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"I still don't understand," writes a dear reader.

"What does it mean, please, when you write, 'money leaves home a servant and comes back a master?' I've wracked my brain to get that."

The reader refers to the trade deficit. We hate to think of her wracking her brain over so trivial a matter, so we will attempt to explain what we mean in plain prose.

First, a lamentation: the trouble with public life in this great empire is that people don't have the proper disrespect for it. They read the news and take it seriously. They listen to politicians and forget to laugh.

They put books by economists in the non-fiction section. They buy magazines about celebrities. They want to discuss "public policy" with their friends.

Rare is the citizen who tries to figure out what the trade deficit is all about, and that poor soul has our sympathy.

We offer her a bit of recent history.

Back in the Land Before Internet, there was a group of voters known as "Republicans." These people bemoaned deficits, bewailed debts in all forms, and bedeviled the ruling party - known as "Democrats" - with their constant complaints and warnings. Then, the "Republicans" found a champion - a former radio announcer named Ronald Reagan - and with him at the head of their legions they were able to smite the "Democrats" and drive them from office.

But once in power themselves, these "Republicans" fell under the spell of the Lorelei, known as "new conservatives," or "neoconservatives," who argued that the group needed an activist agenda similar to the one that served the Roman Empire - bread and circuses at home, wars overseas.

"But how can we afford such things," asked the old "Republicans?"

"Don't worry," said the new conservatives, "deficits don't matter."

And so, the new conservatives did what no conservatives had ever done before - they became big spenders, worse than the "Democrats" who preceded them. By the reign of George Bush the Younger, the new conservatives were running up more debt every 18 months than all the presidents and all the administrations had since the republic was founded 204 years previously.

Those were just the feds' public debts, but their pocket economists applied the same thinking to the nation's private accounts. "Don't worry about the trade deficit," they said, "it is really a sign of economic health, not weakness."

Another George - George Gilder, he of un-hedged faith in Global Crossing, whose spectacular collapse epitomized the tech meltdown - argues that the trade deficit is no problem because the dollars eventually come back to us. We buy things from Asia, and then the Asians take the money and reinvest it again in our economy. What could be better than that?

And that is what has prompted our essay today: yes, the dollars come back, but they went out as servants and they come back now as masters. When they are spent, they are doing our bidding. When they come back, we must do theirs, for they are our new patrons...owners of our factories, our mortgages, our national debt. To them, we owe our jobs, and even our national security.

Most of the foreign debt, for instance, is in the hands of the Japanese and Chinese. Without their support, the United States can afford neither its bread and circuses at home, nor its wars overseas.

But no true superpower can be beholden to its foreign creditors, says Paul Craig Roberts. No real empire has ever been in such a compromising position, adds Niall Ferguson. He who pays the piper, we note, eventually calls the tune.

And, no Daily Reckoning reader should miss the financial implication: the dollar is doomed. Yesterday, June contracts on euros rose to $1.26. Gold went up to $660.

The dollar is doomed for the simple reason that there is no one left to protect it. The old "Republicans" may wrench themselves around in their graves restlessly, but what can they do? Everything degrades, degenerates, and destabilizes - even political parties. And the Republican Party is now in the hands of big spenders, activists, dreamers, and schemers. The Fed is now run by a man who believes he can "target" inflation, and keep the economy booming.

The authorities can control the quantity of the dollar or its quality - but not both. Those who might have controlled its quality have disappeared from public life. What would you expect? The quantity is running wild. For the "New Republicans," what had once been a matter of principle has now become a matter of convenience. And soon, the destruction of the currency will become a matter of fact.

[Ed. Note: Our $804.9 billion trade deficit accounts for a full 6.4% of our total economic output - the worst ratio in the world. That makes America, the business, sound less and less like the risk-free guaranteed moneymaker it used to be...and when our foreign investors get wise to this fact, you'll wish you had some serious wealth insurance...

America: A Business Not Worth Buying

More news our team at The Rude Awakening...

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Eric Fry, reporting from Manhattan:

"The month of May has arrived, which means it's time to pay homage to one of our favorite Wall Street adages: 'Sell in May and go away.'

For the rest of this story, and for more market insights, see today's issue of The Rude Awakening:

Sell!

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Bill Bonner with more various notes...

*** Here's another ridiculous idea that's been brought up to help ease consumer's worries over prices at the pump...

Last week, the Republicans assembled an energy package after public complaints about high gas prices were heard nationwide. The centerpiece of this "leadership proposal" is - $100 rebate check to compensate taxpayers for higher gasoline prices.

"Political anxiety in an election year is to blame for a lot of the bad bills Congress passes," said Representative Jeff Flake, Republican of Arizona, who on Monday called the rebate a "knee-jerk populist idea" that voters would see through.

*** The price of crude fell below $74 a barrel today, on a government report that motor gasoline and crude inventories have both climbed.

Resource Trader Alert's Kevin Kerr told MarketWatch that the first climb in gasoline supplies in nine weeks was due "to refineries getting rid of their wintertime supply of blended gas (winter-grade gasoline) and making way for the summer gasoline grade."

"This build is likely the last one we will see in gasoline for a long, long time," he said. "This is giving the market a decent breather, but it will be short lived."

[Ed. Note: For more on what to expect from the always-changing (and always profitable) commodities and natural resources market, check out Kevin's latest report:

*** We could smell dinner cooking when we came back from our walk, but it was not what we expected. The gauchos weren't grilling steaks over an open fire. Instead, Francisco and Jorge had brought with them a huge wok - at least, that is what it looked like.

"This is actually a big disk. You know, for turning up the ground before we plant," Jorge explained. "We just attached a couple of horseshoes as handles. We use it to cook."

They placed the wok directly over the fire. In it were about 100 pieces of chicken along with large potatoes, onions, and some other vegetables we didn't recognize, all boiling gently in a whitish broth.

Francisco went over to his horse, reached into his saddlebag and pulled out a bottle of wine.

"Here is more of the wine that my grandfather made, " he announced, pouring the whole bottle into the wok.

Close by, Henry, Edward, and Maria were taking turns blowing up our inflatable mattresses, holding the nozzle of a bicycle pump directly onto the air-intake of the rubber mattresses and pumping like mad.

When the mattresses were fully inflated, they placed them down in the vineyard next to the road and spread our sleeping bags out on top of them.

It was only about 9 pm, but it was already getting cold.

As we waited, we wandered over to the vines and pulled off a bunch of grapes, They were ripe, ready to be harvested, and we ate all of them just waiting for dinner.

Gauchos don't usually go to so much trouble when they are out on the range by themselves. But that day, wanting to make a good impression on the patron and his family, they took their time. When the meal was finally ready, we were all huddled around the fire, longing only to get into our sleeping bags.

Still, it was worth the wait. Jorge had thought of everything, even a can of peaches for desert.

You can read the rest of the Bonner's adventure on the range by clicking here:

An Evening Under the Stars

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