Skip to comments.America's Coming Financial Vortex; 6 Predictions for 2009-2012
Posted on 11/28/2008 4:21:26 AM PST by ovrtaxt
It has been an incredible year loaded with surprises but I think that the next few years will surprise even more. Whenever I feel certain about something coming, I m glad to put it in print. In 2004, I had successfully forecast many economic events such as the housing bubble popping and the credit crisis among other events. Current economic conditions and political outcomes have laid the groundwork for more events that we should be prepared for. All of these events combine to create a Financial Vortex that will hit us in the coming years.
First of all, be aware of what current conditions will help lay the groundwork for this financial vortex. They are:
1. Americas debt load. The U.S. government has now $12 trillion in debt. Consumers and businesses are drowning in debt. Americas gross domestic product (GDP) is about $13 trillion yet its total debt is over $44 trillion.
2. Derivatives. Derivatives are complicated, arcane and risky securities that now total about $500 trillion. That makes this market ten times greater than the dollar value of the world economy which is just under $50 trillion.
3. Unfunded Liabilities. The current future tally of the unfunded liabilities of Social Security, Medicare and Medicaid is nearly $99 trillion.
4. Growth of government. The expansion of the governments involvement in the economy is (and will be) massive. Taxes, regulations, controls, spending, etc. at all levels of government (both domestic and international) will be problematic by an order of magnitude that the private sector will not be able to tolerate.
Think about it for a moment. The past few months have shown us what a few trillion in bad debt and derivatives can do to the market. The Dow is down several thousand points in the past few months and is down nearly 40% since hitting its all-time high in October 2007 of 14,164.53. What will happen to the stock market when many multi-trillions of debt, derivatives and unfunded liabilities start hitting us like a powerful vortex in the coming years? The economy is extraordinarily weak right now and it would not take much to see millions of hard-working folks get devastated. It is time to prepare. America needs to know what is coming. Some of these events are now unavoidable so being fore-warned and getting prepared is crucial.
Here are my forecasts for what I believe is coming during the next few years:
1. You will see an inflationary depression that will be evident by 2010. Maybe Ill be off a few months either way but an inflationary depression is almost guaranteed. Why? The latest batch of elected officials see government intervention as either a moral good or a necessary evil. The most likely policy initiatives that we will see in the coming months will be government controls, increased taxes and extraordinary money creation (inflating the money supply). In fact we have (and will) see trillions of new dollars will flood the economy in the coming months. This will probably cause the stock market and some economic indicators to rise and give the illusion of economic health during early 2009. This will cause many commentators to proclaim that we are coming out of the current recession. People will think that government intervention worked. Typically, government intervention only alleviates some of the symptoms in the short-term while postponing the problem(s) toward the long-term. Right now many commentators are calling the current economic environment deflationary but it is massive de-leveraging by huge financial entities that are selling off everything from stocks to commodities to accrue cash and stave off bankruptcy. As trillions of dollars flood into the economy, that condition will change. If they report the statistics properly, then we will see a contracting economy (measured by GDP) coupled with rising prices. A good example of this is Venezuela where that economy is struggling while their inflation rate is currently over 36% (as of October 2008). The government, in an attempt to revive consumption and job creation will increase the money supply by an order of magnitude never seen before in this country. Seeing the inflation rate soar to 20% and beyond during 2010 (or 2011) is a solid bet.
2. Unemployment in the private sector will soar into double-digits by 2010. As the recession morphs into a depression and as the government grows partly as a solution to economic difficulties, the increased burdens of government (taxes, controls, spending, etc.) will grow to burdensome levels for both consumers and businesses. Government spending on unemployment benefits and make work projects will soar to address the large job losses in the private sector. Right now you should re-assess your job, your company and your industry to see if you are at risk.
3. More state and municipal governments will be federal bailout candidates. I forecast this condition many months ago in my national seminars but recently this became headline news so its not such a great forecast new.. California and New York State are already seeking taxpayer money from the Federal government. However, we will see much more of this. During 1995-2008, many state and local governments over-extended themselves. Because they thought that good times (and housing booms) would last indefinitely, they took on more spending and more borrowing. Many of these jurisdictions will be forced into either spending cuts, higher taxes or both. Some will be forced into bankruptcy. Because of these events, there will be some areas that will experience social unrest due to difficult financial conditions.
4. Commodities will be in the next leg of their long-term bull market starting in 2009. Commodities such as oil, grains, precious metals, etc. had a great upleg in early 2008 and then had a brutal correction during the second half. Although much of it is attributed to deflation and demand destruction, these conditions are short-lived. Why? Two basic reasons; shortages (supply destruction) and rising inflation. Since government policy makers will make every effort to avert an economic contraction, they will flood the economy with inflation and renewed government spending. Economic policy decision-makers at the federal level think that increased consumption is the key to economic growth because they are influenced by the Keynesian school of economics. The world hasnt figured out yet that John Maynard Keynes policies are flawed and dangerous. The bottom line is that conditions are ripe for commodities to resume their bull market and reach new highs during 2009-2010. As an offshoot of this, you will also see conflicts across the globe tied to natural resources as countries with growing populations need more food, water, etc.
5. We will see oil hit $200 as Peak oil becomes obvious to all during 2009-2012. Dont be fooled by the recent drop in oil from $147 in the summer of 2008 to $50 during November 2008. the recent data from the world energy market indicates that oil depletion (supply destruction) is far more severe than the recent headlines blaring the misleading condition of demand destruction. The most severe energy crisis in history is in my mind an unavoidable certainty during the next few years. America needs to go full-bore toward energy independence since we will have no choice. This energy crisis will be very difficult to get through and will cause tremendous social and economic difficulty.
6. International conflicts over natural resources will hit the headlines during 2009-12. As governments across the globe seek to address the wants needs of their growing populations, there will be aggressive competition for the worlds limited resources. Natural resources will be seen as strategic as well as economic. National and economic security for America will be a vital concern.
Now you can see why I refer to it as a Financial Vortex. We pray for our country and we hope to get through this with a minimum of suffering but it behooves all of us to be ready. It is better to prepare for problems that may occur than to ignore reality and be set up for pain. Although the Financial Vortex conference will be held in New Jersey on December 6, 2008, let me share with you a few of the strategies that will be covered that day:
1. Buy gold and silver bullion. Yes there have been physical shortages reported but that shouldnt stop you from getting some for your portfolio. Precious metals retain their value during a period of economic uncertainty and rising inflation.
2. Keep a cash cushion. Have money set aside in a safe venue such as a treasury money market fund. This is not for long-term purposes since inflation will be a major issue; it is there for an emergency fund for day-to-day needs.
3. Shift your retirement portfolio into stocks and ETFs tied to human need such as food, water, energy, etc. These companies and sectors will have a better time surviving the coming years than other sectors that are problematic such as real estate, financials and cyclicals (such as autos and other big ticket items). I believe that much of the conventional stock market will get slammed.
The Financial Vortex is coming. Millions will be blindsided but those that prepare will survive and even thrive. I am doing my conference primarily because I want people to be safe and do those things that will ensure greater financial security. It is also why experts such as David Morgan, Jay Taylor and Roger Wiegand will join me that day so that people can get specifics on what to expect and how to prosper. The bottom line is that it is better to be safe than sorry.
Copyright 2008. Paul Mladjenovic. All rights reserved.
There's a hard lesson coming.
There is a hard lesson coming for sure, but the stock market will increase under Obama’s term as it is so low now that it will increase and he will be applauded for it.
Interesting but chilling.
Seems like it is here already.
Also, although there is some truth in what this fellow is saying he is a scamster and should be avoid. Here are 2 reasons why:
Maybe in nominal numbers it will increase, but the dollar will be worth so little, it will be a net loss.
What’s the net amount? I’ve seen this discussed before, but I don’t remember the specific numbers.
Firearms and ammunition are the best investments right now.
The long held axiom of “Don’t fight the Fed” should result in a near term rise in the stock markets. The professional investors do not know what the infusion of trillions of new dollars into the market will bring, but they know from the past that when the Fed injects dollars into the monetary system stocks do go up.
I tend to agree with the author that such a rise in stock prices will be short lived. Soon the rise in commodity prices will overwhelm the companies and their profits will go down.
As things stand today there is simply too much productive capacity in the world and it has the capacity to supply far more than the consumers want or need.
Bullion is tougher to deal with unless you have tons of it.
The problem with bullion is that if you need to 'spend' it or sell it, it's like breaking a $1000.00 bill.
Well, we're off to a good start, aren't we?
Interesting how often the most common sense precautions are not mentioned. If anyone is intelligent, he will move heaven and earth to get out of debt and not buy anything that he can’t afford to pay for in full.
That could be true but remember we are not talking about intelligent FREEPERS but Sheeple who won’t know enough to realize that. But you are certainly right as always!
Yep, I’ve been saying precious metals- gold, silver and lead.
I think a lot of this depends on how quickly emerging economies can create a consumption base at home.
The man is right about civil unrest, he just understates the matter a little.
But we do know the answer for specific cases where the underlying debtor has already defaulted. So for example in the case of Lehman Bros. as I recall the nominal outstanding value of the credit default swaps when it failed was something like $360 billion. But when netted out the actual amount paid was something like $6 billion.
lol no kidding-
“the dow is 20,000, yay! Obama is a genius!
Uh, could you spare a can of beans?”
The article is fact-challenged in every respect, peddling myths and nonsense. Chicken little journalism at its worst.
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