Runaway Inflation Is Now Unavoidable

Bernanke has chosen to do the worst thing possible and that is an open ended qualitative easing. If you have savings or an IRA, expect to lose your shirt since interest will be held low and hyper inflation will lower the value of every penny you have. I suggest looking up the Weimar Republic in German history to get an idea of what is going to happen now.

Stock up on foods and goods while you can, your purchasing power is going to decrease very quickly now. Buying ammo would also be prudent since it will be going sky high after this news is absorbed.

Incompetent and suicidal are the only words I can find to describe this development. It looks like a desperate bid to influence the election.

Let’s Twist Again

To all those who are so insulated by wealth and luck, it will come as a shock when things do fall completely apart economically. Part of being insulated from reality requires having limited and/or censored information to look at that reinforces willful ignorance. Watching how the media distorts and outright lie on many things has been rudely educational for me.

So when when the employment participation rate plummets to its lowest level since Reagan took over from Carter’s disastrous presidency, I was not surprised to see attempts to twist things into a rosier picture:

Still, the report was not all negative. The government revised upward its earlier estimates for payroll growth in February and March by a combined 53,000.

That was the best they could do, given the grim numbers, but hey, they tried. The emphasis on the unemployment rate has been deceptive because it is artificially lowered by not counting those who have given up on finding a job.

Sadly, I cannot exclusively blame a dishonest government and a dishonest media alone. With most people being intellectually lazy in the States, they do not bother with digging for information themselves. Heck, we are lucky if the masses even pay attention to superficial sound bites on serious issues. The excuse I always hear is that “nobody has time to.” Yet they have time to watch Dancing with the Stars or other things of little import. Entertainment is the priority now, which is another twisted thing in my opinion.

Facts and statistics are twisted in every possible way these days and I suspect the horror of fully realizing how bad it is may be too much for people to confront. But you cannot hide from reality forever for it will confront you eventually.

And people wonder why I put faith in God above that of the efforts of man…

Shape of Things to Come

As the economic conditions continue to deteriorate to the inevitable collapse, governments at all levels will become obsessed with picking the pockets of the citizen completely clean. There has already been discussion of confiscating private retirement accounts, which has been done in other countries. Pumping up inflation is another way savings are wiped out and that is the plan in the United Kingdom.

But here is an idea that blindsided me and is already law in Louisiana. All secondhand goods are to be paid for by check or plastic from now on. Curiously, pawn shops are exempted. But what about Goodwill and Salvation Army stores? This also effectively outlaws rummage sales and any other private sale, since you would have to have enough money to survive checks bouncing or to have a credit card scanner. Those have fees per transaction to use, by the way.

Asinine barely begins to describe this. Supposedly this is to stop materials thefts and theft in general. Most of the buyers there are shady and doing it off the books anyway, so it will not stop crime. But it will destroy a lot of small businesses.

So why pass this law?

I suspect the real answer is that it is all about taxes. It is easier to keep track of what should be taxed because checks, debit cards, and credit cards are all traceable. They want a chunk of unreported “black market” sales that go on all the time between private citizens. The legitimate businesses already keep track of that and pay their taxes, but there is an attitude among some legislators that there is a huge underground economy that can bring in big revenue streams.

To some degree, they are right and that is why a national sales tax replacing the income tax would be very effective. But an individual state doing this will just encourage legitimate buyers to stop buying and criminals will do one of two things: money laundering and shopping out of state.

I feel assaulted by dangerous waves of stupidity.

All Along the Watchtower

Time again to collect my thoughts for posterity since this blog was started to be a journal.

With the stock markets diving, it appears reality has finally caught up to investors. The new jobs report shows unemployment down slightly to 9.1% but is due to Americans leaving the employment game. Only 58.1% (or 63.9%, I’m running into varying figures) of the employable population are holding a job right now.

The attempt to decouple employment from economic health baffles me. It demonstrates just how out of touch the elites are. Apparently, they have no knowledge of history – if they did they’d be terrified right about now. The first warning sign is usually a populist political movements being born. If those fail to change things or are suppressed, structural failures in a society begin to be evident. That isn’t saying they weren’t already there, but that the masses begin to perceive them. Consider it noticing that the emperor is walking around stark naked.

I think we have entered that stage with “government” replacing “emperor.”

Should be an interesting day watching the stock markets again. 3% a day declines in US and Asian stock indexes have been the pattern the last few days. We’ll see if that changes.

At home, we now have much higher DSL speeds thanks to a change in modems and the new package from Ace. Speed tops out at 6.7M down, which is amazing after being used to 1M. Streaming is a new world, but tests of HD streams have been mixed. Since I don’t have many to compare, my conclusions are limited but it appears to be dependent on the technology used by the streaming services.

720P works just fine off of youTube, but an anime site I tried still stutters. Come to think of it, they don’t label as 720P, maybe they are trying to push 1080P. I should try out Hulu Plus for the free week and see how that works.

Will this skeptic of streaming movie services ever be fully converted? Time will tell.

Best thing about the increased speed is how software updates seem instantaneous now. There is also enough bandwidth to have two people browsing videos and music without stepping on each other’s virtual toes. VOIP is working better so far as well.

A Mormon Defense League? For all the talk of Latter-day Saints being so media savvy, the fact this only just launched demonstrates how questionable that assumption is. This organization is needed given the rampant bigotry and ignorance on display across the country.

I was checking the stats on the blog and noticed a lot of hits were on my Citizen Kane review. What is surprising is how many people have been looking for the No Trespassing sign still shot. Is there a meme out there I’m unaware of?

And by a lot of hits, I mean in double digits.

One of the nice things about having a small blog is seeing the strange intersections of what I post and what people are looking for. Part of it is nostalgia for when the Web was new and I’d surf to find whatever was out there. That feeling of finding the unexpected and different is no longer there for me. Maybe others aren’t as jaded and find something here to entertain or ponder. If so, I hope that feeling of discovery is aided a little by my meanderings.

Watched the new Clash of the Titans the other night. What a hollow experience that was. None of the charm or respect of the old myths in the original was present. The effects were decent and that is the only area in which it was superior. It simply isn’t a good movie.

Finally purchased and downloaded Planescape: Torment to play. It is a game I’d read about for years and had meant to get last year when it showed up at GOG.com. There are some issues of crashing, but I made sure to add the mod to allow quick saves. Sigil is one interesting place and the Planes always make for a good setting.

Hopefully, I can finish this game eventually. I haven’t gamed that much lately since writing has taken up more of my health induced down time. This is a good thing.

Moody Minnesota

It had slipped my attention that the state of Minnesota was downgraded from AAA to AA+ by Moody’s last month. So it was somewhat surprising to find out that the financial outlook for Minnesota was revised to negative on Monday. This is not a good thing when looking for bonding in the future.

Strange how my state has become something of a predictor for political problems lately. What’s clear is that the public’s love of having divided government doesn’t work so well during a time of economic crisis.  Big governments are slow to react to anything and divided governments are even worse.

So we are seeing that stop gap measures aren’t effective in keeping good credit ratings, which should be a warning sign to the Federal government. There is a very high chance that there will be a downgrade there as well.

I should see how the stock markets are taking things now that the debt ceiling raise was signed by President Obama…

Well, the Dow has plunged below the 12,000 mark and the S&P has shed most of its gains for the year. Not surprising since there is no good economic news to be had. Gold just went higher with South Korea buying more, it is at $1644.50 an ounce. That’s absurdly high and a huge warning sign.

Interesting times.

The Debt Ceiling Mess

This it going to be a purely my point of view entry under the personal category. This way I have something written to look back on in the future. I’m getting the feeling events are history in the making with a capital H. So time to organize my thoughts for posterity.

The debt ceiling expansion is a political no win scenario for the Republican Party and possibly extremely damaging to President Obama. No matter what is passed it will not address the massive debt the government has accrued.

The Left can jack up taxes all they want and it won’t work. There is a phrase called “capital flight” and we’ll see the wealthy move what is left of their money overseas if this happens. That will not generate revenue or jobs here. No employers equal no jobs and the socialist model of all working for the government is unsustainable. The Twentieth Century proved that repeatedly.

Only harsh spending cuts will do any good at stimulating the economy, but that is impossible given two thirds of the government is under Democratic Party control. The House GOP freshmen have badly miscalculated what their real power is. So even if the Boehner plan is passed it will die in the Senate or be vetoed.

I’ve felt for some time we passed the point of no return vis a vis the national debt and that it is impossible to pay it off. Eventually it won’t be possible to borrow any more money, since Europe and Asia are in trouble too. The only thing allowing this charade of solvency to continue is that there is nowhere else for investors to move to than the dollar and US bonds.

Meanwhile, there is zero leadership being exhibited by Obama. His main concern is with kicking the ceiling issue down the road past November of 2012. Even raising taxes is secondary to getting reelected. Harry Reid is not much better. The Senate Democrats haven’t passed a budget in over 800 days. That’s years!

Many of my fellow Tea Party types want a default. Like the House GOP Caucus, they’ve badly overestimated their power in a split government. I don’t always agree with Charles Krauthammer, but his advice to focus on 2012 and taking the Senate is sage. But most in the Tea Party movement are political neophytes and believe taking a principled stand will win the day. Sorry, our government is far too corrupt for that to work.

The fiscal irresponsibility of decades by the Democrats and Republicans has gotten us here. So has the same irresponsibility of the citizens who have run up the same kind of debt. Right now many citizens are paying the price for their screwing up and it won’t be long until everyone will pay for the federal level screw ups.

I’ve often thought Wall Street and stock markets in general live in a fantasy world with little attachment to reality. The fact traders are just now tumbling to the idea there will be a default is a fascinating case of denial. It is much like both sides of the political aisle thinking the other is bluffing.

Default is coming in the future due to the way politics works. It is a matter of when, not if. It is also a matter of who will take the political blame. It doesn’t matter who is in the right or who was really responsible when the blame game begins for real. With a detached political class out of touch with the common man, frictions are going to grow until combustion happens. Why do I keep thinking about the aftermath of the French Revolution?  It isn’t a comforting reflection.

We are in a genuinely hopeless situation barring something utterly improbable and unpredictable happening. Instead of doing necessary things, we have political theater which is pretty much the norm when collapses happen. Neither the political class or the masses are willing to do what needs to be done.

I think it was Mark Twain who said, “History doesn’t repeat itself, but it rhymes.” In this case, I think the Great Depression may not be the proper model. It may be more like the fall of an empire with a massive earthquake followed by many severe aftershocks rippling across the globe.

We haven’t hit the really bad parts yet. But it is so very galling seeing what is coming and knowing nobody will stop it. Procrastination goes hand in hand with corruption and this may be the most telegraphed disaster in recorded history. Why do we have to be so Epimethean rather than Promethean? Bet that’s been thought many times since the age of the ancient Greeks.

The sole comforting thought is that humanity has gone through all this many times and survived. The wheel of history keeps turning and people find a way to make it through the darkness. Eventually, light returns.

Bad Moon Rising

There are those who actually believe we emerged out of the recession and are worried we are going into another. Well, we aren’t. We never got out of the first one and it isn’t a recession, but the early stages of another Great Depression. While we have more social safety nets in place, they aren’t going to last very long at this rate.

One myth on the Left is that Social Security is a “lockbox” and all the funds are safe there to pay it out. If that were true, how could President Obama threaten to not send checks out next month? Note that this is a threat in political speak and his verbal tones suggest he was eager to issue it.  While it is a despicable thing to do, it does unmask the fallacy of the lockbox.  Another Democrat President ended that isolation of Social Security funds from the general fund back in the 1960’s – Lyndon Baines Johnson. They are now controlled at the whim of our government and are not guaranteed.

But the most interesting thing about this is that there will be money to spend on Social Security and other needed things even if we can’t borrow money. It means drastic cuts elsewhere, but that is at the discretion of the Treasury. Which means it is at the discretion of the President. In other words, Obama is threatening to cut off benefits for political gain in the 2012 elections. Some servant of the people he is.

Being on Social Security Disability, this hits me directly. Loss of Social Security means no food, no shelter, no Internet, and the loss of everything I have.  I can’t say I’m surprised how cavalier the President is about the people who will be affected as he is part of the Chicago Machine which is all about thuggery. The willingness to hurt the elderly and disabled just to damage the Republicans shows the quality of Obama’s character.

Sadly, that is only the beginning of our problems. The debt ceiling will mean nothing in the near future because an economic catastrophe has already begun across the globe. Large things tend to be slow moving and people don’t notice the changes until they hit critical mass. And much like an avalanche, they can’t be avoided.

The jobs report for June in the United States is an unmitigated disaster. 18,000 jobs were purportedly created when we need 150,000 new jobs created each month just to match population growth. Notice I used the word “purportedly.” At The NY Post it is revealed that 131,000 jobs were estimated out of thin air to pad the number upwards. In the United Kingdom, their latest report on employment isn’t quite as grim, but it isn’t good.

Meanwhile, the PIIGS crisis in the European Union continues unabated. Ireland just got relegated to junk bond status and Greece continues to be a bottomless sink hole despite hundreds of billions of Euros dumped into it. I don’t even want to discuss the problems China is having with inflation and bad loans. Two ballyhooed stimulus packages have failed to do anything positive at all and now they are talking about another one, QE3. Throwing money that doesn’t exist at something caused by spending money that doesn’t exist is not a sign of intelligent or even sapient behavior.

What will the second Great Depression look like? That’s hard to tell, since there has been so much wealth generated worldwide since the end of World War II. As mentioned before, there are safety nets in place that weren’t previously in developed countries. But there has never been so much debt in place as we have today. It will hit slower than in the 1920’s and 30’s and it has already begun.

We have much more to lose, so the possibility of it being more dramatic and catastrophic increases due to the simple fact the masses aren’t acquainted with real hardship anymore. What happens when food supplies become permanently disrupted? What happens when fuel is too expensive to allow easy migration to better places? What happens when electricity becomes unreliable with rolling blackouts the norm? What happens when groups begin hoarding resources? Those are all questions the world is going to have to face very soon.

Here in the U.S., we have a cultural divide that is now unbridgeable. The Left have gone so far away from common ground with the middle and right that the political frictions we see now are going to look quaint by comparison when the real crisis hits fully.  Though the truth is the middle will do whatever the group in charge tells them to do, so really they don’t matter. It is a sad thing, but the result of apathy/fence sitting is the loss of any real say in things.

My prediction is greater division and rising violence, both of which have already begun. Frustrations will continue to grow and the political class will continue to play games as long as they are comfortable. By the time anything will be attempted seriously, it will be too late.

So where does that leave the little guy? Up a creek without a paddle in most cases.

All we can do is prepare ourselves for the worst outcome and pray for the best. Storing food for more than threes days of supplies is a beginning. Having the ability to protect yourself wherever you are means exercising your 2nd Amendment rights here in the States, no matter how you feel about firearms. Most of all, you need to be spiritually prepared.

In God you can trust, but not man. I wish people would remember that whenever the latest demagogue of any political persuasion shows up.

A Day in the Life

It looks like this post will be made up of bits and pieces of random thoughts, as I’m a bit fuzzy today.
Finally, a good night’s sleep indicates I’m finally getting over the respiratory infection. Still not recovered from it, but it is fading out and the coughing has subsided.

By making myself post regularly, it is helping with being able to write even when impaired by illness. So I’m pleased with the results of prioritizing writing and hope to get started on some fiction.

My sister, her husband and step kids are arriving tomorrow and the place is a wreck. The two weeks of being sicker than usual were supposed to be devoted to cleaning which isn’t going to happen. Irritating. And messy.

The weather is nice and I want to see if the new Hogue grips I put on my Ruger pistol will help with accuracy. It has helped other owners of the same model. But I’m way too shaky at the moment and need to use my energy for other tasks. If I don’t get the improvement I’m hoping for, I’ll probably have to do some trigger work to lighten the pull. While I love a military style pull on a rifle, it appears to give me problems on pistols.

Why does iTunes importing CD’s default to 128 bitrate AAC when their store doesn’t sell anything less than 256?  I’m glad I moved to Media Monkey Pro a long time ago. FLAC is the best way to go if you have decent speaker or headphones, but 256 AAC isn’t bad at all. I do most of my purchasing at Amazon MP3 these days and take advantage of the cloud storage.

Having become a fan of Jack Wall’s soundtracks for video games, I was happy to score the Jade Empire Soundtrack for $1 from a vendor on Amazon. I wish his soundtracks Mass Effect and Mass Effect 2 had been put out on CD as well. But the CD is in trouble and digital delivery is the future.  And yes, I did buy them digitally and burned CD’s, but I’d like the higher quality.

I got a bicycle pump to modify for cleaning electronics. A spring around the hose base is needed to guarantee air flow and so far the basketball needle adapter has worked well. The setup will be a lot cheaper than buying duster cans.

Democrats arguing that having a debt ceiling violates the Constitution shows what amazing hypocrites they are. All of the talk coming out of them lately is how the Constitution isn’t really law, is out of date, and was only meant to be a rough guideline. Two faced doesn’t begin to describe them, especially since there was a default on federal bonds under Roosevelt in 1933. I have no faith in anyone dealing with the economic calamity that is upon us.

Was John Lennon a closet Republican?  Maybe, but I doubt Yoko was.

Mystery Science 3000 is an excellent medication when ill. Watched Werewolf and Laser Blast among other bad movies with Mike, Joel, and the Bots the last couple of weeks on Netflix streaming.  The new settings allowing lower quality streams has been very helpful on our measly 1 MB DSL.

Also saw John Wycliffe, the biography on John Wycliffe, the man who laid the foundation for the Protestant Reformation. Classic early 1980’s video quality but very good. Many Christians know who Martin Luther was, but how many know the man who first translated the Holy Bible into English in the late 1200’s?

Only Now Are They Getting It

There has been no economic recovery.  People need to get that through their heads.  The stimulus was based on the mad idea that you can spend your way out of debt when you have no savings to fall back on. Needless to say, it failed utterly.

Via The Drudge Report, CNBC has a headline that tries to downplay the content of the article.  What Drudge had up is the quote of the article that should have been used.

We’re on the verge of a great, great depression.

Duh. We’ve been in the opening stages of one for years now.  Smoke and mirrors can only get you so far and it looks like people are finally tumbling to the disaster that is already upon us. Take the latest job reports for example. Captain Ed at Hot Air has a good summary of what is going on with that.  Instead of 177,000+ jobs added to the private sector, 38,000 was the figure for May.

It isn’t surprising that the stock market is down from the latest data. What is surprising is how long it took for them to start noticing there was a problem. But I wouldn’t be surprised if they buried their heads in the sand again.  Look at the tone of the first article begging the bears not to rock the boat. It strikes me as desperate.

A great depression is the best case scenario, in my opinion. We may be seeing the eventual fall of the Modern West.

Odds and Ends

Will be working on a post about the Tea Party in Winona last week and about the Republican Congressional District 1 endorsement convention this past Saturday to put up this week.

In the meantime, a few items that caught my eye the last two weeks:

A follow up on the couple beaten in New Orleans last week by leftwing protesters.  The Palin pin part of it has been debunked, but it is very clear this was a politically motivated attack. The mainstream media shows that they are well beyond simple bias by ignoring this one.  If conservative protesters had done this to a pair of Democrats it would be the overkill story for weeks.

Dr. Helen aka the Instawife has an interesting piece up about how psychologists are moving to social activism in their therapy.  This is damning stuff and worth checking out. The desire to control other’s lives is getting to be the hallmark of the left.

Speaking of controlling people, the FDA is going to start regulating salt in prepared foods.  This serves two goals:  controlling the population even in the most miniscule way and to inflate the number of government employees (they’ll need to hire more to administrate this, of course). Idiocy. Look for more of this under the guise of lowering the government’s cost of providing healthcare.

There is no way ObamaCare can be funded, it is simply impossible.  But the Democrats will keep trying and one way they want to raise taxes is by adding a VAT (Value Added Tax). That hasn’t worked out so well for the Europeans and is yet another way to retard the growth of an economy.  In our case, it would kill it dead. Best quote:

In 2008, the average resident of West Virginia, one of the poorest American states, had an income $2,000 a year higher than the average resident of the European Union, according to economist Mark Perry of the University of Michigan, Flint.

Oh yeah, we really need to emulate those Europeans.

Denial of reality seems to be a big part of leftwing big government.  Over in California they are doing their best to be like Europe and ignore the financial catastrophe they are in.  Entertainment comes first but the piper will have to be paid eventually.

Meanwhile, that unpronounceable volcano in Iceland is still hampering flying and a bigger eruption is possible.  But just how unsafe was it to fly?  Turns out that the grounding was based exclusively on computer models and nary a single weather balloon was sent up to get real data. The religion of computer models has already given us the fraud of man made global warming and now this is going on. Once again reality is being ignored in favor of theory.  I’m afraid science is dead.

The relationship between Israel and the United States is on life support as well.  The hostility of Obama and his cronies toward the Israelis  has been palpable of late and has generated a great deal of concern. I’ve been warning people he is slowly building a case for armed conflict with Israel and been greeted with dismissal.  Better look again, as this refusal by the Chairman of the Joint Chiefs of Staff to rule out shooting down Israeli planes crossing Iraqi airspace to hit Iran. The ghost of Jeremiah Wright is alive and well in the Obama administration.

A Must Read

Read it and weep for the future.

Odds and Ends

So much for posting the other night!  It has been another strange week and I’m trying to recover from a trip to the Minnesota State Capitol yesterday.  My father and a mutual friend went up to visit our State Representitive Greg Davids and watch the House in action.  Having floor passes, we witnessed first hand the very messy process of law making.  I suspect that the general public would have an interesting reaction if they saw how things actually function.

Sitting in on the House Republican Caucus before hand was just as fascinating.  All of it was reminiscent of the activity in a beehive with constituents, politicians, lobbyists, pages, activists, and visiting students bussing around the hallways. I would have liked to stay longer and visit with the pols I’ve gotten to know over the few years I’ve been in politics.  But it was taking it out of me and we needed to get going on the long trip home.  There were also sliders to get at White Castle.  All in all, a good time.

Now for a few links to things that caught my interest around the world:

The Russian Bear has been stirring for awhile and the Brits have been intercepting their bombers quite a bit in the past year.  The Norwegians have been busy doing the same and I get the feeling that Obama’s weak behavior in dealing with foreign countries is getting tested.

The economic and totalitarian fiasco that is ObamaCare will soon reap destructive results in the bond markets. Scratch that, it is already happening. Once again it is a problem magnified by Obama’s incompetence in handling foreign affairs – of course he isn’t any better at handling domestic affairs either.

Locally, we had an endorsing convention last Saturday.  Both candidates for the Republican endorsement ran good campaigns and I think Jeremy Miller will win in November.  The results weren’t a surprise but the margin of victory was.  It bodes well that all three counties went for Miller. Congratulations to Jeremy and I look forward to helping his campaign out.

Rekindling the American Dream

A plan to get America out of the financial crisis.

I normally don’t post material written by others, but when I read this message put out by Hugh Miller I felt it should get more attention.  While I haven’t gotten permission to reprint, the fact he paid money to get into the papers in the first place makes me think he won’t mind.  If he does, I’ll take it down!

REKINDLING THE AMERICAN DREAM

by Hugh Miller, Nov. 30, 2009

Our country is in very serious financial trouble, mortal financial danger, and unless and until we turn it around, quickly,the American Dream will die. But upon reflection it’s even worse than that, for while the death of the American Dream would be tragic enough, the end of America being a safe, stable and good place to live would be cataclysmic.

It’s that serious, and as an impassioned American citizen, very worried about his country, there is an obligation to speak out, as forcefully as possible. Here’s how I see it.

The national debt we are accumulating is both debilitating and unsustainable, and by most standards we are already bankrupt. What this means, in practical terms, is shortly we will not be able to control our own destiny -- others will control it for us. It also means our children, and their children, will not have the same opportunities we had, and in fact will be lucky to find a real job. Further, it means our standard of living declines, rapidly, bringing about extreme and likely violent social unrest. Let me try and explain.

The numbers are staggering and confusing, so I’ll try and state it in terms we can better understand.

Imagine you, Mr. or Mrs. Public, have take-home pay of $27,000 per year. During the year, however, you spend $47,000, $20,000 more than you take home. How can this happen? You charge things you can’t afford and your creditors look the other way. Anyway, you now have a debt of $20,000 you’ll have to pay back over time. You have a real problem, solvable, but unless you get at it, soon, you’ll end up in serious trouble.

Now let’s imagine you suddenly realize you have a second debt of $120,000. That’s on top of the $20,000, so the total you now owe is $140,000. That’s a very big number, more than five times your take-home pay. With a really dedicated approach, and cooperative creditors, your debt is still manageable, but only with extreme discipline and understanding bankers.

Believe it or not it gets worse. Now let’s imagine you’ve just discovered you have a third debt and will owe another $480,000 in just a few years. That’s on top of the $20,000 and the $120,000 for a total of $620,000. That’s more than 22 times your take-home pay, so even if you paid all your take-home pay for 22 straight years you’d still be in debt.

You are beyond out of control; you’re a fiscal catastrophe.

Fortunately most of us don’t live this way, as we live within our means. Unfortunately, however, our favorite uncle does not. No, our Uncle Sam has spent too much in the past, is spending too much now, and will spend too much in the future.

Mr. or Mrs. Public in this example is actually the U.S. government, not with take-home pay and spending in the thousands, which we can all understand, but with take-home pay and spending in the trillions, which most of us cannot understand.

Instead of taking home $27,000, the U.S. government takes home $2.7 trillion dollars. Instead of accumulating debt of $20,000 over the next year, the U.S. government will accumulate debt of $2 trillion dollars over the same period.
Instead of having a second actual debt of $120,000, the U.S. government today has an actual debt of $12 trillion dollars. And instead of discovering you have a third debt of $480,000, the U.S. government has unfunded liabilities, due shortly, of $48 trillion dollars and growing. This would include future payments for Social Security, Medicare pensions, and other obligations.

How can any person live like Mr. or Mrs. Public? The answer is they can’t. How can any government live the same way? The answer is they can’t either. Most Mr. or Mrs. Publics know better and would never put themselves in such a terrible position. Sadly, and certainly shortsightedly, and arguably stupidly, the U.S. government has put our country, and all Americans, in extreme financial peril. Worse, they don’t seem to care.

If we are to solve our problems, we must first understand them, and so we need to step back and realize just how much we have already borrowed from our future and future generations. We are a nation of about 300 million people, and we now have a total debt and unfunded liabilities of about $62 trillion. That’s $200,000 apiece! That’s truly a startling figure, but that’s reality, and that’s the burden we’ve already placed on ourselves. Irresponsible doesn’t begin to describe this travesty.

What should we do? Here is what I would do.

1) First we must immediately come to grips with and try to comprehend the dire financial position we’re in, today. And we must explain that ugly truth to our people, also today.

2) Second, we must stop things from getting any worse. We simply must start living within our means, within our take-home pay, whether it’s $27,000 or $2.7 trillion dollars. In that regard I’d be in favor of an amendment requiring our government balance its budget, every year, except in times of a declared war. Until that happens, I’d balance the budget anyway.

3) We don’t take in too little, we spend too much -- much too much. Since 1999 to the present the U.S. government has taken in, on average, 4% more per year. Unfortunately, during that same time frame, they have spent, on average, 9.2% more each year.

Simply put we must cut spending, drastically, tough and unpopular as that may be. The alternative is worse, much worse. Taxing businesses or other job creators is not the answer and will make the deficit worse while increasing unemployment.

Sacrifice will be required by all of us, and it must be done fairly, and that’s as it should be. But whatever policies emerge must not be done at the expense of growth, for that would be counterproductive. After World War II we also had a huge debt, but strong economic growth made it much easier to handle that debt. And the reverse is true, the lower the growth the harder it is to pay back debt.

4) Any new spending programs should be shelved until we have a real plan for fiscal solvency. It’s like redecorating your living room while a fire is blazing in your basement. Put the fire out first, completely, before you even begin to think about redecorating.

Our first order of business, by far, is to put out the fire in our basement. Unless and until we fully extinguish that fire we won’t have a house to live in anyway.

5) Both the second debts, $120,000 for Mr. and Mrs. Public and $12 trillion dollars for the U.S., and the third debts, $480,000 for Mr. and Mrs. Public and $48 trillion dollars for the U.S., must be dealt with, now. Aggressive repayment and other appropriate procedures, in a bipartisan way, must be implemented immediately. We either solve these problems, together, or we die, financially at least, together. We have no choice, it must be done.

6) Lastly, but certainly not least, we must start rekindling the American spirit, which once was so great, and inspired our ancestors to come here in the first place. That same spirit turned this country into a great world power, largely by way of American manufacturing, American education, and American entrepreneurialism.

Today that would seem far less likely, as that American spirit is missing. We live in a highly competitive global society, and, sadly, America not only has a fiscal nightmare it has also lost its competitive edge in manufacturing, in K-12 education, particularly math and science, and in entrepreneurialism.

While our first order of business is digging ourselves out of our self-inflicted financial hole, simultaneously we must also start solving our manufacturing, educational, and entrepreneurial problems. By doing that we make ourselves globally competitive and give ourselves a chance to win. By not doing so we lose.

Those six things are keys to solving our problems and laying the foundation for a successful future. It will be difficult and painful, but it can be done and it must be done.

I often think of my grandfather, who like many others came here with little more than the shirt on his back. But those brave souls also brought with them a dream, a dream of making a better life for themselves in their new country, America -- the American Dream. And they did. I’ve little doubt my grandfather never heard of, let alone understood, the term entrepreneur. But nevertheless he was one, and mainly by hard work and sheer determination established a business, made life better for his family and his community, and created opportunities for others along the way. He lived the American Dream.

Would he be able to do so today? He certainly was strong and determined and his wife even more so, but I’m not so sure, in fact I doubt it -- there simply are too many roadblocks. Would he even want to come here today? I’m not so sure of that either, and that, to me at least, is really sad.

Minus that entrepreneurial spirit our economy won’t grow, jobs won’t be created, and we’ll start to experience an increasingly rapid decline in our standard of living. If we are to recover, it’s entrepreneurs who will lead that recovery. Accordingly they must be encouraged, not discouraged.

This looming catastrophe hasn’t happened overnight, but clearly it has accelerated rapidly this past year. We’ve trusted our politicians to do the right things, and clearly they’ve betrayed that trust. You might give them the benefit of the doubt by saying they don’t understand the problems, but if that’s the case they should find another line of work.

Rather than playing the blame game, however, and God knows there’s plenty of blame to spread around going back many years, let’s take the positive approach and just start solving the problems.

Quite frankly we have a mess, actually messes, almost beyond description, and they become increasingly unsolvable the longer we wait. We must start attacking them today. But it’s going to take a unified, bipartisan approach, starting right now.

From a personal perspective I would greatly prefer not to be the one highlighting these extremely unpleasant issues. However as an American citizen, very worried about his country, and very worried about the future of his children, and someday their children, and all other people’s children, there is no choice -- it must be done. There is, in fact, an obligation.

We can rekindle the American Dream, and we must, but we must get going. Our grandfathers and fathers would want it that way. Our children and grandchildren will be forever thankful.

Hugh Miller
President and CEO
RTP Company

What Recovery?

I find it fascinating how government agencies such as the Commerce Department fudges numbers for media consumption. They put out projected numbers that are usually rosy and then revise them downward after the media has forgotten about them. Somehow we’ve gone from a 3rd quarter figure of 3.5% growth to 2.8%  to 2.2% in three months!

Captain Ed has a great dissection of the announcement and explains how even the 2.2% is inflated by the Cash for Clunkers and new home owners tax credit stunts. Without those the growth was 0.7% and I have to wonder if even that happened. I don’t think things can be hidden forever when people are losing jobs and pay raises. 

Then there are the disastrous home sales figures that came out today.  A rise of 6.2% in sales was expected for November. Instead, they fell 11.3%.  I think this is the quote of the article:

November’s performance was a “hangover from the tax-credit-induced binge in the July thru October period," Peter Boockvar, market strategist at Miller Tabak, wrote in a note.

I think both ugly figures show the perils of government based stimulus efforts.  All the Feds can do is create a short term artificial bounce and that obscures the systemic problems at the core.  It looks good politically and might even get a country through a small recession, but it does nothing to solve the underlying weaknesses.  In this case, it may have done more harm by generating false expectations -- if not more credit bubbles.

Adding to the problem is the way the media portrays sales as increasing by only talking about month to month sales.  Comparing sales by year to year in the same period, things are not good.  Even the anemic 1.3% growth for November sales is from October.  This Gallup survey says holiday spending is actually down 22% from 2008, which was considered a very bad year. If the consumer is all we have to pull us out of the recession, we are in very bad trouble.

It seems we have a great many proverbial Nero’s fiddling while the American economy burns.  Bluntly, it probably already too late to do anything.  We are in for another major fall in 2010.

Economic Worries in Europe

Plus a Black Friday Update

There are a couple of worrisome reports from the Telegraph today, one about Germany and the other about the UK.

Germany

Chancellor Angela Merkel has proposed another bank bailout in Germany as part of another large economic package.  This is not a popular idea with the public and I sense a hint of desperation involved.  Another credit contraction has been predicted with 90 billion Euros of bad loans being written off in 2010.

A survey by Munich's IFO institute revealed yesterday that lending conditions in Germany had tightened sharply in November. Some 53pc of large manufacturing companies found credit hard to obtain, suggesting that the problem has spread beyond small firms without access to the bond markets. "The financing situation of firms remains critical and poses a risk to economic recovery," said the group's president, Hans-Werner Sinn.

If the problem is spreading to the larger industries in Germany, that spells trouble for all of Europe because they are the manufacturing engine of the EU.  What worries me even more is the solution Mr. Sinn proposes:

He said it was an error for the government to buy toxic debt, urging Berlin to direct equity stakes in the banks through partial nationalisations.

Oh great, fascism in Germany, what could go wrong with that?  It makes bailing the banks out look good by comparison.

Interesting stuff, but the quote of the article involves something I think is happening in the US as well:

Volker Treier, chief economist for the German chamber of industry and commerce (DIHK), said worries were mounting among Mittelstand family firms. "The real test has yet to come: the drastic decline in sales has not yet shown up in balance sheets," he said.

I have to wonder what our balance sheets really look like. Creative accounting may be hiding a lot of bad news.

United Kingdom

Over in Britain, Morgan Stanley has warned that the UK may have a massive debt crisis next year. The US company’s prediction is that the economy there will collapse completely, taking the pound sterling down another 10%. Oddly enough, they think the dollar will go up, so I am taking their analysis with a shaker of salt.

Quote of the article:

While the report – “Tougher Times in 2010” – is not linked to the Dubai debacle, it is a reminder that countries merely bought time during the crisis by resorting to fiscal stimulus and shunting private losses onto public books. The rescues – though necessary – have not resolved the underlying debt problem. They have storied up a second set of difficulties by degrading sovereign debt across much of the world.

Boy that really gets to the point.  All these stimulus packages and bailouts have been stall tactics with long term negative consequences. When all is said and done, historians will look back and point to them as madness.  Well, except for utopians who think government solves everything, I don’t think that will ever go away.

Black Friday in the USA

Here in the States, Black Friday weekend sales were disappointing as while there were more shoppers, they each spent less. Unemployment and under-employment still loom large with no relief in sight. Personal debt is at suffocating levels too. Is it any wonder people are spending less?  Hoping the consumer will bail us out is ridiculous as long as there is high unemployment.

Wish I could find some good economic news for the future.

Black Friday and a Hint of Black Tuesday

Another day and more bad economic news.

It is the day after Thanksgiving, when minds turn toward shopping for Christmas presents that often go to oneself. It will be interesting to see how all the sales go, some stores and online firms have had them going all week already. My gut feeling is that they will be down because high unemployment combined with overextended credit means no money to spend.  Personally, I can’t afford gifts or even to mail Christmas cards this year, unless I find a way to get extra cash – which is very hard for a chronically ill disabled guy.

But I doubt I’m alone in this boat.  One of the shoes I’ve been predicting to drop has been the hidden problems with commercial real estate loans. Nobody has been more ambitious in growing their commercial land than Dubai and things have come to a head there.  The city state of Dubai has asked for a suspension of their loan payments for six month and that has spooked the world markets today.  UK banks are particularly at risk due to this, but the ripple effect looks to be large and spanning the globe.  The Dow Jones opened with a 200 point slide before stabilizing around 150 points down.

Meanwhile, the dollar continues to slide.  I wouldn’t consider Japan to be that strong an economy due to its going into deflation. So if the US dollar is so weak against it what does it say about the US economy?  We will be seeing considerable inflation as this continues and that in turn will depress domestic spending even further.

Oil is down as well, going below $75 a barrel due to the Dubai crisis. I remember when a crisis was a much bigger thing, but that is the media for you.  Gold and precious metals are down for the same reason but that will be temporary as foreign central banks move out of the US dollar.

All the ballyhooing going on by various governments that the recession is over seems to be more propaganda (and wishful thinking) than reality.  The instability still remains and the world market reactions reflect it. With commercial real estate investments set to blow up and only a lull in the home loan failures, much will go wrong with in the next 10 months.

Shocking Unemployment Map

Watch this animated map of unemployment shown county by county for the entire US and weep.  It starts out before the recession officially began and slowly becomes a tidal wave of purple and dark gray.  Locally, Houston County went from light orange to purple in two years, which is 4.0-4.9 % to 7.0-9.9 %.  Won’t be long until it is mostly dark for the country.

The Bears Are Coming Out

123 banks have failed so far this year and despite the run up in stocks things are looking worse as the effects of the stimulus end.  Check out this post at The New Editor and watch the video of Meredith Whitney talking about the stock market.  Warning:  her analysis is not a happy thing to watch and she points out that there is no reason for the stock market to be going up.

I’ve long thought the stock market was divorced from reality and is based on the emotional attitudes held by gamblers. The fact that consumer credit has contracted more than during the Great Depression is a huge warning sign that we may be in an unprecedented economic collapse.  That this is being ignored by the investors is amazing.

Over in France, the bank Société Générale is warning their clients to prepare for a possible global economic collapse in the next two years. Basically the idea is that all the problems of the banks have been transferred onto the governments making them insolvent in turn. Quote of the article:

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

No, it isn’t possible and a lost decade is very possible for the entire planet, if not lost decades.

In previous posts, I’ve written about gold going up and that it isn’t a good sign. Martin Hutchinson at PrudentBear.com points out that the last time gold ran up so quickly in value was before the economic woes in the early 1980’s.  Only it is a lot faster this time and Hutchinson predicts $2000 an ounce will be hit in six months time. His belief is that once gold went over $1000 the point of no return was reached and that a second recession is guaranteed.  I’d argue that we never got out of the first one, that any recovery has been an illusion generated by shuffling nonexistent money around.

Once again, I wish I had good economic news to report.  I think what we are about to face is going to make the Great Depression look good by comparison.

So How’s That Economic Recovery Going?

A lot of media spin has been about how we are recovering economically despite the lack of jobs. After all, the stock market keeps going up and it is the barometer of the economy.  At least that is what people assume, but there are many other indicators of economic health.

It isn’t often you see the words “world gold supply runs out.” In fact, I don’t recall ever seeing them until this article at The Telegraph. With less retrievable gold ore in the ground, it is going to be harder for nations to convert their financial reserves to hard metal.  Output is plunging at the mines, so the rush to invest in gold has a problem – there isn’t enough of the precious metal to go around.

That’s always been an argument I’ve had with goldbugs, that there isn’t enough of the metal to cover the currencies of the world. There is a possibility that silver will go back up to make up the slack, but money is an illusion whether it be made of metal or paper or electrons floating in computers. Faith is what sustains it and gives currency value. So what happens when you can’t convert the currently held currencies and they dwindle into nothing?  We may find out.

Speaking of running out of things, the FHA is running out of cash and may require – you guessed it, a bailout from the government. Oh yes, the housing market is still in trouble and there is fear they can’t cover loans due to growing unemployment. The critical quote of the piece:

The FHA’s cash reserves have plummeted to $3.6 billion, compared with $685 billion in outstanding insured loans - a ratio of 0.53 percent that is far below the 2 percent required by Congress and a fraction of the 6.4 percent reserve ratio in fiscal 2007.

Banks are usually closed down if they have that kind of ratio, so this is not good. With no signs of unemployment going down, we’ll be seeing more of these loans defaulting. So there will be a bailout using tax payers’ money.  Except we don’t have enough because revenues are down. But China will loan us the money, right?

Well, China is not very happy with the US right now.  They rightly have figured out that the weak dollar and low interest rates have dangerously ballooned stocks and property investments.  What we don’t need is more bubbles that will burst and that is precisely what we are getting. 

Not that China is really helping things themselves.  Ambrose Evans-Pritchard has an interesting and somewhat alarming commentary on the problems surrounding China’s exporting overcapacity.  We have too much supply and not enough demand from them so they are not taking up the slack from the West. Read it.

Fears of a double dip recession abound, but I still think we never came out of it in the first place.  It was just a plateau in the fall and we are going to see darker days before anything truly gets better.

One kind of darkness has already fallen on Australia. They went with a cap and tax scheme to lower carbon emissions and electricity prices skyrocketed. People can’t afford their bills and are being cut off with retirees being hit hardest. That will strangle their economy in no time flat. Right now they are experiencing what we will if similar legislation is enacted.

I wish I had good news to report.

Misc. - the Useful Abbreviation

One has to love the ability to type “misc.” instead of miscellaneous(which is only correctly spelled here due to Windows Live Writer’s spellchecker).  It is such a useful term too – it covers everything!

Yes, I’m making an excuse to post random unconnected links to stories interesting me today:

Read about stocks jumping to new highs on Yahoo and once reading the reasons for it felt vindicated in thinking the “recovery” is all about banks and the political class – not the peons.  They love the dollar collapsing; such wonderful patriots they are.  They also love blowing bubbles and we are going to see more pop with this irresponsible behavior.  People invested in stocks don’t care about anything but reaping a quick profit and that cannot bring about any long term improvement.

Twenty years ago, the Berlin Wall fell and the end of Communism in Europe had begun. Lech Walesa played a critical role in this and the former leader of Solidarity says some interesting things in an interview with Spiegal Online. His warning to the politicians is one that should be heeded.

At PajamasTV, Bob Owens has a nice rant only a gun nut will appreciate – so of course I enjoyed it a great deal.  It has to do with the “cop killer” label put on the FN Five-seveN (oy, the marketing gimmick) 5.7mm pistol in the reports on the Fort Hood shootings.  This is a pistol I would love to own as I’m a fan of velocity over mass, but Owens’ arguments are sound and I have a heavier caliber pistol for the same reasons.  I’m grateful Hasan fell for the hype, things could have been far worse.

People scoff at computer virus threats while disregarding the legitimate threat.  Frankly, the chance that your PC could be given a virus that downloads child pornography is frightening.  So if anyone reading this doesn’t have a firewall and antivirus program on their PC, please install one pronto!  Being framed for something as depraved as this should be motive enough to add some security.