No one really knows what's going on!

Aug 21, 2015

- By Bill Bonner

Bill Bonner
Baltimore, Maryland

Dear Diary,

Headline on Bloomberg yesterday:

    S&P 500 Erases Gain for Year as Global Growth Concerns Intensify
The Dow lost 341 points. Japanese stocks went down. Chinese stocks went down. Oil and gold went up.

What puzzles us is not why stocks are going down, but why anyone ever thought they were worth so much in the first place.

But the defining feature of modern public life is that no one knows what anything is worth...and almost everything reported is a fraud. Markets, elections, the economy, even our wars - all are rigged up; none are what they appear to be.

We've been describing how and why the feds and the cronies jacked up stock prices. But it's not just stock prices that are rigged - it's' the whole damned system. Almost no one realizes it. Because almost everything we hear comes from the riggers themselves. It's a Great Zombie War...and most of the "information," "statistics" and "opinions" you read are nothing more than propaganda.

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The popular narrative is that the economy grew strongly in the '90s and up to 2007...and then, capitalism hit a crisis, caused by too much greed and too little regulation. Thank God the feds were on the job, or we would have had another Great Depression!

Simple. Easy to remember. But every element of it is a lie.

First, the economy was already scammy and unproductive in the '90s. Then, in 2007, it wasn't greedy capitalism that went into was greedy cronyism. Finally, it wasn't the feds who saved the situation. They actually made it worse. The crisis of '08-'09 was caused by too much debt; the feds gave us more.

It's hard to know what actually is going on because the feds weigh up the situation themselves and report the essential numbers. Trouble is, like a crooked butcher, they put their fat thumbs on the scale, to make it look as though there's more meat.

We've mentioned several times that the GDP numbers are useless. They keep track of activity, but they don't tell you whether the activity makes us better off...or worse off. They don't tell you whether the activity really makes any sense.

Here's an illustration. Remember that expensive house we went to visit in Florida? It was then the most expensive house ever offered for sale in America - a concrete monstrosity put on the market at $139 million.

Well, we just got from sidekick on that mission, whose name we won't mention. The sales agents required a complete financial disclosure before they'd give you a tour. Fair enough. They wanted to be sure they weren't wasting their time. And they probably also wanted to be sure we weren't casing the joint. In any case, we weren't about to give them our financial details. So, we contented ourselves with a look from the outside, which satisfied us completely; the place is so remarkably ugly, so tasteless and gaudy, and so expensive to operate, we wouldn't take it if it were given to us for free.

That was 4 months ago. Apparently there has been some slack in the sales process. Recently, the sellers called us back. No need for financial disclosures now! Our colleague saw the inside this week. He reports:

    "I've never seen this much gold leaf in my life.....and that includes visits to the White House,

    the Louvre and the home of a Persian businessman in Los Angeles combined.

    The palace is truly incredible....and the realtor is convinced you'll love it. I assured him you'd like the excessive gold leafing. It's still in progress. Gold flakes are everywhere. On the floor, inside open outlet boxes and even in the 2" thick Kevlar lining that enshrouds the ladies walk-in closet in the master suite. It doubles as a bulletproof panic room for the family.

    There's an 18 seat IMAX theatre, a 30 car garage, a suspended jacuzzi lined with glass and even an LED-lit water slide down to the pool.

    All of this is enshrouded in enough concrete rebuild a small city. And all of that concrete is completely lined with soundproof's totally silent inside.

    We also discovered the owner of the home is [we won't embarrass him by revealing his name.] He owns a development company.. He has building, paving and other interests there and in Orlando. He also gave $245,000 to the underdog candidate for Broward Co Sheriff in 2012 and he won.

    Before you reach for your pen and write a deposit check consider the palace was conceived 9yrs ago.....that was the exact peak of the last housing bubble. It will be finished by Thanksgiving.....arguably the exact top of another bubble in housing.
Why bring up the posh pad in Pompano? Because it was built - like much of America over the last 20 years - on false pretenses. All that cement, gold leaf and workmanship was included in America's GDP. And most likely, they would never have been put to use had interest rates fairly reflected the country's available savings. Instead, what they reflected was the Fed's ability to push down rates...and make what Karl Marx called "fictitious capital" available to fictitious capitalists.

Then, all this fiction contributed another big fiction - widely distributed in the mainstream media - that the economy was 'recovering.' But building Cyclopean palaces does not necessarily add to the nation's wealth. Sometimes, it subtracts from it. It depends on whether the finished product is worth more, or less, than the value of the resources that went into it.

Too many dotcoms in 2000, too many cheap houses in 2008, too much mortgage finance in 2009, too many frackers, too much copper in Chile, too many factories in China, too many shopping malls in America - wherever, whenever... cheap money causes people to over-do it.

GDP figures are supposed to measure whether we are 'growing' or not. But the GDP numbers, as the feds calculate themselves tell more lies than a presidential contender. What they are really measuring is 'activity' not growth. So, if we borrow a million dollars and use it to buy a house, it shows a million dollars' worth of growth, despite the fact that no one has gained a penny. We have a million-dollar house and a million dollar loan. Net, zero. It looks good, but only as long as the zombies are winning...interest rates remain ultra-low...and nobody really notices that the whole thing is a bamboozle.

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

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