Mar 19 2009 4:44PM
Resurrection Of Economic Idiocy
Lyndon Johnson’s Un-Great Society and Roosevelt’s depression era social programs did not solve the problems they purported to address. Rather, they extended the pain and suffering of their programs’ victims and worst of all taught them to belly-up to the taxpayer trough forever. We are saddled with generations of uneducated losers, who have sunk their collective psyche into a myriad of social problems passed down repeatedly from indigent lazy parents who learned from their parents.
The latest version of this socialism-destruction designed and being implemented by the Obama team of adult children, will in our view multiply the current criminally inspired disaster, extending it for years.
Greenspan and those congressmen-bankers formed a union of free money to avoid a simple and normal recession in 2000. Now nine years later, its economic payback time for violation of standard economic principles that made our nation great. Unfolding tragedies will be legendary.
This Time It Really Is Different
The strength and foundation of the United States Constitution and Bill of Rights have served our nation well since 1776. Our current disasters, however, threaten the very existence of America.
The rule of law, which is the glue for domestic and global commerce, is being openly questioned. Our political leaders, in their frustration of dealing with their own instigated messes, threaten to abrogate legality of contract rules operating our country. This over-reaction is extremely dangerous.
When that pack of congressional hyenas were screaming at AIG’s leader yesterday they crossed the line into illegal, open warfare attacks on AIG’s derivative bonus babies. AIG’s new CEO-leader incidentally, basically volunteered to clean-up AIG’s problems and had nothing to do with these current challenges instigated and installed by Hank Greenberg who wisely got himself tossed-out in 2005. Greenberg made the mess not the current innocent CEO.
Greenberg denied yesterday in a news interview, of having anything to do with AIG’s problems. Most are aware he was the architect and should be the fall guy. This example is similar to Alan Greenspan. Chopper Ben is the fall guy but Sir Alan was the original designer when he dropped interest rates to nothing and encouraged our government and big banks to hand out basically free houses and subsequent free housing ATM cash to the unqualified. The final, destructive capper was tacit permission granted by Congress and other government agencies to go ahead and write derivatives until the cows come home. The end result of course was massive bank failures and the subsequent robbery of taxpayers.
President’s Popularity Sinking Like A Rock
The president is an extraordinary public speaker with undoubted charisma for the position he holds. However, unlike Bill Clinton who was also perpetually campaigning, Mr. Obama’s experience is woefully short for the job. He is a likable fellow but is saddled with The Greenspan-New York Global bank derivatives mess and does not have one chance in 1,000 of succeeding. Further, he cannot speak without a teleprompter signaling to us he cannot think for himself and is afraid of miss-statements. We can say for certain Joe Biden, our irascible Vice President, has no fear of miss-statements and guffaws. He makes them with unbridled impunity each and every day much to the amusement of the right wing press and analysts.
What Obama could have done is to take the reins away from his party leaders and demand they give him his policies to save our economy and that of other nations. Instead, he permitted Sneaker Pelousi and her gang of socialistic minions to concoct a massive, pork-laden social spending program destined to finish-off the Republic. Our president is way too green for the job and permits his entourage and the Democratic party congress to call his tune.
In our view, this is a disaster, but even worse it demonstrates severe leadership weakness to enemies of America. We think the bad guys are being encouraged to begin new offenses testing the US and perhaps even attacking America as so many have warned us about.
All branches of government from the Executive, Supreme Court, Senate and the House are stuck first with (1) the freight train of Greenspan disasters and (2) the wild and reckless collective policies of those currently in power. This is a deadly combination in our view. One that can economically bring down America unless major reversals are implemented, which we feel under current conditions are impossible.
A return to sound gold-backed currencies, massive global spending cuts, and a reduction in government and those wasteful war machines of the world would go a long way toward a pivot reversal. This will not happen but instead we are going the other way toward more waste and a diluted dollar.
This positive change simply cannot happen due to the egocentric predicaments of world leaders and business players. We are going to go through ten years of bloody hell because of their inability and lack of courage to do the right thing. They are moving with expediency, in the wrong direction, while disregarding America’s founding principles.
Fallout Predictions for 2009-2012
The G-20 economic world policy meetings begin April 2, 2009. Powerful national leaders, analysts and their supporters are posturing and positioning to instill and install new protectionist policies at odds with each other. This is a 1930’s re-run.
We have reported for weeks that protectionism was next as countries compete to save themselves at the expense of others. Several have been devaluating national currencies in order to remain economically competitive throughout the world. This deflationary environment of reducing money values and the values of goods and labor has created a death spiral.
Germany has emerged as the leader of Europe. China and Japan are the Asian leaders. The USA is pathetically broken and bankrupt existing among the rest of the Zombie nations. America’s power remains through the US Dollar being the reserve currency of the world but we forecast its value to be cut in half over the next three years; or less. Meanwhile the Un-Great Society policies and the creation of new ingrates as a result; and costly foreign adventures (wars) are draining the life blood of America.
America’s Misfortune 2009-2012
With our government having authorized trillions in spending with more trillions to come, inflation is a foregone conclusion. Currently we are in a deflationary spiral which is unstoppable. We expect more of this for years to come but somewhere in the middle a nasty shorter term period of inflation-hyperinflation might appear.
American unemployment is officially recognized as something under 10%. This is untrue as the stats are bent to avoid an open revolt. True US unemployment is now approaching 20% and can easily be 30-35% over the next three years. Some states like Michigan are 23% jobless and moving higher faster on the Big Three Auto Collapse.
With jobless numbers so high a lot of bad things happen. One not recognized by most is the inability of the states to continue business as usual. We see emerging problems in California (basically bankrupt years ago); with those same problems quickly spreading to other states.
We are now aware of only 4-5 states operating without deficits and impending failures from bloated budgets. These states refuse to cut-back but will be forced to do so when tax revenue fails in a cascade of consumer economic troubles. Expect municipal bond failures, lay-offs, K-12 and university school closures, and public services crumbling in disrepair. With a reduction in force for state police, criminals shall step into the void taking advantage.
Finally, in desperation, we forecast some states will refuse to send money to Washington, keeping it for themselves creating havoc in many markets.
Social problems from massive unemployment will cause higher crime rates. One analyst estimates the US murder rate will increase to 50,000 per year matching national traffic accident numbers. Single mothers, children, elderly and others will go hungry. National government disaster planners cannot cope (think Katrina times 100) as they grossly underestimate how bad this can get and how swiftly it arrives. There is plenty of food but the handling and distribution problems will interrupt-delay deliveries. People eat daily not once a month.
In response to public demonstrations, food riots and escalation of crime, federal troops will be called out and martial law implemented in the worst case cities. The right-wing militias will be joined by other put-upon groups in fighting with these troops. With so many weapons throughout America this is going to be on-going and deadly. Obama’s effort to take the guns will create more mayhem and pardon the pun-backfire.
Large sectors of corporate America will grind to a standstill. With an unsafe social situation and on-going daily mess of other economic problems, impossibility of conducting day-to-day business could cause thousands of business closures.
With so many jobless, black markets will spring-up everywhere. Barter and personal trade will be the norm. While we think the US Dollar survives, it will buy much less. The underground economy will flourish as it cuts-out local, state and federal taxes, rules, and red tape. This business method enables delivery of value at nearly one-half the cost or less. For millions they will have no choice but to participate.
Much of our existing retail will close. They are bankrupt, cannot pay overhead and the newer black market operations basically cut them out of the sales loop. Some big malls will close and many strip shopping centers (already closing) will be boarded-up.
Consumers are saving and not spending, which further accelerates retail failures. Victory gardens are the new thing as folks do not trust the quality of fresh, store-bought food and would rather grow their own saving money and being certain of quality.
The US auto industry will be totally bankrupt with GM and Chrysler history, for the most part in America. Ford can last longer but they will sink with the others. The ‘good times’ auto and truck sales were 17mm annually and are now near 8.5mm. We see that number sinking to a low of 4mm by 2012, or sooner seeking a bottom.
Those with cash and resources will abandon larger cities and live in gated- communities and enclaves with armed guards-having their personal army so to speak. Small towns will flourish with new-comers watched suspiciously.
While the US will not disappear nor will the dollar vanish we see America resembling a third world country in many respects. Our national military will be mostly called home and several formerly large outposts abandoned due to budgets.
In Asia, China could descend into revolution splitting that nation. Japan will form tighter alliances with China as America abandons them leaving them in the lurch defensively. Israel will probably attack Iran on its own with no help from others and this will set-off World War III. We see most of Europe and Russia sinking into economic failures along with South America.
In the United States, economic disruptions create population shifts away from the Mexican border where unstoppable illegal immigration and violence escalates. Families will double-up and triple-up in one dwelling with most household members unemployed. You’ll see families that had three or four employed people reduced down to one or two feeding everyone.
Insurance companies will be decimated and pensions destroyed. Big banks throughout the world will be nationalized (many are already) and the renunciation of debts both public and private will be commonplace.
When the dollar collapses to a shadow of its former self the huge international bond market fails with it.
Governmental policies and party shifts will move to bureaucratic-style socialism and more communism. We see Japan going socialist along with America and most other formerly capitalistic countries in Europe. Only Germany might stay capitalistic. It will move to the far right and begin building a new military complex much to the fear of its neighbors. We see this as a normal defensive response to protect the German nation not a move toward external aggression.
Immigration problems will escalate. Fresh émigrés to western nations will be expelled and denounced as citizens resent their taking jobs and benefits. Others will scream to “send those people back where they came from” out of pure racial hatred. This is going to be a big problem all over the world but especially within Europe and the United States.
Within certain countries cultural clashes are in our view inevitable. Class warfare will grow economically and culturally. The “Have Nots” resent the “Haves” and want their stuff out of jealousy.
In times of crisis, rogue nations like Iran, North Korea, Cuba, Venezuela, Syria, and similar others will move to expand their dictatorships and attack-plunder. Most will be counterattacked to settle old scores.
Are we heading into the dark ages? We think not but see a muddled, messed-up ten years of troubles that can eventually be sorted out after (1) assets are marked down to reality and, (2) economies are restructured on sound economic footing.
The nation who can control energy-crude oil and gas will be the ultimate victor. That victor will be the world’s dominant player as the US was over the past years. Russia and the US are the top two combatants vying for this prize. We think the USSR will lose based upon economics and the fact the Ruble is not the world’s reserve currency.
Government interference created these problems setting-up big banks and hedge funds to flout economic rules. These stupid ideas were instituted primarily for feel-good-liberal-socialistic ideals. While this stuff appeals on a sympathetic level, the reality of free enterprise clashes with it both economically and socially and, creates big trouble. Abolishment of these policy tragedies should set the stage for a new era of hopeful prosperity providing freedom continues to exist. -Traderrog
Editor Trader Tracks Newsletter
& The 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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