Monday, July 5, 2010

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,



  1. I called the POTUS and he said his advisors say everything will work out fine and I should stop worrying. We've got this all figured out. He said his peeps handle the little stuff like the economy. He handles the big stuff like the "War on Terror." I said sir with all due respect our only military action is our occupation of Iraq and Afghanistan. Do you plan to stay there forever? We haven't had a terrorist attack the likes of 9/11 in 10 years. His response was "that is because we are winning." At that point I gave up hung up and phone and just muttered to myself "The guy is a lost cause."

  2. Well if we backed it by gold the US would be sitting pretty since we by far own the most gold. However, to cover the amount of cash and debt gold would have to be around 50k per ounce or so I am told. This will not happen. I mean ever. You cannot print gold and the banksters could not leverage it 40 to 1.

  3. My problem with gold or silver based currency is that these commodities are able to be manipulated (Hunt Bros ring a bell ?). But a basket of them, lets say a dozen, are exceedingly unlikely to be manipulated all at the same time. Just my $.02

  4. My problem with most commodities is they have a limited shelf life. Also we can already trade a bushel of wheat for fiat. The issue I have is that the banksters will hold 1 dollar in deposits for every 10 they loan out. When it comes to investment banks, the leverage can be as high as 40 to 1. Basically money is backed buy the faith of the world governments and I have no faith in the governments.

  5. If state workers go to minimum wage, isn't it fair (and right) for the leaders to accept the same measure?

    Seems to me that this is what defines elitism.

  6. A very nice read. Whatever system they use they won't be able to get me to fight in their wars or scrub their toilets or guard their compounds. Small cooperative groups based loosely on barter will develop after the maggots finish killing off 99% of the people and animals on the planet.

  7. All my comments are getting lost. A very nice read.

  8. "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.."
    ..or Gold

    Sorry, Mr. K., but I side with QueenBee on this one.

    Gold has always represented wealth; always been a store for wealth. WHeat, corn, even copper are consumables.

    Having said that, if things REALLY collapse then food will indeed become money.

  9. The leaders don't care if they get paid minimum wage in their government cheques. They get their real salary in bribes disguised as "campaign contributions," corporate donations to the leaders' "charitable foundations," perks like junkets to resorts where they fly on corporate jets... And if they do their masters' bidding, there's always a high-paid "consultant" job for the industry they've done the most favours for, a la Billy Tauzin of Louisiana and BigPharma. I bet the ones who have been in there for a while can't wait to get tossed out of office. Then it's payiff time, baybee!

  10. Great post! U.S. government doing what it does best...spend and extend and pretend! Our "representatives" remain clueless and maybe if they actually had experience in the real business world, they might comprehend that simply throwing money at all situations does not work...wait a minute, let me have my 2nd cup of coffee and wake up as I think I just made it sound like they have the potential to actually care about Main Street versus Wall Street.