1. Faber: The 'American Empire' has peaked, is on a declineHong Kong economist Marc Faber says "the average life span of the world's greatest civilizations has been 200 years ... Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent ... overspends ... costly wars ... wealth inequity and social tensions increase; and society enters a secular decline."2. Grantham: Learned nothing, doomed to repeat past, only biggerMoney manager Jeremy Grantham warns that our irrational nightmare will repeat. A year ago we came dangerously close to the "Great Depression 2." Unfortunately, we've "learned nothing ... condemning ourselves to another serious financial crisis in the not too-distant future."We had our bear-market rally. Next, historical cycles plus our irrational behavior guarantees another, bigger global meltdown. We "learned nothing."3. Stiglitz: Wall Street creating short respite before next crashNobel economist Joseph Stiglitz recently warned: Unless Wall Street's incentive system is drastically reformed, "the financial sector will only try to circumvent whatever new regulations we put in place. We will simply have a short respite before the next crisis." Warning, nothing's changed, it's worse: Lobbyists run Obama, Congress and the Fed.4. Johnson: Running out of time before Great Depression 2Yes, "we're running out of time ... to prevent a true depression," warns former IMF chief economist Simon Johnson. The "financial industry has effectively captured our government" and is "blocking essential reform," and unless we break Wall Street's "stranglehold" we will be unable prevent the Great Depression 2.5. Ferguson: Fed's easy money fuels new bubbles, meltdownsIn the 400-year history of the stock market "there has been a long succession of financial bubbles," says financial historian Niall Ferguson. Who's the culprit? The Fed: "Without easy credit creation a true bubble cannot occur. That is why so many bubbles have their origins in the sins of omission and commission of central banks."Another bubble (and crash) is virtually certain, thanks to Washington's $23.7 trillion explosion in debt, the Fed's support for the $670 trillion shadow banking system and Wall Street lobbyists getting superrich thanks to Wall Street's insatiable greed.6. Taleb: Fed haunted by ghost of Greenspan's failed ReaganomicsWhen Obama reappointed Bernanke, Nassim Taleb, risk-management professor and author of "The Black Swan," warned of a new disaster: "The world has never, never been as fragile," yet Obama reappoints an economist who "doesn't even know he doesn't understand how things work." New proof? At last week's American Economic Association, Bernanke was still shifting the blame: "The best response to the housing bubble would have been regulatory, not monetary."Wrong: He conveniently forgets he was advising Bush earlier, did nothing. Now Obama's stuck with a Greenspan clone and an insane ideology focused solely on saving a failed banking system by flooding the world with inflated dollars guaranteed to trigger another meltdown7. Soros: Dollar dead as a reserve currency, nest eggs dyingBillionaire investor George Soros' "New Paradigm:" America's 25-year "superboom ... led to massive deregulation ... blindly chasing free markets ... unleashed excessive greed ... created the dot-com and credit meltdowns" and a "shadow banking system" of derivatives."The system is broken. The current crisis marks the end of an era of credit expansion based on the dollar as the international reserve currency," warns Soros. "We're now in a period of wealth destruction. It is going to be very hard to preserve your wealth in these circumstances."8. Hedgers: make billions shorting stupid politicians, bankersSoros isn't alone. Lots of hedge fund buddies made hundreds of millions and billions betting on the stupidity of Washington with the Fed's cheap-money policies. Alpha magazine reports that four hedgers made more than $1 billion each in 2008. The top-25 "managers made $464 million each on average last year ... a kingly sum, especially during a year of global recession, stock market wipeouts and vanishing wealth."9. Shiller: Dot-com, subprime meltdowns, 'third episode' nextEconomist Robert Shiller a "Dr. Doom?" Remember a decade ago with "Irrational Exuberance?" Now he's warning: "Bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they're going to keep forming. We recently lived through two epidemics of excessive financial optimism, we are close to a third episode, only this one will spread irrational pessimism and distrust -- not exuberance."10. Kaufman: Irrationality replaced reason, science, technologyHenry Kaufman was Salomon's chief economist and "Dr. Doom" for 24 years: "Why are we so poor at managing our key economic institutions while at the same time so accomplished in medicine, engineering and telecommunications? Why can we land men on the moon with pinpoint accuracy, yet fail to steer our economy away from the rocks? Why do our computers work so well, except when we use them to manage derivatives and hedge funds?"Kaufman warns: "The computations were correct, but far too often the conclusions drawn from them were not." Why? Selfish, myopic politicians and bankers.11. Biggs: Sell everything, buy guns, food, head for the hillsIn his 2008 bestseller "Wealth, War and Wisdom" former Morgan Stanley research guru Barton Biggs warns us to prepare for a "breakdown of civilization ... Your safe haven must be self-sufficient and capable of growing some kind of food ... It should be well-stocked with seed, fertilizer, canned food, wine, medicine, clothes, etc ... A few rounds over the approaching brigands' heads would probably be a compelling persuader that there are easier farms to pillage." Biggs sounds like an anarchist militiaman.12. Diamond: Nations ignore obvious till it's too late, then collapseThe end will be swift. In our age of short-term consumerism and instant gratification, few hear the warnings of our favorite evolutionary biologist, Jared Diamond. Societies fail because they're unprepared, will be in denial till it's too late: "Civilizations share a sharp curve of decline. Indeed, a society's demise may begin only a decade or two after it reaches its peak population, wealth and power."The warnings were everywhere in 2008, but Greenspan, Bernanke and former Treasury Secretary Henry Paulson were in denial: It will happen again with Obama. Downstreaming problems will fail. Future bubbles get too big, crashes more deadly.
Friday, January 8, 2010
Nobody Left to Fire
"Even the worst days on the farm are better than the best days in a factory." Gene Logsdon
The Financial Media is telling the markets it is time to celebrate - job losses have ended in the U.S.
There is nobody left to fire in Corporate America or Small Business. These sectors had cut into bone long ago. Now government, on the other hand...
I don't have to tell you that we need 100k per month job growth just to keep unemployment where it is because of population growth. Having nobody left to fire is not the same as hiring.
The Financial Media is out there pitching the "The U.S. needs more refineries" story again. If that were true, why the hell do we need all of these ethanol plants? Why are we bothering with wind, solar, tidal, etc...? Who plants these stories, anyway?
Stories don't just magically appear in the media. There is a very good reason the U.S. has thousands of PR firms. You're an industry player and you want a story on widget production issues. Voila! PR to the rescue.
"Believe nothing that you hear, and only half of what you see."
The worst Recession since the depression with double digit unemployment... and Oil is at $83 per barrel. Where would Oil be if unemployment was 5%? Or is unemployment at 10% because Oil supplies are off 10%?
The decade ahead will be a game changer. How old are you? Do you have any resources with which to do anything about it? I got an email from a young person with no money but real brains asking what I would do if I were him. I said "Move South, its going to be awfully cold up there" (he was from the Northeast). George Soros recently said that it is going to be very difficult to preserve wealth in the years ahead. Amen. Still, that depends on your definition of wealth... and how wealthy you are... as well as how old you are... and how flexible you are.
The U.S. is in the grips of a serious cold snap. Imagine life at these temperatures with no heat. (Please spare me the wood stove illusion... There would not be a tree, bush, or piece of furniture within DAYS if the 50 million people in the U.S. Northeast were forced to heat with wood.
No, not tomorrow, but as sure as the sun rises this outcome will arrive within the lifetimes of those reading this. You save for your kids (or grandkids) education... what are doing about this?
Posted by The Short Story Man at 5:06 AM