Harsh Reality Of Sliding Economy

John A. Quayle blueoval at SGI.NET
Mon May 27 12:16:01 MDT 2002

MONDAY, 27 MAY 2002

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*** Gee, Wally, the GDP figures released last month were
wrong... I wonder why that is...

*** Does anyone doubt the recovery anyway? What do the
'experts' have to say?...

*** 30 more states into fray - Merrill got off easy...
Gold, silver on the road 'back from hell'... the Prez
makes a general nuisance of himself in Paris...

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Hmmmn... that's curious, the government revised the GDP
figures for the first quarter. Who would of thought
they'd do that?

Apparently, according to quants at the Commerce
Department anyway, consumer and government spending were
lower than previously suspected a month ago. And it
looks like there was a sharper decline in business
investment, too.

Consumer spending, which now accounts for two thirds of
the nation's economy, grew at 3.2% for the first
quarter, revised down from 3.5%... nearly half that of
last fall's credit-goosed pace of 6.1%. Government
spending actually grew at a slower rate than expected
too - despite the fastest increase in defense spending
since Johnson decided Vietnam was a just cause.

Business investment in equipment and software dropped
for the sixth consecutive quarter, this time at a 2.3%
annual rate.

The overall result? US GDP, say the experts, grew by 5.6
percent in the first quarter rather than 5.8 percent. Oh

What does is matter anyway? Everybody knows the rebound
is well underway. "The recovery is no longer in doubt,"
Chris Rupkey at Bank of Tokyo-Mitsubishi told Bloomberg.
"Most economists agree," says MSNBC, "the recession is
over" and the economy has resumed its "normal" path of

All that's left now is the 'experts' seal of approval.

But wait, what's this? "Recessions are not determined by
GDP, " writes columnist Martin Wolk. "Instead the
National Bureau of Economic Research panel that
establishes business cycle dates focuses on four
measures, including industrial production and

And there's the rub... if you look at either of these
numbers the recovery doesn't look so confident.

Industrial production fell for 15 straight months, prior
to a 4-month increase early this year, cutting the
nation's output by 6.5%. In the recession of '90-'91
output only fell 4.5%. And unemployment? Right now,
there are 3.87 million Americans collecting unemployment
insurance. That's the highest figure since 1983, when
the jobless rate was over 10%.

Meanwhile, last Monday's settlement between Merrill
Lynch and NY Atty. Gen. Spitzer (for $100 million and a
promise to build a "Chinese Wall" between it's
investment banking division and its brokerage firm) may
get Merrill off the hook. But the floodgates are wide
open now.

Not to crow too loud, but here at the Daily Reckoning,
we saw this coming long before it was hip to say so. In
April of 2001, we issued a report called The Big Con,
warning readers that  "the next few years are going to
be a time of financial confusion, bear markets,
spectacular bankruptcies and lawsuits."

Now it seems 30 more states have joined in lawsuits
against America's most lauded financial institutions.
The 'hit' list published on CNNmoney this morning reads
like a wet dream for any Harvard MBAs first job
interview: Goldman Sachs, Credit Suisse First Boston,
Lehman Brothers, Morgan Stanley Dean Witter, Bear
Stearns, UBS Paine Webber.

(I don't know if it's possible to say we told you 'so'
without sounding like a spoiled 5-year old girl vaunting
over her little brother after he's been caught stealing
bonbons from the pantry... but, here goes: we told you
so. For an update of our Big Con special report, please
click here: The Financial Cancer That's Killing Wall
http://www.agora-inc.com/reports/DRI/Ready )

With all that's going on, "it's no wonder gold has a
bunch of new friends," my friend John Myers said over
the weekend. "After months of being one of the few
voices clamoring for gold. I'm beginning to attract an
uncomfortable amount of company."

"Time is going backwards since September 11th," Andy
Smith, an analyst with Mitsui Global Precious Metals,
was guoted as saying at the London Association of Mining
Analysts last week.

"Precious metals suffered during the 12-year stretch of
peace and prosperity following the opening of Hungary's
border with Austria on [another] Sept. 11, 1989," wrote
CBSMarketWatch's Thom Calandra covering the same
conference. As Smith put it, "A world of freer markets,
lower inflation, progressively smaller governments and
more political stability" led to "the road to hell for

Now with the brokerage scandals on Wall Street, Enron-
like bankruptcies coming out of the woodwork and Bush
prancing about the globe drumming up support for the War
on Terror, gold - and commodities in general - are
making a comeback that would make John Travolta proud.

"Gold and silver prices," writes Calandra,
"traditionally precede accelerating inflation of natural
resources of all types - grains, energy, farm products,
the industrial and metal sector."

Our resource man, Myers, has borne witness to the
phenomenon in his Outstanding Investments portfolio.
Myers: "Newmont Mining was up over 2% on Thursday and
has  broken past the highs set during the gold rush of
1996. Another of our gold picks has more than tripled
since we bought it last November when it was trading at
$5.46. And the biggest winner of all we recommended in
June 2000 when it was trading for C$5.75. It closed
yesterday at C$24!"  For more details, click here:

The markets in the US are, of course, closed today as
the nation observes Memorial Day. You'll find a DR
classique below...


Addison Wiggin,
The Daily Reckoning

P.S. Thom Calandra, by the way, will be a VIP speaker at
the New Orleans Investment Conference hosted by The
Daily Reckoning and The Oxford Club, November 6-10,
2002. If you're interested in attending (and can plan
that far ahead) lock in a discount today by calling
Steven King at the Oxford Club at 1-800-992-0205 or 410-
223-2643 or visit the clubhouse on-line:

The Oxford Club

...Both Bill and I will be there.

P.P.S. "This is the first time that the president of
USA, is not home for the Memorial Day weekend
celebration and rememberance of all the people that
fought and died for this countries freedom." observes a
DR reader on the Discussion Board on our website. "I
don't think the ones that died for our freedom had a
choice to be in a safe place at the time. But the
president and a few of his right hand people are safe in
Europe while we here at home are nervously awaiting more
terrorist attacks."

I'm not sure POTUS, as the secret service is wont to
call him, is shirking any responsibility by getting his
backside to safety, but the president is definitely
making a nuisance of himself over here... (at taxpayer's
considerable expense, I might add, considering the semi
I saw carrying nothing but suitcases.)

Yesterday I tried to make my way to WHSmith, one of the
few English language bookstores in Paris. But the metro
stops at Tuileries and Place de la Concorde were closed
on the Rivoli side. At street-level crowds of people
were standing around near the entrance to the Inter
Continental Hotel, where Bush was supposed to be
staying. Police standing around looked as scared as if
they were being chastised by their spouses... and were
equally as silent.

"Who are we waiting for?" I heard one group of Americans
saying to one another.

"I don't know. But it's very exciting."

"Did I tell you I saw Lenny Kravitz in Madrid."

"No... but that's cool, too."

When, I wondered, did the line between the entertainment
industry and politics become some irretrievably blurred?
Oh well, at least, the  entertainment industry is above

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The Daily Reckoning PRESENTS: In honor of Memorial Day,
"American Hero," first written and broadcast May 22, 2000.

by Bill Bonner

"It looks just the same as it did 56 years ago," said
Colonel Flamm Dee Harper, USAF (Ret.). "France is a
beautiful country...as beautiful now as I remember it.
Except you don't have to worry about running into a
German patrol around every bend in the road." Col.
Harper, a small, handsome man of 80 years, stood on the
hillside speaking into a microphone to a crowd of about
200 people. At his right was a young lieutenant, the
USAF attache from Paris who served as his interpreter.
Further down the hill, a group of about a dozen French
officers were formed up into a square, starched and
grave...with enough gold braid to back a currency.

On his left were two flags, hoisted on recently
implanted poles - the Stars and Stripes and the French
drapeau - and a marching band of about 40 pieces,
resplendent in dark blue suits with white insignia. They
were the municipal band of little Montmorillon, the
sous-prefecture about 10 minutes away from my house.

Montmorillon was celebrating the return of Col. Harper,
an American pilot who crash-landed in this field in
1944. In front of me, a blonde woman had tears in her
eyes. She looked as though she was about 55 years old. I
did the math twice to make sure - she had to be at least

"I want to thank Jacqueline Thomas, who saved my life,"
said Col. Harper.

For more than half a century, Jacqueline Thomas, who
stood before me, had wondered whatever happened to the
young flyer she found in her grandfather's vineyard in
1944. It was the vineyard, as much as Jacqueline, who
saved him. Born in Albion, Idaho, Harper was 21 years
old when America entered WWII. Like so many pilots, he
was fascinated by machines and speed. And when a group
of P-38s flew over Utah in 1943, Harper saw them and
knew what he wanted to do. He enlisted in the air force
and was sent to flight school. A few months later, he
was already flying his 29th mission over France. His
target was the German ammunition depot at Sillars, about
20 miles from here.

But something went wrong. A time-delay bomb went off and
ignited the powder magazine just as he was passing
overhead - at an altitude of only a hundred feet. The
debris hit the aircraft, putting one engine out of
action and damaging the other. Worse, Harper had been
struck in the head by flying glass. So much blood
streamed down his face that he could no longer see.
Smoke filled the cockpit.

Harper undid his harness and started to bail out. Then
he realized that the ground was only about 50 feet
below. So he sat back down in his seat and prepared to

Seeing the field again, for the first time since the
event, Harper turned to me: "I don't know how I
survived. A P-38 can't glide at less than, say, 130
miles per hour. I should have been killed."

But the wires that held up the grapevines slowed the
plane. Harper jumped out of the cockpit with no further
injury. At first, Jacqueline Thomas thought he must be a
German. She started to run away. Then by some instinct
she decided to go to his aid. His face was covered with
blood. And the Germans could arrive at any minute.

She led him to her grandfather's house. No one was home.

She tended his head wound in the only manner she knew -
dousing it with "eau de vie," strong spirits that hurt
so much that Col. Harper recalls the pain to this day.

Not long after, Jacqueline's father arrived. He had seen
the plane go down and was concerned for his daughter.
Taking command of the situation, he had Harper take off
his clothes and dressed him as local farmer.

The two grabbed fishing poles and went down to the river
where, pretending to fish, they made their way to a cave
where Harper was hidden.

Eventually, Resistance leaders were contacted. Harper
was driven to a farm where another woman took charge of
him - - Denise LaBrousse. She was there yesterday, too.
Nothing seemed to have changed. Harper was vigorous -
with a sense of humor and a friendly smile. Jacqueline
still seemed like the teenaged girl who found him in the
field. And Madame LaBrousse looked like she's probably
always looked. She looked like she could make a good
omelet - which is just what she did for Harper.

As the story was told, each of these people made their
way up to take their places alongside Col. Harper...
Denise LaBrousse walking with difficulty with the aid of
a cane. And there they stood. The mayor of Montmorillon
had invited me to the ceremony as a representative of
the local American community ("I not only represent it,"
I explained to Col. Harper, "I am it. Apart from my
family, there are no other Americans in the area.") and
as an interpreter. He now presented Col. Harper with a
medal from the town. A representative of the French Air
Force gave him another medal - a set of wings. The band
struck up the Star Spangled Banner...and then the

Tears welled up in many eyes. Many of those present had
fought in the war. Others had vivid memories of it. My
friend, Gilbert Mining, was there. He had made his way
to North Africa to join the Free French Forces of de
Gaulle. He'd made friends with an American
soldier...whom he has never seen again. Another old
soldier sat next to me at the dinner following the
ceremonies in the field. He had been with the French
army at the Maginot Line. They were driven back by the
Germans and finally pinned against the Loire River.

"I asked my commander for permission to desert," said
the retired schoolteacher. "He told me to go ahead. So I
swam across the river. Then I fought in North
Africa...and then back to France."

Harper, meanwhile, went on to glory. He joined the local
S.A.S. forces, Britain's underground operation that
coordinated resistance activity throughout the war. John
Fielding, an Englishman who was part of the local unit,
was also at yesterday's ceremony.

Together with the local French resistance, they blew up
train lines to keep the Germans from moving troops from
the south of France to the front in Normandy.

But Harper did not remain on the ground, or under it,
for long. Scarcely three weeks after the local paper in
Utah reported him "missing in action," he was back in
England and back in the cockpit on various missions.

Later, in Korea, he was shot down again. His ribs were
broken, but he managed to kill two North Korean soldiers
with a handgun and was rescued by helicopter. He became
the only pilot to get shot down in two wars and keep on
flying. But the most remarkable phase of his career was
probably during the period following his rescue in North

While he was recovering from his injuries, Harper
directed the activities of his unit of flyers. One of
his pilots reported a massive build-up of supply trains
in the sector.

Harper was unable to get permission for an attack, but
ordered it anyway. The pilots went to work. They
discovered that the boxcars were loaded with ammunition.
The whole sky lit up, brightened by the explosions.
Encouraged, they just kept hitting the train, which just
kept blowing up.

Some military historians believe this attack was the key
to ending the war. The ammunitions train was meant to
supply a massive million-man Chinese army. Without
supplies, the offensive was called off, and the North
Koreans decided to resort to the bargaining table.

But world politics were a long way away from the
thoughts of those assembled here in Montmorillon this
weekend. "I'm just glad to be alive," said Harper.

Your correspondent,

Bill Bonner

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