"How long can households sustain negative savings?"

USA Today posed the same question yesterday that we did, but the USA Today hacks had an answer: a long, long time.

Americans own about $62 trillion worth of assets, they tell us. Even if they were to sell them off, mortgage them, and squander them at the rate of $1 trillion per year, that would still give them 62 years. Then, the Chinese might own every light bulb, trailer, and Elvis painting in the entire country. But it would have been a fun 62 years, right?

If it only worked that way!

The trouble with wealth is that it is not distributed as neatly and equally as the hacks tell us. Some people are flush with assets; others have none. Most people have too few assets. There are millions and millions of people who are already only a step from being paupers. They already count on credit cards, mortgage refinancing, Christmas bonuses and extra hours of work just to keep going. As the national savings rate dips, these people do not calmly lower their own savings rate from, say 10% to 8%. They had no money to start with and now they will be forced to borrow just to keep up with bills.

But why should they have to save for a rainy day, they asked themselves distant years ago, when there is so much ready credit just lying around begging to be given away? Hey, if they get themselves in a jam there'll always be another shiny plastic card in the mail to bail them out. The fine print can wait. They'll just borrow and borrow.

And why shouldn't they? They are urged by economists to do so. Americans don't really need to save...because Asians save enough for themselves and everyone else in the world. And these poor Asians desperately need someone to take all that money off their hands. What could be nicer than doing them a favor? It's as if we blasted a hole in the back wall of some Asian bank and can take their money whenever we want.

"Suffering from the greatest domestic saving shortfall in modern history," explains Stephen Roach, " the United States is increasingly dependent on surplus foreign saving to fill the void. The net national saving rate - the combined saving of individuals, businesses, and the government sector after adjusting for depreciation - fell into negative territory to the tune of 1.3% of national income in late 2005. That means America doesn't save enough even to cover the replacement of its worn-out capital stock. This is a first for the US in the modern post-World War II era - and I believe a first for any hegemonic power over a much longer sweep of world history."

Well, there's a first time for everything. This is also the first time any people have ever had such ready access to so much credit. But is a credit card really as good as money in the bank? Are Asian savers really prepared to lend us as much money as we want whenever we need it? On those two questions dangles the empire's financial future. But who bothers to ask?

We do, dear reader. We will even bother to answer them.

If a rainy day were to come, the difference between savings and credit is the difference between owning a snug pair of galoshes of your very own and having to borrow a pair from that strange lady next door. Will she have a pair that will fit you? Will she be home when you ring the bell? What will she ask in return? Does she even have any galoshes?

You just don't know...

Which brings us to the second part of the question: can America count on Asians for its savings needs? That question answers itself readily, too. The Chinese, of course, are such dear and trusted neighbors. Helping rich capitalists finance their extravagant lifestyles is what they live for; we all know that. It just warms the heart of the Chinese laborer - a selfless soul, working 12 hours a day in an unheated factory - to know that it is his savings that help Americans pay for their air-conditioned garages and for cable TV in every room. And the Japanese...have they not been reliable allies and helpmates ever since Admiral Perry discovered them?

Yes, dear reader, you can stop worrying on that score. Asians have too much money. They will always be only too happy to lend it to us at less than 5% interest.

But wait, you say. At 5%, the poor fellows are losing money. Domestic inflation in America is said to be 3%, but who believes it? And on the world market, prices for the things Asians need - oil, copper, wheat, gas, beef, tungsten, silver - are exploding. Gold rose 30% in the last 12 months. The U.S. balance of trade is $700 billion in deficit. The U.S. federal budget is $500 billion in deficit. Why would he continue to lend money to the world's biggest debtor at 5%...when his own hard costs are rising at 10% to 20% per year and when he can get 30% just by holding safe, sure gold?

Well, say the economists, because the U.S. dollar is the world's reserve currency and because he needs it to buy oil and those other things. But does he? This month, Iran has promised to start selling its oil for euros. And even if oil were still sold for dollars, there's no guarantee that the price won't change. The foreigner may be better off holding his money in euros, yen, yuan or better yet, in gold. He can always exchange for dollars at the last moment and at, perhaps, a better rate.

How long can Americans sustain negative savings? We don't know, but when Asian savers figure out that that they are better off in gold than dollars, U.S. householders are bound to start wondering about it.

Bill Bonner, with more thoughts from France...

*** This has been quite the year thus far for precious metals...the price of silver broke through 22-year highs this week, anticipating the launch of the silver ETF.

Although the SEC has not yet approved the ETF, Barclays Global Investors' spokeswoman Christine Hudacko confirmed the SEC had begun the standard procedure for financial products in registration, but it does still need to be approved.

According to Barclays, "the silver ETF appears structured similarly to the pair of existing gold ETFs - the precious metal is held in a vault and investors trade shares that represent ownership of a fraction of an ounce."

The silver ETF will be good news for investors who have not gotten involved in the market before this, due to storage costs and shipping fees.

We'll keep you updated...

*** The chains grow heavier...the lies grow more absurd...and the delusions more preposterous.

At first, the chains are so light they can't be felt and then, they're so heavy they can't be broken.

A great empire degenerates into deceit and delusion, imagining that its government is the same modest republic of 1776, with the same simple virtues of the founding fathers. The empire imagines that its businesses are still the energetic, freewheeling enterprises of Gould, Rockefeller and Vanderbilt.

We note, for example, that the CEO of Citigroup earned $23 million last year. What were the shareholders thinking? They must have been thinking about what a great thing capitalism is because it permits people to earn far more than they are worth.

And this little note from correspondent Byron King:

"The bureaucrats forbid even the taking of photos of the flag-draped caskets at Dover. It is, in its own way, the same sleight of hand that is now doing away with the reporting of M-3 by the Federal Reserve.

"For a mundane example of the foregoing, I was talking with a young graduate student last weekend. He is studying architecture and urban design. I asked him if he had visions of one day becoming another master builder or planner in the likes of Palladio or Christopher Wren. He said no, much of what they learn in school deals with how to fill out forms at the building code office, and write zoning approval applications. He barely even understood my question."

And here cometh our favorite columnist, Thomas L. Friedman, praising the Land of the Free, and imagining that a little more central planning is just what it needs.

"The Energy Question is the big strategic issue of our time," he writes, "overtaking 9/11 and the war on terrorism. If a leader from either party would correctly frame the issue - that a gas tax is the single more important geostrategic move we could make today - a solid majority would support it."

*** At least we both agree that energy is a big thing.

From the New York Times:

"The Age of Oil - 100-plus years of astonishing economic growth made possible by cheap, abundant oil - could be ending without our really being aware of it. Oil is a finite commodity. At some point even the vast reservoirs of Saudi Arabia will run dry. But before that happens there will come a day when oil production 'peaks,' when demand overtakes supply (and never looks back), resulting in large and possibly catastrophic price increases that could make today's $60-a-barrel oil look like chump change. Unless, of course, we begin to develop substitutes for oil. Or begin to live more abstemiously. Or both. The concept of peak oil has not been widely written about. But people are talking about it now. It deserves a careful look - largely because it is almost certainly correct."

The days of cheap energy may be over. The world will have to adapt. But how could you make a bigger mess of it than by allowing Thomas L. Friedman come up with a solution - not just for himself, but also for the entire empire?

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