I have previously laid out my thoughts as to what will eventually happen with the whole inflation-deflation debate, but the issue is still raging full speed ahead. It is interesting that it is hard to find 2 experts that actually agree on what will happen or is happening, deflation or inflation. I think it is obvious that we have disinflationary forces here as producers cannot pass along higher prices or they will lose business. In fact, only food, a basic necessity, has any real pricing power right now.
While I am comfortable claiming we have disinflation right now I do not think it will last for a very long period of time. I believe we will see more easing by the Fed via asset purchases, but that will not create immediate inflation. However, over a longer period of time we will see that inflation pick up and not because of money velocity, but because of straight out dollar devaluation. Let me explain.
We did not experience inflation in the 1930’s because no one spent large sums of money on a regular basis. People actually were starving even as food prices declined, sad really. The thing is that since we were on the gold standard, or a form thereof, it was impossible to have true inflation even though FDR was spending like a madman. The Fed was also not in the practice of buying assets because, well, they followed the rules. Because of the gold standard and there were no asset purchases, government bonds or otherwise, inflation remained tame, deflationary in fact. This is a very 30,000 foot view of the situation, but I think you get the gist of what I am saying.
Now we do not have the gold standard, I am not preaching for a gold standard either, just pointing out the obvious, and we have a completely fiat money supply. The Fed has used its “emergency powers” to do what it would not do in the 1930’s, buy assets. It is clear that the asset purchases are doing nothing for the economy other than keeping rates low on loans, which no one wants or are really willing to make unless you have a perfect credit score. It is not even kicking up much inflation, at all, which is because there is simply zero money velocity. Since there is no money velocity the typical economist will say that inflation is impossible and it can never happen, never say never.
What the heads buried in the sand do not realize, because they are using the Depression as their road map (they always do this at the wrong time I might add), is that the dollar is floating now with nothing backing it. That in itself is not bad, as a matter of general opinion, as long as the printing press is used sparingly and every country prints money at relatively the same pace. The problem is that now, after the crisis supposedly ended, countries are printing money at a slower pace or they stopped printing altogether. Many are certainly not doing asset purchases.
Forgetting the fact that QE will do nothing to ease the pain of the economy being bad, sorry, but it will do nothing whatsoever, what it will do is wreak havoc on the dollar. Since the currency is floating more printing and asset purchases will diminish the value of the currency. This has been Ben’s and Obama’s plan all along since Obama wanted to double exports within 5 years, something that can never be accomplished. We are seeing the impact of what more printing will do to the dollar now, unless you think 1.5 cent moves in the Euro/USD pair is normal, as investors move to a currency that is somewhat more sound, not that the Euro is sound, but perception is half the game.
The citizens, us, will not feel the devaluation right off the bat because we consume 87% of what we produce domestically. However, imported products will cost more and we do import a lot of goods, obviously. As domestic supplies are sucked up by foreign countries, as our dollar is worth less thanks to Ben, we will have to import more from elsewhere. This is how our next bout of inflation will begin, dollar devaluation without an increase of money velocity. If you think about it it will make sense, capital flows to the land with the cheapest goods and a weak dollar means China, Europe or whoever, will find more value, cheaper products, from America.
That actually sounds good, more purchases of American goods means higher production as we have to replace what others are buying, but that may not be the case. Why? Simple, prices domestically will be rising and our government, always trying to do the right thing will institute some sort of protectionist legislation to stop prices from rising as incomes are stagnant. It would be a form of capital controls of sorts, but in reverse. Can’t you see it now? Prices are rising and people are not able to get those big screen TV’s or something less important, food, so the government tries to stop it through making new laws. It sounds counterintuitive, but it would happen, look at what Congress wants to do to China in order to get the yuan to appreciate in value? Actually, if we do more QE Congress will not want that to happen because China will literally own us if or when the dollar is devaluated.
While all of this is happening the treasury market, after an initial huge ramp up in prices, this is what the Fed will be buying, will be in freefall as no one will want to be repaid, without a substantial risk premium, in devalued dollars. This will lead the Fed into more massive buying because even at this stage Americans will not even want to buy our own debt. Also, China will have no need to hold their massive treasury holds so they will be selling like mad. All of this is happening without money velocity picking up. Even if you think I am wrong about the previous paragraph think of it this way, if our production did pick up because of foreign country buying sprees that means we will have the money to buy things, but it will only increase the inflation rate… damned if it does, damned if it doesn’t.
It has nothing to do with actual money velocity anymore, we even have mild inflation with dwindling velocity now, and has everything to do with confidence in the system. More QE will be bad news for global confidence in the USD, it is on shaky ground as is. If we look at today’s market action it proves how the market will react, lower dollar, higher commodity prices and equities stuck because it is good news on one hand and bad news on the other hand. Longer term high inflation is bad news for stocks, in my opinion, and bullish for commodities, obviously. Stocks are horrible inflation hedging instruments, look at the last 10 years for proof, while silver (by far my favorite investment right now), gold and other metals should do very well. Of course, precious metals are not really an inflation hedge, but a currency hedge instead. Since we are looking at a currency issue rather than straight out inflation it makes bullion of any flavor very attractive.
Could anything change my mind about what I think will happen? Sure. If no QE happens it will be great news, but the likelihood of no QE ever happening again are about as long of a shot as you can get. While I am using QE for my defense of my position in this article I believe we can safely assume that budget deficits will not get better so even if no QE happens our spending will accomplish the same thing. I say that knowing that if the deficit does not resolve itself the Fed, to save the US, will still have to do QE eventually on a massive scale no matter what, to keep rates low so the interest doesn’t bust us. However, the Fed cannot suck in all that paper and treasuries will fail eventually.
Outside of no QE I think there is not much that can change my mind about what I think will happen. It is pretty much in stone and will happen either as I laid it out or in a somewhat similar fashion. In the near-term I am still bullish on treasuries, now that we sold off, and on silver, gold too, but I am more partial to silver right now. I am not crazy about stocks and would be very hesitant about committing major capital to any position right now, the market is trading odd to say the least. At this point bullion is your best play, silver looks very promising and a recent Scientific American article points out that there is only 19 years left of easily mined silver, a no brainer to me, buy it.
People always wait to buy metals to “see how it does” and while they are waiting the price goes nuts and then they buy it and wonder why they lost money. Don’t be one of those people, but buy it smart, some every month. Because even if you think the bulk of my argument is wrong, or all of it, we have disinflation and higher bullion prices, what do you think will happen when we do have inflation? Not to mention silver is not only a precious metal, but an industrial metal. So, if you think the world is going to end, buy silver. If you think we are in a real recovery, buy silver.
Much has been made about the death cross of late, the 50 day moving average crossing through the 200 day moving average, although I think and know it is a significant event it is nothing compared to something else I have noticed. We are all aware of the primary reason of the bull run over the past 12 months, massively oversold markets, combined with marginally better economic data and, most importantly, a weakening dollar. Why the dollar weakened is important to note, quantitative easing via the Federal Reserve’s asset purchases or the printing of money. Although we will not know the long-term implications of QE for some time to come it is safe to assume it accomplished its goal, weaken the dollar and boost the economic data through negative interest rates, essentially.
We all know the market action of late, a horrendous selloff which was only a surprise to the parade of bulls on CNBC and those who kept their heads buried in the sand, but those out in the real world knew it was coming. What was unexpected was the 4th of July rally that took us back up some 7% on the backdrop of pretty bad economic data. Some of the bounce was because of a technical bounce and some of it was because of the expectations of stronger earnings which started last week. I fully expected 2Q10 earnings to be good, but I expected to see more top line misses and the outlook from CEO’s to be downgraded as well. So far, it is a mixed bag, but the outlook or guidance remains very bullish for many firms, however, a look back through prior earning announcements, particularly 2000 releases, as Mark forwarded to me, shows that Intel did not foresee a slowdown there either, so trust the economic data rather than CEO guidance going forward.
Back to what is going on in the equities market and why the dark cross is less important than the other ‘grey swan’ that is going on. First, everyone and their grandmother knows or knew about the dark cross, not that it takes away from its importance, but when everyone knows about it very rarely does the market deliver the results we are looking for. Except the market kind of did deliver, but stopped short and rallied all the way back to some important moving averages where it failed to break through, very bearish from my lens. At the same time we saw the selloff begin the dollar was moving towards the 89 mark on the DXY, but it stalled after a dramatic breakout and reversed course. Not only did the DXY reverse course, but it got crushed moving down from 89ish to about 82.5, not an insignificant move.
Exhibit 1-1 2 Month DXY Chart
Why is this a big deal? It is a big deal because stocks went up on a weak dollar trend which meant a better environment for U.S. companies to sell products abroad. Basically, a weaker dollar is better for U.S. exports and sales as we become more competitive in the world. It made sense for the markets to not like the move of the DXY from the low 70’s to 89, but to not like the move from 89 to 82.5, well, I am perplexed. The market should love this and we should be flying to at least 1,100 on the S&P 500, but we are not. This is a huge warning sign that stocks cannot rally on a weak dollar and it means more than the dark cross.
Exhibit 1-2 1 Year S&P 500 and DXY
The charts show the trends pretty clearly, lower dollar higher equity prices, higher dollar, lower equity prices, but over the past couple of months things have been out of whack. What else is going on during this time period? Treasury yields are collapsing to historic lows. We have the 2 year treasury under .60%, the 10 year under 3% and the 30 year under 4% which is a sign of 2 things, risk aversion and fear of deflation. My belief is deflation is the clear danger as of right now, it is fairly evident from my lens and the market is pricing it in as we speak. The credit markets have been pricing it in for some time and will continue to, I am bullish on debt securities, have been for some time now, but the equities markets, well, it has not priced in any real deflationary pressure at all.
Exhibit 1-3 Yield Curve
Granted, we have not seen total deflation yet, just the beginning sign of it, but the evidence is pointing towards it. Here is the rub, everyone says the Fed will do QE2, but they won’t do it. See my other posts as to why they will not do it, but from my lens they would be insane to even attempt QE2 at this point. The problems in the U.S. economy has nothing to do with what is happening in Europe, a little I suppose, but not directly related. My past posts about Europe relate directly to actual defaults by countries and to corporate earnings. I think anyone will find it hard to believe that the Jones’s are not buying that new car because they are worried about Hungary being kicked out of the IMF-EU rescue package. They are not buying a car because they are worried about their job and do not want to take on much debt or because their credit score is so lousy they cannot get financing, 25% of Americans have a credit score below 600 now. Instead the Jones’s are paying off debt and buying what they need, not what they want which is deflationary.
This trend will continue and so far only the credit markets are pricing this in, the equity markets are in La-La Land, still. The DXY – S&P cross is very bearish if the trend continues and will mean a big correction in the near future especially if commodities head lower as well. Commodities are not performing well and that is reflected in the Baltic Dry Index and combine that in with the above information and it is putting the explanation point on the whole theory. So far the only strategist I know for sure who is putting all of these pieces together, and has been ridiculed relentlessly by the bulls on CNBC and such, is David Rosenberg. All of the rest of the strategists are telling you to buy the dips even when they see everything I presented to you, they know what it means and, to top it off, they know the ECRI is rolling over and housing is going down the tubes. It is incredible to say the least. Be ready for some fireworks soon unless this trend breaks.
What works in a deflationary environment? Income and dividends, pure and simple. I like (and own) the following: CTL, MO, PM, WM, PFE, MRK, LLY, BPT, RYU, PEY, INB, DNH, CGO, VZ, high quality corporate bonds, strategic income bond funds, emerging market debt funds (PCY has been good to me), short and intermediate term treasury funds. Many of the above mentioned stocks have underperformed, which I like, and pay very nice dividend yields, which I love, but may not do well in an inflationary environment. This is why one has to hedge with precious metals or, at the very least, TIPS.
I was reading Zero Hedge yesterday, a post in regards to gold where Peter Schiff was part of the topic, and there were some interesting comments. One caught my attention as being somewhat ludicrous which is not unusual, but is was because the author is a contributor to the site. Unfortunately the comment was flagged as junk, I hate it when that happens because counterpoints are always good things to have and I do not mean to rip him apart, but rather correct years of misinformation he probably picked up from school or TV armchair economists.
One comment he made was:
“On gold to the moon: Peter you’ve been talking up your gold positions for years, but once calm is restored, you’re going to take a major haircut on gold.”
Another was:
“On the US economy “not growing”: Has he looked at the ISM, employment (not just payrolls but household survey), industrial production, and the leading indicators over the last ten months?”
And the other one was referencing that as soon as the trillions in bailouts the banks received hits the economy it will calm the economies or something to that effect. He also indicated that as long as confidence remains in the system everything will be fine, which is true, but how much will it take to keep that confidence or instill that confidence? Also, the more money we inject to create confidence the more confidence it actually erodes, it is a zero sum game in the end. Part of the comment was that the EU was trying to avoid a “deflationary death spiral” or something similar, this is why people should not flag things as junk because they are not junk, which is what really bothered me.
People are thoroughly confused by deflation and deflationary death spirals and what that means. Deflation is a problem, we have deflation now, but it is not a huge problem. However, a deflationary death spiral is what we had in the 1930’s and is what keeps Ben Bernanke up at night. We will not, I do not think, have that deflationary death spiral and I think we need to understand what that death spiral was, what caused it and why we will not have it. After that I want to address the rest of the comments he made above.
What we suffered fro in the 1930’s was horrible and something I hope we never see again. To understand more about what it was like in the Depression please Read The Depression: A Diary by Benjamin Roth and stay away from the academic stuff. However, during the depression dollars were scarce because fo the massive bank failures and deposits were frozen or simply lost when the bank closed down. On top of that the stock market wiped out millions of peoples savings which had a domino effect into the real estate market which is what caused the banking crisis, somewhat reversed from today’s crisis I might add.
What this did was literally wipe dollars out of existence, they just disappeared and were not transferred to anyone else. Today one persons loss is likely another’s gain through derivatives or other hedging instruments known as bailouts, but that was not the case in the 1930’s. Since these dollars were gone or frozen and the U.S. was on the gold standard we did not have a Helicopter Ben to get dollars into the system, at first the Fed tightened credit, who knows why, but they later tried to reverse that decision, but it was too little too late. What we had was complete demand destruction and people saving whatever dollars they had, which was strange because people would rather starve than spend their money.
In fact, while people were starving crops were on or at a record pace, prior to the dust bowl fiasco of course. It was a simple fact that the U.S. was tied to the gold standard and could not put more dollars into the system and people just did not want to spend what they had saved because who knew what tomorrow would bring. We also had no safety systems in place such as unemployment insurance, welfare or Social Security, until FDR was elected a few years into the Depression. By not having those safety nets in place it made things much, much worse and that is why we had such massive deflation.
This was not the run of the mill demand deflation, which is what we have now, this was the death spiral lack of dollars in circulation plus no demand deflation. So for people to draw a comparison to 1930’s deflation to todays is a bit ridiculous to say the least. We have those safety programs now so people will not starve instead of spending money, ironically our poor actually have cable TV, go figure, and we have other safety nets in place. This is why we will not see 1930’s deflation and this is also why we can hide the evidence of our current Depression, if we do not have to see the soup lines they are not there, right? Never mind the fact that 1 in 8 Americans receives some form of Food Stamp assistance, if that is not a Depression statistic I am not sure what is.
The banking system is still suffering from after shocks much like we saw in the 1930’s, closures did not stop for years after the crash of 1929 as real estate continued to decline in value, sound familiar? We are still suffering from similar bouts of bank closures today because of declining real estate prices and that is unlikely to change. Many of these banks were bailed out, funny how some “too big too fail” are now failing after they were bailed out. How can, as his comment claimed, the markets be calmed because of trillions in bailouts will build confidence when those banks who were bailed out are still failing? This is very similar to the 1930’s when many banks who received aid under the first Hoover plan still failed. The point being is that it will take a long time for the system to heal itself and with the government propping it up it will take much longer. The Depression lasted some 10 years, 7 with major government help, our current problem got help on day 1, how long will our recovery really take?
With the massive stimulus and government spending in the banking system it is nothing more than inflationary measures. The comment that “when the trillions making it into the economy will only build confidence,” is a bit absurd, in my opinion, as it points out that the issues were very bad for a very longtime. Also, when the trillions, a bigger and more accurate statement would had been if the trillions, make it into the economy it will create inflation, period. There is really no doubt that the measures taken by all the central banks were to stem the tide of the aforementioned deflationary spiral and it did work, but the central banks cannot stem the tide of the inflation that they created. After all, central banker’s primary mandate is to inflate the currency at about a 3% annual rate to begin with so they have no real mechanism to dis-inflate a currency anyhow. Sure, they can raise rates and do reverse repos, but serious, that will do little.
In fact, for all the money spent on bailouts and stimulus measures I would argue we have received a very poor return on our investment. We had a sharp mini-V of a +5% GDP print, but that appears to be it. We had spend far less in the past and had averaged far higher GDP prints, about a 7% print after major interventions, so, sure, you got a V, but it is one side of a W, sorry Charlie. People had been bragging about the ISM Survey’s for some time until the Ism survey’s failed to support their claims, but they fail to support my claims as well. In fact, they are neutral, but well below what we would call normal expansion averages. Not to mention, these are survey’s and should be calculated as survey’s, as in this is how people feel at this point in time, not as this is what will happen in the future.
My main point is that we do have growth and things are better, but no where near where the bulls think they are and we are not heading to where they think we are going. The comment also pointed to the leading economic indicators as a “bright spot.” Funny, Kudlow and company have not brought up the LEI for sometime now because, well, the number rolled over a couple months ago now and has been heading lower, funny what happens when Uncle Sam cuts off the money. So, I am not sure what LEI the commenter is looking at, but the one everyone else is looking at is pointing to the South, not the North, good luck if you think down is up and up is down because you got Vertigo my friend.
The global economy is about to end its amazing recovery, sorry folks. Europe is 20% of the global economy and they are instituting massive austerity measures right now and these are only the start, more is needed. If 20% of the world’s buyers have less money you will see economists start lowering forecasts very soon, trust me on that one. You know how the U.S. is pestering China to revalue its RMB? Well, it is pegged to the U.S. dollar, right? Do you know who China’s largest trading partner is? Hint, it is not the U.S., it is the EU. That means Chinas products are now more expensive in the EU than they were just 2 months ago. Wasn’t China credited for the global recovery? Isn’t China in the middle of a liquidity bubble? Won’t not selling products hurt their exports causing an artificial popping of their bubble which could cause more problems for the world than originally thought? I think so, but we are still pressuring them to revalue and spreading the falsehood that we are their largest trading partners, what baloney.
It is kind of funny to see people dismiss all this information and keep economic events locally when this is a global economy, I mean, there is a reason why when the U.S. market tanks foreign markets go down as well and why when we go into a recession so do other countries. Decoupling will happen, but not until the rest of Asia emerges like China did, but until that happens China is dependent upon the U.S. and the EU. However, let us mak sure we are clear, the EU is, for sure, China’s biggest trading partner and a falling Euro is a big problem for China as well. Keep an eye on that, I am.
On to the topic of the day, gold. Peter Schiff has been bullish on gold since, well, forever now and has taken much heat for it since it climbed from $250 to $1,240, yes, taking heat for something that quadrupled. The commenter stated that gold will take a haircut, a major one, when markets calm down, maybe he is right, but let’s take a look so far. Trillions have been spent on the banks, that has not calmed the markets and now you have governments in trouble, what is going to calm the markets even if small governments start defaulting? Even beyond that, look at 2003, 2004, 2005, 2006, 2006, 2007, 2008, 2009, 2010. During most of those years the markets were considered “calm” and in a “goldilocks” period upon a new wave of global liquidity never before seen, what happened to the price of gold? Oh, yeah, it quadrupled.
The one big down year gold had was in 2008, when it first hit $1,000 I might add, when everything was in liquidation because of a global margin call. If the Fed did not start dropping money from helicopters we would have had our 1930’s deflationary spiral on our hands, but that is not what happened. What happened was things were supported by the government and long before the markets shot back up 70% gold was on its way back up to it’s previous $1,000 high. So, Peter Schiff can hold on to his gold trade all he wants, it worked for him as he lost little during the collapse by holding it and it returned more than the S&P, from January 1, 2009 to December 31st, 2009, than the S&P 500 did without the volatility. Comments like the ones made by the person in question show that they do not look at the facts and simply do not like the asset class, or do not understand it, and end up looking silly at the end of the day.
Do I think gold will go down? Yes. Why wouldn’t it? Everything rises and falls, but I think it will be much high 10 years from now than today. We know that central banks inflate the currency, that is a fact. We know, especially right now, that sovereign default risk is real and confidence in currencies is really a fleeting thing, we have merely been lucky for 38 years since the gold standard was eliminated, we know that turmoil will always exist and we know gold, silver or other commodities are a finite resource that has much higher demand that supply could ever meet. In my opinion, only a fool would not want to own gold, just look at APMEX.com, all their smaller American Eagle coins are sold out for crying out loud, is that the confidence in the global system we are looking for? Is that the sign of a growing global economy? Nope.
I first came to the conclusion that temporary hiring was not the forward looking indicator it may have once been, actually I always thought it was a poor forward indicator for more employment. However, most pundits, friends and even some commenter’s felt I was wrong, but I never wavered on my belief that today’s temporary hiring was merely a cost cutting method and not indicative of a better job market in the near future. Apparently the Associated Press now feels the same way along with some other sources, i.e. David Rosenberg, and such.
My belief was that employers were simply hiring temporary workers for pure financial reasons, they are less costly, easy to terminate and right now you can get highly skilled workers for a fraction of the cost by hiring them temporarily. It was more than that though as inventories dropped to such low levels the need to restock, a large portion of that mythical 5.7% 4Q GDP print, which made employers hire people. However, why hire a fulltime employee when employers know the business cycle is severely damaged and restocking is a short-term boost only? Employers know their business and they know what real demand is meaning they know there is no real end demand at this stage of the game. Yes, deflation is here to stay for now.
My theory was confirmed by the AP’s article and some of the economists quoted. Here is what a portion of the article said:
“I think temporary hiring is less useful a signal than it used to be,” says John Silvia, chief economist at Wells Fargo. “Companies aren’t testing the waters by turning to temporary firms. They just want part-time workers.”
The reasons vary. But economists and business people say the main obstacle is that employers lack confidence that the economic rebound has staying power. Many fear their sales and the overall economy will remain weak or even falter as consumers spend cautiously.
Companies also worry about higher costs related to taxes or health care measures being weighed by Congress and statehouses. That’s what Chris DeCapua, owner of employment firm Dawson Careers in Columbus, Ohio, is hearing from clients.
That basically hits the nail right on the head and then some. There is just no way to know if the recovery is real or a stimulus induced liquidity rush. On top of that, the unknown about taxes and health care are a huge problem for employers as they do not know if having more employees will cost much more than just a year ago. Yes, Washington is working on a jobs bill to reduce taxes on employers, but that bill was slashed by the Senate leadership from some $85B to $15B, I mean why bother with a $15B jobs bill anyhow?
I have advocated for the government to stop their Keynesian policies as they will create much bigger problems than we have now, but I even concede that we need a jobs bill now. Tax breaks would be a start for hiring, but do not kid yourself this is a short-term fix, see Jimmy Carter’s same attempt and its aftermath. No company is even going to hire until real demand actually comes back anyhow so we need to spark demand. How we could do this is by simply reducing patrol taxes and income tax rates and implement a TEMPORARY, I cannot stress that enough, national sales tax. This way the government will not sacrifice tax revenue and people will feel richer with the tax break.
I do not expect Washington to embrace any reasonable solution and that temporary sales tax would end up being permanent so it is not the best idea ever, but it is certainly better than what they are trying now. Perhaps if they mandated the tax had to expire in a year it might fly, but I doubt it. The primary problem with trying to spur job growth is that it needs to involve tax cuts, but we cannot cut taxes as it will kill the deficit, see Greece for the end result. This is why we would need to replace one tax with another unassuming tax for now as one would certainly make up for the other. Again, it is not perfect, but it is much better than what is being proposed in Washington.
Unemployment will continue to weaken for sometime into the future. Yes, we will have decent unemployment numbers over the next couple of months for the Census, but, again, don’t kid yourself as those jobs are very temporary. The caveat to the higher unemployment figure is that the BLS continues to take people out of the workforce which means if the government has its way we could be at 5% “official” unemployment by the end of next year. It doesn’t mean it’s true, but let’s face the facts, governments around the world do what they have to do to make things “look good” in order to not create a panic. Again, look at Greece for the lengths a government will go to in order to make things look good.
While demand is weak, unemployment is high and deflation is here to stay, for now, I still believe precious metals are a fantastic play. I like Palladium, silver, platinum and gold, in that order, for precious metals as I do believe we are in for a bumpy ride in the FX market. As the dollar strengthens these prices will come down and be a screaming buy, in my opinion. I see deflation being the current conditions for prices I also foresee some problems in the currency market which will benefit precious metals in a positive way in the near future. Plus, the summer time is usually the best time for precious metal prices. I am now a buyer again, scratch that, I am a selective buyer now of most metals.
We are all a little biased towards ourselves and most people are likely to not judge themselves harshly. Even mass murderers tend to justify or view their actions as moral or for the greater good, well many of them anyhow. My point is that when we are faced with a question about our performance we tend to spin it in the best possible light, another great example is Goldman Sachs spinning their huge bonuses as God’s work. The reason why I bring this up is because our President was asked to grade himself during an interview a few weeks ago and he gave himself a “solid B+” which is absurd.
The reason why he should have avoided the question altogether is because he has not completed one campaign promise to the people, except for higher taxes. Health care was done behind closed doors, Gitmo is open, Iraq is still somewhere, Afghanistan is getting more involved 9a big mistake I might add), and unemployment is sky high (add back in those “marginally attached” people and we are pushing 11%). Let us not forget that the annual deficit is 4 times what it was under the last President, who was certainly no peach, and we are quickly approaching 100% debt to GDP, not good.
All of this while Democrats keep blaming Bush for everything and the Republicans accept that argument, what? Oh, how quickly we forget the recent past. Before I go any further I did not like Bush, at all, and firmly believe he was one of the worst President’s of all time, so save the hate mail. However, Democrats are just as guilty of where we are today as the Republicans as they were ushered into power in 2006 in congress, the real power in politics. They rebuffed any attempt to rein in the GSE’s and they rubber stamped all of bush’s policies for 2 years. So, to say “we inherited this problem” is utter nonsense and has to stop.
When you have the power to say no and stop crazy spending and you do not you are just as guilty as the person who proposed it. That is exactly what the Democrats did for 2 years and to make matters worse, they simply allowed things to continue the way they were without a peep. Don’t believe me, check YouTube.com for the GSE hearing meetings or go check Democrat voting records for raising the debt ceiling, 7 times. They did not inherit anything, they helped create it, end of story.
If you actually believe that they inherited all these messes and did nothing to create them then you have a poor knowledge of politics, history or simply are blinded by partisan politics. I, on the other hand, do not care as I see all politicians for what they are, parasites on the backs of the American people who care about 2 things, reelection and power, not necessarily in that order. To sit here now and say that the stimulus is working is simply crazy, babbling, rabid partisan bickering because it is clear that it did not. If it did work GDP would not be at 2.2% in 3Q09, I know we will get an initial estimate of 4 or 5% for 4Q09, but that to will be adjusted lower and will be all government heroin.
Never before had the US government spent $787B in any stimulus plan and not seen any results. Instead the best argument Democrats can muster is that it stopped us from going over the abyss, oh really? Are these the same Democrats who said that not all the money has come into the system yet so we don’t know how well the stimulus is working? So, how can you say that on one hand it stopped us from falling off a cliff, but on the other hand say we don’t know how well it is going to work? You can’t because that is political double talk for we spent a bunch of money on stuff and we made many mistakes, but will not admit it. Instead, they decide to lie to us and then launch secret stimulus packages, i.e. the jobs bill passed at the dead of night.
What no one ever talks about is this, what would have happened if the stimulus was not enacted? I am willing to bet that things would have probably followed about the same track it is following now. Well, I think there would have been an exception to that, employment would have bottomed sooner and we would be seeing real recovery a lot sooner. Considering even Jim Cramer has admitted that the CEO’s he has spoken to have not seen one dime of stimulus I am pretty sure that the stimulus did not work at all. I mean, even the government is not adding tons of jobs, yet, until the census begins. Of course we do have more government employees making over 100K than ever before in history, but who cares, right?
If the original stimulus saved us and is going to get us back to growth then why in the world do we need a second stimulus? Simple, the first one was the greatest fleecing of America next to TARP in the history of the world. However, never fear because it is all Bush’s fault, a year later. I absolutely hated it when Bush blamed Clinton for the recession in 2000 just as much as I hate Obama blaming Bush now for one simple reason, the President has very little to do with the economy. I say that with a caveat, unless they implement policies that impact the economy like ridiculous stimulus packages, unpaid for tax cuts or Medicare advantage plans and things like that. What I mean is that the last 2 administrations, in my opinion, have had a greater impact on the economy than previous administrations mostly because of their lackeys in Congress happen to be in power at the same time.
Because of the absurdity of what is going on, even though I cannot stand the hypocritical Republicans, I am praying the Republicans take all of Congress in November and grid lock this thing for the next couple of years. Why would I want that to happen? Simple, I do not want my currency to be toilet paper around the world and I certainly do not want more spending. I also do not want more unionization of government employees, we need more firings in government, not hiring’s or raises. What I am trying to say is that we need balance restored back in Washington, it worked in 1994 and perhaps it could work again.
In the meantime, our President should not be issuing any grades for himself as he certainly did not earn a “solid B+” as I am pretty sure his math teacher would have flunked based on his estimates on health care costs and budget deficits. I am fairly sure a big “I” is what the President should have given himself for incomplete since he has not even kept the transparency promise he made. When C-SPAN says what is going on, you got an image issue Mr. President. So, keep some promises, fire some government workers, starting with all of you Czars, and let’s really figure out the deficit before the dollar does crash.
2 Comments to Read 
Subscribe to Annuity IQ's Feed
