As he mentioned in his recent speech on health care, Obama is being careful to place the blame on the prior administration.  Yes indeed, he did inherit a trillion $$  problem, but he has, at the same time, done nothing to improve it.

I have read economic texts that state that a federal deficit is nothing to worry about.  How can that be?  Someone has to come up with the money the government is spending above and beyond any income.  Lately it has been China, but Saudi Arabia, Russia and Brazil and other have been buying our Treasury debt as well.  Are these the ‘partners’ we need and want?

Part of the government’s response has been to let the $$ decrease in value when compared to other global currencies.  Aslo, the Fed has pegged interest rates at record lows (basically zero for short term inter-bank loans).  This has been good for the U.S. because our roughly $8 trillion of debt requires less interest right now (certainly for short term rates — i.e. 2 year Treasury notes are paying ONLY 0.94% and 6 month Treasury notes are at the fabulous rate of 0.19%).

Dang it affects all of us too.  Many are afraid of putting their savings into the stock market (and they should be too) but what are the alternatives?  I checked with a national financial institution today and their rates on savings of over $1,000,000 are ONLY about 0.30%.  That means you will only get about $30,000 a year for ‘investing’ your money in their Money Market Savings account.  Most of us have only a fraction of that are are earning only pennies every month on our savings.  True, check your most recent statement.

Jeese Louise folks.  Who could possibly say that deficits don’t matter??  Only government funded economists that want to convince you and I that it is true.  Bull-crap!

Of course deficits matter.  Don’t let anyone tell you different.

And our deficit this year (part Bush’s and part Obama’s) is going to be about $1.6 trillion!  By far the highest in history and one that makes the highest of the Bush era seem like ‘chump change.’

In fact our national debt (about to be $8 trillion) will be around one half of our entire GDP.  In another couple of years with more trillion $$ deficits we will be approaching  75%-85% Of GDP.  Are you kidding me?

How are we going to pay for this?  At only 2% our debt service could be $200 billion per year.  But how long is China, Russia and Saudi Arabia (you know . . . our closest friends and allies) and other governments (or investors) going to be willing to pay only 2%??  Not long when inflation of only 2% will eat up their profits.

The Treasury is going to have to start paying much higher rates to get anyone to buy and keep our debt afloat.

What will happen if inflation and other factors (most of which are inevitable: a declining economy, high unemployment, even more increases in government spending) cause the rates to go to 5%??  Or what if they soar to say 8 or 9%??  Or even higher?  Holy Mackeral, Batman!

How is our government going to manage to pay a $1 trillion per year debt service?  Total government spending this year is only about $3.7 trillion . . . income (taxes etc.) only about $2.1 trillion.  A third of spending on debt?  Half of income going to debt service??

Come on folks, this is just not sustainable.

You don’t have to be a genius (or a fake one with the title of ‘economist’) to figure out the coming problem is one of monumental scope.  And here is the worse news . . . the figures I have given you do not even contemplate the unfunded obligations of our government for Social Security or Medicare/Medicaid!

In a couple of years America will be on sale and it will be A FIRE SALE!!

Our big business will be bought for fractions of their real value by foreigners (China if those business have anything to do with natural resources).  Our real estate will be cheap even by today’s standards.  Our stock markets?  If we allow this to continue the shock of the past 20 months will seem like nothing more than a bump in the road.

So, we’ve got more to worry about.  And we, as Americans, must do everything possible to prevent this.

How?

1 – Make Obama live up to his promise . . . not a dime additional spent on health care reform (which we need).

2 – Get rid of the idiots in congress by NEVER voting for incumbents (term limits is the best solution but our elected leaders will NEVER let that come to pass — so don’t EVER vote for any of them).

3 – And finally press your elected leaders to do something now about unemployment and the debt (they both go together).

A strong America is an America out of debt.  A strong America is an America that is fully employed with good ‘tax paying’ citizens.

Just that easy.

Copy everyone you know with the blogs from this site and lets you and I and 300 million others start taking America back!

Join the band wagon.

Today.

Thanks for reading.

Scott

Now, we are NOT in another great depression (yet) but it is fair to call our current circumstances a great recession (as many already have).

Sure companies are doing better because they have cut costs dramatically (mainly by letting our neighbors and friends — and some of you? — lose jobs).  But can they increase sales?  Can they grow once the stimulus, bailout and clunker programs end?

Yes, that is the big question.  What will happen when all the government money runs out?  I don’t want to think about it either, but someone has to.

Only a few months ago, President Obama  predicted a budget deficit increase of 7 trillion $$.  Yesterday the White House bumped it a little (their words?).  Up nearly one third (2 trillion more $$) to 9 trillion $$.  Yikes what will this burgeoning Socialist administration accomplish in 4 years?  THAT is something I really don’t want to think about . . . yet someone must.

Add in the cost of healthcare reform and cap and trade carbon costs and anything else the uncontrolled Democrats want and we could be bankrupt by the end of Obama’s first term.

I liked him at first (thought I remind you that I did NOT vote for him — I currently never vote for incumbents or anyone that will give a legislative and Executive majority to any party — and by the way, you should take the same avenue for improving our nation’s governance).  But, now I am not so sure.  He is a celebrity President and hardly ever talks without a teleprompter and that worries me.  He may not be as smart or sharp as his friends in the liberal media portray.  Nothing like great potential to ruin one’s real achievements!

Remember, I have made it clear I am for change:  health care needs it, energy policy needs it, politics need it, and much more too.  But not too much at once and do it with open and frank debate not acrimonious ideological dissension.

Back to the economy.

The Commerce Department gave us some new data  today.  Here is some of it for for you to digest and I suggest you take Lomotil first.

We now have four straight quarters of GDP decline behind us.  The last two quarter declines of 6.4% and 1%  represent the biggest back-to-back declines in more than fifty years!  Further these four straight quarterly declines represent the only time this has occurred since 1947!!

Also the current recession is the longest and the most severe (in terms of GDP decline) since WWII.

Further we are still losing jobs at an alarming (though improved) rate.  We actually need to ‘create’ about 150,000 jobs every month just to keep up with the growth in the work force (due to population and immigration).  Yet we are losing over 500,000 jobs a week (that’s new unemployment claims and must be offset with new hires to get the actual damage)!

Dang, this is worrisome.  Couple it with that fact that in the not so distant future our National Debt will EXCEED total GDP (Obama’s 9 trillion $$ remember) and you have a disaster in the ‘closet.’  How the heck is the government even going to make debt paymenrts?  You know, like most of us have to on our mortgages.

Is the U.S. debt headed for a ’subprime’ rating because income is going to be so much smaller that just even the debt (forget the principal amount)?  Think about what happened to a big part of the real-estate market in the U.S. in the last 2-3 years.  Does the comparison concern you?

There is much that we can do to mitigate the looming disaster, but of course that must wait until Obama returns from Martha’s Vineyard and Congress returns from their embarrassing and revelatory vacations of townhall meetings and expert avoidance of answering any real questions.

The question now is:  will they do anything substantive when they return.  Anything to brighten the future of our children and grand-children?  History does not give us much hope.

Confused?  Don’t be.  Things aren’t nearly as rosy as the administration and the Democrats (and much of the media) are telling you.

Be prepared for further bad news and decline.  What’s the risk in that?  Nothing . . . it is the smart thing to do.

thanks to gagilas for the flickr photo

America is losing the economic supremacy it has held for over a century.  We have gone from a nation of winners to one of losers.  That goes for the stock markets (I remember just a few years ago a friend of mine from Netherlands wanted only American stocks–now he never calls) and for the real estate markets (losing nearly half of our legacy net worth in just three years).

Even Warren Buffet is concerned with our debt and its growing size relative to overall GDP and frankly he supported Obama and the billions and trillions he has spent on less-important things that are politically expedient (Bush is responsible to).

China is building an economic wall around their own internal interests and we stand by congratulating everyone.  They are buying up up natural resources around the globe and it is easy for them because our $$ is weak and our corporations are running scared.

All the while, our President just wants to make nice (he let that moron Putin ramble and complain for 90 minutes in their first personal meeting before responding).  Our Secretary of State seems more worried about how she stacks up against her former President husband that in accomplishing anything (she embarrassed our country and herself by her outburst in Africa).

I read that developing nations now account for half of the world’s GDP . . . and they are ‘developing’ while we are ‘backsliding.’    We used to be preeminent in this area but now the combined output of China, India and Brazil are equal to that of the United States (estimates from the International Monetary fund . . . but according to other figures from The Economist they aren’t even close when it comes to percapita comparisons).

Huge trade imbalances are washing our incomes and wealth overseas.  Some economists say this is not a problem . . . but of course it is.  At some point America’s debt will be ‘called’ just like that of all of neighbors who are losing their homes.

We have been a nation of spenders, though, due to the recent and unrelenting crisis, Americans are starting to save.

I just wonder if it is too late.  Has the global power shift to Asia and South America become irreversible?  Are America and Europe destined to become the lowest on the economic totem pole in the next generation?

Dang, it seems so and that is NOT a good thing. We have to stop or at least slow the trend.

Our technological and intellectual superiority (education-wise and not inherently) have been a big advantage for decades.  Our abundant natural resources were a tremendous foundation on which to build.  In both areas we are in rapid decline (can’t you remember that incoherent rambling by Miss California in the Miss America pageant?).

Something can be done about this.  Bailing out financial and auto companies and their executives to the tune of several trillion $$ is NOT one of the ways. Let the capitalist economic system destroy the weak and open doors for the strong.

We need to put our money where our mouth is.  We need to ‘recreate’ our infrastructure.  We need to create millions of jobs (there are 12 million more workers in the U.S. now than there were in 2000–yet nearly 7 million jobs have been los!t).  We need to invest in the best technologies and we need to subsidize education so that is available to all (imagine an inner-city ghetto child with an IQ of 150 who is forced by circumstances to forgo an education that just might lead to the discovery of a truly unlimited alternative fuel–then multiply that by ten million or more!).

By the way, one of the things that makes America great is that virtually anyone with the desire, innate capacity and the time can accomplish great things.  Not in China it seems, Newsweek informed us (July 20 issue) that 91% of the 3,220 multi-millionaire Chinese are the children of top Communist Party officials.  Yeah people, that seems fair and balanced!!

Back to the issue at hand.

Sure healtcare is important, but we can’t forget all the other things that make healthcare even a possibility for most.  Create a strong foundation and let’s build up again from there.

I hope Congress (and now the President) who are on vacation for the next two weeks get rested and come back ready to start facing the tough decisions that time will only make worse.  Yet, I fear they only worry about getting re-elected.

America was better when we were an economic power house . . . guess what, so was the rest of the world!

Go USA!!

thanks to smokingpermitted for the photo from flickr

Typically these are the ‘dog days of summer’ — hot days filled with vacations and generally with little interest in markets.  Not this year.  The money managers have stayed home to work . . . and a good thing too!

News this am was good, better than expected.  The second qtr GDP was  -1% which is better than estimates (-1.5%) and substantially better than the revised 1st qtr of -6.5%.

A long time ago I predicted DOW 10,000 by June-July, clearly this isn’t going to happen but that 10,000 is less than 10% away.  Closer than my critics would have thought.  What about the DOW 13,000 I predicted for the end of the year?  Still possible and I am sticking with it and would include a 12,000 mark as a hit.

However, as I pointed out last week this is going to be a roller-coaster ride and not a steep climb up Mt. Rainer.  If you are a trader you are going to have at least one good chance to sell and buy at better prices (10% or so).  But you had better be good at your timing and few are.  If you are a long term investor just make sure you own good companies and go along for the ride.

Sadly, unemployment will continue to climb and the Democratic controlled government will continue the move leftward.  This means higher taxes and inevitable inflation down the road.  Further, and even more sadly, the Prez. and his posse are doing almost nothing about solving our long term energy import problems.  Consequently oil prices are going to rise with the improving economy (minus employment of course since this will be a pure democratic jobless recovery).

Bottom line:  enjoy the rest of summer with relatively low gas prices and improving markets.

Can I suggest a trip to Utah?  Sure it is hotter than Hades here in July, but by tomorrow (August) the temps will be on their way down and you could spends weeks checking out our mountains, valleys, rivers, lakes and GOLF COURSES!!

Just in passing, the third qtr GDP should be positive and by the fourth qtr the recession will be declared dead.  It has been longer than most post-war recessions already and it was especially ugly for those that lost jobs.

For those fortunate to still have jobs when it is over times will be good.  For the unemployed I can only suggest you contact your Congressmen and the President to find out why their stimulus package did almost nothing for YOU!!  Ask them what they are going to do for you TODAY!

thanks for the picture to flickr’s e0000