Yesterday was a holiday in the US. Little news from that quarter.

But while Americans were enjoying their backyard barbecues, the rest of the world turned.

“Obama plans ‘leaner’ car industry,” says the BBC.

While most readers will focus on the last three words of that sentence, we direct your attention to the first two. The subject is the important part…not the predicate.

That the car industry may or may not get ‘leaner’ is of little interest to us. It will do what it needs to do. But that the president of the United States of America is now creating the business plan for an automobile company is surely a sign of something big. The world has already turned…perhaps more than we realize.

It was only a few months ago…we’re almost sure…that a private company figured out for itself how it would compete. If it was well-managed – and lucky – it would grow. If it made a serious mistake, it would go out of business…leaving the premises vacant for another entrepreneur.

Americans not only accepted this model, they applauded it. They thought the “free enterprise” system was the best in the world. They believed it was responsible for their wealth…their progress…and their place in the world.

Now, they seem to have come to believe something else: that the president of the United States – an elected politician – should have a direct say in how individual private enterprises are organized and run.

But these are the same people who elected Bill Clinton and George W. Bush – twice! They’ll believe anything…

“Power Pendulum Swings Toward Washington,” says another paper.

People think capitalism has failed them. They never understood what capitalism was…and wouldn’t have wanted it at all if they had known what it was all about. Still, that doesn’t mean they won’t come up with something worse…

Capitalism is full of what Galbraith called “innocent frauds.” The capitalists try to exploit the workers. The workers try to take advantage of the capitalists. And the managers try to put one over on them both.

But now, the innocent frauds of capitalism are being replaced by the brute force of government. Now, the Obama team is calling the shots itself.

What does Barack Obama know about the car business? Ha…ha…ha…

Oh, you and your silly questions…

The role of government is commonly misunderstood. It is thought to be an impartial judge…an objective arbiter between competing interests, always asserting the common interest over the narrow interests of the competitors themselves. It is nothing of the sort. It has its own interests…its own delusions of competence…its own lusts for power and money.

When the pendulum swings towards Washington it is always bad news. For no matter how big a mess GM’s owners, managers and workers made of the auto business…Washington is sure to make a bigger one.

A hedge fund manager came by the office yesterday.

“There’s a new theory making its way around Wall Street,” he explained. “Some people think that the government will succeed in reflating the bubble. They’re putting so much money into it that they’re going to be able to create one last super-bubble…a little like the 2004-2007 period.”

Anything is possible. We were surprised the feds were able to inflate the last bubble. Back in 2002, we thought the bubble days were over – instead, the biggest bubble of all was still ahead.

The dotcom bubble had exploded. Stocks were going down. The economy was in recession. But the recession turned out to be very, very mild. Most people seemed unaware that there was a recession at all. Spending never went backwards…not an inch. In fact, all the trends already in place continued…and got much, much larger.

It is very different now.

“There’s a major change going on; most people have not noticed,” said our new friend. “People are spending money differently. First, it is obvious that they are forsaking the higher priced stores. Our fund is taking advantage of this in a very simple way. We’re short the luxury retailers and long the discount stores. Because people are changing their shopping habits. And we expect this to go on for a long, long time.

“They’re also buying different things. Everyone knows that sales of guns and ammunition are going through the roof. There are actual shortages of some items. But people are also stocking up on gardening supplies. They’re planting gardens in order to grow some of their own food. And they’re buying home entertainment systems – videos…sound systems and so forth. Instead of going out to the restaurants or the movies…they’re staying home. So, they’re making their homes more comfortable…and safer.

“Speaking of safer…sales of home safes are also taking off. They want to protect what they’ve got.

“And speaking of restaurants…have you looked at what is happening? Same phenomenon as in the retail sector. The lower priced, fast food places, such as MacDonald’s, are doing fine. But just look at the ‘casual’ dining places – the places where middle class people go to eat…places like Appleby’s and Friday’s. They’re losing a lot of business.

“What I think is happening is this: people are reorganizing themselves for a different, less expensive lifestyle. They’re spending less already…but they’re preparing to spend even less in the future. Instead of going out to the mall or to a restaurant…they’re going to stay home.”

Whence cometh this desire to stay home? Remember, this is not a recession…and not even a phony recession such as we had in 2001-2002. This is different. It’s a balance-sheet depression. People are cutting back in order to repair balance sheets.

How do your repair a balance sheet? It’s not as easy at taking it in to the Pep Boys…or the muffler shop. Instead, you have to pay down debt and increase equity. You have to become wealthier by saving money, rather than spending it. That’s what companies are doing. That’s what individuals are doing. And that’s what the government ought to do.

Americans were saving almost nothing a couple years ago. But in the first quarter of this year, they saved 4.2% of disposable income – or $453 billion (annualized). That’s up from just $20 billion a year before.

Saving money is the wrench you need to repair a balance sheet. After a very long time, finally, American grease monkeys are getting to work.

“Americans are making big structural changes in the way they live. These changes are going to have a big impact on the economy for many years to come,” our friend concluded.

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