Best of the Week
Most Popular
1.Election Forecast 2015 - Opinion Polls Trending Towards Conservative Outright Win - Nadeem_Walayat
2.UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - Nadeem_Walayat
3.Gold And Silver - When Will Precious Metals Rally? Not In 2015 - Michael_Noonan
4.Preparing for the Next Stocks Bear Market - Forecast 2015-2016 - Gary_Savage
5.Is a Stock Market Crash Imminent? - David Eifrig
6.Gold Price Slumps as US Dollar Soars, What's Next? - Nadeem_Walayat
7.US Dollar Forex Pairs and Gold Chartology - Rambus_Chartology
8.Election Forecast 2015: The Day Labour Lost the General Election - Nadeem_Walayat
9.The ECB Should End QE Next Month - EconMatters
10.Silver Price Poised to Surge - Zeal_LLC
Last 5 days
Sheffield Hallam Election Battle 2015 - Lib Dems Go to War Whilst Labour Sleeps - 27th Mar 15
Gold Effect On Mining & Shale Wasteland - 27th Mar 15
How Stock Investors Should Play the 2016 Presidential Race - 26th Mar 15
MidEast Energy Alert: Why the Crisis in Yemen Could Get Ugly Very Fast - 26th Mar 15
Stock Market Downward Spiral of Dumbness - 26th Mar 15
The Monetary Approach Reigns Supreme - 26th Mar 15
Stock Market Large Gap Down, Despite the Algos' Push Back - 26th Mar 15
Crude Oil Surges, Gold price Spikes as Middle East Tensions Escalate - 26th Mar 15
The U.S. Housing Market Recovery Is Fabricated Optimism - 26th Mar 15
Why Yemen Is The Next Saudi-Iranian Battleground - 26th Mar 15
The Crude Oil Price Crash and China Economic Slow Down - 26th Mar 15
Global Financial Markets Are More Distorted Than Ever Before - 26th Mar 15
One More Stock Market Rally and Then a Huge Drop Expected - 26th Mar 15
Danger Will Robinson - Stock Market Crash Warning - 25th Mar 15
Learn the Basics of Corrective Elliott Waves - 25th Mar 15
Why CNBC Is Hazardous to Your Financial Health! - 25th Mar 15
Will Your Retirement Accounts Survive The Coming Tax Code "Revolution"? - 25th Mar 15
US Dollar - Americas Phoenix - 25th Mar 15
California’s Epic Drought: Only One Year of Water Left! - 25th Mar 15
What’s Wrong With Silver? - 25th Mar 15
SPX Futures Appear Weak. WTIC and Gold May Be at Max Retracement - 25th Mar 15
We’re at the Dawn of a “New Energy Age” - 25th Mar 15
A Very Weak U.S. Economic Recovery - 25th Mar 15
Zero UK CPI Inflation Rate Prompts Deflation Danger Propaganda For Fresh Money Printing - 25th Mar 15
Stock Market NYSE Hi-Lo Index Aggressive Sell Signal - 24th Mar 15
Palladium Commodity Price Forecast - 24th Mar 15
Bitcoin Price Gearing Up for a Fall - 24th Mar 15
Safety Deposit Boxes In UK Being Closed By ‏HSBC – Not Closing Gold Vaults - 24th Mar 15
Japan Short Term Gains And Long Term Disaster - 24th Mar 15
China's Fragile Evolution - 24th Mar 15
David Cameron Announces Resignation Even Before Being Re-elected, Handing Labour 6 Seats - 24th Mar 15
City of London's Ownership of American Colonies - 24th Mar 15
Stock Market Reversal May Have Begun - 24th Mar 15
Casey Gathers Top Gold Experts to Share Secrets for Making Money in Any Market - 24th Mar 15
Thoughts on The Current Crude Oil Market - 24th Mar 15
U.S. Economy Still on Life Support - What Your Governments Hiding From You... - 24th Mar 15
UK Election Forecast 2015 - Budget Bribes Fail, SNP Insurgency Catastrophe - Video - 24th Mar 15
Is Stock Market Minor Top Taking Hold? - 23rd Mar 15
Greece and EU Running Out of Time as Bank Runs Intensify - 23rd Mar 15
Stock Market Slightly Negative Expectations Following Last Week's Rally - 23rd Mar 15
This Rising Interest Rates Play Could Make You a Quick 55% - 23rd Mar 15
Platinum Commodity Price False Break Low - 23rd Mar 15
The Real Reason The American Dream is Unraveling - 23rd Mar 15
Election Forecast 2015 - Budget Bribes Fail to Impress Voters, Tory's Lose Seats in Opinion Polls - 23rd Mar 15
Silver Price Reliance During U.S. Dollar Rally - 23rd Mar 15
Gold Price Outlook Dramatic Improvement Following US Dollar Topping Action - 23rd Mar 15
Wall Street Doesn't Want You to Do This - 22nd Mar 15
The "Natural Interest Rate" Is Always Positive and Cannot Be Negative - 22nd Mar 15
Exploring The Gold Market: The Fed, The Charts. The COTS and GLD - 22nd Mar 15
Stocks Bull Market Continues - 22nd Mar 15
Gold And Silver - China's AIIB Spells U.s. Dollar Demise, Not Clear For Precious Metals - 22nd Mar 15
Cocoa Commodity Price Technical Outlook - 21st Mar 15
Yield Curve, Futures, Suggest No U.S. Interest Rate Hike Until December - 21st Mar 15
Three Iconic Stocks Are Poised for a Dive - 21st Mar 15
We're All Hedge Funds Now! - 21st Mar 15
Why Stock Market Seasonality May Be Critical in 2015 - 20th Mar 15
Yellen's Tiger Riding Dilemma Keeps Interest Rates Near Zero - 20th Mar 15
FOMC is boxed in, Gold and Silver - 20th Mar 15
Silver Price Poised to Surge - 20th Mar 15
Why Aren’t These Investors Worried About The Gold Price? - 20th Mar 15
Gold Price Downside $850/oz; Upside Jump to $2,000/oz on ‘Grexit’ - 20th Mar 15
Cheap Paper Money - Precious Metals Technical Outlook - 20th Mar 15
Best Cash ISA vs Budget 2015 Scrapping Tax on Savings Interest on First £1,000 - 20th Mar 15
GDXJ / Gold Ratio - 20th Mar 15
What the “Yellen Effect” Ultimately Means for Crude Oil - 20th Mar 15
Sharp Fall In USD Index And Its Implications - 20th Mar 15
UK Solar Eclipse - End Time Sign, Judgement Day, Doomsday! - 19th Mar 15
How Many Shale Oil Plays Make Money At $37 Per Barrel? - 19th Mar 15
Gold Price Rises 2.1% – Fed Signals Loose Monetary Policies to Continue - 19th Mar 15
The Hottest Investment Opportunities in Tech Stocks Sector Right Now - 19th Mar 15
China's Deflationary Economic Bust and Beyond: Anne Stevenson-Yang Presentation - 19th Mar 15
T-Mobile CEO: "Sprint couldn't give away service...their network is completely dead" - 19th Mar 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

US Economy Still on Life Support

2012 Calm Before Stock Market Storm 2013

Stock-Markets / Stock Markets 2013 Dec 24, 2012 - 05:48 AM GMT

By: Gordon_T_Long

Stock-Markets

Red Sky at Night, Sailors Delight,

Red Sky in the Morning, Sailors take Warning!

We have a new era dawning in Global Monetary policy. It is a new day with the monetary skies already red.

Within 90 days the captains of monetary policy have steered the world into uncharted waters and on a course that history warns us against.


Federal Reserve: QE3 "Unlimited" and QE4 within 90 days, ECB: OMT "Uncapped", BOJ: QE 10 and the newly elected Prime Minister Abe's mandate for "Inflation at any cost" BOE: UK's newly appointed BOE Governor, Mark Carney's Monetary Evan Rule targeting.

These untested and newly commissioned captains all have PhD's from the finest Economic schools in the world, but they clearly have not studied nor grasped the key lessons of history.

Old Lessons Being Relearned

The following lessons, in the following sequence, should resonate with all who are clearly watching, listening and paying attention to what is going on around them, and not what the press 'conjures up' and the political apparatus 'spins'.

1- It starts with LIVING WITHIN OUR MEANS.

2- The Understanding of the Critical Importance of SOUND MONEY

"It is impossible to grasp the meaning of the idea of sound money if one does not realize that it was devised as an instrument for the protection of civil liberties against despotic inroads on the part of governments. Ideologically, it belongs in the same class with political constitutions and bills of rights."

The Theory of Money and Credit (1912), Austrian economist Ludwig von Mises

3- The Maintenance of Money as a STORE OF VALUE

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks...will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered....

The issuing power should be taken from the banks and restored to the people, to whom it properly belongs"

Thomas Jefferson

4- Being Aware of the MORAL DECAY that begins to happen when we veer from these previous tenets

"When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it"

Frederic Bastiat

5- Knowing the UNAVOIDABLE conclusions it leads to

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved"

Ludwig von Mises

6- REMEMBERING the Central Lessons of History

The problem is WITHIN OUR SOCIETY

"A great civilization is not conquered from without, until it has destroyed itself from within. The essential causes of Rome's decline lay in her people, her morals, her class struggle, her failing trade, her bureaucratic despotism, her stifling taxes, her consuming wars."

Will Durant, The Story Of Civilization III, Epilogue, 1944

INEPTOCRACY

"A system of government where the least capable to lead are elected by the least capable of producing, and where the members of society least likely to sustain themselves or succeed, are rewarded with goods and services paid for by the confiscated wealth of a diminishing numbers of producers".

Unknown

7- The resulting INEVITABLE ROADMAP

Not having learned these lessons, our Monetary Captains have set us on a course of Monetary Malpractice that leads to:

  • Increasing Authoritarian Control and Central Planning,
  • Crony Capitalism, Corporatocracy which increasingly feeds off an ever expanding state, while stifling open competitive innovation,
  • Financial Repession, Moral Hazard, Unintended Consequences and Dysfunctional Markets, and
  • Statism breed through the forces of Collectivsm and Complexity.

Forces of Social Globalization

Doomed Middle Class

The engine of prosperity is SMALL BUSINESS and a strong MIDDLE CLASS. The economic foundation is presently under unprecedented assault. In the last 15 years, the shift from defined to contributory benefits, a housing collapse, exploding education costs, a crushing shrinkage in real dispoable income, and growing 'financial insecurity', have left the US middle class paralyzed.

Growing Social Stress

EQUALITY & FAIRNESS has been broken.

Whether the growing hoards of frustrated and unemployed youth, worried retirees unable to garner any earnings on their life's retirement savings, the increasing ranks of "part time worker" or the squeezed employed worker with lost or reduced benefits and unmatched cost of lving increases, there is a historic disparity between the "haves and have nots". Corporate profits are at record levels against GDP, while labor against GDP continues to plummet. There is a palpable sense of inequality and unfairness?

RULE OF LAW is in jeopardy and the US Constitution is in peril.

Our transition from more-or-less free country to police state is accelerating.

  1. The NSA's Utah Data Mining facility,
  2. Ever-tighter restrictions on offshore accounts,
  3. The Internet "Kill Switch",
  4. The Patriot Act's many assaults on the Bill of Rights,
  5. The Militarization of local police, (Equipment, FEMA Graduates ... the new NDAA's "indefinite detention without trial")
  6. The spread of Drones for domestic surveillance (FAA planning for 30,000 by 2020)
  7. The NCTC's (National Counterterrorism Center) " Disposition Matrix" - Kill Lists

... each has a role in the high-tech updating a very old idea: that the state is paramount and the individual a slave to public order and national power.

Why is this happening now, rather than in 1950? ANSWER: We're reaping the whirlwind that always accompanies fiat currency. We created a central bank in 1913 and freed it from the constraint of gold in 1971. Give the government or the large banks the power to create money out of thin air and you eventually create a dictatorship.

"Eventually" just happens to be now.

SOCIAL CONTRACT is breaking down

The Political Foundation of the status quo in America is based on a Grand Bargain of Complicity between the top 25% who pay approximately 90% of the taxes, and the bottom 50% who draw on the benefits that stem from government. James Madison, in the "Federalist Papers", outlined this complicity in the "Tyranny of the Majority". What is becoming painfully evident is that the political elite in America have falsely over-promised on the entitlements that can be delivered, which is now surfacing in the political turmoil of the Fiscal Cliff negotiations and has the potential to quickly lead towards a constitutional crisis.

This Grand Bargain is now rapidly fraying as 75 million baly boomers begin retirement and find that the promises made to everyone cannot possibly be met. As the Fiscal Cliff crisis is highlighting, for those who can read between the carefully crafted lines, funding for Social Security, Medicare/Medicaid, National Security and Interest on the debt is consuming more than can be realistically raised through taxation.

To collect enough tax revenue to avoid deeper debt levels would require over $8 trillion in tax collections annually. Expropriating the entire income of the top 25% of households that pay almost 90% of the tax and all corporate taxes would only bring in $6.7 trillion.

"The actual liabilities of the federal government -- including Social Security, Medicare, and federal employees' future retirement benefits -- already exceed $86.8 trillion, or 550% of GDP. For the year ending Dec. 31, 2011, the annual accrued expense of Medicare and Social Security was $7 trillion".

Chris Cox and Bill Archer, Former Congressmen - WSJ 11-26-12

Claims on welfare and disability programs are skyrocketing at the same time that the demographics of an aging populace are causing 10,000 people a day to enter Social Security and Medicare, the two costliest government programs. Meanwhile, the upper-middle class that pays most of the taxes has been slammed with lower income and a devastating drop in their housing-based net worth. Compounding this is the fact that the disillusioned wealthy have slowed dramatically their invested CAPEX (Capital Expenditures) in productive assets in the US.

The 2008 Financial Crisis which quickly morphed into a Global Economic crisis is now entering the Political instability phase, where the broken grand bargain and social contract is going to greatly impact the attempts by the global Captains of Monetary, Fiscal and Public Policy to steer a safe course.

FINANCIAL > ECONOMIC > POLITICAL = SOCIAL CONTRACT

Ungovernable Democracies

As a larger percentage of the public becomes dependent on government entitlements, transfer payments and employment, the helm will be pulled from the Policy Captains' hands.

Austerity only works conceptually and as long as it doesn't impact anyone directly. Obviously, this cannot be the case. UK's Prime Minsiter Cameron was elected on a platform of austerity. When it came to implementation, it became quite a different matter. He is not alone.

The Democratic system becomes ungovernable when unsound money is sustained for any period of time. It is the virus that silently cripples it.

The Looming Adjustment

To any sane person, who has a grasp of what is presently occurring, it is obvious that the current state of affairs is unsustainable. The question is how long can the Monetary Captains' misguided policies keep us off the shoals of our economic destruction. How long can policies of "Extend and Pretend", Kick the Can Down the Road" or "Fake it Until You Make It" continue? The answer is likely unknowable, the certainty of it ending badly is not.

The Globalization Catalyst: FRAGILITY AND COMPLEXITY

The financialization, securitization and rehtpothecation of almost all our systems, the explosion of an unregulated, offshore, off balance sheet, off exchange and opaque $639 Trillion SWAPS markets, along with a $67 Trillion Sahdow Banking System on a $70 Trillion global conomy should beg some questions.

The complexity of the interwined and interdependent global Financial systems gives us a clue to what lies ahead.

All these systems are fragile and not robust. They have never been stress tested. They were never designed, but rather evolved in Darwinian fashion. Minor set backs and adjustments simply allowed for more layers of complexity to be rapidly and randomly added. So far, there has not been a catastrophic collapse. The probability of this not occurring is diminishing exponentially.

It will occur. It is only a matter of time. The internet and potential cyber attacks almost guarantee a triggering event.

Market Signals Are "Bright Red"

STORM FORECAST

2012: Calm Before the Storm

2013-2015: A Market Clearing Event

2016: Sorting through the Debris

The charts are clear about what lies ahead based on our current path. Eventually, all this will end badly.

History is very clear that when something is UNSUSTAINABLE it is INEVITABLE that it will end.

TIME is the only unknown.

It is better to be way too early than one minute too late!

Sign Up for our FREE 2013 Thesis Report. To read more, go to GordonTLong.com

Gordon T Long     Publisher & Editor general@GordonTLong.com     

Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that you are encouraged to confirm the facts on your own before making important investment commitments. © Copyright 2012 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or suggestions you receive from him.

Gordon T Long Archive

© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014