Laissez les bons temps rouler.

As the 1990s moved along, the unofficial motto of New Orleans became the unofficial motto of the entire nation. Let the good times roll. And every time something came along that threatened a bout of sanity - the collapse of the tech stock bubble, the recession of 2001-02 - financial officials reacted as they always do - by looting the future.

In ancient Rome, when the imperial program of foreign wars and domestic bread and circuses became so expensive as to bring the empire close to bankruptcy, financial authorities reacted by increasing the money supply. Silver mines in Spain moved to round-the-clock production. Meanwhile, the actual silver and gold content of the imperial money reduced. The coins were "clipped" so the mint could produce more of them with the same stock of precious metal. Let the good times roll.

In Rome, 17 centuries later, the Mussolini government found itself in much the same fix. Prior administrations had already loaded the nation with debt. Il Duce campaigned on a platform of cutting expenses and reducing the debt, but faced with crisis (or opportunity) he borrowed even more. Let the good times roll.

The Greenspan Fed speaks English, but its modus operandi is pure Latin. Let the good times roll - at least until the maestro is out of office. As predicted in the Daily Reckoning last week, the hurricane down in the bayous is providing the Fed with another crisis...and another opportunity to do the wrong thing.

"Fed rate hikes now in doubt," says an AFP headline.

The New York Times carried an estimate that the hurricane could cost the nation as much as $100 billion. Nobody really knows, but the cost must be huge.

Katrina was the rainy day for which people are meant to save. But Americans of the Greenspan era saw no need to save. The latest figures show them saving in July at the rate of MINUS 0.6% of income. Oh la la...laissez les bon temps rouler! Not since The Flood has so many rich people saved so little money. In the month preceding the most costly flood to ever strike America, residents of the fair land saved less than zero...in fact, they ate into their savings in order to keep the good times rolling. And now that they are soggy from the storm they look to their temporal authorities to "do something."

What can the functionaries do? Just as there was no Noah to load them onto an ark, nor was there any pharaoh with his trusty Joseph filling the national coffers during the seven fat years. Robert Mabro of the Oxford Institute of Energy Studies says the U.S. refining system had "no reserves, no excess capacity, no cushions." He might have been speaking for the entire economy...which many years ago had switched from 'just in case,' to 'just in time.' The Strategic Oil Reserve is said to have only a 35-day supply, hardly enough for seven lean years. The Federal Government has no reserves of money or plywood to which it can turn. A few fusty, old citizens had the sense to stock their own supplies of cash and canned goods. But most seem to have no more reserves than their leaders. And now they turn their faces to Washington...

Bill Bonner, with more opinions from London:

*** Last week, gasoline rose above $3 a gallon. Prices were reported as high as $3.79 - with drivers lined up to get the stuff. Papers reported "spot shortages."

How will Greenspan react to this new "crisis?" Will he not react as the ancient Romans...and the modern ones? Can he not be expected to do as he always had - to provide more easy money to help the Big Easy out?
 
*** What will be the effect of the hurricane disaster? "History suggests not much," says the Economist.

We don't know. A few dimwits imagine that a natural disaster can be a positive thing. They see the clean-up and the new building as economic boons. Of course, if it were that easy to make economic progress, we could knock out the levees every few years. No, the hurricane is a negative for the wealth of Americans. It will cost money to undo the damage.

It could be also that the disaster could bring about a change of sentiment. Occasionally, people become worried that they are over-stretched...that they have taken on too much...that they are not prepared to meet the challenges that life throws their way. Three-dollar gasoline may push them in that direction.

Once begun, it can be a hard thing to reverse. House prices would fall - knocking down the valuations upon which so much consumer credit depends. Sentiment would soon be reinforced by reality. The people who thought they should spend less would soon find it impossible to spend more.

*** The boys begin their new school in London today.

Saturday, we went around looking for school supplies. What an awful experience. The shops in Kensington were so crowded you could barely make your way through them. Stores that sell the shoes that 15-year-olds want to buy are particularly revolting. They seem to think customers want to listen to terrible music while they shop. After a few minutes your editor couldn't stand it any longer; he had to leave. Someone should give the clerks I.Q. tests after a few days on the job. The noise is bound to knock off a few points.

In the shoe store we found the same canvas sneakers we recall buying when we were 15 - then known as Chuck Taylor's All Stars. Unbelievably, the shoes themselves have scarcely changed in the intervening 40 years. But now they have become fashion items - selling for $180 a pair!

Bill Bonner is the President of Agora Publishing.  For more on Bill Bonner, visit The Daily Reckoning.