I really do try! My optimism about many things is unbridled. My kids all turned out well, I live in a wonderful old home in a town with wonderful weather, and in sight of the most rugged mountain range in America. My health is excellent, I don’t look anywhere near my age, and I am optimistic about a lot of things except the economy. The American economy especially. If I weren’t a pessimist about the American economy, I don’t suppose I would be doing what I do for a living. I practice what I preach and write about, have no savings account, and never have. The more I read, the more I worry about America’s future.
I am certain you have noticed I don’t use charts, graphs, and moving averages. I don’t know how accurate the teacup with a handle formation is, nor the head and shoulders, or other chart formations people use to predict what will happen. I don’t need them, because I think I know. Not when, but what. Look at the absolute facts of our economy.
The government will print a trillion dollars this year, backed by nothing. This will add a trillion dollars to the money supply. 35,000 new dollars are coming into circulation every second. The counterfeiters are already reproducing the new $20 bills with impunity, many coming off of color printers. Fake hundred dollar bills, are probably being produced by the millions in various places, here and overseas. This is in addition to the government issued trillion new dollars every year. If this weren’t true, why do cashiers always have a marker to test hundred dollar bills when one uses them? If it is a fake, the mark turns brown, they say. Blizzards of dollars are being turned out every single day.
Our trade deficit is half trillion dollars a year. This means that every second, $17,000 more in capital leaves America, than comes in. Hundreds of containers leave the West Coast for the Orient, and come back loaded with merchandise from China, Japan, and other nations. All of this is being produced by labor, which earns a fraction of what similar labor here would earn. This influx of cheap labor produced merchandise, “keeps prices low,” as the various big box merchants like to say. If our capital is leaving at the rate of $17,000 per second, how long will it be before we have none left? If a siphon takes a liquid from one container to another at a lower level, it can’t siphon forever. It can siphon as long as there is something left to siphon. If one has a thousand dollars in a checking account, one can write checks for up to a thousand dollars, and then checks are no good, because all the capital is gone. Doesn’t this make sense?
Bankruptcies are at all time highs, as are consumer and mortgage debt. Americans are on a spending spree, like there is no tomorrow. Cities, counties and states are all in huge debt quandaries, and not just California. In Illinois, two cities are trying to condemn privately owned water works in order to raise income. Borrowing money to buy them, won’t solve anything, because of inherit government inefficiency, plus interest for the loan to buy. Governments are trying everything to raise dollars to pay their bills, and mostly are not having much luck. The federal government has no trouble of this type, because it can produce all it needs, a-la-the trillion new bucks a year.
According to a Washington Post piece on Nov 12th, government grew by 27% in the past two years, and the Congressional Budget Office says fed spending in 2003 will be $2.16 trillion, a 7.3% boost, and tax collections are way down. Stephen Roach, chief economist at Morgan Stanley, says there is a “shortfall of seven million jobs.” David Rosenberg, chief North American economist for Merrill Lynch, says that true unemployment is 9%. Other economists say that America needs a steady increase of jobs of 150,000 a month, for the economy to actually recover. Fat chance!
Unemployment is wide spread, and every new day brings more layoffs, factory closings, and white-collar job flight to India. Blue collar jobs are mostly already gone, but there still is an exodus. Technical jobs, computer programming, manufacturing of all sorts, bookkeeping, and every type of occupation one can think of, is now conducted overseas with cheap labor.
High-end real estate, is not selling, and even with radically cut prices, still is not selling. Realtors in these posh communities, in some cases are offering their services for 2%, rather than the customary 7% or more, in an effort to generate business. This is true not only in Colorado, but all over the US. Will middle priced homes be next? Then lower priced ones? If interest rates are raised, will this hasten the real estate bubble’s collapse?
Government statistics and figures are highly suspect, and understandably so. Examples are many, but a financial analyst investigated the supposed 7.2% GDP increase so widely reported, and found that there were no supporting statistics in the report. Only a flat, “The GDP went up 7.2% in the last quarter.” When the government reports on just about everything, I suspect the accuracy of these figures, be they unemployment, inflation, cost of living, or anything that might cast a poor light on their performance. With the thousands of layoffs weekly, is it really a true statistic of 6% “official” unemployment, or perhaps more than the 9% economists say it is? With a trillion dollars a year being added to the money supply, plus everything within my line of sight constantly going up in dollars, is it really accurate to say we are having a 2% inflation rate? In history, have governments ever told the truth, when truth would harm their image, or cause their regimes or approval to fall? Does anyone really believe all is well in Iraq and Afghanistan? Would we know less of the truth, if these places weren’t full or reporters?
With $87 billion additional approved for Iraq, how long can paper dollars perform well? Saddam had begun to sell his oil in euros, and it is said that Russia and Venezuela are considering it too. Gold is still denominated in dollars, as is oil in some places, but the stress on the dollar is unmistakable. If China ceases locking in its renminbi to the dollar, and ceases buying US Treasury Notes with dollars it receives for its merchandise, what will happen to the US economy? If foreign investors in America, finally get tired of low interest, and various things around the world being priced in non-dollars, will they cease buying US debt? Have they already? Suppose they decide to unload what they have? Would you invest in a shaky “investment,” whose administrators dilute it with wild abandon, thereby reducing its value? If you wouldn’t, why should sovereign nations do so?
Using specious government statistics and figures, the entire financial community constructs other equations and prognostications on a daily basis, which causes stocks to go up, as long as the charade lasts. Citizens of any nation, will willingly follow government, political, and professional leads, until at some point, a mass rebellion takes place, and the citizenry throws over the leadership. Historically, it has always happened this way. Currently, 95% of financial advisors are frothing at their mouths, because of the 7.2% figure, and telling everyone all is well. Is it?
I wish it were so. I hope it is all true. I do not want the American dollar, nor its economy to collapse. But I must face the fact that we are losing our capital, jobs, influence, and affluence with such rapidity, that I am not sure how long it can stand. The old siphon comparison, if you please. Does it matter that our jobs and wealth are disappearing? I say it matters a whole lot. If it doesn’t, I wish someone would PLEASE inform me as to my error. In all sincerity, please say it isn’t so, and tell me why. When, in history, has a nation begun to travel down the road we are now traveling, and not met with disastrous results for itself, and its citizens? Unfortunately, history does indeed repeat itself. Would that it weren’t so.
I know what will happen to tangibles priced in dollars, and you do too. I don’t need graphs and charts to tell me, even though I greatly admire those who use them with success. My columns are not about technicalities. These columns are designed to be forwarded to those who are not in the know, so they may do as you do, and that is protect yourself.