06/08/11 Farmington, Pennsylvania – Stocks struggled yesterday to reverse a long series of losses. For a while, it looked like they would succeed. But by the time the bell rang, the Dow was down again – 19 points.
Oil held steady at $99. Gold closed down $4, with the euro edging up towards the $1.50 mark.
Are stocks headed down, while the major market trend remains fundamentally bullish?
Or are they headed down, resuming a major bearish trend that began in January, 2000?
We don’t know. But we heard from a technical analyst today with a system he calls “The Grail.” The system just gave a sell signal for stocks.
Meanwhile, the headline on yesterday’s USA Today told the tale:
“US owes $62 trillion.”
Beneath the headline was a photo of Congressman Anthony Weiner sobbing.
Poor man, we thought, he’s taking this too personally. It’s not his fault the US is so deeply in debt.
But Mr. Weiner doesn’t give a damn about the US going broke. He wasn’t weeping about the fate of the nation, but about his own fate, his own pathetic career. Now that voters know what a silly creep he is, he’s afraid he could be kicked out of the House. As for his campaign to replace Michael Bloomberg as mayor of New York City, it will have to wait until voters forget!
There you have the whole story, dear reader. America is going broke. Congress is worried about getting re-elected. Do you need to know more?
USA Today goes on to report that the total of America’s debts and unfunded obligations – which the newspaper computes following generally accepted accounting principles – increased by $5.3 trillion last year and now comes to $534,000 per household.
Okay, so let’s do the math. The average household has about $45,000 in income…and about $30,000 in ‘disposable,’ after-tax income. If the $534,000 were looked at as an additional mortgage, at say 5%, it would cost about $2,200 a month…or about $26,000 per year.
So, let’s not bother with any more math. The feds have loaded the average household with so much debt that there is no way it can keep up. It would require almost all its disposable cash to do so – leaving almost nothing for food, transportation, housing, and everything else.
In short…forget it. This debt is not going to be paid.
Well, then, what will happen to it? Easy answer: it will disappear. Retirees will not get what they hope for. Bondholders won’t earn the kind of returns they hope for either.
That’s just the way it is.
‘Okay, Bill, you say retirees won’t get what they expect…’
That’s right, but they’ll get what they deserve!
‘Ha, ha…you’re so funny… But let’s get serious. Did you bother to look over at the editorial page of USA Today? If you had, you’d see that the retirees aren’t going to give up without a fight.
‘There are letters there from military retirees. To make a long story short, they claim they deserve every penny. And how can you deny them? They say they’ve paid for their benefits in “blood and sacrifice.”‘
Yeah…yeah…nobody ever wants to give up nuthin’. Especially when they didn’t earn it. And military retirees are the worst. They pretend that if it weren’t for them our wives would all be speaking Vietnamese.
But what’s so bad about speaking Vietnamese?
Seriously, the military has contributed mightily to the bankruptcy of the nation. They fight phony ‘wars’ at great expense…and then we pay the residual costs for many decades. And who wants to say ‘no’ to an old soldier with a missing leg? Or an old teacher with a facial tic? Or an old firefighter with a drinking problem?
Not us. And not Congressmen either. Remember, they want to be re-elected. And you don’t get re-elected by saying ‘no.’
And now, we have a whole new class of people nobody is going to want to say ‘no’ to – America’s middle class.
Guess which houses have lost the most value? Low-priced, middle and lower class, houses. The homes of the rich have lost much less as a percentage of their pre-crisis values.
Guess who have lost most jobs and income? Again, the middle and lower middle classes. There are now 25 million people in the US who lack full time jobs; very few of them are bankers, lobbyists or lawyers.
Guess who has the hardest time paying higher gasoline and food prices? You guessed it!
And guess what consumers this headline refers to:
“Economic Perfect Storm Halts Consumer Spending.”
Not shoppers at Neiman Marcus, Saks, or Tiffany’s. We’re talking about people living paycheck to paycheck, struggling to keep up with rising living expenses.
Yes, dear reader…the middle and lower-middle classes are taking a beating.
Yes, the US is going broke, too. But that is far in the future. We need to help these people now! That’s what Barack Obama says.
Poor Barack Obama. He seems like such a nice guy. He’s probably even a distant relative. He’s Irish too, you know.
But what’s a nice guy like Barack doing in a place like this?
“I am concerned about the fact that the recovery that we’re on is not producing jobs as quickly as I want it to happen. Obviously we’re experiencing some headwinds.”
The president faces a re-election campaign in the midst of a Great Correction. The wind is in his face, not at his back.
Of course, he seems to have no idea which way the wind is blowing. Yesterday, he told the nation that it did not face a ‘double dip’ recession. How did he know that? Of course, he has no idea.
And when the double dip comes…and the triple dip…and the quadruple dip…
…and when the election approaches…
…do you think President Obama and Congress will say ‘no’ to America’s middle class voters?
Mr. Market is wily, cunning and cruel. He always tries to disappoint the greatest number of investors. So what will he do now?
What do most investors expect?
Many think the economy will recover slowly…with slowly rising stock prices.
Many others think inflation will pick up…with falling bond prices.
What if neither of those things happens?
More to come…
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
The Daily Reckoning is your premier source for making sense of the news Washington and Wall Street generate. Each business day, The Daily Reckoning calls on its stable of world-class writers and thinkers to show you how to get ahead.
Start your 100% FREE subscription to The Daily Reckoning today and you’ll get a free research report, “How to Survive the Fall of Social Security.” Simply enter your email address below to get your free report and join over 495,000 worldwide Daily Reckoning subscribers!
We Respect Your Privacy and We will
Never Share or Sell Your Email Address
somebody at the WSJ has been reading your pieces:
http://online.wsj.com/article/SB10001424052702304906004576369960155065484.html?KEYWORDS=zombies+consumers
‘America is going broke. Congress is worried about getting re-elected. Do you need to know more?
Nope. That pretty much sums it up for me. Next question is fight or flight? Texas or Panama.
“But what’s so bad about speaking Vietnamese?”
not much by itself. but it would be accompanied by the loss of civil rights and property rights.
it’s interesting you would say veterans didn’t earn their pensions. at least they work for it, putting their lives on the line to uphold the nation we live in. an infestor doesn’t work for his profits – he buys workers and siphons off the results of their work.
rights do not simply exist as a matter of course. they must be asserted and maintained. those who don’t do the work of maintaining their rights certainly deserve them less than those who do. when you deprecate those who protect you you declare yourself habiru. you can expect to be treated as such.
there is no longer enough money for anyone’s pensions. that’s the way it is. if you think your rights will continue to exist in this environment, if you think you will be able to keep what you have “earned”, you are mistaken. when you need help, when you are calling upon soldiers and police to uphold your rights and no-one responds because there are none who care to serve those who view them as parasites, don’t be surprised at what happens.
Love the irreverence, so sick of all the ‘heroes’ out there.
Bill I take issue with you about Social Security recipients. Take myself for example. I started working after school at age 16 behind a soda fountain. I was forced to pay into the SS system for more than 50 years before reaching retirement age. During that time I and others like me paid in much more than has ever been paid out by SS. The government stole the excess to give it to the New York bankers so they could get their annual $50 billion in bonuses. No wonder Asian countries are rocketing ahead. They still respect the elderly instead of looking at them like they are just another group to screw.
Answer:
Too many of you Social Security recipients voted Democrat over the years.
So now, as a whole, you will get what you desreve.
“So now, as a whole, you will get what you desreve.”
I dunno man. that “whole” just might cover you too.
Bills got a point on the Military thing. If you stay your twenty/thirty you get a nice retirement check, medical and your almost guaranteed a job at the Post Office plus tax free food at the commissary. If you take a bullet, decide to get out like I did you get a….. limp!
About half of Americans are being supported by the other half. Politicians appease their bases with the welfare-warfare state. Send all of the statists and liberals home in 2012 if you want relief. Free markets, bullion for money and a small federal government will bring prosperity to America. End the wars and the foreign military bases. End the corporate income tax and the estate tax. If you do not like these choices, keep the liberals in power and continue 5 1/2 years of misery.
Retirees who are estranged from their children, will get hit the worst. Many will starve before this whole thing unfolds. For anyone wanting an accurate picture of what is in store for the elderly; -study early post-Soviet Russia circa 1993 or 1994. Each successive currency reform left the retirees even more distitute than the raging inflation had of the previous currency. Many were forced onto the streets to beg. Streets that were over-run by abandoned dogs no one could afford to feed. For many, the only solution was to drink themselves to death. Imagine the horror to continue waking up still alive each day. Sound too dark to happen here? Don’t bet on it! Back in 1961 the USSR was the second largest economy in the world behind only the USA. 30 years later the wheels had come completely off the bus, and all those Soviet workers who had labored at the apex of the nations ascent found themselves in abject poverty by the time they retired. Anyone who doesn’t think the same is in store for the US and western Europe is blind to history.
“Especially when they didn’t earn it. And military retirees are the worst.”
I went into a public-’ouse to get a pint o’beer,
The publican ‘e up an’ sez, “We serve no red-coats here.”
The girls be’ind the bar they laughed an’ giggled fit to die,
I outs into the street again an’ to myself sez I:
O it’s Tommy this, an’ Tommy that, an’ “Tommy, go away”;
But it’s “Thank you, Mister Atkins,” when the band begins to play,
The band begins to play, my boys, the band begins to play,
O it’s “Thank you, Mr. Atkins,” when the band begins to play.
I went into a theatre as sober as could be,
They gave a drunk civilian room, but ‘adn’t none for me;
They sent me to the gallery or round the music-’alls,
But when it comes to fightin’, Lord! they’ll shove me in the stalls!
For it’s Tommy this, an’ Tommy that, an’ “Tommy, wait outside”;
But it’s “Special train for Atkins” when the trooper’s on the tide,
The troopship’s on the tide, my boys, the troopship’s on the tide,
O it’s “Special train for Atkins” when the trooper’s on the tide.
Yes, makin’ mock o’ uniforms that guard you while you sleep
Is cheaper than them uniforms, an’ they’re starvation cheap;
An’ hustlin’ drunken soldiers when they’re goin’ large a bit
Is five times better business than paradin’ in full kit.
Then it’s Tommy this, an’ Tommy that, an’ “Tommy how’s yer soul?”
But it’s “Thin red line of ‘eroes” when the drums begin to roll,
The drums begin to roll, my boys, the drums begin to roll,
O it’s “Thin red line of ‘eroes” when the drums begin to roll.
We aren’t no thin red ‘eroes, nor we aren’t no blackguards too,
But single men in barricks, most remarkable like you;
An’ if sometimes our conduck isn’t all your fancy paints:
Why, single men in barricks don’t grow into plaster saints;
While it’s Tommy this, an’ Tommy that, an’ “Tommy, fall be’ind,”
But it’s “Please to walk in front, sir,” when there’s trouble in the wind,
There’s trouble in the wind, my boys, there’s trouble in the wind,
O it’s “Please to walk in front, sir,” when there’s trouble in the wind.
You talk o’ better food for us, an’ schools, an’ fires an’ all:
We’ll wait for extry rations if you treat us rational.
Don’t mess about the cook-room slops, but prove it to our face
The Widow’s Uniform is not the soldier-man’s disgrace.
For it’s Tommy this, an’ Tommy that, an’ “Chuck him out, the brute!”
But it’s “Saviour of ‘is country,” when the guns begin to shoot;
An’ it’s Tommy this, an’ Tommy that, an’ anything you please;
But Tommy ain’t a bloomin’ fool – you bet that Tommy sees!
oh yes. we see.
gman,
With all due respect,you should give credit where credit is due when posting someone elses work, no matter how long they have been dead.
“you should give credit where credit is due”
yeah, you’re right. I was just very certain it would be recognized. it’s by rudyard kipling.
For what little it’s worth- we’re not even supposed to have a standing army. It’s supposed to be citizen militiamen with their own weapons. But of course- there’s no vast fortunes to be stolen in that.
You are right on Bill and what are we supposed to do? The psychos are in power and everybody wants to believe them. I know, I know, buy gold and when the crash comes build yourself a very high wall around yourself and your gold and hire an army (out of work military turned mercenaries to protect you and your gold because it is becoming very clear that no one wants to work together anymore. And that will work until your army turns on you.
“For what little it’s worth- we’re not even supposed to have a standing army. It’s supposed to be citizen militiamen with their own weapons.”
completely true. but with modern weapons systems this approach is simply insufficient and on this issue the constitution is obsolete. congress may of course cut funding but this leaves the country immediatly and critically vulnerable. meanwhile as long as a military exists the constitutionally absolute commander in chief is the president. it’s a problem.
“But of course- there’s no vast fortunes to be stolen in that.”
the abuses are a sideshow to the issues involved.
“what are we supposed to do?”
turn to god and sell most of your possessions.
You would cry too if your name was “Wiener”.
“About half of Americans are being supported by the other half. Politicians appease their bases with the welfare-warfare state.”
The only people being appeased with a welfare state aren’t people at all, they’re the US Megacorporations.
As for part of the population supporting the other half, it’s worse than you think. Something like 90% of the US population is supporting the top 2% or so. Most of that 2% would quickly starve if they didn’t have the bottom 90% supporting them.
There we go with the “God,” thing. Puppet master in your head. Food and water are becoming the most valuable commodities on the planet. You got gold and I have food. I will give you a slice of bread for all of your gold.
Karl, you always were bad at math and logic.
The middle class effect can be moderated with a little due dilegence. Great information and reference! Nice work Bill.