http://market-ticker.org/akcs-www?post=167922
Yepp!
Posted 2010-09-30 11:22
by Karl Denninger
in Editorial
WSJ Opinion Page: A True Path Forward?
From this morning....
Solution No. 1 was to throw nearly $1 trillion of stimulus at the economy. But Keynes failed. Then they sprayed the economy with gallons of Chairman Ben's Quantitative Elixir, or QE. Nothing happened. They could have extended the Bush tax cuts, but instead the Pelosi Democrats punted the subject past the November election, the equivalent of kicking the ball straight up in the air.
It looks to me as if there's only one policy they haven't tried: economic growth.
More recognition of the problem - and a potential solution?
Ok, let's look at an actual path forward. Do this, we win. Don't do this, you need to come up with a path that does as much as this one will.
Shut down the Chinese abuse engine. Right now. Either they revalue up 20% today, and to 40% within two years, or we hit them with tariffs representing the full wage and environmental differential in their products. I know they say they can't, and that it will cause "problems." But the problems are of their own making - slave labor wasn't our policy, it was theirs. They could have enacted labor and environmental reforms over the last 10 years, and kept making promises they broke. We, for our part, didn't enforce the mandates. Ok, we start. Right now. Oh, and incidentally, this is not just China. The same thing applies to Mexico, Vietnam, India and everywhere else.
This will get rid of the $3 T-shirt and $30 DVD player. I recognize this. That's ok, because.....
We're going to build nuclear power plants. On each and every military facility. We will pre-empt state and local challenges and lawsuits, and just do it. Those who don't like it, too damn bad. The Navy will run them at a supervisory level and civilians will build them. We will build a mix of Pebble Bed, Fast Breeder and Thorium Salt reactors. The first two will be built in a fuel-cycle neutral mix. The latter will get its fuel from coal ash. This is a sustainable, green, and permanent energy solution. If the Government is going to spend money, this is what we will spend it on.
Those who are on welfare may either take one of the jobs at the above plants or lose their benefits. Exceptions are available only for documented full disability. Fraud in that claim will lead to 20 years in the slammer. No exceptions. If you're able, you work or you starve. End of discussion; no more freeloading.
We repeal the 16h Amendment and all other income and payroll taxes. The Fair Tax is implemented immediately. January 1st 2011 - cold start. This will result in an instantaneous flood of capital and businesses coming to the US. The electrical plants above will produce the power they will need. It will also instantaneously restart Capital Formation which is NECESSARY for us to get entrepreneurship and innovation going again - right here, in this country.
We either repeal Obama's Health Law and implement my plan OR we set a percentage of GDP we will spend on health care at the Federal Level and implement the Canadian system. Choose one. Have the debate in public, pick one, make it happen by 12/31/2011. The ability of companies to bill out $5,000 for an MRI to "uninsured" people while the insurance company pays $150 is an obscene rip-off and must end. Further, the idea that you can show up with no money and no insurance and force someone else to pay, instead of having that responsibility attach to you as a valid debt to the government is also obscene. This is rank profiteering on people's DEATH and must end - right now.
No more illegal immigrants. Period. This is non-negotiable. Come here legally or you will be held to account for a criminal offense, serve your time, and then be deported. End birthright citizenship when your mother comes here unlawfully. For those who are here now, they can stay - as adopted kids. If that's unacceptable they can leave with their parents. We have too many people for the number of jobs at present, and those who are not here legally must lose first. I am all for LEGAL immigration - and once we settle out our growth plans, if we need more workers then let's start letting people in, starting with those who lawfully stood in line.
ALL of the frauds in the financial system are prosecuted. Every one. We will make space for these crooks in the prisons by legalizing marijuana and treating it like alcohol, except that we will sell it at Pharmacies where the people doing the vending have a lot to lose (their six-figure annual income!) if they sell to minors. It is time to end our failed prohibition experiment and besides, we need the prison space for all the banksters. They're a HELL of a lot more dangerous to our society than some dude smoking a joint.
Clarify and extend The Federal Reserve Act to require that actual price inflation, measured by a basket of items representative to the spending in the actual economy (goods and services) deflates at 1/2% per year. Yes, deflates. Technology improves. The natural progress of a society is toward better efficiency and lower costs. Therefore, this should result in small deflation over time. I recognize that this will make lending for speculation or consumption inherently dangerous as in such a regime recessions are necessary to contain balance in the currency and banking system. This is how it should be! This also means that you can save your retirement over your working life without engaging in ridiculous and dangerous speculation in which virtually EVERY person ultimately loses.
Recognize that this growth will be a one-time deal. We'll get something approaching 10% GDP growth for 3-5 years. But then it will be over. Government spending must decrease as entitlements are removed and debt must be paid off - no more games. We cannot build or guarantee indefinite compound forward returns - that's mathematically impossible. This rock is vast but it is finite. We use the above plan to stabilize and grow our economy, restoring what we had in the 1950s and 60s - and to prepare for a more-or-less steady-state future where the gains of the future come from technological advance, not leverage and financial fraud.
You want a growth plan?
There it is.
Now do it Washington.
Thursday, September 30, 2010
Tuesday, September 28, 2010
Saturday, September 18, 2010
http://online.wsj.com/article/SB10001424052748703440604575495670714069694.html?mod=WSJ_hp_mostpop_read
Thanks to Globalization and "free trade" for China, India, and Mexico.
We have allowed this to happen to ourselves.
Time for a Third Party that takes care of Americans, not Globalized Corporations.
Thanks to Globalization and "free trade" for China, India, and Mexico.
We have allowed this to happen to ourselves.
Time for a Third Party that takes care of Americans, not Globalized Corporations.
Monday, July 5, 2010
Another Tea Party
http://kunstler.com/blog/2010/07/my-tea-party.html
My Tea Party
By James Howard Kunstler
on July 5, 2010 9:19 AM
Now that congress has passed a fake financial reform bill that will accomplish absolutely nothing to correct a recently engrained culture of swindling, I want to start my own tea party. I don't want to associate it with the other tea parties that have already formed because I am allergic to much of the idiot ideology they express - especially the bent for merging Christian fundamentalism with governance.
One of the few things I agree on with the existing tea parties is that the Republicans and Democrats have made themselves hopeless hostages of political money and bargained away their legitimacy. In line with my general belief that American life must downscale or die, I'm not wholly persuaded that federalism can survive in any case - but assuming it will lumber on for a while anyway, the two major parties cannot retain their monopoly on power. Indeed, it is in the natural order of things that this country must periodically endure a realignment of political ideas and political power. This tends to occur during moments of cultural convulsion, and that is exactly the moment we are in as the sun sets on the fossil fuel based industrial extravaganza and we enter a crisis of intense resource austerity.
The other tea parties have been silent on the war because of the ties between Christian fundamentalism and military chauvinism. This is due, I suspect, to the tea parties first emanating out of Dixieland, where an old Scots-Irish "cracker" belligerence persists in a romantic view of violence - and where, coincidentally, there happen to be so many US military bases, and families dependent on careers connected with them. The confusions of hellfire Christian theology with governance form an overlayment on this, so you end up with a political culture favoring military adventures abroad and pushing citizens around at home on matters of social behavior (while mouthing a lot of disingenuous nonsense about "liberty").
I don't like that political culture and I'm not in favor of continuing our adventures on the fringes of the Middle East. The half-assed occupation of Afghanistan cannot be resolved in a way consistent with our fantasies and wishes. To put it as simply as possible, we can't control the terrain there and we can't control the behavior of the population. Our campaign to turn that remote and impoverished land into a governable democratic state is an exercise in futility that we can't afford. No doubt there are strategic wishes pinned to it - mainly a wish to influence and moderate neighboring Pakistan - but that appears to be back-firing with the minting of evermore Islamic maniacs seeking to blow up anything that presents a target, including their own women and children.
Iraq is a somewhat different story, but I suspect the bottom line is that we can't afford to run a police station there forever. In the worst-case of our leaving, Iran might attempt to step in and control the place (and its oil), but that would only produce a bloody collision of Arab and Persian culture - and the side effect of that might actually be to our benefit. Anyway, my tea party would shut down that operation ahead of schedule.
My tea party would reduce legal immigration to a tiny trickle and get serious about enforcing sanctions against people who are here without permission. A New York Times editorial last week expressed the Democratic-progressive view in typically tortured style, saying of the recent Arizona law:
..it makes a crime out of being a foreigner in the state without papers -- in most cases a civil violation of federal law. This is an invitation to racial profiling, an impediment to effective policing and a usurpation of federal authority....
The fine distinction they want to apply in this matter between civil and criminal law is the same as NPR's house style of referring to illegal immigrants as "undocumented" - leaving the impression that the only problem for these people is a some bureaucratic glitch rather than a transgression of law. The truth is that neither party really wants to do anything about the extraordinary influx of Mexican nationals because they want to pander to a growing segment of Hispanic voters (or secondarily want to maintain the pool of cheap labor for US businesses). My party does not believe in unbounded multi-culturalism. My party also views the lawlessness of the current situation to be corrosive of the rule-of-law generally. My party views the global population overshoot problem as a condition that requires a more rigorous defense of US territory, sovereign resources, and even whatever remains of American common culture.
My tea party would systematically dismantle Too-Big-To-Fail banks into smaller units subject to real reforms that would prevent any further "socialization" of losses by financial buccaneers. In effect, my party would re-enact the Glass-Steagall laws - and get rid of the 3000-page bundle of prevaricating crap in the current "Fin-Reg" law, which has been constructed with all the guile and mendacity of a collateralized debt obligation. My party would seek the return of banking to its function as a utility, while letting investment freebooters gamble with their own funds without any government back-up. (You'll see the investment houses get small fast that way.)
My tea party would get the government out of the housing business. The main effect of 70 years of federal intervention for the sake of "affordable" housing has been to drive the price of housing up far beyond the ability of normal people to afford a place to live. And the current policies devised during the bubble crackup crisis have only served to prevent the price of houses from returning to a level where people might be willing to buy them. Of course, the whole process has also encouraged local governments to jack up property taxes to a level that can only be described as intolerable (in the 1776 sense of the word).
My party would undertake a rebuilding of the US passenger railroad system - not a flashy new "high speed" system, which we cannot afford, but the system that is lying out there rusting in the rain waiting to be fixed. This is imperative because we are on the verge of very disruptive problems with our oil supply which are going to put our beloved Happy Motoring matrix out-of-business. We also face the end of mass commercial aviation (even if flying remains an option for the wealthy). A restored passenger rail system will not solve all the problems connected with the demise of mass motoring, but it will help a lot, and would be an aid to the necessary re-activation of our small towns and cities as suburbia inevitably loses its value and utility.
The leaders of my tea party from the president on down would make a concerted effort to inform the public in straight talk about the real problems that we face involving peak oil and debt. My tea party would promote reality-based politics rather than techno-grandiose fantasies and wishful thinking. My tea party would encourage the necessary downscaling of all the critical activities of American daily life, including the re-localization of food production, the rebuilding of local commercial networks, the revitalization of the small towns and cities, and the difficult transition out of extreme car dependency. My tea party will do everything possible to construct a coherent consensus about what is happening to us and what we can do about it. My tea party is based on the true spirit of 1776 - the binding together of common interests and common culture - not the destruction of them as in the spirit of 1861.
_________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.
My Tea Party
By James Howard Kunstler
on July 5, 2010 9:19 AM
Now that congress has passed a fake financial reform bill that will accomplish absolutely nothing to correct a recently engrained culture of swindling, I want to start my own tea party. I don't want to associate it with the other tea parties that have already formed because I am allergic to much of the idiot ideology they express - especially the bent for merging Christian fundamentalism with governance.
One of the few things I agree on with the existing tea parties is that the Republicans and Democrats have made themselves hopeless hostages of political money and bargained away their legitimacy. In line with my general belief that American life must downscale or die, I'm not wholly persuaded that federalism can survive in any case - but assuming it will lumber on for a while anyway, the two major parties cannot retain their monopoly on power. Indeed, it is in the natural order of things that this country must periodically endure a realignment of political ideas and political power. This tends to occur during moments of cultural convulsion, and that is exactly the moment we are in as the sun sets on the fossil fuel based industrial extravaganza and we enter a crisis of intense resource austerity.
The other tea parties have been silent on the war because of the ties between Christian fundamentalism and military chauvinism. This is due, I suspect, to the tea parties first emanating out of Dixieland, where an old Scots-Irish "cracker" belligerence persists in a romantic view of violence - and where, coincidentally, there happen to be so many US military bases, and families dependent on careers connected with them. The confusions of hellfire Christian theology with governance form an overlayment on this, so you end up with a political culture favoring military adventures abroad and pushing citizens around at home on matters of social behavior (while mouthing a lot of disingenuous nonsense about "liberty").
I don't like that political culture and I'm not in favor of continuing our adventures on the fringes of the Middle East. The half-assed occupation of Afghanistan cannot be resolved in a way consistent with our fantasies and wishes. To put it as simply as possible, we can't control the terrain there and we can't control the behavior of the population. Our campaign to turn that remote and impoverished land into a governable democratic state is an exercise in futility that we can't afford. No doubt there are strategic wishes pinned to it - mainly a wish to influence and moderate neighboring Pakistan - but that appears to be back-firing with the minting of evermore Islamic maniacs seeking to blow up anything that presents a target, including their own women and children.
Iraq is a somewhat different story, but I suspect the bottom line is that we can't afford to run a police station there forever. In the worst-case of our leaving, Iran might attempt to step in and control the place (and its oil), but that would only produce a bloody collision of Arab and Persian culture - and the side effect of that might actually be to our benefit. Anyway, my tea party would shut down that operation ahead of schedule.
My tea party would reduce legal immigration to a tiny trickle and get serious about enforcing sanctions against people who are here without permission. A New York Times editorial last week expressed the Democratic-progressive view in typically tortured style, saying of the recent Arizona law:
..it makes a crime out of being a foreigner in the state without papers -- in most cases a civil violation of federal law. This is an invitation to racial profiling, an impediment to effective policing and a usurpation of federal authority....
The fine distinction they want to apply in this matter between civil and criminal law is the same as NPR's house style of referring to illegal immigrants as "undocumented" - leaving the impression that the only problem for these people is a some bureaucratic glitch rather than a transgression of law. The truth is that neither party really wants to do anything about the extraordinary influx of Mexican nationals because they want to pander to a growing segment of Hispanic voters (or secondarily want to maintain the pool of cheap labor for US businesses). My party does not believe in unbounded multi-culturalism. My party also views the lawlessness of the current situation to be corrosive of the rule-of-law generally. My party views the global population overshoot problem as a condition that requires a more rigorous defense of US territory, sovereign resources, and even whatever remains of American common culture.
My tea party would systematically dismantle Too-Big-To-Fail banks into smaller units subject to real reforms that would prevent any further "socialization" of losses by financial buccaneers. In effect, my party would re-enact the Glass-Steagall laws - and get rid of the 3000-page bundle of prevaricating crap in the current "Fin-Reg" law, which has been constructed with all the guile and mendacity of a collateralized debt obligation. My party would seek the return of banking to its function as a utility, while letting investment freebooters gamble with their own funds without any government back-up. (You'll see the investment houses get small fast that way.)
My tea party would get the government out of the housing business. The main effect of 70 years of federal intervention for the sake of "affordable" housing has been to drive the price of housing up far beyond the ability of normal people to afford a place to live. And the current policies devised during the bubble crackup crisis have only served to prevent the price of houses from returning to a level where people might be willing to buy them. Of course, the whole process has also encouraged local governments to jack up property taxes to a level that can only be described as intolerable (in the 1776 sense of the word).
My party would undertake a rebuilding of the US passenger railroad system - not a flashy new "high speed" system, which we cannot afford, but the system that is lying out there rusting in the rain waiting to be fixed. This is imperative because we are on the verge of very disruptive problems with our oil supply which are going to put our beloved Happy Motoring matrix out-of-business. We also face the end of mass commercial aviation (even if flying remains an option for the wealthy). A restored passenger rail system will not solve all the problems connected with the demise of mass motoring, but it will help a lot, and would be an aid to the necessary re-activation of our small towns and cities as suburbia inevitably loses its value and utility.
The leaders of my tea party from the president on down would make a concerted effort to inform the public in straight talk about the real problems that we face involving peak oil and debt. My tea party would promote reality-based politics rather than techno-grandiose fantasies and wishful thinking. My tea party would encourage the necessary downscaling of all the critical activities of American daily life, including the re-localization of food production, the rebuilding of local commercial networks, the revitalization of the small towns and cities, and the difficult transition out of extreme car dependency. My tea party will do everything possible to construct a coherent consensus about what is happening to us and what we can do about it. My tea party is based on the true spirit of 1776 - the binding together of common interests and common culture - not the destruction of them as in the spirit of 1861.
_________________
A sequel to my 2008 novel of post-oil America, World Made By Hand, will be published in September 2010 by The Atlantic Monthly Press.
Market Ticker July Fourth
http://market-ticker.denninger.net/archives/2472-July-4th-Market-Musings-Half-Year-Checkup.html
With all the screaming going on this weekend by various market prognosticators - and the truly pitiful performance Friday late, I thought I'd try to put forward some balance on this Independence Day.
First, Gold.
Momentum is unfavorable and the close under the 50MA not positive at all. Short-term regaining and holding the 50MA, and preventing it from turning downward, is critical. Should that fail first-level support is around the 1160 level and second-level around 1075 - the latter, however, is under the 200MA and isn't very likely to hold if we get there.
This isn't the sort of pattern you want to see if you're bullish on Gold. I've talked about it for months now - the original triple-ascending slope is a relatively-common and dangerous parabolic blow-off sort of move. Gold then fell through the second trendline and wallowed along the lowest-slope one for over a month, leading many to proclaim it as a "buying opportunity." I warned on the 28th that if it did not regain that trendline with at least a chart pin in the next few days a huge selloff was likely, and that's exactly what we got.
Yes, that is a 50/200MA "Death Cross" - by a fraction of a point, but it is indeed. The S&P 500 looks like total crap on a daily chart, with only one little glimmer of hope - stochastics, which imply a short-term bottom may be at hand. The key here is "short-term." It seems that everyone is looking for a crash ala 1987 - they rarely happen when everyone is looking for it, of course. Indeed, those placing bets on it tend to provide exactly the fuel for short-covering rallies that stop it from happening with the smallest pretext.
Calling crashes is a fool's game. What one can say, however, is that this current decline - 10 days of red with one tiny spinning top in the middle - is the worst consecutive string of declines in this Bear Market, including the October 2008 nastiness (in which we managed to string eight together, including a massive reversal on the last day on 10/10.) In point count it's not the worst, but in terms of the relentless nature of the "grind downward" it sure is.
If you recall my earlier writings I said that while you might not feel like the market was crashing it wouldn't really matter in terms of the impact on your account if you stayed too long in the game. Such it now appears to be. The weekly chart makes the problem more-clear:
That's the 13/34 weekly exponential moving average, one of the long-term timing signals that I follow. Back in September of last year when it crossed positive I opined that I was not going to put my long-term funds back into the market on the signal, even though a purely-mechanical trading system would call for exactly that. This is what I fully expected to happen, and is why - it is virtually impossible to avoid a sell signal now on that indicator unless we were to rally beyond 1100 this week.
80 points straight up? I kinda doubt it. But the buy was at 1010, which means right now you're a paltry 1.2% to the good if you followed that signal. Blech.
The 20/50WMA (another long-term timing signal I've covered in the past) crossed at 1005, incidentally, and remains reasonably-apart now, with the 20W at 1129.72 and the 50W at 1091.86. The danger here should be obvious - you could easily be well underwater before you get a SELL on that indicator. Again, back when it crossed I said I was not going to follow it this time, and this is why - the insane divergence in slope of the indicator and price at the time it crossed positive meant you could easily be 10 or even 20% underwater before you got a SELL if it turned out badly - the risk was simply too high for long-term (defined as "intended to be in the market for five years or more") money.
To those who argued with my logic at the time - how's it looking now? Remember, these are mechanical signals - if you're going to trade them you have to trade them as they come. In the fullness of time, I like my decision from last fall, despite all the people telling me I was "nuts" and that we were "in a new bull market" last year.
Scoring the 2010 Look Forward Ticker, I get the following thus far:
This is not a new bull market: Any questions?
The long end of the Bond Curve will move higher. Miss thus far. Quite possibly a massive miss, but we shall see. My personal nightmare scenario is a back-half selloff in equities, bonds and the dollar. That leaves Benny and Friends with damn little room to act. So far, however, this is a clean bust.
House prices will fall another 20%. Not yet, but the year is not over. This much we do know - there has been no material increase in prices.
Banks will "give up" on holding real estate. They're doing it. And everyone is trying like hell to shove back their bad paper. I believe this trend will continue to accelerate.
Credit will not ease for "ordinary people." It hasn't. Bullseye.
A massive second wave of small-business bankruptcies. I couldn't have predicted the oil leak, but damn, you should have seen the Destin Commons last night for the fireworks. Easily down by half on traffic from last year. The government continues to say that small businesses are firing rather than hiring, so this looks good so far.
Unemployment will appear to stabilize, but that will prove illusory. We got the first half, now let's see if the second pans out.
The "revolting" call for last year was early - but not wrong. Greece anyone? That's not over - by a long shot.
The states will go to the government well, but it won't matter. Bingo. Ill-noise has become the poster child on this one. Gee, where's Obama from again? Interestingly enough the states haven't gotten bailed out - at least not yet.
A "double dip" will be recognized. Lotsa talk so far. ECRI's LEI complex says it's in the bag. I agree as this was exactly what I was looking to happen. We'll see.
China will lose control of their bubbles. Looks like they may be. The PMI report recently is likely just the first of big trouble over there. Beware.
Canada's real estate market will crack. Creaking, but not breaking - yet. So far in line with expectations.
The Fed's games will "leak" and their credibility will be shaken. Heh heh heh.... yep. I could spend five Tickers on this one; the "junk bond" fiasco is just part of it.
The Democrats lose big in the House. November approacheth.
Congress tries to spend its way out - and fails. No bond market dislocation yet, but I don't like those TBAC reports nor do I like the updated GDP and debt graph.
One or more of the PIIGS is forced into austerity. Bullseye!
Contrary to virtually EVERY "investment pundit" return OF capital will re-assert itself. Uh huh. 1220 to 1022 in less than two months, all gains from early September 2009 gone.
Six months left to falsify any of these, or prove 'em up. So far, however, I like how this is playing out.
Short-term there are just too many people calling for an immediate collapse down another 130-150 handles, or roughly 15%. While this could happen - indeed, crashes come from severely oversold conditions, the odds do not favor this. Instead, the more-likely path is to scare the living bejeebus out of people and then rally like a SOB, trapping all the bears that got too aggressive and cocky in their short positions and destroying their accounts - then the market falls apart.
Speaking of which, this is a good time to talk about general strategies - specifically, being short in a deflationary environment.
Sure, you can make money. But let's look at this objectively.
Being short a $100 stock has a maximum possible profit of 100%. That is, the stock can go to zero, and you get to keep the entire $100.
But consider the $100 stock that goes to $10 and doesn't bankrupt, but then recovers. If you buy at $10 you have 10x your original investment, or a profit of 900%.
The fallacy of "holding through downturns" also applies. If you start with a $100 stock and it loses half, you now need a double to get back to even. If it loses 90% you need a ten bagger to get back to even. The Jim Cramers of the world will try to tell you that there's a decent strategy for this sort of thing if you get caught holding stocks into a big dump.
I disagree.
For most, if not nearly all, people who are in the market they have absolutely no business trading actively. This is particularly true in markets like this, where 2, 3 even 4% swings on a daily basis have become commonplace. While the last year has seen these be nearly all upward, the last few weeks and months has seen it be nearly all down.
For the long term investor the point is to wind up with more money than you started with - in purchasing power - over a 10, 20 or 30 year horizon. You cannot afford big mistakes as they will force you to take big risks in order to recover, and if you're wrong on the latter you will wind up with a destroyed account.
Speculation is an entirely different thing. There has been good money to be made in the last few years and with the volatility being what it is there will be plenty to be made for years to come. But the wise long-term money isn't short in this market - it's out and has been since the end of 2007, when I (and a very few others) called "everyone out of the pool!"
Always remember that it's risk-adjusted return that matters. If you wish to gamble with 1/20th of your net worth, have at it. As you make gains take them and move them to your long-term accounts and sit on them. Gamble with the house money and so long as you do so effectively, keep at it. No harm there at all.
Near the lows in 2009 I was selling $5 PUTs on GE like a mofo, trying to get intentionally assigned. Why? I didn't believe GE would go bankrupt, and I was willing to buy tens of thousands of shares at $5 each. GE never traded $5 and I got to keep the premium from those PUTs I wrote. C'est la vie.
The key to making a true fortune in anything folks is to buy smart - not sell smart. This is something I've learned through my entrepreneurial affairs. MCSNet was successful in large part because I was a bare-knuckled negotiator for what I needed to acquire for the company. In short, I was a hard-nosed SOB and made no apologies for it, as that's how you make money legitimately in any business venture. If you buy smart making money is easy. If you have to sell smart you're always one mistake away from massive losses and potential bankruptcy.
Nobody is good enough to bat 1,000. 600, 700, sure. 1,000? Nope. Not unless you're God - or are cheating.
During The Depression people who had capital and sat on it were able to buy stocks at extremely cheap prices. But they didn't buy in 1930. They bought during the second downward move, in 1932 and 33. They bought at an 80% or 90% discount, not a 60% one. They were able to buy houses, machine tools, land, all for a literal nickel on the dollar. They didn't get rich fast, but they became rich with certainty over time, because they bought smart.
Such it will be this time, just as it was last time.
There are a lot of people who have been chasing real estate at "half off." They're fools. I'm a buyer at 90% off with both fists. Ditto for stock in companies I believe will survive. Sure, I'll be wrong about some of them, but the others will be 10 baggers. Until then I'm a patient man with my capital, happy to speculate short-term with small amounts of my "nut" but ever-mindful that it's when you buy, not when you sell that matters.
There is no reason in a deflationary environment, which we are now in, to add beta to your long-term funds. The cowboys who want to do that with their entire net worth are welcome to it - you'll still have a place to live when they blow up and are under a freeway overpass. Most of them will - indeed, while there is always someone who claims to have "nailed it" ex-post-facto for each big market move, you'll note if you bother to view things through an objective lens that 100 people had opinions prior to the move and only one of them still has an account with a positive balance in it. Worse, that person's prognostications for what's to come next are almost-certain to be dead wrong.
There were many who predicted in the summer of 2009 that we were "up up and away" and would "exceed the 1576 SPX high" some time in the next two years. If you listened to them in September of 2009 you've lost all your gains. If you listened to them after that point you now have a loss. It matters not what someone does over the short term - what matters is whether they can manage their portfolio over ten or twenty years and, including what they spend to live on, whether they still have it.
Jesse Livermore thought he could beat those odds - and the math. He went from being extremely wealthy to broke several times during his trading career, having made $100 million in the 1929 market crash - at a time when $100 million was roughly equivalent to a few billion today.
In 1940, having lost all of it, he blew his brains out in a cloakroom.
Don't be Jesse.
With all the screaming going on this weekend by various market prognosticators - and the truly pitiful performance Friday late, I thought I'd try to put forward some balance on this Independence Day.
First, Gold.
Momentum is unfavorable and the close under the 50MA not positive at all. Short-term regaining and holding the 50MA, and preventing it from turning downward, is critical. Should that fail first-level support is around the 1160 level and second-level around 1075 - the latter, however, is under the 200MA and isn't very likely to hold if we get there.
This isn't the sort of pattern you want to see if you're bullish on Gold. I've talked about it for months now - the original triple-ascending slope is a relatively-common and dangerous parabolic blow-off sort of move. Gold then fell through the second trendline and wallowed along the lowest-slope one for over a month, leading many to proclaim it as a "buying opportunity." I warned on the 28th that if it did not regain that trendline with at least a chart pin in the next few days a huge selloff was likely, and that's exactly what we got.
Yes, that is a 50/200MA "Death Cross" - by a fraction of a point, but it is indeed. The S&P 500 looks like total crap on a daily chart, with only one little glimmer of hope - stochastics, which imply a short-term bottom may be at hand. The key here is "short-term." It seems that everyone is looking for a crash ala 1987 - they rarely happen when everyone is looking for it, of course. Indeed, those placing bets on it tend to provide exactly the fuel for short-covering rallies that stop it from happening with the smallest pretext.
Calling crashes is a fool's game. What one can say, however, is that this current decline - 10 days of red with one tiny spinning top in the middle - is the worst consecutive string of declines in this Bear Market, including the October 2008 nastiness (in which we managed to string eight together, including a massive reversal on the last day on 10/10.) In point count it's not the worst, but in terms of the relentless nature of the "grind downward" it sure is.
If you recall my earlier writings I said that while you might not feel like the market was crashing it wouldn't really matter in terms of the impact on your account if you stayed too long in the game. Such it now appears to be. The weekly chart makes the problem more-clear:
That's the 13/34 weekly exponential moving average, one of the long-term timing signals that I follow. Back in September of last year when it crossed positive I opined that I was not going to put my long-term funds back into the market on the signal, even though a purely-mechanical trading system would call for exactly that. This is what I fully expected to happen, and is why - it is virtually impossible to avoid a sell signal now on that indicator unless we were to rally beyond 1100 this week.
80 points straight up? I kinda doubt it. But the buy was at 1010, which means right now you're a paltry 1.2% to the good if you followed that signal. Blech.
The 20/50WMA (another long-term timing signal I've covered in the past) crossed at 1005, incidentally, and remains reasonably-apart now, with the 20W at 1129.72 and the 50W at 1091.86. The danger here should be obvious - you could easily be well underwater before you get a SELL on that indicator. Again, back when it crossed I said I was not going to follow it this time, and this is why - the insane divergence in slope of the indicator and price at the time it crossed positive meant you could easily be 10 or even 20% underwater before you got a SELL if it turned out badly - the risk was simply too high for long-term (defined as "intended to be in the market for five years or more") money.
To those who argued with my logic at the time - how's it looking now? Remember, these are mechanical signals - if you're going to trade them you have to trade them as they come. In the fullness of time, I like my decision from last fall, despite all the people telling me I was "nuts" and that we were "in a new bull market" last year.
Scoring the 2010 Look Forward Ticker, I get the following thus far:
This is not a new bull market: Any questions?
The long end of the Bond Curve will move higher. Miss thus far. Quite possibly a massive miss, but we shall see. My personal nightmare scenario is a back-half selloff in equities, bonds and the dollar. That leaves Benny and Friends with damn little room to act. So far, however, this is a clean bust.
House prices will fall another 20%. Not yet, but the year is not over. This much we do know - there has been no material increase in prices.
Banks will "give up" on holding real estate. They're doing it. And everyone is trying like hell to shove back their bad paper. I believe this trend will continue to accelerate.
Credit will not ease for "ordinary people." It hasn't. Bullseye.
A massive second wave of small-business bankruptcies. I couldn't have predicted the oil leak, but damn, you should have seen the Destin Commons last night for the fireworks. Easily down by half on traffic from last year. The government continues to say that small businesses are firing rather than hiring, so this looks good so far.
Unemployment will appear to stabilize, but that will prove illusory. We got the first half, now let's see if the second pans out.
The "revolting" call for last year was early - but not wrong. Greece anyone? That's not over - by a long shot.
The states will go to the government well, but it won't matter. Bingo. Ill-noise has become the poster child on this one. Gee, where's Obama from again? Interestingly enough the states haven't gotten bailed out - at least not yet.
A "double dip" will be recognized. Lotsa talk so far. ECRI's LEI complex says it's in the bag. I agree as this was exactly what I was looking to happen. We'll see.
China will lose control of their bubbles. Looks like they may be. The PMI report recently is likely just the first of big trouble over there. Beware.
Canada's real estate market will crack. Creaking, but not breaking - yet. So far in line with expectations.
The Fed's games will "leak" and their credibility will be shaken. Heh heh heh.... yep. I could spend five Tickers on this one; the "junk bond" fiasco is just part of it.
The Democrats lose big in the House. November approacheth.
Congress tries to spend its way out - and fails. No bond market dislocation yet, but I don't like those TBAC reports nor do I like the updated GDP and debt graph.
One or more of the PIIGS is forced into austerity. Bullseye!
Contrary to virtually EVERY "investment pundit" return OF capital will re-assert itself. Uh huh. 1220 to 1022 in less than two months, all gains from early September 2009 gone.
Six months left to falsify any of these, or prove 'em up. So far, however, I like how this is playing out.
Short-term there are just too many people calling for an immediate collapse down another 130-150 handles, or roughly 15%. While this could happen - indeed, crashes come from severely oversold conditions, the odds do not favor this. Instead, the more-likely path is to scare the living bejeebus out of people and then rally like a SOB, trapping all the bears that got too aggressive and cocky in their short positions and destroying their accounts - then the market falls apart.
Speaking of which, this is a good time to talk about general strategies - specifically, being short in a deflationary environment.
Sure, you can make money. But let's look at this objectively.
Being short a $100 stock has a maximum possible profit of 100%. That is, the stock can go to zero, and you get to keep the entire $100.
But consider the $100 stock that goes to $10 and doesn't bankrupt, but then recovers. If you buy at $10 you have 10x your original investment, or a profit of 900%.
The fallacy of "holding through downturns" also applies. If you start with a $100 stock and it loses half, you now need a double to get back to even. If it loses 90% you need a ten bagger to get back to even. The Jim Cramers of the world will try to tell you that there's a decent strategy for this sort of thing if you get caught holding stocks into a big dump.
I disagree.
For most, if not nearly all, people who are in the market they have absolutely no business trading actively. This is particularly true in markets like this, where 2, 3 even 4% swings on a daily basis have become commonplace. While the last year has seen these be nearly all upward, the last few weeks and months has seen it be nearly all down.
For the long term investor the point is to wind up with more money than you started with - in purchasing power - over a 10, 20 or 30 year horizon. You cannot afford big mistakes as they will force you to take big risks in order to recover, and if you're wrong on the latter you will wind up with a destroyed account.
Speculation is an entirely different thing. There has been good money to be made in the last few years and with the volatility being what it is there will be plenty to be made for years to come. But the wise long-term money isn't short in this market - it's out and has been since the end of 2007, when I (and a very few others) called "everyone out of the pool!"
Always remember that it's risk-adjusted return that matters. If you wish to gamble with 1/20th of your net worth, have at it. As you make gains take them and move them to your long-term accounts and sit on them. Gamble with the house money and so long as you do so effectively, keep at it. No harm there at all.
Near the lows in 2009 I was selling $5 PUTs on GE like a mofo, trying to get intentionally assigned. Why? I didn't believe GE would go bankrupt, and I was willing to buy tens of thousands of shares at $5 each. GE never traded $5 and I got to keep the premium from those PUTs I wrote. C'est la vie.
The key to making a true fortune in anything folks is to buy smart - not sell smart. This is something I've learned through my entrepreneurial affairs. MCSNet was successful in large part because I was a bare-knuckled negotiator for what I needed to acquire for the company. In short, I was a hard-nosed SOB and made no apologies for it, as that's how you make money legitimately in any business venture. If you buy smart making money is easy. If you have to sell smart you're always one mistake away from massive losses and potential bankruptcy.
Nobody is good enough to bat 1,000. 600, 700, sure. 1,000? Nope. Not unless you're God - or are cheating.
During The Depression people who had capital and sat on it were able to buy stocks at extremely cheap prices. But they didn't buy in 1930. They bought during the second downward move, in 1932 and 33. They bought at an 80% or 90% discount, not a 60% one. They were able to buy houses, machine tools, land, all for a literal nickel on the dollar. They didn't get rich fast, but they became rich with certainty over time, because they bought smart.
Such it will be this time, just as it was last time.
There are a lot of people who have been chasing real estate at "half off." They're fools. I'm a buyer at 90% off with both fists. Ditto for stock in companies I believe will survive. Sure, I'll be wrong about some of them, but the others will be 10 baggers. Until then I'm a patient man with my capital, happy to speculate short-term with small amounts of my "nut" but ever-mindful that it's when you buy, not when you sell that matters.
There is no reason in a deflationary environment, which we are now in, to add beta to your long-term funds. The cowboys who want to do that with their entire net worth are welcome to it - you'll still have a place to live when they blow up and are under a freeway overpass. Most of them will - indeed, while there is always someone who claims to have "nailed it" ex-post-facto for each big market move, you'll note if you bother to view things through an objective lens that 100 people had opinions prior to the move and only one of them still has an account with a positive balance in it. Worse, that person's prognostications for what's to come next are almost-certain to be dead wrong.
There were many who predicted in the summer of 2009 that we were "up up and away" and would "exceed the 1576 SPX high" some time in the next two years. If you listened to them in September of 2009 you've lost all your gains. If you listened to them after that point you now have a loss. It matters not what someone does over the short term - what matters is whether they can manage their portfolio over ten or twenty years and, including what they spend to live on, whether they still have it.
Jesse Livermore thought he could beat those odds - and the math. He went from being extremely wealthy to broke several times during his trading career, having made $100 million in the 1929 market crash - at a time when $100 million was roughly equivalent to a few billion today.
In 1940, having lost all of it, he blew his brains out in a cloakroom.
Don't be Jesse.
http://oilprice.com/Geo-Politics/International/The-New-Civil-Wars-Within-the-West.html
Internecine civil wars are underway almost everywhere within the West, and most virulently in the United States of America. They are not yet kinetic wars, but wars of grinding prepositioning, the kind which lead to foregone conclusions without a shot being fired. They are wars of survival, nonetheless, because the basic architecture for national strength is being altered incrementally or dramatically. And, in many cases, consciously.
Almost all of the strategic restructuring of states is occurring in large part as a result of an accumulation of wealth; an accumulation and value of which is seen as permanent. This has resulted in the hubris — expressed by those who did not earn it — of triumph in the Cold War. This is a Western phenomenon because the widespread growth of wealth, the creation of freedoms classically associated with democracy, resulted — as it must inevitably result — in complacencies which in turn led to a “vote too far”: the extension of the democratic franchise to those who do not help in the creation of wealth.
Once the voting franchise of the West reached the point where those who sought benefits outweighed those who created benefits, the tipping point was reached. The situation of de facto “class warfare” thus emerges automatically under such circumstances, and the envy of those who take against those who provide erupts into “rights” and “entitlement”. By deifying “democracy” above justice, the enfranchised non-producers could always outvote the producers. We are at this point. The result can only be collapse, or restructuring around a Cæsar or a Bonaparte until, eventually, a productive hierarchy reappears, usually after considerable pain.
The United States of America
Virtually every conscious step of the Administration of Pres. Barack Obama and the overwhelming Democratic Party majority in Congress has been to increase the size and role of government in the economy and society, and to decrease, limit, and control the position of private enterprise and capital formation. Given that this progressively contracts and ultimately eliminates production, and reduces the inherent asset base of the country — its raw materials and productive intellect — to a null value, the tradable value of the US currency will inevitably decline. We cannot be swayed by the enormous wealth of the North American continent. Almost all areas have an inherent wealth of some kind, but assets left idle in the ground or infertile in the brain define countries which fail, or are not victorious in their quest for unbridled sovereignty.
Thus, a decline in currency value is exacerbated, or accelerated, by the increasing supply of money, inextricably depreciating its value, particularly at a time of decreasing productivity in vital perishable and non-perishable output.
The US Obama Administration has focused entirely on an agenda of expanding government — the seizure of the envied (and often ephemeral) “wealth” of the producers — without addressing the process of facilitating the production of essential commodities and goods. Even the USSR and the People’s Republic of China, during their communist periods, focused — albeit badly — on the production of goods and services, when they realized that the “wealth” to be “redistributed” existed only as the result of production and innovation. The US, meanwhile, heavily as a result of policies of the former Clinton Administration, has “outsourced” production, and the State — that is, the Government — cannot easily, in the US, become the producer.
FREE Breaking Investment & Geopolitical Intelligence - Previously only available to Governments, Intelligence Agencies & selected Hedge Funds. Click here for more information on our Free Weekly Intelligence Report
Pres. Obama has addressed the US’ economic crisis by expanding government, and government-related, employment in non-productive sectors, while at the same time blaming and punishing the private sector for all of the US’ ills. Empowered by the extended franchise, this was the politics of envy now becoming enabled.
Moreover, the populist, short-term response to the major oil-spill in the Gulf of Mexico was clearly geared toward (a) transforming a crisis into an opportunity to pursue a green energy agenda by highlighting the evils of the fossil fuels on which the US remains dependent; (b) ensuring that the President was not blamed for the poor crisis response; and (c) ensuring that the Democratic Party did not suffer from the crisis in the November 2010 mid-term Congressional elections.
The result of all the Obama initiatives has been to expand government and reduce or absolutely control and tax the private sector, even though, without the private sector, the US has no viable export or self-sustaining capability. The net effect has been to mirror — and overtake — the situation in which, for example, Germany found itself a decade ago: without the ability to retain capital investment or attract new capital investment.
And in order to restrain capital flight from the US, the Obama Administration seeks to further control worldwide earnings of US corporations and citizens. For other reasons, the US, believing that it still dominates the technology arena, has imposed greater and greater restrictions on international exports of technology through its ITAR (International Traffic in Arms Regulations) and the Foreign Corrupt Practices Act.
All of this conspires to limit investment in US manufacturing and restrict foreign interest in US exports because the regulations are being enforced merely for political punitive reasons. The US is making itself increasingly unappealing to foreign investors and has, as this writer has noted, made the appeal of the US dollar as the global reserve currency evaporate, saved, for the moment, only by the lack of a ready alternative. That situation will change within a very few years.
Thus, the US has, in the space of a couple of years: (i) so dramatically inflated money supply that the value of the dollar is only shored up by the lack of international alternative currencies to act as reserve trading currencies; (ii) so dramatically inflated public debt, without stimulating economic growth, that US economic performance will continue to decline on a national and a per capita basis while competitive economies, such as the PRC and Russia, will grow, reducing strategic differentials; (iii) severely punished the private sector, thereby reducing the opportunities and incentives for strategic capital formation, and in particular punishing the industrial production and energy sectors, almost ensuring major dislocation to the delivery of US basic needs in the near-term; and (iv) so blatantly reduced its strategic capabilities through all of these actions and in its diplomatic and military posture as to guarantee a reduction in US strategic credibility. Concurrent with all of this is an increasingly punitive taxation framework.
The near-term impact will include rising domestic energy prices, possibly even before the November 2010 mid-term Congressional elections, which could result in the Democratic Party losing its substantial majority in both Houses. Even on this matter, Democratic Party ideologues have attempted to suggest that this is exactly what the country needs: expensive energy in order to facilitate change to “green” solutions. This defies the historical reality that pre-eminent powers must always have vast energy surpluses and use.
So much damage has been done to the US strategic posture in just two years (although building on a base of inefficiencies which have been growing since the end of the Cold War), in many respects equal to the 1917 Russian Revolution (but without the bloodshed), that it is difficult to forecast whether — because of a changing global environment — the US can, within a decade or two, recover its strategic authority and leadership.
Domestically, the massively statist and interventionist approaches of the Obama Administration have polarized the country, and the response will be reactive rather than innovative, inducing a period of isolation and nationalism, but with grave difficulty in rebuilding confidence from the international investment community.
Europe
Artificial, wealth-induced complacency following the end of the Cold War led to fury when economic collapse inevitably occurred in 2010, leading to draconian restraint in public spending in many societies, but particularly Greece and Spain. It is said that tourists are warned not to feed bears in Yellowstone National Park (in the US) because the bears do not understand when the tourists have run out of food. State-fed populations in Europe, the US, and Australia (see below) equally do not understand when the free ride is over, and work must recommence.
Germany, France, and the United Kingdom have begun the arduous path back to recovery, but the euro may, as a currency, have been irrevocably damaged, and the European Union itself may have spent the term of its virility. Clearly, the wealth-induced complacency, which had the compounding effect of allowing a decline in a sense of national survival and national identity among the European Union (EU) component states, has led now to a revived — but as yet unrealized — sense of nationalism.
This is beginning to lead to the recognition of the cohesive national efficiency required for survival and competitiveness. It can be said that the EU destroyed nationalism, without replacing it with any mechanism to create a new sense of social cohesion, thus removing Europe’s capability for economic competitiveness, self-defense, or ability to define a new culture (and identity) to replace the national identities.
Had the British Labour Party Government of outgoing Prime Minister Gordon Brown persisted in office with his slavishly doctrinaire governance — and demonstrably unworkable socialism, led by a privileged élite of Labour mandarins wallowing at the trough — it is possible that an economic recovery in the UK would have been problematic. It may still be problematic. And in this, Brown was a prototype Obama, with his rank sense of entitlement.
Even now, the British political psyche is fractured along geographic lines, and, wealth-induced, considers itself effectively “post-industrial”, and therefore beyond the need for a manufacturing (or even agricultural base). Thus, even though the UK is now far more dependent on a maritime trade base than at any time in its history, it is incapable of defending or projecting that maritime base; neither does it have the wherewithal to trade.
Australia
The Australian Government has — like the Obama Administration in the US and the Brown Administration in the UK — demonstrated its absolute lack of experience in management, economics, or real-life work skills. A decision by Prime Minister Kevin Rudd to impose a new “super tax” of some 40 percent on resource companies — miners, who produce most of Australia’s export wealth — suddenly highlighted the reality that the mining companies did not need to put their investment into Australian projects.
This “tax and spend” approach so damaged Prime Minister Rudd’s popularity in the run-up to a November 2010 election, that his deputy Prime Minister, Julia Gillard, an extreme left-wing feminist, mounted a rapid campaign within the ruling Labor Party to overthrow him. But apart from some temporary back-peddling on the Resources Super Profits Tax until the next election is out of the way, don’t expect incoming Prime Minister Gillard — the first Australian female head-of-government and the most left-wing ever — to back off her punitive stance against the private sector.
The Australian Government’s punitive tax approach, initiated by Rudd but likely to continue for as long as Labor governs, also highlighted the fact that foreign investors did not need to invest in Australia, and that capital could move — as it always does — away from draconian tax regimes. As Chilean Mines Minister Laurence Goldborne said in June 2010, “Just because you have resources doesn’t guarantee investment.” This is something which the governments of most African states know.
In Australia, the realization of the over-reaching greed — and envy-inspired approach of the proposed new tax laws — in turn led much of the ruling Australian Labor Party (ALP) and the profoundly leftist Australian media to begin their drift away from Rudd, leaving him with the prospect that he could either be abandoned as party leader before the late-2010 general elections, or be faced with the prospect of becoming Australia’s first one-term Prime Minister.
Gillard’s unbridled ambition also saw to that. The question remains as to whether she will be able to win the November 2010 general election. A more important question remains, however, as to whether the markets will still be there when the ruin of trust in Australian export and investment reliability is addressed by a future government. The People’s Republic of China (PRC), Australia’s major export client state, and Russia are now developing vast iron ore reserves on their mutual border, possibly — in the near future — obviating the need for much of what Australia exports.
In the meantime, both Kevin Rudd and the opposition Liberal Party have essentially embraced the move by Australia to see itself as a pseudo-post-industrial society, gradually eroding the independent and innovative manufacturing sector which had been a hallmark of Australian economic growth. A pseudo-post-industrial society is one which believes that it can live solely on the intrinsic value of its currency, without the necessity to sustain a balanced agricultural and industrial base to preserve sovereign independence. A true post-industrial society — something thus far a utopian dream — can produce all of its food and goods with a minute fraction of its population, which would largely be left to address intellectual pursuits.
Australia, thus, faces a major challenge to its comfort, wealth, and security when value perceptions, investment, and clients evaporate. We see, then, in the very deliberate acts of envy and entitlement politics, the seeds of national collapse in Australia, the US, and Western Europe.
Conclusions
Some of the Western powers have slumped before, and recovered. The United States has yet to demonstrate this resilience. Other Western societies have slumped, and have yet been protected by a strong regional system so that their societies could prosper under foreign protection. The Netherlands, Spain, and Portugal, for example, retained stable and individual prosperous societies and yet never recovered their strategic leadership, relying, instead, on the power of their region for economic and security protection. States which remain dependent on others for their protection never fully regain their wealth and freedom.
States such as New Zealand depend on their greater neighbors for protection. But wither New Zealand if Australia fails? Wither the Netherlands today if the European Union fails? And wither the United States if its fortunes erode? Re-birth is, as Britain has found through history, as did Rome, more arduous than that first, pure flush of strategic victory.
The West is at its watershed, not because of a threat from a less-productive society. The collapse of the West is not because Islam is at the gates. Islam is at the gates because of the collapse of the West.
Analysis. By Gregory R. Copley, Editor, GIS/Defense & Foreign Affairs.
(c) 2010 International Strategic Studies Association, www.StrategicStudies.org
Next >
http://oilprice.com/Geo-Politics/International/The-New-Civil-Wars-Within-the-West.html
Almost all of the strategic restructuring of states is occurring in large part as a result of an accumulation of wealth; an accumulation and value of which is seen as permanent. This has resulted in the hubris — expressed by those who did not earn it — of triumph in the Cold War. This is a Western phenomenon because the widespread growth of wealth, the creation of freedoms classically associated with democracy, resulted — as it must inevitably result — in complacencies which in turn led to a “vote too far”: the extension of the democratic franchise to those who do not help in the creation of wealth.
Once the voting franchise of the West reached the point where those who sought benefits outweighed those who created benefits, the tipping point was reached. The situation of de facto “class warfare” thus emerges automatically under such circumstances, and the envy of those who take against those who provide erupts into “rights” and “entitlement”. By deifying “democracy” above justice, the enfranchised non-producers could always outvote the producers. We are at this point. The result can only be collapse, or restructuring around a Cæsar or a Bonaparte until, eventually, a productive hierarchy reappears, usually after considerable pain.
The United States of America
Virtually every conscious step of the Administration of Pres. Barack Obama and the overwhelming Democratic Party majority in Congress has been to increase the size and role of government in the economy and society, and to decrease, limit, and control the position of private enterprise and capital formation. Given that this progressively contracts and ultimately eliminates production, and reduces the inherent asset base of the country — its raw materials and productive intellect — to a null value, the tradable value of the US currency will inevitably decline. We cannot be swayed by the enormous wealth of the North American continent. Almost all areas have an inherent wealth of some kind, but assets left idle in the ground or infertile in the brain define countries which fail, or are not victorious in their quest for unbridled sovereignty.
Thus, a decline in currency value is exacerbated, or accelerated, by the increasing supply of money, inextricably depreciating its value, particularly at a time of decreasing productivity in vital perishable and non-perishable output.
The US Obama Administration has focused entirely on an agenda of expanding government — the seizure of the envied (and often ephemeral) “wealth” of the producers — without addressing the process of facilitating the production of essential commodities and goods. Even the USSR and the People’s Republic of China, during their communist periods, focused — albeit badly — on the production of goods and services, when they realized that the “wealth” to be “redistributed” existed only as the result of production and innovation. The US, meanwhile, heavily as a result of policies of the former Clinton Administration, has “outsourced” production, and the State — that is, the Government — cannot easily, in the US, become the producer.
FREE Breaking Investment & Geopolitical Intelligence - Previously only available to Governments, Intelligence Agencies & selected Hedge Funds. Click here for more information on our Free Weekly Intelligence Report
Pres. Obama has addressed the US’ economic crisis by expanding government, and government-related, employment in non-productive sectors, while at the same time blaming and punishing the private sector for all of the US’ ills. Empowered by the extended franchise, this was the politics of envy now becoming enabled.
Moreover, the populist, short-term response to the major oil-spill in the Gulf of Mexico was clearly geared toward (a) transforming a crisis into an opportunity to pursue a green energy agenda by highlighting the evils of the fossil fuels on which the US remains dependent; (b) ensuring that the President was not blamed for the poor crisis response; and (c) ensuring that the Democratic Party did not suffer from the crisis in the November 2010 mid-term Congressional elections.
The result of all the Obama initiatives has been to expand government and reduce or absolutely control and tax the private sector, even though, without the private sector, the US has no viable export or self-sustaining capability. The net effect has been to mirror — and overtake — the situation in which, for example, Germany found itself a decade ago: without the ability to retain capital investment or attract new capital investment.
And in order to restrain capital flight from the US, the Obama Administration seeks to further control worldwide earnings of US corporations and citizens. For other reasons, the US, believing that it still dominates the technology arena, has imposed greater and greater restrictions on international exports of technology through its ITAR (International Traffic in Arms Regulations) and the Foreign Corrupt Practices Act.
All of this conspires to limit investment in US manufacturing and restrict foreign interest in US exports because the regulations are being enforced merely for political punitive reasons. The US is making itself increasingly unappealing to foreign investors and has, as this writer has noted, made the appeal of the US dollar as the global reserve currency evaporate, saved, for the moment, only by the lack of a ready alternative. That situation will change within a very few years.
Thus, the US has, in the space of a couple of years: (i) so dramatically inflated money supply that the value of the dollar is only shored up by the lack of international alternative currencies to act as reserve trading currencies; (ii) so dramatically inflated public debt, without stimulating economic growth, that US economic performance will continue to decline on a national and a per capita basis while competitive economies, such as the PRC and Russia, will grow, reducing strategic differentials; (iii) severely punished the private sector, thereby reducing the opportunities and incentives for strategic capital formation, and in particular punishing the industrial production and energy sectors, almost ensuring major dislocation to the delivery of US basic needs in the near-term; and (iv) so blatantly reduced its strategic capabilities through all of these actions and in its diplomatic and military posture as to guarantee a reduction in US strategic credibility. Concurrent with all of this is an increasingly punitive taxation framework.
The near-term impact will include rising domestic energy prices, possibly even before the November 2010 mid-term Congressional elections, which could result in the Democratic Party losing its substantial majority in both Houses. Even on this matter, Democratic Party ideologues have attempted to suggest that this is exactly what the country needs: expensive energy in order to facilitate change to “green” solutions. This defies the historical reality that pre-eminent powers must always have vast energy surpluses and use.
So much damage has been done to the US strategic posture in just two years (although building on a base of inefficiencies which have been growing since the end of the Cold War), in many respects equal to the 1917 Russian Revolution (but without the bloodshed), that it is difficult to forecast whether — because of a changing global environment — the US can, within a decade or two, recover its strategic authority and leadership.
Domestically, the massively statist and interventionist approaches of the Obama Administration have polarized the country, and the response will be reactive rather than innovative, inducing a period of isolation and nationalism, but with grave difficulty in rebuilding confidence from the international investment community.
Europe
Artificial, wealth-induced complacency following the end of the Cold War led to fury when economic collapse inevitably occurred in 2010, leading to draconian restraint in public spending in many societies, but particularly Greece and Spain. It is said that tourists are warned not to feed bears in Yellowstone National Park (in the US) because the bears do not understand when the tourists have run out of food. State-fed populations in Europe, the US, and Australia (see below) equally do not understand when the free ride is over, and work must recommence.
Germany, France, and the United Kingdom have begun the arduous path back to recovery, but the euro may, as a currency, have been irrevocably damaged, and the European Union itself may have spent the term of its virility. Clearly, the wealth-induced complacency, which had the compounding effect of allowing a decline in a sense of national survival and national identity among the European Union (EU) component states, has led now to a revived — but as yet unrealized — sense of nationalism.
This is beginning to lead to the recognition of the cohesive national efficiency required for survival and competitiveness. It can be said that the EU destroyed nationalism, without replacing it with any mechanism to create a new sense of social cohesion, thus removing Europe’s capability for economic competitiveness, self-defense, or ability to define a new culture (and identity) to replace the national identities.
Had the British Labour Party Government of outgoing Prime Minister Gordon Brown persisted in office with his slavishly doctrinaire governance — and demonstrably unworkable socialism, led by a privileged élite of Labour mandarins wallowing at the trough — it is possible that an economic recovery in the UK would have been problematic. It may still be problematic. And in this, Brown was a prototype Obama, with his rank sense of entitlement.
Even now, the British political psyche is fractured along geographic lines, and, wealth-induced, considers itself effectively “post-industrial”, and therefore beyond the need for a manufacturing (or even agricultural base). Thus, even though the UK is now far more dependent on a maritime trade base than at any time in its history, it is incapable of defending or projecting that maritime base; neither does it have the wherewithal to trade.
Australia
The Australian Government has — like the Obama Administration in the US and the Brown Administration in the UK — demonstrated its absolute lack of experience in management, economics, or real-life work skills. A decision by Prime Minister Kevin Rudd to impose a new “super tax” of some 40 percent on resource companies — miners, who produce most of Australia’s export wealth — suddenly highlighted the reality that the mining companies did not need to put their investment into Australian projects.
This “tax and spend” approach so damaged Prime Minister Rudd’s popularity in the run-up to a November 2010 election, that his deputy Prime Minister, Julia Gillard, an extreme left-wing feminist, mounted a rapid campaign within the ruling Labor Party to overthrow him. But apart from some temporary back-peddling on the Resources Super Profits Tax until the next election is out of the way, don’t expect incoming Prime Minister Gillard — the first Australian female head-of-government and the most left-wing ever — to back off her punitive stance against the private sector.
The Australian Government’s punitive tax approach, initiated by Rudd but likely to continue for as long as Labor governs, also highlighted the fact that foreign investors did not need to invest in Australia, and that capital could move — as it always does — away from draconian tax regimes. As Chilean Mines Minister Laurence Goldborne said in June 2010, “Just because you have resources doesn’t guarantee investment.” This is something which the governments of most African states know.
In Australia, the realization of the over-reaching greed — and envy-inspired approach of the proposed new tax laws — in turn led much of the ruling Australian Labor Party (ALP) and the profoundly leftist Australian media to begin their drift away from Rudd, leaving him with the prospect that he could either be abandoned as party leader before the late-2010 general elections, or be faced with the prospect of becoming Australia’s first one-term Prime Minister.
Gillard’s unbridled ambition also saw to that. The question remains as to whether she will be able to win the November 2010 general election. A more important question remains, however, as to whether the markets will still be there when the ruin of trust in Australian export and investment reliability is addressed by a future government. The People’s Republic of China (PRC), Australia’s major export client state, and Russia are now developing vast iron ore reserves on their mutual border, possibly — in the near future — obviating the need for much of what Australia exports.
In the meantime, both Kevin Rudd and the opposition Liberal Party have essentially embraced the move by Australia to see itself as a pseudo-post-industrial society, gradually eroding the independent and innovative manufacturing sector which had been a hallmark of Australian economic growth. A pseudo-post-industrial society is one which believes that it can live solely on the intrinsic value of its currency, without the necessity to sustain a balanced agricultural and industrial base to preserve sovereign independence. A true post-industrial society — something thus far a utopian dream — can produce all of its food and goods with a minute fraction of its population, which would largely be left to address intellectual pursuits.
Australia, thus, faces a major challenge to its comfort, wealth, and security when value perceptions, investment, and clients evaporate. We see, then, in the very deliberate acts of envy and entitlement politics, the seeds of national collapse in Australia, the US, and Western Europe.
Conclusions
Some of the Western powers have slumped before, and recovered. The United States has yet to demonstrate this resilience. Other Western societies have slumped, and have yet been protected by a strong regional system so that their societies could prosper under foreign protection. The Netherlands, Spain, and Portugal, for example, retained stable and individual prosperous societies and yet never recovered their strategic leadership, relying, instead, on the power of their region for economic and security protection. States which remain dependent on others for their protection never fully regain their wealth and freedom.
States such as New Zealand depend on their greater neighbors for protection. But wither New Zealand if Australia fails? Wither the Netherlands today if the European Union fails? And wither the United States if its fortunes erode? Re-birth is, as Britain has found through history, as did Rome, more arduous than that first, pure flush of strategic victory.
The West is at its watershed, not because of a threat from a less-productive society. The collapse of the West is not because Islam is at the gates. Islam is at the gates because of the collapse of the West.
Analysis. By Gregory R. Copley, Editor, GIS/Defense & Foreign Affairs.
(c) 2010 International Strategic Studies Association, www.StrategicStudies.org
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http://oilprice.com/Geo-Politics/International/The-New-Civil-Wars-Within-the-West.html
Saturday, July 3, 2010
Once we were a Republic, now we are a Corporatocracy
http://www.financialsense.com/contributors/d-sherman-okst/why-we-are-totally-finished
"We Have a Corporatocracy: Not capitalism.
Corporatocracy: A government that serves the interest of, and may de facto be run by corporations.
Some states have government workers who have powerful unions that influence the government's decisions. California has a massive pension mess, created in large part by government unions and elected officials who have catered to these unions.
"Too Big To Fail" is living proof that capitalism is dead. These TBTF institutions that blew up the economy in 2008 with their stupidity crisis, at the very least deserved to fail. They blew it. That is the definition of capitalism. You do well you are rewarded, you screw up you close shop. You commit fraud and you do time.
But with a Corporatocracy you have Hank Paulson - a former Goldman Sachs CEO worth about 700 million dollars who winds up becoming our past Secretary of the Treasury. There is a serious distinction between a civil servant and someone who serves a corporation, especially the last corporation he worked for. His salary was only six figures, but his benefit was that he got to cash out of his stocks and pay no taxes. He gave the morons who blew up the economy 700 billion dollars. He had another former Goldman Sachs employee disperse the funds while the current CEO of Goldman Sachs professed to be "Doing God's work.""
"We Have a Corporatocracy: Not capitalism.
Corporatocracy: A government that serves the interest of, and may de facto be run by corporations.
Some states have government workers who have powerful unions that influence the government's decisions. California has a massive pension mess, created in large part by government unions and elected officials who have catered to these unions.
"Too Big To Fail" is living proof that capitalism is dead. These TBTF institutions that blew up the economy in 2008 with their stupidity crisis, at the very least deserved to fail. They blew it. That is the definition of capitalism. You do well you are rewarded, you screw up you close shop. You commit fraud and you do time.
But with a Corporatocracy you have Hank Paulson - a former Goldman Sachs CEO worth about 700 million dollars who winds up becoming our past Secretary of the Treasury. There is a serious distinction between a civil servant and someone who serves a corporation, especially the last corporation he worked for. His salary was only six figures, but his benefit was that he got to cash out of his stocks and pay no taxes. He gave the morons who blew up the economy 700 billion dollars. He had another former Goldman Sachs employee disperse the funds while the current CEO of Goldman Sachs professed to be "Doing God's work.""
Tuesday, June 8, 2010
Sunday, June 6, 2010
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