Dear President Obama

Our leaders.. President Obama, Larry Summers, Tim Geithner, Nancy Pelosi & Helicopter Ben.. despite all outward reassurances that all is well.. are all crapping their pants after the last few weeks of terrible economic reports. One and all of these people have taken to one (or more) of the flask, cigarettes or ibuprofin pills. Bernanke in particular see's whats really going on.

In October 1929, the stock market crashed. This was the start of the Great Depression.. sort of. Throughout 1930 and into 1931, the stock market actually rallied quite nicely. By late 1931, things were getting worse as deflation began a death grip on the economy, and the stock market took another ugly dive into 1932. Alas.. we have arrived at late 1931. Here's a short recap:

* Housing: The federal tax refund to first time home buyers has ended; the result was that new home sales plunged by an unprecedented 32.7%, nearly double the expected -18.7, compared to a previous reading of 14.7%. The median sales price of new houses sold in May 2010 was $200,900, lowest since December 2003, and drop of 9.6% YoY.

* Unemployment: The number from last week came in at 9.5%.. actually a little down. But why was that ? Because the number of people who have given up looking skyrocketed. The "labor participation rate".. the percentage of working age folk in US who are employed.. dipped again from 58.7% to 58.5%.. and this was down from 63% three years ago. Despite government numbers massaging, unemployment.. and underemployment.. is going up. The U6 unemployment number.. the most accurate, and thus no longer reported officially.. is at 17%.

* States: California, the poster child so far of state mismanagement, has seen state workers suffer a 14% decline in wages thanks to forced furloughs. The Governator has announced that a little over 200,000 state workers are being reduced to the $7.25/hr minimum wage.. and still there is a huge budget gap. But the Governator can take a little comfort.. the state of Illinois has surpassed California in the budget catastrophe category. The state has a deficit of $12bn and is $5bn in arrears to schools, nursing homes, child care centres, and prisons. "It is getting worse every single day," said state comptroller Daniel Hynes. "We are not paying bills for absolutely essential services. That is obscene." In effect, Illinois has simply stopped paying it's bills.

* Baltic Dry Index: The Baltic Dry Index, which measures shipping tonnage and thus manufacturing and trade activity, fell 3.5% in May, the sixth month in a row it's declined and the steepest monthly decline since early 2009. This is a very important measurement of how the economy is doing; many economists list this index as well as railroad traffic indices (which are also declining) as the most important of all statistics printed.

There has been increasingly loud rumors of another round of "quantative easing".. ie.. money printing by The Fed. The rumors are that it will be a massive amount of it.. one rumor lists $5 trillion. Paul Krugman would be ecstatic. But what effect would this have on the price of basic goods ? It would likely stop deflation for quite a while.. but it does not solve the basic problem of the US (and most of the developed world) economy.. debt. Massive currency manipulation will, in some way, unleash destructive forces completely unforseen by those who unleash it. My original thought was that this would not happen before Election Day.. but at the current rate of disintegration, I now think at least part of it will be done by summer's end. It is, to an extent, an admission that everything is not going well.. and thus political dynamite, which is why is has not already happened.

Therefore, Mr President.. despite all attempts to the contrary.. there is literally no escape from this economic collapse. Be it deflationary or inflationary, the result will be the same. My suggestion.. however painful in the short term.. is to work on a way to repudiate all debt, declare national bankruptcy, eliminate the Federal Reserve and the fiat money system, and replace it with a system whereby currency is introduced into the economic system via checks made out to the people and not via loans made out to the people. A currency standard who's value is based upon a basket of commodities.. lets say that 100 New Dollars would equal 25 bushels of corn, or 15 bushels of wheat, or 30 pounds of copper, or.. or.. or.. with the party expected to cough up the commodity getting the choice which commodity he will cough up. The current system is, at it's heart, meant as a way for banks to tax the people via the currency. It's robbery, and however painful, it indeed must end. Instead of a legacy rivaling that of Herbert Hoover, you could have one rivaling that of Thomas Jefferson. The rest of the world, also hopelessly indebted (most of it anyways), would likely follow you into a new age of people power and would welcome the demise of the era of banker induced serfdom for the masses. Thomas Jefferson would welcome you with open arms in Heaven.

Oh yeah.. and drop a suitcase nuke on the leaky oil well.. the Russians did it and it worked out just fine.

Your Most Sincere & Humble Veteran & Serf,

Mr.Kowalski