motivations, emotions, what you think about other people, etc. It must be wonderful for them to know how wise and knowledgeable they are about all things.

– M. Dyer

Bill Bonner’s writings are insightful, humorous and edgy… one must have a lighter heart and an open mind to get through his prose.

The one thing that he has overlooked is that the Trump election represented wishful thinking and lots of hope by enough voters simply tired of the worn out status quo and its inherent crooks.

If I had to guess the bumper sticker in favor of Trump it would be along the lines of… “Vote for Trump. With $4 billion in wealth, he is not likely to steal as much as the others…”

– J. Hosemann

In Case You Missed It…

The cryptocurrency revolution is underway…

It started when bitcoin’s value spiked more than 1,000% in the span of a few months in 2013. But since then, hundreds of cryptocurrencies have joined this expanding market. Many have shown incredible tenfold gains in months or even weeks.

But here’s the important part: This exploding market is still virtually unknown. That means investors who do take advantage today can get in on the ground floor of what could be the most important financial revolution in decades. Which is exactly why we want to share this important video with you.

In it, our friends from the Palm Beach Research Group explain exactly how you can take advantage of this explosive opportunity.