Resistance...denial...debt.

We Americans are a people in revolt against fate. Wealth and power are migrating from West to East...our empire is peaking out...our dollar is doomed - if only we could take it more gracefully. Instead, politicians, central bankers and ordinary consumers want to dispute it, as if they could stop the tides of history, like Xerxesâ�,��"�s troops doing battle with the waves.

Just listen to the mindless rants coming from Congress: The Arabs want to take over our ports; the Chinese are taking over our oil companies! What do they think this is...a free country? Last year, 96 American companies were bought by firms from emerging markets. Those transactions were worth about $14 billion and were hardly noticed. But when a big offer makes the headlines, you can count on resistance, indignation, and dissembling.

Who do these Chinese think they are? How dare they try to stabilize their economy by tying their currency to that of their largest trading partner? Donâ�,��"�t they know theyâ�,��"�re supposed to let their paper money rise so ours can fall?

Meanwhile, the Financial Times reports on â�,��"How China is Winning the Resources and the Loyalties of Africa.â�,� China needs resources; Africa has a lot of them. So far, they seem to be going after them honestly - with smiles and cash, both of which they have in abundance.

Back in the homeland, consumers spend more than they earn, borrowing the shortfall from Asia. And why not? They deny that there is any problem at all. If there is a problem, theyâ�,��"�re sure it can be solved with more debt. Have real hourly wages gone down? They donâ�,��"�t seem to have noticed. Donâ�,��"�t they already owe a lot of money to a lot of people? It doesnâ�,��"�t seem to bother them. And, isnâ�,��"�t most of the growth since 2001 simply a by-product of a booming housing market? It never seems to occur to them that there is anything wrong with it.

Investors, too, deny that there is a problem. They buy stocks at an average of 20 times earnings - with a dividend yield below 2%. How do they expect to make any money? And over in the bond market, at current yields, after taxes and inflation, an investor is practically guaranteed to lose money. How could he miss it? The math is so simple: a 4.5% yield...less inflation of 4% (being optimistic about it)...leaves only half a percentage point to pay taxes. There is no way that will work.

But, Americans have been told that they have the worldâ�,��"�s most dynamic and flexible economy, and they believe it.

What they really have is a mature, shopworn economy struggling to appear young. What can it do but dye its hair, pin back its face, and lie?

Around the world, people are beginning to notice the signs. While no maturing economy can avoid some sag, bulges and lines, it is the resistance, denial and debt that produce the real problems.

The Russian newspaper, Pravda, reports:

â�,��"The United States is heading to financial crisis at top speed. That is correct, America will default on its foreign debt sooner or later if the actual trends remain unchanged. Consequently, the whole dollar-based world (including savings in U.S. currency) may crumble. The picture looks pretty grim this time around. Several factors will have an extremely detrimental effect on the dollar, according to U.S. Secretary of the Treasury John Snow who forwarded a letter full of ominous predictions to 21 members of U.S. Congress. The letter was made public after the markets had been closed for Christmas and New Year's holidays â�,�“ a rather appropriate precautionary move in terms of the international foreign exchange market, which is extremely sensitive to any sound produced by U.S. bureaucrats.

â�,��"Besides, the U.S. Federal Reserve is going to stop publishing the so-called â�,�˜M 3 aggregateâ�,��"� reports i.e. data on increase rates in money supply. Given the New Year's predictions by John Snow, the Fed's intentions look pretty suspicious. In other words, the international community will have no tool for measuring a real value of the dollar...

â�,��"The Fed is going to pull the plug on the data in March this year. Several events should occur in different countries more or less at the same time and thus damage credibility of the U.S. securities. Risk-averse investors get rid of speculative securities e.g. the dollar securities under the circumstances.

â�,��"All in all, the situation is quite alarming though it looks like a play being staged on purpose.â�,�

What purpose?

Peter Schiff: â�,��"The Feb distracts the audience with short-term rate hikes, while behind its back it monetizes long-term government bonds. It creates the illusion of its being an inflation fighter, while in reality it is an inflation creator. No wonder it wants to further cover its tracks by no longer reporting M3!
 
â�,��"My guess is that the Fedâ�,��"�s goal is to keep long-term interest rates low long enough to allow millions of homeowners to refinance their adjustable rate mortgages into 40 or 50 year fixed-rate loans, and to create enough inflation to cause nominal incomes to rise sufficiently in order to enable homeowners to make higher debt payments and prevent nominal home prices from collapsing.â�,�

*** â�,��"Itâ�,��"�s a problem everywhere in the Western world,â�,� commented the mayor of our little town in rural France last night, speaking about one of our Big Es. â�,��"We have a factory in town that produces furniture. It employs 275 people, which is a lot of people for a small town. So, when something goes wrong, I have to get involved. The company was bought about five years ago by an Italian group. They make a lot of money in the furniture business, but where theyâ�,��"�re making money is the top end of the market, where the margins are high enough to permit a company to pay our wage levels.

â�,��"I mean, wages arenâ�,��"�t high here compared to Paris or London, but theyâ�,��"�re very high compared to Poland or Indonesia. And this factory here in town produces down-market furniture. Itâ�,��"�s the sort of stuff that you buy in the big discount stores, but the big discount stores buy in huge quantities and at very good prices. And more and more, they donâ�,��"�t buy from Europe. They buy from Asia, or Eastern Europe and sell in Western Europe. So, I donâ�,��"�t see how this factory is going to stay in business. And if it doesnâ�,��"�t stay in business, I donâ�,��"�t know what these 275 people are going to do. Itâ�,��"�s all very well to say they can be trained for the New Economy, but what New Economy? Thereâ�,��"�s no New Economy here.

â�,��"And these people are not the kind of people that are likely to start up new websites or work their way into the information technology business. By the time they figure out information technology, there will be about 300 million people in Asia already ahead of them. They just donâ�,��"�t have any particular advantage that I can see over workers in India or China who work for only one-tenth as much. And since they have no advantage now, and since people in Asia are making such rapid progress, I donâ�,��"�t see how they will ever have an advantage. So, I donâ�,��"�t see how they can ever expect to earn more money â�,�“ speaking about it in a purely theoretical way - than the Asians do.

â�,��"You know, this area has been losing population since the 1960s. I think itâ�,��"�s going to continue losing ground.â�,�

*** We spent the weekend in Paris. It was freezing cold, windy, with occasional snowflakes passing along horizontally.

Henry was there for another â�,��"rallye.â�,� Edward was there for the birthday party of his friend, Matthieu, whose mother died recently, and Jules was coming back for a two-week vacation from his American college.

As we get older, the family logistics seem to get more and more complicated. Everyone has a separate program. Somehow, all of them have to be coordinated. In yesterdayâ�,��"�s case, we had to collect Henry from one place, Edward from another, and Jules from the airport - all in time to catch a train down to the country.

But on Sunday morning, Elizabeth and your editor had a little time to themselves. We crossed the street and found a nice patisserie near Notre Dame. Then, we went to church at St. Nicholas on rue Monge. There are a lot of churches in Paris; few of them operate at capacity. This one was an exception; it was hard to find a seat. We soon discovered why.

St. Nicholas church is run by schismatics who broke away from the Church of Rome in 1977. The priest explained why in his sermon:

â�,��"Light and darkness. There are some people who spend their whole lives in darkness, because they have no choice. There are others who have access to the light, but who choose to live in darkness. The first are unlucky...unfortunate...and it is our duty to bring the light to these people. But the second are sinners. They have the light...they have seen the light, but they turn away from it. They live in darkness despite the light that God offers them.

â�,��"We have left the guidance of Rome because the church leaders decided to live in darkness. Today, we pray that they may turn to the light again, so that we may return to them. But until they do, we will continue to teach and celebrate and live in the great tradition of our Catholic faith. We may be martyred, but we will not be apostate.â�,�

The mass - conducted in Latin - was very long, with much kneeling and rising...chanting and ceremony. The first hour passed quickly enough, but by the second hour, our legs grew restless and we began to feel the stirring of our Episcopalian roots. We wondered what the nature of the schism really was. We wondered how one group of Catholics could claim a source of wisdom superior to another group. And we didnâ�,��"�t much care for the idea of going to Hell for eating red meat this Wednesday - not that we had any intention of having a steak (why take chances?). We just didnâ�,��"�t appreciate the threat.

Finally, we got everyone together and got on the train at Montparnasse for the trip down to the country. Unfortunately, Sunday was a big travel day. We couldnâ�,��"�t get tickets for the train we wanted; weâ�,��"�d have to wait in Poitiers for two hours to catch the next train. When we got to the station in Poitiers, there was our gardener, Damien, who had driven up to meet us.

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