The Exodus of power and money from West to East continues, if you judge by reports from the plutocratsâ," premier pow-wow - the World Economic Forum in Davos, Switzerland. A friend asked if we would be attending that August assembly. We could only respond that we werenâ,"t invited. The invitation must have gotten lost in the mail. But what we hear from news reports is that every hack, has-been, and hustler there is angling for a private meeting with officials from India or China. Every sharpie in the world craves a piece of Asian action.
Heâ,"ll need it too, to take his mind off the home front.
And here, we cut long-term Daily Reckoning sufferers a break. Since we are rushing to the airport, we wonâ,"t waste our words. Weâ,"ll just check in on our Big Es.
On the Energy front, the price of natural gas shot up on Monday after investors listened to the weather report. They were surprised to hear that it typically gets cold in winter. Who would have thought?
Meanwhile, the Economic cycle continues to spin against the new Fed chief. The economy only grew at a 1.1% rate last quarter, even, as Dr. Richƒ«bacher pointed out, after playing fast and loose with the numbers. Last month saw a steep drop in the sales of existing houses, down 5.7%. That means theyâ,"ve been falling at a 36% annual rate for the last three months. The backlog of unsold houses is now 25% greater than it was a year ago. The median price for a house in America fell in December - 4% below its August peak. If consumers are going to keep on spending, we donâ,"t know what theyâ,"re going to keep on spending with.
Finally, historyâ,"s most incompetent Empire peaks out. It seems altogether too soon. Why canâ,"t the American hegemony last for another, say, 800 years like Rome? Well, few empires hang on that long, and modern empires usually have shorter lives than their ancient ancestors. Besides, the United States really isnâ,"t cut out to be an empire...or even capable of it. Its Homeland boys really donâ,"t seem to relish the idea of missing an episode of â,"Family Guy,â, let alone getting themselves shot up, for the sake of imperial glory. And its Texas Tyrants and Plain State Caesars seem peculiarly inept at the business of running an empire.
Thatâ,"s the problem with the empire business. People start losing the hang of it; they slack off and pretty soon, before you know it, the fellow next door is jumping over the gate and setting up his tent on the front porch. Old Rome was weakened in its later days by â,"consuetude fraudiumâ, - widespread, widely accepted cheating. And then, Rome was crushed by hordes of Germanic barbarians pouring over the frontier. Centuries later, it was the turn of the English; their empire began to peak out and the next thing they knew, they were wasting themselves battering against German trenches in World War I.
Today in America circa 2006, fraud creeps into nearly every transaction, and the empireâ,"s military power is squandered in a war against...well...against no one! Instead of tracking down the villains of 9/11, the empire went to war with Iraq...killing tens of thousands of people who had nothing to do with 9/11, and costing the empire more than a trillion dollars it didnâ,"t have. Every day, enemies we are essentially creating ambush our centurions...
*** Yesterday, January 31 was chock-full of little tidbits of news. Letâ,"s see...President Bush addressed the nation...the controversial Judge Samuel Alito, Jr. was sworn in as the 110th justice of the U.S. Supreme Court...and oh yes, Greenspan ended his 18-year run at the Fed, passing the torch along to Ben Bernanke.
Did that last one sneak by you, dear reader? If so, youâ,"re not alone...Bernankeâ,"s nomination slipped under most peopleâ,"s radar - including two 2008 presidential hopefuls.
According to the IHT, when Senator George Allen was asked his opinion of the Bernanke nomination yesterday, he replied:
â,"For what?â,
Whoops.
The same question was posed to Senator John McCain...with similar results.
â,"McCain said he did not know too much about Bernankeâ, continues the IHT report, â,"but was comforted to know that Greenspan had a high opinion of him. The senator was asked if he would be surprised to learn that the hearing were a thing of the past. He paused for a minute, his eyes widening, before giving the verbal equivalent of a knock on the forehead:
â,"â,˜Youâ,"re right, youâ,"re right, youâ,"re right. Duuuuuh.â,
*** We find it remarkable that so few people show interest in the fact that Greenspan - who is referred to time and time again as â,"the worldâ,"s greatest economistâ, - ended his tenure at the Fed yesterday. To us, it shows that the average American (and the average politician) have no concern over the state of our economy...an economy, as Pat Buchanan puts it, that â,"appears healthy, a disease is eating [it] away inside, a disease that Dr. Greenspan has been treating with oxycontin.â,
Not exactly the ideal economy for Helicopter Ben to takeover.
â,"While the nationâ,"s economic growth was 3.5 percent last year, that was below the best year of the Bush recovery, 2004, when growth reached 4.2 percent,â, continues Buchanan.
â,"More ominously, in the fourth quarter of 2005, U.S. economic growth fell to 1.2 percent, the worst quarter since 2002, before the recovery began. If we are approaching the end of boom times on borrowed money, Ben Bernanke may be left holding the bag.â,
*** Consumers are spending everything they have - and then some. The Commerce Department reported yesterday, â,"Americans' personal savings fell into negative territory at minus 0.5 percent last year. That means that people not only spent all of their after-tax income last year but had to dip into previous savings or increase their borrowing.â,
Other than spending on the usual doo-dads and gadgets, Americans this time of year are hit with the â,"double whammyâ, of Christmas credit card bills and high heating bills.
Despite the unseasonably warm weather most of the country has been enjoying this winter, the Energy Information Administration tells us, â,"U.S. consumers are expected to pay $985 to heat their homes with natural gas, heating oil, propane and electricity between October and March, compared with $786 during the last heating season. (Midwesterners can expect to pay 36% more, or $1,182 on average, this season.)â,
Although some are feeling the pinch of high heating bills on their wallet, there are still many Americans who have a false feeling of wealth due to high home values.
When the air starts to come out of these inflated prices, more than a few consumers will come flying back to Earth with a thud.
Bill Bonner is the President of Agora Publishing. For more on Bill Bonner, visit The Daily Reckoning.
Free Festival of Traders Videos
