A recession is around the corner

Sep 28, 2015

- By Bill Bonner

Bill Bonner
Paris, France

Dear Diary,

What should you do if you are running out of time and money?

This is the question we get from readers over 50...over 60...and sometimes over 70. We 'baby boomers' were famously 'na..na..na...live for today.' Now, it's tomorrow. And many of us - often through no fault of our own - are having trouble making ends meet.

Here at the Diary, we write about big world of money, broadly. About how it works. And about economic policy and how it affects you. But what if, in your own world of money, you are running short? What should you do to get more money? Check under the seat cushions? Rob a bank?

We'll come back to this question in just a few moments. In the meantime, let's look at what is going on in the big world - the macro world - of money.

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It appears that the world economy is headed for recession, or already in one. An economy makes and takes. And whatever you make, whether it is an apartment building or a plastic toy, you have to begin by taking dirt out of the ground. You need to dig a hole before you can put up a building or even make a parking lot. And you need to scrape up raw materials - copper, iron, aluminum, oil -- before you can make anything at all. This requires machines. Yellow machines. When sales of these machines go down, so does economic activity.

Yellow machines move dirt. They are used in construction, mining, and every sort of resource industry. We're talking about backhoes...tractors...forklifts...excavators...bull dozers...and loaders. Ominously, demand for these machines - along with the stuff they move - is collapsing.

Two of the biggest suppliers are Caterpillar in the US and JCB in Britain. Both report almost catastrophic drops in sales. Caterpillar, for example says that sales have fallen 3 years in a row and are expected to fall another 5% next year, marking the first time in its 90-year history when sales have fallen 4 years straight.

The Illinois company - that gets 60% of its revenues by selling machines outside the US - says it has had to lay of 31,000 people so far, with more job losses to come.

Meanwhile, in the UK, JCB says that it too is suffering a devastating falloff in sales. Business Insider:

    UK construction machinery firm JCB has said it will cut 400 jobs around the world, mostly due to a massive slowdown in business in Russia, China, and Brazil.

    This is a horrible sign for three of the biggest economies in the world.

    "In the first six months of the year, the market in Russia has dropped by 70%, Brazil by 36% and China by 47%,"said JCB CEO Graeme Macdonald in a press release.

    "Parts of Europe are also struggling, with France down by 26%," he added. "Even the strong growth in the UK and North America has softened due to a fall in market confidence over the summer, which resources to drive economic growth."


The yellow machines are at the beginning of the process, not the end. You have to move dirt before you put up a factory. Or make an automobile. So, when the wheels stop turning on the yellow machines, it won't be long before the whole economy slows down.

Now, back to the question on the table. You are 70....you have no money. What can you do? Sell your body for medical experiments? Invent a new app?

We have already said that sophisticated trading systems and expensive investment programs are not a good idea. They are for people who have money already. If you have money, want more, and enjoy the thrill and challenge of financial adventure, why not?

But what if you don't have money already?

We don't know anything more than anyone else on the subject. We don't have any secrets. But after thinking about, we have some ideas. This is not advice. This is just what we would do if we were in that situation.

First, we would go back to philosophy...Democritus, Epicurus, Zeno, Seneca, Marcus Aurelius and Lucretius... (Not to mention Jesus of Nazareth!) They argued (in different ways) that what really matters in life has little to do with one's wealth or status. What really matters (at least, according to Plato's description) is courage, wisdom, justice and temperance. We would add beauty and dignity. And a good wine. And a good cook. But nowhere on the list is a Rolex watch or a house in Malibu.

The nice thing about Plato's list...as well as the whole epicurean/stoic/ascetic creed...is that it doesn't cost much! In fact, as many philosophers and religious teachers have said, wealth may actually get in the way of the things that matter...it may actually distract you and reduce your real happiness. You may be better off without it.

But wait. We are not ducking the question. We are just putting it in context. If you want more money, you first have to understand what you want it for, and how it might really affect your life. Our goal is not to 'come to terms' with our own financial misery. Nor is it to submit to poverty, even happily. Instead, we want to master poverty... to live better. As Nietzsche put it, we aim to 'set to dancing with arms and legs'...and for that, we need context.

Tomorrow...a simpler, better philosophy...and how to use it to get more money!

Publisher's Note: Vivek Kaul, the India Editor of the Daily Reckoning, just made a bold call - Real Estate prices are headed for a fall. Well, if you are someone who is looking to buy real estate, or is just interested in the space, I recommend you read Vivek's detailed views in his just published report "The (In)Complete Guide To Real Estate". To claim your copy of this Free Report, just reconfirm your Free subscription to the Daily Reckoning...

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 "A recession is around the corner"

Ravi shah

Oct 2, 2015

Thnks Bill for giving us glimps of macro environment and alert us about impending disaster of croni capitalism.Your artcle is very helpful to guage world economies.

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