It seems simple enough to us. Almost too simple.

Birds gotta fly. Fish gotta swim. The feds gotta print money. Why? Because there isn’t any other good way for them to get it. And because the economy is getting worse...not better. The feds feel they have to “do something” to fix the situation. That is the depth of their simpleton machine philosophy – a correction is a “problem”...problems need to be fixed.

The problem as they see it is that Americans don’t have enough money. And since they don’t have enough they don’t spend enough. And because they don’t spend enough, the whole consumer economy sinks.

Yesterday, the Dow lost another 219 points – it has given up almost all the post-ZIRP gains. You remember ZIRP? Zero interest rate policy. The Japanese tried it; it didn’t work. So, now it’s America’s turn. After the Fed announced its ZIRP, the Dow shot up more than 300 points. Now, the Fed has used up its last 100 basis points...and the Dow is back to where it started.

We’ll give you the rest of our market update and then return to our point:

The Washington Post suggests that hedge funds might go extinct as a result of this downturn. That would be a shame; they are such a convenient way to separate fools from their money.

We didn’t notice it when we were in LA last week, but California has been especially hard hit. House prices in many areas are down 40%. Towns are going bankrupt. And the state has had to stop billions of dollars’ worth of new projects in order to protect its remaining cash. Bankruptcy...drought...fire and brimstone – our California Babylon seems to be getting an almost Biblical judgment.

And now we’re seeing the Revenge of the Dustbowl. You remember, during the ’30s, there was a drought in Oklahoma, Kansas, and parts of Texas. The rich earth turned to dust and practically blew away. The poor farmers couldn’t pay their mortgages...and couldn’t raise crops. So, they loaded what they could salvage onto their Tin Lizzies and drove to California, where they tried to get jobs picking fruit.

The natives weren’t always friendly. Californians had their own problems. They didn’t want any more Oakies on the job market. So, they tried to turn them back at the border.

Now, 75 years later, it’s the Californians who are pulling up stakes. For the first time in history, more people are leaving the Golden State than entering it.

And pity the poor old folks in Palm Beach. The island was one of Bernie Madoff’s favorite haunts. And the island’s rich retirees and trust fund heirs were his among his favorite prey. He bilked them out of billions. And now, the Chicago Tribune reports that the pawn shops in Palm Beach are doing a jolly business...

Gold fell $7.90 yesterday...the price is now $860, still well above where it began the year. Gold is the only thing we know that has resisted this bear market. Why so? Because investors suspect that this drama has another act or two. Which brings us back to our point.

The outlook is too simple...too obvious.

*** The feds want to give people money. They’ve already cut interest rates to zero – as a practical matter, they can’t go lower. And Obama is talking about a new stimulus program of more than $850 billion.

The last major stimulus program was $700. So far, only half that money has been skimmed. It takes time to work a hustle of that scale. The money is destined for the accounts of Paulson’s friends and colleagues on Wall Street; everybody knows it. Still, you don’t want to be too transparent about something like that. You have to pretend that you’re not giving away hundreds of billions to the richest people in the country. Instead, you’re helping to “recapitalize the financial system.” And that takes time. In this case, you have to pretend that you are smarter than the market...that you are putting one over on Wall Street by buying its castaway “assets” at bargain prices. Heck, you might even make a profit for the taxpayer.

Paulson has gotten his hands on only half the money that Congress authorized. He wants to be sure there aren’t any Madoff-style blow-ups – at least until the rest of the loot is under his control.

Obama’s additional $850 billion sounds like a good idea to most people. People need cash. They’re not too particular where it comes from...and don’t seem to mind that it belongs to someone else.

But where does all this cash really come from? There are only two choices...up or down...honest or corrupt...inflation or deflation. It is either borrowed...or it is counterfeited.

If they borrow the money, they can bailout cronies and prop up amigo industries. But it does nothing for the economy as a whole. They are just taking money from one person and giving to another. Even this is pretty sleazy...since it is really nothing more than redistributing wealth...from the people who earned it to the people who didn’t. It’s corrupt; but at least it is honest corruption. That is, people are used to it and don’t seem to mind.

Trouble is, Japan proved that it didn’t work. You can borrow and spend all you want. Prices still fall. Unemployment rises. People go broke. They whine and moan. And the pols think they still have to “do something” more.

The United States has an additional problem...even if the feds wanted to borrow every penny of their bailout money, they couldn’t do it – not without driving up interest rates much higher and making the situation much worse. Americans don’t save that much. And the foreigners have their own bailouts to finance.

That leaves no choice. Birds gotta fly...and the feds gotta print.

Stick with us here...we’re getting somewhere...

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