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The Weekend Edition - May 16-17, 2009 Bill Bonner on the overstretched American empire... Dan Amoss on the truth behind the bank stress tests... Chuck Butler on green shoots that are not so green... Mogambo Guru with a sobering look at gold investing... Bill Bonner on capitalism at work...and more! The Daily Reckoning's Highlight of the Week Baltimore, Maryland It was a busy week here in The Daily Reckoning's HQ, where we were implementing a wide variety of new features on the website. We're now publishing about five posts a day on our website in addition to the two daily articles we run in the e-letter. So, if you haven't already, make sure to check out all the new content on our site. Or, perhaps the easiest way to follow our new posts is through Twitter, where we can keep you informed - throughout the day and at no cost to you - when new thoughts are posted online...so please, follow us here. In addition to our regular features from characters you'll recognize like the Mogambo Guru and Chuck Butler, two of our principal new content partners include Addison Wiggin's The 5 Min. Forecast and Eric Fry's Rude Awakening. They publish tremendously insightful content usually only available to subscribers to Agora Financial's paid publications, but that we're now making available to readers of The Daily Reckoning. With all of the new content we're publishing it's become more difficult than we expected to pick a Highlight of the Week. Even so Bill Bonner hit a note that rang especially true in discussing the challenges that face the overstretched American empire. Here is a brief passage so you can understand its selection... Yes, Dear Reader, the 'great man' always seems to come along when you need him. Longtime Daily Reckoning readers will recall our theory: After the Berlin Wall came down... America had no enemies worthy of the name. She had a monopoly franchise on the world's money - the dollar was the undisputed queen of the planet's reserves. And she had a monopoly on military power too - the undisputed king of the hill, with a Pentagon budget nearly as large as all other nations' military spending put together. But nature abhors a vacuum and detests a monopoly. Lacking a suitable challenger, America had to become her own worst enemy. Lacking a rival who could destroy her, she had to destroy herself. And so, when Americans went to the polls in November of 2000, they elected a president who was up to the job: George W. Bush. Eight years later, the Clinton surpluses had turned into the biggest deficits ever...an immense bubble had impoverished the middle class...and the country was engaged in two unwinnable, unnecessary, and hugely expensive wars. Mission accomplished! But it's not over. The millstones of history may grind slowly...but they grind exceedingly fine... The American empire is clearly overstretched and over-indebted. If it is to save itself, it should scale back immediately...cutting the Pentagon budget in half, for example, and eliminating all unnecessary expenses (which is most of them). Instead of spending $3 trillion, it should spend...say...$1 trillion, and run a surplus. What about the depression, you might be wondering. Isn't this the time to increase government spending, rather than decrease it? Ah...if you are even asking the question, you are the victim of a dead economist. Keynes' theory was that the state should run contra-cyclical surpluses and deficits - to offset the ups and downs of the business cycle. But that is too soggy a bog for us to trod in today. Instead, we will skirt it with another of our dicta: People come to believe what they must believe when they must believe it. When an empire is new and fresh and growing...people believe in saving, hard work, and small frugality. When an empire is old and decaying...they think the government should spend "whatever it takes" to take care of them. This attitude helps destroy the empire...thus making room for the next one... So, if you missed this article...or now realize that you'd like to read it again...you can find it on the website here. Keep reading below for some additional standouts... ALSO THIS WEEK in The Daily Reckoning: We had an all-star line-up of essays this past week... Former buy-side analyst Dan Amoss, your regular dose of contributions from the Mogambo Guru and Chuck Butler, and of course fresh thoughts from Bill Bonner... The Truth Behind the Bank Stress Tests By Dan Amoss Jacobus, Pennsylvania "We have probably not seen the end of the stress test process," forecasts short side analyst Dan Amoss. "The market's reaction to the stress test - in the form of soaring bank stocks - tells me that the consensus is treating this stress test as if it has the ability to magically predict yearend 2010 capital levels with pinpoint accuracy." GM and US Both Going Broke By Bill Bonner London, England Even by the official estimates, the US government is spending $2 for every dollar it brings in. Even GM doesn't operate that recklessly. GM loses money on every car it makes...but the loss is nowhere near 50% of sales. What's going on? How come the world's biggest, most successful company...and its biggest, most successful country...are both skidding out of control? Green Shoots, Not So Green By Chuck Butler Las Vegas, Nevada Another day here in Sin City... This city is packed with people, everywhere we go, it's simply amazing... There's been no sign of a recession here... Of course, if you got out of the casinos, and shows, you would see some of the greatest devastation anywhere in the housing market here. A Sobering Look at Gold Investing By The Mogambo Guru Tampa Bay, Florida Well, GoldForecaster.com reported the interesting news that "With a hefty increase in long positions of nearly 28 tonnes and the trimming of some short positions, COMEX turned around again and went long last week.' This means that although the gold exchange is full of lying, thieving, corrupt bastards, they are not stupid! They are buying gold! These are the insiders! Capitalism at Work By Bill Bonner London, England Partly for the benefit of new readers, we were trying to explain "The World According to The Daily Reckoning." In this article, we continue our explanation - partly to bring new Dear Readers into the picture...and partly to remind ourselves what the hell we're talking about. ----------------------------------------- One last point: if you haven't already, make sure you sign up the 2009 Agora Financial Investment Symposium in Vancouver, Canada. The conference is rapidly approaching, and officially marks the 10th anniversary of The Daily Reckoning! Join us in July as we gather to celebrate a full "Decade of Reckoning." You'll have the chance to meet all your favorite writers and speakers over the course of four days that will uncover for you the profit opportunities of the next ten years. This event will surely sell out...so secure your spot ASAP. Call Opportunity Travel at (800) 926-6575 to make your arrangements or click here for all the info... The Agora Financial Investment Symposium: July 21-24 Best, Rocky Vega The Daily Reckoning