“My Administration is making America safer, more prosperous, and better. We are meeting the challenges of our time,” says George W. Bush in his end-of-the-year message.

“Our armed forces, joined by our allies, are on the offensive against terrorist enemies around the world. Saddam Hussein is no longer in power and we are hunting down al Qaeda leaders and al Qaeda terrorist cells and bringing them to justice. Fifty million people in Afghanistan and Iraq have been liberated from tyranny and our homeland has been made more secure.

“So people could find work, I proposed an economic stimulus package. Our tax cuts returned money to the people who earned it. They have put it to work in our economy, which is growing again and beginning to generate new jobs, but we won’t rest until everybody who wants to work can find a stable, productive job.

“The country is better off because we passed historic education reforms that will provide all our children a quality education, beginning with teaching every child to read. We took on a tough issue and fulfilled a promise to seniors by providing prescription drug coverage and more choices in a stronger Medicare system.”

Americans, at the beginning of Anno Domini 2004, are a happy and contented race — but in revolt against Fate. The president’s description may not be accurate or prescient, but it is probably not far from what most Americans believe. They have little doubt that they have liberated the desert tribes from tyranny, rather than imposed a tyranny of their own. They do not worry about the softening dollar; they hardly notice it. Nor do the biggest deficits in history, the weightiest debts, or the highest bankruptcy levels seem to bother them; they borrow more and think they are getting rich. They even support the biggest government and fastest growth in bureaucracy since Franklin Roosevelt…and do it in the name of liberty!

Our readers sometimes think they detect an anti-American attitude in these reflections. We deny the charge, but face the facts. At the beginning of the year, we look in the mirror and see sags and wrinkles we would ignore in an Albanian or a Fiji islander. Our amour-propre forces us to look more closely at ourselves than at others. We expect more. At least, we hope for more…and are more bitterly disappointed when we turn out no better than other men.

“I think you Americans are making a mistake,” began a conversation with a gray-haired Frenchman yesterday. “As I understand it, you’re using a variety of the ‘flypaper’ strategy in Iraq. The idea is to pin down the enemy by attracting him to you where you can control the terms of the fight. There are two great examples of that in French military history. Neither of them turned out very well.

“At the battle of Alésia, for example, Vercingetorix fortified himself in on a hilltop. His idea was to force Caesar to come to him…and while the Romans were facing his troops on the hilltop, they would be encircled and attacked from the rear by other Gallic tribes.

“It almost worked. But Caesar figured it out and brought in the Germans. While the Gauls were surrounding Caesar’s troops, the Germans surrounded them. Caesar won.

“Much more recently, we tried it at Dien Bien Phu. There, as in Iraq, the problem was that the enemy could roam around freely and attack wherever he wanted. We needed to pin him down and force him to fight a conventional battle — which we were sure we could win. So we put our troops down in the valley of Dien Bien Phu, and like George Bush, we invited the communists to ‘bring ’em on.’ Well, they did. We never thought they were capable of rolling up artillery. But they did. And we were sitting ducks.

“Maybe Americans are better than we were. Maybe the mistakes others make don’t bother them. I don’t know…”

We will find out. If any trick can be found to cheat Nature or defy the gods…Americans will find it. Otherwise, we will suffer the consequences of their own errors, just as all mortals do.

After the long party of 2003…and the festive years that preceded it…we checked the looking glass on New Year’s day and thought we saw deeper creases…darker eyes…and a palsied shake. Had we been partying too hard? Too long? Looking closer, we think we see 2 strains of delirium tremens in the contemporary American. One is likely to be fatal to his finances. The other may be fatal to his soul.

We chronicled the Great Delirium of the late ’90s in these pages. The end of it came not in a bang of revelation, but in a whimper of self-delusion. All of a sudden, as the 21st century began, the future seemed less sure. Stocks proved they could go down as well as up. The economy itself shrank in the recession of 2001. And then a tiny group of fanatics delivered a stunning and spectacular blow — driving commercial airliners into New York’s Twin Towers.

But these setbacks did nothing to change the current of American sentiment. Instead, they merely increased the jolt. Never before were Americans so sure they were right — about everything. Their army was unbeatable. Their system of government represented not merely a spark of temporary success…but permanent democratic perfection. Nor could they imagine any improvement in their economic model. America has been the ‘engine of growth’ for the entire world. They could not imagine that the little engine would fail.

Americans look in the mirror this New Year’s and like what they see. They think they see superior men, with a superior system…men with such big feet they will not fall into life’s pits and traps…men who know how to get rich and how to run the world. America’s economists and intellectualosos used to admire the Germans — in the ’30s…then, the Japanese in the ’80s…Now, since they have no one to look up to but themselves, they do with double the adoration and three times the fidelity.

“What he knows that isn’t so.” That’s the steel-toed boot that really hurts a man, not the soft shoe of what he doesn’t know at all. Americans think they know almost everything they need to know. Hence our advice and New Year’s resolution: Cover your derrières.

At the end of the ’90s, the similarities between Japan and America stood out like two Republicans in a police lineup. The two economies seemed so close to one another, an ambitious prosecutor could have gotten a wrongful conviction. And what difference would it have made; both were frauds.

But in years 1 to 5 following the peak of the Japanese stock market, investors and economists still couldn’t believe it. Japan would soon bounce back, they said. By year 13, they had given up. Japan would never bounce at all, they maintained.

We are now nearing the 4th year of America’s great correction. So gentle has it been that it seems like no correction at all. Indeed, little has been corrected. The errors not only persist, they get worse. The Fed’s flypaper strategy has brought the borrowers out in force and stuck them so deep in debt they may never get out. Consumer spending continues — even through a recession. Deficits get bigger. Speculation replaces investment. Lines of credit replace savings. Jobs get shipped overseas. The dollar falls.

Americans don’t seem to be able to imagine that things could go wrong. They still buy stocks at 30 times earnings, confident — to a fault — that no Dien Bien Phu nor Alésia is in their future.

Bill Bonner [send him mail] is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century.

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