The US Federal Government is in its death throes. It is thrashing around, writhing on the floor, like a person suffering a grand mal seizure.
The Obama Administration, The Federal Reserve and Congress are completely clueless on the methods necessary to bring America back from the financial precipice. Would you like some examples?
1. Easy money and easy credit spawned a consumer society, rather than a saver society. America has gone from a producing nation to a consuming nation and the world's largest debtor. Personal debt is at an all-time high.
2. The Federal Government is convinced that more easy money and easy credit will revive our economy. They want the reinflate the bubble that America has been living in for the last 20 years. So, Congress and the President authorized over a trillion dollars of paper money to be manufactured and given to the financial institutions that were accessories to the bankruptcy of America.
3. The Congress rushed through spending bills that ran hundreds of pages long, with "earmarks" added by legislators as extortion for their votes. There was no time for these bills to be read by legislators. They passed the legislation and the President signed it into law.
4. The "banksters" and AIG did take the time to read the law once they got the money. They found out that the law didn't give them many restrictions on how they spent it. So, there are stories in the media about the billions of dollars that have gone un-accounted for. Merrill Lynch paid big bonuses to their employees only days before a bailout. AIG paid over $165 million in bonuses to the very executives in their company responsible for its demise. So now, the Congressional roosters are crowing about how they are going to punish AIG. I predict that we will find out that AIG did not violate any law in paying bonuses.
5. The Federal budget also includes Social Security, Medicare and Medicaid, a monster military budget and normal operating expenses. Then, there is the part of the budget that is "off budget." (Congress never wants you to know how much money they REALLY spend). Most of the Federal tax income goes to pay interest on the national debt. The big entitlement programs have automatic cost-of-living increases.
So, a big reality adjustment is about to occur over the next few months and 1-2 years. Everyone from toddlers up to octogenarians knows that one cannot continue to spend more than one takes in. That is, everyone except politicians.
The inevitable collapse is going to occur. Here are several ways that it will manifest itself very soon.
1. Massive inflation is just around the corner. In the annals of human history, inflation has NEVER failed to follow government corruption of money. Washington has tripled the money supply with no underlying value. Inflation MUST follow as night follows day. Zimbabwe's staggering inflation is a real time example. America is just not that far down the same road, but is doing the same things that has destroyed Zimbabwe.
2. Pensions will begin to implode and many will fail. The Pension Benefit Guarantee Corporation will fail as it has never been adequately funded by Congress. Tax-deferred accounts will be seized by Washington and "guaranteed." But they will use the money to fund rollovers of Treasury debt. If you are receiving a pension now, you won't be soon. If you think you will receive one in the future, think again.
3. Annuities. Insurance companies sell annuities, which are essentially savings accounts held by insurers. Many insurance companies will fail, and the annuities will be toast. Get out of your annuities, take your penalties, pay your taxes...just get what you can before there is nothing to get.
4. The FDIC will soon be unable to make good on bank failure obligations. They will try to raise insurance rates on remaining banks (what they are doing now) but the remaining banks will revolt. Congress will back up the FDIC, but with more fiat money created from nothing.
5. Tax receipts are imploding, caused by business failures and rising unemployment, and will continue to implode. Eventually, real spending cuts will have to occur in the Federal bureaucracy, which will mean thousands of layoffs of government workers. Even with the stimulus packages recently enacted by the Obama Administration, there will be an end to stimulus packages...especially when it is proven that they don't work. When federal stimulus ends, the inflated economy will deflate.
6. Despite the Washington stimulus packages, banks are not going to lend to companies teetering on the brink of collapse. Like the Big Three automakers. I predict that a large percentage of publicly held corporations will fail over the next 24-36 months.
7. With industrial collapse will come the Federal takeover of the health care liabilities of the failed companies. Congress will finally have the political cover necessary to nationalize health care in the USA.
8. The Labor Department, irrespective of what President is in the White House, cooks the unemployment numbers each month. U-3, the official unemployment rate, will reach 15% nationwide. But U-3 does not count unemployed people who have stopped looking for work. U-6, the real unemployment rate, will reach 30% within the next 18 months. State governments will be unable to fund skyrocketing unemployment benefits. Which will lead to...
9. Civil unrest. That's a nice term for burglaries, robberies and looting. The National Guard and the military will be called upon to try to stop it, but it will be too widespread. There aren't enough Guard in America now, because thousands are in Iraq and Afghanistan. Even if all the military troops in uniform in all the branches were on American soil, there wouldn't be enough to quell the coming crime wave. Just remember New Orleans 24 hours after Hurricane Katrina. It became a looter's paradise. That same dynamic will happen in most cities, and will spread out into the suburbs as time passes.
10. What the Federal Government will experience shall be replicated in each state as they go through cuts in tax revenue. Look at what California is going through right now.
Consider the words of Communism's father, Karl Marx, written in 1867: "Owners of capital will stimulate the working class to buy more and more of expensive goods, houses and technology, pushing them to take more and more expensive credits, until their debt becomes unbearable. The unpaid debt will lead to bankruptcy of banks, which will have to be nationalized, and the State will have to take the road which will eventually lead to communism." See? This stuff isn't so hard to forecast, not if a dim bulb like Marx could do it over 140 years ago.
What can you do now to prepare for the apocalyptic future that looms before us?
1. Get all of your assets...401K, IRA, savings, stock holdings, etc...into cash. Right now, you should be 100% concerned with wealth preservation. Forget interest...forget return on investment...forget dollar cost averaging. Take the penalties, pay the taxes, take your losses. Get out of investments and into cash.
2. Buy significant amounts of gold and silver coins. Do not buy collector coins, because you would be counting on some intrinsic collector value as some portion of the coin's value. Buy gold and silver coins. At this time, I favor silver because of its availability, as well as its favorable pricing against gold. Do not buy gold and silver stocks. Take physical possession of the precious metals you buy.
3. Buy a safe and put your coins and cash in the safe.
4. Buy firearms and ammunition, and learn how to use them.
I believe that the outlook is really that bleak. The folks in Washington have committed horrible crimes against the Constitution, as well as fraud in the way they spend tax money. That small little group of a few thousand bureaucrats and elected officials is going to bring down the greatest nation in the history of the world.
Disclaimer: I am voicing my own opinion. I am not an investment advisor or attorney. Use this article as a primer for you to begin your own research. Before you take any action recommended in this column, consult your investment advisor and/or attorney. I accept no responsibility or liability for your personal decisions.
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