Jul 9 2010 2:17PM

Rabid Mass Austerity

What happens when suddenly most everyone stops buying stuff? The cream is gone off the top. There is no more discretionary income. Now comes the hard part. We only buy what we must have and the rest is simply forgotten. What can you do without? Credit card addicted USA consumers are desperately using plastic for groceries, utilities and emergencies. When those cards are tapped out, then what? Already, many of them are, and they’re card-defaulting while running for food stamps. Big banks reported today card collections are not good at all.

The fool’s paradise known as Washington, D.C. continues in a horrid vacuum of zero leadership. Various mammoth departments continue to operate as individual fiefdoms bouncing off the walls and careening toward the ultimate tragedy as our kid president whistles past the graveyard. Meanwhile, two wars are running full blast, the nation has no budget, the oil spill grows worse and USA borders are wide open for every terrorist in the world-all in the name of power and votes.

Someone wrote many years ago that the entire life of most countries-societies is 250 years. If this is true, the USA has about 16 years remaining before the big breakup. I seriously wonder if we can even make it through the next 16 years. The way things are going, will our nation resemble anything like just a few years ago? We are all broke and this is when things go violent. Hot summer ahead and it started right on time per our old forecast yesterday in Los Angeles, California.

Obama-Economics spends like our government money pit is bottomless. It is not. Our Northern Advisor has watched this stuff for years, much of it first hand. His key point: “Many times the stupid reaction of government to emergencies is not necessarily due to ignorance and disorganization. Often the budgets are not available in advance of major trouble to instantly react and they simply don’t have the money or authority to quickly spend. We saw this in Katrina and now with the Gulf of Mexico oil spill.

I never thought of this idea considering the way government tosses cash into the wind. Most would say go spend it now, solve the problem and sort it out later. Government budgeting is laid out in neat little boxes; quite compartmented to say the least. They can easily waste $2 Billion in a flash if the needs are budget covered. However, if a national catastrophe like Katrina or, the BP oil spill hits, pre-planning does not cover nor cope. 

Further, all the marvelously stupid bureaurat red tape rules residing in 150 agencies have roadblocks in place to avoid emergency management like the Coast Guard recalling  Louisiana spill control ships back to port for not having life jackets. We respect the rule but how about someone letting them continue to work and provide the jackets on an emergency basis keeping the spill contained. Nope. It won’t work that way. Our advisor says they simply are not prepared for these emergencies and never will be. Surprised?

We suggest the worst Achilles Heel is storms, and extended power outages from our creaky half-century old electric grid system. When your power is off, you are finished. I think about recent winter storms in Kentucky when thousands had no power for several weeks in very cold weather. This means no lights, communications, i-net, television, refrigeration and the inability to get fresh food. Most when hit with this dilemma just give-up and run for government help. Thankfully, the Red Cross does good work to help ease the pain, but they are not really the government but a charity designed to help those in need. They cannot, however, begin to do it all.

Thinking on this, I can see more reasons why the Sheeple had better get busy and learn to take care of themselves. Uncle Sam will not do it as he is simply not set-up to help. Further, your emergency is probably not funded anyway and even if it were, ten miles of red tape sit between you and your critical demand assistance.

Actually, those folks that are quite poor and living hand-to-mouth are going to better weather this economic storm than most. This is because they are used to be on the scramble 24/7 to find another meal, stay warm from the cold and find a way to enjoy utilities. When every day is an emergency you learn to deal with it having low expectations in the process. The middle and upper-middle class spoiled brats will be helpless and have no idea where to begin to help themselves. Their lives are going to get nasty.

Now that Greenspan is out of his old job where he destroyed half the immediate credit world within five years with his give-away cash, he tells us “The USA may soon reach its borrowing limits.” Wow! What a refreshing and honest statement. Especially when you are outside, retired and looking-in and can blame your instigated messes on others like Chopper Ben and Timmy “The Kid Junior” Geitner, our Pseudo-Treasury-Secretary-Goldman-Gangster-Alumni. For those not aware, Timmy was the PPT’s Chief-Computer-Button-Pusher-Market-Support-Guy in New York City where he was the local Federal Reserve Honcho. Welcome to the United States of Goldman Sachs.

Why We Pay The Price

Greater Depression II Enters Phase II With Harder Repercussions.

Housing sets new extremes in low sales with the lack of credit, end of the tax credit, millions on negative equity and the new jingle mail; walk-aways. Millions have learned they can stop making payments and continue to live in their homes without immediate banker backlash. There are so many, the banks are overwhelmed with paperwork and not near enough staff. Meanwhile, hundreds of thousands of home repossessions remain on the books as they’re being held back so as not to flood markets with merchandise driving down prices even further.

America just like Europe is so far behind in state and federal tax collection payments, expect installation of the new VAT or Value Added Tax to be congressionally approved. This is a stealth tax difficult to pinpoint directly by the Sheeple. After all since the bureaurats cannot begin to balance the budget they just take more.

European bank stress tests are supposed to be published. They cannot be or credit markets will implode. Look for delays in printing the results. If and when they are visible, they will be watered down and made palatable for the Sheeple to swallow.
One of the important new developments is a European movement toward austerity while the USA administration prefers throwing cash and credit at this disaster. Since Europe is suffering from lack of credit and debt overload, they have chosen to “take their medicine now” and de-leverage the debts. America must de-leverage too, but is kicking the can down the road not being able to, or having the will to do the right thing. This heightens credit tensions between Europe and America as both head for a larger, exaggerated major crash in this dispute. Watch what happens at the end of this month between July 25-August 6.

Insolvency of the PIGS; Portugal, Italy, Greece and Spain has terrified bankers of all stripes world-wide. We say they better be afraid as the rolling crash and insolvency of these nations is well on its way to reality. Banker media stars are working feverishly to cover and the stories are no longer believed. Greece goes down first but they are quite small. The bigger story in July is Italy and it is indeed scary. We suggest when a significant portion of this regional group and their neighbors economically crack-up, it could be the catalyst ruining the happy-phony credit delays in North America with the exception of Canada. It will indeed spread quickly.

Two others most at risk in Europe other than the Eastern European bloc would be Ireland and the U.K. They have more staying power than the others along with Germany and France for the moment, but we can see a domino cascade taking them all down in a huge rolling crash. The USA cannot help as they are structurally worse-off than most imagine and the US Senate has voted no on IMF credit help for Europe. The US is too broke to help.

There is no single central bank in Europe for fat origins of credit to backstop these nations as in America. The IMF is about out of gas as they’re mostly funded by American credit. This nears the end of the line and the ECB is not legally authorized to help any member by charter. Germany very reluctantly offered slightly over $1.1 Billion to help Greece but it’s not yet been approved by the German politicians nor paid.
The two USA wars are going badly primarily due to lack of cooperation from the Iraqi’s and Afghan’s. These two sinkholes remind me of the Vietnam conflict. This is a terrible drain on human resources and the US Treasury. And, with the leadership or lack thereof in Washington we can count on those resident idiots to do exactly the wrong thing.

While deflation worsens for now, the last gasp attempts by international treasuries and central bankers tossing credit and cash will incite inflation. This comes not right away, but we are building toward that eventual event.

China, long the recent engine of growth, is peaking and slipping economically. The Chinese stock market is down the worst in 15 months and a new offering for agriculture shares for over $21 Billion is going badly and has sunk -5% from the initial offering price before it had been all sold. Car sales have been hot but they are slowing. Real estate prices have peaked and credit is being tightened to avoid inflation already rudely underway. The recent Yuan reforms are mostly public relations and lack any real teeth or effects. However, these markets are peaking as the Yuan currency sneaks up in value.

The BP mess has made bitter new enemies everywhere. In the U.K., parliament and the shareholders are angry over the USA nasty Tony Hayward interrogation. In the USA everyone is mad at the Obama administration for being so inept and slow to respond. Just on this one topic many previous hard-core Democratic supporters no longer support Obama-Land. Meanwhile, large parts of the USA energy industry have been drilling-handcuffed and cannot proceed with budgeted, approved, and planned gas and oil development.

In the Middle East, oil producers have seen the price of crude oil skid from near $80 to $70 and back to $76. They prefer and are happy with $70 but are fearful of more selling. Our latest forecast for the SHORTER TERM had been $70-$65. Natural gas has been rising on proposed summer air conditioning power plant demand but this has softened in the wake of several American negative, economic reports. Oil and natural gas prices are firming for now on reserve draw-downs and drilling moratoriums.

Where Does This All Go Next?

Russia’s income is primarily from oil and gas. With this sector in a mess they have serious problems. Putin has voiced the idea of a new currency backed by gold for trading oil. Our view is this goes nowhere. German Euros may soon be traded as Marks along with the US Dollar, Yuan, Yen and Won. We think this latter group could hold-up as they are the least worrisome fiat currencies for the time being. Canada is also among the fortunate along with Australia. Eventually, however, these ‘better’ currencies could revalue, too. For now the resource currencies are strongest along with the blue chip Swiss Franc.

The first half of 2010 is over. The second half could be much more trying and ugly. When the little nations have run out of credit resources they collapse, and the stronger ones will have witnessed first hand as to what could be their fate. How they all react is going to be quite interesting to say the least. Some could panic and make ill-timed moves. Others could reverse strategies making things worse. Time will tell but events are getting closer.

July Will Be A Time Of Testing On Several Fronts.

However, we think this month must endure more than one severe test. Among these could be inflammation of new violence in the Middle East fomented by Iran in particular. Israel is about ready to attack for several reasons and her current and former allies will just look the other way and act surprised. The U.S. Navy fleet is watching near Iran. Iran’s commercial airliners are being refused foreign airport refueling per new sanctions. Wonder how this works out? All parties are playing chicken and the ending is nigh.

If something goes wrong in August relative to BP’s well capping efforts all kinds of bad things can happen. We think they can cap it and drain-off the balance with a new relief well. However, rumors of seeps coming through a fractured ocean floor at depth are beginning to surface creating new worries. Our sources say the best of the best are on this problem having saved 42 out of 42 wells. These are private contractors skilled in relief well technology. On a previous disaster this contractor punched five relief wells to stop leaks on one single well. We think they will be successful but the mess goes on for years.

American politics has grown increasingly caustic, loud and accusatory. The Democrats have no budget and are moving forward continuing to spend without one. The Administration despite having accelerated the bankruptcy of America continues to spend and pretend forcing spendy new programs on a super mad populace that is totally fed-up. Much of this stuff is coming to ahead. Confrontational and accusatory politics are tiresome to the max.

Another major test just ahead is the forthcoming involuntary austerity of national and state governments. This began with our citizens and it has spilled over into states’ budgets. The final straw will be extreme austerity at the national level. Since federal government can tax and spend at will, they have a longer extension of time to continue the game. However, this ends when credit and bonding abilities cease. We are there right now. The international bond and equities markets are collapsing. The stocks go down first and this is well underway. Within another 90 days, later this fall, the bonds could smash in an epic event. That then is the beginning of the end.

If a rolling crash originates out of Europe or Asia and affects the USA stock markets, this one could be the final blow to these politicians everyone loves to hate. No one can forecast where the outcome goes after that event.

In our view, we expect Obama to be a one term president and there is an excellent chance he may not finish his current four year term. We say chances of this are now one in three and moving rapidly toward 50-50. Could there possibly be an insurrection and revolt of some kind? We say the chances are moving toward that event as several matters worsen.

When the Obama administration has outlived its usefulness to the crooked bankers and international cabal of corporations backing its power, it will be cast aside for the next package of useful idiots. This is the day when things could change dramatically.

More than one of our highly respected colleagues has said, “You will not even know the USA by the end of 2010, it shall have changed so much.”
America in general is now fully aware the USA’s southwestern borders are wide-open to gangsters and terrorists. Formerly peaceful sections of Arizona (a national park) cannot be used by American citizens as the dangers are too high. Phoenix is the car theft capital of the USA with over 50,000 vehicles stolen last year and probably most of them taken into Mexico. The Mexican government is now more at risk than ever as a major political figure was killed and Hugo Chavez and other outsiders are supplying revolutionary aid and encouragement.

No surprise to us but Venezuela has now been moved to the top of the sovereign failure list with a 58% chance of national bankruptcy and total collapse. Greece is number two and Argentina third. Argentina last had such a massive bond failure in 2002.

This is the first time in my memory when USA borders are open and at risk of attack and nothing is being done by the administration to stop it. They want the borders open for new welfare recipients who will vote Democratic. The voting thing is dirty enough, but what about the crime and danger to USA citizens? Arizona and New Mexico along with most of Texas might take things into their own hands. They are getting no relief from elsewhere. This could be the old Wild West revisited. There are millions of guns and hot tempers in this region; a volatile combination to say the least. Watch the United States southwest for the beginnings of open rebellion if the bureaurats don’t get busy and help. Arizona could use a whole National Guard army division just to catch-up. Obama promised only 500 soldiers when they need 15,000 to 20,000 right now.

Collapse of the American middle class is obvious and apparent. The Tea Party Movement is part of the outcome. This story is one played out in history during the American Revolution in 1776 and again somewhat for some similar reasons during the US Civil War. Where are we going this time? The second half of 2010 could tell the tale.

What ever happens to foreign economies, credit and banking along with the American vote in November could be a major turning point in world affairs affecting all citizens world-wide. This is a generational changing series of events. It might be prolonged but we think not. Prepare for several smashes and crashes from later in this month of July through nasty springs and falls all the way to 2012 when I predict World War III begins over energy, economics and settlement of several old grudges; some of them being 5,000 years old.

Wilshire 5000 Composite Shares Index Tells The Big Story.

It’s Selling to 7,500 Support After 10,500, 9500, 9000.  

The US Dollar and American standard of living shall be cut in half over the next few years.

Now, more than ever, it is important to take the immediate necessary precautions to protect yourself and your families and friends. Traders and investors should be buying precious metals and select shares right now. In our newsletter we have a great list of trading and investing ideas for you. Meanwhile, you can never go wrong buying physical precious metals and holding them for security. We’ve had a constant run of nearly ten years in gold rising 15% per year so this remains a good trade. In the last twelve months, gold rallied over 34% and is going ever faster.

It’s not going to stop any time soon. In fact, we predict those annual percentages will rise even more and this offers a chance, arriving only once in 25 years on the historical cycles. Good trading! -Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com


Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information

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