"Bernanke is not inheriting the best of situations," said Paul Volcker.

If we were in Ben Bernanke's shoes, we would have ducked the reading of the will. What can he possibly do about the legacy Alan Greenspan has left
him: the trade deficit, consumer and government debt, the dollar, or the declining financial cycle?

"How would you like to be responsible for an economy that's dependent upon $700 bn of foreign money every year?" added Volcker. "I don't know what I would do about it, but he's going to have to do something about it sooner or later."

Has he not inherited the wind? Will he not reap the whirlwind?

There are only two ways to reduce the empire's reliance on foreign capital: Americans can save more money themselves, or they can spend less, thus needing less from overseas. Both amount to the same thing: nearly a trillion dollars less spending in the United States. Take away that kind of money from a consumer economy and you are going to have trouble. There is no way to avoid a recession - or a depression. Last year, two million people went broke - with the U.S. economy in full expansion. Think about what would happen if the GDP went down 5%! Or, if you are Ben Bernanke, think about hot tar and feathers!

Yet, Fed officials, imperial apologists, and their lapdog economists see no problem at all.

"There may be in the future some stress in some areas, but broadly speaking I think that consumer finances are enough to keep the economy at or close to its potential output growth rates," said Ben Bernanke last week. "The increase in mortgage debt may not be a particularly serious problem."

What about the "inversion" of the yield curve? The last five out of six times short rates rose above long rates, it has signaled a recession. But, Bernanke claims this old indicator is as out of date as spats and solvency. This time, he said, an inverted yield curve may come from investor confidence - a portent of more good things to come.

Unfortunately, it looks to us as though Americans have squeezed all the sweet juice of the orange already. What's left is only a bitter pulp. The Financial Times reports:

"Levels of US household debt are vertiginous, rising 8.6pc in 2000 from already dizzy heights, then again 8.6pc in 2001, 9.7pc in 2002, 11.4pc in 2003, 11.1pc in 2004 and 11.7pc in 2005."

Much of this borrowing is centered on housing, says the Financial Times, with "[real estate] agents, surveyors, and the army of workers linked to property made up 55pc of the 2m jobs created by the US economy from 2000 to 2005, according to Moody's.

"The rolls of the National Association of Realtors have grown from 767,000 to 1.2m in five years.

"The Americans are now drawing down 6pc of GDP from the equity in their houses each year, much of it to pay bills or splash out on a spanking new V-6 Chevrolet Equinox.

"Goldman Sachs estimates that 68pc of this home equity withdrawal is spent outright on consumption. It warned that the drag on growth could reach 1.5pc of GDP by next year if property stalls.

"It is a portrait of a nation that is living further beyond its means than any advanced society has ever dared before."

*** American dreamers and schemers are not worried, and here, in his own words, is the mad prophet of the Great Tech Bubble himself, King George of the Gildered Age:

"A balance of trade or a balanced budget is not necessarily desirable at all. Indeed, a trade gap signifies a capital surplus. It means that people want to send us money. It means they trust the stability and order of the U.S. economy. You can see how this works when you realize that one-third of global GDP is in the United States. The United States generates fully one-third of global GDP.

"But the market caps of our companies represent 57% of global market cap. In other words, people all over the world want to invest in the United States and this is because the United States has the most stable environment for investment. It has the deepest and most creative capital markets. It's got the largest and most liquid stock markets and it has the rule of law, we hope, rather than the rule of lawyers which threaten it.

"So, the way to think of this is: a foreigner with a dollar can do two things with it. He can buy an American good - buy an apple exported from the United States, for example - or he can buy an asset in the United States. If he purchases the apple, he eats it and we don't have it anymore. If he purchases the asset in the United States, we keep it."

But do we really "keep it" when a foreigner buys a U.S. Treasury note? Or, do we just "get it" good and hard? Of course, God doesn't care who owns U.S. debt, U.S. factories, or U.S. ports. He is neither xenophobe, nor patriot.

As Americans go further and further into debt to our friends in the Far East, and sell off more and more U.S. assets, they transform themselves - from creditors into debtors, from capitalists into post-industrial serfs, and from independent citizens (who could tell the rest of the world to drop dead) into modern wage slaves. They are so deep in debt to the foreign-owned company store that they have to stand on tiptoes to kiss the derriere of a Chinese duck!

*** Is it really true, dear reader? You may have wondered yourself. Do things really work the way they're s'posed to work? Does virtue really triumph over evil? Do prudence in investing and honest toil on the job really beat reckless day trading and a government job?

Maybe George Gilder is right. Maybe the trade deficit is nothing to worry about. Spend, spend, spend...whoopee!

It just doesn't matter. Sin, debauchery, or debt - in this new Information Age, everything will work itself out...right? Play the tambourine, let the little ones dance about, refi and refi again. Save money? Forget it! Max out the credit cards, get a convertible, buy a Miami condo on credit, and still go down to the beach with a young blonde on our arm, in peace.

But wait. Is that the world we want to live in? There's the rub, isn't it? If we were able to do what we wanted - and get away with it - everyone else could, too. And what a depressing mess that would be. What if being naughty isn't so much fun after all? What if we didn't get away with it? What if we don't go to the beach in peace? And, what if the burden of it floats on our soul like a dead fish at low tide - stinkin' to high heaven?

What if we run out of time? Out of credit? Out of good humor? What if bad dreams disturb our sleep - or demon worries trouble our digestion? No thanks; it doesn't seem worth the risk.

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