Hi everyone. First, I’d like to say I’m sorry I haven’t responded to those who have contacted me or left comments recently; I have been on an extended and much-needed vacation and haven’t been checking or updating recently. Thanks for your emails.
Usually my posts are filled with hyperlinked references, to give substance and credence to my opinions, so I don’t come off as someone who thinks he knows it all, and also to encourage independent research. Today, however, I am going to post my predictions for 2009 without any references whatsoever. This is 100% opinion, based upon what I’ve been reading and observing. 2009 will be the year of action and culmination.
1) Major inflation. Sticker shock on everything from food to gas will repeat last year’s spring and summer pattern. The new fad scare of deflation will drift away as the US can’t get anyone to continue financing its debt and the Fed finally resorts to massive inflation to close the massive budgetary gaps. China will slowly stop buying debt so the inflation will be steady rather than in spikes. The government statistics on inflation, like unemployment, will under-report it by two or three times. The price of oil, silver, and gold will shoot up as they did last year, and in approximately the same time frames.
2) Russia and Germany up. UK, US down. Though Russia is currently hurting from the low prices of oil, they still have a net surplus and savings; something the US hasn’t had for a long time (not to mention 1/8 of the world’s land mass and all the resources that go with it). Ukraine’s tiff with Russia over gas right now is likely to fracture Ukraine into two pieces, not harm Russia in the slightest. Russia might even gain territory. Germany is much more pragmatic and better-positioned to weather the storm, being one of the few rich nations that actually produces more than it consumes. Soon, Germany will de-facto control the EU and the euro like the US currently controls the UN. UK won’t shed the pound for the euro — not because the pound won’t fall, but because the rest of the EU won’t allow it. Riots and unrest in Germany and Russia won’t be nearly on the same scale as the US and the UK, as both are more homogenous societies and race relations will become a white-hot divisive issue during the new depression in multicultural societies. China will be a little bit of both. Riots by the have-nots, but no economic deterioration like the US and UK. China will mostly remain flat.
3) Israel regrets its Palestine invasion. Israel’s attack dog, the US, is very ill and won’t be able to cover for Israel quite as well as before. The Muslim world will converge on Israel politically and will be supported to an extent greater than ever before due to worldwide souring of opinion towards the policies of the nation of Israel. High risk of expanded war in the region, with players such as Syria, Lebanon, and even Pakistan. Israel will have minor losses comparatively but will lose public sympathy (its most valuable asset) forever. No nuclear weapons will come into play, however. Israel’s economic status sours considerably. Iran will not play a large part, counter to most peoples’ expectations.
4) Obama appears to be Bush with a different face. Same policies, same excuses, same results. Slight variation on the implementation. (Coke with the sweetness of Pepsi — it’s Coke II!) Different group of blind supporters, I suppose. Huge let-down for those with half a brain, no surprise for those with a complete brain. Expansion of military engagements in the Middle East, blind support of the Federal Reserve’s disastrous policies (rather, existence), more spying on citizens, increased police aggressiveness, bailouts, and spending money we don’t have. Big push to “regulate” and filter opinions on the internet based upon the excuses of fighting “hate speech and “extremism.” Congress will continue to be mostly ineffective except at endorsing the President’s policies.
5) Huge housing bailout. Likely to include a massive delay of foreclosures, mandatory interest rates, changes in bankruptcy laws, tax laws, etcetera. Probably won’t occur until around tax time. Will help keep people in their homes and prevent a larger wave of rioting but will not cause prices to suddenly start rising. Established homeowners’ complaints will fall on deaf ears. Credit card bailout also a strong possibility. Corporate bailouts of every imagined (and unimagined) stripe are also likely. Bailouts of cities and states will be frequent and certain.
6) Unrest followed by deployment of soldiers as “helping teams” (read police state) and all the bad press, riots, and anger that accompanies such. Increase in power of local gangs and hatred directed along racial lines. Economic division will not be seen along class lines as is more accurate, but along racial lines. 2009 will be the first year most people start to think about the US as several different regions, rather than a single nation. Possibility of bank “holidays,” government-assumed control of private retirement accounts, even a dollar default. Like the 30s, massive anger towards bankers, and wealthy people in general, and massive sympathy for any criminals who take on the establishment. Possible relaxation on the rules, or lax enforcement, of criminal marijuana laws. Marijuana becomes the new prohibition issue with its myriad motivations and repercussions. Huge increase on the regulation of firearms and acts of “terrorism.”
And there you have it. Stay tuned next time for my regularly-recurring article of doom.
“Like scores of evangelists and hypocrites and moralists who spew and praise family values and pretend to be holier than thou and are then regularly caught cheating or found to be perverts, these Bush hypocrites who spewed for years the glory of unfettered Wild West laissez-faire jungle capitalism allowed the biggest debt bubble ever to fester without any control, and have caused the biggest financial crisis since the Great Depression.
They are are now forced to perform the biggest government intervention and nationalisations in the recent history of humanity, all for the benefit of the rich and the well connected. So Comrades Bush and Paulson and Bernanke will rightly pass to the history books as a troika of Bolsheviks who turned the USA into the USSRA.”
From this article. Great summary. Here’s another good one: stock market cheers financial insanity. Our denial is staggering. As if throwing another trillion at the problem is going to fix it. Neither will two trillion. Or three. Or fifty. Want to know what the problem is in simple terms? This picture will illustrate it:
That’s the problem. The small number on the left is the amount of dollars in existence, which is directly tied to our purchasing power. The slightly larger number is the productive capacity of the entire world to deal with the problem. The number to the right of that is the total value of all the monetary assets.
The bomb on the right — well, that’s the debt that is now being called due. Not national debt — but phantom monetary credit called CDS (credit default swaps) that is basically fake money big banks lend to each other to protect each others’ assets. If you’re shaking your head, it’s because the concept is absurd. How can there be $516 trillion in credit/debt relationships when there is only $15 trillion in existence?
Good question. THAT IS THE PROBLEM. The problem is not greed, nor “lack of regulation,” nor poor oversight, or any of that. The problem is our entire fiat money-based system, which uses fractional-reserve lending, at the core of which is our Federal Reserve, which allows an infinite amount of fake money, and derivatives thereof, to spring into existence, by the whim of a few bankers. Back when currency stood for a fixed amount of gold and silver, like checks represent actual money in the bank, there was no problem. But now that money is decoupled from gold and silver, there can be an infinite amount of credit issued based upon it, and an infinite amount of it created. Its value, and all debt relationships based upon it therefore, can become worthless. Just ask Zimbabwe.
Now, can the government create $516 trillion to unwind those derivatives? Sure, they can add as many zeroes to banks’ databases as necessary; they don’t even have to pay for the ink and paper to print the money. But then, if there are suddenly 50 times the amount of dollars in existence, how much do you think your dollars are worth in purchasing power? Well, the answer is $0.02. Good thing you’ve been saving up!
Of all the people talking about our financial system over the past year, they were all wrong; all except one. All gave varying degrees of “well, the basics are okay, we’ll just ride this out. We’ll think of something. The system just needs a few tweaks.” Whether it’s McCain’s tax cuts, or Obama’s tax cuts, or talk about earmarks, or curbing spending, or shuffling of this or that, blah blah blah blah blah, none of it hits the mark. It’s arguing over property boundaries in Nagasaki after the bomb drops. It’s irrelevant. No one said, “Hey, we’re in meltdown! This is the second great depression! Wake up! Our dollar will be worthless!” No one, except one person.
Bernanke was wrong.
Paulson was wrong.
Greenspan was wrong.
McCain was wrong.
Obama was wrong.
Bush was wrong.
Pelosi was wrong.
Giuliani was wrong.
Clinton was wrong.
Not until recently, in the past few months, have any of these people started to admit that something is wrong. If you listen to their comments from a year ago, they were all sunshine and lollipops.You know who was right? That “crackpot” — the one no one would vote for. The crazy guy. Ron Paul. Ron Paul was right. Period. Everyone else was wrong. From this:
Back in September 2003, Mr Paul told a House Financial Services Committee that: “Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market.
“This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions.” Of course, if we are going to give Mr Paul credit, than we should also highlight the efforts of Peter Schiff, his economic advisor and long-time economic hawk.
A year ago, he warned about the impending crash of the dollar and pointed the finger directly at the Fed. For everyone who wasn’t paying attention, here is a video summary from last year:
Ron Paul on the economy in 2007:
Ron Paul on the economy yesterday:
The politicians are predictably pointing fingers at each other, lamenting the greed of anonymous culprits, and telling us the solution is that we, the common people, should pay for it all, even though we had nothing to do with it. And, predictably, we are agreeing to that, bowing to the benevolent wisdom of our leaders, and crossing our fingers, hoping two plus two won’t equal four this time.
Today’s article of doom: just pick up a newspaper.
Want to know something interesting? There was, except in brief times of great duress such as a (declared) war, no inflation in the US dollar until the Federal Reserve came along. You could save a dollar and it would have as much purchasing power to your great, great, great grandchildren as it had to you. Since the Federal Reserve was established, the value of the dollar has fallen between 96% and 98%. In fact, the rampant devaluation is the main reason no one in this country saves, whether they know it or not. This article outlines some of these themes.
How ironic that the institution causing this problem, the Fed, continues to be in charge of how to fix it. In fact, the catastrophic failure of the monetary policies in the last 90 years is going to result in even more power of the Federal Reserve, because people don’t understand what’s causing things to go awry. As time goes by, people will clamor for more regulation, more stimulus packages. “Wall Street” will get blamed. Greedy investors will get blamed. The Bush administration will get blamed. Everyone except the one organization that controls the entire money supply by setting the value of a dollar — the Federal Reserve. Not only will they not get blamed, they’ll get praised.
I must stop dwelling on the Federal Reserve; the powers that created it are the same powers that raise and level governments — it’s a waste of time to get upset at them. So, instead, I guess I’ll get upset at people who steadfastly believe the government’s economic numbers, as if they are the last bastion of truth and accuracy. After all, 2+2=4 no matter what, right? Even though these same people believe the government lies about Iraq, lies about WMDs, lies about everything under the sun — and these people distrust corporations and religions and global warming and what have you — somehow they believe the official economic numbers. And they should know enough to realize a fiat currency is based completely on faith. In fact, there is very little difference between a religion and a fiat money system.
Well, some mainstream publications, such as this article, hint at how common misleading data is published by the government, although it’s just a hint. For a full dose of reality, try Shadow Stats. How else can global food prices have increased by 40% in 2007, according to the UN, but food inflation was only 5% here, according to our government’s official figures? Oh, it’s because we don’t import much food, right? Wrong. It’s because our dollar has increased, then, perhaps? No. It’s because we live in a magical fairyland whether food pops out of the ether into our plates, I suppose. Or maybe the government is lying. Do you have a receipt from August of 2007 from the grocery store to compare? Betcha it’s 40% lower. In fact, you don’t even need to check. You know it’s true. Along with 5% food price increases, we only have 5.7% unemployment and 2.6% core inflation. Whew. That’s a relief.
Today’s article of doom: far larger wave of home defaults building.
Well, this one’s even bigger than Bear Stearns. We’re going to bail out Fanny Mae and Freddie Mac, both technically insolvent (their liabilities are greater than their assets) and it’ll only be to the tune of TRILLIONS. “…a complete bailout of these huge mortgage finance players could double the fiscal deficit.” Double the national debt. Double. Words fail me. Most of the foreign owners of the 6 trillion dollars worth of owned or secured mortgage debt are China, Russia, and Saudi Arabia. However, from what we hear on the news, buying stock in the worthless companies with taxpayer money so the shareholders on Wall Street and the debt holders in foreign countries get bailed out is somehow good for the American homeowner. Go figure. The Federal Reserve says no more bailouts are expected. Right. I’m sure they’ll have to bail out a few of the 150 banks that are expected to soon go belly up.
In other news, not only are food prices going up, but I’ll bet few people notice the size of the food products are stealthily shrinking. Most people don’t know the weight of the food they buy, so it’s a great marketing trick. Oh, and here’s an ex-government employee in the UK affirming that the official inflation rate there (and here too) is rubbish. I mostly agree, but I think it’s more like 18%, not 10%, here in the US. I like this article too. “This recession could easily tip into a depression.” Hahaha, really? Another interesting read was this person’s take on why the bailouts must occur — to prevent lawsuits forcing the banks to buy back their fraudulent mortgages. I don’t know much about the legal world, but I wouldn’t be the least bit surprised.
You may have heard that the Federal Reserve, over the weekend, took over the second-biggest bankrupt bank since the FDIC came into play, IndyMac. You may have heard how many billions this would cost. What you probably didn’t hear about, however — and the lack of coverage was no coincidence — was that there was a run on the bank leading up to and culminating in its doors closing on Friday. Fear spreads fast, and the talking heads want it contained.
Today’s article of doom: might as well keep harping on the oil price. Up to $147 now.
Suddenly the market euphoria has lifted and reality has set in once again. As a nation, we were high for a couple of months and now we’re coming down. It’s becoming apparent that oil isn’t going down anytime soon. Neither is food. And inflation will only get worse.
In fact, your last trip to the grocery store — the one where you experienced your own private “Shock and Awe” by viewing your sales receipt — is likely the cheapest shopping trip you’ll experience for awhile. Same with your last trip to the gas station, and your last electricity bill. In fact, any recent increases in consumer spending were related less to the rebate checks and more to the stockpiling factor. And stockpiling is probably the best option — investing certainly isn’t, and neither is saving. The official inflation rate (which is a grotesque lie) is even less than interest rates the bank will give you. Unlike the 70s and early 80s, we don’t have 15% interest rates to lift us out of the inflation quagmire.
Here’s a good telegraph article. Reality isn’t pretty, but it’s a lot better than the cotton candy cloud reporting we’ve been given since April. Maybe gold will climb back up to its rightful place again since oil keeps breaking records and now tops $142 per barrel (which is only roughly six times its price in 2001).
What a great time to be provoking Iran, right mainstream Presidential candidates? Good thinking. Too bad no one listened to Ron Paul a year ago when he laid out this economic crisis exactly. He’s starting to sound angry.
Today’s article of doom: EU elite says public vote results will be ignored. Maybe Zimbabwe should join the EU.
The British government wants to record the details of every phone call, email, and all activity on the internet. Big brother complete. Assuming the US would like the same (and of course they would) the only relevant questions are whether or not we already have something like this in development and when they’re finally going to announce it. As the US Principal Deputy Director of Intelligence said recently, “Privacy can no longer mean anonymity.” Britain is the most “progressive” society in the world. Based upon history, what happens there generally happens here after a small time delay. Good thing we get to look forward to such enlightened rulings as “children don’t need a father.”
Ah well. It’s hard to criticize Britain when we have genius lawmakers over here trying to sue OPEC over high oil prices. As if it’s OPEC’s fault that the value of the dollar keeps plummeting to new lows. We keep printing more and more dollars and expect the value of each one to remain the same. Last time the Federal Reserve reported the increase to the money supply, we were adding 16% annually. Of course, that was over a year ago and they don’t report the number anymore.
Besides, it makes perfect sense for us to be able to dictate to other countries at what price they should be selling their goods to us. And if you don’t agree, maybe you should be bombed. Oh yeah, and according to Bush, the reason our food prices are high aren’t due to the government miscalculating inflation. They’re due to all those gluttonous Indians.
Today’s article of doom: oil at $133 per barrel.
It’s been awhile since I’ve updated. Every time I come across an article I think is noteworthy, such as this and this, I realize I’m just repeating myself. The government is lying about the true inflation number and we are not in the middle of a recovery. That’s it. That’s my mantra. It’s going to take awhile for this to become common knowledge, however. Maybe after a few months when Bush can no longer say “wait til the rebate checks arrive” we’ll hear a little more honesty.
So, in the meantime, I guess I’ll just sit back and read about the spectacle that is the Presidential election and shake my head at how no one (except Ron Paul) is willing to admit the scope of the problem, nor have any understanding as to what’s causing it. The Mogambo Guru is always entertaining.
Today’s article of doom: oil “steady” at $127 ber barrel.
Well, disaster averted. See this worthless pile of rubles to the left? That’s not gonna be us. I was getting worried for a minute, since all fiat currencies end up dead in the end. But, all is well with the markets and our economy. Everything’s gonna be all right now — housing prices will return to their peaks, stocks will recover, commodities will drop to reasonable prices, and the dollar will soar once again. 401Ks will stop bleeding assets, the banks will act responsibly, and employment will improve. The fundamentals are all in place.
Seriously, I don’t pretend to know the back room deals going on constantly, or how the shell game of the $500 trillion (yes, trillion) worth of derivatives actually works, or what kind of coordination the world’s central banks have. But I do know there is no reason for the elation the stock market has shown the last couple of days, and especially with financial stocks today. And there is no good reason commodities have dropped so much, unless it was due to a bunch of people having to sell their losing positions to fund margin calls.
While Wall Street seems to be slapping each other on the back and saying, “Whew, that was a close one,” everyone with common sense should be freaked out the Federal Reserve had their first emergency weekend session since 1979 because they couldn’t even wait two days to intervene with their scheduled and expected cut, fearing a market crash on Monday.
I even saw an article today whose title was something like “Fed only cuts rates by 0.75% — bad news for gold.” Um…. what? I don’t get it. I just simply don’t understand. It seems I can no longer find this article, so maybe the author wised up and modified the title.
Oh well, the next few days will force a showing of cards. The camel can withstand just a few more straws. After Bear Stearns dropped in worth from $80 to $5 per share this month, Lehman Brothers was rumored to be next on the chopping block due to the way in which it is similarly leveraged. But hey, some good cashflow results and all is normal! The stock climbed over 40% today. Well, that’s understandable, since we all know reporting is completely accurate, and when a CEO says liquidity is not a problem, that person must be telling the truth.
Today’s article of doom: For everyone who cringes at the phrase New World Order.
Ultimately, the Fed has its reasons to bail out an institution that makes its profits by speculation and enriching the already rich, by indirect collection and fleecing of the rest of us underlings, but I guarantee its reasons have nothing to do with the prosperity of you or me. Arguably, an investment bank is one of the most parasitic of all businesses, and yet it’s first in line to get a bailout by the Fed with your tax dollars and mine. Why? Why should any businesses be bailed out, much less ones that don’t create useful things, such as food or energy?
Bush chimed in with, “It was a strong action by the Fed and they did so because some financial institutions that borrowed money to buy securities in the housing industry must now repair their balance sheets before they can make further loans.” Uh….? Poor bank can’t make loans, so sad. They were teetering on the brink of collapse due to poor management or greed or whatever, and instead of letting Capitalism work, the Fed just decided to use our money to give them a free ride. I don’t care if they can make more loans. Too bad if they collapse. Good riddance, bye!
Here is a great video where Jim Rogers says simply the Federal Reserve should be abolished. He’s got common sense answers to common sense questions but of course everyone smirks when he says the obvious. Buckle up, this is going to be a strange ride.
It’s a simple concept, but somehow it still isn’t understood by most people. Dollar bills are a good, just like Crunchberries are a good. If it rained Crunchberries from the sky every day at 11:03 AM, no one would ever be able to sell Crunchberries and stores would stop carrying it. In other words, the more Crunchberries there are, the less each Crunchberry is worth. Supply and demand.
So it is with dollars. The more total dollars there are, the less your dollars are worth. So, when the Fed announces it’s going to further dillute your dollars by printing up 200 billion more, it’s bad news, not good news.
But the media can spin things in 180 degrees of course. This will increase liquidity! Banks can now make more loans! Great! So, let’s see… banks who deserve to take a loss for their shady loan practices instead get bailed out by the government. And corporations that have mega-assets will continue to make a return on their investments, and the only catch is that those with modest means foolish enough to have saved money in a bank account will note their dollar doesn’t go so far this year.
What a relief the Federal Reserve acted! Way to go! I was afraid Wall Street wasn’t going to continue making obscene profits at the expense of the little people, but that fear is allayed. This graph from ShadowStats.com shows the rate at which the Fed has been printing up money lately, just in case you’re wondering why everything you buy is so expensive:
Hey, I have an idea. Since we have a 10 trillion dollar deficit, let’s just print up 10 trillion dollars to cover it, and then we’ll have paid off our debt at no cost!
Today’s article of doom: people starting to walk away from mortgages in droves.