Jan 8 2010 12:54PM

Paralyzed In An Idiotic Fiscal Freezer

In this essay, we review current news opinions and offer our predictions as to where things go in 2010-2012. Normally, we do these for only one year but some of the more important events will overlap from this year into 2011-2012. Also, certain current trends are difficult to date-pinpoint in 2010 with precision.

Please do not be despondent over these ideas as a few can bend your mind and produce sleepless nights. Rather, take them with a grain of salt and instead focus on the bright side. We should see the several years’ long messes eventually get cleaned-up simply because the sliding global economy will force those adjustments. For example, spend-thrift consumers will quit buying as they run out of allowed credit. Next, the same screws tighten on crooked bankers, congressmen and governments. We say the Sheeple pay the price but finally, those instigating scumbags will too. I suspect a larger list of politicians will enter forcible retirement this year and in 2012. Good riddance to them all.

Here Is The Larger View

The USA government bailouts including TARP and other specious global bank and corporate welfare programs placed a quick band aid on a strategic economic gaping wound. This post Lehman fix was only temporary repairing about 10% of all these problems. Now that big American business and her banks are partially fixed, these banker-idiots are back to their old games with derivatives trading, not making badly needed business loans, and stashing cash inside the guaranteed return nest of Treasury Department bills, notes and bonds. No loans for you or business but plenty for them.

In other words, the government hands banks’ almost free credit and then pays them the interest using the same funds. These banks are free to run recklessly with ironclad returns, not lend or be real bankers and, skim the bonus cream while backstop funding taxpayers are screwed three different ways.

We have never seen such open animosity within the U.S. congress and our two major political parties. They are openly fighting, lying, and deceiving. They are issuing false statements and attacks upon each other to the extent the people’s serious business both domestic and foreign has been relegated to the back burner.

The president’s chief press officer was more than rude to reporters this week who were asking simple, straight-forward questions. His attitude was basically go to hell and next question. These jerks were elected and appointed to serve the American people and we are being denied the right to critical, accurate, timely information.

We know, for example, that government statistics, which are so important for commercial, industrial and military operations are fraught with miscues and lies. We cannot begin to depend upon key reports like the missing M-3, or unemployment, tax collections, debts, payments and proper systems for normal data discovery. Without this critical data we are all basically flying blind. We have more than once watched canny old television reporters scoff at the weekly sliced and diced employment data. It’s such a bad and readily recognized joke it’s pathetic.

The United States of America is bankrupt and the only way the game stays in play is to print money, lie about the amount of debt, play sleight-of hand with tax revenues and produce billions in new bills, notes, and bonds produced out of thin air each and every month. Foreign purchasers of our national debt paper are tired of it and now clearly recognize that their plans to escape must be accelerated. If not, they will be stiffed when all this junky stuff slides toward zero. This is why when nearly 200 tons of gold came on the market India snapped it up with a fast purchase beating China and other buyers to this opportunity. India paid a comparatively high price and was very happy to do so. We would suggest that any other similar chance to buy would result in the identical quick purchase.

The U.S. Administration’s health care, cap ‘n’ trade and other crazy fiscal destroyers will probably be passed in some meaningless form or another. United States commerce and small business owners are mortified and do not know what to do. They cannot reasonably plan to add and expand corporate enterprise as they have no clue as to what all of this foolishness will cost them. Meanwhile, nothing is moving as most types of credit are denied, for the most part.

We are frozen in time. We are paralyzed in an idiotic fiscal freezer waiting for the warmth of any honesty or sunshine on our collective situations. Don’t wait as it ain’t coming soon.

Inflation First-Hyperinflation Next? The inflation-deflation-hyper-inflation debate continues to rage. When we are asked our posture, our answer is as follows:

(1) Greenspan blew the housing-credit bubble with low interest rates from early 2000 until Chopper Ben took over his seat. This set the table for the housing debacle enhanced by some stupid congressional house reps forcing easy credit on new homeowners who could not afford to pay. As usual, they did this to buy votes. As usual, their plans failed.

(2) Years ago Enron got some key trading rules relaxed allowing them to go nuts with illegal energy trading. After Enron’s fall, those same idiot-lax trading rules were left in place and Derivative Land was born. Too bad it wasn’t still-born as it’s still around and still being nefariously practiced.

(3) This creates a set-up for Lehman Act II. Because of cycles and time, Lehman Act II can hit us in spring or fall of 2010 or, spring of 2011. We expect a drastic markets tragedy in May-July 2010 upon convergence of negative, multiple markets’ events.

We think by spring of 2011 most of the Phase One and Phase Two Crash Damage is complete.

(4) There would still remain a potential for Lehman Act III but we think that one would be milder and the next disaster (Lehman Act II) will finally and permanently ruin lots of banks and corporations. If true, this could destroy the derivatives buyers and sellers (5) This sequence installs new inflation this year with a strong first half and a spring crash.

In the second half of 2010, we’ll see lots of stumbling and bumbling through the smoking wreckage followed by a weak recovery. Then we might see prolonged choppy markets into 2011. In this scenario, inflation-hyperinflation could appear in either fall of 2010 or spring of 2011. (6) After hyper-inflation crescendos and crashes, we go back into deflation and frozen markets until World War III (always the final solution for depressions) breaks open. (7) Then we begin the global shooting war for world domination with the winner being the nation in control of most energy- probably either Russia or the USA, or both.

Forecasting this series of events is not as difficult as you might imagine if you are a student of economic history. The hardest part of course is the timing; the actual when; and the when for those preludes leading-up to all this great fun. Your guess is as good as ours on that calendar but we would suppose we could be fairly close and probably have things in the right order.

20 Years Of Stagnancy Like Japan is the forecast offered by some smart analysts. This would depend, of course, on maintaining some semblance of economic control on an interconnected world of global economic snakes. Quite frankly we have no confidence in that one. However, if command-and-control fascism becomes pure, or a combo of communism-capitalism gains power as in China, all bets are off. Anything is possible. We like to think in maybes and probables with emphasis on potential Black Swan variables.

Retail Sales has three strikes against any major recovery. (1) Consumers and probable buyers are broke. Their credit is almost all gone. They will spend until it is but then the game is over. We are nearing game-over as $40 Billion of credit card failures are forecast by card lenders for spring 2010. (2) The internet is stealing sales from brick and mortar retail stores. It’s simply faster, cheaper and easier. That trend continues ruining more malls, strip centers and big box stores. (3) Credit card lenders are taking-away credit lines, or reducing them. This means fewer sales. (4) In a depression, weak income and no income make consumer’s stop spending and begin to make do and avoid new purchases. (5) There were way too many stores and malls built over the past 15-20 years. We are grossly over-stored. The result is thousands of empty buildings with no employees or customers and zero taxes for local governments. This game fell down with the housing crash. They took a dive together. We predict no recovery for years with some gone for good. A quick review of those major chains closed in bankruptcy would amaze.

Industrial Production is easily measured by the amount of goods shipped in trucks, by rail, and in ocean transport. We have a good reader friend in trucking dispatch arranging loads. His data says trucking reports are so bad you do not even want to know. Rail is way off due to cuts in commercial stuff, autos and others. Train transport of coal and grain will be strong as this continues on in any depression. You must eat and heat. There are so many parked ocean ships; some with loads and many parked empty; it is a near tragedy. Orders for new ships are shut-off but old orders remain in the construction process. When these boats are ready, many will be parked. Lots of older ships will be scrapped as they’re not operationally economical any longer. These older junkers would still have some useful life but they’re not competitive with modern, new ship inventory coming on stream especially from Korea.

How many auto plants are now closed forever? How many that had multiple-shifts are now on one shift, or on one slow shift? How many new commercial buildings are not being built? Answer: More than most would imagine.

Housing And Commercial Real Estate fell in the order we expected. (1) First condominium sales fell with single family not far behind. Now we are seeing higher vacancies in rental apartments as unemployment bites harder. In 2005, we did forecast this dilemma and said, “The housing crash would be so severe adult jobless children would come back to live with mom and dad as they still have a house, a pension and some modest income. We further said, “Families would be doubling and tripling-up beneath one roof for sheer survival.â€