Uncertainty

With far too much of the world gripped in a panic induced by a pandemic, I've been contemplating how poorly the vast majority of humans deal with uncertainty in life. The following ramble came out of that exercise.

Fear of the unknown has been considered the most potent of fears experienced by humans. A microscopic virus cannot be seen by the unaided eye with only its casualties left behind to be witnessed as evidence of its passage -- unless you work in a lab analyzing test samples. For all intents and purposes it is almost supernatural to the lay person, resulting in an intense primordial fear being felt by more than a few and far too many.

The most dangerous problem with intense fear is that it is intrinsically irrational and furthermore generates deeply irrational reactions that really can't be called thoughts. Feeding into that is another fear that is common and lurks below the surface in a constant fashion: uncertainty. Often manifesting as anxiety over change, it can be debilitating all by itself.

Now add the normal fear of death and you have a cocktail of genuine madness that is capable of being spread more quickly than any virus. If that wasn't enough, the continued political actions based on Rahm Emmanuel's famous line, "You never let a serious crisis go to waste," has generated genuine fear of government infringement of civil rights here in the United States. Since the upper middle class to wealthy so far aren't affected by job loss the way middle and lower class voters have been, a huge disparity in economic impact is exacerbating the situation.

There is a terrible social and economic disconnect between the highly educated classes and everyone else being fully revealed by this. Not only is there no empathy, there is zero sympathy exhibited toward the struggles of the poorer as they suffer economic devastation. Instead, vilification is the order of the day as the lock down turns into an open class struggle.

When people are oscillating from fear of death to fear of losing their homes to fear of having their rights taken away to fear of anyone disagreeing with them, you have truly reached uncertain times. The uncertainty is inescapable, not even through binge streaming television as has become the big thing to do -- with so many trapped at home now.

It's driving people crazy and making them meaner.

Why I Am Voting for Mitt Romney

Earlier this year, I would have told you that I was voting against Barack Obama because I didn’t expect to have a candidate I could vote for.

Four years ago, America faced a choice that would decide whether the country would continue on or embrace change while in the middle of a crisis. When the latter was decided on, many voters assumed that change for change’s sake was a great thing. However, many did not understand anything about Obama because much of his past was buried deeply by the main stream news media. As a result, change did come and things got far worse.

Change for change’s sake is a teenager’s concept of improving life. The results of four years of President Barack Obama has resulted in things listed in this post by anonymous blogger Zombie. Please read them since they include a great deal that you will never hear from the national media.

Germany Removing Gold From the Fed

German courts want an auditing all its gold holdings and has begun moving 50 tons a year from the Fed to Germany. This is very interesting because it indicates a lack of trust in the security of the banks. It also shows the German government does not trust the current economic conditions to get better – or stay the same. Fascinating times.

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…

Dueling Banjos

Sometimes it seems like politics is all about who shouts the loudest, but the reality is that the winner is often the one allowed to shout the longest. There is a limit to how effective such tactics can be and woe be onto the ones who try to base strategy on it. Here in Minnesota, Governor Dayton found out that lesson the hard way with a state shutdown calculated to catapult the DFL into retaking the state houses in 2012.

Instead of getting widespread support from the public, he got an earful from the proles in a tour the last week. It is no surprise even union members wanted a deal done and the budget passed now. Why?  Most union members are public employees these days, that’s why. They were the ones suffering the most. While a cutoff of beer to Minnesota may have been a factor, this is what most likely caused Dayton to blink.

Now there will be a passing of the last negotiated budget, which is still the largest increase in state history. A victory, but how much of one?

Meanwhile, President Obama continues to demagogue the debt ceiling and threaten the disabled, seniors, and military veterans with cutting off their August checks. Will he blink or is he bluffing? If he isn’t bluffing, the country will begin tearing apart very quickly. Take advantage of every crisis is the motto of this administration, but there is that pesky 2012 presidential election coming up. So who knows what will happen?

But I’d like somebody to ask the President if he’ll keep paying federal employees while he’s starving the elderly and disabled. Not very likely to be asked, is it?

I don’t think the disconnect between the ruling political class and the masses has ever been bigger. With the political class isolated from the day to day reality that the average citizen experience, they have no way of understanding what is at stake. A complicit and equally distant media aren’t helping when they should be bridging the gap. That’s a disaster.

Then there are Europe’s economic analysts, mad at the GOP because they want the debt limit raised in order for countries to buy more U.S. debt. They insist the issue of default be kicked down the road while acknowledging it is a problem. Why is that so important to them?  They want a safe haven for money to move to and apparently have no real faith in the European Union despite what they say publicly. In other words, the political class there wants someplace to stash money before the Euro collapses. Talk about a twisted mess!

It is little wonder that the people are losing faith in government and trust no one. That’s the biggest danger to maintaining order there is. The political class appears to be oblivious to this, especially on the Left. People compare Obama to Carter or Hoover, but perhaps we should be thinking about Nero.

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.

The Shutdown

The big news in Minnesota is the state government shutdown due to an inability to get a budget passed. As I expected, the media is backing Governor Dayton and one of the main line of attacks is hammering on incessantly about the closure of state parks during the popular camping season of the 4th of July weekend. All very predictable and probably very effective in swaying public sentiment. Portraying the Republicans as only cutting spending when they actually presented an increase in spending is all part of the dishonest game.

I have to give credit to the state Republican leadership who didn’t cave in despite knowing this was exactly what Dayton wanted, contrary to his protestations to reporters. The surprising thing is how many Republicans I know who didn’t think the shutdown would happen. When a reversed version of this happened while Pawlenty was in office in 2005, the Democrats used it to great advantage to vilify the Republican party and it was believed it contributed to the rout of the GOP in 2006. Of course Dayton was going to return to that playbook!

In the end, there is a high probability that doing the right thing on holding back spending will damage Republican chances statewide in 2012. The power of the media is still great and that can’t be ignored. For all the talk of how the new methods of communication like Twitter and Facebook have changed things, the old partisan media is still where most people get their information. However, there is a lot going on nationally that will effect the local races, especially the economy. That keeps things unpredictable for the moment.

Frankly, I don’t think the public has the intestinal fortitude to deal with the extensive cuts that are really required and we will see Minnesota and the nation collapse into economic ruins. Cynical pandering and class warfare are already being used to buttress the Left’s insane devotion to Keynesian economics. Spending when you have no savings will never get a person, a state, or a nation out of debt. So all of that stimulus into the economy just made things worse and yes, both political parties are to blame for it. You would have thought the lessons of the 1970’s would have been remembered.

Dark times are ahead, far darker than most expect because it is a systemic problem with how our government “works.” People look to the demonstrations and riots in Europe while wondering if it can happen here. It can and could get much worse with the Left’s history of violence.

I would like to be wrong about this.

Comic Books and Economic Realities

Back in high school, I was a serious collector of comic books. Financial problems for the family compelled me to sell off my collection for a pittance in 1987 and that always haunted me.  But after reading this article at The Weekly Standard, I don’t feel so bad now.

It is a very good article on the perils of speculation and what happens when the bubble bursts. The lessons of it apply to many types of industries and even government programs.  Loose credit is a dangerous thing when it artificially boosts business with nothing concrete to back it up. 

The money quote of the article:

As painful as it was for some of us, the comic-book bubble teaches two important lessons. First, bubble-mania is not always the fault of buyers and sellers. Sometimes it’s caused by intermediaries. Second, sometimes markets don’t “come back.” People who owned blue-chip comics took a hit in 1993. People who owned modern-era comics were wiped out, the value of their collections never to return.

That’s something to keep in mind. The same thing happened to baseball card collectors around the same time period. As mentioned, housing may see the same results and that will take a lot of banks down – not to mention people’s futures. Go read the whole article.

Oh and I had that #1 issue of The New Teen Titans too.

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.

State of Disunion Speech

Well, that was a dismal performance last night.  Watching the talking heads on PBS try to spin the State of the Union speech being a great performance was to view an exercise in futility, as even Mark Shields admitted the speech wasn’t one that would be remembered in history.  I didn’t catch the entire thing but what I saw was a vintage Obama campaign speech.  That means it was devoid of substance, filled with lies, and highly partisan.

The AP put out a fact check that took the President to task on multiple statements and promises he made during the speech last night.  All are valid points and I’d like to add the one that managed to really anger me:  the claim to have supported the protesters in Iran.  Those of us who have followed the protests there have been frustrated with Obama’s refusal to support them and weak criticisms of the ruling dictatorship he wants to negotiate with so badly.

Despite the voters in Massachusetts rejecting Obamacare in shocking fashion earlier this month, the President showed himself to be no Bill Clinton.  There was no attempt to triangulate, or at least no intelligent one, by moving away from health care “reform.” Instead, Obama showed himself to be utterly committed to passing that corrupt bill no matter the cost.  Nobody is buying that it will lower costs, Champ.

Of course, he whined constantly about inheriting all the problems and this shows the Democrats inability to do anything other than “blame Bush.” That isn’t going to work anymore and will be completely without effect by the elections in November.

Another thing jumped out at me was when he announced the spending freeze and that it wouldn’t hurt people today because it would be implemented next year when the economy was better.  No applause when he made his typical “stop for the adulation pause” and scattered laughter followed.  Mr. Cool lost his cool and glared at Congress and ended up evoking more laughter.

Empty promises are the medium politician work with, but this one was such a whopper that even a chamber full of pols couldn’t believe it.  Obama believes everyone is so stupid that they’ll buy into the ridiculous concept of making an emergency cut in funding after it is no longer needed!  That way it won’t hurt!

Oh, please.

More people are waking up to the fact that President Obama is a con man who doesn’t really care about the people of this country.  If he keeps throwing out farcical pronouncements like the spending freeze, his only supporters will be the diehards in the Democratic Party.  It is already getting dangerously close to that as recent special elections have shown. By the time November rolls around, the Democrats in Congress will be in dire shape.

But we are stuck with this fraud in the White House for another three years and he will do a great deal of damage through the bureaucracy.  Barack Obama is simply the wrong man at the worst possible time to helm America.

 

ADDENDUM

I forgot to mention the direct attack on the Supreme Court that was made to their faces.  That was not a Presidential action and showed just what a demagogue Obama really is. Trying to cajole Congress into writing what would be another unconstitutional law to override the SCOTUS decision freedom of speech shows what disdain the so-called Constitutional scholar has for the Bill of Rights.  It also made clear how little value he has for the separation of powers across the three branches of government.

Barack is not a class act.

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.

Another Debt Crisis or Two

Ran across a few interesting economic pieces last week, but didn’t feel well enough to write about them. Fortunately, or more accurately unfortunately, they still apply. I’ve been warning that bad commercial real estate loans would be the next shoe to drop.  We’ve seen that happen in Dubai, which I’ll write about further on.

But another debt problem is brewing and it will dwarf the real estate bubble.  That debt problem is the debt of sovereign nations, with the United States poised to be in major trouble.  Earlier in the year, the federal government had problems with some of its bond auctions not selling.  Now a new complication has entered the picture.

Ralph Benko’s op-ed at The Washington Examiner lays out the details of our debt servicing problem.  I was surprised to find out that we are only giving 1-2% interest on treasury bonds.  What country would want to buy those from us when inflation could easily turn them into losses rather than investments?  Something has got to give.

Quote of the piece:

The federal government currently pays, according the article, $202 billion a year in interest. White House estimates that interest payments will rise to $700 billion a year in 2019.

That doesn't count the projected catastrophic increases in entitlement costs in Medicare as the baby boomers retire. And you thought the American people were already shellshocked!

I don’t know, I think there is a point where the barrage of bad news ceases to register emotionally.  How low can we go is the question I ponder reading the news anymore.

Meanwhile, Greece is in a financial meltdown that is spooking investors in Europe.  Credit agencies have been making noises about what’s going on, even lowering ratings for Greece.  Quote of the article:

Analysts and credit-rating agencies are warning that countries with already high debt levels have rung up historically large deficits during the financial crisis, with tax collection plummeting even as public spending has soared.

The same principles that apply to individual debt apply to nations as well, duh!  Yet the idea of more spending by governments has taken such a firm hold on policy that increasing deficits are the norm rather than the exception.  But when it is someone else's economy they have no trouble in telling them to make cuts.

Instead, most officials in Europe are pushing the Greeks to clean up their own mess by making tough cuts.

"Considering the gravity of the situation, I am confident that the Greek government will in the near future take the courageous and necessary measures required," European Central Bank President Jean-Claude Trichet told the Belgian economic dailies L'Echo and De Tijd this week.

I can’t decide if it perverse hypocrisy or an indication the other European countries don’t have any capital they can infuse into the Greek system.

The Dubai financial crisis has been a problem that rippled out all the way to Scotland.  Now their neighbor, Abu Dhabi has come to a short term rescue to the tune of $10 billion.  It looks like a temporary solution that doesn’t address the long term defaults that may happen. After all, it a $80 billion debt that still need to be addressed. 

Buying time is a scary part of solutions offered by debt ridden governments and is becoming all too common. I think the truth is that nobody knows how to deal with what is happening world wide and domestically. 2010 is going to be interesting.

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.

Weekend Links: The Economy

It was quite a week for developments on the economic front.  I wish I could report it was good news.
First off, official unemployment hit 10.2% after October’s figures came in.  This indicates things are getting worse for the American worker – not better. Ed Morrisey at Hot Air has an excellent post on it including an updated Romer graph of what the stimulus promised to do versus what actually happened.  We are off the chart now.  Also from Ed is a post with links of what jobs were really saved by the stimulus, starting with California.  Hint: the state & federal governments aren’t honest.
Doesn’t get much more pointed than what India’s finance minister said when their central bank bought 200 tons of gold in order to reduce dollar holdings.  What did he say about the economies of Europe and the US?  That they had “collapsed.”  Asian countries are running from the US dollar now.
Makes the wrangling over how much to increase health care look silly if there won’t be any money at all.  Still, the Republican health care plan was rolled out Wednesday after having the CBO (Congressional Budget Office) go over the figures.  It would actually reduce the deficit by $68 million over a ten year span.  Sounds good compared to the trillion dollar increase in debt from ObamaCare.  Still, how will any of it be paid for? There is no answer on that, because there is no way to!

UPDATE:  I was wrong, the Democrats plan isn't a trillion dollar outlay, but $3,000,000,000,000 plus over 10 years according to the CBO! The Heritage foundation estimate comes in at $2.4 to 2.6 trillion.  This is insane.