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Contributed by Bill Bonner
Publisher of: The Fleet Street Letter



Today:  What So Proudly We Hailed, Part ll

In Today's Daily Reckoning:
*** No news is probably good news...
*** Debt...debt...debt...a fool and his borrowed money are 
soon parted
*** Thank God for Harry Potter Greenspan

*** Nothing to report from Wall Street yesterday. It was 
closed for the holiday. No widows were robbed, no orphans 
became wards of the state, and no fools were parted from 
their money. But it's back to business as usual today.

*** It is not at all surprising that Wall Street separates 
fools from their money. That is its role in life. What is 
more puzzling is how the fools got together with their 
money in the first place.

*** A lot of it is, of course, borrowed money. Bill King 
tells us that the average U.S. household now has 13 credit 
cards and a balance of $7,500. "Non-financial companies," 
he says, "borrowed an additional $4.5 trillion, or an 
increase of 67%, in the last 5 years."

[If you're interested in Bill King's service, just call 1-
800-433-1528 and ask for code 3457 to receive a FREE one-
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*** IBM, for example, illustrates both the trend towards 
corporate debt and the fraudulent nature of delivering 
"shareholder value" on a short-term basis. The company 
earned $31.1 billion over the last 4 years. But it spent 
$34 billion just to buy back its own shares. 

*** Over this same period, IBM's revenues rose only 5%. 
Gross profits rose barely at all - only 1.3%. But debt rose 
from 31% of capitalization to 54%. Thus, while the stock 
price rose, the net value of the company actually fell.

*** Which is what has happened in the entire market. Money 
that might have been used to build up balance sheets - by 
paying off debt or buying capital assets (such as new plant 
and equipment) - was instead thrown into stocks - many of 
them new ventures that could never reasonably be expected 
to produce satisfactory earnings.

*** The result? Lower earnings. And weaker balance sheets. 
In a cyclical downturn, may I remind you of the obvious, 
stocks go down in value. Debt does not.

*** And yet, we are told, almost daily, that the American 
model - with its quest for 'shareholder value,' its debt, 
its free spending consumers, and its own Harry Potter 
Greenspan who is able to conjure up whatever miracle the 
economy requires at precisely the right moment - is 
superior in every way. How is it then, that the stodgy, 
rigid German economy has managed higher levels of 
productivity growth for almost 20 years - 1.9% vs. 1.4% for 
the years 1977 to 1995? Only recently has the U.S. economy 
outpaced the Germans in productivity...and then only after 
the statisticians at the Bureau of Labor Statistics stopped 
crunching numbers and began extruding them.

*** According to a '96 GAO audit, reported recently by 
Richard Russell, Alan Greenspan - America's most beloved 
bureaucrat - commands a staff of 25,000 employees, with its 
own air force of 47 Lear jets and cargo planes, a fleet of 
cars that includes personal cars for the 59 Fed bank 
managers, a full-time curator who oversees the Fed's 
collection of paintings and sculptures and a budget of $2 

*** Thank God there is the Fed, though. Its main job is to 
protect the value of the U.S. dollar - which was stable for 
the entire 19th century. Since the Fed has been in business 
the dollar has lost 95% of its value. But who knows what 
would have happened without the Fed.

*** "June normally produces the best return of the Summer 
Rally," Bill King tells us. Everything went as well as it 
could, King believes - "Easy Al" did not raise rates, 
inflation, productivity and other numbers were as 
flattering as the BLS could fudge them, polls showed Bush 
with an increasing lead over Gore. Still, the June rallies 
were unimpressive. 

*** To get our bearings after the holiday...the Dow is down 
9% so far this year. The S&P is down 2%. 

*** The Saudis announced that they would pump more oil and 
the price of oil fell $1.55 on the news.

*** Japan's Tankan report said that business was picking 
up. Could it be that the sun is finally rising in the land 
of the rising sun...after 11 years of darkness?

*** "In all technological revolutions from the railways to 
the Internet," says a recent article in the Economist, "the 
only sure long-term winners are consumers who gain from 
lower prices and hence higher real wages." 

*** An Arkansas panel of judges is trying to get our 
president disbarred. They claim he lacks "overall fitness" 
and has "damaged the legal profession" by lying in his 
Paula Jones testimony. 

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"I have just one question," asked a representative of the 
John Birch Society many years ago. "Do you love this 

I doubted that I could give him an answer that would 
satisfy him. He was looking for Patriotism. But not the 
sort of patriotism I am capable of. Fortunately, my friend 
Jim Davidson was there at the time. As always, Jim had an 
answer that satisfied us both:

Quoting John Milton, Jim replied: 'Wherever freedom is, 
that is my country.'"

The John Birch Society representative, perhaps a little too 
slow on the draw to distinguish freedom from nationalism, 
went on his way.

Hearts swelled yesterday as bands played the Star Spangled 
Banner. Voices, stretched to their limits, choked or went 
dumb, depending upon the key...and people all over the 
nation...and the world...celebrated their sentimental 
attachment to the Stars and Stripes.

And such an odd attachment it is. America never really was 
a nation state - despite the efforts of the public schools 
and the 1950s nationalists to make it one.

It is a powerful state. But there is no nation of 
Americans. Instead, there are groups of immigrants from 
various places in the world with very different ideas about 
how the world should work.

Culturally and genetically, I probably have more in common 
with most Europeans than Americans. I feel at home among 
the French, the English, the Germans, Swiss, Austrians and 
the Irish. I feel safer on city streets in any of these 
countries than I do in Baltimore. I enjoy the music, the 
food, and the architecture on the east side of Paris more 
than on the east side of Washington, D.C.

This makes me a bit footloose. But wherever I go, I am 
still an American.

Americans are not united by blood, not by territory. 
America began as a group of colonies on the East Coast of 
North America. But the land itself meant nothing. Over the 
years, America has taken many different shapes - spreading 
out to the west all the way to the other side of the 
continent...and then hopping over 4,000 miles of the 
Pacific Ocean to the Hawaiian islands.

No particular land or climate characterizes the U.S. You 
can find almost any variety you like. 

Nor are the America people a "nation" in a tribal sense. 
Unlike, say, the Scots, the Irish, or the even the French, 
there are no over-riding blood links with other Americans. 
Any individual American might have more in common, 
genetically and culturally, with a tribe in Africa or a 
clan in Scotland than with the rest of the population of 
the U.S.

We do not even have a language of our own. 

Compare this to France, perhaps the best example of a 
nation-state. The French are, with the exception of 
immigrants such as I, related to one another, speak a 
common language, have a common history, and inhabit the 
same land - bordered by the Pyrenees on one side and the 
Rhine river on the other - where they have lived for more 
than a thousand years. 

Frenchmen are rooted in France. They rarely leave it. 
Though many will spend years working abroad, most 
eventually return. 

When I first arrived in Lathus, I was visited by the local 

"What are you doing here," they asked, putting the question 

I explained my business rationale. France is centrally 
located; it gives me a base of operations for Britain and 
Germany. This would have been satisfying to an American, 
but it seemed to have little effect on the gendarmes. They 
seemed suspicious. There were rumors that the chateau had 
been purchased by an American cult (I didn't know at the 
time that I was a cultist). The police were eager to know 
what was up.

Then I explained that my mother's family was of French 
origin, from a nearby area, in fact, Deux Sevres. Suddenly, 
their expressions changed. They almost smiled in relief. 
Now it made sense to them. We were coming back home (after 
two centuries in the New World!)

Neither blood nationalism, nor land, unites Americans. It 
is only an idea that holds us idea that is in 
danger of disappearing all together, like the last Liberty 
Tree that was cut down last autumn in Annapolis.

What makes America special is the idea of independence and 
liberty. The Declaration of Independence established 
America as the first and only country in which the 
individual was free and sovereign - free to go where he 
chose and do as he pleased...without having to get the 
permission of the ruling class. And the new country was 
open to anyone and everyone who liked that idea.

In came the huddled masses yearning to breathe free. They 
brought ideas and energy...and made the country the most 
dynamic place on earth.

Our hearts, too, swelled with the dinner table 
yesterday...where we suddenly reflected on what being an 
American was all about. 

We, who live in the Old World again...and still yearn to 
breathe free. We are still very much Americans.

Your patriotic, sentimental correspondent,

Bill Bonner
About The Daily Reckoning:
The Daily Reckoning... "more sense in one e-mail than a month of CNBC."  That's what readers are saying about The Daily Reckoning.

Bill Bonner, recognized internationally as a brilliant writer, entrepreneur
and publisher of The Fleet Street Letter, offers you his daily market
commentary absolutely FREE. For the first time, outsiders are getting a peek into his powerful and profitable investment insights. Bill's practical contrarian advice empowers even average investors to protect their hard-earned wealth and achieve amazing gains.

Bonner writes his email letter from Paris, France, each morning --
describing the wacky, wonderful world of investment, politics and everything remotely related. Irreverent. Sharp. Honest. Thoroughly, unabashedly contrarian. It's also among the fastest growing e-letter on the Internet.  It's a brand new service... but it has a distinguished history..

For nearly 62 year, The Fleet Street Letter, the oldest investment
advisory letter in the English language has consistently delivered
invaluable economic and political foresights to savvy investors. Current readers regularly enjoy impressive investment gains even as the market falters. Here's more from his online readers...

"My small portfolio has followed true to my wife's description of my
investment philosophy, "buy high and sell low." However, that has changed since I started religiously reading DR... I credit this reversal of fortune directly to The Daily Reckoning"

" Your Daily Reckoning is the best in business commentary... mixing
serious warnings and the state of the market with gentle humor"

"It is actually better than some of the newsletters that I pay to

"Your statements and philosophy have kept me from storming into the market and in fact [I'm] making some money in put options" (Frank)

Open your mind with the most stimulating e-mail newsletter that you'll ever read, The Daily Reckoning. To receive this free daily email newsletter click here now.

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Last modified: April 02, 2001

Published By Tulips and Bears LLC