After so much traveling, we’re happy to stay at home this week and do our reckoning here.

This past weekend, we got back from Florida only to depart immediately to a wedding in New York. The roads are a lot worse in New York than they are in Florida. Maybe it’s the weather. Maybe it’s the tax system. But as you drive up from Maryland, the roads deteriorate as it costs more to drive on them. You run into more and more potholes and shabby tollbooths as you go north.

That’s not likely to change. Local governments are going broke. So are national governments. The politicians will have to make choices. Repair the roads…or keep the libraries open? Day care…or default?

At the wedding was a former Goldman bond trader. “How long do you think it will be before government debt blows up,” we asked him. His reply, “no time soon”…more below…

Not much happened on Wall Street yesterday. The Dow lost 48 points. Gold went nowhere.

And so far, almost everything that we thought ought to happen is happening. More or less. The crisis. The feds’ reaction. The market’s lack of reaction to the feds’ over reaction. Then, the feds’ reaction to the markets failure to react. One dumb thing begets another.

But so far, government debt market hasn’t blown up. But even when things happen that we expect, they don’t necessarily happen the way we think they ought to or when we think they should.

We’ve had the crisis we expected. Then, the feds poured good money in after bad…as expected. They said the economy would ‘recover.’ Of course, the economy would do no such thing. Instead, it has only just begun its “Great Correction” – with high unemployment, falling house prices and treacherous asset markets. And now Obama and Congress are paralyzed by upcoming elections. And Ben Bernanke is thinking about Plan B…and hoping it won’t be necessary.

Unemployment is really far worse than the ‘official’ numbers suggest. The feds take people off the unemployment roles if they go too long without finding another job. In that regard, this slump is the worst ever. People wait longer than ever before to find another job. So more of them slip off the jobless tally before they ever find work. They are disappeared by fed statisticians. We haven’t done the numbers ourselves but John Williams of ShadowStats tells us that if they still did the figures the way they did before Clinton-era “adjustments,” we’d have an unemployment rate between 15% and 17%.

Gradually the financial media and investors are catching on. They’re beginning to realize that this was no ordinary recession…and there won’t be any ordinary recovery either.

The New York Times brought the story to readers this weekend:

“In the old days — before 1990 — American recessions tended to be fairly sharp. But the recoveries, when they came, were also rapid. Laid-off workers were recalled and consumers who had deferred purchases out of fear they might lose their jobs were willing again to buy cars and homes.

“The newer version of recessions — in 1990-91 and 2001 — provided shallower downturns. But the aftermath was also slow and painful. They came to be known as jobless recoveries.

“The National Bureau of Economic Research determined this week that the recession that began in December 2007 ended in June 2009. That made it the longest downturn since World War II, and data had already shown it was the deepest in terms of decline in gross domestic product.

“And now that we know the recovery is more than a year old, it appears that this cycle is combining the worst of both worlds: deep fall followed by slow recovery.”

“There are some aspects of this cycle that have no direct precedent. One is the performance of service industries. For most of the years after World War II, the United States economy became more and more oriented toward service jobs, and both employment and spending rose, whatever the state of the rest of the economy. But this time service businesses suffered, and they have been slow to recover.

“That is particularly true for the industry that bears the most blame for the recession — financial services. The big banks were bailed out — Lehman Brothers excepted — but employment fell sharply during the recession and has continued to decline.

“Another area that is weaker than in previous recoveries is the condition of state and local governments. Working for them was always considered safe, if not particularly rewarding. Neither of the two recessions before the latest one had any significant impact on those jobs.

But in this cycle, governments are facing severe budget shortfalls, and layoffs are accelerating.”

What kind of cruel fate is this, dear reader…when even the zombies on the public payroll aren’t safe from layoffs? Have the gods turned against us?

And more thoughts…

The Great Correction is good news, as far as we’re concerned. Finally, the financial gods are kicking the right butts. You can’t really get rich by spending money. And you can’t really create prosperity by building houses for people who can’t afford to pay for them. So to the Bubble Epoque, we say: ‘Goodbye and Good Riddance.”

America needs a correction; it’s getting one. It was wasting too much of its resources on phony, unsustainable ‘growth,’ while actually going deep into debt.

Why was it doing that? Well…blame Alan Greenspan…blame the Fed…blame the US Treasury…blame Richard Nixon…blame Milton Friedman and John Maynard Keynes. They all had a hand in it.

We’re beginning to see more clearly how economists and the feds connived and conspired to rig the system. The dollar-based monetary system they created has a huge bias towards debt and inflation. Almost everyone likes it. And the others don’t know what’s happening anyway… But has any pure paper money ever survived an entire credit cycle – from the boom years through the bust years – intact? Nope. Never.

And now the Great Correction has begun. And the serious question is: how much of this scam is it going to correct?

We don’t know. But there’s a lot to be corrected.

*** “Well, I think the bond market is the most misunderstood market in the world. Everybody is talking about how bonds are the worst place for your money. But I think they are the best place for your money.”

Speaking was one of the best bond traders in the US. At least, that was the judgment of other bond traders and industry experts. We wanted to know more…

“Some of the best investments you can make now are in the bonds of places such as Ireland and Greece. Everyone thinks they’re going broke. But they’re not. The European Central Bank will give them the money to make their payments. They’re not going to default.

“That’s what is great about bonds. We’re entering a difficult period for the world economy. There is simply too much capacity. This correction is going to take a long time. People are worried about defaults on sovereign debt? They can forget about it. Neither Europe nor America will default. The central banks won’t let them. Instead, they will announce a program of long-term deficit reduction. In return for correcting structural budget problems, European nations will get the money they need to meet their obligations. These will be pure cash “awards,” not debt. So their debt won’t increase. Bond investors won’t have anything to worry about.

“I don’t know if they will actually correct their long-term finances or not. It depends on the growth rate. If they can grow their economies fast enough, they may not have a problem. But whatever problem it is, it is far in the future. In the meantime, these sovereign bonds will go up. Because the payers won’t default. And everything else will go down. Want some good advice? Buy bonds.”

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