The Invisible Boom

In yesterday's New York Times, David Leonhardt wrote an article entitled, "For Many, a Boom that Wasn't. Here is the link to that article if you wish to read it:

In 2000, at the end of the previous economic expansion, the median American family made about $61,000, according to the Census Bureau’s inflation-adjusted numbers. In 2007, in what looks to have been the final year of the most recent expansion, the median family, amazingly, seems to have made less — about $60,500.

What's even scarier is that this is based on government inflation figures. These are severely understated. The dollar has lost 40% of its value in the last 6 years but you wouldn't be able to tell by looking at any government figures. Unfortunately, most Americans are even worse off than they would think.

We have wasted around $1 TRILLION in Iraq and financed this war via inflation. HEY WAR MONGERERS, IF YOU WANT BLOOD SO BAD THEN PUT YOUR MONEY WHERE YOUR MOUTH IS AND PAY FOR THE WAR YOURSELF. Of course the chickenhawks in this administration would never raise taxes on their billionaire corporate scumbags. Instead we all get to pay for the war with a depreciating greenback.

Deflation or Inflation

Okay. So the US economy is in a recession. However, the $64,000 question is: Will the future bring inflation or deflation? I believe that there will be deflation in certain areas of the market (i.e. housing, derivatives, etc.) and inflation virtually everywhere else. This is because the dollar is no longer linked to gold and central bankers will print as much as they can. Bernanke himself has said that he will do whatever possible to stave off a deflation. Helicopter Ben to the rescue.

With $110 oil and $920 gold it is hard to argue for deflation.

Here is an interesting quote from Woodrow Wilson, after he enacted the Federal Reserve:

I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world, no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of a small group of dominant men.

No market is free with a central bank. The idea that a central bank can intervene and establish the correct interest rate is laughable. With inflation currently running at around 10% or 4.3% if you believe the government lies, how does it make sense that the Fed Funds Rate is around 2%. And the rate cutting cycle is still not over. Not for a second. Bernanke will make sure that this Wall Street party keeps going. The billionaires will have plenty of more free lunches. Well not exactly free, they will be wholly subsidized by you and me, via the inflation tax. Remember, the big J.P. Morgans and Rockefellers get to play with the fiat money first. They don't have to worry about inflation.

And here is what Jefferson thought about central banks. This view was also held by Andrew Jackson, one of the few common man Presidents this nation has had.

If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, (i.e., the "business cycle") the banks and corporations that will grow up around them will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

But of course the big banking establishment won in the end with the tacit approval of Congress. After all, if you are a politician it is a lot easier to get elected by running up huge deficits, making billions in promises, and inflating away, all the same time as you deny any fundamental fiscal problem and cover up the scam.

Hello All

Just starting this blog today. I've done this a few times before but this one has a different scope. In the coming days and months I will follow the unfolding of what is sure to eventually become one of the most devastating economic depressions of all-time.



Stocks ended a Super Cycle degree advance dating back to 1932, the Great Depression lows at the peak in 2000, and have ushered in a high order secular bear market.

As far as the short term goes I think the powers that be will be able to power the markets even higher this year by pumping more fiat money into the system. This is just a charade though and will ultimately end in an inflationary bust. Any extended rallies this summer are merely rallies in what is now a secular bear market. Remember that rallies in a bear market are usually strong and momentous, just as corrections are in bull markets. This is because the weak hands are shaken out of the market. But the smart money will always be with the trend and will block out the day to day noise.

Today the S&P closed at 1372 and change. Could we retest the highs of 1576 set in October of 2007? It would definitely not surprise me but any rally that takes us this high will be met with serious resistance and will be the end of a wave up. When this rally is over the target for the next wave down is 1000. This would be devastating for the market as we haven't seen these levels since the fall of 2003.