Gold didn't move yesterday. It remained at $1,139.

Mortgage delinquencies hit a new record in the third quarter. And producer prices came in lower than expected. These are both indications of a weakening, deflation-prone economy.

Perhaps this is what prompted Mr. Ben Bernanke to tell the world that he may keep rates lower, for longer, than he thought...and perhaps forever.

"Bernanke signals 'extended' low-rate period may become longer," reports Bloomberg.

Today, we discover that "1 in 6 hungry in America last year." That is the headline in the USA Today. If you believe the report, 49 million people went hungry at some point in 2008, the highest number since the government began keeping track in 1995.

Meanwhile, we learn - in the same paper - that "Rising obesity will cost the USA $344 billion." That's what fat people cost the nation annually, equal to 21% of health-care spending.

The two problems should cancel each other out, shouldn't they?

Oddly, the states with the greatest girths are also the poorest. Mississippi is number one in fat. It's also the poorest state. Could it be that fat people are going hungry? Is this a good thing; or a bad thing?

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

• Lending Rates Will Go Up With Inflation
• Things That Matter in the Economy are Going in the Wrong Direction
• Consumers are Suffering Because European Governments Boosted Spending
• IMF Deems Gold An Idle Asset
• Eurozone Drops GDP Bombs

"Much of the world is going through a downswing of the credit cycle. Argentina doesn't have and didn't have much credit. So it will be spared the big problems. But it sells farm produce to the rest of the world. It has to expect a period of sluggish sales and soft prices.

"I don't know if I would advise foreigners to bring their money to Argentina. But I would advise everyone to diversify beyond their home country - especially if they are American or British. Generally speaking, it appears that the go-go finance-based economies of the Anglo-Saxon world have peaked out. They lived on credit. Now, they die on credit. And they will find it very hard to shift their economies from credit-fueled consumption to investment-driven production and export. The competition is too stiff. America is a high cost producer. It can't compete easily with the developing and emerging economies. So, it will just have to get used to a lower standard of living. That means lower asset prices too. Which is why an investor - broadly speaking - can anticipate a higher rate of return from his investments in India, Brazil and even Argentina, over the next 20 years, than he can from the US."

But isn't Argentina full of crooks, booty-shaking tango dancers, escaped Nazis and Norteamericanos on the lam?

A friend of ours thought so. She was having lunch at a nice restaurant in La Recoleta, one of the nicest parts of town, when someone stole her purse. Poor thing, we were afraid her trip was ruined. But then, she got this email:

"Hi good afternoon, my name is Emiliano, is that i work doing maintenance of parks and squares in the area of palermo, and in one of the trash bins encontre a series of documentation to its name and among other things i could detect this mail.

"That is why i warn that i have the papers mentioned, licenses, passports, credit cards, etc. without more and in anticipation of any response on their side and wishing you are with their belongings, i leave my mobile Phone in order to combine a meeting so that you can restore their belongings, but more, i dismissal of you carefully."

She writes: "This 'Santo Emiliano' is now and always will be the patron saint of Buenos Aires. He has restored my faith in humanity by going beyond his job tidying up the beautiful local parks and helping a total stranger to once again see the real beauty of his city. He explained that he enlisted the help of many friends to compose the email above. I get teary-eyed thinking about it. I can't wait to meet him and try to explain to him in my broken 'castellano' that he is working in the wrong municipal department and should be promoted to the head of the department of tourism!

"Ah, the world is once again a nice place to live."

And lastly...

"I must say," Elizabeth began, after hanging up the phone. "Being married into your family is an enriching experience."

Elizabeth comes from a good New York family. Her ancestors were ambassadors, officers in Washington's army, heiresses and socialites. She went to private schools and then to an Ivy League university. Poor thing. She had never had much contact with Irish riff-raff, tobacco road farmers, and lowlife financial publishers. She can thank your editor for introducing her.

She had just been talking with one of our cousins. Well, the wife of a cousin who died suddenly last week. He was only in his 50s and seemed like a nice enough fellow. But he was no Harvard-trained go-getter.

"I felt so sorry for her [the widow]," Elizabeth continued. "Your cousin hadn't worked in years. He was on disability. I'm not sure what that is. Some sort of welfare, I guess. He didn't look disabled when we met him two years ago. He was such a big, strong man.

"But when he died, he left his wife with no source of income at all. She's applying for disability too. She has no income at all. I don't think they have any savings either. And her disability status hasn't been approved yet. It hasn't come through. I wanted to tell her that we'd help her but I felt a little awkward. I've only met them a few times. You should do something...

"There is a whole world out there that I didn't know anything about...that lives and thinks in a much different way than we did. They're very nice. I like all your family. But they have very different attitudes and habits than what I'm used to. I wonder what caused it. Maybe they probably worked hard when the steel mills were operating. But then, when the mills shut down, maybe they got in the habit of getting paid not to work. I don't know...but it's very strange."

"What do you mean," was our reply. "Your family didn't work for generations. They inherited wealth and spent it. They spent money they didn't earn. My family did the same thing. They just spent wealth from other families...and didn't get as much of it."

Until next time,

Bill Bonner
for The Daily Reckoning Australia

• Kirchners Lose Election in Argentina
• A Chilly Trip to Argentina
• Cattle Prices Have Risen Only 1% This Year
• Our Cattle in Argentina
• Painting the Shutters With the Family

You editor is visiting his son and grandson in Buenos Aires. Last night, granddad agreed to babysit so the young parents could go out to dinner.

After a pizza and some horsing around, the little boy - 18 months old - began to have doubts about granddad. It was late. He was getting tired. He looked around and asked for "mama."

No stranger to parenting, your editor knew just what to do. He put the boy in a stroller, took him out on the street, and began a long walk.

We were in Palermo Soho, a thriving and trendy neighborhood of Buenos Aires. The buildings are only two or three stories high. Streets are made of cobblestones, with sycamore trees on each side. And everywhere you look, there are restaurants, cafes and boutique shops. By day, it is a nice area...but a visitor sees derelict buildings as well as spiffy renovated ones. At night, the run down properties disappear in the shadows.

In the Plaza Serano, a man on stilts walked the streets. He must have been looking for tips from the automobiles that passed. Little Liam, our grandson, looked up at him in alarm. The world must be a strange and wonderful place to a small child; he must have wondered how the man got so tall. In the center of the square, a small woman sang tango songs, accompanied by a guitarist and an accordion player.

We walked along. People looked at Liam in his stroller and smiled. He smiled back. Then, they looked at your editor with curiosity, wondering if he was the father or the grandfather. Couples walked arm in arm. Some embraced on street corners. One couple sat on a bench, kissing on each other so enthusiastically they clearly needed a hotel room. Several cafes had tables out on the sidewalks. Waiters carried trays of beer and wine. Girls in blue jeans looked at the fashions in a shop.

Within two blocks, Liam was fast asleep. The jostling of the paving stones didn't seem to bother him. Neither did the wail of an ambulance or the murmur of couples in conversation. Or the bright lights of the restaurants.

But by then, we were fascinated. There were so many young people on the street. So many fashionable shops. So many renovated houses, many with innovative and interesting designs. So many bars. So many cafes and restaurants...each with its own theme. One promised a traditional 'parrilla"...another advertised 'Italian cooking'...still another was clocked in red, promising diners an amorous encounter.

We wandered for blocks. Then we realized we were lost. No matter. We just kept walking...looking in the restaurants...studying the shoes and dresses in the shop windows... and smiling at the passers-by.

There are many cities with lively sections. Many offer interesting nightlife. But we can't recall one where the nightlife seemed so relaxed and friendly that we could walk along with an infant in a stroller and have such a good time. Maybe it's because we never tried.

Regards,

Bill Bonner
for The Daily Reckoning Australia

• Why Not Move to Buenos Aires?
• Republican Candidate’s 17-Year-Old Daughter is Pregnant
• Unexpected Visitor at the Chateau in Ouzilly
• Normally Small Businesses Lead the Economy Out of Recession
• The Rising Price of Oil Has Done Less Damage in Europe Than in America

We did some thinking yesterday, on our trip to Uruguay. Why Uruguay? We thought we should have a look around. Montevideo is a cheap place to live. It's on the sea, with beaches near the downtown area. It is an old town, with many fine buildings. It is clean. It is safe. It has history too. When the English invaded Buenos Aires, the Spaniards launched a counterattack from the fortress at Montevideo and got it back.

"It looks like a nice place," we said to our local contact. "But it seems a little like a resort town out of season; it's very quiet."

We were having dinner in the best restaurant in town, next to the opera house. The restaurant was large and well fitted out. But it was almost empty. A French group sat at one table. An American group sat at another. The only other diners were sitting with your editor. Outside on the street, it was as if everyone else had been warned of an approaching tsunami; there was no one.

"Well, it's out of season all year round," our host replied. "It's a nice place to live. But it's not very lively.

"Montevideo used to be a lot richer. You can tell that just by looking at the public buildings. They're very grand. We couldn't build those places today. We don't have the money. But during the war years, Uruguay was booming. We were leading exporters of beef and grains. We're still leading exporters...but the margins are no longer there. You can make money in farming, but not enough to get rich."

We wonder what people are going to be saying a century from now.

"Yeah, Manhattan used to have the richest real estate in America...back in the financial boom. Wall Street was the center of the financial industry. People made fortunes from high-margin financial products. But then, the financial industry went into decline...and new financial centers in Shanghai and Singapore took the business."

Could New York have already passed its peak? Perhaps not quite. The papers are reporting record bonuses on Wall Street. But the story has an undertone of desperation about it...like the wild parties in Berlin in 1945, just before the Soviet Army arrived. Maybe that's why the bonuses are so high. Get it while you can! This could be the last hurrah for the US financial industry.

Private sector credit is still contracting. In fact, it's shrinking faster than at any time in the last 35 years. And this trend is not likely to change. As we keep saying - you're probably getting tired of hearing it - the private sector has 7 to 15 years of de-leveraging to do. The financial industry will be forced to downsize, along with the economy.

Wall Street's leveraged debt bombs are still blowing up. Banks are going under. As we reported yesterday, the 'second wave' of residential mortgage defaults may be just beginning. Commercial real estate debt isn't far behind...with no Fannie Mae to help the wounded or pick up the dead.

And how about all those private equity deals Wall Street financed? Of the top 10 deals from the bubble years, 6 are in trouble...and 4 have already defaulted.

The idea of private equity was that the hotshots were so smart they could take over a company, re-organize it, restructure it, and sell it back to the public market at a higher price. What they actually did was merely to load up the company with debt - using the money to pay themselves lavish fees.

And as we know...and maybe we alone know it...debt hurts. Run up enough debt and sooner or later bad things will happen. But not necessarily to the borrower!

Right now, the dollar is at a 15-month low. The speculators borrow dollars. Then, it doesn't matter what they do with them. Everything is going up against the greenback.

But that's why our Crash Alert flag is flying. Mr. Market doesn't like it when morons make money. We wouldn't be at all surprised to see these carry trades go bad in a big, big way. All of a sudden, stocks...bonds...emerging markets...commodities...and even gold...could go down against the dollar. Watch out!

The Dow rose another 20 points yesterday. It is now only 54 points below the 50% retracement level...where the bounce of 1930 peaked out.

Gold, meanwhile, held above $1,100.

As we were saying...once in a while, we think. The last few days have been so busy, we didn't have any time to think. But, now things are settling down, so we've had a chance to put our thinking cap on.

What are we thinking about?

Well, of course, we're trying to understand the basics... George Soros had the right idea: Find the story whose premise is false...and bet against it. What premise is false?

The major premise that almost everyone believes is that government economists can improve the workings of an otherwise free economy. That leads people to believe that the feds have pulled off a save...they've now got the economy well along on the road to recovery...the recovery is getting stronger as time goes by...and soon, the feds will begin to exit from their stimulus efforts.

The big question in most investors' minds is this: how quickly will the feds exit? As long as they keep up their stimulus efforts, investors expect rising prices for everything but the dollar.

Those who think the feds will be able to exit quickly believe growth will come without too much inflation. Those who think the exit will come slowly expect higher rates of inflation.

Well, guess what? The whole premise is false. From top to bottom. From beginning to end. Even the air it breathes is tainted with the smell of fraud and self-delusion.

The theory behind the recovery concept is that government spending and stimulus from the Fed has a "multiplier" effect. That is, the feds spend...the money goes into the economy...and then, the private economy multiplies the spending by growth in consumption and investment of its own. If there were no multiplier effect the whole exercise would be a waste of time, because we know that government spending in itself is a cost to an economy, not a source of real wealth. Government spending, generally, is a drag on prosperity. The Soviet Union proved that. The question remains however, can extra government spending at critical moments "prime the pump" so that it is multiplied by the private sector?

Answer: no.

"Our new research," writes economist Robert Barro in The Wall Street Journal, "shows no evidence of a Keynesian 'multiplier' effect...the available empirical evidence does not support the idea that spending multipliers typically exceed one, and thus spending stimulus programs will likely raise the GDP by less than the increase in government spending."

Now, we turn to the current situation. Is there any evidence of growth beyond the government's own stimulus efforts? From what we can see so far, again, the answer is 'no.'

The premise of recovery/multipliers/growth/and exit is false. We want to bet against it. Tomorrow we'll talk about how.

Real economists know that there are no secrets. You work hard. You invest carefully. You save your money. That's the best you can do. There are no multipliers. There are no miracle cures. There are no easy exits from trouble.

That's why the world has little use for honest economists; they tell you what you don't want to hear. So, people turn to the phonies...the charlatans...the imposter economists who say "yes we can!"

Trouble is, they can't.

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

• Government Debt
• Keynesians Believe Governments Have to Manage Economy in Macro-Economic Way
• Why Weren’t Economists On Top of This Thing?
• Can Government Bureaucrats do a Better Job of Allocating Capital than Free Markets?
• Have the Feds Given the Economy a Miracle Drug?

Contrary to popular mythology, we Californians do not live merely on love, sunshine and granola.

I mean, sure, we've all got our yoga mats, our quartz crystals and our "life coaches" (who doesn't?), but life is just so much more than "namastes" and positive energy. Life is also about building enough windmills (somewhere else) and installing enough solar panels (somewhere else) to keep our yoga studios air-conditioned.

And, yeah, I guess we need SOME crude oil, cause our Priuses cannot ALWAYS run on electricity. So I guess its fine to use crude oil if we have to, as long as we can obtain the oil in an ecologically friendly way...like getting it from somewhere else. (OMG, remember the Santa Barbara oil spill in 1969? That was a SERIOUS bummer!)

So, yes, we Californians certainly understand that we cannot break our dependence on crude oil overnight. At least not until some "next generation" process comes along that can convert text messages into jet fuel. And even if we Californians use less crude oil, someone else is bound to use more of it...like all those reckless industrialists in the Developing World. Don't they know how bad crude oil is for the environment?

But I guess there's just no reasoning with these people. So I guess we'll just have to keep finding and pumping crude oil for a long time to come.

Hmmm... I'm not sure how easy that's going to be. When I was out recycling newspapers the other day, I saw an old headline that said crude oil is becoming much harder to find...and that oil production is falling off rapidly at many of the world's largest fields.

So I did a little research and - would you believe - it's true. Crude oil is becoming much harder to find and much more expensive to produce.

Eric Fry
for The Daily Reckoning Australia

• The Price of Oil Explained by ‘Astrology’
• Supply of Conventional Crude Oil is Very Close to its Peak
• Increased Oil Production Won’t Solve the Energy Crisis
• We Are Facing a Global Oil Crunch
• Consumer Confidence is at its Lowest Point Since 1980

It's More Than Half Full.

Ok, Bill, let's review those wonderful days from whence we sprang, so fraught with the advantages of having nothing. So potent with opportunity. It was the middle of the '70s when we started our careers. Inflation was high and rising. The Soviets were seen as a major threat. Japan was beating our brains out and buying everything, even if nailed down (like Pebble Beach and New York skyscrapers). I had to borrow money at 15% (or more) to buy paper in order to meet customer demands for printing. And guess what? The banks got into trouble and called loans willy-nilly. (My bank even called my mother and threatened her to pay my loan - against written agreements - and she did. Evil sons of bitches. The more things change... And they delightedly did fail! Not that I hold a grudge.)

There were multiple successive and deeper recessions. Gold was rising as the dollar was seen as a joke. Howard Ruff (a good friend to both of us when we were starting out!) and almost every newsletter writer were telling people to buy gold and freeze-dried food to protect themselves against a near certain economic, if not apocalyptic, catastrophe. Unemployment was high and rising for a decade.

The correct answer to the question, "Where will the jobs come from?" back then was "I don't know, but they will." And it is the correct answer today.

In 20 years, no one will want to come back to the halcyon days of 2005. Our kids (all 13 of them) are getting ready to live through what will be the most exciting period in human history. There will be a century's worth of change, measured by the standard of the 20th century, just in the next ten years, and then we will double that pace in the next ten after that. Medical miracles that will mean our kids and grandkids will live a lot longer than their dads, although I intend to be writing well into my 80s, like our mutual hero Richard Russell.

There will be whole new industries developed in the US. How do I know that? Follow the money. The rest of the world spends a fraction on research and development that we do. Where do you go if you are looking for venture capital?

Do I care if the Chinese and the "developing" worlds are far better off, relatively speaking, than the US in 20 years? Not a whit. Good on them. I hope they make discoveries and inventions and new businesses that benefit us all. But we are not going into some long dark night. We, and our kids, get to choose how we respond to what is the reality of the day.

Our nation had to almost hit the wall in 1980 before a Volker could come along and force us to take the pain of recessions to beat back inflation. And we will have to come perilously close to the wall this time before we take action as a nation. Way to close for comfort. Maybe you are right, and we have a soft depression. I hope not, but even so, the world will be better, far better, in 20 years, with far more opportunities than today.

It was not fun starting new businesses in the '70s and early '80s. But we did. I remember coming to Baltimore and being (literally) afraid to get out of the car to visit your offices in the slums. But that was what you could afford. A far cry from the chateau in Ouzilly.

I lived in a small mobile home. Tiffani was born there, and we converted part of the kitchen to be her bedroom. (Yes, I was white "trailer trash.") But I got up every morning just like you did and killed as many alligators as I could. The rest had to wait till the next day.

And that is the legacy our kids have. They know what it is to wade into the swamp every morning. Never quitting. In thinking about this, you may be the father I respect the most. You have raised your kids to be multi-lingual children of the world. What a work ethic. How did you get them to scrape window shutters at your chateaus? (I actually saw this, and my kids marveled.

Thereafter I threatened to make them go live with you when they did not act right!)

You have given your kids the opportunity to follow their dreams, even demanded that they do so. And such dreams they (and mine) have. Will they succeed? Who knows? But they will go at it with gusto, in a world with more opportunities than you and I ever imagined 40 years ago. And, oh boy, were we optimists back then. How else could we have done what we did? If we believed the rhetoric that the world was coming to an end, would we have dared to venture out?

You cannot have raised your kids to be such bold adventurers without instilling in them a certain high level of optimism. I am going to out you, Mr. Bonner. You present yourself to your readers as a bona fide end of the world pessimist. But you are a really and truly a closet optimist. Your whole business empire (and what an empire it has become!) is based on finding people who are optimists, in the sense that they think they can actually get people to send them money for what they write. Which they do! Even if it is to read why the world will come to an end, which it thankfully never does.

You are right in this: it is personal gumption that makes or breaks us. There are those who started out with less than we did (hard to imagine but true) and made a lot more. And there are those who started out with far more and made less. But there are very few who are happier than either of us. Or luckier.

Our kids? It is not the times which dictate the man (or daughter!), but the response of the man which dictates his own time. Today has a brighter future for someone young than any other time in history, whether they are in the US or Brazil or China. They just have to seize it.

And as our kids do just that, and as the millions of kids of those who read us do so, and the billions of kids who are just now getting ready to bust loose all work to achieve their dreams, the world is going to be a far more fantastic place. Smooth ride? Not a chance. We didn't get one, and in thinking through history, there have not been many smooth rides. Why should we think we will get any better? Our kids will just have to live with our generational (and individual) iniquities, government debt and all, and figure out how to master their own fates. But if I had a choice to take the '70s or today? In less than a heart's beat I choose today. And I bet you would too!

Regards,

Bill Bonner and John Mauldin
for The Daily Reckoning Australia

• Baby Boomers Figure They Will Have to Work Longer than Expected
• Children Growing Up in a Different World
• Baby Boomers Are Ill-Prepared for Retirement
• Rare Coins as an Informal Way of Estate Planning
• Jules Begins His Last Year of School in Boston

There were hundreds of them...different shapes...different sizes. A businessman in a pin-striped suit, briefcase in hand, concentrating on his sales report; he almost stepped in front of a motorcycle. A salesgirl, grotesquely overweight...yellow hair streaked with brown...wishing she hadn't had so much to drink the night before. A lawyer daydreaming about his secretary. A man who would have rather been fishing...still in his waxed coat. A woman annoyed about something. A heavy construction worker, his legs splayed outward as he walked. A tense young woman who dared not look up. A woman worrying about her son. A man thinking about buying a new car. One man trying to remember a line from a song he learned 30 years ago. Another talking to herself. One looked like a doctor taking an afternoon stroll. Another was stark raving mad.

All of them walking along...from one place to another...shuffling along...the living towards the dead.

We were thinking of our children. What a different world they grow up in. And yet, it is still the same too. A man might have been stuck on a London street 50 years ago...and hundreds of years ago he might have watched the same shopkeepers and carpenters walk by, each caught in his own thoughts like a fly in a spider's web.

Our old friend John Mauldin wrote to say that his mother's experience was not much different than ours. She joined the WACs during the war...met John's father...and then nature took her course.

But both John and your editor had a big advantage in life. We both caught the upswing.

Not so with our children. They inherit a different world. America was the world's leading nation in the '50s and '60s. And it was growing in power and wealth - rapidly. We grew up with it. Things were getting better and better...we were sure we'd live much grander, richer, and more exciting lives than our parents. The sky was always the limit!

Now, America is in decline. China's economy grows while hers declines. The Far East has savings, while she has none. The Asia nations are net exporters, making huge profits...while American industries are judged too old, too expensive, and too highly regulated to compete. Americans have debt up the kazoo, while their competitors have little. A young person in America has to look forward to supporting 70 million retired baby boomers...and paying for their drugs, their food, their wars, and their bailouts.

For our children - ours and John's - the situation on a personal level is different too. Coming from poor families, we could look forward to much more wealth and material success than our parents ever knew.

We came back to Ireland this week for a reason that our parents would never have dreamed of. Your editor has set up a family office. It is a very modest affair by family office standards. The typical family office manages a fortune of $100 million, according to The New York Times. We may not even be on the same planet with these rich families; but we are in the same universe. That is, we try to think about...and manage...our wealth as rich people do...as a family legacy or an endowment, not as a retirement fund.

What wealth we have accumulated - even if it is paltry - will be held by a family-owned corporation. Then, the corporation, run largely by the adult children, manages the assets - from our base in Ireland.

Your editor, freed from the responsibility of managing his own money will be free to wander and think...like a vagabond, a gypsy, a refugee, an itinerant mendicant...forced to sup on whatever is at hand and take lodging wherever he can find it - but favoring the Four Seasons and Chateau Margot when they are available.

Whatever else this does, it puts the children in a very different situation from their parents. Instead of starting out with nothing, they're starting out with something. While this would seem to be a big advantage to them, it has huge hidden disadvantages. Like America itself, they are in danger of finding themselves slipping downhill. Instead of expecting things to get better, they may find it hard even to hold onto what they've got. Instead of the "Morning in America" that Ronald Reagan promised, they may find that it seems more like evening, both in their personal as well as their national lives.

"From shirtsleeves to shirtsleeves in three generations," say the French. The grandfather begins without a coat. His grandson ends that way.

But what to do? Spend it all now...so the children begin with the same clean slate we had? Move to Brazil or India - countries with more obvious upside?

In the deep, cosmic end, it probably doesn't matter. The advantage to starting out on an upper rung of the ladder may be about equal to the disadvantage of having to worry about falling off. Who can know?

Every man has to play the cards he's been dealt. What else can he do? He may have a humpback or a beautiful voice. He may have had a hard upbringing or a soft head. He may have a fortune worth of poetry in his soul but not dime in his pocket. As far as we can tell, every young man starts out even. Each one begins life in the same place - where he is. And every generation takes what it is given, and makes the best of it.

The real advantage in life is having the gumption to get on with it; no one knows where that comes from.

Until next time,

Bill Bonner
for The Daily Reckoning Australia

• The Family Office
• All You Need is Love… and Work
• Dinner in White
• Life is a Long Hike
• Global Warming and the Children of Israel

"House prices here in Ireland are still too high," judged our man on the scene. Chris is our main man at the family office - where our own family money is managed.

"Everything is still much too expensive to buy. The prices don't really make sense when you compare them to the rents. I found a beautiful cottage, with direct access to the beach. It's lovely. It has whitewashed stone on the outside with a real thatched roof. On the inside, it has been completely renovated and modernized, but in very good style. Three bedrooms. Idyllic setting. Just what I was looking for.

"If that house were put on the market, the asking price would probably be about 400,000 euros. But I can rent the place for only 700 a month. It's crazy. Prices probably have a lot further to fall."

Until next time,

Bill Bonner
for The Daily Reckoning Australia

• A Nice House With No Mortgage
• The Kitchen is the Place to Be
• Obama Plans to Do Away With Ireland’s Tax Advantage
• The Bonner Family Are Taking a Month Off to Paint Window Shutters
• A Great Place for a House in Southern Maryland

"...if you want to stay with us you're going to have to straighten up ..[mother has a bad case of osteoporosis]...

"...no more drinking late at night. No more parties 'til 3 in the morning... No more sticking us with your gambling debts..."

"Oh...okay...but is it alright if I just sit in the corner and do my crossword puzzles?"

"Well, I guess so... Just don't ask us for anymore 8-letter words that mean 'a lot.' It's plethora. It's always plethora."

We made it very clear - she better mind her Ps and Qs or she's out on the street!

"But you're being very silly...as usual. I remember the real depression. I was born in 1921. So, I was 8 years old during the crash of '29. Then, I was a teenager throughout the depression.

"It wasn't anything like what is going on now...I remember my father was director of a local bank in Baltimore. My mother was ill, so he didn't want to trouble her, I guess. And I was so young I really didn't know what was going on. Then, one day Aunt Sophie sent a note with a news clipping, saying she was so sorry to hear about what had happened. I read the news. The bank had failed. My father had all his savings in the bank. When rumors began that the bank was going to fail, he felt couldn't pull his money out, because he was one of the directors. I guess you would say he went down with the ship. But he never even mentioned it. Even after we all knew, he acted as though nothing had happened.

"Then, he was too old to start over. All we had was the little farm. And we only had that because it belonged to mother. She was still ill. So I went down to the farm with her to take care of her while my father continued to work in the city. Then, he retired completely and came down too.

"I liked the house. You know...where you were born. But it didn't have heat, or electricity or plumbing. It was just an old farmhouse that had never been modernized. And then, in the depression, we didn't have the money to do anything to it. So, we just lived there as it was. It seems strange now. But then, a lot of people lived like that. We got water from a spring. We used oil lamps. In the winter, we had to start a fire to melt the ice water before we could take a bath.

"But by then the war had started. I remember sitting in the parlor listening to our old radio when President Roosevelt told us about the bombings at Pearl Harbor. I must have been in my early 20s. My father was home then and he told me that it wasn't a good idea for me to stay at home...I was too isolated. He suggested I join the WAC - the Women's Army Corps.

"Of course, that changed everything. I had never been away from home. And the next thing I knew I was on a train for Texas. That's where I met your father. He had just come from Pearl Harbor where he was stationed when the Japanese attacked. We met at a New Year's party. We wanted to get married right away...because he was leaving for the South Pacific...but I couldn't get married in Lent. So, we waited until after Easter."

Until tomorrow,

Bill Bonner
for The Daily Reckoning Australia

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"Yes, we just built it ourselves. You know, nowadays you can't do this. You certainly can't do this in England. I'm sure you can't do it in America either. But we just didn't say anything about. And we did it all ourselves so not many people knew about it."

The house was hidden from the road by a dense hedge.

"And cheap? The whole house barely cost anything. We got a few truck loads of stone delivered. Then, I just bought mortar - one bag at a time - as I needed it. We recycled the floor tile. And the roof tile too. And we made the wood beams ourselves. We just cut down a couple trees and then cut them to the sizes we wanted. It took a little time. But we just did it on weekends and vacations. One of my nephews came to help too. It was fun.

"The only things that really cost money were the roof tiles, which we had to buy...and the doors and windows, which we had made by a local woodworker. Everything else was very cheap or we found it or recycled it ourselves. So, in the end, we have a nice house with no mortgage."

Bill Bonner
for The Daily Reckoning Australia

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