Global Wealth Shifts as Asians Stock Up On Bad Debt

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Recently by Bill Bonner: The
World Goes Crazy



we promised a new idea. Alert readers may have noticed – we
didn’t deliver.

But when you
have a new idea you don’t just throw it out like small change.
It requires a certain amount of preparation…a bit of fanfare…a
drum roll and a countdown.

The subject
yesterday was European debt. The bond vigilantes came ashore in
Portugal, attacking Portuguese government bonds. They seemed to
be heading for the Spanish border.

All over Europe,
the cry went up: “Can anyone stop them?”

It was as if
the Huns were at the doors of Vienna…or the Moors were massed
at the walls of Poitiers. Where is Charles Martel when you need

The funny thing
about yesterday’s news was that Japan had come to Europe’s
aid. Following China’s lead, Japan said it would lend the poor
Europeans some money.

What are these
strange benefactors up to? Why would Japan – with the highest
debt load in the world…and barely able to finance its own deficits
– lend to Europeans? But the Asian rescuers are just exchanging
bad US-dollar debt for bad European debt. They must figure that
they are up to their eyeballs in American paper…might as well
diversify into some Euro trash as well.

The other thing
it signals is more shift of wealth, from the West to the East. Asians
are now creditors to Europeans and Americas. That’s just the
way it works. The old world goes into debt to the new world. America
is part of the Old World now. The Asians will now be calling the

Which brings
us closer to our idea.

But hold on…one
second, Dear Reader… Let’s look at yesterday’s financial

The Dow rose
34 points. Gold rose $10. Nothing much to talk about.

But check out
these headlines from The Wall Street Journal:

“Job openings
fall in tough market,” says one.

ugly trademark,” begins another. “Steep, lasting drop
in US wages.”

Now just hold
on a cotton-pickin’ minute. What happened to the recovery?

It did just
as we said it would do – it vanished. The Great Correction
began in 2007. It is now in its 5th year. But it’s not over.

the real estate analysts, now report that the “double-dip”
in housing is here. Prices are falling again in many areas.

Prices at the
consumer level are not exactly falling…but they’re not
rising much either. The official CPI is flat at barely 1% increase
per year. This isn’t much comfort to the average household
– which has higher food and energy bills (not included in the
core CPI reading) to pay. But the low figures show us that we’re
still in a Great Correction, not an inflationary recovery.

And, there
were fewer job postings in November than the month before. And here’s
the bad news: if you lose your job, a pox will be on your house
for generations. No kidding. According to a study by a Columbia
economist, you are likely to earn less in your next job, if you
get one. Not only that, fast-forward to 2030 and you’re likely
to still be earning less than colleagues who weren’t laid off.

But it gets
worse. Your children are likely to earn less too…and heck,
maybe even your grandchildren.

The article
mentions a manufacturing manager with two masters degrees. He was
earning good money until he lost his job. Now he’s sweeping
floors. He’s a janitor earning $9 an hour.

What good are
those two masters degrees? Apparently, no good at all.

Another of
the people spotlighted by the WSJ hopes to beat unemployment by
going back to school. More degrees will lead to better job prospects,
she thinks.

She should
read the article. It doesn’t seem to work that way. More education
may not pay off. Why?

Again, we return
to our new theme…our new idea.


Bonner [send
him mail
] is the author, with Addison Wiggin, of Financial
Reckoning Day: Surviving the Soft Depression of The 21st
The New Empire of Debt: The Rise Of An Epic Financial Crisis

and the co-author with Lila Rajiva of Mobs,
Messiahs and Markets
(Wiley, 2007).

Best of Bill Bonner

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