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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.

And as the structure degenerates and weakens, practically everyone, everywhere holds up his or her hands to try to prop it up. We see in Grant's Interest Rate Observer, for example, the efforts of real estate appraisers to keep the bubble expanding. The Homebuilders Index is at a three-year low. Inventories are growing, yet, the L.A. papers tell us that prices are still going up, pushed up in part by appraisers. This is revealed in the difference between the House Price Index of the FHEO - the Federal Housing Enterprise Oversight, no doubt a worthy and important agency - and its "Purchase Only Index." The House Price Index includes refinancings, which are based on appraisals. The Purchase Only Index does not; it is based only on what buyers were willing to pay. When you take into account the data that includes appraisals, house prices rose 12.95% in the fourth quarter of 2005 - over the year before. But, when the appraisals are taken out, the number is only 10.8%.

More about the American gaming system tomorrow…

For now, more news from Aussie Joel and The Rude Awakening…

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Eric Fry, reporting from Manhattan:

"A few 'Rude' readers expanded the parameters of 'alternative energy' to accommodate their recommendations…and we're glad they did…"

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

Life After Oil, The Final Chapter

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Bill Bonner, with more of various things…

*** "Which is worse?" asks colleague Byron King. "To have no ideas, like the Democrats? Or to have no backbone, like the Repubs?"

Byron refers to yet another spending bill…this one designed to offer "heating assistance" to people in cold places. Who could be against that, right?

"It is one thing to lose an election while going down fighting for ideas that you believe are correct. I think, however, that the GOP will take some serious licks in November because of the failure to put up a fight for some semblance of fundamental fiscal, let alone monetary, sanity. The Repubs will lose by default. And worse, the Democrats will find a way to blame the GOP for all of the resulting problems, when many of the problem spring from Repubs trying to act like Democrats.

"Federal 'heating' assistance? Would that be in the 'Heating Clause' of the U.S. Constitution?"

*** "Some would like to build a wall around the U.S. economy," says a headline in USA Today. When American voters finally realize what is happening to them, we don't doubt that more people will queue up to pile on the bricks…or throw them. Every major empire brings globalization with it. Trade barriers are typically dismantled. The empire's money - and the empire's troops - push back the frontiers of the "common market" in which the imperial merchants can do business. Even the Mongol Empire allowed trade within its borders to flourish.

As the empire falls apart, globalization usually turns down. Up go the barriers to trade - financial, political, and logistical. And, down come the imperial people. That is why the Dark Ages, following the collapse of the Roman Empire, were so dark.

Americans want to erect walls to protect themselves from history's grinding, but no matter how high they make them, no matter how much heating assistance they offer or how much they jiggle and jive the numbers, history won't stop.

*** "It is winter all year round here."

Claire, an assistant who recently came to London from Paris - and who lived in North Africa before that - longs for the tropics, or at least for spring.

We have already slipped by the Ides of March. There are small, white flowers peeking out from under leaves around in the garden, and pink buds forming on trees in St. James' Park. Spring is less than a week away, but the weather in London gives no hint of it. There are no whispers of warmth; there are no rumors of sunshine or pullulating printemps.

On the subway, everyone was bundled up, almost all in thick black coats. Everyone held a newspaper, enthralled in the business pages…sports…or health and fashion. No one seemed to notice the lovers by the door, nor did they notice anyone else. They stared into each other's eyes…embraced…interlaced…smiled and cooed to each other.

Your editor rummaged around in his crusty old heart. He was looking for some souvenirs to help him remember what it was like. He was trying to understand how people could stand in a public subway car and make perfect fools of themselves. These were not teenagers, after all, but a man and a woman who seemed to be in their early thirties. They were dressed in suits and ties…and dopey in love. The train stopped at several stations - each time, the couple took no notice. Surely, they missed their stop, said your editor to himself.

Finally, reaching Blackfriar's station, we got off. They were still there…not noticing anything but each other. They were riding around on the Circle Line, on their way to…who knows where. Good luck to them, and to all young lovers.

Outside, a cold wind blew as we crossed the bridge. Was it raining? Snowing? We couldn't tell, but we felt a cold tingle on our face, as we looked at all the faces crossing in the other direction.

"I had not thought death had undone so many," said T.S. Eliot, many years ago, of a crowd no different on a similar London bridge.