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HISTORY, n. An account mostly false, of events mostly unimportant, which are brought about by rulers mostly knaves, and soldiers mostly fools. - Ambrose Bierce, The Devil's Dictionary.

Where was history yesterday? She was out grinding away in the Middle East, and grinding away on Wall Street, too.

The big news is that the U.S. current account deficit rose to a new record - its ninth record high in 10 years. The number for last year was $804 billion. The number for the last quarter of last year was $224.9 billion, which shows the trend is still upward. At the current rate, the current account deficit will hit $1 trillion within a year or two. It is already at 7% of GDP - a figure that would normally only be seen in a banana republic or an empire going bananas.

"A ticking time bomb," a Canadian economist calls the deficit. The
United States needs $2.5 billion dollars every day just to cover its borrowing needs. Already, China has lent the country so much money that it has nearly $1 trillion worth of U.S. government debt in its vaults. If the debtor is slave to the lender, as it tells us in the Bible, what does that make Americans? They'd rather not think about it. Besides, they have economists willing to delude them, and politicians able to defraud them.
"U.S. tells China to cut its trade surplus," reads a headline in the Financial Times. We wondered where was the equal and opposite headline: "China tells U.S. to cut its trade deficit." But, we could find it nowhere. We wondered, too, what big stick the United States carried in its hand. What was it going to do...threaten to stop borrowing? Brandish a credit card? How would it fund its War on Terror? Its consumer economy? Its housing bubble?

America can speak loudly - for the benefit of American voters, we presume - but it has a limp noodle in its hands. The Chinese are the ones holding the big stick; they could dump their U.S. debt holdings and clobber the American economy any time they wanted.

But wait - aren't American companies extremely profitable? Aren't American companies setting up plants overseas, buying overseas companies, and making deals to leverage their technology, their brands, and their know-how on the world markets? Yes, of course they are. But that, too, is reflected in the current account numbers. In the fourth quarter of last year, for example, foreigners actually earned more from their U.S. holdings than Americans earned from their holdings overseas: $132.6 billion compared to $129 billion. Even in the technology sector, where the
United States is supposed to have a commanding lead, Americans bought more
from foreigners than they sold to them.

Always grinding away, our General Theory of Grinding tells us that history never stops. She is the mistress of creative destruction - constantly turning things upside down and inside out. She is always undermining great empires, and eating away at great companies. She grinds men's pathetic little conceits, ambitions, and pretensions to a fine dust.

History cannot seem to leave well enough alone. Economies, societies,institutions, animals, vegetables, and even minerals are always degenerating, degrading, and disappearing. When our present civilization has finally gone away, what will be left of it? Just a few old coins, and granite countertops...some converted into tombstones.

"Every generation needs a new revolution," said Jefferson. He understood that you can't stand still. When a society reaches a certain level of success, it becomes a soft target for gamers. Parasites find the still unprotected spots and move in, like tapeworms into a fat man's belly. New life forms fill the hollow niches, and flourish. Opportunists leech onto the slow-moving hulk. Where a dynamic new republic pushes up its brightest and best to leadership positions - like Washington, Adams, and Jefferson himself - in the stagnant pool of an aging empire, the heavy thinkers
sink to the bottom. What rises to the top are lightweight scum - the John Kerrys, George W. Bushes, and Hilary Clintons.

Why doesn't the election process produce better political leaders? It is because as time goes by, more and more people become complicit in decadence. The voters are further and further removed from the actual process of government...it is only slogans and photo-ops to them. The people close to power are the hacks and the hustlers, the politicians on the make, the parasites and players on the take.

Laws multiply like the fishes and the loaves. Moses handed down only 10
commandments; Jesus said only two of them were really important. But federal, state and local government give us 10,000 commandments - each one of them designed to protect or pamper some slimy creature living in some dark hole of the republic. More and more people get checks, subsidies, grants and payoffs. More and more committees, agencies, and bureaus are set up to provide sinecures and curry favors. If we read it right, as many as half all the jobs created in America in the last five years were created by government!

Fraud and decrepitude seeps into the whole society. People begin to believe things that couldn't possibly be true: deficits are good, savings are unnecessary, and that we don't actually have to make anything, we can just "think" our way to prosperity.

From The Daily Reckoning...www.dailyreckoning.com