Great Corrections

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Yesterday when the markets closed the price of oil was only 66 cents shy of $100. What a come back. We expected oil, stocks and gold to sink down deep…and not come back for a long time. So far, we’re wrong about that. People are still sending money to Wall Street to buy stocks and gold.

Where is all this money mail coming from? We don’t know exactly, but there are foreign stamps on many of the envelopes. Foreign stock markets are down. Many of the leading foreign bonds are down too. Investors look at Italy; they see Vesuvius. They look at France; they see Dunkirk. They look India; they see a Black Hole.

Investors are afraid. They look to the USA for safety.

But oil? Hmmm… We don’t know the cause, but we have a pretty clear idea of the consequence. High oil prices make it harder for oil- dependent US households to make ends meet…thereby reinforcing the slump in consumer spending.

Yes, the Great Correction proceeds. Low levels of consumer spending, high unemployment, with periodic bankruptcies, blow-ups and financial crises.

And what else do we see ahead?

…falling real estate prices…they could go down another 30%, or so

…the sell-off in the stock market (hasn’t happened yet)

…more zombification of the economy, with greater “investment” in unproductive industries — health care, education, and war

…more resentment towards the rich…tax increases…revolution…and repression…

…growing corruption as people become more cynical… “Get it while you can,” they will say.

Regards,

Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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