The empire of debt

Where is Dillon, South Carolina? Surely, they have put up a monument to their hometown boy, Ben Shalom Bernanke. Or maybe it is in nearby Augusta, Georgia, where he was born?

Mr Bernanke is jobless now. So he’ll have time on his hands. We should wander over to Dillon. Perhaps we’ll run into him at a local strip club. We have a few questions we’d like to put to him.

But wait. Does he have bodyguards? He probably doesn’t need them. No sparrow can fall anywhere in the world without setting off alarums at the NSA. Any plan to harm the former Fed chief would surely be foiled by the ever-alert spooks.

Most empires were financed on the loot captured from their conquered opponents. But the US empire depends not on generals, but on bankers. Ben Bernanke, the ‘Hero of ’08′, kept the credit flowing at a crucial moment.

He kept the empire on schedule and on target for its rendezvous with disaster.

Yesterday, the Dow registered a 74-point gain. Gold was up too.

No one asked us. But we gave our reply anyway. “Are we in a new bull market in gold” was the question. Our answer: we don’t know. But our reply suggested that it didn’t make any difference. Gold has survived hundreds of paper currencies and hundreds of empires. Though the dollar may have gained ground last year, gold will survive it too.

Colleague Braden Copeland thinks gold stocks may have entered an explosive bull market too. He notes that not only are prices rising, more importantly, so is volume.

“There’s no fever like gold fever”, says old timer, Richard Russell. And when gold fever takes hold, the results can be spectacular.


Bill Bonner on markets, economics & the madness of crowds

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Here at The Daily Reckoning, however, we are not speculators. We are observers. And what we notice is that gold is real money – ultimate money – the kind of money people turn to when the other kinds seem unreliable. It is also what great empires tend to accumulate.

In the 16th century, Spain collected the world’s gold. In the 17th century, Holland was where the gold coins rolled. In the 18th century, France was the world’s richest nation.
In the 19th century, Britain brought home the world’s gold. And in the 20th century, the USA was number one, with the largest gold hoard on the planet.

So, who are the biggest buyers of gold today? The Chinese. They are preparing to take their place on the world’s largest stage.

Recently, we were asked to update our book, Empire of Debt, written with Addison Wiggin. Most observers, we pointed out, have concentrated their attention on the growing pile of debt, scheduled to reach 200% of GDP by 2020.

We preferred to focus on the empire itself. Debt has its lifecycle. So do empires. Both expand. Then, both, without exception, contract.

An empire funded by debt is an especially ungainly, grotesque thing. It lurches from one disaster to another, going deeper and deeper into debt each time.

The Vietnam War pushed Richard Nixon to abandon the gold standard. Now, the Iraq and Afghanistan wars further weaken the empire’s finances, with costs approaching $5trn and up.

But it is not the debt that kills it. Debt is just a razor conveniently left on the side of the tub.

In the meantime, Mr Market can do whatever he pleases. And it may please him to push the price of gold stocks considerably higher.

We will see…

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One Response

  1. 03/03/2014, sym wrote

    Hi Bill you did not have to write in his middle name ,Ben S would have been enough unless you have something else in mind?

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