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. America’s debt load. The U.S. government has now $12 trillion in debt. Consumers and businesses are drowning in debt. America’s 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 government’s 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 I’ll 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 it’s 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 hasn’t 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. Don’t 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 world’s 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 shouldn’t 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.
As the government house goes under, micro-economies willl spring up as people lose faith in Big Brother. Barter, trade, cash, alternative local monies will come into being.
Some of these alaternative models will flourish. My guess is that the economies in conservative states will thrive, while liberal states will collapse. And as the collectivist states collapse, they will make an effort to steal wealth from productive states.
The number one strategy should be removing yourself and your family from states run by Marxist/liberalls, and settlle into an area with strong Christian values, respect for famillies and a commitment to private property. This is where America will be reborn.
When that happens, I won’t be the only one with a problem.
Yeah, but is the economists, lending institutions, and wall street who put that stupidity in their heads.
"The unemployment rate has remained low, at 4.5 percent. A recent report on retail sales shows a strong beginning to the holiday shopping season across the country -- and I encourage you all to go shopping more." G.W. Bush\December 20, 2006.
“Crap, that guy is darker than Dracula.”
Yup. Almost triggers my 30 Minute Nuclear Annihilation Response:
Lawn chairs, backyard, bottle of vodka, pack of smokes (carton would take too long), and a bag of interesting tiny leaves and rolling paper.
When we start to hear Quadrillion tossed around we will know we are done for. I predict quadrillion being heard around 2011. It will take quadrillions to pay off the world bailout.
>The Feds are printing and borrowing money at a record pace. Flooding the economy with paper will almost certainly drive inflation in the long term.
>Baby boom generation has begun to retire and is projected to cause entitlement outlays to increase substantially.
>We are a consumer nation rather than a savings and investment nation. Personal savings and investment are at all time lows.
>American manufacturing has been devastated. America has lost millions of good paying positions. The economy has rapidly shifted to a service based economy, leading to the largest shift of wealth in world history from America to foreign entities.
>Foreign countries have purchased massive amounts of American debt, invested billions into American financial institutions.
>The almost certain push for Amnesty of over twenty million illegal aliens in this country will add billions to the national debt through increased entitlement programs and massive taxpayer giveaways such as the earned income tax credit.
>As the recession deepens (I pray that it does not), more and more layoffs will occur, this in turn will slow consumption.
It is my opinion that the federal government bailed out the wrong segment of our economy. It is the American taxpayer that should have received billions upon billions of dollars.
Just another wealth redistribution scheme led by the republicans and supported by both sides of the isle.
This government of ours is out of control. I hear so many complain that the democrats are gonna do this and that. Has it not been the republicans that have rallied the move toward socialism?
It's time for American middle class to form or support an alternate conservative party that's primary focus is on America and her health and well being.
Enough is enough....stop supporting either of these power hungry parties. Neither the democrats or republicans are on our side....the side of the American middle class.
I recall reading an analysis of Germany's collapse after WWI that stated that the vast destruction of it's production capacity had a major impact on the massive inflation it suffered. I.E. that it needed goods produced but, since it produced very little, Germany was forced to buy them from "producing countries". Germany, having no production capability of it's own, was forced to pay higher and higher prices.
I have my problems with the domestic auto industry, but I share your concerns about the massive loss of manufacturing capability which has taken place. Once we lose this production knowledge we will never get it back.
And by "production knowledge" I don't mean the assembly line. I mean the knowledge that goes into research, design, building the machinery, tooling, process design, the educational and training infrastructure that supports production, etc.. I am concerned that as we lose more manufacturing capability we've also lost citizens who, picturing only the assembly line, fail to understand all that we are losing.
Keep in mind that Republicans-not conservatives and not just RINO’s-have been very much a part of this. Those who thought tell that all we had to do was cut taxes while we continued insane spending. Those who promoted government programs just as long as they had a “conservative” spin such as faith-based welfare. What Republicans are to the right of FDR or LBJ. That is people who have wanted to take us to the days before these monsters.
No, it’s going according to “plan”, namely to offshore any “polluting” industries. It’s for “the environment”. Hm.
Well, then, assuming Lehman Bros. is representative of nominal to net, and also assuming that the $500 trillion nominal amount is reasonably accurate, then we’re looking at “only” $8.33 trillion net after settlement?
Excellent observations. I’m seeing that too, and a return to things that really matter.
lol you’d go out in a blaze of glory, all stoned? haha
You were sounding rather dire, yourself, as recently as a month ago. Am I misreading your sentiment here, or has your opinion changed? I've seen nothing in that time that would have caused a change of heart.
” assuming that the $500 trillion nominal amount is reasonably accurate, then we’re looking at “only” $8.33 trillion net after settlement? “
I’m not sure I’m understanding this — it looks to me, then, like some $490 trillion has just evaporated off the books and into the aether...
Somebody’s (and I suspect it’s us taxpayers) gettin’ robbed......
IMO, they are both (Reps and Dems) bought and owned by central bankers.
Ron Paul was the only candidate telling the truth about this.
You know what else we’ll lose if things go really haywire? A lot of talented young people who will move out. The brain drain used to flow INTO America. It may not stay that way.
Think of it as offsetting insurance policies.
To be fair, Ralph Nader and Dennis Kucinich said it, too - inviting heaps of scorn from the Obamoids who were sure that Hope and Change were just over the horizon. ;)
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