-->The Daily Reckoning

Ouzilly, France

Friday, 26 December 2003

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*** No easy 'Way Out'... or is there?

*** What an elegant solution... stick it to the
foreigners...

*** A visit to the doctor...

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The rest of the world somehow knows.

They know it is all a fraud. The recovery....the consumer
economy... the Bubble Reloaded... something tells them that
it is not going to turn out the way people think.

And so, day after day, they sell the dollar. Every U.S.
company... and every U.S. asset... every paycheck... and every
bottle of booze is calibrated in dollars. Selling the
dollar takes them all down a notch. And people scarcely
notice. At least, not at first.

The dollar is the 'Way Out' for everyone - or so it
appears.

President Bush could do the honest and honorable thing. He
could go on national TV and explain to voters that the
nation is spending more than it can afford."We're all
going to have to cut back," he could say."And we're
setting the example here in Washington by cutting Federal
spending by 15% next year...

"Plus, I'm sorry to have to tell you this, but we're going
to have to raise taxes, too. Otherwise, we're just getting
ourselves further into a hole that our children and
grandchildren will have to deal with."

You have not yet heard George W. Bush say such a thing?

Well, have you heard Alan Greenspan tell Congress that he
has"reluctantly decided to raise interest rates in order
to reduce consumer spending, lower debt levels, and protect
the dollar?" You haven't?

No, and you're not likely to. Voters want lies, not the
truth. They want to believe that they can continue to
borrow, spend, and eat all they want without any ill
effects. They know they cannot eat all they want; they see
the results for themselves. But economics is confusing. If
Alan Greenspan says the economy is in great shape, who are
we to argue with him? If George W. Bush says the nation is
better off with a $500 billion deficit, how could we know
any better?

Bush supporters point out that the extra spending was made
necessary by the War on Terror. But more than half the
additional slop has gone directly into the usual domestic
trough.

The president must know as well as everyone else that
someone, somewhere, somehow will have to make up these
deficits. Just so long as it's not his problem, now! And
Alan Greenspan knows perfectly well that someday this whole
consumer debt/paper money economy will blow sky high. He
just wants to be sure it's not while he's on the job... or
not in any way that people notice.

The charming thing about the dollar is that it can
fall... and the voters don't seem to mind. In fact, they
rather like it. For while all America's assets have dollar
signs in front of them... so do America's debts. A 50%
decline in the greenback, for example, wipes out more than
$4 trillion worth of foreigners' claims on U.S.
assets... while Americans think they are still whole!

Voilà! There goes a big slice of America's debt
problem... stuffed down the gullet of foreigners. What an
elegant solution! What a delightful outcome! The foreigners
don't vote. They can't even complain - for it's clearly
their own damned fault. Fed governor Ben Bernanke said
right out loud that we would destroy the dollar rather than
allow the consumer economy to slow down. We reported it
right here in the Daily Reckoning. Weren't they paying
attention?

But wait. Is it really that simple? That easy? The
foreigners are wising up already. Day by day, the value of
everything American goes down - its houses, its stocks and
bonds, its hourly earnings and dividends. How can Americans
continue living in the style to which they have become
accustomed? Without foreign lending... where will they get
the money? Where will the federal government get the
wherewithal to continue squandering cash at the present
rate? How will consumers go further into debt when no one
will lend them money? What will the consumer's house be
worth when neither he nor many of his neighbors can afford
to make the monthly payments?"

We cannot wait to turn the page and find out.

All the markets of Christendom were closed yesterday in
celebration of the birth of the Prince of Peace... but here
at Ouzilly, there's nothing much to report. Your editor is
still suffering from some ailment, which he believes is a
form of pneumonia. He cuts this letter a little short so he
can go over to visit the local doctor...

.."Wow," he says 20 minutes later."That was such a
pleasant health care experience, I think I'll get sick more
often."

In the space of 20 minutes, your editor drove into the
village, appeared before the doctor, was examined and
prescribed... walked next door to the pharmacy... got 4
different medicines... then stopped at the bakery on the way
out of town to get bread... and returned home. He waited
nowhere. And the whole thing cost less than 50 euros -
including the bread.

Doctor Resner looked like he had just come in from treating
a cow. He was dressed in a sweatshirt and chewing gum. It
was hard to believe he was a doctor at all. But there on
his wall was a certificate to prove that he was at least a
graduate of the Poitiers medical school.

Nor were there any clerks, assistants, nurses or other
professionals in attendance. The man was on his own and
ready for lunch.

"What's the matter," he wanted to know. We explained that
we thought we had a touch of pneumonia. He wasted no time
asking about medical history, drugs, health problems,
insurance or anything else. Instead, he got right down to
business:

"Ah, no problem. Let's have a look at you."

We sat down on the examining table in a his dingy,
depressing office. The table was just like those you see in
America, with the paper rolled out on top, except for one
detail... the paper looked as though it hadn't been changed
in weeks. It was creased, wrinkled and not particularly
clean.

He listened our lungs... then checked our blood pressure.
Finding nothing of interest, he went immediately to his
desk and wrote out a prescription.

"How much do I owe you?"

"Twenty-euros..."

We gave him 2 10-euro notes, said 'merci' and left.

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The Daily Reckoning PRESENTS: A Boxing Day DR Classique,
first published three years ago today.


A CHRISTMAS LETTER
By Bill Bonner

We enjoyed a very quiet, and unseasonably warm, Christmas
here in Poitou. The festivities began with a party for the
English speakers in the area. We invited the five or six
families we know - English, South African, Scottish - and,
of course, our own American bunch. Among them was a doctor
and her husband... and a farmer whose wife is named Looney.
I am not making this up - just reporting it to you. Looney
is an avid horsewoman, like my wife, Elizabeth. Eventually,
every serious rider is kicked in the head, trampled, or
thrown from his horse onto his head. So, I assume that the
name is descriptive... or perhaps predictive.

Kurt, meanwhile, does underwater construction work. It is a
difficult career, but he seems to enjoy it. He is leaving
today for 6 weeks in Iraq - where I presume he is working
on oil equipment. Richard manages a local Bed-and-
Breakfast, frequented by English tourists. And Kim is
restoring a château in an even more remote little hamlet.

Of course, there is no reason why you should be interested
in our Christmas - especially since nothing out of the
ordinary happened. But the Daily Reckoning is a free
service, and I feel entitled to bore you from time to time.
Plus, it is the day after Christmas and I am not ready to
address trivial matters.

The purpose of our get-together at the house was to sing
Christmas carols in English. Caroling has been a family
tradition for many years - it is something we miss out here
in the French countryside.

The tradition began in Baltimore more than 15 years ago. We
lived in a formerly Jewish neighborhood of elegant houses
built in the last century. But the Jews had moved out... all
that is left is the synagogue on Eutaw Street - which is
still in use. By the time we arrived, in the mid-80s, it
looked as though the area might be ready for an urban
renaissance. So we bought a house for $27,000 - and joined
a small group of white homesteaders in a predominately
black ghetto.

It was an uphill battle, and ultimately, a complete defeat
for the forces of gentrification. But it had its comic
moments. Among them was our futile attempt to bring
American bourgeois culture to the ghetto. One effort was
the annual caroling - in which a little band of earnest
homeowners would parade up and down the inner city
sidewalks singing Christmas carols.

The spectacle was almost as foreign and absurd to the local
drug dealers and welfare addicts as if aliens had landed in
front of the corner liquor store. But at least one woman
tried to make sense of it:

"What's this?" she asked the carolers, rolling one white
tradition in with another,"Chantikah?"

After giving up on the city, we moved out to the country,
near Annapolis. There, our caroling took on a new
dimension. Along with other members of the church group, we
would drive around to `shut-ins.' It was fun for the
carolers, but the shut-ins were - in some cases - so
tightly shut-in, and deaf to boot, that they didn't hear a
note or a word... and actually slept right through the whole
show while we shivered in their front yards.

But here we were on this Christmas Eve, drawn up around the
fire... a small outpost of Anglo-Saxon Christendom in remote
Poitou.

Elizabeth had made fruitcake, cookies and homemade eggnog -
to which we added rum or whiskey depending upon our tastes.
The eggnog was so frothy that by the time we began singing,
we all had traces of white mustaches. Now, it turned out
that while we all knew the same carols, the English had
different melodies. That is the way with the English... they
can never quite get in tune with the rest of the English-
speaking world. But it didn't seem to matter anyway. After
a few rounds of eggnog, we were surprised at how good we
sounded.

The party ended in the early evening. But there was more
singing ahead. Elizabeth, Maria and I rushed over to the
church - where we had been welcomed into the choir in the
spirit with which a fat girl might be invited to enter a
beauty pageant... it is always nice to have someone around
to whom you can feel superior.

The little church at Bourg Archambault was packed on
Christmas eve. We were late getting there, but fortunately
Pierre had saved a seat for me and had begun to worry that
I wouldn't show up. We are the only two basso profundo
voices in the choir. We don't sing very well, but when we
feel sure of ourselves we really belt it out and chuckle to
ourselves after the fact. But we drown out the rest of the
choir on these occasions... and Pierre's two daughters -
Anne Sophie and Elisabeth - turn around and frown at us. My
own daughter, meanwhile, took a seat on the other side of
the church. At 14, she fears embarrassment more than death.
And I'm afraid I give her plenty of cause for
mortification.

But Anne Sophie and Elisabeth are both in their early 20s -
and beautifully turned out. Pierre seems to find it a
pleasure to catch their eyes, as I do - even if it is to
draw a look of disapproval.

Then, after church - at about 11pm - we returned home and
gathered around the fire again, partly for intimacy... but
largely just for heat. The fireplace is the only source of
heat out in that wing of the of the house. The children
were soon sent off to bed so that Mr. And Mrs. Santa could
fill the stockings hung by the chimney with care... and
finish wrapping a few presents. Actually, Mrs. Santa did
the work... while Mr. Santa helped himself to what remained
of the eggnog and put on a CD of holiday music.

And so, our Christmas eve came to a close much as it
began... with carols. I dozed in my chair in front of the
fire... perhaps dreaming of the Depression of 2001... as
Tammy Wynnette sang `Silent Night'.


In the holiday spirit,

Bill Bonner