America's 2nd Greatest Generation

May 25, 2015

- By Bill Bonner

Bill Bonner
London, England

Dear Diary,

If we had any credibility on the subject, we'd say gold is stuck at $1,200 and stocks are beginning to roll over. The Dow was down 53 points on Friday. In itself, this is not worth talking about. But summer is coming...and then autumn. Our own short term indicator has turned dismally negative. And Janet Yellen is talking about raising rates. USA Today:

    "If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate target," Yellen said in a speech at the Providence Chamber of Commerce in Rhode Island.

    She added, however, that after the first hike, "I anticipate that the pace (of subsequent increases) is likely to be gradual. The various headwinds that are still restraining the economy ... will likely take some time to fully abate, and the pace of that improvement is highly uncertain."

    Yellen said that "it will be several years" before the Fed's benchmark rate is back to normal - which is close to 4% in an economy that's performing well.
We have proven, and beyond reasonable doubt, that if anyone can predict the market's movements he doesn't work here at the Diary. But when it comes to the economy, we claim a little credibility. We saw the crisis of '08-'09 coming. It was so big, so obvious, so in-your-face...who could have missed it? Janet Yellen!

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We also saw not only that the economy was not really recovering, but that it couldn't recover. Real growth is something that you can allow, but cannot force. And if you try to trick your way to it, with phony interest rates, higher debt, and cockamamie inflation targets, you will actually retard the whole process.

This is obvious too. But Ms. Yellen is paid not to see it.

And in the absence of real growth, the Dow at 18,000 looks more and more vulnerable. It wouldn't be at all surprising to see a great, rolling top take shape...with a sharp break in the fall.

But we leave the market for this Memorial Day holiday in order to pay homage to the Second Greatest Generation.

Yes, we feel guilty about the way we've treated the old f**ts. We wish to make amends to all our readers over the age of 55. After all, these are the people who made America what it is today.

So, today, we rise to take their part...to sing praises to the fallen heroes ...and to wave their banners. Here at the Diary, we are used to standing up for lost causes, die hards, and under-dogs. But today, we defend those who don't need it.

Everyone knows that people who came of age in WWII were our Greatest Generation. They were the ones who risked their lives to beat the Nazis and the Japan's grisly war machine. Not only that, they were the ones who made the innovations we take for granted today - credit cards, climate controls, freeways, commercial air transportation, television...you name it.

But it is to the following generation - our generation, the baby boomers -- that we raise our glasses today...the Second Greatest Generation in US history. Wasn't it on their watch that we developed power point presentations, twerking, frappacinos and wife bonuses?

As to this last innovation, we just learned about it yesterday. In the pages of the Financial Times it is recorded that Manhattan's elite bankers and lawyers are rewarding their wives - with money, we presume - for their children's SAT scores, and other measures of family success. Good luck with that!

The business world has long known about the power of financial incentives. But we recall a study that told us that sometimes they backfire. Certain managers with financial bonuses actually performed worse than those without bonuses. Psychologists tell us that there are "intrinsic" benefits to, say, seeing your children do well in school. "Extrinsic" benefits sometimes seem get in the way. Mom may get distracted by the money, in other words.

In a way, that's our critique of the whole funny-money generation, from the 1970s to today. The feds put out a lot of cash and credit. People got distracted by it, forgetting the essential formula for a healthy economy and a decent society. Instead of saving, learning, investing and cultivating the virtues that build real wealth, they went for the easy money.

But today, we put that aside. Today, exceptionally, we come to praise the Second Greatest Generation, not throw mud in its face. This was the 'make love, not war' generation. But the one thing that stands out this Memorial Day is that it has made more war than any generation before it.

We all know our parents won WWII, for example, but we forget who won the War in Vietnam! Who? Ho, that's who. Ho Chi Minh. So forget that one. Fifty-eight thousand dead Americans...and as many as 3 million dead Vietnamese. For what? Nobody can say. Not a great moment in US history. But at least Robert McNamara had the decency to admit it. Late in life, he apologized. And cried.

All right. We didn't win. But at least we tried. And Vietnam was just the first of a long list of wars that the Second Greatest Generation fought, each time doing its level best to make the world a better place, or least to make itself richer, whichever came first.

War on Poverty - lost. But $15 trillion went to the poverty fighters since 1964.

War on Cancer - lost. But $30 billion was spent on cancer research since 1971...and hundreds of billions on cancer treatments that didn't work.

War on Drugs - lost. "A trillion dollar failure," said CNN. Cops, dealers, lawyers, prisons - everybody gets more money and the drugs keeping coming.

War on Terrorism - lost. "Five Trillion Dollar War on Terror," says TIME. We don't know what TIME put in that number, but it should have included the money the US government spent to create its enemies -- Saddam Hussein, Al Qaeda, and ISIS - as well as the money it spent to fight them. But the pentagon is a big winner, along with all the lard-butt zombies in Congress and Northern Virginia.

War on Iraq? 4,500 dead US soldiers. War in Afghanistan? 2,500 dead Americans.

Kosovo? Libya, Granada, Panama, Kuwait, Somalia, Haiti, Pakistan...

Oh, forget it.

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

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2 Responses to "America's 2nd Greatest Generation"

chris caesar

May 26, 2015

Great insight Bill.
Chilling to the 'Boner" .Thanks for enlightenment.Keep up the fantastic mission.I've become your follower

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Aqeel Ahmed

May 25, 2015

This is the first time I am reading an edition of Daily Reckoner given that I am a new subscriber.

I truly appreciate Bill's style and how he represents market dynamics. Keep it coming Bill and thank you!

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