I'm glad that I'm not the only one who is just a little miffed at the way that Fed chairman Ben Bernanke and his elite staff have chosen to handle our economy. My feelings fall pretty much in line with those of investment genius Jim Rogers. I listened to a short interview with him today on public radio. He pretty much confirmed my belief that the dollar could be going the way of the dinosaurs. For crying out loud, the Fed dumped about four tons of greenbacks on the financial system Thursday. Bank leaders such as Citigroup Inc. (NYSE: C) aren't generating enough profit to meet the demands of operation and to please the shareholders at the same time! What's the Fed going to do about the 80% profit decline at Wachovia Corp. (NYSE: WB)? A lower basis point for bank borrowing won't even scratch the surface of the cash shortfall. In fact, the lower the basis point the more it injures the bank's ability to make a profit on the loans that we need right now to salvage some home ownership scenarios from the mortgage debacle. How much more evidence do you need to realize we are living in a time of disastrous fiscal policy? We're lining up to make 1929 look like a cake walk.
In the next two years, Americans as consumers could become increasingly irrelevant in the world economy. You are entering a time when reserved industrial capacity worldwide could create a global marketplace where absolutely everything will be marketed on a sale to the highest bidder basis. They say that we peaked in world oil production sometime about the middle of last year, yet world demand continues to grow. Honestly, what do you think is going to happen?
You can't believe one claimed economic statistic that comes from Washington. They're feeding you a line of crap. Look around your country and read the news. You do the math. Our government sources released on Thursday some heartening news about new job numbers for the country. The figure I believe was 110,000 new jobs, but what they didn't tell you was that about 70% of those jobs present reduced pay and benefit packages when compared to those jobs lost in October, and that scenario has been going on for several years now. In our current economic climate, the affluent and those in government are able to ride with the tide of inflation, which means that they don't need to report inflation accurately. If our country remains on its current course, the rest of us had better be prepared to tighten our belts and lower our standards.
Can I present solutions, you may ask. I have not many to offer aside from severe adjustments to our government's money policy. I think we may now have to ride this one out. I can tell you though that right about now my only new domestic investments would be in railroads, warehousing, oil and water, and solar. I am also considering taking a crash course on commodities, which I currently know next to nothing about. Ownership will mean control going into the next decade. Think very hard right now about what you want to own.
I'd stay out of China until their bubble bursts. I'd be looking at India yet for hot growth investments. Geothermal interests me as an investment, and solar does also, but in solar I'd play shy with traditional technologies for now and take a good hard look at some of the fringe alternatives such as focused solar energy collection and solar cooking, among others. If you're going to survive into the next decade, you need to realize that at $115 a barrel crude oil is going to change your world more than 9-11 ever did. Seek out the alternatives . Remember that we are at the crossroads where fuels and materials not petroleum based can attempt to economically compete with their petroleum-based competition.
Can anyone tell me why the Brits are crawling up our pants leg? I think it's because they know what's coming and they're getting ready for it. The British know that the world economy is going into a full shakedown of currency and trade exchange values. I believe that they feel the need to brace the pound against the dollar for sheer power of volume, and that may help to prop the dollar up some but otherwise, in my opinion, economically they do little for us. We had better make the adjustments needed to bring our currency value up and freeze our nation's debt incursion habit starting right at the very top. Your economy is increasingly built upon phantom dollars that your government can't back up, and very soon the dollar could be an "also-ran" currency. Please leave your global superpower badge at the door on your way out.
As the concept of manufacturing alliances between nations becomes more acceptable (which it is), we had better be forming our groundwork right now. For instance, if we don't enter into trade and supply contracts with Canada, in a couple of years a 2x4 will cost us about $18. Think about when China cracks the code for a car safe enough to drive on American roads. We'll be buying steel by the pound then rather than by the ton and you may then be obligated to kiss the American auto manufacturing pastime goodbye. I only hope and pray that General Motors Corp. (NYSE: GM) continues to make good global moves in keeping with the past couple of years.
Now is a great time to seek out a government grant because they're trying to flood your economy with baseless cash. Just be ready to pay $7 for a loaf bread. All of this is taking place at a time when your government, at all levels, is spending money hand-over-fist that they don't have, and meanwhile the tax base they support that spending with is beginning to deflate in value. Just try to find more than a handful of large manufacturing operations in this country that are truly healthy in a net profit sense. We can hardly compete anymore in a world that is paying its laborers less and less to make products out of raw materials that are costing more and more. Take a hint here, check into scrap metals.
I hate to be a downer but I've promised that I'd never lie to you. Much of what you read here I warned you about coming into this year. As the value of the dollar degenerates and true inflation keeps its current pace, it will become increasingly difficult to justify domestic manufacturing, and as manufacturing goes, so goes our country. Disastrous money policy and an economy financed by debt are creeping back up and threatening to overtake a manufacturing base that has been sorely injured by ruinous government policy.
But that's just my opinion.
Entrepreneur's Journal: Want to get a piece of the Buffett/Goldman honeypot?
The week in preview: No turkey earnings from Tyson, Hormel, Cracker Barrel ...
Comfort Zone Investing: Intel is saying something ... can you hear it?
Reader Comments (Page 1 of 1)
11-05-2007 @ 12:39PM
Mr. noitall said...
Excellent article, Gary.
Some of us have been warning people about this scenario for well over a year now. It looks like Goldilocks is still sleeping and the 3 bears are at the door, the big bad wolf is blowing down the 3 little pigs house and Bernanke is out in the forest with no bullets left in his gun. I think we'll have to ride this one out. We can't expect the same people who caused the mess the come up with any solutions. Don't count on our "leadership" to start to act responsibly all of a sudden. That's just not logical.
I've suggested that an alternative, underground global currency should be created (gold in the form of jewelry), in order to help us commoners get through these times. Maybe scrap metals could be used for small transactions. So hold on to your nickels & pennies they might be worth more than your paper dollars some day........soon.
One more thing about our "leadership" and I mean BOTH parties. It seems that they do an EXCELLENT job managing their own money. Most of them are multi-millionaires, their kids and grandkids are set for life. But when it comes to managing OUR money, the tax payers, they all turn in to finacial morons. Explain that phenomenon.