We’ve all heard countless times from mainstream economists, policymakers, and their ilk that America is somehow immune from consequences. They always pin their argument on the dollar standard. ‘Our’ central bank issues the reserve currency of the globe and that alone immunizes us from any repercussions. The 25% unemployment of Spain and Greece? The 50% unemployment among the young people in Spain? Forget about it! Never going to happen here because our paper is better than everyone else’s. Right? Sounds good, but only if you take them at their word and ignore the realities that lie just under the surface. [Let’s take a closer look at those realities.] Words: 2220
So says Andy Sutton (www.sutton-associates.net) in edited excerpts from his original article* entitled My Two Cents – “Double Trouble and the Reckoning” .
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), may have edited the article below to some degree for length and clarity – see Editor’s Note at the bottom of the page for details. This paragraph must be included in any article re-posting to avoid copyright infringement.
Sutton goes on to say, in part:
While it may be true that the reserve status can buy us some extra time, it is by no means a guarantee against hardship. In fact, it is quite the opposite in that it guarantees that our beating will be worse than everyone else’s because we’ll be the last to fall. Greece’s problems started when debt/GDP crossed the 103% area. The rest of the PIIGS and all of Europe for that matter ran into problems in that same area, +/- a few points here and there.
What would you say if I were to tell you that:
- America’s per capita share of the national debt currently outstanding was 35% higher than that of Greece’s per capita share? You might do a double take.
- America’s per capita share of the fiscal gap (net present value of future unfunded liabilities) was more than 18 times that of Greece?
These little useful tidbits of information are precisely the kind of thing the syndicate that runs the global financial system would prefer you remain ignorant about because you might start to wonder how exactly are we to sustain our current path. The answer is – we’re not. However, the syndicate would prefer that you continue to load up on iPhones, big screen televisions, and all the modern day trappings of a neo-Roman society….
Now I’m not going to put my reputation on the line and give a timeline for this great unraveling and period of reckoning. [Read: If You Are Not Preparing For a US Debt Collapse, NOW Is the Time to Do So! Here’s Why and The “Great Crisis” Is Well On Its Way and Will Make 2008 Look Like a Joke!] There are too many quality analysts who have already discredited themselves in the eyes of the general public as the boy who cried wolf by putting absolute dates on these events. That is a shame because the rest of their message is, for the most part, spot on. All I’m willing to say is that this might very well go on a while longer than most people would think. It could also end next week. Look at Europe. It was going. Then it stopped.
While it is true that the USFed is backed into a corner, there are still some tricks they can pull. The same goes for the USGovt. Accounting is a lovely business, especially when you can change the rules to suit your whims.
Who in the world is currently reading this article along with you? Click here
The Consumer’s Millstone
Another problem facing America that is perhaps unique in the world is the level of personal indebtedness. I know I sound like a broken record, but I’ll say it again. When you borrow money, you are essentially voting for your own economic enslavement – in more ways than one.
- Your borrowing allows the banking system to create inflation, which lowers the purchasing power of your currency so you end up having to borrow even more because your current borrowings don’t buy as much – and it quickly becomes a cycle.
- The job market is downright pitiful. The ‘good’ jobs keep disappearing. For example, Lockheed Martin laid of 3,000 workers this week and the jobs the economy is ‘creating’ are junk, paying below-subsistence wages. It is pretty sad when you can have a job and still qualify for all types of government assistance because the job doesn’t pay a living wage. This is another consequence of the USFed’s inflationary Keynesian rattletrap policies. Wages haven’t kept up with prices. Borrowing has filled the gap. Enter a good dose of materialism and voila – instant serfdom to the banking system. In this type of environment, who in their right mind would want to further encumber themselves with debt?
Nevertheless, the latest report from the USFed shows that consumer credit outstanding hit a record high. Yes, an ALL-TIME RECORD HIGH. [Read: 75% of Americans are in Deep _ _ _t!] Ironically, the culprits were automobile and student loans. I’ve already written previously about the student loan crisis that is brewing. Aside from the bubble in USGovt debt, the student loans mess qualifies as the #2 bubble as far as I’m concerned. Of course the ignorant media spun this utterly awful report as a good thing, following in their good Keynesian bias that debt to spend is good and doesn’t matter. Debt equals prosperity in fact. Very 1984ish. More on this later.
What the Reckoning Will Look Like
Austerity will be coming to America. Of course it will not be called austerity [Read:What is Financial Repression? Why It Will Fail], because that is now another of the ‘bad words’ for which there is no place in American journalism outside describing Europe woes. We seem to be settling on the idea of using ‘fiscal cliff’ to describe our own set of woes.
Austerity will not be any prettier in America than it has been in Greece because we’re of the same mindset by and large [Read: The U.S. and Greece are Frighteningly Similar! Here’s Why]. The freeloaders in this country are not going to take well to the idea that they can no longer eat off the sweat of someone else’s brow. They’re no different than the freeloaders in Greece and the rest of Europe who are now rioting in the streets along with pretty much everyone else.
America has already defaulted on its debt and the rest of the world for the past several years has been playing along, leading people to the idiotic notion that the Chinese don’t realize that they’re being paid back in dollars of steadily decreasing value. Does anyone actually believe this nonsense? The Chinese (and the rest of the world) might be a lot of things, but ignorant isn’t one of them, especially their policymakers. This default is one of the main reasons that China, Russia, [Read: Watch Out! Russia & China Stripping USD of Its Dominant Role in World Trade] and the OPECs [Read: 2012: The Beginning of the END for the U.S. “Petrodollar”!] have been cutting deals quietly to exclude the USDollar from their trade. We’re not talking about two-bit countries here. China and Russia have massive economies and massive economic power. They are making some very poor choices by the way, but they are still miles ahead of America. They are cutting us out.
Everyone on earth has been quietly and slowly stepping away from USDebt, [Read: U.S. Continues to Lead the World — In Debt!] particularly that of a longer-term nature. The USFed and other central banks have been sopping up that debt to keep the game going. The syndicate then dispatches its minions to monkey with the precious metals markets to keep the illusion that the dollar is still worth something. They bash gold in their banker-owned television networks, and then load up behind the scenes. Has anyone noticed that the Cash4Gold places won’t sell you gold? They only buy. They’re more than happy to give you paper for the family jewels.
- It’s FREE
- It contains the “best of the best” financial, economic and investment articles to be found on the internet
- It’s presented in an “edited excerpts” format to provide brevity & clarity of content to ensure a fast & easy read
- Don’t waste time searching for articles worth reading. We do it for you and bring them to you each day!
- Sign up HERE and begin receiving your newsletter starting tomorrow
However, there will soon come a major paradigm shift. Central banks will stop printing fiat money to buy bonds. They will continue printing like crazy, but instead of buying debt, they’ll be buying gold. The big (and smart) money is moving towards metals. Soros [read: Soros Selling Stocks and Stacking Gold! Should We Be Buying More Gold Too?], Paulson [Read: John Paulson Now Has 44% of His Hedge Fund’s Assets in Gold Stocks/ETFs! How Much Do You Have?], Putin in Russia, and China have all been buying gold. Soros doubled his holdings in one day, albeit it through the gold ETF. Think he doesn’t have physical gold? Think again. The syndicate knows gold is money and is preparing for a massive power shift. He that has the gold makes the rules.
The end of the USBond bubble [Read: These 5 Trends Suggest It Is Time to Short Bonds NOW!] will spell a certain end to the entitlement structure and America’s welfare society. Much in the way the Greeks and Spaniards have been suffering so shall Americans who have not properly prepared.
By prepared. [By that] I mean:
- shunning new debt,
- paying down (preferably paying off) existing debt [Read:In Debt? Kick it to the Curb, Get Rich, and Start Living Life to the Fullest! Here’s How], and
- building up savings,
- storing a good portion of your savings in precious metals [Read: Your Portfolio Isn’t Adequately Diversified Without 7-15% in Precious Metals – Here’s Why and Don’t Laugh – Invest At Least 65% of Your Portfolio In Precious Metals!]. Too many people consider metals an investment. Gold and silver are cash. Pure and simple. Just another way of holding cash that happens to be a lot better at holding value than paper currency….[Read: GOLD: The Currency Without a Printing Press]
Other austerity measures [Read: Forget About the Fiscal Cliff! Increased Taxes & Austerity Measures Are Coming to the U.S. Regardless! Here’s Why] in the U.S. will consist of:
- steady increases in the retirement age to ‘save’ Social Security,
- increases in premiums and
- cuts in benefits to keep Medicare from blowing up.
Be prepared to pay a lot more from healthcare [Read: Obamacare is Coming: Here Are Some of the NEW Taxes You’ll Be Paying for It ], despite the massive reform that is forthcoming. That reform doesn’t even come close to dealing with the real problems, but instead mandates that approximately 35 million Americans who don’t have health insurance buy it from the insurance industry. Rather convenient, but should be no surprise considering the insurance industry crafted the reform bill.
Much of this austerity will fall under the labeling of ‘shared sacrifice’ and those who are against the theft of their Social Security contributions for example, will be deemed to be ‘unpatriotic’. That is already happening and, regardless of your worldview, the facts are out there.
The K-winter, Generational Theory, and Death of Keynesianism
There are clear cycles in society and they come under a vast array of names. The Kondratieff winter [Read: Current Long Wave Kondratieff Winter Snow Storm to End in an Economic Avalanche – Here’s Why] and the Strauss-Howe Generational Theory are two of the more popular monikers given to the period in the progression of societies where decadence leads to complacency, which ultimately results in bondage. We’re clearly either at the very end of the decadence/complacency stage or the beginning of the bondage stage, depending on how cynical you happen to be.
What cannot be denied is that the world is going through a massive paradigm shift. The following are all slated for termination:
- the dollar standard era,
- the age of consumerism,
- the parabolic accumulation of debt, and
- Keynesianism [Read: Obama Administration Applying Keynesian Economics to ‘Ensure’ America’s Future Prosperity].
The great experiment that began with “A Treatise on Money” in 1931 that encouraged people to spend rather than save (among other things) is beginning its disastrous end as central banks and governments around the world engage in unlimited monetary stimulus as a means by which to ‘fight’ economic malaise. The patented answer and justification for additional stimulus was, is, and will continue to be ‘well, the last one just wasn’t big enough’. We’ve seen that with the USFed’s failed policies over the past half dozen years. When the mere lowering of interest rates failed to achieve the desired ends, interest rates were lowered to zero. When that didn’t work, they pledged to maintain ZIRP until 2015. That hasn’t worked and we’ve seen two QE failures and a TWIST program that has done absolutely nothing. So now we’re into QEunlimited. [Read: QEunlimited is NOT Going to Save the U.S. Economy – Period!]
The mainstream parrots the party line that unlimited QE is the way to prosperity. I reject that hypothesis out of hand because every last one of them already knows what the end result will be. The banksters will end up owning the title to your house, your car, and will enrich themselves infinitely with the spoils of your labor.
It is quite obvious that the Keynesian experiment results in prosperity, but it is not that of the people as was asserted back in the 1930’s, but rather it is that of the financial oligarchy. At the end of this cycle, Keynesianism will meet its well-deserved demise, but the American standard of living that has been enjoyed since the Depression will die along with it. In truth, that living standard has been compromised for quite some time now with its maintenance becoming more and more dependent on the accumulation of debt, but even that will no longer be enough.
Our society has reached a point where we are so far disconnected from our last great lessons in economics and hardship that we are now doomed to experience the next round. All the ingredients are in the mixing bowl and the blender has been slowly picking up speed for the last half dozen years.
My parting question to you is which side are you on?
- Are you on the side that is willing to face these problems head on and impose some austerity on yourself so as not to be caught off guard or
- Are you on the side that wishes to remain blissfully ignorant?
If you’re in the former group, you are to be commended. If, however, you find yourself in the latter group….
Until Next Time, Andy
*http://www.sutton-associates.net/issues/mtc_2012/mtc_11092012.php (Andrew W. Sutton, MBA received international honors in the field of Economics in graduate school and is the Chief Market Strategist for Sutton & Associates, LLC, a Registered Investment Adviser in the Commonwealth of Pennsylvania. For more information about the company, its products and services, or contact information, please visit our website. Please feel free to distribute, copy or otherwise disseminate this information.)
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Financial repression occurs when governments channel funds into their own sovereign bonds in order to reduce debt levels through mechanisms such as directed lending, caps on interest rates, capital controls, debt monetization, or by other means. The promise of financial repression is that it will hold down government borrowing costs and reduce government debt levels, but critics argue that financial repression merely targets the producers of society, i.e., the middle class, and therefore harms the economy. Let’s take a look at financial repression ands its supposed pros and cons. Words: 1486
It’s easy to find analysts and investors who are certain that a deal [to avoid the fiscal cliff] will be reached, or at least that the can will be kicked down the road to buy more time. It’s also easy to find more pessimistic views that are based on the lack of cooperation in the past, and a deeply polarized country and political system. However, I think many are missing the point, which is that austerity is coming to America – taxes are going up and government spending will be reduced – [and. as such,] the United States is likely to face a recession and market correction in 2013, regardless of whether or not a compromise is reached over the Fiscal Cliff. Words: 970
With the pop from the USFed’s latest attempt at financial shock and awe already seeping from lackluster markets, and the teleprompter news networks losing steam over their promotion of the same, it is time to take a look back at the decisions made on 9/13/2012 and set the record straight on some things.
The latest round of quantitative easing (an additional $40 billion a month until conditions improve) has been dubbed as “QEternity” or “QE-Infinity” by its critics but it will end much before that. We are witnessing a massive bubble in US government debt, and we’ve reached the point where no one in charge believes it will ever end – an excellent contra-indicator. [Let me explain.] Words: 720
The Fed professes that QE 3 or as I call it, QE Infinity (QEI), will create jobs but I am not sure how they can expect anybody to buy their rationale. As we know, QE 1 and QE 2 did very little in the way of creating jobs. Might the Fed realize that QE Infinity could actually be counter-productive to economic growth?
There are several variations of Long Wave theory, but the most famous is based on the work of Nicolai Kondratieff, a Russian economist who gave the various stages seasonal names, with summer and autumn denoting the peak of financial speculation and winter the aftermath of the resulting crash. The conditions for a global catastrophic failure are in place. Snow (in the form of trillions of new dollars and euros) is falling. There’s no way to know which dollar (or which external event) will start the avalanche, but without doubt something will. [Let me expand on why I hold that view.] Words: 888
As the fiscal cliff is nearing with the end of 2012 in sight and total public debt approaching the debt limit of $16.4 trillion, investors need to seriously start worrying about the U.S. bond market. [Below are 5 trends that support that view.] Words: 599
The inability [of Congress] to reduce spending and tax its citizenry represents a competitive disadvantage for the U.S.. It is the mark of a country that cannot keep its fiscal house in order, does not care about repaying its debts and, [as such, it] may well be heading for collapse. Words: 978
When a major global player with direct ties to the White House, Wall Street, and the banking system starts off-loading stocks and starts stacking gold, it suggests a very serious market move is set to happen – and that is just what George Soros has done according to his latest 13-F report filing. [Should we buy more gold too?] Words: 484
Closely-followed billionaire hedge fund manager John Paulson, who famously bet against the subprime housing market in 2007, released his 13F regulatory filing revealing that his hedge fund increased its stake in gold in the second quarter to 44% of his funds equity assets. How much do you have invested in physical gold, gold ETFs, gold mining shares and warrants?
Before China and Russia can boot the U.S. military out of Asia and Eastern Europe, they have to strip the dollar of its dominant role in world trade, especially of Middle Eastern oil and that’s exactly what they’re trying to do. [Let me explain.] Words: 816
A major portion of the U.S. dollar’s valuation stems from its lock on the oil industry and if it loses its position as the global reserve currency the value of the dollar will decline and gold will rise. Iran’s migration to a non-dollar based international trade system is the testing of the waters of a non-USD regime…transition to a world in which the U.S. Dollar suddenly finds itself irrelvant. [Let me explain.] Words: 1200
The traditional view of portfolio management is that three asset classes, stocks, bonds and cash, are sufficient to achieve diversification. This view is, quite simply, wrong because over the past 10 years gold, silver and platinum have singularly outperformed virtually all major widely accepted investment indexes. Precious metals should be considered an independent asset class and an allocation to precious metals, as the most uncorrelated asset group, is essential for proper portfolio diversification. [Let me explain.] Words: 2137
There is such a “fear of gold” amongst most people that it must be due to statist indoctrination and propaganda because it makes no rational sense to have such a fear of such a time tested and true store of wealth. After all, we are talking about time tested and true money – the only money that has lasted for thousands of years and is still fully accepted worldwide as a store of wealth….What would you rather hold “for eternity” gold [or] US dollars [which are nothing more than] a paper debt obligation of a bankrupt nation state? Words: 450
When it comes to investing in gold, investors often see the world in black and white. Some people have a deep, almost religious conviction that gold is a useless, barbarous relic with no yield and an asset no rational investor would ever want. Others love it, seeing it as the only asset that can offer protection from the coming financial catastrophe, which is always just around the corner. Our views are more nuanced and, we believe, provide a balanced framework for assessing value. Our bottom line: given current valuations and central bank policies, we see gold as a compelling inflation hedge and store of value that is potentially superior to fiat currencies. [Here are the details of our analyses.] Words: 1316
If you’re among those struggling with debt and just want to be rid of it and move on with your life, it can be helpful to find some information and inspiration from others who are financial experts or people working to pay off substantial amounts of debt. You’ll find all of that, and more, in these inspirational personal finance blogs that can offer you advice, motivation, and guidance in paying down your debts so you can start putting that money to other uses. Words: 1010
Rising education and medical costs, on-going credit card interest payments, well used personal lines of credit and large mortgage debt and home equity loans – most a penchant for living beyond their means – is keeping 75% of American households in some degree of debt. Take a look and then pass it on to your friends, neighbors and co-workers.
In order to prevent a recession from getting out of hand, the central bank must lift the money supply and aggressively lower interest rates. Once consumers have more money in their pockets, their confidence will increase, and they will start spending again, thereby reestablishing the circular flow of money, so it is held. Words: 542
The USA continues to decline economically relative to some parts of the world, most notably those in Asia yet we still lead in many areas. Unfortunately being number one is some categories is not a good thing and our level of debt is one of these areas. In fact, our debt burden leads the world. [A look at the charts below illustrates that all too clearly.] Words: 272
Timing the U.S. debt implosion in advance is virtually impossible. Thus far, we’ve managed to [avoid such an event], however, this will not always be the case. If the U.S. does not deal with its debt problems now, we’re guaranteed to go the way of the PIIGS, along with an episode of hyperinflation. That is THE issue for the U.S., as this situation would affect every man woman and child living in this country. [Let me explain further.] Words: 495
For over two years now, I’ve been warning that the 2008 Crash was just a warm up and that the REAL Crisis would occur when the stock market realized that the Central Banks, lead by the US Federal Reserve could NOT actually hold the financial system together. Well, the Crisis I’ve been warning about is here. [Let me explain.] Words: 306
Now that President Obama has been re-elected, Obamacare will become reality and that means that a lot more people in the United States will have health insurance and, if the program works as it is supposed to, it also means that the growth of healthcare spending overall will eventually slow. Both of those are good but, in the near term, Obamacare also means a lot of people will be paying more taxes and higher insurance premiums. (You didn’t think Obamacare was free, did you?) Below are some of the new taxes you’re going to have to pay to pay for Obamacare. Words: 565