The End of the Road- Default or Delay?

Today’s headlines are daily of our government trying to reach an agreement to raise the debt ceiling.  What seems like intense efforts back and forth is in reality only political posturing for the next election, unfortunately at the expense of the American people.  We are now set up for a massive decline in the stock market, a surge in cost of living, a scaling back of our freedoms, and the end of our senior position in global leadership.  Our politicians, especially in congress- have seen the largest jump in net worth over the past couple of years in the history of our country.  Why is that?  How are these politicians getting rich while the rest of America is getting poor?  The answer lies in the fact that our democracy is now a pseudo-democracy.  Politicians no longer answer to us, the citizens of this great country.  Instead, they are working for Wall Street and big business. 

You may say, “How do I know this?”  After countless bail outs and stimulus packages at the taxpayer’s expense flooding Wall Street and big business, you can get a clear picture where loyalties lie.  It’s hard not to know who our politicians are working for when people like the Jobs Czar appointed by President Obama himself- Jeffrey Immelt from GE, decided that he is moving GE’s 115 year old X-Ray business overseas to Beijing with plans to invest $2 billion across China over the next few years.  Immelt can be credited with shipping tens of thousands of good jobs out of the United States.  As head of Barack Obama’s “Jobs Council”, why is this leader sending our jobs overseas?  Is he really working for the American people? The answer is a loud and audible NO!  Over and over again, politicians and senior elected officials campaign to bring prosperity to the American people while this priority really falls at the end of their true list of objectives.  At the end of the day, nothing has changed in America.  Wall Street and big banking continue to rule the day and call the shots.

This is evident in their handling of this debt ceiling crisis.  There have been threats by Standard & Poor’s to downgrade our debt rating here in the U.S. if we don’t raise the debt ceiling.  Who do you think controls Standard & Poor’s?  The average person probably doesn’t realize that Wall Street is paying Standard & Poor’s bills.  We’ve too soon forgotten that these same government sponsored rating agencies committed massive fraud by covering up improper ratings after the fact which greatly contributed to the financial crisis of 2008.  These recent threats are simply a ploy to convince the American people that we MUST raise the debt ceiling.  In reality, raising the debt ceiling is the worst thing that we can do for this country. 

At the same time, Wall Street is calling for cutting Social Security.  Well wait a minute- why is this at the top of the chopping block?  After all, isn’t this money coming out of our paycheck time after time to guarantee us assistance upon retirement?  This isn’t a government hand out, but rather this is something we have paid for.  As we all know, it is a Ponzi scheme on a grand scale, but regardless, why is this first to go.  It seems our government would rather stiff the American people, than the banks- interesting isn’t it?  It comes back to a lesson I learned long ago- if you want to figure out what is most important to a company, look to where they spend money.  Follow the money trail.  If you want to see what is most important to our current federal government- look at where they are pumping the money.  I can tell you, that it is not you or me that is of importance. 

Looking at geopolitics- I’d say we are heading for very difficult times ahead in the world.  The entire western world is on the verge of default, which could plunge these civilizations back in time.  China on the other hand is a rising giant.  What is the one way that the western world can keep China under control somewhat?  Looking to the west, we receive most of our oil from Canada, Mexico, Venezuela, and a long list of oil exporting countries.  While we do import oil from the Middle East, they aren’t our core supplier and we only depend on 20% of our oil from that region.  China on the other hand relies on the Middle East for 62% of their oil, along with many other Asian countries.  NATO and the United States have really rattled the Middle Eastern world over the last 10 years, taking over Iraq, Afghanistan, and establishing major operations in the region.  Then we saw more recently the involvement in Egypt, and the war in Libya which I might add is completely ridiculous, and indicates a possible strategy developing.  That strategy being- control the oil in the Middle East, and keep China at bay.  Unfortunately, this strategy could have disastrous worldwide consequences seen when China and Russia say, enough is enough.  The extent of the consequences can’t even be known, as China is extremely secretive about their military capabilities.  What we do know is that they do have the largest army in the world.  The current conflicts in the Middle East alone will have a major effect on oil prices over the next few years sending them far north of where they are now. 

But here we are at the end of the road.  We have two options, raise the debt ceiling or default on our debt.  Both options have disastrous consequences.  Should we raise the debt ceiling, we are looking at the injection of more funny money into an already over inflated system to cover our deficits.  This leads down the road to massive inflation, surge in cost of living, families being forced to starve, and the robbing of our wealth.  Americans will wake up poor and homeless- just as Thomas Jefferson predicted many years ago.  This will devalue our currency, and possibly even cause the dollar to crash, plunging us into a societal situation that is so dire, it will shake every man, woman and child to their core.  I say this because the culture of our country has become one of selfishness, violence and entitlement, rather than the principles that our country was founded upon of hard work, giving, and community. 

Should we default on our debts, we are looking at the beginning of the greatest depression the world has ever known.  We would see the largest reduction of government in the history of our world, skyrocketing unemployment, and a crashed stock market.  It will take many years to recover from a default, and Americans would lose many things that they have worked hard to attain in order to merely feed the family.  This doesn’t sound too enticing, but it is the better choice of the two options.  Allowing a default, would force our country to become fiscally responsible.  It would force government to balance the budget.  It would allow a correction in the markets by allowing failing companies and corrupt banks to actually fail.  It would give us a shot at becoming a great nation once again someday. 

Either way, our nation is on the verge of a fall.  I’d prefer the default, and I actually worry that they will come to a debt ceiling agreement.  These destructive policies will lead us to the end of our country as we know it.  Unfortunately I’m a realist, and I realize that due to political pressure, government will somehow or some way come to an agreement to raise the debt ceiling yet again.  That is why I buy commodities and precious metals.  I don’t buy because I’m uncertain about the markets or what is going to happen, but I buy because I’m certain that government is going to get it wrong yet again, and continue easy money policies.  I’m certain that the dollar will continue to decline and become debased, and I’m certain that the stock market is nothing but an inflated train wreck waiting to happen.  I buy because of certainty, not uncertainty.  I urge you to do the same.  That’s all I have for today. 

John F. Haettich- 7/29/2011

Where’s the Growth?

Here we are in mid-July, and we are starting to see the true colors of our new economic reality.  The funny thing about truth, you can hide it for so long but eventually it always shows its face.  The truth of our economic decline is slowly becoming evident to the public at large.  The first piece of evidence can be found in jobs.  We continue to lose over 400,000 jobs per week with very low job creation numbers.  One clear way to indicate that an economy is growing is jobs growth.  Our job market continues to be on the decline, but hey, the economy must be growing because Obama says so.  The truth- our economy is shrinking just like the brains of those that regularly watch TV shows like Jersey Shore.  We are in a depression, regardless of how well our government can fudge GDP numbers.  Even Tim Geithner came out recently saying that Americans will be experiencing economic pain that has not been felt in our lifetime.  Of course he didn’t mention that he is one to blame.  It’s interesting how our leaders make these key decisions on economic policy, but the result is never their fault.  There is always something or someone else to blame.  Where’s the accountability? 

CNN Money conducted a recent survey of 27 economists, who are in general predicting that GDP growth in 2011 will be 2.6%, and will rise to 3% in 2012.  I ask these economists- where’s the growth?  The only areas where I’m seeing growth are in deficit spending courtesy of the federal government, growth in our money supply courtesy of the Federal Reserve, and growth in our unemployed population.  Under the current policies that are in place- these results are “change we can count on.”  We’ve seen the illusion of growth in the stock market over the past few months as the QE2 program came to an end, but again we are seeing the market downslide as the easy money isn’t available any more.  I expect that to change soon, but until then the market will decline.  The official unemployment rate has risen to 9.2%, of course not including discouraged workers, and PT workers looking for FT work.  Our intelligence is constantly being insulted by mainstream coverage of the present situation, and it seems to be politics as usual in Washington, and in state and local governments. 

Gold is again on the rise along with silver.  Governments created the perfect storm for a bull market in metals.  Keep in mind, precious metals usually have a very weak performance during the summer months- yet Gold isn’t looking so weak right now.  The present additional money supply, coupled with the news of country after country on the verge of debt default and collapse are ideal for the precious metal markets.  The latest news of Italy and Spain on the verge of debt crisis is especially significant, in that these are some of the bigger European players in the EU.  The world doesn’t know if the EU can afford to bail out Italy, that is, without drastically devaluing the Euro.  Too many things are going wrong with governments and fiat paper currencies which of course cause the wise investor to hedge in metals and real assets. 

Across the board, we are seeing stock markets decline along with bond markets and fiat currencies, so where can you protect what you have?  You can’t make economic predictions without looking at geopolitics.  I believe this is the mistake of most economists that seem clueless on what is next to come.  When you look at what not only our government is doing, but other governments worldwide, and you see debt exploding causing currencies to be devalued, you can be sure that people will start flocking towards real assets- commodities, food, metals, oil, etc.   We’ve had a taste of this in 2010 and early 2011 where we witnessed rising commodities prices as a result of a growth in money supply, and fear in the markets.  I’d argue “we ain’t seen nothin yet.” 

When you boil a pot of water, first you see little bubbles forming at the bottom of the pot.  They don’t rise; they just sit there for a bit.  As the water gets hotter, those bubbles get a little larger, and small bubbles begin to surface, but only here and there while the surface of the water is still intact.  When the water reaches the boiling point, huge bubbles engulf the water, and the surface of the water becomes violent and extremely turbulent.  This is how I view our world economic situation.  We’ve seen the small bubbles form at the bottom already in the form of 9/11, the mortgage crisis, the credit crisis, the corruption crisis beginning with Enron, bank failures, huge corporate failures like GM and AIG, news of Ponzi schemes, greed, and failing entitlement programs.  We’ve seen the small bubbles beginning to surface in 2008 with the recession, TARP, the bail-outs, QE1, QE2, skyrocketing unemployment, rising commodities prices, Middle Eastern unrest, the overthrowing of Egypt, the NATO war in Libya, and the soon to come war in Syria.  These are big events motivated by geopolitics and economics, but keep in mind; these are only “small bubbles” beginning to rise to the top.  As the debt problems spiral out of control and currencies fail, this is when you will really see some of the big bubbles and turbulence surfacing.  It isn’t until then that the people will realize that they’ve been duped.  It isn’t until then, that unrest will be given a new meaning.  When our money problems become evident and currencies fall, the order of society as we know it will be shaken.  It isn’t until then, that we will see a boiling point.  We are at risk of reaching the boiling point, if our government fails to address and fix the economy by cutting this insane deficit spending and allowing the market to act as freely as possible.  If you don’t have real assets when the pot begins to boil, have fun bathing in that hot water. 

As it sits, the federal government is trying to raise the debt ceiling again by August 2.  The talks seem to be focused towards a tax hike which will most likely affect the middle class, as it always does.  To address rising oil prices, the President came out recently and released some oil from the Strategic Petroleum Reserve.  He touted that this would go to help quell the rising oil and gas prices that have been hurting American citizens.  What most don’t realize is that the amount of oil that he released equates to only one day’s worldwide consumption.  This isn’t nearly enough to quell anything, but is again a political move to make Americans believe that he cares.  Unfortunately, most Americans don’t check the numbers as usual.  Meanwhile, Obama Care is going to be rolled out in full force, regardless of the fact that it has been ruled unconstitutional by federal judges in Florida and Virginia, all while Obama and his constituents have been handing out waivers to over 1,000 corporations including McDonalds.  This goes directly against the Equal Protection clause.  Is it now legal to break the law if you are the President, a Senator or Congressman?  This program will be an economic disaster and couldn’t come at a worse time.  Any chance at a balanced budget will go right out the window. 

It seems that we are slowly losing the protection of checks and balances in our government.  President Obama is making it standard to bypass the Congress on just about anything.  Not only does this violate the Constitution, but it is an extremely dangerous practice for the health of our rights, freedom and liberty.  Dictatorship didn’t make our country thrive economically.  It was the freedom of our people and freedom in our markets that made our economy thrive.  Why all of the moves towards a dictatorial form of government lately?  Our President went to war with Libya without Congress, he bypassed Congress and had the EPA declare Carbon Dioxide a pollutant boxing Congress into a corner to pass the regulation of CO2 in all new or expanded power plants, and our President is aggressively working on the capability to shut off the internet without Congressional approval.  Too much power given to one office is bad for any economy.  Yet our President constantly reassures us that we are growing.  We are told “Don’t worry about the jobs numbers, we are in a recovery.”  My response is “What?”  Until we become a country that is again making things, rather than consuming things, we will continue on our downward spiral.  The party’s over folks.  It’s like the reality check that college grads get when they graduate and realize they have to pay back their student loans. 

I challenge any politician to educate me on where they are seeing growth, and by that I don’t mean QE growth.  I mean real growth without dependence on an expansion of the money supply.  Our economy is shrinking before our eyes, making preparation extremely important.  The pot is heating up, but hasn’t yet reached its boiling point.  Start hedging your money, and investing in healthy foreign markets before your savings disappears.  Also, stay away from Green Energy investments as they are set to collapse over the next couple of years.  Their government subsidies are running out over the next two years, and they still can’t compete with oil, gas and coal.  I expect the floor to fall out from underneath Green Energy investments in the near future.  That’s all I have for today. 

John F. Haettich- 7/11/2011