America's Coming Financial Vortex

9 posts / 0 new
Last post
Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
America's Coming Financial Vortex

http://www.financialsense.com/fsu/editorials/2008/1126.html

America's Coming Financial Vortex
6 predictions for 2009-2012

by Paul Mladjenovic | November 26, 2008

It has been an incredible year loaded with surprises but I think that the
next few years will surprise even more. Whenever I feel certain about
something coming, I 'm glad to put it in print. In 2004, I had successfully
forecast many economic events such as the housing bubble popping and the
credit crisis among other events. Current economic conditions and political
outcomes have laid the groundwork for more events that we should be prepared
for. All of these events combine to create a "Financial Vortex" that will
hit us in the coming years.

First of all, be aware of what current conditions will help lay the
groundwork for this financial vortex. They are:

America's debt load. The U.S. government has now $12 trillion in debt.
Consumers and businesses are drowning in debt. America's gross domestic
product (GDP) is about $13 trillion yet its total debt is over $44 trillion.

Derivatives. Derivatives are complicated, arcane and risky securities that
now total about $500 trillion. That makes this market ten times greater than
the dollar value of the world economy which is just under $50 trillion.

Unfunded Liabilities. The current future tally of the unfunded liabilities
of Social Security, Medicare and Medicaid is nearly $99 trillion.

Growth of government. The expansion of the government's involvement in the
economy is (and will be) massive. Taxes, regulations, controls, spending,
etc. at all levels of government (both domestic and international) will be
problematic by an order of magnitude that the private sector will not be
able to tolerate.

Think about it for a moment. The past few months have shown us what a few
trillion in bad debt and derivatives can do to the market. The Dow is down
several thousand points in the past few months and is down nearly 40% since
hitting its all-time high in October 2007 of 14,164.53. What will happen to
the stock market when many multi-trillions of debt, derivatives and unfunded
liabilities start hitting us like a powerful vortex in the coming years? The
economy is extraordinarily weak right now and it would not take much to see
millions of hard-working folks get devastated. It is time to prepare.
America needs to know what is coming. Some of these events are now
unavoidable so being fore-warned and getting prepared is crucial.

Here are my forecasts for what I believe is coming during the next few
years:

1. You will see an inflationary depression that will be evident by 2010.
Maybe I'll be off a few months either way but an inflationary depression is
almost guaranteed. Why? The latest batch of elected officials see government
intervention as either a moral good or a necessary evil. The most likely
policy initiatives that we will see in the coming months will be government
controls, increased taxes and extraordinary "money" creation (inflating the
money supply). In fact we have (and will) see trillions of new dollars will
flood the economy in the coming months. This will probably cause the stock
market and some economic indicators to rise and give the illusion of
economic health during early 2009. This will cause many commentators to
proclaim that we are coming out of the current recession. People will think
that government intervention worked. Typically, government intervention only
alleviates some of the symptoms in the short-term while postponing the
problem(s) toward the long-term. Right now many commentators are calling the
current economic environment "deflationary" but it is massive de-leveraging
by huge financial entities that are selling off everything from stocks to
commodities to accrue cash and stave off bankruptcy. As trillions of dollars
flood into the economy, that condition will change. If they report the
statistics properly, then we will see a contracting economy (measured by
GDP) coupled with rising prices. A good example of this is Venezuela where
that economy is struggling while their inflation rate is currently over 36%
(as of October 2008). The government, in an attempt to revive consumption
and job creation will increase the money supply by an order of magnitude
never seen before in this country. Seeing the inflation rate soar to 20% and
beyond during 2010 (or 2011) is a solid bet.

2. Unemployment in the private sector will soar into double-digits by 2010.
As the recession morphs into a depression and as the government grows partly
as a "solution" to economic difficulties, the increased burdens of
government (taxes, controls, spending, etc.) will grow to burdensome levels
for both consumers and businesses. Government spending on unemployment
benefits and "make work" projects will soar to address the large job losses
in the private sector. Right now you should re-assess your job, your company
and your industry to see if you are at risk.

3. More state and municipal governments will be federal bailout candidates.
I forecast this condition many months ago in my national seminars but
recently this became headline news so it's not such a great forecast new..
California and New York State are already seeking taxpayer money from the
Federal government. However, we will see much more of this. During
1995-2008, many state and local governments over-extended themselves.
Because they thought that good times (and housing booms) would last
indefinitely, they took on more spending and more borrowing. Many of these
jurisdictions will be forced into either spending cuts, higher taxes or
both. Some will be forced into bankruptcy. Because of these events, there
will be some areas that will experience social unrest due to difficult
financial conditions.

4. Commodities will be in the next leg of their long-term bull market
starting in 2009. Commodities such as oil, grains, precious metals, etc. had
a great upleg in early 2008 and then had a brutal correction during the
second half. Although much of it is attributed to deflation and "demand
destruction", these conditions are short-lived. Why? Two basic reasons;
shortages (supply destruction) and rising inflation. Since government policy
makers will make every effort to avert an economic contraction, they will
flood the economy with inflation and renewed government spending. Economic
policy decision-makers at the federal level think that "increased
consumption" is the key to economic growth because they are influenced by
the Keynesian school of economics. The world hasn't figured out yet that
John Maynard Keynes' policies are flawed and dangerous. The bottom line is
that conditions are ripe for commodities to resume their bull market and
reach new highs during 2009-2010. As an offshoot of this, you will also see
conflicts across the globe tied to natural resources as countries with
growing populations need more food, water, etc.

5. We will see oil hit $200 as Peak oil becomes obvious to all during
2009-2012. Don't be fooled by the recent drop in oil from $147 in the summer
of 2008 to $50 during November 2008. the recent data from the world energy
market indicates that oil depletion ("supply destruction") is far more
severe than the recent headlines blaring the misleading condition of "demand
destruction". The most severe energy crisis in history is in my mind an
unavoidable certainty during the next few years. America needs to go
full-bore toward energy independence since we will have no choice. This
energy crisis will be very difficult to get through and will cause
tremendous social and economic difficulty.

6. International conflicts over natural resources will hit the headlines
during 2009-12. As governments across the globe seek to address the wants
needs of their growing populations, there will be aggressive competition for
the world's limited resources. Natural resources will be seen as strategic
as well as economic. National and economic security for America will be a
vital concern.

Now you can see why I refer to it as a "Financial Vortex". We pray for our
country and we hope to get through this with a minimum of suffering but it
behooves all of us to be ready. It is better to prepare for problems that
may occur than to ignore reality and be set up for pain. Although the
Financial Vortex conference will be held in New Jersey on December 6, 2008,
let me share with you a few of the strategies that will be covered that day:

Buy gold and silver bullion. Yes.there have been physical shortages reported
but that shouldn't stop you from getting some for your portfolio. Precious
metals retain their value during a period of economic uncertainty and rising
inflation.
Keep a cash cushion. Have money set aside in a safe venue such as a treasury
money market fund. This is not for long-term purposes since inflation will
be a major issue; it is there for an emergency fund for day-to-day needs.

Shift your retirement portfolio into stocks and ETFs tied to "human need"
such as food, water, energy, etc. These companies and sectors will have a
better time surviving the coming years than other sectors that are
problematic such as real estate, financials and cyclicals (such as autos and
other "big ticket" items). I believe that much of the conventional stock
market will get slammed.

The Financial Vortex is coming. Millions will be blindsided but those that
prepare will survive and even thrive. I am doing my conference primarily
because I want people to be safe and do those things that will ensure
greater financial security. It is also why experts such as David Morgan, Jay
Taylor and Roger Wiegand will join me that day so that people can get
specifics on what to expect and how to prosper. The bottom line is that it
is better to be safe than sorry.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: America's Coming Financial Vortex
The gold market experts have been saying for ages that
the paper gold market is being manipulated by "them"
in order to keep the price of gold in US$ low
and hence the apparent strength of the US$ high.
 
As the paper price on COMEX and the physical price on eBay diverge
there will likely come a point where sellers of gold futures
are asked to deliver physical gold at completion
only they won't be able to get their hands on the physical metal
so something will go into default - I'm not sure what,
and the market ( a sub-market of New York Metals Exchange) will collapse.
 
"Them" probably includes JP Morgan Chase, the largest US bank,
which is also heavily involved ( 50%) in all derivatives trading,
so they are definitely "too big to fail" and will have to be rescued.
 
Presumably the price of physical gold will then take off
meaning the US$ will be weaker and in danger of implosion,
although the international gold market would collapse in all hard currencies.
 
If anyone comes across a good explanation of how this should unfold
please post it here as this could be the death-knell for the fiat money system.
Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3200
Re: America's Coming Financial Vortex

matrix

"the international gold market would collapse in all hard currencies."

Could you explain what you mean?  I may be dense, but I don't understand.

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: America's Coming Financial Vortex
Doug wrote:

matrix

"the international gold market would collapse in all hard currencies."

Could you explain what you mean? I may be dense, but I don't understand.

Where did I say that? 

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3200
Re: America's Coming Financial Vortex

In your post above, line 16.

Brainy's picture
Brainy
Status: Member (Offline)
Joined: Nov 29 2008
Posts: 1
Re: America's Coming Financial Vortex

  Would like to attend the Seminar, sounds interesting - Briany ....

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: America's Coming Financial Vortex

"In the past, when businesses hit rough patches, owners negotiated with
banks or refinanced their loans. But many banks no longer hold the
loans..."

Tumbleweeds are set to blow through US malls
November 29, 2008

http://business.smh.com.au/20081128-6myx.html

THE full scope of the United States housing meltdown is not clear -
already there are ominous signs of a new crisis, one that could turn out
the lights in shopping malls, hotels and shops across the country. Even
as the holiday shopping season gets into in full swing, the same events
poisoning the housing market are at work on commercial properties, and
the bad news is trickling in.

Malls around the nation are entering foreclosure, hotels in Tucson,
Arizona, and Hilton Head, South Carolina, also are about to default on
their mortgages, and the pace is expected to quicken. Late payments and
defaults will double, if not triple, by the end of next year, according
to company credit analysts from Fitch Ratings Ltd.

"We're probably in the first inning of the commercial mortgage problem,"
Scott Tross, a New Jersey real estate lawyer, said.

That is bad news for more than just property owners. When businesses go
dark, employees lose jobs. Towns lose tax revenue. Schools and social
services feel the pinch.

Companies have survived plenty of downturns but economists see this one
playing out as never before. In the past, when businesses hit rough
patches, owners negotiated with banks or refinanced their loans.

But many banks no longer hold the loans. Over the past decade, banks
have increasingly bundled mortgages and sold them to investors.
Insurance companies and pension and hedge funds bought the seemingly
safe securities and are now bracing for losses that could ripple through
the financial system.

"It's a toxic drug and nobody knows how bad it's going to be," said Paul
Miller, an analyst with Friedman, Billings, Ramsey, who was among the
first to sound alarm bells in the residential market.

Commercial mortgages, unlike home loans, are usually written for five,
seven or 10 years with big payments due at the end. About $20 billion is
due next year, covering office and apartment complexes, hotels and
malls.

The retail outlook is particularly bad. Circuit City and Linens 'n
Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor
and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover
mortgage payments. When the $20 billion in mortgages become due next
year - 2010 and 2011 totals are projected to be even higher - many
property owners will not have the money.

Many properties are worth less than when they were purchased, and since
investors no longer want to buy commercial mortgages, banks are
reluctant to write new loans to refinance them.

California, New York, Texas and Florida - states with a high
concentration of mortgages in the securities market, according to Fitch
Ratings - are particularly vulnerable. Delinquencies and defaults have
risen in Texas, Florida, Michigan, Tennessee and Georgia.

The worst-case scenario goes something like this: with banks unwilling
to refinance, a shopping centre goes into foreclosure. Nobody can buy
the mall because banks will not write mortgages as long as investors
will not buy them. This drives down investments already on the books.
Insurance companies' stock prices fall on fears they have too much
exposure to commercial mortgages.

"The system has never been tested for a deep recession," Ken Rosen, a
hedge fund manager and University of California at Berkeley professor of
real estate economics, said.

Initially, it was hoped the US would use some of the $700 billion
financial bail-out to buy shaky investments from banks and insurance
companies - but the Treasury Secretary, Henry Paulson, in a stunning
turnaround, said the US no longer planned to buy troubled securities,
much to the dismay of those watching the cresting wave of commercial
defaults.

"He's created havoc in the marketplace by changing the rules," Professor
Rosen said.

The Securities and Exchange Commission is considering a change to
accounting rules so banks do not have to declare huge losses when the
market declines.

But the only certain remedy is for the economy to stabilise, businesses
to start expanding and investors to trust the market again. Until then,
Mr Tross said, "there's going to be a lot of pain".

Associated Press

Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: America's Coming Financial Vortex
Doug wrote:

matrix

"the international gold market would collapse in all hard currencies."

Could you explain what you mean? I may be dense, but I don't understand.

 

I think that "would" should have been a "could". I expect the US Dollar would collapse, but the other hard currencies could implode at the same rate, if they stick with the broken COMEX price, especially if it is a slow-motion collapse.
 
www.financialsense.com 2nd hour, shows nobody knows how it will play outbut we are about to find out.
 
Damnthematrix's picture
Damnthematrix
Status: Diamond Member (Offline)
Joined: Aug 10 2008
Posts: 3998
Re: America's Coming Financial Vortex

Chinese economy 'losing its edge'

http://www.abc.net.au/news/stories/2008/11/30/2433693.htm?section=justin

Chinese President Hu Jintao said China is losing its competitive edge amid the global financial crisis, the latest in a series of warnings about threats to the country's rapid economic growth.

At a meeting of the Communist Party Politburo, Mr Hu said the demand for Chinese exports was falling.

Mr Hu said that in the coming period China would start to confront the effects of the international financial crisis and he warned that the economic situation was a test of the Communist Party's ability to govern.

Recent figures show that the Government has cause to be concerned.

Growth has slowed to 9 per cent and predictions say that it may drop to seven or 8 per cent next year. so China has already taken action.

This past week the central bank carried out the biggest cut in interest rates in more than a decade.

Earlier this month the Government announced a stimulus package of $586 billion dollars.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments