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The Daily Reckoning Tuesday, January 5, 2010 The Battle of the Lost Decades: Japan 2, USA 1...so far, Depressions and downturns as the mothers of all inventors, Plus, Bill Bonner on more Fed folly and his brand new pickup truck... Eric Fry, reporting from Laguna Beach, California... In today's edition of The Daily Reckoning, we turn our attention to the "Decade of No Returns" - aka, the "Lost Decade." Students of recent financial history may recall that our friends over in Japan have already logged a couple of "lost" decades. Japanese workers still punch time clocks every day, but the national economy barely seems to notice. Meanwhile, the Nikkei Index has surrendered 73% of its value during the last twenty years. Here in the States, things are a little bit better. We've only lost ONE decade so far... The S&P 500 Index posted a total return of MINUS 9% during the first ten years of the new millennium. And THAT was the "strong" index. The NASDAQ Composite tumbled 40% during the same 10-year span. Stocks are not exactly synonymous with economic vitality, of course. And we know that US GDP increased during the decade. So maybe the US economy isn't as lost as the stock market suggests. But based on the nearby chart, the economy looks so disoriented that no GPS device on the planet could lead it back to the path of productivity. In terms of job creation, the last 10 years were a complete bust. Despite an abysmal 10-years of zero wealth creation and zero job growth, betting on a second consecutive Lost Decade seems like a bad wager. And yet, it happened in Japan... But let's not dwell on the negatives so early in this promising New Year. Instead, let's consider the potential positives - the upside of the downside. According to Patrick Cox, editor of The Breakthrough Technology Alert, adversity truly is the mother of invention: "Historically, downturns have been enormously creative times technologically. Our current economic mess will be no exception. Economic pressures are forcing reassessments and hard, creative choices. The result will be an explosion of breakthrough technologies... "In the early 1400s, German goldsmith Johannes Gutenberg invented the movable-type printing press. This invention did far more than facilitate book production and increase the availability of knowledge. It started an information technology (IT) revolution that continues to accelerate even today. "In Gutenberg's era, his advances in lithography not only increased access to the world's greatest thinkers, they also put practical business and technical knowledge in the hands of commoners. This seemingly insignificant invention smashed monopolies of thought and political power. The result was exponential growth in science, technology and democratic ideals. The Renaissance and the Enlightenment followed, on up to our present era. "We've already seen a series of printed circuit lithography technologies revolutionize the electronics industry. Every electronic device you own - from your television to your mobile phone - contains a lithographically printed circuit board of one form or another. Like many of the transformational technologies of the last century, it was invented during the Great Depression. The timing was not a fluke." So which breakthrough technologies will rise from the ashes? Check out Patrick's latest free investment report: 6 Events in 2010 Could Reshape Your Future --- The Breakthrough Technology Report Introduces... --- 6 Events in 2010 That Will Reshape The Future, and Deliver Unending Wealth To You Many years from now, your family could remember your swift action today as the start of their unending wealth. Find out how the first 2010 event, scheduled for Feb. 5, can begin your unending wealth. All the details here... --------------------------------------------------------------- And here’s Bill Bonner, with today’s reckoning from Agora Financial’s H.Q. in Baltimore, Maryland... "It's amazing...I love it!" Elizabeth is rediscovering life in the USA. After 15 years, most of it in Paris, we are now living in the suburbs of Washington, DC...more below... First, the financial goings-on. How was the first day of 2010? Well, most commentators would say it was a good day. The Dow rose 155 points. Oil closed over $81. The dollar fell. And gold shot up $22. Is that a good day, or what? 'Or what' is probably the best answer. Stocks rose. But are they forecasting a booming economy? Or more EZ money from the feds? Are they signaling the end of the slump? Or, no end to the feds' rescue efforts? Here at The Daily Reckoning, we will stick with our view. We're in a depression. It won't end until it has done its work. And, with the feds trying to block it, prevent it, hold it off, deflect it and retard it, it could take years before this depression has finished its job. Martin Feldstein, an expert on business cycles: "The recession isn't over." In a Bloomberg Radio interview on December 17th. David Rosenberg explains that 90% of the 'growth' in the third quarter came from stimulus measures. And that still only produced a 2.2% annualized GDP increase, far below the rates typical at the end of a recession. "What is normal is that the first quarter of post-recession growth is that real GDP expands at a 7.3% annual rate; 2.2% is really nothing to get excited about - it's actually quite worrisome. "Never in recorded history has growth coming out of a string of declines been as weak as what we just witnessed. Considering all the government efforts to usher in a V-shaped recovery, what we saw unfold in the real economy in Q3 - admittedly quite divorced from the action in financial markets - was, in a word, sad." What is happening? How come so much government 'stimulus' produces so little real stimulation? Well, because an economy is so heavy...you can only push it downhill! Monetary stimulus only works when it pushes the economy in the direction it wants to go. When people want to buy, you can make them buy more by giving them more credit. But when they don't want to buy, extra credit doesn't help. Extra credit is what people don't want. Offering them more of it doesn't make it more attractive. But government spending on the other hand - fiscal stimulus - is a more effective imposter. People see the feds spending money and they mistake it for genuine, economic activity. The government hires people. The government spends money. It looks just like the real thing! Heck, it's better than the real thing. Because the feds pay better. And they don't have to worry about showing a profit either; the whole idea is to lose money...that's what fiscal stimulus is all about. Want a fiscal stimulus program? It's easy. Replace honest business activity with phony federal make-work. And replace honest workers with parasites! Our friend Marc Faber writes that Congress has just voted the biggest health care initiative of all time - forcing everyone in the nation to participate, except Congress itself. The parasites have a better plan, naturally. The number of federal employees making big money is growing fast. In the Defense Department, for example, "civilian employees earning US $150,000 or more increased from 1,868 in December 2007 to 10,100 in June 2009, the most recent figure available..." writes Marc. Marc sees the US rapidly becoming a banana republic, in which elites use positions of influence to feather their own nests. Federal employees, lobbyists, politicians, government contractors, favored groups - all of them connive to strip assets from the public and use them to cushion their own fat derrieres. Typically, the banana republics have nice weather and bad money. They borrow too much...run their printing presses when they get in a jamb...and then go broke. The world turns, doesn't it? While the US slips into banana-ism, the world's biggest banana republic, Brazil, is booming. It has the number one position for stock markets in 2009 - up 145%. The US is fast becoming the worst kind of banana republic...one with ice storms and no bananas. And more thoughts... "You can buy practically anything at practically any time of the day or night. In France, shopping can be a major effort. The salespeople have no interest in selling you things. The stores aren't open. And they don't have what you want. "But I just got back from Tyson's Corner. Look at this...I bought a television screen for $99. And a printer for the computer. And a whole set of sheets and towels. Everything is made in China or Vietnam, of course. But you can buy anything you need at that mall. Anything. I went into one store and there were 4 clerks waiting to help me. In France, you never find a clerk...and when you do they don't want to help you. These guys kept asking how they could help me. And then I went to Fresh Foods. First, it is amazing how much they have...the variety of things...and all of it looks so good... And then, when you go to check out, they have people who pack your bags for you...and take them to your car. "It really is wonderful." This morning, we hitched a ride into town with our daughter. Then, we needed to buy a vehicle to get home. We could live perfectly happily in Paris without a car, but you have to have wheels if you're going to live in the suburbs. Not wanting to spend time looking, we asked an assistant to call around, find the best deal on a Ford F-150 pickup and buy it. "I just don't have much time," we told her. "So try to make it as smooth as possible..." She set to work at 10AM. At 3:25PM a young man appeared in our office with car keys in his hand. "Mr. Bonner? Here are the keys to your new truck." Sure enough, he was the low bidder. He got the sale and brought the truck to our door. Silver, with a bench behind the driver's seat. A full bed. Perfect for farm work on the weekends...and for Elizabeth to pull her horse van. "Thanks for your business," he continued. "It's hard to find any customer these days. Business is very slow. At least, that's how it looks to me. A customer with a check in his hands is a real pleasure. Here's my home number. You call me if you have any questions or problems. Oh...and I filled it up with gas for you." What a great country! It's probably easier to part with cash in the USA than any nation in the world. Regards, Bill Bonner for The Daily Reckoning --------------------------------------------------------------- Joel's Note: As "long suffering" readers (as Bill likes to call them) will already have noticed, we're trying a few new things here at the DR. If the new things closely resemble the old things, that's because most of the old things worked very well. So, at this stage, the changes are mostly of a cosmetic nature, meaning we're just playing around with the format a little to try and identify a presentation that best delivers the message you've come to expect from us. We are, however, also working on a couple of exciting new projects that we expect to launch over the coming weeks and months. You'll probably notice too a few changes to the graphic outlay of the mailing as our web guys test a couple of their new programs and tech-tools. So, if you see a bit of tweaking and jigging going on behind the scenes in the days ahead, don't be alarmed. Nothing fundamental is changing and, if these projects work out the way we hope they will, you could even end up with a couple if additional (gratis) research tools to help you navigate your way through the markets. As always, your thoughts on all things DR-related are most welcomed. Until next time... Cheers, Joel Bowman Managing Editor for The Daily Reckoning joel@dailyreckoning.com   The Daily Reckoning - Special Reports: The US Trade Deficit: Fort Sumter...And The U.S. Trade Deficit US Recession: By far the Weakest Recovery "THE GREAT AMERICAN RECOVERY RP-OFF" Brace yourself for what's about to go down as the BIGGEST FINANCIAL SWINDLE in world history.