Cogito, ergo ignoramus.

The more we think, the less we know. In fact, the only thing about which we become surer is that the people who think they know something are swindlers or hallucinators.

Not that we have anything against them. They are often charming, intelligent and persuasive. And who knows, they could even turn out to be right!

"Yes, but Delphi is an old, unionized industry," came the answer from one of them.

It came in response, not to a question, but to an observation we made over
dinner: Some of America's most important industries are going broke. This fact did not bother the group of fund managers at the table. It merely confirmed what they already knew: It's a new era. Old industries, old rules and old principles are no more interesting than day-old bread. That's why the trade deficit no longer matters...why debt levels no longer count...and why people can get rich without making anything.

Delphi makes auto parts. It employs 180,000 people around the world. When Delphi went belly up, it signaled the beginning of, "inter-generational warfare facing much of the industrialized world," says a Financial Times commentary. If old workers insist on being supported in the style to which they've become accustomed, it will put the younger workers out of a job. Our old industries cannot compete - not with the ball and chain of union contracts, health care and pensions attached to their ankles. But so what? They can get jobs as stockbrokers and real estate agents!

"What do they make in England?" one of the fund managers asked. "Nothing. And yet look around you...this city is booming. England is rich. It is prosperous. It is growing. Did you know that the City (equivalent to New York's Wall Street) is now a quarter of the entire nation's economy?"

The money shufflers are getting rich, we have no doubt about that. You can see it just by walking around South Kensington. But what do they add to mankind's wealth? It is hard to say. And can an entire nation of people flourish by financing each other's consumption?

"The trouble with you perma-bears," our host continued, "is that you are like the Physiocrats of the 18th century. They believed that all value came only from the land...that is from agriculture. They could not believe that the Industrial Revolution would create a new kind of value.

"Well, now we have a new kind of value being created. You can see it. While the old, unionized industries in America - like the auto industry and the airlines - go bankrupt, there are new industries being invented all the time. They don't need to build factories. Whatever they want to sell, they can design and put out for bids. They don't need factories and they don't need unionized labor. That era is gone."

That may be, we protested, but that is the era that made the United States and Europe the richest part of the world. Now, you can talk about how inventive and smart Americans are all you want, but just look at the national chart of accounts. We lose money every day.

"The biggest mistake most economists make," he continued, "is in treating the national accounts as though it were a company. This is the mistake that Buffett makes, too. He thinks that a nation with a current account deficit is like a nation that is in the business losing money. It is nothing of the sort. The deficit in America's current account is merely a sign that people all over the world want to hold U.S. assets. Why do they want to hold them? Because they are safe."

Some of the brightest people in the financial world believe it, including our companions at dinner last night. The world has changed, they say. You no longer need to save money, or to build factories, in order to prosper. Now, what you need is brains and information. And those are the two things that America has in abundance.

"The Anglo-Saxon empire has peaked out? Are you kidding? What would replace it? China? Not a chance. China is booming, but it is also ready to blow up at any moment. And smart people know it. That's why they take their money out of China and invest in the United States. Yes, foreign ownership of U.S. assets may be increasing, but so what? We advise our clients to buy more assets in the United States and we're very bullish on the dollar."

This is why, dear reader, we turn to the essentials. Smart people can find good reasons for anything. Often, they are right. But which smart people are going to be right about which thing? And what is it that makes the dollar "safe" - except that a lot of smart people think so?

*** And the news just keeps getting better for goldbugs.

"Gold has reached a 17-year high, its highest level since 1988 overnight with the overall weakening of the dollar," our currency counselor, Chuck Butler reported.

"That pushes gold's return this year to 9.1%. But my longtime friend, Doug Casey, believes that this is still just the tip of the iceberg with regards to the gold price increase!"

*** After a series of natural calamities, the world is getting edgy. Avian flu could cause an economic collapse similar to the Great Depression, says one analyst. It might bring a period of, "chaos worldwide for over a year," says an article in Foreign Affairs. We might have to impose quarantines, says President Bush.

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