This is not a normal economy at all

May 17, 2013

Baltimore, Maryland

When a man is up to no good, it doesn't help that he gets lucky.

A fellow goes to rob your house. He finds the door unlocked. He enters without breaking. He steals everything. Mission accomplished.

Later on, he is arrested robbing a bank. He gets 10-to-20.

He would have been better off if he had found the door impregnable...and gave up!

So the latest news from the US budget office is not good either.

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Now the politicians can stop worrying about deficits...and continue to rob the future. Good news is bad news.

    US. Budget Deficit Shrinks Far Faster Than Expected

    WASHINGTON - Since the recession ended four years ago, the federal budget deficit has topped $1 trillion every year. But now the government's annual deficit is shrinking far faster than anyone in Washington expected, and perhaps even faster than many economists think is advisable for the health of the economy.

    That is the thrust of a new report released Tuesday by the nonpartisan Congressional Budget Office, estimating that the deficit for this fiscal year, which ends on Sept. 30, will fall to about $642 billion, or 4 percent of the nation's annual economic output, about $200 billion lower than the agency estimated just three months ago.

So you see, even dumbbell economists believe lower deficits are bad news...but for an entirely different reason. They think lower deficits will reduce GDP and jobs. They think the only reason the economy is doing so well is that the feds have been willing to spend money they didn't have on things they didn't need.

And that's another reason the budget news is bad news: it makes people think the Great Experiment is a success!
Here's the US Trust analysis:

    ... we believe the policy response we call the Great Experiment is appropriate and has helped the economy heal and normalize. As gun shy investors see the policies working they are returning to the risk markets and a secular bull market is beginning. Other countries have responded to this success by trying these bold initiatives with the Bank of Japan now the most prominent example...
Whoa...did we hear that right? The 'Great Experiment' helped the economy 'normalize?'

Hold on. Something funny about that. "Normal" is what you get when you don't experiment. Normal comes from normal. If you want a normal outcome you have to make sure you're not doing anything too extraordinary, no?

So, how can you get to 'normal' from a 'Great Experiment?'

We will leave that for the philosophers of tomorrow. Today, we'll merely suggest that maybe this economy isn't so normal. What's normal about an economy where the major financial institutions can borrow money at zero real cost What's normal about an economy in which people who have run their businesses so recklessly that they had to be bailed out by the government are still running their businesses...and can now borrow at lower rates than good businesses? And what's normal about an economy where the feds still spend $1.60 for every dollar they get in tax receipts...and make up most of the difference by printing money

This is not a normal economy at all...but a strange and grotesque one...with wires going into its brains and tubes feeding into its veins. The Great Experiment in monetary policy has produced an experimental economy...just as you'd imagine.

The word 'normal' refers to what eventually happens to an matter how hard the feds try to stop it. It's where you end up after the Great Experiment fails...and you realize that your Dr. Bernankensteins have produced a monster...not a normal economy.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer: The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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1 Responses to "This is not a normal economy at all"


May 19, 2013

I have a question for Mr.Bonner - You have been constantly giving out negative views on the US & Eurozone, but stock markets are making new highs. There is a saying that markets are always right & they price in everything in advance. If a person had followed your advice in the past five years he wouldn't have made a dime. What is the logic of having & giving a contrarian view - is it just that if one is constantly bearish or bullish for that matter, as some point of time he will be proved right? Kindly explain how people will make money by listening to you?

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