In a nice sounding call to arms President Obama charged Vice President Joe Biden with heading up a “task force on the middle class.” It is not exactly clear how the task force will help this particular demographic, other than it being “a panel made up of Cabinet officials, business, labor and advocacy groups to ensure that policies and legislation help increase the living standards of the middle class.”
Additional economic fixes cited in this article include the $819 billion fiscal “stimulus” bill passed unilaterally by Democrats in Congress, and new labor policies that will “enhance the ability of workers to organize.”
President Obama clearly states:
I do not view the labor movement as part of the problem, it’s part of the solution. We need to level the playing field for workers and unions.
In a seperate press conference, Obama voices his frustration with Wall Street and corporate executives, citing bonuses and other compensation structures as inappropriate to the times. He states that “this is not the time for profits,” urging corporations to cooperate with government and commit resources to growth strategies. It is not clear to what extent this language will translate to policy.
Those are the facts, here’s my take on it:
America is suffering the consequences of decades of bad policy-quasi Keynesian inflationary policy, to be specific. Fiscal and monetary tools have been employed to prop up asset prices and bad businesses whenever the business cycle showed signs of weakness. Further, Federal Reserve policy since its inception has inflated away the real purchasing power of our currency; consistently eroding the real value of savings and fixed income investments, primarily affecting the low and middle classes.
The policies Obama is advocating are not pro-growth. Increasing labor costs through additional unionization, borrowing and spending trillions, and attacking corporate profits are misdirected efforts that will render America less competitive in the global marketplace.
To sum this up, we have artificially built up over-capacity throughout our economy evidenced by asset price devaluations and bad businesses still standing. This has led to systemic mal-investment, the consequences of which have been surfacing since last year.
Next, we have pervasive political assaults on the lower to middle classes, particularly because these demographics are not as well poised to benefit from artificially propping asset prices. Rather, the bulk of their wealth resides in savings and fixed income holdings which are pillaged by inflation to fuel the various asset bubbles we’ve experienced. This is reverse socialism for the rich and constitutes ridiculous transfers of wealth by subterfuge. The perversion is that this occurs while politicians rhetorically vow to defend the very classes they are destroying.
Here’s my advice to clients, friends, and family: Get your assets out of harms way! Consider transferring portions offshore, and avoid the worst managed fiat currencies. Consider www.goldmoney.com as an alternative, where you can physically own, store, and use gold or silver as backing for an offshore bank account. Avoid long-term debt instruments denominated in USD, short 30-Year Treasuries if you’re feeling particularly bold, and start acquiring high yielding foreign assets.
I’m not advocating speculating on high risk foreign markets; rather, I think it prudent to replicate certain aspects of your current domestic portfolios in friendlier foreign markets. At a minimum, hedge some of your wealth from the disruptions in our economy that are bound to occur with these persistently irresponsible government policies. Politicians are rolling the dice with our savings and futures, betting that more inflation, more borrowing, and more spending will solve the problems these same behaviors have caused. If they are wrong, at least be prepared!
Disclosure: Short TLT