Senator Coburn Explains Why We Are About to Fail

IF you are getting an email, you won't see the YouTube image.   The link should be in the email or you can go to the blog. This video is simple, clear, and terrifying. Please send this video to everyone you know.  Our only hope is to vote out the establishment.  Get involved in the primaries.

In addition, consider that the amendment for the direct election of senators is a mistake. Senators were supposed to be a deliberative body that was representing the states, not the rabble.

Thanks to Greg for this item.  Retirement looks promising

Hey Beth, Read this: United States of Toast

Bob, our resident trust officer, gave me a copy of the Gold Stock Adviser to read this morning.  The bottom line of David Skarica's report was take advantage of a current price jump in the U.S. dollar, the result of short covering and, perhaps, some movement of money away from the EU as Greece melts down. 

After this period, which will not be too long, the dollar will continue its collapse and gold will move in the opposite direction, not so much as an increase in its real value but as a reflection of the falling dollar.   I have talked about this, so I figure David is a genius. 

One comment I will take to heart is don't fuss over the details of the gold price right now (silver too).  Just get out of the dollar. We are not in a normal cycle, so don't try to play it.  You may want to spread this entry around.

Here are some interesting data (yes, its plural):

1990: the federal government spent 1.25 trillion as against 1.03 trillion in revenue.
   
     Deficit of 221 billion or 3.81% of GDP


2000 the amount spent was 1.79 trillion while revenues increased 2.03 trillion.
    
     Surplus:  2.42%

Now, that all sounds good and we hear about the good old Clinton days, but look closer. 

This "surplus" was a government sponsored bubble, a basis for more spending, as spending went up 97.1% from 1990 to 2000.  Revenues increased by 43.9%.  Congressional saliva was running down the steps of the Capitol and there was precious little difference between the parties.  The GOP had prattled on about being more financially sound than the evil Democrats. A pox on both their houses.

Note the inflation in the 1990s was 31.8%.  Spending, thus, increased a bit more than inflation, but revenue was 2.5 times faster than inflation.  Again, this is not the way to analyze what was done to us. We didn't do anything new other than push a ponzi game.  Inflation was rampant and our revenue was based on a bubble the government fostered.

There was, as George Soros puts it, a "super bubble" being created.  During this time, no one addressed medicare or social security.  Madoff was in charge of the ATM. 

2000 saw the technology mini-bubble, but the government kept the super bubble going.  Fannie Mae and friends were directed by the government to fuel the fire storm.  No one took to fixing anything. Investment banks fed the greedy and made billions.

By 2009 revenues were 2.11 trillion, not much of a rise from 2000, see above, but the expenses were 3.52 trillion,

     Deficit of 1.42 trillion

 Government more than DOUBLED since 1990 and bubble revenue turned flat. 

The deficit was 12% for 2009.  According to the the Rule of 72s, if the 12 percent were NOT increased, the entire deficit would DOUBLE in six years, then doubled again in another six years. 

The current estimate is that up to $9 TRILLION more will be spent in the next 10 years and the mad people in D.C. want to add cap and trade along with a medical spending plan.  Just wait, you will see even more of the rats resign and head for cover.

We are, as a nation, done. Let it sink in.  Idiots have killed us and they are still kicking the fallen body. 

We did not want to be a fallen empire; we did not want to be any empire.  Perhaps, it is just as well we will no longer be responsible for the world, but it is going to seriously hurt as our "friends" decouple and our dollar vanishes.  A new currency is likely and I would not rule out confiscation of gold.

We have two choices:  inflate the curency to pay bills and lose foreign investors and the status of the dollar ( =  more inflation) or declare bankruptcy.  You decide on what will be done.  Hint:  there is not enough money made in the U.S. to pay down the debts.

I can't say it any simpler.  If you didn't follow all this, please reread or let me know and I can revist the prose.  Here is another way to look at things:

*  The total of all governmental debt, today, is 110.8% of the U.S. GDP. 
*  If you include consumer debt the total is 350% of GDP, double our WWII rate.

Let's say your home mortgage is 110% of your income AND your credit cards and insurance are another 240%.  How long will you be able to carry on? 

The only reason no one has foreclosed on the U.S. is YOU and the husbandry of generations of prior Americans.  Our oligarchs have used you.  Our investment bankers used you.  Now, it is all coming to an end and we are being asked to buck up.  For my part, to helll with that.

So, we are done.  Accept this and prepare.  Get out the back, Jack.  Before Europe and Asia decouple from the dollar, YOU DO IT.  You can be in this country, but not of it.

We are not about to leave a war economy ending in 1945 where things were built, factories created, inventions perfected, young people wanted homes and educations, where the church provided stength.  We are not leaving anything; we are falling deeper into government sponsored debt, which we permitted, ultimately. and we still have wars going on. We have precious little in the way of hard industry, though as we fall toward third world status, our prices will be attractive.

Probably, this financial madness is purposeful so that a facist government can now step in to quel the coming chaos, a North American Union can be established.  To my mind, this seems likely because grown ups in government and investment banks can't be as stupid as they act. 

Skarica thinks gold and gold stocks will help you preserve your cash - warning: get out of the dollar immediately in this recent run up.  He assumes a stable political environment.  David is Canadian. He probably thinks a little make-believe socialism is a good thing, but our mess is nothing like the Canadian system, for now.

He did mention a few Canadian gold stocks worth looking into. I will see if I can buy them using a Canadian account.  In the meantime, I continue to suggest US silver coins pre 1965.  Buy some on this weakness, then bury them. Do not participate in the government-banking complex.  Become invisible. 

Your homes, 401Ks, bank accounts, interest income, estate, and car are all targets. Think carefully about blowing your money on good colleges unless you can get a long loan.

If Congress is purged this year, I am still not confident that anyone can fix this mess. Assume you are toast and act accordingly. We need a few more months of blizzards in D.C.Skarica

For update click on title below:  

U.S. NATIONAL DEBT CLOCK
The Outstanding Public Debt as of 16 Feb 2010 at 09:00:11 PM GMT is:

The estimated population of the United States is 307,851,808
so each citizen's share of this debt is $40,171.52.
The National Debt has continued to increase an average of
$3.85 billion per day since September 28, 2007!
Concerned? Then tell Congress and the White House!

A final concept to keep at hand:  The progressive rally cry that we should tax wealth is a misdirection to quiet the masses.  Wealth is not taxed, income is taxed. John Kerry will be fine, but not a truck driver. The oligarchs will protect themselves and set you up.

Seek assets, real ones like land, silver, food.  Convert your financial assets into real wealth. Do not leave them in the intermediary dollar form.  We will all learn soon enough that the dollar is a piece of paper.

Getting ready

Seeking Alpha has pieces to explain the "bail out," another Orwellian use of language. It is a spending spree, not a bail out. In other articles, they recommend SLV, a proxy for silver, a display of the plunging dollar against other currencies (only the beginning), and an argument for long positions in SKF.

SKF is interesting in that it is around 50 and has been  250.  Get this, it is designed to be the double inverse of the financial stocks.  If you think banks are still in trouble (and big ones are being propped up with mirrors), then this is a good play. As Soros said yesterday the financial system crashed in October. The Bush bailout was designed to stop the massive collapse and runs on the bank, but since then, we are just propping up the old houses. [Of course, he is probably shorting the U.S. dollar.]

Anyway, get out of the dollar or into something that will ride inflation.

The conclusion from the selection below:  This also means that the asset side of the balance sheet is potentially "inflated" by almost 75% and the net result could be the most dramatic collapse in a banking system's assets in record history as over $8 trillion in "assets" are reevaluated.

The Core Of The Problem

As the table below tries to capture, the core of the Bail Out problem is reconciling the balance sheet of the banking and thrift system. The biggest concern is the roughly $8.1 trillion in loans currently on the asset side of the equation. The other assets, however, which include $2.8 trillion in securities and $2.5 trillion in other assets, should not be ignored. I point out the loans as this is where the vast majority of the "toxic assets" reside. The real question mark is what is the true value of this $8.1 trillion number as the financial system contracts massively. As has been pointed out, banks have taken only about $1.2 trillion in write downs against these assets.

Is that amount of write downs enough?

Not by a long shot, if one considers the various guarantee and support programs enacted by the Federal Reserve and the Treasury. In a normal world, the Assets, by definition, should equal the Liabilities plus Shareholder Equity. As nobody knows what the true value of the assets really is, the Bail Out support programs are designed to provide the backing to make it seem like the almost $8 trillion in deposits, the core of bank and thrift liabilities, are not "supported" by toxic assets, or "hot air" to use popular jargon.

As presented, the various Bail Out programs now support over 72% of the total liabilities on the balance sheet. The implications of this are staggering: Roubini anticipates the total amount of write downs (in the US) will reach $3.6 trillion, or another $2.4 trillion to go. The revised IMF estimate (which is not the final one by a long shot) estimates $3.1 trillion in total US losses, or another roughly $2 trillion to go. These provisions are optimistic. Why? Because through its various implicit and explicit guarantees the administration is saying the total pain could potentially reach $8.8 trillion. The Fed and Treasury are also providing support for up to 20% of the bank system shareholder equity through TARP preferred stock. As the government has the best information about the true sad state of affairs, it is likely that as more and more information about the weakness of the financial system comes to light, more of these support guarantees will become utilized to their full extent.

This also means that the asset side of the balance sheet is potentially "inflated" by almost 75% and the net result could be the most dramatic collapse in a banking system's assets in record history as over $8 trillion in "assets" are reevaluated.

Another Word to the Wise (you)

No pictures today. Today, I use words. Don't need any cute media image. I seriously recommend you actually read this and not skim it as more rambling in your inbox. As the title suggests, a word to the wise is worth something or other. What is that, a pound of cure? Saves nine? A bird in the hand?
-----

Two years ago, Glenn Beck pointed out the government stopped reporting how much money it prints. Yes, prints. That is how we keep going after idiocy like Fannie Mae, etc. (No, no analysis of a scandal 30 times bigger than Enron, here. Fait accompli, for sure. No more fixes.) At the time, we were told no one really needs to know the printing information. Not part of the matrix of data. No?

Beck suggested there was no reason for this other than they expect to print a great deal of money.

Today, on his radio show, he pointed out that he had his staff spend time (a week) to find out how much money was printed recently (undefined, unless I missed it). The answer was more than $3,000,000,000,000. To put this in perspective, divide by 300,000,000, the number of Americans in the country, and this is a new obligation of $30,000 on EVERY American. No, it won't help to get more illegal alients.

Considering there are roughly 150,000,000 tax payers, business and personal, that is a new $60,000 debt on each taxpayer. Somehow, people seem to think these obligations are remote to their lives - they are not. But wait, there is more.

Then he pointed out that today's T Bill auction was the largest in history at $20,000,000,000, which you are liable to pay back. The paper commented today that the Treasury "still" had its lustre - as though it was an interesting phenomenon. You know, it is.

Only, it is not world investors, who are smart, are being tricked into U.S. obligations as much as there is no where else to go. The best of the worst? Word to the wise.

Oil prices are collapsing, making us feel better, like things are getting better. I had been predicting a fall to a rational price, one that wasn't controlled by fear. However, the rapid collapse of the prices, currently, is NOT a good sign, except in the very short term and to those who see the freight train coming. Consider the prices are collapsing because the smart money sees a dramatic collapse of demand. A bigger fear has taken over. In the future, if you have cash, you will be able to buy gas at a low price - a word to the wise.

A few weeks ago, I watched a C Span coverage of a symposium about the financial situation. An undersecretary of the Treasury, without fanfare, mentioned the government is planning for a deflation next year. A rapid deflation is a depression. I never saw that elsewhere on TV or in the paper, as we were in the Obama support game, at the time. There was no discussion of substance, only that the game was McCain going to Washington and Obama presenting himself as a more reflective, distant deep thinker. (As he said, Tell me what to do, I will sell it....)

The deflation should hit hard, the under secretary thinks, and last for the rest of year, plus. We all know how good the government is at projecting impact. However, I have no reason to doubt his overall analysis as this is classic economics, not government whimsy. Also, you can think of the gas prices as deflation, rather than a boon to buyers, as it appear. Don't fall for the superficial and stick to the word to the wise.

These are enough dots for me to shift to a prevent defense.

For my part, I am not as exposed as most, having been leveled by illness. Things can't get worse for me. In fact, I can switch to foreclosure law and use the downfall. So, I pass this along to those who feel motivated to prepare. If I am wrong, not a big deal, you will have lessened liabilities, have a basement filled with canned goods, some cash under the mattress, and may have an apartment in your house.

If I am right, you could easily lose your job or a major portion of income. Those around you will not be able to pay you. Prices will collapse, along with income, of course, but not your mortgage payments and government taxes. Not, government salaries which are now, what, 50% of the economy. Real estate taxes will not come down for some time as the government will be needing your money as its waste blows up in their faces. Governments universally don't understand revenue goes down as tax burden goes up. Just another junkie standing in the loser line.

Cash will be king. Get cash. Getting cash can also mean get out of debt. Now. That's the magic bullet. Shift debt to a form you could deal with. If you are over 65, get a reverse mortgage today.

This unrequested advice is not a general idea from a former blogger, it is a religious dogma to put into effect today, if you sense trouble. Don't put aside this info as as part of the mass of data that flows through life. As Bacon said of books (or something like it), some are to be tasted, others are to be carefully eaten and considered.

I am not projecting some economic downturn that we can stumble through because of the kindness of others. We are possibly looking at a wipe out caused by the stupidity of others. Again, if I overstate this, there is no downside to paying off debt and saving money.

If things are terrible, having a lawn sale, so to speak, today will be very important.

I am not an economist, so I would not presume explain how to prepare fully for a deflation. We have not had one in our lifetimes, unless you are old and knew it was coming all along. Deflation will require study and, perhaps, this site could be a way to look into what to do. For example, it seems buying gold and silver is smart, after buying food and storing it away. (Is gold artificially being depressed? What happens when holders of futures decide they want delivery? Is this AIG in a vastly more massive scale, there being no inventory to meet the demand?)

I am, however, acting on common sense. The coming mess is something a private business would have dealt with and fixed or reorganized. The government just prints money. Now, it wants to bail out car companies, because the unions want it and don't want members hurt. That is a nice idea, but at some point mommy government does too many stupid fixes which can delay a collapse, but increase the severity, as they say about the FDR projects.

At some point, world investors, upon whom we are addicted, will say, "Enough...." This is already starting to be heard around the world. The U.S. dollar is losing its appeal, overnight. This means something to you - directly. It is not some abstruse concept passed along to those who watch financial networks.

We are used to the government gliding over its massive mistakes. Remember Enron and the massive media interest and convictions? Congressional outrage at those big bad business people? (That Bush put them in jail was not part of the propaganda.) That episode was what happens when there are those in charge who have no decency or care of the rules of the game. They screwed up and are in jail. People are hurt. We are told the government should control all this.

So, what happens when we put loose cannons in charge of Fannie May and Freddie Mac, who think other people's money is to be spread around to voters regardless of economics? The result is a financial fiasco for the history books of future generations, far overshadowing in size and all other disaster than an Enron episode. Everyone on the planet will be hurt.

We print $3,000,000,000,000, borrow $20,000,000,000, and McCain says, as president he may hire Cuomo, patient zero of financial collapse. Who are these dopes? Who? Why aren't people being arrested? Thrown from office? Who is responsible.

We are.

Indeed, Cuomo was voted into the insanity of NYS government, a perfect home. There really is no hope for NYS as long as NYC remains part of the country.

Anyway, just understand it is time to remove yourself from game. The game is not only on the cliff, it is sucking in more and more victims in an attempt to balance its position on the cliff. It is losing its stability, so is sucking in all of us. Sooner or later, down we go.

In the past, I told clients that "the bank is never your friend." Now, I will add, "The government is your enemy." Indeed, it is your pusher who needs more from you to protect itself. It has stopped being America's representatives and we went along with that. It is now Big Brother, the crazy one.

So, a word to the wise.

Ideas to consider, immediately, like now:

1. Reduce assets to protected cash, perhaps gold. (Stop spending)

2. Get out of debt asap. Even if all you can do is lower interest cost, do it. Shift things around.

3. Don't buy anything that requires borrowing money. Indeed, sell your house if you are near the mortgage amount, or prepare to pay the mortgage with much less income....see below.....

4. Do a budget that assumes your income is reduced, one day, by 50%. Consider a plan that includes bankruptcy. Put assets in the right places.

5. Watch for the credit status of the U.S. being lowered - that's the writing on the wall that all hell is coming. Foreign money will vanish at a geometric rate. Followed by the collapse of the dollar. Socialist will say they need control, you can't let citizens run their own country. Game over.

Have a nice day.

The Arabs have a saying, "Trust in Allah, but, first, tie up your camel."

Final word to the wise: take Vitamin C. Especially, if you get the flu, take, at least, 5 grams a day. Forget the delusional vaccine which is just another way to get money from the government by drug companies. Flu victims die of scurvy - the absence of Vitamin C. How simple (aka cheap).

Gene

Good luck.