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The Daily Reckoning | Friday, February 10, 2011 Greek turmoil abounds...markets react “accordingly”... All the beauty of a Malibu beach house, for a fraction of the price... Plus, Bill Bonner on the lion’s share of jobs in winter, and plenty more... ------------------------------------------------------ Wait until you see what could happen in America as early as this MAY... An unbelievable phenomenon is set to sweep the nation as early as this May... The railroad age... the steel age... the electronics age... the technology age — this phenomenon triggered them all. And now it’s taking shape again! Watch this special, time-sensitive presentation now for full details on how it could affect your job... your lifestyle... and your wallet. Economic Growth in the New Millennium When Unprecedented Progress Leads to Astounding Calamity Joel Bowman Reporting from Buenos Aires, Argentina... Wow! That was quick! “Greek Bailout at Risk as Party Pushes Back,” reports Bloomberg. “Greece Plunged Into Political Turmoil Over Austerity Measures,” chimes The New York Times. “Greek government hit by resignations,” adds the FT. We spilled a good deal of virtual ink in yesterday’s issue casting doubt and aspersions over the validity of the Greek bailout plan. The story, we reckoned, was at best an old one...at worst an irrelevant one. Bailout or no bailout, the Greeks are broke. The rest is merely noise. Curiously (and to their credit), markets yesterday would not be roused to action, neither by rumour, hearsay or scuttlebutt regarding the imminent, 11th hour deals “struck” between Greek Prime Minister Lucas Papademos and European Central Bank President Mario Draghi. Instead, they held tight, patiently. “Among other things, investors are waiting to see what happens with Greece,” we observed in yesterday’s reckoning, before adding, “We’ll save them some time. Nothing will happen. Nothing different, anyway.” And lo! Twenty-four hours later and the Spartans are back in Syntagma Square, bellowing at their useless politicians. Markets have since responded accordingly with measures in the US ticking ever so slightly to the downside. Good for them, we say. At least they’re pointed — according to our own quack theories — in the right direction. Besides, all this delusional optimism was beginning to get to us anyway. But let’s take a break for a moment and return to the other thread we touched on yesterday, the one about the sheer enormity of history occurring in our own, short lifetimes. Data compiled by The Economist a year or so ago showed that an astounding 55% of all the economic output generated since Jesus played QB for Jerusalem came in the last century of the last millennium. Why was this? How could one century account for more growth than the previous 19 centuries combined? Well, partly it was because there was nobody around before then to do much of anything anyway. Big trends require big drivers...and there simply weren’t enough people alive to take the wheel. The global population-o-meter didn’t click over from millions to billions until 1811...smack bang in the middle of the Industrial Revolution...but still 70 years before Colonel Drake would really steepen the curve of production by sinking the first commercially viable oil well in Pennsylvania. Mankind had, somewhere around that time, reached a critical mass of sorts, one accelerated by the splendor of cheap, abundant energy and the many luxuries and advancements derived from it. By the time Tim Tebow got around to taking his cues from the late, great J.C.’s playbook, the world was standing on top of a single decade that had produced nearly one quarter of the total economic growth of the past two millennia. More remarkable still, this heretofore-unseen growth flew directly in the face of the prevailing trends in the western, “developed” countries. Japan, leading the way, had already been a zero-growth zone for two decades. Likewise, the gears of the Old World were grinding to a halt as the euro-currency began exposing itself as the flawed experiment it always was. The Greek saga, visited above, is only the latest chapter in that well-rehearsed play. As for the United States, it was in for perhaps the rudest awakening of all. Leveraging the emotion hinged on a terrible tragedy suffered at the outset of the millennium, the world’s only remaining “superpower” went about compounding its many pre-existing problems by spending trillions of dollars it didn’t have (but was always ready to print) on wars it didn’t need to fight and will never ever win. But still the human race marches on, at once spurred by the innovation of entrepreneurs and hampered by the heavy hand of the state. There are more scientists alive today than at any time in history...but the same goes too for politicians...and for TSA agents and their vulgar, mirthless ilk. The developing world continues to surge, though it must outgrow dependence on an export model that the collapsing developed world may no longer be fit to sponsor. Thriving bastions of free market innovation — such as the Internet — are daily delivering more education, more information and more opportunities to more people around the world than ever before thought possible, but the driving force that fosters its growth — the freedom to share, copy and evolve — is the very target the Feds want to take out. And in the midst of all this, we travel along at breakneck speed...quickening our clip with every mile clocked. What to do but throw our hands up in the air and enjoy the ride. Whee! In today’s guest column, International Living’s Margaret Summerfield slows things down a bit before the weekend. Relax and enjoy some coastline musings... The LAST STOCK You’ll Ever Need You’re about to witness a shocking, hidden story. This could also be the biggest market story in history But you must act on this urgent wealth creation event before midnight Tuesday, February 14th. Here’s why...! The Daily Reckoning Presents California Dreaming Margaret Summerfield “Imagine you’re cruising down Highway 1 approaching Malibu when a beach home catches your eye. A figure of five or six million dollars goes through your mind. Now picture that same drive on a stretch of beach here and a similar house. Except this beach house will cost you $200,000 not $5-$6 million.” Mike Sager’s a California boy. He loves warm sunny weather and spending all his free time at the beach. He just couldn’t afford a beach home in Southern California. But Mike’s found a place that looks a lot like California. He admits it’s not quite the same as Highway 1. Mike’s coast isn’t as well- known. You won’t see crowds on the beaches — and you won’t get sticker shock when it comes to property prices. Mike’s inviting you to come and see his piece of paradise with him, and check out the prime properties on this coast. More on that in a moment. Now, back to Mike. Mike grew up in Huntington Beach, California. Even back in the 1960s, when he started surfing, he fought his way through the chairs and towels and crowds on the sand to get to the ocean. Once there, he shared the waves with tons of other surfers. Today, Mike lives right on the beach on Ecuador’s South Pacific coast. He opens his front door, takes a few steps, and he’s on the sand. A few more steps and he’s in the water. Even on big holiday weekends, it’s easy to find a piece of this beach to call his own. The rest of the time, he often has the beach all to himself. As Mike puts it: “Sitting with your feet in the sand, a cold beer in your hand and a huge plate of fresh grilled mahi mahi in front of you (that will set you back $3.50)... It’s like a scene out of one of those Corona commercials, but this is REAL living in Ecuador.” And here’s the thing. Mike’s got a great beach house. He’s living the relaxed beach lifestyle that many of us dream of. But Mike didn’t have a million bucks in the bank or a fat-cat retirement fund. He worked in the US as a mail carrier. So how did he get his dream home? You could say it’s all down to luck. Mike first came to Ecuador to surf. He liked what he found — beautiful beaches, good surf and a laid-back lifestyle. And he loved the little beach town of Olon. Olon reminds Mike of Huntington Beach. The water’s warmer, but it’s got the same surf and sand. Olon’s popular with surfers, swimmers, and sunbathers. And it’s a great spot for watching this coast’s amazing sunsets. And Mike quickly figured out that although he couldn’t afford a beach house in California, he could afford one in Olon. That was the clincher. Mike moved to Olon in 2006. These days (when he’s not hanging out at the beach) Mike spends his days helping other expats find their piece of paradise on this coast. And this May 1st-5th, 2012, you can join him on a real estate tour that will showcase the coast’s finest properties. You won’t believe the prices. Take a look at some of the properties for sale right now: Beach lots from $45,000. An ocean-view two-bedroom home, a 5-minute walk to a pretty beach, for $54,000. A two-bed, two-bath furnished house in a small private community of 15 homes. It’s a 3-minute walk to the beach, and listed for $62,000. A 2400 square foot house directly on the beach. The 3-bed, 2.5- bath home sits on a large piece of land. The home, with an open-plan kitchen and living area, comes furnished. The spacious upstairs deck overlooks the beach. It’s priced at $139,900. The annual property tax averages less than $200. On the May tour, you’ll see the best real estate bargains on Ecuador’s South Pacific coast. You’ll really get a feel for this location. You’ll get the lowdown on what it’s like to live here. And you’ll meet Mike — and find out first-hand why he loves this coast so much. The tour runs May 1st-5th, 2012. It costs $629 per person. That price includes five nights’ hotel accommodation, breakfasts, lunches and round-trip group transfers from Guayaquil international airport. You’ll travel Ecuador’s South Pacific coast, from the up-and-coming beach town of Playas to the relaxed surf haven of Olon. You’ll also spend a chunk of time in Salinas, the nicest resort city on Ecuador’s coast. If you book before March 1st, you’ll get a $50 discount. That cuts the tour price to $579 per person. Spaces are strictly limited to 24. To get a full itinerary and to lock down your spot, click here. Regards, Margaret Summerfield, for The Daily Reckoning Margaret Summerfield is Director of Pathfinder, Ltd., whose mission is to scout the globe to find the most unique and value-oriented real estate opportunities the world has to offer. For a free report on the best destinations on the planet today, go here. Ed note: If Mike’s story appeals, and you like the idea of retiring full- or part-time overseas, you might be interested in an unusual opportunity our colleagues atInternational Living have on the table right now. Wanted: Retirees to test-drive life overseas for a month — FREE — in the world’s top retirement haven. Must be willing to relax... take walks... go to concerts... shop... enjoy local restaurants. Details here. Make “Big Oil” pay for your retirement Oil fat cats got rich on $4 gas. Now how’d you like to make them pay you back? This little-known “loophole” let’s you collect up to triple the retirement income most stocks or bonds pay... without touching the stock market... and all while “Big Oil” gets stuck with the bill. Click here now for all the details. Bill Bonner Why US Job Creation Heats Up in Cold Weather Bill Bonner Reckoning from Delray Beach, Florida... We used to like traveling. Now, it’s a drag. “No, we don’t want to go through your new x-ray machine,” we told the TSA guard. “Whassa matter? It’s safe...” she replied. “How do you know that?” “The government said it was safe.” “Do you believe everything the government tells you?” “Heh...heh... Okay...” then, turning to no one in particular... “REFUSAL on 11. Male.” We were out quickly...but the poor old woman behind us had to get up out of her wheelchair...hobble through the x-ray machine...and then they still wanted to feel her up on the other side. You can’t be too safe, right? This has been going on for 10 years. But it is still shocking. No one seriously believes that 85-year-old crippled Lutherans are going to cause mayhem on commercial airliners. But no one seems willing to say so. You can’t even ask the question. Because it leads to other questions. Who, actually, is a threat? Probably no one. So, why are we herded...inspected...and pawed...as if the survival of the nation depended on it? For the money and aggravation, all this security has probably done little to make air-travel any safer. But it’s done wonders at turning the American population into whipped dogs. They bark on command. When they begin the round-ups, interrogations and deportations...Americans will be ready to get in line... You’ll see part of the reason why, below... Recent news brought reports of more new jobs. We suspect that most of the good news was merely misinterpretation of the data. Many people have been looking for work for so long, the feds have stopped counting them. Besides, they routinely adjust jobs upward in winter, to make up for bad weather. So when there isn’t any bad weather in January, the job numbers go up automatically. But there’s another problem. “Most of the new jobs being created,” complains Robert Reich, “are in the lower-wage sectors of the economy — hospital orderlies and nursing aides, secretaries and temporary workers, retail and restaurant. Meanwhile, millions of Americans remain working only because they’ve agreed to cuts in wages and benefits. Others are settling for jobs that pay less than the jobs they’ve lost. Entry- level manufacturing jobs are paying half what entry-level manufacturing jobs paid six years ago.” He continues, in the Christian Science Monitor: Other people are falling out of the middle class because they’ve lost their jobs, and many have also lost their homes. Almost one in three families with a mortgage is now underwater, holding their breath against imminent foreclosure. The percent of Americans in poverty is its highest in two decades, and more of us are impoverished than at any time in the last fifty years. A recent analysis of federal data by the New York Times showed the number of children receiving subsidized lunches rose to 21 million in the last school year, up from 18 million in 2006-2007. Nearly a dozen states experienced increases of 25 percent or more. Under federal rules, children from families with incomes up to 130 percent of the poverty line, $29,055 for a family of four, are eligible. Too bad; Reich misunderstands everything. He thinks Republicans are to blame for wanting to reduce government handouts. Reich believes he can replace real middle-class earnings with a cushier safety net...as if there was no difference between a person who earns a living...and one who begs one.... ..and as if the middle class wouldn’t have to pay for it. And more thoughts... On the subject of handouts, the Republicans are on slightly more solid ground than Reich and the democrats. They say they will cut them back. At least, those that don’t go to the voters. For example, Mitt Romney says he doesn’t care about the poor; he cares about the middle class. Why? The middle class votes; the poor don’t. Trouble is, there are more and more people who are slipping from the middle class...to the poor side of town. Investment Business Daily is on the story: The American public’s dependence on the federal government shot up 23% in just two years under President Obama, with 67 million now relying on some federal program, according to a newly released study by the Heritage Foundation. The conservative think tank’s annual Index of Dependence on Government tracks money spent on housing, health, welfare, education subsidies and other federal programs that were “traditionally provided to needy people by local organizations and families.” The two-year increase under Obama is the biggest two-year jump since Jimmy Carter was president, the data show. The rise was driven mainly by increases in housing subsidies, an expansion in Medicaid and changes to the welfare system, along with a sharp rise in food stamps, the study found. “You can’t get around the fact that policy decisions made over the past two years, on top of those made over the past several decades, are having a large effect on the pace of growth of the index,” said William Beach, who authored the Heritage study. Government dependence has climbed steadily since 1962, when the index stood at 19. By 1980, the index had risen to 100. It stood at 294 in 2010, the last year for which the data are available. D.C.- based Heritage has produced the index for nine years. The report also found that spending on “dependence programs” accounts for more than 70% of the federal budget. That, too, is up dramatically. In 1990, for example, the figure stood at 48.5%, and in 1962 just over a quarter of federal spending went to dependence programs. At the same time, fewer Americans pay income taxes, the report notes. Almost half (49.5%) didn’t pay income taxes in 2009, the latest year for which the researchers have data. Back in the late 1960s, only 12% of Americans escaped the income tax burden. Other findings: The number of people dependent on the federal government shot up 7.5% in the past two years. In 2010, for the first time ever, average spending on dependence programs per recipient exceeded the country’s per-capita disposable income. Our quick-witted Dear Readers are probably already gasping for air. The zombies now are getting more money than wage earners. And millions of those wage earners are zombies themselves, on the government payroll...or the payroll of some industry — health, education, military — that depends on federal spending. That leaves honest working people in a minority. And everybody gets a vote. How do you think the zombies will vote? To cut back on spending on education? On healthcare? On foreign wars or new weapons? On welfare? On food stamps? On unemployment comp? No, dear reader, there are some ailments that can’t be cured...and some problems democracy cannot solve. Regards, Bill Bonner for The Daily Reckoning