My Crystal Ball for 2010 and beyond

The future doesn’t just appear to be bleak it is! While the numbers are up and down (mostly down) and despite rhetoric and pandering the country is not heading in the right direction and the “Double Dip” is coming because of the policies our leaders are implementing.  The Dip may not be as bad but we are right on the edge of the toilet already and I assure you when all the taxes, HealthCaid, Cap and Trade, financial reform and global austerity are in place Americans will get hurt and badly and this may cause a Dip to be much worse.

Instead of dealing massively with the many issues we face politicians are spending billions on media and most of their time pandering for votes to defend their shoddy consumer brands, jobs and to give the people their opinion.  There is no “Invisible Wall” as Alan Greenspan says – I can see it clearly.  It is the blind leading the blind who can’t see it.  Here are some visible and “invisible” facts:

70 percent of the US economy is consumption.  Businesses live or die by this.  We cannot tax our way out of debt – there is too much of it.  But taxes is what we are in for and logic would say that people already can’t or won’t buy enough products, goods and services to sustain any recovery and now new levies will take even more money out of their pockets.  Add to that the global pull back on debt and tax hikes and now the world can’t borrow and spend more either.  Am I just stupid or does that mean people will have less money to spend?

• Tax Hikes here and more coming.
• The Debt Commission will include increasing taxes but after the elections of course.
• Financial Reform already guarantees more taxes.  The cost will be passed right along to you and me in more fees and lending will be severely affected breaking the other leg and the backs of many Americans.
• The Bush Tax Cuts are expiring and those that make more than $250k a year will get taxed even more.  Tax the “rich” and businesses and see how much they buy and invest.   
• VAT Tax is coming too it is just a matter of when – and there you go again making more products, goods and services more expensive.
• Capital Gains going up and up.  The investment climate is bad enough and you are already taxed on your income prior to investing and God forbid you invest, take risk and make money – because you are taxed again.
• Non Profit donations will be taxed.
• Home Equity and property taxes will increase.
• HealthCAID may as well be called a massive tax hike.
• Cap and Trade will be vile and will cause fuel prices to go up for certain and many more jobs lost.
• Environmental companies will require a lot of investment to comply – let’s just call it a tax.

Shall I continue or do you get the point?  Consumers are broke already so why don’t we just tax them more.  Once again we CANNOT tax ourselves out of debt!

The 3 most impactful things we can do are a flat tax system, elimination of capital gains and government commercialization.  Get the other 50% that don’t pay taxes to pay their equal share – although even with the VAT taxes coming the lower income people will get tax credits back – so the other 50% pays even more.  Secondly, Capital Gains cheats our economy more than anything else – unleash massive investment here – get rid of it or put it on hold for several years.  Finally, instead of borrowing and using tax revenues to grow and sustain government we should take huge portions of the bureaucracy and privatize it.  This would have a dramatic impact on government revenue, the budget and a windfall of capital and investment (perhaps we can use that to pay off some of the debt as well).  The effects would be dramatic and this is the kind of massive action we need – not more failed policies based on government borrowing.

Unemployment.  Much worse in some areas than others and nationally these numbers do not represent the facts at all.  Unemployment is a record of those getting government subsidies through money borrowed and handed to them.  The people that leave the workforce, not getting benefits anymore, didn’t apply for unemployment, temporary workers (still can’t imagine we hired all these new people for the Census when we could just have the unemployed do it) and the biggie UNDER employment.

• Unemployment is an epidemic.  It will not recover all the jobs lost and even over many years it will not be back.  Many are not going to find work and their benefits have and will run out – that may make the numbers look better because they are not counted in the statistics anymore but this is a misrepresentation of the truth.
• Underemployment is a far greater number than unemployment.  Simple – to work people have had to accept lower wages than they were earning a few years ago.  This would have a massive impact on the overall employment numbers but no one includes them and a result is people have less money and that means less buying.
• Hiring will stagnate and go down.  Tax companies and us to death and wait to see how many layoffs, little or no investment to grow a workforce and a mass migration overseas.
• Overseas will be a much better place to build a business and hire workers.  We will be #2 in the world for taxes and have massive government oversight and intervention.  Companies and the affluent, that employ most Americans, will leave in droves.  Look at NJ, NY and other high tax states – an exodus of businesses and jobs.
• Cap and Trade will crush the energy sector and many companies that rely on energy to operate – so they will raise prices at the pumps and get rid of employees.

Shall I go on or do we all get the point?

These unfortunate citizens won’t be consuming and won’t be able to consumer for a long long time.  Why wouldn’t the government allow all US citizens, rich and poor, small and large businesses to consolidate all their debt this one time?  Why wouldn’t the government step in and mandate that the Credit Bureaus reduce the impact of late payments, the longevity of bankruptcy and foreclosure reporting during the recession times?  Doesn’t it make way more sense to attack Main Street with massive force and help people afford just to live and pay their bills instead of just writing it off and borrowing more money for failed stimulus programs?  I am certain the toxicity of the loans held by Freddie, Fanny, banks, The Fed and Ginnie among many others would not be as bad and people could take advantage of the ultra-low interest rates instead of bankruptcy, foreclosure, 30,60,90 + day lates on their credit.  What a huge boom that would make for the housing industry, banks, brokers and a massive injection of liquidity into American’s pockets.  If they can backstop failed Federal programs with $10 trillion plus they can step in and use the balance sheet to save our streets.  See below how bad the balance sheet is and note the backstops the government has committed to programs.  I believe pure logic says if we make all the current debt more affordable then people are more than likely to be able to repay much more than they can today and the government wouldn’t have to buy all this worthless paper and real estate.

The US Balance sheet tells us we are sunk!  We show everyone the $13 + trillion of debt and deficits far into the future.  But if GAAP accounting rules were used our balance sheet would include all the other liabilities the US has.  These are contingent liabilities – commitments of which many will have to be funded and are backed by the “FULL FAITH” of the US government.  Just remember ENRON!

$5 trillion commitment to the appalling Freddie Mac and Fannie Mae.  The Fed has committed to buy over $1.2 trillion of bad mortgages and already absorbed almost $600 billion and worse Freddie and Fannie bring $5 trillion of liabilities right to the doors step and their stock prices got them right to the Pink Sheets.
$130 trillion in unfunded liabilities.  Much of these projections and current horrifying liabilities is our money that the government has borrowed from and continues to borrow.
$4.8 Trillion commitment by the FDIC to back stop bank accounts.
$1 Trillion already committed to HealthCAID and this is going to go way way up.
$2 Trillion (appx) in new Fed liabilities.
$600 Billion + insured mortgages by Ginni Mae – owned by the government.
$600 Billion + insured by the Federal Housing Administration.
42 states going broke and will have to get a federal bailout at some point.
Declining tax revenue.

Approximate Total:  $145,800,000,000,000

Shall I go on!

The fact is credit addiction got us here and unless we attack the issue at the consumer level the programs will just keep going under water.  So I predict nothing radical will change and this mess will get much messier.

The Oil Spill will have far reaching unemployment, government bailouts, subsidies, cleanup costs, long term economic stifling and drilling bans and moratoriums among much more. This will be a large scale problem on a national basis – just more fuel costs for the fire at a minimum.  Pandering a $20 billion fund that “The President” got for us is a fallacy – BP was already setting it up – how horrifying is that trash.  Then all these trips to the Gulf all of sudden – to make up for the abysmal leadership – Do they really think we are just outright ignorant and stupid!

Global Economy.  The G-19 now face alarming debt problems.  Huge in fact!  But they are all implementing austerity measures to curb spending, increase taxes and reduce debt.  The global economy and the US economy are at odds and the credit addition that fueled the growth has run dry.  Banking reform will suck up the mud too.  The world realizes it is in big trouble yet the US stands alone in policy to borrow and borrow and spend and spend.  What will be the result of a massive pull back in worldwide borrowing to spend and increased taxes – less money for people and governments to buy stuff!  This is going to make things much worse for the global recovery and definitely bad news for America.  China is an overheated economy and is and will slow down.  China is also distancing itself from reliance on the US to buy its stuff and we will see a pull back on their buying our debt – it is a fallacy that we are so economically linked that they wouldn’t do that.  The emerging markets just will not make up the difference by a long shot.  This is going to get a lot worse and riots in Greece are just the beginning.

Up and down the food chain – manufacturing products for stores that went under or are going under for people who can’t or won’t buy will be forced into bankruptcy, downsized and purchased for pennies on the dollar.  To make sure that happens taxes will go up, consumers will have less money and financial reform will dry up their credit.  Services like Airlines, travel and tourism (The Oil Spill will devastate and is devastating many areas of the country that rely on this), restaurants, health clubs you name it.  At least I can predict that liquor and beer sales will be way up.

The long list goes on and on and on.  And what do we see?  Political pandering and billions being spent on media to cover up the terrible truth.  Obama is touring the country to help Democrats stay in power and get reelected.  More promises and promises and promises and using gaffs, negative ads, missteps and anything imaginable to get our attention far from the truth  – when is all this BS going to end.  We have a Gulf disaster, moral, social, political and economy bankruptcy from coast to coast and our leaders are just trying to get reelected instead of doing the things they were elected to do.

WHAT IS WRONG WITH US!
I SAY EVERYTHING!