Economic Forecast and Commentary for 2012

By Joshua E. Stone

As the election year frenzy whips up, the Federal Reserve is target numero uno for the emotional base on both sides of the political spectrum as cannon fodder to gain votes, with the global economy at stake. Adding yet one more headwind for a fragile recovery and a bug in the margarita of the mostly under rated and brilliant Central Bank Governor Ben S. Bernanke.

Monetary Policy

            The forecast for interest rates on this blog have been exactly right so far. It is now become patently clear how long the Gov will keep them low, since he now sets up a time frame for his policy instead of just language that everyone can debate to utter oblivion and confusion.           

            If one wants to have more than a drive-by understanding of how Ben Bernanke has used his arsenal of tools up to this point to re-write the text books, one need look not much further than his speech to the National Economists Club in Nov. 2002. A speech many would seem correct in saying is likely the reason he was appointed by a horse smart President from Texas.

            While an alphabet soup channel understanding of the maneuvers of the Federal Reserve Bank both past and in the future are far more sensational and conducive to ratings and the Cassandras` of the world; this perspective is not only physically unhealthy since it causes so much stress, it is fairly ill informed and not a very accurate take on Central Bank Policy from my position in the drive-by theatre. 

            This sort of polarization has only served to elect leaders who are willing to use emotion and omission to gain constituent favor. With the end result being bubble burst after bubble burst for decades and a declining standard of living for Americans as collateral damage.

On the bright side: globally more people have risen out of poverty in recent history than ever before.  If one happens not to believe this fact, one must use some basic reasoning and math skills and draw a simply obvious conclusion. An inability to be able to make this kind of judgment is concerning and dangerous. It not only shows a lack of critical thinking, it demonstrates in a nutshell how the dumbing down of America has been a resounding triumph for propaganda monopoly.

Now let’s look inside the mind of Gov. Ben by simply examining some parts of this speech in the autumn of 2002 that he made. A speech that outlined every step he has taken up to this point and clearly explains what he will do next.

            In this speech Bernanke said the following when describing one of the tools he would use in the various steps he would take to fight deflation that reveals with a fair degree of certainty exactly what his most recent operation has been, and at what stage we are at in his series of steps he described in this speech:

            “… For the Fed to commit to holding the overnight rate at zero for some specified period…”

            This is a very easy reference point, a sign post that one can easily recognize as one of the Gov.’s most recent actions that almost everyone knows about if they follow interest rates to some degree. These days the number of folks doing this is quite a few, since many are watching the housing market as either first time buyers looking to buy that first home, or those who are trying to refinance, and as an indicator of the economy and confidence.

            If the US economy is the Professor’s laboratory, the mad scientist must be feeling some degree of satisfaction at this point. In his speech, the Gov. explains his theory on the application of agency tools and their effects on deflation and the steps he would ideally follow to combat it. While quite difficult to grasp in my opinion, one of the things I pull away from it is the idea that his theory if executed properly will always stop deflation, but more importantly that not everyone agrees with this concept despite historic precedent that seems to support the Gov.’s hypothesis. The current empirical results of real world applications and executions of the methods modeled in his speech by him and his predecessors show the evidence is in his favor at this time.        

            If one doubts this reality, they just need to put things in perspective, use some simple reasoning and math skills, and the facts will become clear to an open mind.

 I am not going to take any time out in this forecast to defend the emotionally unstable notion that the US economy is in a depression, a double dip, or that it is ,”..Just about to go over the cliff any day now...”.

             I am certainly tired of hearing the partisan spin from both sides that everything has been done wrong and only made everything worse.  However true that may be, the fact is we are not contracting as much as one would expect by now. The fact is there is growth in the economy, and it is enough to keep us with our head above the water as the economic data flow proves.

            But, if your one who thinks everything about the data is not real, then it is not possible to believe the data. But then that only leaves you with pretty much one thing left to believe in which granted is very lucrative; but also dubiously healthy, which is fear.

So since we know that the Gov. is going to keep rates fixed for a predetermined amount of time, we can then look to his next comments for a clue as to his next actions, or even actions he has taken but may not be widely or easily known by most:

“…For the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt… “

He has done this in what is widely known as Operation Twist , whereby the FED has been buying the US debt. As one can imagine, this operation has been the subject of a great deal of propaganda for the masters of spin and the architects of the convenient truths who use emotion and omission to keep the politics distracted and in the gutter, appealing to the worst in everyone.

The fact yields are falling and not rising appears to me to be the crown jewel of evidence supporting the Professor `s deflation theories. A fact that would have the Doc getting giddy with excitement as the laboratory results continue to stack up in support of his thesis. Indeed, if the world was a fair place in my opinion, the Gov. would be awarded a Nobel Peace Prize for his contributions in economics not to mention policy. But as I will explain shortly, it has become very clear to me after reading this speech, why feelings about him are so polarized.

But lets first take a look at a couple of other steps the Gov. would take after purchasing shorter term Treasury debt:

“Of course, if operating in relatively short-dated Treasury debt proved insufficient, the Fed could also attempt to cap yields of Treasury securities at still longer maturities, say three to six years.”

This is just an extension of Operation Twist spun as many disappointed propagandist and gold bugs claiming the Gov. is out of options as “Shout”. The Gov. is far from out of options at this point, and here are some of the reasons why as the Gov. goes on to explain:

            “…the Fed has the authority to buy foreign government debt, as well as domestic government debt… the quantity of foreign assets eligible for purchase by the Fed is several times the stock of U.S. government debt”

            This is the bazooka with a silencer in the FED`s arsenal, and if everyone catches on to and becomes aware of it, will cause the rabid base to cry foul and every possible conspiracy under the sun. Even more entertaining to those in the “know” like traders is the fact this is already being done.

            So what does this mean exactly? I am no expert and my analysis is certainly not the final insight, but it would appear to me that the FED has the ability to purchase several times the amount of US debt in foreign securities! This is truly a mind numbing idea in my opinion. Let’s just say for example that the US debt is only 4 trillion, this means the FED could be the purchaser of nearly 30 trillion in foreign debt! No wonder the ECB is so resistant to being the lender of last resort; there already is a global lender of last resort: the FED.

             I wonder about this and its implications. Does this mean the FED basically has an unlimited balance sheet? Not needing approval by anyone? Not even the President? Furthermore, that it is not even transparent so as not even known by anyone outside the FED? I would not even be surprised if there are built in charters amongst the various Central Banks that protect the supremacy of the FED. After all they invented this fiat system. It is also a fact that the ECB charter is very limited, I can`t help but think this is a hangover from WWII and how fearful the world has been ever since of global currency denomination domination by the German Central banks. This is not conjecture, it’s a fact all wars have been fought over the dollar and its standing vs. other banks in the world; from WWI and Iraq, to Libya. 

            So given the fact that QE3 is actually already underway in the form of stealth operations by the FED and world Central Banks, and is going to continue for quite some time it is only a wonder why many folks can`t believe the Gov. when he says the following since he is in fact already doing this by purchasing securities foreign and domestic:

“…intervening to affect the exchange value of the dollar is nowhere on the horizon today”

“A striking example from U.S. history is Franklin Roosevelt's 40 percent devaluation of the dollar against gold in 1933-34, enforced by a program of gold purchases and domestic money creation.”

            The Gov. is devaluing the dollar, and I think he plans to continue this as long as the economy stays in deflation.  According to the quotes above, the historic precedent for devaluation was 40%. I think that the Gov. is trying to say that it will likely be the case this time as well.

            Next in the speech by the Gov. he explains what could only be described as QE4 and flies in the face of the global liberal agenda to hike tax rates across borders and shows how those waiting on QE4 might be waiting for a long time indeed. But it is beyond the horizon at some point as the global political gears continue to mesh and churn. It also explains why he is so polarizing:

 “…of course, in lieu of tax cuts or increases in transfers the government could increase spending on current goods and services or even acquire existing real or financial assets. If the Treasury issued debt to purchase private assets and the Fed then purchased an equal amount of Treasury debt with newly created money, the whole operation would be the economic equivalent of direct open-market operations in private assets…”

            “…policy options I have discussed so far involves the Fed's acting on its` own. In practice, the effectiveness of anti-deflation policy could be significantly enhanced by cooperation between the monetary and fiscal authorities. A broad-based tax cut, for example, accommodated by a program of open-market purchases to alleviate any tendency for interest rates to increase, would almost certainly be an effective stimulant to consumption and hence to prices…”

            The best way to describe all this is “stealth socialism” in my opinion.  But to be perfectly honest, it’s a bit over my head at this point. I think as time goes by these statements will become easier to understand. It is safe to figure that at this point these policy maneuvers are not being exercised.  If I understand this part of the speech correctly these policies would be recognized as a tax cut by the fiscal authorities, and an increase in government spending. Neither of which has happened yet depending on whom you ask. I happen to be living in the very real world of Government cut backs and see and hear of the effects on a daily basis. A trend I expect to see for a long time to come. Not only would we need to see a very publicized increase in public spending, but this increase in demand on goods and services by the Government would also be accompanied by an equal amount of FED purchases in the private sector. But it has to be pointed out, that all of these measures were in effect taken during the Great Recession in the form of extending the Bush Tax cuts, TARP and the American Recovery Act.

GDP

            If China is to overtake the US economy, they will have some Ghost Cities to show for it. While everybody in 2011 was looking one way across the Atlantic to the Euro crisis, from behind in the other direction across the Pacific was another big story of this coming decade: the China charade. Americans know very little about this great country except that they respect and fear it in many cases. According to my own writings of the last few years by the year 2012 the economic recovery would be derailed by bad debt, energy and foreign policy. This has begun to pan out as the Arab Spring solidifies into a deep freeze against America and Israel. My take is that if the Super Majority that came in on the tide with the election of 2008 had not been paralyzed by the health care heist, we would be on our way to a very certain and prosperous future. However the US economy continues to resists another downturn according to data releases in 2011. As a result I expect to see US GDP come in between 1-2% again this year. Last years forecast was the same and it is turning out that 2011 GDP is expected to come in right at the middle of the road at 1.5% 

Dollar

            The reports out of the Middle East about possible dangers to global oil supply are ongoing, developing, and gestating into a plethora of ingredients for the perfect storm. As a result Oil will be supported at 90 a barrel this year. We are very close to seeing a surge past 120 if policy continues to be so flippant. Gold is in correction until the market finishes realizing that the fight against deflation is here for a while, and the Eurozone crisis is dealt with. I think gold is well supported around the current levels and won’t be surprised to see it be very volatile with a swing lower to 1150-1350 but still make another run to 2000k this year. I personally am not as confident of the long gold trade this winter as I have been for the last few, but am pretty sure it will be a good buy again before next winter. The stock market is technically poised for gains this year, with valuation placing it around 1350. It will remain volatile and capped as long as the Eurozone crisis is not satisfactorily resolved.

Politics

            The GOP nomination process will continue to be a thorn in the incumbents` side, having the potential to derail the longer term strategy the left has to keep the current President in power. That strategy is one of apparently having a rhino nominated in the GOP Primary, continued economic improvement, and perhaps an ace in the hole is another war, then pulling yet another one of the plays from the Bush playbook: “… stay the course…”.  On the other side for the GOP, the improving economy is diminishing their chances at unseating the incumbent. It is also becoming clearer that the assumed GOP nominee will not be able to win the General Election because of a host of reasons not the least of which is simple stereo types that the majority of voters will never let go of. The opinions on this good man on the street are unfair to say the least, and are bigoted at best. The curve ball is still yet to come, if Rick Santorum gets folks attention we may avoid the fiasco of a third party candidate and give this nomination something less than a rabble rousing contest and an actual throwing down of the proverbial conservative gauntlet at the liberals.

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Economic Outlook for 2011 and Commentary

Middle East revolutions are yet another straw on the camels back among a storm of headwinds buffeting the outlook for the US economy in 2011 and beyond.

By Joshua E. Stone
 

Monetary Policy

“Expect the Fed to keep the Federal Funds Rate at current levels near 0-.25% for the remainder of this year at least” This is a repeat of my last two year’s forecast verbatim. There is some possibility that rates could be raised before the end of the year this time. There is a very high probability that the language will change enough to set the stage for rate hikes next year.

            The FED has a dual mandate: to keep unemployment and inflation low. Right now it’s failing on both of these mandates in many peoples opinion. While perhaps inflation is debatable, I am in the camp that sees higher consumer prices as deflationary. But it appears that we can’t argue against disinflation either, as this is clearly being felt by anyone who buys things.  However there is no debate about the worst employment picture we have had in the US in many decades. Worse, thanks to the fact that apparently no one in Washington is reading this blog; there is still no job creating energy policy. A Manhattan or Man to the Moon equivalent energy policy that switches all Government vehicles to Natural Gas, and road and infrastructure projects that launches us past China and last but not least…a new cheap source of alternative energy that does not transfer the wealth of the current energy cabals via some government mandate or new taxes or the termination of subsidies that will ensure the proposals are DOA. While the “experts” say we can never do these things, we are not China and can’t compete with them; I say we are America and can do anything. I would also suggest that those who think we can’t do anything need to move to somewhere that low expectations are the norm.

That we have not dealt and even worse not even addressed the issues is setting us up for real troubles in the next year or so if not sooner.

                Inflation hawks will use everything at their disposal to confuse the markets about future policy changes, like the fact we might get some dissenting votes at the next FOMC meeting in March and the following ones this year. I would point to the UK, where something similar is happening. But if you dig deeper, you will find that the UK is in no position to raise rates and thus this recent rally in the pound has been nothing more than a breather before more downside ensues by many peoples estimation.

                Delving a bit deeper into the Bernanke Dilemma there is a big problem I have only heard addressed by some people, mostly callers on the talk radio shows saying they can’t get a loan because the lenders are getting stricter and stricter in their terms. This is contrary to the mainstream understanding that QE2 was designed to help keep lending available to everyone and loosen the purse strings. Why is this happening?

                As brilliant as Bernanke is, and as smart as his policy has been in my opinion to defy consensus in an effort not to repeat history, he seemingly did not count on or foresee one critical thing: the ability of the fat cats to put money where the interest is. I wonder about this conundrum though, and whether a man as intelligent as Bernanke really could have over looked something this problematic. To the best of my knowledge the deal Bernanke has made with the banks works something like this: the banks can borrow money for free, they can then sit on that money and earn interest on it risk free. What a deal!                

So that leaves the banks two clear choices to choose from: If they loan it out, they have to take a risk. If they keep it they earn interest albeit small, but the bottom line is all that matters to these folks. Not to mention because of the new regulations they have to stay well funded to protect all those toxic assets they still carry.  After all the bursting bubbles in recent decades, can anyone blame them if they don’t want to take on anymore risk? How can we expect any bank to risk funds on a business that may or may not succeed, when it is more likely than ever before to fail than succeed do to the uncertain nature of policy going forward? After all, it is their job to keep money safe. Why are they suddenly sticking to the letter after all this time one can only wonder. Perhaps the new regulations have worked too well.  One can only wonder what they are hatching up for the next bubble though. Or perhaps this is the new crisis, the new “bubble” or even worse the next scam and fraud pulled on the people…

It appears to me, the only way out of this dilemma besides a three or four point improvement in unemployment would be an executive order to force banks to lend and corporations to start investing. This has its problems however: who is going to decide who wins and loses? Not to mention it was the politicians telling banks to loan to certain demographics that was largely responsible for the sub-prime meltdown of 2008. The only other option is for Ben to raise rates. Something he needs positive economic growth that runs the risk of inflation to do, which is not happening at the moment from his point of view

 It’s quite a quandary: banks and companies don’t want to lend or invest till there are jobs to prove the economy has recovered, and the economy can’t recover till the banks and corporations start lending and investing to create those jobs.

The coming days and weeks will bring about a major debate over the debt ceiling. This will likely trigger a good bout of dollar weakness and market jitters, but I don’t think the great bond crisis is at hand this year. There is still no viable blueprint for another reserve currency at this point. What is already happening is that other countries are ditching the dollar in many places and trading in their local currencies instead.  So in a way, our sovereign debt crisis is at hand, but only in stealth mode and not readily apparent. It’s not like a few trades made between Russia and China denominated in their respective currencies are a big deal, but the day Saudi Arabia or China announce they will no longer accept or require dollars for oil or trade will be noticed and felt by all. It will be equivalent to an act of war and will trigger a massive sell off in everything but commodities from what I understand. So it seems the gold bug scenario is at best a tapestry of doomsday for now. That said, recent developments in the Middle East do seem to make this scenario much more likely. China is also very unhappy with their exposure to US debt and has a number of tools at their disposal politically and economically before they have to use the “no dollars accepted here” nuke. At this point they are using the Broken Arrow method of beating us for lack of a better expression, and it is quite effective.

That said, all these forces moving away from the dollar are already in place and in motion as mentioned before, and as a result that is why we will continue to see inexplicable rises in gold and especially commodities.

In recent testimony Bernanke defended QE2 when asked about global commodity prices explaining that it is supply and demand issues, not FED policy causing the spikes in prices. As true as this may be in part, it is only one of many things one could call a perfect storm driving up demand and diminishing supply. The fact that QE2 has added fuel to the fire in this trend can’t be denied as the spikes in most commodities took steroids after QE2 was announced. Most folks don’t understand how QE2 works in my opinion and as a result most are quite confused about FED policy going forward. Bernanke can not only raise rates in fifteen minutes like he said on Sixty Minutes, he will stop the QE2 sooner rather than later if the employment picture improves.

If employment does not improve, and the US Treasury bond yields continue to go higher, it is hard to defend the FED and its policies regarding QE1 and QE2 and many think it will result in QE3. This will in turn result in a run on the dollar and force the implementation of a global gold standard by China and others. Something that is already in the works and is bound to happen sooner rather than later in my opinion. The question is how long the people in the US will let the politicians keep them snowed and asleep before they wake up, or will the global gold standard come first, plunging America and the UK into Third World (this is already occurring due to the natural course of events in the US, but is exacerbated by Government policy or lack thereof) status to wake them up.

Housing

               

                In the last two years forecast I predicted:  “…the housing prices to start to bottom in the next year maybe even longer…”… and it appears like it will be more on the latter side of that statement...”

It appears this was fairly accurate as the most recent data confirms the expected correction in housing values after the First Time Home Buyer tax credit expired resulting in a slowdown of home purchasing over the remaining months of 2010.

                The forecast for this year is pretty simple and straightforward: we are once again heading off a cliff in home values with no hope of any return at this point because there are no meaningful signs of a recovery in jobs or even worse no plans to create those jobs. While this continues, the “stealth” or shadow “supply” of unsold homes continues to build continuing to compound the problems.

                In the tradition of this blog, I would like to be more optimistic about this outlook. The only encouragement I can find is that I think some folks will be in their homes to stay this time, in the belief that home prices will not fall much further and that they are pretty much out of options as rents are rising along with everything else so eventually home values will follow. This is a pretty sound strategy in my opinion. But I am biased as I have recently helped my own mother buy a place with the help of Uncle Sam.  The interesting thing is; that as a result of the free money, we have a very high pain threshold for falling value in that home. It is also a home, not an investment property. This is one thing we won’t be dealing with this time: is the collapse of the speculative investment real estate bubble.

Employment

                In the last two years I said in this blog to “…Expect unemployment to reach double digits before this recession is over. I am guessing it may go as high as 10% this year. I don’t see much of an employment recovery really. This will be a jobless recovery. Unless the new Administration in Washington can get the corrupt politicians to make a new energy policy that creates jobs. Yes We Can! ...” 

 We have reached a new norm, where the number of underemployed and people out of work for more than six months has not measurably or meaningfully diminished during the last year or so. This means many people are now unqualified to work or when they do finally get work, it will not be at as high a pay rate as before.  This makes weekly unemployment claims one of the key data releases to be watching in the coming months along with the usual like NFP, GDP, Consumer Confidence, Housing and other data related to inflation like PCI and CPI.

                With no hope in site of any real job growth from the private sector or by any political initiatives on the horizon, unemployment will not decrease much from the current level of 9.0% for the rest of the year. I have no idea how it will get much lower than this if some drastic changes are not made regarding the current direction of the country. I think it is more likely to move back up if the status quo continues in Washington. I think a depression has been prevented, but this economy can’t be propped up indefinitely. 

                While unemployment has steadied, and never got above 10% this year; there are some very troubling statistics showing up if you look beneath the headline numbers.  There are also bills being proposed by politicians that would drastically lower the unemployment rate and slash the entitlements, creating a permanent underclass. While this is pretty much cheap political theater, playing the politics of fear is not a help. In fact is tantamount to dereliction of duty. How can any politician in good faith waste time on frivolous bills that have no chance of being passed in a time of war and crisis like this! It only shows and demonstrates a caliber in Washington of what I can only imagine and hope to be inadvertently nefarious politician’s and there equally suspicious proposals to help this country in good faith. One can only assume at this point that this and many other monsters` proposed and in some case created; like in the case of GSE `s are not by accident. The Federal Reserve and the amount of power it has is another example how smoke filled rooms have decided the direction of this country with the country only along for the ride.               

                A source of optimism is the underground economy, greatly underestimated by economist at large in my opinion, it is very unquantifiable and perhaps the most vital and resilient part of the US economy. I have said before there is a job at every firm for Social Networking engineers, and I am glad to say that in the time I first mentioned that last year I have seen many companies are taking it seriously at last and hiring for such positions. Unfortunately as with many things, often one must start as a volunteer or just as a side hand and show results before a company or potential boss will take notice and decide to give you a salary. So that’s right, I am suggesting you find a company you love and start blogging and managing a social network for them. Of course, it goes without saying they should already have a social networking presence, or if they do then that means you are trying to show them it can be done better. So like everything, communication and openness in what you are trying to do for them is a prerequisite. If they have good management, they should have no objection with you giving them positive exposure to the internet. Of course, it also goes without saying that one could easily find a niche being a critic, but the prospects of obtaining a salary from such work would seem more difficult to me. But perhaps not if it is noticed by competition and that gets you a job. 

                The biggest obstacle to creating and keeping jobs in the USA is a good energy policy and regulation. The forex industry is a prime example of this. There have been so many new regulations put in place by the CFTC in recent years I have personally had to move money out of the USA in order to get the flexibility I desire from my broker. Many countries will not even consider taking my deposits or doing business with me simply because I am in the USA. This has restricted my access immensely to the market. This is all done under the guise of “protecting” me and making the markets “uniform”. I see it all as a terror attack on the heart of our financial freedom. I have literally lost sleep at night in terror wondering how long before the CFTC figures out a way to keep me out of the forex entirely.  Sadly I think that Japan will be a leading proponent of banning retail forex trading in the coming years. It’s not like there is not plenty of compelling evidence that something is amuck in the futures industry. The USA could be a financial powerhouse if it was not for the free market killing regulations that have a stranglehold on this country.

An example of how ongoing detrimental energy policy and new regulations could derail jobs and small business is my own organic farming business: highly dependant on local transport and being free of costs related to regulation; I figure four to five dollars a gallon for gasoline could very well put us under. I have not figured out the exact breaking point, but much above the current three twelve a gallon is already making it much harder to break a profit and is depleting what cash there is to spare. Already we are pulling back on spending as a result of the higher gasoline prices seen at the pump in recent weeks. Not to mention the cost of wheat, the higher fuel prices go, the higher wheat prices go. This a very real and present threat, many have talked about food shortages and thanks to the QE2 fueled perfect storm mentioned before this issue could derail stocks and the recovery at any time.  People globally have already been feeling this pinch; folks in the developed nations will soon be feeling it even more as well. 

GDP

                I am expecting the GDP to chug along at about 2% again this year. Some argue that what positive data we do see in GDP is purely a result of QE2. I don’t think this is true, since in my opinion there is an underground economy fueling an organic recovery. This is the only way to explain how the US is doing so well in the recovery up to this point in my opinion. I fully expect the GDP to continue in this same range for the next several years. This is a new norm and with the result of Benny and the Inkjets policies, everything has been drastically inflated. Resulting in an apparent economic data “recovery” but I would rather call it an economic data “rescue” because the economy has been rescued from intense contraction (that would have been painful but was sorely needed in my opinion).

               

Stocks

               

                The two year bull cycle in stocks I have observed and forecasted on this blog for two years now appears to be on an unusual third year extension. This is based on a number of factors, QE2 not being the least of them. As a result I expect to see another good year in the S&P500 of about 15-20%. I am expecting some volatility this summer, the age old adage of sell in May and go away will probably be very true this year.

Dollar

Last year I wrote: “…Of course you can’t forget the possibility of events affecting the market. Any number of things could change the outlook for the dollar/stocks and energy/commodities in a hurry not the least of which is terror; but China is also a big problem. We can’t depend on them to keep fueling the bulk of this recovery as market action in recent weeks is telling us….”

This has turned out to be quite accurate in the sense that the dirty laundry that is the China economic machine is finally starting to be aired. As a result they are slowing there economy down with rate hikes. This has had a pretty significant affect on the markets over the past year. Slowing down a QE2 fueled rally in stocks and keeping major currencies like the Euro in check. 

While my “Death of the Dollar” mantra has matured recently and I don’t think we are going to see that happen completely for the foreseeable future. I, like everyone am bombarded with spin, and I am slowly beginning to see straight as I learn more. I have come to the conclusion that the dollar is the prettiest pig in the ugly contest as one analyst put it during the darkest months after the global meltdown in summer 2008, and that’s not likely to ever change. If it does, it will only be temporary before the replacement is found to be more attractive at first, but not at all functional or an even worse basket case. This puts the Euro on a teetering ledge. I expect to see the EURUSD trade in a range this year between 1.19-1.50 on the outside. I don’t think it is destined to fall apart this year. In fact China has begun buying up EURUSD and Euro zone debt. So the EURUSD looks to be well supported for the foreseeable future. We will see how things look next year, but you know the mantra by now: if these politicians and bankers don’t figure out how to stop creating bubbles and start creating a system that actually works this year were probably all heading down the chute in short order.

This does not mean that gold is going to stop going up though. Quite the contrary, it only adds more fuel to the fire as it becomes an instrument of hedging against uncertainty even for the smallest of households to the largest of banks.

 Another factor leading to gold and the rise of silver in my estimation is the IPhone. There are over 500 million phone users in India alone, and soon the phone and pc will be replaced for the most part by the IPhone. Can anyone say upgrade? This will only put more pressure on already limited resources.

 I could rattle off the traditional litany of reasons to buy gold and silver I have cited on this blog many times before, but I thought the IPod argument was a refreshing perspective; especially since the Debbie Downers of the gold rally love to point to supply and demand as a cornerstone for their argument against rising gold prices.

I have come to the point where I am not going to guess about possible corrections or what levels any corrections might go to. What I have observed is the most recent correction was decent, but has left those looking for more with a dry mouth of disappointment. In 2009 I did post charts on Twitter when gold re-tested the 1070-90 dollars per ounce support indicating it was a good place to increase long positions. I also forecasted last year that gold would close at around $1200 an ounce. This was pretty accurate to put it fairly. I expect gold to close at a lofty $1500 and ounce this year, perhaps even make a run to $2000 or at least $1681. It’s rather hard to guess at exact levels at this point since it has never been this high before and the best tool besides common sense is projected fib ratios. Silver is also on track for $50 an ounce. I have never talked much about silver, choosing rather to speak about gold as a barometer. It goes with out saying that if gold is going up then so is silver, and that has been true. Some argue that the move in silver is actually what is behind the rally in gold and is a canary in the coal mine for the economy and even geopolitics. It appears these speculators are being rewarded with more evidence everyday as the price of silver goes parabolic.

Oil can’t really sustain a level above $100 a barrel as long as the economy is in recovery in the opinion of many experts. So I expect to see oil to continue bouncing around from the $80-150 a barrel for the year. The wide range is due to all the factors I have been pointing out on this blog for over two years now and more. Not the least of which is the Middle East Revolution. It could go far higher if the Middle East alignment against the USA and Israel we have seen manifesting as a result of the ongoing revolutions continues spreading to other countries allied with America and Israel like Saudi Arabia.  Like I said before, it’s hard not to get caught up in the death of the dollar mantra and freak out about oil prices. But in the mildest tone I can muster: if the politicians don’t do something about our energy and foreign policies soon the dooms dayers are probably right, we will see oil being traded in a currency other than the dollar for the most part and this will set off a chain reaction that will cause gas, oil and food prices in the USA to go through the roof. It goes without saying that most of the rest of the world will suffer even more as they already have been for many years.

This could all happen over night, so being a trader or investor in this time is something that requires paying close attention to the ongoing unraveling of Americas influence, credibility and power. A process that has been expedited under an idealistic Administration brought to power by a naive populace wooed by a media so immersed in affirmative action and getting an African American in power that a mainstream journalist like Tom Brokaw can be quoted on Charlie Rose as saying “We don’t really know who he is or what he stands for…” on the eve of the election. A populace that still fails to see the wisdom former president Bush led the US with; and still sees him as the worst president ever simply because everything unraveled on his watch. Never mind it was his ideal of bringing democracy to the Middle East that is largely responsible for the revolutions we now see taking place; just as it was Bush who popped the oil bubble in 2008 by lifting the ban on offshore drilling. It goes without saying that every president I know of has done something to help destroy this country, and of course Bush was no exception, but vilifying him and canonizing another is the road to repeating the mistakes of the past.

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A Tale of Two Economies

As America struggles with crises after crises, she looks to her people for her future

By Joshua E. Stone


As the S&P closes in and surpasses the 1220 target mapped out in Jan by me, and even earlier by others; the questions are becoming more and more glaring. Where is the volume in this rally? Where are the average investors? Does the rally mean the recovery will be strong? If so, then why is new employment still below 300k a month?
I have come to the conclusion there is a tale of two economies: one in which the traditional job market is gone forever, another where the job market is wide open and not enough talent to fill the demand.
I think the biggest challenge facing America going forward is its people. They are used to getting jobs the old fashioned way, where you go to the paper and find something you can live with, or you get a job at the local mill or car company because that’s all the town has ever known.
While there may not actually be a job posted at the local mill, there is a job there no doubt….its just the management and the seekers don’t see it. At a local mill there is one job I can think of right away that is most likely not being filled: social networking marketer. Another example of a job at a hospital or any big firm that is not being filled: waste reduction engineer. Radio and TV stations are already using social networking or WEB2.0 with great success. The forex industry is a near grandparent in this field already, with social forums and whole websites devoted to experts and consumers alike where you can chat and exchange ideas with like minded individuals.
Between social networking and reducing waste in this economy, we could see vast improvements’ in our productivity and profit thereby increasing the GDP. Things like this are already underway in the form of the Green Economy. These are just two examples I have thought of for the purposes of writing this article, but there are more. For example, it is well known that the high tech industry in the USA is flourishing, but is plagued by a lack of talent in the employment pool and flying vultures in the form of new taxes.
The result is jobs are outsourced, the employment is floundering, industry growth is stagnant and the long term outlook for the economy gets more uncertain to many. Since it appears the people of the USA have been collecting unemployment for the longest time in history, one can’t blame them for feeling like there is no hope for improving their situation.


In theory and in history, the spendicide the US government is committing on behalf of its people will work to get us out of recession in the short term. The problem is that the principles of good economics demand that we don’t run large deficits during the good times. This is something we have failed to do since the late nineties; this has put us in a very bad condition to deal with these tribulations. Aside from the fact the spending policy in Washington has to change dramatically, the private sector has to put the other foot forward and create sustainable jobs for the future, thereby increasing the size of the economy and the revenue base the government has. All that said, history seems to suggest government surpluses as well as taxes that are too low lead to recession.
If this does not happen the next financial tsunami known as the bond market collapse will surely be impossible to navigate and survive in a meaningful way. A strong US economy will help us weather the collapse of the bond market much better, I would think. It also needs to be said that the USA is not Greece or like any country anywhere else, and our bond market crises will not be like the ones we are seeing now in Europe. Will this be good or worse as a result, only time will tell. All that said, history seems to suggest government surpluses as well as taxes that are too low lead to recession. I also do know we can print our own money, so that certainly changes the traditional dynamics of any bond market crises we will have here in the USA.

It is also easy to blame the government for this jobs crisis, the current administration fails to get serious about a jobs creating energy policy. This will ultimately be all of our undoing as the prices for everything continues to soar for the average person. The average person is not going to make it through the transition to more energy efficient models as even the most optimistic plans don’t have everyone driving hybrids in the next few years. I know that high energy prices are deflationary, but cheap energy is a prerequisite for a strong economy. An idea that seems to be lost on everyone these days but the poor folks and business owners who are seeing 60% increases in the COD and fuel expenditures year over year as we transition into the new decade. A VAT tax will put many of the small businesses left in this country right out of business. The recent disaster in the Gulf of Mexico proves the argument and concern beyond a shadow of a doubt: industry and the US administrations have proven there incompetence regarding energy production and policy. Just the consequences of this most recent catastrophe alone may have wiped out nearly an entire gulf and may devastated many industries in one of the world’s formerly most prosperous and beautiful regions for decades to come. In my opinion the Gulf of Mexico has pretty much been quite devastated up to this point by dereliction in policy and industry, and this flow of oil into the sea will certainly not help at all…no matter how lucky we get with the exact details of the cleanup.

My take on the market and the economy at this point are not very optimistic, I do have some optimism. But it is fading as I see the real issues and problems in this country either not being fixed, or even being completely ignored or exacerbated by a seemingly inadvertently genocidal political and corporate establishment.
I do think the current bull market is still in place, as mentioned before on this blog, most bull markets have two year cycles, that puts the current cycle at the age of a toddler by next March and set to end its buoyant ways in the next several months. I don’t see the FED raising rates before then, so that leaves the markets with room to move up baring some development that changes the current trend: like the FED adjusting their language to allow for an increase in rates.


The events in Europe recently have also demonstrated the contagion effect is quite real and could very well if not already have capped the markets in this bull cycle. Some analyst say the market will begin to fall this summer and there is somewhat scary evidence to support that now with the way the markets fell and gold surged on the heels of the Greek crisis in recent days. On the other side the recent uptick in volume could be a sign the average investor is putting their toes back in the water, perhaps as a result of the regulatory bills being passed increasing confidence in the market. I see this market as quite strong still, and the trend we have seen since March of last year though threatened at this point has not quite been broken. The rally and fundamentals are still intact; bolstered by improving economic data and a burgeoning consumer wallet fattened from ripping up credit cards, selling jewelry and walking away from mortgages. I think some sideways action will be in store for summer, then fall will arrive and the market will have done the classic sneak range up by that time.


This leads me to think the most likely scenario for the recovery will be something like what one analyst I saw describe as square root shape. We are seeing a bounce, but I think we will have another recession soon if the taxes go up as many are saying they will next year, and of course as the “business as usual” policy continues.
On the foolishly optimistic side, we could see a history defying economic boom from here on out. I believe in the USA, so I am certain we will do well at the very least. As Americans we can all look forward to the next great road bump, they are hard to deal with and painful, but we need them to wake us up and keep making this world a freer and better place for us all on Gods Green Earth.

Economic Outlook for 2010 and Commentary

By Joshua E. Stone

Monetary Policy:
Expect the Fed to keep the Federal Funds Rate at current levels near 0-.25% for the remainder of this year at least. I know this might come as shock to many, and it repeats last year’s forecast verbatim. The fed has new tools at its disposal beyond the scope of this article, but suffice it say the current language “extended period of time” means “we are not changing this language for at least 3-6 months”; when the Fed changes the language that will mean only that the door is open to the language getting more hawkish. That means another 3-6 months of jawboning before we actually get to any language that will allow the Fed to raise rates, and then it could be another 3-6 months or longer before they actually do raise them. Fed action in the week of the posting of this blog supports this outlook.
So being conservative that puts any significant change in Fed language at least 9 months out before the Fed even has the language in place to allow a rate hike. I have heard some analyst say that September might be the earliest we will see a hike. The language in the Fed statements would have had to change already in my opinion for that to happen. There is much mystique around the Fed and how it operates; in my opinion this might not be a good thing that Bernanke has done: drawing some of the curtains back so we can peer into the Fed’s ivory tower. These maneuvers only result in more questions which is not bad, but it also results in special interest using confusion to promote their agenda.

Housing:
In last year’s forecast I said: “…expect the housing prices to start to bottom in the next year maybe even longer…” and it appears like it will be more on the latter side of that statement. We have got a very bad situation in housing, and it’s perfectly indicative of the overall situation facing the country at large.The Federal Reserve CRE Forecast for 2010 is not at all rosy, and hints at an even bigger problem facing the real estate world: the commercial real estate bust. Like all the forecasts from the Fed and economists, a recovery in real estate all depends on the recovery in the economy.
The recovery from the Great Recession is still ongoing, and will be derailed by the coming sovereign debt default facing the USA in the next 5 years if we don’t get the people off this sinking Titanic of derelict spending fast. With deficits and debt as high as the eye can see, I was among the first to point out that there is over 120 trillion dollars in unfunded liabilities’ on this blog fxretracer; now it is common knowledge a year later. In short, the real estate market is telling us we are heading over the cliff in the next year or so. This could be stopped like all our economic problems with a real energy based economic initiative like I always say. But with the tax rebate for home buyers program ending in April, it is going to take some months before everyone realizes that something is wrong in real estate again. Right now with everyone buying on the lower income of society, it’s hard to hear the higher end earners when they say their houses are not selling. This is going to make things worse obviously. But that said, data recently has been encouraging for the USA.

Employment:
Last year I said in this blog to “…expect unemployment to reach double digits before this recession is over. I am guessing it may go as high as 10% this year. I don’t see much of an employment recovery really. This will be a jobless recovery. Unless the new Administration in Washington can get the corrupt politicians to make a new energy policy that creates jobs. Yes We Can!...”
I think we could be surprised to the upside in employment this year, the Adminastration is already predicitng 90k jobs a month being created by spring. I think unemployment will not go much higher from here, but dont expect it get back to the normal 5% for a few years at least. Of course that also depends on whether we deal with the problems still facing us.
During the week of the release of this article, the President has made a step in the right direction by ordering the creation of two new nuclear power plants, however this is measly and is really another tremendously blown opportunity for a President who has had enough support, especially in his first year he could have got anything he wanted done. I think biomass/biofuel or some space age technology for energy would be best to pursue for this country, but I know nuclear power has some very good arguments to support it. I think we could do better than nuclear power. This is just slipping into the same old big interest pattern so familiar from Washington now. That said, the President has done a good thing and this ads steam to an economy that came out of recession in Sept or Oct according to the Conference Board.
What I found most remarkable this year was that unemployment did not rise as fast as many I heard from said it would, it was slow grind up to 10% last year, and then it retreated from the double digits! While many of the critics say that we did not have a recovery this year, in the same breathe they tell us that the stimulus had no effect. How then do they explain the positive GDP in recent quarters? They will contradict themselves by telling you it was all government spending.
What does this mean? We clearly have a lot of doubt around the recovery, that’s not news. What is noteworthy is that it is true that much of the economic recovery is organic at this time, this is why we do have some decent GDP results in recent quarters, and the government spending did not account for all of that growth. What the problem is with this organic job recovery is that it will be drowned next year from what I understand by new taxes that will be coming to everyone, “rich” and “poor”. The reason we have not seen better activity as of yet is because of the uncertainty going forward for small business, not because they can or can’t fund pay roll with debt. That kind of thinking from our leaders is scary.
To find a good example of how the government can help stimulate the economy, one has to look no further than my home sate of New Mexico, where the unemployment is below the national average thanks to a diversified economy and the government created tax rebate for the film industry that has catapulted us into the top five best filming locations nationwide. New Mexico has other good incentives as well and is rising in the ranks for one of the best places to do business in America. We need sales for small business, to get sales we need people to have jobs, to have jobs we need the government to direct incentives on cheap energy and other industrial policies: the lifeblood of strong democratic economies for over a century now. What we don’t need is the spending we have had, and the repeal of finance laws that kept the financial wizards and their political cohorts from weaving the kind of catastrophe we saw in 2008 with the collapse of Lehman.
Take me for example, if fuel costs less, the seeds would cost less, then I could go out and hire someone to promote my product. As it is, I am squeezing by on a thread still thanking the daylights Bush popped the oil bubble and a bit bitter at a media that does not remember that fact. But then, that is no surprise: after all this is the same administration and media that ran and covered a campaign platform based precisely upon opposing the surge and losing a war just to gain power. Now that the surge has succeeded, it has become a strategy that they now take full credit for and the media has let them do so. We all know who they would be blaming it on had it failed. I am also left having somewhat mixed feelings about an economy that was engineered to crash, and as a result has kept prices low on consumer goods. I do know that it is a good thing we have not recovered fast, any recovery that bounced back too fast would have got us right back to a standstill with high oil prices and inflation. Going forward I know that any recovery that does not have the uncertainty for small businesses addressed, have a jobs creating energy policy and has dealt with the debt will not be a recovery, but a blip on the radar before the mightiest and richest nation on God’s green earth fell.

The Dollar:
Last year I said in this blog: “the S&P 500 has a 50% downside risk from these levels and is the key to the recovery, besides a good energy policy.” The first half of this turned out to be spot on (the stocks recovered 50% from that time and the recovery is on track for the most part); the second half is still true. If we don’t get a good energy policy soon we can expect the death of the dollar, not that it’s not already pretty dead; having lost a full third of its value in the last ten years alone, and some 98% of its value since the 1800`s.
Again we can look to stocks as an early warning signal for the recovery, if the equities close lower this year I would take that as a sign that the recovery is all but derailed. If they close higher, about 2-3% as I expect, it will mean that there is increased optimism surrounding the economy, and that more importantly, the Washington gridlock will have manifested something productive. My feeling is that there will be a shift of power in the House and Senate and this alone will create enough optimism for 2011 to keep the markets up for the year. It is even likely in my humble opinion, we could see good gains again this year…not 50% again, but 20% does not seem unrealistic.
As for the GDP I expect it to grow at about the same rate as stocks this year, 2-3%. But there are some much smarter people than me out there saying we could see a much higher growth rate this year. Even if that ends up being the case, it would not really be a good thing as it would only trigger massive inflation later, due to the unfettered debt Washington is pouring on. Even worse it won’t matter or help at all, as it will just be a spike on the chart before the Mother of Depressions is here to stay. Don’t get me wrong, it would be great to have an outstanding recovery this year, but it would be equally disappointing and tragic only to see it derailed by large deficits and a neglected energy policy whose fixes were delayed by the euphoria of the recovery. Sadly we need pain to get change and the more the recovery happens in fits and starts, the longer it takes to recover, the better chance we have of really getting things back on track. I think there will either be a recovery (which we are already in) or a depression (which we have not yet slipped into), and there is no “double dip” scenario possible in my opinion. We either get it together fast, or the consequences will be too massive to overcome without a monumental crisis, and it will happen quick, I keep saying 3-5 years; but it will likely be sooner as we have more crises on the horizon not the least of which is the sovereign debt issue and credit ratings for the US.
When it comes to gold, it is a buy in the sub 1070 area, if it goes to $945 an ounce this year, it will be the best buy ever. Why is it going to go that low? We have a long year ahead of us, and the fear is still rampant out there. If you pay attention to the gold bugs, you can see that they are correct about the fundamentals driving gold up, but if you read between the lines you can also see that there is still a risk of deflation due to the doubt surrounding the recovery. What this means is folks buying gold above 1k at this time might have to sit on it for a few years waiting for the politicians to finish flushing this country down the toilet. If Washington does fix the debt problem, then the gold bugs will be sitting on a post Reagan range once again, locked in the 900-2k area in a world where the dollar is in favor bolstered by strong fundamentals. You can also look to silver for sentiment regarding the recovery, as its price is reflective of demand for many products that are used in manufacturing and consumer goods. What I am saying, is I think gold will go up this year to 1500 or maybe even 2k. I think gold could easily close above 1200 this year if everything stays on track. It will only pop out the roof in coming years with continued dereliction of duty in Washington, highly probable that’s for sure. Don’t misunderstand stories of gold losing its safe haven status; the reason gold has fallen against the dollar with the recent sovereign debt crisis in Europe is because this whole juggernaut of debt unwinding is just beginning. Once the debt crisis hits the US, there is nothing left; the buck stops here (pun intended). We have hit the iceberg folks; this is not a joke or a movie.
As for oil, I don’t expect it to go up much this year, due to doubt about the recovery, but closing above $90 a barrel seems very realistic to me. I expect petro prices to stay stable this year; we will get close to, if not over $3 a gallon at some point this year of that I am fairly certain, but I don’t expect it to stay there either. It is a bit harder to tell about gasoline this early in the year for me, as spring is not here yet, and that’s usually the peak in gasoline use for the year. But the recovery is on track and there should be good demand for fuel this spring as consumers hit the road putting pressure on prices at the pump.
Of course you can’t forget the possibility of events affecting the market. Any number of things could change the outlook for the dollar/stocks and energy/commodities in a hurry not the least of which is terror; but China is also a big problem. We can’t depend on them to keep fueling the bulk of this recovery as market action in recent weeks is telling us.

The following credit goes to these sources that I have used in this article, there are also some other sources added not used in this article:


Hot Air » Blog Archive » More “unexpected” economic news
http://bit.ly/9fevni


Hot Air » Blog Archive » Bye-bye Fed funds rate http://bit.ly/9XeSFZ

2010 GDP: Look For A Strong Recovery | FX Instructor Blog - For
Traders, By Traders http://bit.ly/5d0xrz

The Conference Board - Trusted Insights for Business Worldwide http://bit.ly/c4HxfP

Philip Blumberg Blog: Federal Reserve CRE Forecast for 2010 http://bit.ly/cuoewP

Gold Price to 2000 as U.S. Dollar-Gold Correl...bit.ly/83BvHU

Safe Haven | "Commodity Super Cycle"...bit.ly/8KUx2R

Is It Time to Buy Gold? | Uncommon Wisdom http://bit.ly/bhdPOj


FreshPips Stimulus funds nearly 600,000 jobs last quarter
http://bit.ly/91NcMC

cristo1 Rosenberg: Housing Is In A Depression, And It's Already
Double-Dipping: The latest NAHB numbers from yesterday are...
http://bit.ly/4VZZuA

InEgoVeritas Fullcarry: Stock market to decline only after the
FED hikes rates: http://is.gd/52Y8Y Steve Saville.

politiconomic $$ Philip Blumberg Blog: Federal Reserve CRE
Forecast for 2010 http://bit.ly/4VdKcp

FreshPips Gold Loses Safe-Haven Status For First Time in History
http://bit.ly/bhBreB

KevinMHughes upsidetrader $$ 824,000 jobs will disappear
on Friday http://bit.ly/aECvHg

KevinMHughes alaidi and the EUR MONTHLY CHART (Blue
graph) speaks volumes http://bit.ly/88mm6K

Fundamental Commentary for 2009

A stellar rebound in equities in the last year of the decade has many wondering what else we may have lost besides ten years of no gains in the stock market.

By Joshua E. Stone



The Lost Decade: After 9/11/01 & 9/18/08 still business as usual.

Although stocks posted amazing gains in 2009, it has left most with an empty feeling as the decade overall was flat in US equities. The politics though fiery and hopeful at one euphoric moment in 2008 were also empty.
It appears that in hindsight the last decade was a wash for America. Americans marched through most of the last ten years mad at a President who recovered an economy that had been dealt its largest blow ever and kept us from being attacked for a second time during his watch from an enemy that is so dangerous the western world does not even comprehend it for the most part. Over 10% of the US economy was in the World Trade Centers…putting that into perspective, California equals 20% of the US economy.
The attack on the US on 9/11/01 was a fantastic opportunity for America to wake up and create an economy that does not instill anger by impoverishing so many. The opportunity to get off foreign oil and create a jobs creating energy policy after the attack was truly there…the President could have ordered Americans to do anything at that point and we would have done it. Instead we were told to go “shop”.
Then we saw opportunity number two: the financial meltdown of 9/18/08. This was not only another chance to fix the energy crises that had blown up in our face in the form of 147 dollar barrel oil earlier that summer, a price and bubble that President Bush popped by lifting the ban on off shore drilling; it was also an opportunity to fix the problem with the financial industry and most industry for that matter: the lobbyist.

The Tragedy: A Change We Wanted to Believe In

It is no surprise to about 57 million of us that the new President has seen his approval ratings fall the fastest and hardest ever since records like that started being kept.
Change we can believe in appears to mean making everyone pay for a few folks mistakes. It has to be admitted that this is a valid prescription for cleaning up messes most of the time. But when it targets the limbs and not the roots it’s not going to work. It appears Washington thinks the answer to getting back the rest of the TARP funds is to tax big banks; did it occur to anyone that some of those banks may have paid back what they borrowed? Would it be fair to make them pay again for others who received bailout funds but can never pay it back?
This example of “change” that has come in the form of proposals for bank reforms, reforms that if implemented will benefit the big banks and their stock holders the most such as Goldman Sachs and JP Morgan as they will by law be required to spin off their most unprofitable operations: the consumer instruments, and thus make the share prices of those companies much better valued and thus more attractive to investors. For example if you look at JP Morgan’s stock price, it has traded at the same value for the last decade or so precisely because their value is pretty much capped, there is no growth in the consumer credit instruments that make up a large part of their operations. This is something most of the banks share in common, so its is no wonder that so called bank reform coming from the lobbies of Washington would end up benefiting the banks the most and not the consumer.
To think that these kinds of measures and policies will not be passed onto the consumer is naive. What this will do is make it harder for small retail traders to get into the market because of higher fees. Not to say, as this article written by fellow Twitter user PumPuiMonkey writes, it is not already getting increasingly difficult. I do realize that some people think that traders such as my self are next thing to nefarious and should not be allowed “day trade” in the first place, but that aside; this policy only serves to limit opportunity for people looking for a chance to get ahead by trading and investing. Whether the “opportunity” is safe for them is not something for anyone else to decide really, especially for individuals…lets be real: you're not going to be forced to bail me out of a bad trade or investment. A more in depth look at this discussion and how it has affected me personally can be found by reading the "No More Hedging"
thread I made contributions to in an attempt to share my perspective on the subject.
Real change would have been doing something about the stranglehold Wall Street has on Main Street via the lobbies. But then that would not have fulfilled any campaign promises, and would only have assured that a derelict electorate is delivered some other more cooperative candidate the next time around.
Can't miss the chance to hound again, what a change it would have been to come up with a sound energy policy.

The Legacy: Less Opportunity and the Inheritance of Debt

It looks like we have a legacy of debt, a retreating free market and a democracy with increasing transparency but infected from the enemy within that is always tied to some special interest spinning the progress being made as a bad idea from the opposite political party; while all the time nothing of real meaning is ever addressed or even discussed. Worse yet, when something is accomplished it is so burdened with special interests and buy offs that it just becomes another debt increasing monstrosity that this country and its people have had enough of already.
After the attacks in 2001 the powers of the government were greatly expanded to protect against more threats, however I happen to think that our freedoms were not so much infringed upon as they were clarified. After all, our government had been doing these things forever already. Only it was in secret and sometimes manifested itself in National shame such as the Japanese internment camps of WW II.
After the financial collapse of 2008, for many the jury was out on capitalism. Almost like a deer in the headlights, Greenspan in testimony to Congress all but shattered many peoples faith in the free market. I never thought as highly of Greenspan as many in the first place, sure he is a genius…but every genius has a blind spot. He was an instrument of the lobbies like all of the heads of Washington so therefore I don't think he “missed” anything. Every aspect of this economy has been carefully manipulated for generations already. Over time it has been technology that keeps us ahead of total ignorance and enslavement by the educated elite who think most of us are too dumb to make qualified decisions for ourselves.
The latest round of lost opportunity comes in the form of the President going on a somewhat perplexing campaign like stump into the heartland where he was supposed to be going to give the people hope when it comes to the dire job market. Instead of doing anything close to what so many see as our only chance to get out of this mess: announcing a jobs creating energy policy; the President promised to fight. I just am still unsure exactly what he will fight. The lobbies and special interests that are really holding things back? We can be sure that will not be the case. The alternative fight must be politics and Filibuster gridlock as usual. We have already got a glimpse of what that will look like and how the market and therefore by default the economy will fare under a return to that kind of partisan bickering and gridlock with the asinine Senate protests over re-nominating Ben Bernanke as head of the Federal Reserve. This is a fine example of how partisanship wrecks everything. If we want to fire Ben Bernanke out of some moral duty, then we have the duty to fire the entire government starting with the President who also took money from the lobbies who engineered this crisis as well.
Don't misunderstand me; we do need to fire everyone and I hope we do in 2010 and 2012. The biggest problem is even the new faces will be in the pockets of lobbies so change will still take more time before we can figure out who will and will not stick to the principles the people want like lowering debt, creating jobs and making regulations work instead of creating more government and more regulations.


The Hope: Americas Resiliency

One thing I have learned is that not even a writer can imagine what America might do or accomplish next. The nature of our democracy is largely misunderstood by the world and it is far more conservative than any other regime on the globe or in history. This is one reason why we have such an incredibly strong market. It is true that part of our strength comes from geographic luck and resource…but there are other regions of the planet that if they were more like the American system would be much more resourceful than they currently are no doubt.
China is a good example of this; they have now become the second largest economy not by rejecting western models but by embracing them. The difference is the corrupt nature of their system allows them to exploit everything without any concern for the consequences because there are none since everything is run by the State. This has pretty much “gamed” the entire theater of Chinas entry onto the global economy. It is no wonder they have progressed too far to fast, you could say they have cheated in a way. It all spells trouble for the global communities future, their policy on many fronts not the least of which is currency value and how most recently monetary rate policy is hurting the global recovery in some analysts views.
It’s not these particular policy issues that bother me as much as the other more human and environmental policies they have that have no regard to human rights or the environment that create an unlevel playing field for the market and most importantly hurt people.
So considering America and the western economy has no choice but to do things correctly or face certain doom, we will produce a sustainable and innovative economy that will end up being the model for the 21st Century to the entire world as we have been since we were born over two hundred years ago.