The world Experiment with paper money proceeds apace - like a Greek tragedy - towards its pre-destined catastrophe. The dollar fell against gold yesterday. Almost all financial assets are falling against gold. The nothing-but-paper dollar is doomed.

We began the week in a dull mood, but we end it in a better one. What happened in between? Nothing much. Our Big E's are still advancing precisely - like a formation of sharp pins - towards the inflated illusions and conceits of the early 21st century.
 
The days of cheap Energy seem to be running out...and fast. There is less of it around and more people who want it.

The long Economic cycle of the end of the 20th century has seemingly topped out. For nearly a quarter of a century, gold fell and stocks rose. Get ready for the opposite trend.

Meanwhile, the American Empire has entered its decadent phase. "The British Empire really did seem to make the world a better place," said an English dinner guest last night. "The quality of manners, style, architecture, behavior, and life itself - if you set aside technological progress - reached a peak in the Edwardian era before World War I. Men, at least of a certain class, tried to act like gentlemen. But it happened at a time when the empire was peaking out politically...and after it had already peaked out economically.

"You could go almost anywhere in the empire - from Africa, to the Malay Peninsula, to India to New Zealand - and get a good drink or find a good conversation. But the empire was run by people of this same class...people who felt they had a duty to maintain certain standards of civilized behavior...at least as we Englishmen saw them. America doesn't have the same dedicated civil servants, nor the same spirit of self-sacrifice for crown and country."

Americans are sacrificing plenty for their country: they sacrifice savings for big houses they cant really afford; they sacrifice health care and decent wages for jobs at Wal-Mart.

The Exodus of power and money from West to East continues. Today's press tells us that the Indian automobile company, Tata Motors, saw its profits rise 46% in the latest period. And the World Bank expects China's economy to grow three times as fast as the United States in 2006. More on the Exodus below.

But in the homeland, U.S.-based automakers are laying off 60,000 workers, cutting salaries, and struggling to stay in business. Though none was needed, further evidence for the decline in U.S. manufacturing, imperial decadence, and political numbskullery was generously supplied by Senator Hillary Clinton. According to the Detroit Free Press, she came to the Auto City not to bury it, but to praise it...and subsidize it!

The senator from New York proposed a "Marshall Plan" for Detroit, bursting with the usual pork and fat, and spread it thickly all over town. The senator then lectured the autoworkers on what it would take to get their mitts sticky with grease: "In a democracy," quoth the former First Lady, the tougher half of Billary, and a veteran cattle trader, "you have to win to set the agenda." In other words, if you want to pick someone's pocket, stand in line and vote. In due course, presumably, for Mistress Clinton.

We thought George Bush had set a standard for political discourse that wouldn't be matched for many years. The hurdle of imbecility and vacuity were set so high in his tenure, we expected it to stand as a record for at least a few presidential cycles. So, we're pleased to see the lady give him a run for his money. Her comments and proposals, as reported in the paper, were so senseless we couldn't even laugh, and we were beyond tears.

Despite the Big E's, we're enjoying the giddy splendor of the Fin de Bubble period. After all, what's not to like?

Houses are still selling for more than they are worth and so are stocks. Consumers are still spending money they don't have. The world's richest and most powerful empire is still borrowing from poor people in poor countries. And the former chairman of America's central bank is getting $250,000 for attending a fancy dinner in Manhattan.

This last item caused some throat clearing and eyebrow raising among the sniffy set. They had labored under the illusion that Mr. Greenspan was a species of saint. Surely he walked among us only to make certain that we all had stuff - and had it more abundantly. Surely he turned New York City tap water into Chateau d'Yquem, and walked across the Washington's Potomac River barefoot. Now, they are flabbergasted to see the man in white stooping to pick up a few quarters.

Sometimes, we feel as though we are the only ones in the world to really understand the maestro. Nothing that he does surprises us, because we might do the same thing. The people want more paper money? Well, give it to them good and hard.

And now that he is out of office, why shouldn't he get a little of that easy green stuff himself?

Nor does it bother us that he gave out some inside information to the rich and powerful. In fact, we kind of like the way he charged them for it, and we hope he had his own trade in place before the news hit the financial wires.

Bill Bonner, back in London with more views...

*** According to the White House's new 2007 budget, Bush will meet his goal of slashing the deficit in half over the next four years. But - surprise, surprise - this rhetoric is nothing but smoke and mirrors.

Addison tells us, "When Bush talks about cutting the deficit in half, he's not talking about dollar amounts. Instead, the plan calls for a reduction in the deficit to half of the current percentage of the nation's GDP."

That means the deficit doesn't actually have to decline for the president to declare he met his goal of cutting it in half. "To hit their target," says Addison, "the economy just has to grow by 3.3% a year for the next 4 years."

The new budget spending plan, at $2.77 trillion, will leave America with a record $423 billion deficit. The 2007 Defense Department budget alone will cost America $439.3 billion, 7% more than 2006. And does not include spending for wars in Iraq and Afghanistan, which would add another $120 billion for 2006.

"The sheer magnitude of this budget shows that there is little political resolve to deal with spending at the federal level," Addison continues. "In the current climate, all problems, no matter how small are believed to be problems Washington needs to solve - rather than at the state or local level. And so the budget is 2,400 pages long and weighs 11 pounds."

*** We wondered what causes such big changes in our moods. We also wondered how whole societies seem to get caught up in "moods" or sentiments that later seem preposterous. More on that below.

*** Colleague Karim Rahemtulla went off to India to try to figure out what is really going on. He sends this note:

"What will $600 per month will buy you in India?

"A friend of the family recently relocated to India from London to focus on a $400-million property-development project. At dinner the other night, I asked him about the types of adjustments he is making, noting that after just a few days in Dilli (what the locals call Delhi) I would not move there for all the tea in India. After our conversation, I did lean towards rethinking my position...maybe half the tea in India.

"In London, he was not a person of little means either. After all, you can't be poor anywhere and be involved in a development project of this size. But, I got the distinct feeling that being a little fish in a big pond was not his style. 'I have people to make my bed, clean my shoes, house, make breakfast, drive me around, run errands, cook and do just about anything else...not one person mind you, but one for each task. I hang out with Indian socialites at night hitting the exclusive parties and making deals over a Courvoisier and a Cuban'. Sounds like a pretty luxurious lifestyle. But it must cost a fortune, no?

"In Dilli, his staff of seven "servants," including his driver, gets a grand total of $800 per month...for all of them! His biggest expense is his expensive taste for partying, and even that is less than half the cost of London. So, he is needless to say, adjusting very well in his own version of the Neo-Indian Colonial lifestyle. Sure, the streets are dirty, the water is undrinkable, the people poor, but when ultra-luxury has a price equal to a nice car payment in the United States, some things can be overlooked...by some people, anyway.

"In his part of Dilli - actually just past the outskirts - a luxury apartment decked out in marble and about 3,000 square feet, will set you back about one crore - a cool 10 million rupees. That is about the average wage of an entire small Indian village in 50 years. One crore is about U.S. $250,000.00, chump change in comparison to the U.S. housing market. And that is after an increase of more than 60% in the past two years. He lives in Gurgaon, an up and coming area in Haryana province, about 30 kilometers from central Dilli. It takes a good hour to get there, but then when you have a chauffeur, time does seem to take as long to do anything or go anywhere.

"In Gurgaon, you will find modern malls selling everything from iPods to plasma screen TVs. A new five-star Westin is getting ready to be built, and the area is dotted with mid-rise multi-national office buildings. Now, if they could figure out how to get rid of some of the animal carcasses being gnawed on by loose dogs in the middle of the street, or the stench and pollution of human habitation, it may make it past its neighboring province on the scale of third to second world.

"The area is also populated by NRIs, or Non Resident Indians, who are flocking back to India with tons of money to invest in everything. They are the real drivers of resurgence in many areas. After all, spending winter 'back home' for a few months of luxurious pampering for the cost of a new big screen TV back in the United States does have a certain appeal. These NRIs are buying up real estate, creating new call centers and I.T. operation left and right. They are booking big profits while the times are good. And, the times are good for Indians...those that are educated. Their salaries are bounding upwards, but still not close to what we are paying in the West. Here, lies India's advantage, and just maybe the hope for its future.

"Here, is why we cannot compete with Asia. This advertisement appeared in the 'Power Jobs' section of the Hindu Time in New Delhi yesterday; it's for a well-known Indian snacks company.

"'Factory Manager - Law graduates with a minimum of 10 years experience in Liason/Civil/Electrical work and the entire gamut of HR/PM and IR processes and Legal compliances thereof. Candidate will be responsible for taking complete charge of production in an automated snack-foods plant in Bikaner. Must possess excellent supervisory skills. Knowledge of ISO 9001and HACCP, government rules and regulations applicable to food industries like license approval. Trade Mark Registration etc. will be a definite advantage. Renumeration (20K to 25K).'

"That 20K to 25K is monthly, but it is in Indian Rupees. That works out to about $600 on the high side, per month. Compete with that!"

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