House of Cards

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Well, it appears that the economy is back on solid footing, the stock market is zooming ahead, sales at the stores are increasing and things are generally moving in the right direction, at least that’s what the financial “experts” would have you believe. I have looked at this from the most objective point of view possible and I can tell you that this whole economy is built on a house of cards. Let me explain:

One of the disturbing trends I have found is that every time there is bad macroeconomic news on the U.S economy the stock market goes up. Has anyone else noticed this? It’s simple, the more the bad news, the more likely that the Federal Reserve will continue its money printing exercises. Everyone loves free and cheap money, so if there is more money in circulation, then it is natural that the prices of “stuff” will go up, which includes some stocks, commodities and precious metals. Think of it like this, the stock market is a crack addict, and the Federal Reserve is his reliable pusher. So when the crack addict (the economy/stock market) is weak, his pusher (The Federal Reserve) is there to give him his next fix. Anyone who thinks this is a long-term sustainable solution is either a stock cheerleader or delusional. This is an action that will inevitably debase the currency and will create future inflation, and inflation is a tax on all consumers, especially the lower to middle income earners.

Has anyone also noticed that housing prices are beginning its next leg down? Yes, housing inventories have soared, which means that a price drop is inevitable and it is already beginning to happen. This whole crisis had to do with the housing market, so if houses are set to leg down again, how do you believe this will affect the REAL economy, not the stock market, but the economy? Considering that every time housing prices go down, it adds incentives for people to default on their home loans, especially the ones who are underwater on their loans; it will be the banks who take the hit, and if the banks have to write those losses down, how do you think this will affect their lending patterns? It won’t be positive, let’s just put it that way.

Also, whatever happened to all those “toxic” assets the banks were holding? One day they had hundreds of billions of bad “toxic” debt, then the next, there was no mention of it. It’s simply because the government decided to eliminate the mark to market accounting. What this means is that instead of these banks reporting the actual real time value of these “toxic” debts that they own, they can apply a future price of their liking to it, which in short means they get to hide their TRUE debt for a while. Does that sound honest to you?

Meredith Whitney, one of the most accurate bank forecasters out there, recently wrote a dire report on municipal and state bonds, and in her report she stated that there would be hundreds and hundreds of billions of dollars in defaults. Simply because state and local governments are so in debt, not just because of the down turn we experienced, even though that made it much worse, but mainly because of the unfunded pension liabilities that these states will owe. California, Illinois and New Jersey are all screwed, no matter how good the economy gets there; they will never be able to overcome their debt. The deals struck by the Unions and the politicians beholden to these corrupt organizations are amazing, and they should all be put in jail. But, it is what it is, and now these states will have to pay dearly. They are already beginning to lay off hundreds of thousands of workers, and this will continue along with tax increases. The politicians of these states have really screwed them up and now soon they will be asking for a bailout from Uncle Sam, which means that they will either default or we will pay for their sins.

Also, has anyone noticed that oil prices are now over $90 a barrel and rising? So let’s see here, we have oil approaching $100 a barrel and food prices soaring, all while the unemployment rate is rising and nearing 10% YIKES!!!!

And how about our National debt? You don’t believe that the bond vigilantes will hold our nation accountable for our debt just the same way that we saw with Greece, Spain, Portugal and Ireland? If you don’t believe that this could happen to our country, then good luck. If this were to occur, the dollar would plummet and precious metals would go through the roof, most likely doubling in a very short period of time.

Folks, I’m here to tell you that this economy is not strong, contrary to the “experts” popular belief. If you haven’t protected yourself yet with precious metals, then I suggest that you do so before it’s too late.

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