Oct 30 2009 3:03PM

Zombie Government Reality Check

The stats and growth prognostications from tout television, New York banksters, our Federal Reserve, U.S. Treasury, and various U.S. Government fiscally incestuous cabal members are replete with liars, exaggerators, and crooked politicians. The U.S. Government and several others are economically dead; they just haven’t admitted it yet.

The United States’ financial affairs are an empty burning hulk of disaster.

There is not enough taxing power, stealing power, money and bond-printing power on this globe for these dudes to worm their way out of a major collapse. It may take some time, but its coming for sure. There is no way out except to inflate. And, we know how that one ends. Read about Germany’s hyper-inflation of 1921-1922.

We are not yelling fire in this theatre of the absurd but rather giving an untenable situation the cold, blank, fishy-eyed stare of an auditor. Two and two isn’t 20 and never will be. Most everyone is broke and going broker. Even those with no debt and holding supposedly strong assets in government paper and real estate reside in quicksand. Why, because these assets are only worth what a buyer will pay for them on any given day. And, on this day, most asset values are plummeting.

There is simply way too much debt, way too little cash and credit, and an astounding inability to pay the bills.

The stock and bond markets are one big phony scam with the exception of those holding hard asset reserves in precious metals. Food and energy assets roll up and down like a yo-yo along with the latest media fiction and last quote on the dollar. Oil and gas reserves along with real food as in grain, meat, vegetables, etc. have true value. This value is volatile as it relates to fiat currencies being diminished by the hour as governments race to manufacture new money using computers and printing presses.

Artificial Growth Courtesy Of Government Taxes Take a minute and think about what propels these so-called recovery markets.

The phony, positive GDP growth rate announced on October 29 is a bald-faced lie. John Williams at Shadowstats.com, our trusted and very accurate source of numbers, says the annual GDP rate is sinking at -5.7% and we would agree.

We’ve previously reported that when a nation’s GDP-to-debt ratio surpasses 6% it can never recover; that is historical fact. The USA’s today is projected at 13% and getting worse. Since statistical distortion is the name of the game even the government hasn’t a clue whether its 6, 13 or 30. One thing we know for sure; it’s much worse than imagined.

Consumers’ primary assets are cars and houses. Cash for Clunkers was a clunker that cost taxpayers $28,000 per car as one analyst reported. Further, it took paid-for cars and trucks off the road and sunk these new vehicle owners into payments they cannot afford. Look for those new vehicles to be repossessed in few months.

Consumers’ residential loan failures are legendary. New homes are being produced at a rate of 400,000+ per year with a normal year being 1,700,000. It that a recovery? That’s a disaster! Other used home sales seeming to be perking-up are those of new buyers getting free down payments from the government. How long are those loans any good?

John Williams tells us durable goods, the hard, expensive stuff like furniture and appliances fell to a 1997 order level. He also told us help-wanted advertising for jobs sits at a 58 year low. Is that a growing economy?

These broken consumers need jobs and credit and have neither. As governments and central banks steal more taxes and print more currencies in this low interest environment, hyper-inflation seems inevitable to us.

We are already in a depression so we get a hyperinflation-depression. This is the worst of all worlds.

Busted consumers are living-off credit cards and bankers are jacking-up interest rates to 30% as they too, are broke and have no new banker loan income either.

We Are Puckering-Up

And, we do not suggest smooching either. By puckering-up we mean an unstoppable contraction of credit, spending, expansion, cash, and the inclination to invest in new business enterprise.

We’ve watched with great interest the appearance of ridiculous made-up jobs’ ideas like ethanol, solar, wind, and various other concocted schemes designed to skirt around old-fashioned mining, manufacturing and agriculture. Here’s a few really stupedo examples:

  1. How about buying a new three ton SUV hybrid? Now there’s an oxymoron.

  2. How about demanding 1/3rd of the US corn crop be used for ethanol despite this one being economically unfeasible beyond common sense?

  3. How about demanding 20% of all USA electricity be produced from wind by 2020 when the wind blows only half the time?

  4. How about shutting-off irrigation water in California’s vegetable growing belt to save a two inch trashy fish? This killed 40,000 jobs and ruined one million acres of formerly productive farm land. And, there is no use for this fish whatsoever.

  5. How about the tree huggers telling us, no demanding, that all coal-fired power plants be shut-down permanently for EPA reasons? China is building one new coal power plant per week. Don’t you suppose their wind pollution ends up over our country and elsewhere?

  6. How about the world’s champion really dumb idea of eliminating all livestock and poultry as their, uh-hem, bodily function gases are not of the greenhouse variety but shall we say more of the barnyard variety?

  7. And, of course the best one of them all-print counterfeit currencies and bonds with abandon having no consumer-commercial buyers-users. This being designed to fill a global void of zero-negative economic activity.

  8. How about a new $40,000 hybrid electric car with a range of 40 miles before it stops? Most cannot afford a $20,000 car let alone one twice as costly. Besides most of us would not be thrilled to get stuck in the Mohave Desert with dead batteries.

  9. Personally, with all of these wonderful new suggestions, we might suggest someone develop and build a new chain of insane asylums to house those mentally unstable folks spouting these great new ideas. Now there is good idea! That would be a flash of brilliance! With thousands of these nut-cases on the loose, those buildings would fill literally overnight.

And Now The Good News

We learned today that Paul Tudor Jones, one of the all-time great trading legends tells us: “I have never been a gold bug. It is just an asset that, like everything else in life, that has it’s time and place. Now is the time!”

Mr. Jones went on to say, “Total international reserve assets have quadrupled over the last decade, primarily from the accumulation of global money. However, the percent of total reserve assets held in gold has declined markedly…In our opinion, the scope for increased (gold) investment demand over the coming years is much stronger than the potential for new supply. As result, incremental new demand must buy gold from current holders. With a macro backdrop that suggests gold is undervalued, we doubt the transfer of gold from current holders to its new owners will occur at, or near, current prices.”

Mr. Jones has been so eminently successful in his trading he could probably buy all of California. He would never do it as he takes only the good trades; those with the best potential to win.

The general population in America is mostly oblivious to gold and silver. We would suspect 90-95% are still stuck in those old fundamentalist buy and hold ideas using New York’s latest and best mutual funds. What do you suppose happens when even 5-10% of that group catches on to gold and silver? How will they buy precious metals if there are no sellers? We are even forecasting a shortage of available, higher quality precious metals shares at some point.

Our years’ ago highest gold price forecast remains at $2,960. We’ve known all along throughout this gold rally (over years) that figure was too low. However, we are waiting for some serious new buying to occur so we can technically measure higher gold prices from posted-closed higher cash prices like $1,250 and today’s inflation adjusted price of $2,300 per ounce. Jim Turk told us many months ago of gold to $8,000 in Barron’s magazine. I would trust his forecasting more than most others.

Financials crashed in fall, 2008 with Lehman. Recovery began with TARP in May, 2009: During October, 2009, we’re ending a dead cat bounce with selling this month. Precious metals and their shares are still toppy on this October 29, 2009; for the shorter term. Beginning November 9-13, most all trends can reverse and moves to rallies. Between now and then some selling and corrections should appear. We are at a turning point in most markets.

Keep in mind, if you own paid for stuff it will most likely remain in your hands; not in somebody else’s. That includes gold and silver. Do not get tangled-up in daily noise. Keep studying the larger view and buy precious metals after each profit-taking correction. Headwinds are building into an economic hurricane. Take care of business right now.

My dire fall prediction might surprise us and arrive later. Selling is now. But next summer could be the larger crash. In the coming middle, look for more buying. Time is short.

Personally, I can see unbelievable opportunities to trade that we would never see again for many years. Turn these problems into opportunities. Those on the right side of the trade might get rich. Those on the other side are just victims. Stay Alert. –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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Kitco Contributed Commentaries 2006
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