Monday, June 22, 2009

Prosperity for God's People - Monday June 22, 2009

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Consumers are Thinking Smaller
by Bill Bonner
Paris, France


There are two major schools of thought on the bailout:

The first of which believe that the banks are still in trouble and need to be nationalized. (Roubini, Krugman)

The second school of thought thinks that the banks are still in trouble, but that a public/private partnership can recapitalize them as they work their way out of the hole. (Geithner, Gross)

As usual, we play hooky. Here at The Daily Reckoning, we're not in either school.

In our view, the banks are in trouble because they lent too much money to too many people who couldn't pay it back. They should take the verdict of the market...and hang.

Hey...won't this cause a depression?

Ah...here is where we really part company with our fellow bipeds. We in a minority...such a small minority that all its adherents put together could probably fit into an elevator. Because we believe that a depression is just what America needs...and what it's going to get regardless of what the meddlers do. In fact, we think they will turn an ordinary depression into a great one. Or maybe even a "greater depression," as our old friend Doug Casey puts it.

Stocks barely moved on Friday. The Dow lost 15 points. Oil lost $1.76. Gold and the dollar moved little - the former up, the latter down.

California demonstrates what has to happen in an honest slump. They're preparing for "deep cuts" in school budgets, say the papers. Naturally, the education lobby is howling. But most of the money spent on 'education' is wasted anyway. Cutting back might even help kids learn something.

Consumers are cutting back too. That's probably the most important new trend to come with the post-Bubble era. Consumers are thinking small...smaller houses, smaller utility bills, smaller cars, smaller debts, smaller retirements.

That's a change that's likely to stick. They've seen where thinking big got them. Now, small is beautiful.

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