All That Glitters...

OF ALL THE MANY MISERIES that man faces on his journey from cradle to grave, few of them can be eased by enlightened central banking, writes Bill Bonner in his Daily Reckoning – and a credit contraction is not one of them.

Japan proved it. After the Japanese market collapsed in 1990, public officials went to work with their characteristic energy and incompetence. They lowered the cost of borrowing to nearly zero. But did consumers take up the money and add to the demand for bread and bicycles? No. They didn't want to borrow. They wanted to save. They had speculated during the previous bubble years and lost money. Then, with retirement approaching, a penny saved was worth even more to them than a penny earned. They saved more than ever...and the consumer economy sank.

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