American Austerity Is About to Begin

While all the talk at present is about economic corners turned and markets charging ahead, no one is paying much notice to an American economy deteriorating before our eyes. These myopic commentators seem to be simply moving past the now almost-universally held conclusion that before the crash of 2008, our economy was on an unsustainable course. If these imbalances had been corrected, then perhaps I too would be joining in the euphoria. But evidence abounds that we have not veered at all from that dangerous path.

Last week, the Bureau of Economic Analysis reported that consumer spending as a percentage of U.S. GDP has risen to 71%, a post-World War II record. This level is notably higher than other wealthy industrialized countries, and vastly higher than the levels sustained by China and other emerging economies. At the same time, our industrial output is contracting, our trade deficit is expanding once again (after contracting earlier in the year), and our savings rate is plummeting (after an early year surge).

The data confirms that government stimuli are worsening the structural imbalances underlying our economy. The recent 'rebound' in GDP is not resulting from increased economic output, but merely from the fact that we are borrowing more than ever. That is precisely how we got ourselves into this mess. An economy cannot grow indefinitely by borrowing more than it produces. Not only is such a course untenable, but the added debt ensures a deeper recession when the bills come due.

This soon-to-be-called depression will not end until the pendulum of consumer spending habits swings violently in the other direction. This will be a jarring change, but it is the splash of cold water that we need to return our economy to viability. I believe that consumer spending as a share of GDP will need to temporarily contract to roughly 50% of GDP, before eventually moving toward its historic mean of 65%. Such a move would indicate a restoration of our personal savings, a decline in borrowing and trade deficits, and an increased industrial output. That would be a real recovery.

In the meantime, the higher the spending percentage climbs, the more painful the ultimate decline becomes.

Consumers and governments must spend less so their savings can be made available to businesses for capital investments. Businesses, in turn, will produce more products and employ more people – increasing domestic prosperity. However, rather than allowing a painful cure to return our economy to health, the government prefers to numb the voting public with a toxic saline-drip of deficit spending and cheap money.

The primary factor that enables our government to peddle economic snake oil is the dollar's unique role as the world's reserve currency, and our creditors' willingness to preserve its status. By buying up dollars and loaning them back to us through Treasury debt, productive countries give American politicians carte blanche to play Santa Claus.

Ironically, as foreign governments finance our spending spree, they are simultaneously scolding us for our low savings rate. At the recent G20 meeting in Pittsburgh, all agreed – including President Obama - that resolving the global economic imbalances was a top priority. By definition, this would require Americans to spend less and save more. However, with foreign central banks continuing to buy our debt, the President has shown no political will to encourage this change.

Normally, if politicians run up the government deficit, voters soon suffer the unpleasant consequences of higher inflation and rising interest rates. Yet, if foreign central banks keep supplying the funds, these consequences are indefinitely postponed. As a result, there is no need for American politicians to ever make the tough choices required to solve our problems.

Instead, the burden may fall squarely on the citizens of those governments doing all the lending. The conflict is that within the creditor states, a vocal minority actually benefits from this subsidy (owners of Chinese exporters, for example) while the overwhelming majority fails to make the connection. Thus, foreign politicians have the same incentives as ours to keep playing the game.

The bottom line is that foreign governments can lecture us all they want about the need for prudence but if they keep lending, we'll keep spending. Any parent knows that if you give your child a curfew yet never impose any penalties when it's violated, it will not be respected. My gut feeling is that foreign governments are tiring of our conduct and on the verge of finally imposing some discipline. That means the dollar's days as the world's reserve currency are numbered, and the days of American austerity are about to begin.

Comments

[Dave Wrixon:]

Very good, but you have not explained how to get the Banks to lend to US industry when they won't do it now, even though they are in receipt of free money. Getting Americans to save is one thing. Preventing those saving flowing out in the productive capacity of other countries is going to be entirely another. In order to attract capital investment US Industry must demonstrate its potential to achieve a competitive edge. That could be a tough call, unless Obama introduces exchange controls, which is a bit a problem if you are still the Reserve currency.

Oct 18 05:37 AM

[Matevski:]

"An economy cannot grow indefinitely by borrowing more than it produces. Not only is such a course untenable, but the added debt ensures a deeper recession when the bills come due."

Unfortunately, it's the civil population that will pay this bill. Would it have been the government and the financial elite, then they would probably not kept borrowing money from abroad for all eternity.

Oct 18 06:51 AM

[Liz:]

1. A lot of the savings rate decline can be attributed to the recent rise in gas prices.

2. While it's true that consumer spending accounts for 71% of GDP, 20% of that is health care! (It's been that way for over 40 years.)


Sorry to burst your bubble, but the American consumer is not currently on a spending spree.

Oct 18 06:52 AM

[optionsgirl:]

Mr. Schiff, this article is consistent with what you have written previously, and I believe you. I only hope the American people will make the changes necessary before it is too late. We need you in the Senate now more than ever.

Oct 18 07:03 AM

[Dave Wrixon:]

Or perhaps better have the Senate closed down so his influence would be superfluous.


On Oct 18 07:03 AM optionsgirl wrote:

> Mr. Schiff, this article is consistent with what you have written
> previously, and I believe you. I only hope the American people will
> make the changes necessary before it is too late. We need you in
> the Senate now more than ever.

Oct 18 07:20 AM

[Dave Wrixon:]

Unfortunately, the entire US Democratic System needs to be revamped, so that it does what it says on the Tin.

Oct 18 07:21 AM

[Michael Clark:]

Raise interest rates and we will have both the austerity that is needed and the higher savings rate. We will have the pain of a massive contraction and higher bankruptcy -- but we will begin to confront the truth about the orgy we have just been through, engineered by the financiers and gladly embraced by most Americans.

We cannot get to the other side without embracing the truth (and suffering the pain associated with that truth). This administration is just stalling, pretending that Judgment Day can be put off. The longer Judgment Day is put off, the longer it will take to re-create America, with a new ethic and a new productivity.

Oct 18 07:34 AM

[User 353732:]

When a parasite consumes a host, initially the pain is hardly noticed; then the distress grows as the parasite increases and the host decreases. These are known as "boom" times for the parasite and all who live in the Parasitic Economy believe it is the best of all times in the best of all possible worlds.

There soon or often reaches a point where the host becomes the slave; The Productive Economy no longer gives some of its portion to the Parasitic Economy but is coerced into giving most of its portion and exists only to serve the voracious and insatiable appetite of the parasite.
At this stage, the Productive Economy exists only at the pleasure of the Parasitic Economy and no longer has the capacity or even the will to rip out or purge the parasite which is now endemic. Clearly this is now the state of Main St and the Productive Economy versus the WashDC-Wall ST-MSM alien invader for whom all America is now its personal fiefdom and the Middle Class its chattels.

There may still be cures available. However, the brief yet agonizing pain that any cure entails seems to many ,maybe even the majority of Americans, more terrifying to contemplate than slow yet inexorable decay of economic and civil society; loss of liberty, prosperity and security ; and the still desperately denied but accelerating termination of the American Experiment.

2. The single most potent and insidious instrument of resource control and weapon of destruction at the disposal of the US Regime is the Fiat Dollar: it is the invisible, silent, mass killer that spreads in the economic night like a noxious vapor: too stealthy to be noticed until it is too near to be resisted.
As long as the Fiat Dollar spreads its corruption through the world, foreigners will continue to lend to the US Regime and many Americans will continue to believe that deceit is truth, unreality is reality and the fake is genuine.

When(the time for IF sees to be nearly over) the Fiat dollar falls, the parasitic regime will be briefly weakened, confused and greatly distracted. That will be the window of opportunity for Americans to regain their Nation, reclaim their legacy and regenerate the Productive Economy while thoroughly cleansing WashDc, Wall St and the MSM.

Otherwise, the last great shared event in the life of Americans will be the funeral of the Constitution and the mass burial of personal and property rights.

Oct 18 07:50 AM

[Leftfield:]

There was a time of confusion, September, '08, just before and after TARP was proposed. The talking heads on Bloomberg radio from Wall St. didn't have the usual talking points. They stumbled about in confusion as their world teetered. Then, the day TARP was proposed, one of them manically kept repeating his relief over the "gleeful compromise" just announced.
During this time, MSM, including NPR, continued on, life and business as usual. The meltdown was an important news item, TARP was just another day at the office.
Whether Americans can be bothered to action by the accelerating and increasingly clear decline of the US is uncertain. I imagine future crises will, as did '08, present inflection points for Americans to respond with their heads in the sand or to awaken before the parasitic economy is established in full control.
Our rights have been subverted. "Freedom of speech" has been co-opted by rampant corrupt interests who have bought our government and MSM. Fake and diminishing "rights" bestowed by the most grossly intrusive legal system ever, distract from the God-given rights we have from which we bestow limited powers on government, not the reverse. This system, so overrun with corruption, is bought and sold to the highest bidder which is not Main St. anymore. Fiat, now, fake money, is generated by and for the fake, parasitic sector, for our grandkids to pay.
We must elevate voices such as Peter Schiff's over yet another bread-and-circuses "stimulus" check from Washington.

Oct 18 08:37 AM

[davidbdc:]

Agree in principle, but where is the data to back up the claims of consumers borrowing more than ever?

"merely from the fact that we are borrowing more than ever"

I don't know of very many folks being approved for additional credit, in fact I know of more and more people having their credit limits cut or eliminated. And small business folks that I know are being squeezed by their banks when it comes to lines of credit.

I agree that we need to save more as a nation. Having our government put forth a real energy plan, with a stated goal of eliminating 100% of foreign oil imports within 10 years would be a good start. Make spending cuts elsewhere to pay for it. And tell people the truth.....everyone will have to tighten their belts. Wealthy will see their tax rates rise, social security will see reduced benefits, ration public health care, reduce military spending, and no more transfer payments to the states.

Oct 18 08:41 AM

[De Graaf:]

The political problem (for creditor nations and Central Banks that fund the US deficit) when they stop subsidizing America's exponential growth dream is too disturbing for them.

Remember what happened to France when they didn't suppor the war? There you go.

Those creditor nations just think by themselves...let us just get a low return (or perhaps a moderate loss) on our US dollar investments and keep the friendship going, or we could face a complete isolation in international matters by veto...

1. You fund the deficit and have good international relationship although the US will lose hegemony and power over time, or

2. Stop funding the US deficit and risk protectionist measures against your nation, plus the added effect of serious fiscal reform in America, once again revamping the US as a global power and lose respect for the coming century...for example.

Choice is clear for them, but I understand Shiff's ideology and principle which I fully support by the way, from America's perspective.

Oct 18 09:05 AM

[j-dub:]

"Last week, the Bureau of Economic Analysis reported that consumer spending as a percentage of U.S. GDP has risen to 71%, a post-World War II record. This level is notably higher than other wealthy industrialized countries, and vastly higher than the levels sustained by China and other emerging economies. At the same time, our industrial output is contracting, our trade deficit is expanding once again (after contracting earlier in the year), and our savings rate is plummeting (after an early year surge).

The data confirms that government stimuli are worsening the structural imbalances underlying our economy. The recent 'rebound' in GDP is not resulting from increased economic output, but merely from the fact that we are borrowing more than ever."


Thank goodness the dow is at 10k to balance all of that other bad stuff out!!!!

Oct 18 09:14 AM

[chap08:]

OK Mr Schiff and all you hard money SA types, how is this consistent with a stronger dollar?

Mr Schiff calls for a simultaneous decline in consumer spending and increase in industrial output. Great, I agree, but how do you achieve that with a stronger dollar? Who is buying the increased output if not us? It has to be exports right?

OK, so we need to export this increased production, plus what we've stopped consuming. That's quite a lot. Meanwhile the trend in our trade deficit has shown that American workers and industry have become increasingly globally uncompetitive. So we need to reverse that trend at the same time. Then, on top of that, you want to increase the value of the dollar??

Let's say the dollar goes up by 20% to where it was 6 months ago. OK, so our goods cost 20% more to our export buyers. So, to stand still, we need to cut our prices by 20%. But we don't want to stand still, we want to export a big chunk of our current consumption and then add the "increased industrial production" on top. So how much do we have to cut our prices by to achieve that? 50% in total?

How can we cut our prices by 50%? About the only way that you can do that is a wage cut of 90% - for everyone. How's that going to work? Oh, I forgot, at the same time, interest costs to business and individuals have gone up as part of your strong dollar policy.

Strong dollar? Dream on.

Oct 18 09:34 AM

[yellowhoard:]

There is no painless solution to our problem.

Peter is simply the only person currently running for office that understands that the path that we are currently heading down will end in our complete destruction.

Yes. As chap08 would say, a strong dollar will be very destructive to the US. GE and a whole lot of other concerns will go to zero if rates climb to 6%, much less the 10% or more that will be needed to stabilize the buck.

A strong dollar would probably result in 25% unemployment, but we'd survive as a republic. People will take care of one and other. That's what we do.

Oct 18 09:57 AM

[Ricard:]

Another erudite piece by Peter Schiff.

The key quotes for me:

"The primary factor that enables our government to peddle economic snake oil is the dollar's unique role as the world's reserve currency, and our creditors' willingness to preserve its status. By buying up dollars and loaning them back to us through Treasury debt, productive countries give American politicians carte blanche to play Santa Claus."

"However, with foreign central banks continuing to buy our debt, the President has shown no political will to encourage this change."

Carte blanche indeed. We may end up exhausting a good amount of our credibility, but this time will probably not be the time when we pay the piper - China knows this all too well.

Oct 18 09:58 AM

[ron_paulite:]

Yes, cut wages. Let the market decide on wages.

Weakening the dollar is the same as cutting wages because a weak dollar will push up gas price and other imported goods. Cutting wages is more honest and will make people realize that if you want to earn more, you have to be more productive or innovative, you have to move up to value chain.

But if the dollar keeps on falling, it will definitely lose its reserve currency status and when that happens, it will bye bye America the economic superpower and welcome banana republic. Social Security will then collapse. US will not be able to borrow money from the rest of the world anymore - except at very high interest rate.


On Oct 18 09:34 AM chap08 wrote:

> OK Mr Schiff and all you hard money SA types, how is this consistent
> with a stronger dollar?
>
> Mr Schiff calls for a simultaneous decline in consumer spending and
> increase in industrial output. Great, I agree, but how do you achieve
> that with a stronger dollar? Who is buying the increased output if
> not us? It has to be exports right?
> How can we cut our prices by 50%? About the only way that you can
> do that is a wage cut of 90% - for everyone. How's that going to
> work? Oh, I forgot, at the same time, interest costs to business
> and individuals have gone up as part of your strong dollar policy.
>
>
> Strong dollar? Dream on.

Oct 18 10:01 AM

[Mayascribe:]

Peter: Please, please win a seat in Congress, and then bring back bankruptcy before my beloved USA bankrupts itself. Please, please unseat Dobb's.

Leftfield & Hoard: Great comments. I'll add that the leadership of our country are both intellectually and economically bankrupt. I'd like to Chapter 13 every one of the DC morons whoring themselves out to Wall Street.

Oct 18 10:17 AM

[User 283977:]

I would add morally bankrupt to your list Maya.

Oct 18 10:20 AM

[studiophoto...:]

>>> Agree in principle, but where is the data to back up the claims of consumers borrowing more than ever? <<<

"merely from the fact that we are borrowing more than ever"

>>> I don't know of very many folks being approved for additional credit, in fact I know of more and more people having their credit limits cut or eliminated. And small business folks that I know are being squeezed by their banks when it comes to lines of credit. <<<

But why should Mr. Schiff let the truth get in the way of hyperbole?

Oct 18 10:24 AM

[Dave Wrixon:]

It would also seriously curtail government expenditure as the cost of servicing the debt would rise dramatically.


On Oct 18 07:34 AM Michael Clark wrote:

> Raise interest rates and we will have both the austerity that is
> needed and the higher savings rate. We will have the pain of a massive
> contraction and higher bankruptcy -- but we will begin to confront
> the truth about the orgy we have just been through, engineered by
> the financiers and gladly embraced by most Americans.
>
> We cannot get to the other side without embracing the truth (and
> suffering the pain associated with that truth). This administration
> is just stalling, pretending that Judgment Day can be put off. The
> longer Judgment Day is put off, the longer it will take to re-create
> America, with a new ethic and a new productivity.

Oct 18 10:36 AM

[Dave Wrixon:]

Yes, you are right to a point, but it is all relative. If they don't do something about it soon the biggest growth area is going to be wheelbarrow production, and you are going to need ATMs with their own printing capacity and preferably their own log mills.

On Oct 18 09:34 AM chap08 wrote:

> OK Mr Schiff and all you hard money SA types, how is this consistent
> with a stronger dollar?
>
> Mr Schiff calls for a simultaneous decline in consumer spending and
> increase in industrial output. Great, I agree, but how do you achieve
> that with a stronger dollar? Who is buying the increased output if
> not us? It has to be exports right?
>
> OK, so we need to export this increased production, plus what we've
> stopped consuming. That's quite a lot. Meanwhile the trend in our
> trade deficit has shown that American workers and industry have become
> increasingly globally uncompetitive. So we need to reverse that trend
> at the same time. Then, on top of that, you want to increase the
> value of the dollar??
>
> Let's say the dollar goes up by 20% to where it was 6 months ago.
> OK, so our goods cost 20% more to our export buyers. So, to stand
> still, we need to cut our prices by 20%. But we don't want to stand
> still, we want to export a big chunk of our current consumption and
> then add the "increased industrial production" on top. So how much
> do we have to cut our prices by to achieve that? 50% in total?<br/>
>
> How can we cut our prices by 50%? About the only way that you can
> do that is a wage cut of 90% - for everyone. How's that going to
> work? Oh, I forgot, at the same time, interest costs to business
> and individuals have gone up as part of your strong dollar policy.
>
>
> Strong dollar? Dream on.

Oct 18 10:47 AM

[Albertarocks:]

On Oct 18 09:57 AM yellowhoard wrote:

> A strong dollar would probably result in 25% unemployment, but we'd
> survive as a republic. People will take care of one and other. That's
> what we do.<

YH, as you've probably figured out by now, I'm not an American. But I just gotta tell you, it makes my heart feel real good to hear an American say those words. 95% of Americans think their form of government is a "democracy". And the same 95% don't stand up and scream from the rooftops as their constitution gets trampled on. According to a few Americans I admire beyond words (Ron Paul, Peter Schiff, Alan Grayson), the Constitution is still a valid document. The sooner that is recognized, the sooner the pain in the USA will come to an end.

Oct 18 11:13 AM

[Mark Bern:]

I also agree with the theme of the article. We are headed down the wrong path; a path that will culminate in a long and painful economic stagnation for the masses.

Isn't it funny, though, that the party now in power has always positioned itself as the protectors of the poor and middle class? The evidence that we are witnessing currently would indicate that they are really the party of helping the rich get richer and the expansion of the number of poor people in this country.

The poor are being assisted by government. They don't pay any taxes. So they look to the government to bail them out. What it's going to take to get to the necessary pain is for the poor and middle class to realize that things just keep getting worse regardless of the promises that keep emanating from their leaders in Washington. They don't have a clue about who's making the money on Wall Street or how, so it doesn't matter. They listen to MSM for all their "input.."

I am sorry to say that I suspect it will take a prolonged period of failed attempts by government to right the ship, with the average wage earner getting hammered by rising prices (due to a decline dollar increasing imports of oil and consumer goods), increased costs for health care in spite of "reform," a cap and trade system that also increases the cost of energy for every family, and the addition of a VAT that will increase the cost of everything before reality will sink into their heads. We may have to endure several more years of things getting worse before enough voters will actually understand that it is "their representative" that needs to be voted out of office, not just the other guy.

I am not trying to be pessimistic. I don't like the answer I am offering. It's just human nature, and the track record of this nation supports the assumption, that we won't do anything about the real problem until it is completely out of control. Today, we are merely in the denial stage. As a nation, too many people still believe that all the problems we are living through were brought about by the past administration. We blame Bush for everything! It isn't just Bush, it's the system of career politicians on both sides of the aisle! They won't make the necessary, difficult decisions because it would mean political suicide for them personally. And their own career comes before country, before constituents, before everything. That is the foundation of our problem.

Until we get back to the basics of the Constitution and reinvent our government to one that creates an environment conducive to productive growth. creativity, and the entrepreneurial spirit we will continue to flounder.

While Peter Schiff is on the right track, it will take far more than one elected official to change the course of this great nation.

Oct 18 11:21 AM

[chap08:]

yellowhoard, I agree that there is no painless solution, but I believe that you under estimate the pain of the solution that you favor.

25% unemployment with 10% interest rates and no bailouts? Nowhere near it. Try 50% plus, in a recessionary spiral. The key point is that unemployment and poverty would reach the point at which civil society breaks down. I am touched by your view that we would take care of each other (I hope you're right) but, the cold reality is that it wouldn't be possible. Homelessness, hunger and loss of hope would lead to rioting and looting. You want the police to step in? Unfortunately, in this scenario, falling tax revenues mean that we can't pay them. Good luck defending your gold from those that want a piece of it. Good luck defending your gold and savings from what's left of the government too. The most likely outcomes would be military coup or civil revolution. Either way, you and I, and our families, might not survive it and we would certainly not "survive as a republic".

I am not exaggerating.

On Oct 18 09:57 AM yellowhoard wrote:

> There is no painless solution to our problem.
>
> Peter is simply the only person currently running for office that
> understands that the path that we are currently heading down will
> end in our complete destruction.
>
> Yes. As chap08 would say, a strong dollar will be very destructive
> to the US. GE and a whole lot of other concerns will go to zero if
> rates climb to 6%, much less the 10% or more that will be needed
> to stabilize the buck.
>
> A strong dollar would probably result in 25% unemployment, but we'd
> survive as a republic. People will take care of one and other. That's
> what we do.

Oct 18 11:34 AM

[Albertarocks:]

On Oct 18 11:21 AM Mark Bern wrote:

> We blame Bush for everything! It isn't just Bush, it's the system of career politicians on both sides of the aisle! They won't make the necessary, difficult decisions because it would mean political suicide for them personally. And their own career comes before country, before constituents, before everything. That is the foundation of our problem.<

Those are the words of a man who knows what he's talking about. How do I go about giving more than one thumbs up?

Oct 18 11:37 AM

[User 283977:]

Well said Mark!

Oct 18 12:09 PM

[doubleguns:]

Mark, Thanks for putting that out. I can't understand why everyone fails to see what the core problem is with our country. We are rotting away form the inside. Keep preaching and don't forget the solution. goooh.com our last peaceful attempt before we head down the road chap08 describes and I believe is the other alternative if we don't get the political corruption removed.


On Oct 18 11:21 AM Mark Bern wrote:

> I also agree with the theme of the article. We are headed down the
> wrong path; a path that will culminate in a long and painful economic
> stagnation for the masses.
>
> Isn't it funny, though, that the party now in power has always positioned
> itself as the protectors of the poor and middle class? The evidence
> that we are witnessing currently would indicate that they are really
> the party of helping the rich get richer and the expansion of the
> number of poor people in this country.
>
> The poor are being assisted by government. They don't pay any taxes.
> So they look to the government to bail them out. What it's going
> to take to get to the necessary pain is for the poor and middle class
> to realize that things just keep getting worse regardless of the
> promises that keep emanating from their leaders in Washington.
> They don't have a clue about who's making the money on Wall Street
> or how, so it doesn't matter. They listen to MSM for all their
> "input.."
>
> I am sorry to say that I suspect it will take a prolonged period
> of failed attempts by government to right the ship, with the average
> wage earner getting hammered by rising prices (due to a decline dollar
> increasing imports of oil and consumer goods), increased costs for
> health care in spite of "reform," a cap and trade system that also
> increases the cost of energy for every family, and the addition of
> a VAT that will increase the cost of everything before reality will
> sink into their heads. We may have to endure several more years
> of things getting worse before enough voters will actually understand
> that it is "their representative" that needs to be voted out of office,
> not just the other guy.
>
> I am not trying to be pessimistic. I don't like the answer I am
> offering. It's just human nature, and the track record of this nation
> supports the assumption, that we won't do anything about the real
> problem until it is completely out of control. Today, we are merely
> in the denial stage. As a nation, too many people still believe
> that all the problems we are living through were brought about by
> the past administration. We blame Bush for everything! It isn't
> just Bush, it's the system of career politicians on both sides of
> the aisle! They won't make the necessary, difficult decisions because
> it would mean political suicide for them personally. And their own
> career comes before country, before constituents, before everything.
> That is the foundation of our problem.
>
> Until we get back to the basics of the Constitution and reinvent
> our government to one that creates an environment conducive to productive
> growth. creativity, and the entrepreneurial spirit we will continue
> to flounder.
>
> While Peter Schiff is on the right track, it will take far more than
> one elected official to change the course of this great nation.

Oct 18 12:10 PM

[SAS70:]

Mark

Great Comment. You've got my vote!!

Mark Bern 2012

Oct 18 12:23 PM

[User 102353:]

Please fpllow up with commentary on how, where, what and why to invest in if one subscribes to this theory. Thanks.


On Oct 18 05:37 AM Dave Wrixon wrote:

> Very good, but you have not explained how to get the Banks to lend
> to US industry when they won't do it now, even though they are in
> receipt of free money. Getting Americans to save is one thing. Preventing
> those saving flowing out in the productive capacity of other countries
> is going to be entirely another. In order to attract capital investment
> US Industry must demonstrate its potential to achieve a competitive
> edge. That could be a tough call, unless Obama introduces exchange
> controls, which is a bit a problem if you are still the Reserve currency.

Oct 18 12:26 PM

[Pat C:]

Mark, I am with you. If we could all just "get it" and not vote for any incumbent, period. It should only take one election cycle, maybe two.

Oct 18 01:04 PM

[sticktoitiv...:]

I'm usually a little more gloomy. I'll dare to be different today. Here's our plan B. The energy policies of Obama's work, our trade deficit is virtually eliminated through less oil consuption. And the tea party movement ushers in a new era of accountability on capital hill.

Oct 18 01:25 PM

[Duvanie:]

I wonder if detachment of the host is going to happen. The Constitution was written at a time when the country was very small and representatives/senators were personally responsible to their constituents. They were people they knew, they were people they worked with, and they were available. Now, these government officials are alienated and hardly available, and certainly not connected to the reality of main street. What happens when you try to contact your State Rep or Senator??? Th 'aid' receives your letter, or takes your call, or whatever, and will "pass it along."

This happened because the slow and incremental devouring of state rights by the federal government over many years, with the consent of the courts, transferred too much power to the federal government, and thereby to those larger entites who do not have an interest in the liberty enjoyed by Americans (on a global scale, America is merely one piece of a much larger puzzle). If they didn't have so much power and so many new things to do that were never authorized by the Constitution, I believe our representatives would still have time to take our calls.

It is apparent that those who do the bidding from Washington DC are swathed in enough money, luxury, and power that they are not to be concerned that natural laws of economy. The result is that the man made laws by which they those natural laws are implemented have been twisted into a contorted and grotesque image of what they should be. This was demonstrated when the current administration organized the coup d'etat over the legitimate GM bond holders.

By the time a new administration regains control, I think it will be far too late to reverse the tide. The money will have already been borrowed and spent, and the die cast. But I am not blaming everything on this administration - this is the culmination of many many years of effort, and neglect of the parasite.

Oct 18 01:49 PM

[badScooter:]

Chap08, Yellow Hoard, great discussion all.

The take-home for me is to expect plenty of pain. Whether it be a faux-republic continuing the slow, steady evolution into totalitarianism (perhaps modern feudalism) by way of progressive socialism, or a violent collapse with 50% unemployment leading to civic revolt of some stripe or another. My two bits, I'd rather "clean house" and take my chances with the Republic surviving a major wave three down. Got some thoughts at strikeback.biz (a blog-aiming mainly for massive incumbent replacement with people who demonstrate an Austrian understanding of our dilemma)...YH, I'd like to invite you in particular.

Oct 18 02:08 PM

[Albertarocks:]

On Oct 18 01:49 PM Duvanie wrote:

> I wonder if detachment of the host is going to happen. The Constitution
> was written at a time when the country was very small and representatives/senators
> were personally responsible to their constituents. They were people
> they knew, they were people they worked with, and they were available.
> Now, these government officials are alienated and hardly available,
> and certainly not connected to the reality of main street. What happens
> when you try to contact your State Rep or Senator??? Th 'aid' receives
> your letter, or takes your call, or whatever, and will "pass it along."
>
>
> This happened because the slow and incremental devouring of state
> rights by the federal government over many years, with the consent
> of the courts, transferred too much power to the federal government,
> and thereby to those larger entites who do not have an interest in
> the liberty enjoyed by Americans (on a global scale, America is merely
> one piece of a much larger puzzle). If they didn't have so much power
> and so many new things to do that were never authorized by the Constitution,
> I believe our representatives would still have time to take our calls.
>
>
> It is apparent that those who do the bidding from Washington DC are
> swathed in enough money, luxury, and power that they are not to be
> concerned that natural laws of economy. The result is that the man
> made laws by which they those natural laws are implemented have been
> twisted into a contorted and grotesque image of what they should
> be. This was demonstrated when the current administration organized
> the coup d'etat over the legitimate GM bond holders.
>
> By the time a new administration regains control, I think it will
> be far too late to reverse the tide. The money will have already
> been borrowed and spent, and the die cast. But I am not blaming everything
> on this administration - this is the culmination of many many years
> of effort, and neglect of the parasite.<

Duvanie, for a person who's only written 3 comments, this is impressive.

And what's even more impressive is what I read on your bio. If that's true, you have my sincere applause. I urge you to participate more... there are some wonderful commenters who are really supportive and helpful types.

Oct 18 02:14 PM

[Michael Clark:]

Survival of the Republic IS the issue. And not in its present form: government of the bankers by the bankers for the bankers. We need to go back to our roots and rediscover our ethic and our founding principles.


On Oct 18 09:57 AM yellowhoard wrote:

> There is no painless solution to our problem.
>
> Peter is simply the only person currently running for office that
> understands that the path that we are currently heading down will
> end in our complete destruction.
>
> Yes. As chap08 would say, a strong dollar will be very destructive
> to the US. GE and a whole lot of other concerns will go to zero if
> rates climb to 6%, much less the 10% or more that will be needed
> to stabilize the buck.
>
> A strong dollar would probably result in 25% unemployment, but we'd
> survive as a republic. People will take care of one and other. That's
> what we do.

Oct 18 03:11 PM

[Mr. G:]

What I perceive from all the chatter about govt bailouts and the trend towards socialism is perhaps the worst pessimism about America I have ever seen in my lifetime. The poor lady is being battered about by the pundits, the conservative right and by the "experts" reading doom and gloom in their crystal balls.

The alternative to present govt economic policies would have been exactly what everyone is saying will happen.

It is my belief we have all learned a lesson about free unregulated capitalism. The lesson is that overleveraging freedom to our Wall Street and banking industry exposed an insidious weakness in our capitalistic system. Intense greed results in destruction of the system, lending deficiencies and ultimately meltdown of our credit based system. The comments I hear everyday reminds me of the middle ages and feudalism. I believe the conservatives still feel they are the "barons" of ancient times and the middle class are the worker bees who must depend upon the rich for lending handouts in order to survive. So much for supply side economics.

70% of our GDP is consumer based and til the demand side of the equation returns to equilibrium I am afraid the barons are may not flourish as in times gone by. GI

Oct 18 03:29 PM

[Graham and ...:]

Besides electing Schiff, his successful candidacy would also take out Chris Dodd, one of the worst "problems" in Congress.


On Oct 18 07:03 AM optionsgirl wrote:

> Mr. Schiff, this article is consistent with what you have written
> previously, and I believe you. I only hope the American people will
> make the changes necessary before it is too late. We need you in
> the Senate now more than ever.

Oct 18 03:34 PM

[Jimbo:]

Message for Alberta Rocks: Alan Grayson is MY congressman and he is no hero. He is an opportunistic ideologue who is very dangerous to the Constitution you revere. True, he has endorsed auditing the FED but his motives are suspect.

Oct 18 03:44 PM

[aardvark:]

If the US was put up for auction who would buy it? No one with any sense because the liabilities far outweigh the assets, almost exactly like GM. So how do you make the US a good buy? You reinvent the economic structure. You rebalance an overweight, unproductive, uncompetitive, overpriced, bankrupt, economy and start over again. You reinvent, streamline, focus on necessities, and work like hell to survive. No more debatable wars of choice, no more redundant medical systems, no more tax breaks for the wealthy , no capital loss deductions, no third- rate public schools. You bite the bullet before the bullet bites you.

Oct 18 04:22 PM

[Albertarocks:]

On Oct 18 03:44 PM Jimbo wrote:

> Message for Alberta Rocks: Alan Grayson is MY congressman and he
> is no hero. He is an opportunistic ideologue who is very dangerous
> to the Constitution you revere. True, he has endorsed auditing the
> FED but his motives are suspect.

Jimbo, I've read some of your previous comments and it seems to me that you and I are pretty much on the same wavelength. You're much closer to the action than I am, so I'll have to cede to your experience. My opinion about Mr. Grayson is based on what I've heard him say about the FED and he sure came across to me as having a legitimate understanding that the constitution was being trampled on. Maybe he behaves differently, depending on which venue he's performing in?

Oct 18 04:35 PM

[badScooter:]

Hi, Mr. G,
I appreciate what you're saying about the prevailing pessimism (I can only hope it means a "bottom" is near, in political terms)...but really, how can you state that this is a failure of "free, unregulated markets", when they most certainly have been nothing of the sort, my entire adult life? "Crony Capitalism" might be a better description. Dodd, Franks, and others were and are joined at the hip with Wall St. interests, in ways that make me shake my head and mumble 'conflict of interest'. The democrats have no monopoly on this behavior, which is obvious with a cursory look at the Iraq conflict vis-a-vis no bid contracts.

I do believe Rahm Emanual when he states "never let a crisis go to waste". I guess I hold with Elliot Wave theory in the sense that our economy has not seen the full impact of our past malfeasance yet, and I shudder when I think what our current batch of progressives in power will do...using the exact claim that you just made as an excuse...that "capitalism had its chance and failed". Hogwash.

Oct 18 04:41 PM

[Dave Wrixon:]

Well, it is not simply a question of what Americans wish to invest in but it is clear that China for one is now prioritizing investment in its own economy. That is likely to be a pattern that is about to emerge just about everywhere across the globe. However, nobody with any brain is going to invest in an economy with such a heavily built in competitive disadvantage as the US. The die is cast for high taxes, poor infrastructure and service, heavily indebted consumers, rust belt industries and a poorly trained and overpaid workforce. The latter of course will be the first to be remedied but the rest could take decades.


On Oct 18 12:26 PM User 102353 wrote:

> Please fpllow up with commentary on how, where, what and why to invest
> in if one subscribes to this theory. Thanks.

Oct 18 06:33 PM

[ron_paulite:]

Well written article, Peter, and please win the Senate seat!
Good luck!

Oct 18 07:18 PM

[Old Trader:]

A number of great and insightful comments!!! Getting back for a moment to the fact that savings rate is again dipping, is that possibly due to the fact that real incomes are falling, and there's a declining amount of money available for the average citizen to save? From what I see in terms of anecdotal evidence, there are big shifts happening in consumer behavior, in terms of cutting back.

Oct 18 07:49 PM

[Fighting Yoda:]

"Thus, foreign politicians have the same incentives as ours to keep playing the game." That is the crux of the problem everyone is playing the same bubble/Ponzi bigger fool game.

For those who don't realize China is printing a lot more money than even the US. Chinese Govt. is totally dependent on exports to the west to keep its employment and growth going. Chinese growth is a mirage – without internal consumption rising and exports falling – everything will come to a halt- as soon as the stimulus money is spent.

In the US- the consumer spending went up and savings went down - so it is the same confidence bigger fool game. There are no drivers for job growth - no jobs no income no spending and more foreclosures more losses for banks. All this is inevitable and despite all the green shoot propaganda and PPT - all roads lead downwards. US has to get back to basics – save and invest rather than borrow and consume. The individual consumers to some extent realize it – but the leadership imagines there is a easy way out.

Market going up gives a totally false signal, markets for most part are always wrong else you won't have such big bubbles and busts. Remember the markets were at their all time high a couple of months before the start of the biggest worldwide recession. I am suggesting shorting the market (have been saying the same for last 2000+ points) - hype springs eternal and markets can stay irrational for too long.

Oct 18 07:55 PM

[Coomaraswamy:]

Turn on. Tune in. And drop out.

Impossible? Not at all. Desirable? That would be up to you. A fierce way to see what you're made of. But it becomes second nature over time. Freedom is really not so bad. And the best part is you can start right away. You and the family. Right now.

Oct 18 10:30 PM

[Mayascribe:]

Peter: Do you get that there is some support hear on SA? A quick glance at the "thumbupedness," versus the "thumbsdownedness" tells me that you have an audience. There are some ill-informed here on SA, but, for the most part, overall, I see, witness, experience, investing-wise, patriotic-wise, utter brilliance. This brilliance is behind your brilliance.

Keep up your take-tasking to DC. Keep up your take-tasking to Wall Street.

Oct 19 12:22 AM

[Dave Wrixon:]

If you think China is in the same monetary mess as the US, then you clearly do not get it. With low living standards and a need for growth in double figure huge monetary expansion is in not only desirable but essential. However, China uses a wide range of monetary tools to keep things under control under normal conditions. They have only currently loosened them to offset the financial disaster the US has unleashed on the rest of the World.


On Oct 18 07:55 PM Fighting Yoda wrote:

> "Thus, foreign politicians have the same incentives as ours to keep
> playing the game." That is the crux of the problem everyone is playing
> the same bubble/Ponzi bigger fool game.
>
> For those who don't realize China is printing a lot more money than
> even the US. Chinese Govt. is totally dependent on exports to the
> west to keep its employment and growth going. Chinese growth is
> a mirage – without internal consumption rising and exports falling
> – everything will come to a halt- as soon as the stimulus money is
> spent.
>
> In the US- the consumer spending went up and savings went down -
> so it is the same confidence bigger fool game. There are no drivers
> for job growth - no jobs no income no spending and more foreclosures
> more losses for banks. All this is inevitable and despite all the
> green shoot propaganda and PPT - all roads lead downwards. US has
> to get back to basics – save and invest rather than borrow and consume.
> The individual consumers to some extent realize it – but the leadership
> imagines there is a easy way out.
>
> Market going up gives a totally false signal, markets for most part
> are always wrong else you won't have such big bubbles and busts.
> Remember the markets were at their all time high a couple of months
> before the start of the biggest worldwide recession. I am suggesting
> shorting the market (have been saying the same for last 2000+ points)
> - hype springs eternal and markets can stay irrational for too long.

Oct 19 02:24 AM

[fatcat:]

I admire Mr. Schiff for his consistent message....it has not changed for years.

Can't say that for many pols...hope he doesn't change when he becomes one....

Oct 19 02:26 AM

[LCACM:]

The author and several of the commentators seem to indicate that US citizens must suffer great economic hardship to placate the Free Market Deity. To change the current economic course, we need to first understand what brought us to the juncture of the economic meltdown.
US and other World economies have been sucked into the economic black-hole, first promised by Russia's Kruschev (en.wikipedia.org/wiki/...) in his "We will bury you" speech. It appears that the Communist threat has instead been made good by today's Communist China, using Free Trade as their weapon of choice. Corporate CEOs have been willing collaborators of the Communist regime, investing billions in China to shift manufacturing plants there.
Even if Americans started to save, CEOs would figure out a way to plough those savings into China, unless the US government takes steps to prevent that.

Oct 19 06:43 AM

[Zmartmoney:]

LOL! Nothing like a little gallows humor - half were irritated, thinking you were serious, and the other half are laughing at the irony of it all. I think I'll laugh along with them.


On Oct 18 09:14 AM j-dub wrote:

> "Last week, the Bureau of Economic Analysis reported that consumer
> spending as a percentage of U.S. GDP has risen to 71%, a post-World
> War II record. This level is notably higher than other wealthy industrialized
> countries, and vastly higher than the levels sustained by China and
> other emerging economies. At the same time, our industrial output
> is contracting, our trade deficit is expanding once again (after
> contracting earlier in the year), and our savings rate is plummeting
> (after an early year surge).
>
> The data confirms that government stimuli are worsening the structural
> imbalances underlying our economy. The recent 'rebound' in GDP is
> not resulting from increased economic output, but merely from the
> fact that we are borrowing more than ever."
>
>
> Thank goodness the dow is at 10k to balance all of that other bad
> stuff out!!!!

Oct 19 10:02 AM

[Zmartmoney:]

What you're ignoring is that the Chinese actually HAVE money. We have printing presses. They will tire of our paper and then they can focus on expanding their own economy within. Why do you think they've been so busy buying every commodity that's not nailed down? They intend to produce and expand, with us or without us. Without us is fine with them if need be, and they're planning on it.


On Oct 18 07:55 PM Fighting Yoda wrote:

> "Thus, foreign politicians have the same incentives as ours to keep
> playing the game." That is the crux of the problem everyone is playing
> the same bubble/Ponzi bigger fool game.
>
> For those who don't realize China is printing a lot more money than
> even the US. Chinese Govt. is totally dependent on exports to the
> west to keep its employment and growth going. Chinese growth is a
> mirage – without internal consumption rising and exports falling
> – everything will come to a halt- as soon as the stimulus money is
> spent.
>
> In the US- the consumer spending went up and savings went down -
> so it is the same confidence bigger fool game. There are no drivers
> for job growth - no jobs no income no spending and more foreclosures
> more losses for banks. All this is inevitable and despite all the
> green shoot propaganda and PPT - all roads lead downwards. US has
> to get back to basics – save and invest rather than borrow and consume.
> The individual consumers to some extent realize it – but the leadership
> imagines there is a easy way out.
>
> Market going up gives a totally false signal, markets for most part
> are always wrong else you won't have such big bubbles and busts.
> Remember the markets were at their all time high a couple of months
> before the start of the biggest worldwide recession. I am suggesting
> shorting the market (have been saying the same for last 2000+ points)
> - hype springs eternal and markets can stay irrational for too long.

Oct 19 10:05 AM

[Alphameister:]

I'm late to this thread, and
my thoughts won't be read,
and the best of the comments
have already been said.

Special kudos to a few
like User 353372
who impressed me the most
in this enlightened stew.

With little to add
to a story so sad
I'll share a few thoughts
on a world that's gone mad.

I have been skeptical since the start of this recession that a country of consumers wedded to instant gratification would suddenly be shocked into becoming a nation of savers. But with credit severely constrained, you ask, how are they financing their purchases?

They are borrowing from banks in ways not approved by the banks. Every dollar that does not go into payment on a mortgage or credit card is a dollar that can be used to pay cash at a restaurant or clothing store. I see an emerging revolt against the banks, not entirely unjustified, that seems likely to gain momentum in coming months.

They are borrowing against retirement accounts and insurance policies. To hell with the long-term consequences; we live for the moment.

They are selling their jewelry. They are finding off-the-books jobs in recession resistant fields (prostitutes complain about the sudden increase in competition).

It must all end badly, as Peter and most of the above commenters understand very well. But the real question is whether it ends with an extended whimper or with a bang. How creative can the federal parasites be in keeping their victims unaware of the slow death that awaits them and their children and their grandchildren?

Oct 19 10:47 AM

[th0th:]

I've seen a bunch of comments requesting Peter to justify his statement regarding the fact that we've reverted back to our previous mentality of not saving. Here is a link to personal savings rates as recorded by the st. louis fed, we went from a peak savings rate of nearly 6% in May, back down to 3% in August with the trend line on a downward trajectory for September...

research.stlouisfed.or...[1][id]=PSAVERT#

Oct 19 11:24 AM

[Hot Richard:]

In Washington, there are one million tons of pressure for every ounce of pressure Peter can apply to break the Ponzi policies.

Studying the billionaires that emerged after the collapse of communist USSR for strategies. Some interesting trends: commodities, energy, and well connected sweetheart deals.

Oct 19 11:46 AM

[Saranac518:]

Every dollar the US Government borrows is an obligation that its citizens must repay, whether through taxes or inflation. Despite the fact that Americans are eking out a 3% saving rate, our government is piling on suffocating layers of debt through the largest fiscal deficits in history. Peter's comment is directly on point. For years, our rotting, self-interested political mass has been handing us enormous liabilities. We are now nearing the tipping point.

Oct 19 01:12 PM

[ebworthen:]

Having lived right outside the beltway for 15 years I can tell you this:

The politicians won't see or understand the problems until they are laid on their doorstep or bursting past the threshold...hopefully with tar and feathers not far behind.

Oct 19 07:26 PM

[ebworthen:]

Having lived right outside the beltway for 15 years I can tell you this:

The politicians won't see or understand the problems until they are laid on their doorstep or bursting past the threshold, hopefully with tar and feathers not far behind.

Oct 19 07:27 PM

[ebworthen:]

Sorry...website was giving me an error...didn't mean to double post.

Oct 19 07:28 PM

[Moto:]

The Constitution is no longer a valid document.


On Oct 18 11:13 AM Albertarocks wrote:

> On Oct 18 09:57 AM yellowhoard wrote:

Oct 21 08:51 AM

[user396040:]

He doesn't really explain how his model of more production/less consumption will work. How will buy the items produced by more production; the only plausible answer is increased exports/decreased imports. This, in turn, depends to a great extent on a weaker dollar which he doesn't like either.

Oct 23 12:11 PM

[Advill:]

Americans are doing what everybody else in the world is doing....paying debts and saving
Saving rates for example in Spain move from 4% in 2007 to 24% in Aug. 2009, Great Britain is in the same trend.

A reduction in the use of credit (forced or choiced) is the common rule now days (sell your Porsche, buy a Mini), if policies are focused with consumption increase in mind ...it will take time, is a psychological attitude you see around, read the news...and reduce you consumption...is human.

Regards.

Oct 24 08:19 PM

[gordo39:]

Wake up, America! Let me borrow some famous quotes...Government is not the solution, govt is the problem. Rewind two short years...Of all the bright ideas to allow the economy to revive itself since the "financial crisis", have any of you heard even the mention of tax rate cuts? Do tax rate cuts reduce the value of the dollar? Are they interest rate sensitive?

Anyone ever heard of the Laffer curve? Well, if the govt needs money to spend to "revive the economy", why the heck not raise all tax rates to 99.9%? After all, higher tax rates equal higher tax revenues to the govt, right??

The price of freedom is eternal vigilance. Well, if anyone thinks lower interest rates are going to solve a problem of too much debt, continued borrowing, and stagnant economy, they really aren't being too vigilant. Another issue for vigilance...What country is 50 bps away from being the proud owner of the highest corporate tax rates on the planet? Yup, the USA! How can it possibly be that the country with essentially the highest corp tax rates and zero interest rates is struggling to service its debts? Where do we go from here? Higher interest rates and more expensive debt service? The world looks to us as an economic superpower and bastion of economic freedom??

How did this happen? Popular ignorance, and violation of another famous quote. Those who give up a little freedom in exchange for a little bit of security, deserve neither and will lose both. Oh yeah, the road to you know where is paved with good intentions. The helpless slide into insolvency has been the result of a mentality that wants cradle to grave support from the govt, instead of self determination and freedom. If we truly wanted and valued and respected our freedom and rights to self determination, we wouldn't vote for feel good govt programs and ridiculous govt controls.


So let me get this straight. The answer to our problem of burdensome debt is more lending (DEBT!!) ???! If not, what did interest rates matter for the last ten years? "Wall Street" wanted a rate cut every time the economy showed a hint of visiting the slow side of the business cycle. Congratulations!! Avoid the business cycle, for now, until you drive rates to zero! Now what??? How about tax cuts? By the way, tax cuts don't increase the money supply. Maybe our poor little dollar can recover a little bit.

What made America great? Think of something you enjoy in the USA, a place you like to visit? What do you like about it? How do you think it happened? How many of your favorite places or things are the result of the government, and how many are the result of hard work, freedom, and financial responsibility. Rewind another 98 years to 1909. Did America borrow its way to prosperity in 1909? High tax rates then? What was the highest income tax rate then? How many great cities and enterprises have sprung up across our fruited plain in the last 15 years?

Shame on all of us! Not even the most conservative voices so much as suggest the merits of tax rate cuts, while govt spending runs wild, financed by paper, and lower interest rates are the answer for debt spurred economic recovery. Personally, I think Ronald Reagan and Ben Franklin earned a bit more respect than what we've been showing them.

Oct 24 10:29 PM

[Jon316:]

"This soon-to-be-called depression will not end until the pendulum of consumer spending habits swings violently in the other direction. This will be a jarring change, but it is the splash of cold water that we need to return our economy to viability."

What would happen if credit cards were outlawed and people could only buy what they had money for? Where would the banking industry make up the lost revenue, and then what % of GDP would consumer spending become? Easy money has driven a generation into a "I can just pay for it later". Our economy is paying for it now.

Oct 27 04:43 PM

[Michael Clark:]

Clearly that is a big part of the cause -- less money to put away. Also, the fact that the Fed is attempting to punish savers and force them to invest in stocks or commodities or more houses (.25% interest is not a way to encourage saving) is enough to discourage most people from saving.

I'd say hold on to your dollars. With HUGE deflation coming, the dollars you do hold will be worth more in 2019 than they are today.

Inflation? We won't have another 70's type stagflation. In the 70's the public was not debt-ridden; so, in the midst of a deflation, they were able to borrow and chase rising prices spurred by banks lowering interest rates. But today, like in the 1930's, the consumers cannot take on more debt. Cheap money may be available (low rates) but not for the insolvent. What bank is going to loan more money to a massively indebted business or consumer?

There is no way ahead except through the dire darkness of deflation, which will be good for us, bringing us sobriety, austerity, real religion again (and not the religion of the evangelists who shamefully preach for money, for the 'religious empire' of capital expansion). We have no God today, as a society. We need to go down into the wilderness so we can find God again, the Living God.


On Oct 18 07:49 PM Old Trader wrote:

> A number of great and insightful comments!!! Getting back for a moment
> to the fact that savings rate is again dipping, is that possibly
> due to the fact that real incomes are falling, and there's a declining
> amount of money available for the average citizen to save? From what
> I see in terms of anecdotal evidence, there are big shifts happening
> in consumer behavior, in terms of cutting back.

Nov 04 08:40 AM

[Freedom Fan:]

The only thing we have to fear is Liberalism. The Libs have declared war on prosperity in the U.S., so investors have sent their capital elsewhere, and businessmen have postponed all risky decisions related to hiring and expansion.

Why should China be kicking our butts economically? It's Communist CHINA for crissakes.

We have enough cheap, clean energy to last 100 years, right here in the U.S. -- it's called natural gas.

This is still America, and our most valuable resource -- the sleeping animal spirits, appetite for risk and innovation will eventually erupt in a tsunami, once we are free again.

If Washington can just stop spending our grandkids' future, and crush the life out of the global warming canard, then we will grow our way out of this liberal malaise.

The Tea Party movement will gather steam. Hundreds of thousands sent a message to D.C. on 9/12. Hopefully the group organized by Katherine Bachman will be successful today too.

If Peter wins the Senate seat and Congress adopts a new Contract For America, a la Gingrich, there will be a dramatic, sustained economic expansion just like we had in 1994-2000.

Nov 05 04:32 PM