Mar 27 2009 12:06PM

The response to our essay entitled Resurrection of Idiocy was largely successful and we received several positive comments on the story. However, we did receive a few emails suggesting we had flipped out and gone over the edge so to speak; reaching too far toward the Doom and Gloom Crowd. We felt it necessary to rebut our own essay adding some opposing positive views to reinforce our ideas and elaborate on what traders and investors can do to protect themselves and their families. This format will retain our essay from last week with new interspersed rebutting comments to key points.

Last Week We Said

Lyndon Johnson’s Un-Great Society and Roosevelt’s depression era social programs did not solve the problems they purported to address. Rather, they extended the pain and suffering of their programs’ victims and worst of all taught them to belly-up to the taxpayer trough forever. We are saddled with generations of uneducated losers, who have sunk their collective psyche into a myriad of social problems passed down repeatedly from indigent lazy parents who learned from their lazy parents.

The latest version of this socialism-destruction designed and being implemented by the Obama team of adult children, will in our view multiply the current criminally inspired disaster, extending it for years.

Greenspan and those congressmen-bankers formed a union of free money to avoid a simple and normal recession in 2000. Now nine years later, its economic payback time for violation of standard economic principles that made our nation great. Unfolding tragedies will be legendary.

This Time It Really Is Different

The strength and foundation of the United States Constitution and Bill of Rights have served our nation well since 1776. Our current disasters, however, threaten the very existence of America.

The rule of law, which is the glue for domestic and global commerce, is being openly questioned. Our political leaders, in their frustration of dealing with their own instigated messes, threaten to abrogate legality of contract rules operating our country. This over-reaction is extremely dangerous.

Rebuttal: While Congress, The Federal Reserve, US Treasury and the New York Global Banks have joined hands to scam the system and its taxpayers, we think the good news is they will fail in a crash and burn event setting-up our nation and the world for long over-due improvements. Yes, the depression is serious and getting worse but we will survive it and rise again as a better nation.

When that pack of congressional hyenas were screaming at AIG’s leader yesterday they crossed the line into illegal, open warfare political attacks on AIG’s derivative bonus babies. AIG’s new CEO-leader incidentally, basically volunteered to clean-up AIG’s problems and had nothing to do with these current challenges instigated and installed by Hank Greenberg who wisely got himself tossed-out in 2005. Greenberg made the mess not the current innocent CEO.

Rebuttal: Since the threat by the House to impose illegal and onerous taxes upon AIG criminals hit the news, both the president and others with more brain power and common sense seek other LEGAL AND LEGITIMATE WAYS to take back millions in illegal bonuses. We think the Senate rejects the House vote on this event and dies right there.

Greenberg denied yesterday in a news interview, of having anything to do with AIG’s problems. Most are aware he was the architect and should be the fall guy. This example is similar to Alan Greenspan. Chopper Ben is the fall guy but Sir Alan was the original designer when he dropped interest rates to nothing and encouraged our government and big banks to hand out basically free houses and subsequent free housing ATM cash to the unqualified. The final, destructive capper was tacit permission granted by Congress and other government agencies to go ahead and write derivatives until the cows come home. The end result of course was massive bank failures and the subsequent robbery of taxpayers.

Rebuttal: While we doubt the perpetrators such as Alan Greenspan, John Paulson, Tim Geitner, Ben Bernanke and the other gang members (of which there are many) will ever see jail time, we suspect lawsuits will fly, their names will ultimately and historically find there rightful place in criminal history along with instigators of Tulipmania, The South Sea Bubble, Madoff, and others. A challenge to the larger perps is a challenge to the elimination or implication of the Federal Reserve itself. This is a tough nut to crack and it would take open revolution ala 1776 to sink this gang. We suggest this is not in the cards for now. Traders and investors need to work around the problems but more importantly clearly understand this ENTIRE GROUP IS OUR FINANCIAL ENEMY AND CANNOT BE TRUSTED-EVER.

President’s Popularity Sinking Like A Rock

The president is an extraordinary public speaker with undoubted charisma for the position he holds. However, unlike Bill Clinton who was also perpetually campaigning, Mr. Obama’s experience is woefully short for the job. He is a likable fellow but is saddled with The Greenspan-New York Global Banks’ derivatives mess and does not have one chance in 1,000 of succeeding. Further, he cannot speak without a teleprompter signaling to us he cannot think for himself and is afraid of miss-statements. We can say for certain Joe Biden, our irascible Vice President, has no fear of miss-statements and guffaws. He makes them with unbridled impunity each and every day much to the amusement of the right wing press and analysts.

Rebuttal: We stand by this statement on the president and feel he is way in over his head. We see it in several social aspects of this young presidency, along with wrong-headed policies leading America and the world to economic failures. The good news is these failures have the power to eliminate those bad policies and those backers of them; driving them from power for good. In other words, we are going to get the change but not the kind promised by the Obama administration. By 2010, the damages will be so bad and so obviously laid upon the doorstep of those in power, voters will be crying FOR REAL CHANGE and we suspect they vote for it.

What Obama could have done is take the reins away from his party leaders and demand they give him his policies to save our economy and that of other nations. Instead, he permitted Sneaker Pelousi and her gang of socialistic minions to concoct a massive, pork-laden social spending program destined to finish-off the Republic. Our president is way too green for the job and permits his entourage and the Democratic Party congress to call his tune.

In our view, this is a disaster, but even worse it demonstrates severe leadership weakness to enemies of America. We think the bad guys are being encouraged to begin new offenses testing the US and perhaps even attacking America as so many have warned us about.

Rebuttal: We suggest Joe Biden was correct in that America will be tested. While we are expecting negative events and potentially attacks upon the US and it’s foreign interests, they for the most part will be thwarted with terrible counter-attacks and responses by our military and others connected to the secret parts of government. As naïve as our president is in our view, with his childish pollyanish foreign relations ideas (example trying to talk peace with Iran) we have senior officials in America who will not permit this executive stupidity to endanger our nation. For those who try with a test, they will be met with severe force. We expect this especially in Israel and their new no-nonsense prime minister. The evil in this world can be eliminated easier than most would imagine. Evil understands only one thing, brute force. They are going to get it for sure. Economic dislocations encourage retribution.

The Dilemma

All branches of government from the Executive, Supreme Court, Senate and the House are stuck first with (1) the freight train of Greenspan disasters and (2) the wild and reckless collective policies of those currently in power. This is a deadly combination in our view. One that can economically bring down America unless major reversals are implemented, which we feel under current conditions are impossible.

Rebuttal: Our nation and the policies of other nations (with a few exceptions) have gone so far the wrong way a catastrophic failure is needed to re-align the global system. Think of it as a market over-sold or overbought to the extreme. The snapback will be vicious but the correction and aftermath a blessed relief. Wrong-headed ideas and those who promote them must be exposed and driven from power. They will be, in our view. Yes, we get years of pain but the cleansing is required.

A return to sound gold-backed currencies, massive global spending cuts, and a reduction in government and those wasteful war machines of the world would go a long way toward a pivot reversal. This will not happen but instead we are going the other way toward more waste and a diluted dollar-first.

Positive change simply cannot happen due to the egocentric predicaments of world leaders and business players. We are going to go through ten years of bloody hell because of their inability and lack of courage to do the right thing. They are moving with expediency, in the wrong direction, while disregarding America’s founding principles.

Rebuttal: (See rebuttal remarks shown above). We have to have the cleansing crash to flush the bowl of this idiocy. It’s coming and with such a vengeance, the instigators will be run out of town on a rail.

Fallout Predictions for 2009-2012

The G-20 economic world policy meetings begin April 2, 2009. Powerful national leaders, analysts and their supporters are posturing and positioning to instill and install new protectionist policies at odds with each other. This is a 1930’s re-run.

We have reported for weeks that protectionism was next as countries compete to save themselves at the expense of others. Several have been devaluating national currencies in order to remain economically competitive throughout the world. This deflationary environment of reducing money values and the values of goods and labor has created a death spiral.

Germany has emerged as the leader of Europe. China and Japan are the Asian leaders. The USA is pathetically broken and bankrupt existing among the rest of the Zombie nations. America’s power remains through the US Dollar being the reserve currency of the world but we forecast its value to be cut in half over the next three years; or less. Meanwhile the Un-Great Society policies and the creation of new ingrates as a result; and costly foreign adventures (wars) are draining the life blood of America.

Rebuttal:All parties in the G-20 must put-up appearances, flex their collective economic muscles, calling for new ideas and most of all a new currency to replace the US Dollar as the reserve money of the world. After the meeting is over and the dust settles, the US Dollar shall remain standing albeit bloodied and of less value. Several of the enemies of the west will be destroyed economically suffering economic fallout from shrinking US Dollars and bonds going in the tank. The most important factor concerning retention of power will be to be the controller-holder of global energy and this will be the US. Russia is now second but shall descend into a huge depression mess as will China, Venezuela, Iran and Iran’s Middle Eastern rogue state buddies.

America’s Misfortune 2009-2012

With our government having authorized trillions in spending with more trillions to come, inflation is a foregone conclusion. Currently we are in a deflationary spiral which is unstoppable. We expect more of this for years to come but somewhere in the middle a nasty shorter term period of inflation-hyperinflation might appear.

Rebuttal: I suggest we get a full blown depression with a nasty bout of inflation within the next 6-18 months. Our country and most other nations will survive it but with a lot of pain. Those who understand how low is low and how bad the economy could be and prepare for it will be fine. We must understand there is no returning to those salad days of 1995-2005. The world is a different place. Deal with the change or the change will deal with you.

American unemployment is officially recognized as something under 10%. This is untrue as the stats are bent to avoid an open revolt. True US unemployment is now approaching 20% and can easily be 30-35% over the next three years. Some states like Michigan are 23% jobless and moving higher faster on the Big Three Auto Collapse.

With jobless numbers so high a lot of bad things happen. One not recognized by most is the inability of the states to continue business as usual. We see emerging problems in California (basically bankrupt years ago); with those identical problems quickly spreading to other states.

Rebuttal: You can deal with unemployment using several ideas. First cut expenses to the bone and eliminate most all overhead you can. If a job change is needed or you are jobless, find work that can endure in a depression. There are too many opportunities to list in this report. The most difficult thing is for folks to understand the world is really different and they have to change to get through this. You can do it.

We are now aware of only 4-5 states operating without deficits and impending failures from bloated budgets. Most states refuse to cut-back but will be forced to do so when tax revenue fails in a cascade of consumer economic troubles. Expect municipal bond failures, lay-offs, K-12 and university school closures, and public services crumbling in disrepair. With a reduction in force for state police, criminals shall step into the void taking advantage.

Finally, in desperation, we forecast some states will refuse to send money to Washington, keeping it for themselves creating havoc in many markets. That outcome will be very interesting.

Rebuttal: The easiest way to escape state and municipal problems is to relocate where they cease to exist.  Many who claim that’s impossible are not working the problem or believing the depression will hit them hard. We’ve talked with millionaires who refuse to buy a hidey-hole second home, which is so easy on a big income. Lots of reasons are given for not doing it; most of them nonsense. Go live in a small town in a low tax or no tax state and drastically reduce your standard of living. It’s not that difficult. You can rent or buy something now and stay where you are having an exit strategy.

Social problems from massive unemployment will cause higher crime rates. One analyst estimates the US murder rate will increase to 50,000 per year matching national traffic accident numbers. Single mothers, children, elderly and others will go hungry. National government disaster planners cannot cope (think Katrina times 100) as they grossly underestimate how bad this can get and how swiftly it arrives. There is plenty of food but the handling and distribution problems will interrupt-delay deliveries. People eat daily not once a month.

In response to public demonstrations, food riots and escalation of crime, federal troops will be called out and martial law implemented in the worst case cities. The right-wing militias will be joined by other put-upon groups in fighting with these troops. With so many weapons throughout America this is going to be on-going and deadly. Obama’s effort to take the guns will create more mayhem and pardon the pun-backfire.

Large sectors of corporate America will grind to a standstill. With an unsafe social situation and on-going daily mess of other economic problems, impossibility of conducting day-to-day business could cause thousands of business closures.

Rebuttal: Social problems and food scarcity can be eliminated with common sense. Probably 95% of the US will not be affected with riots but if you reside in the other 5% you better get moving. We suspect this summer will not nice. Gardening and other outdoor endeavors are good for the body and the soul. We think many folks will have a better more active life and actually thrive in a more rural environment. It’s not forever; nothings forever.

With so many jobless, black markets will spring-up everywhere. Barter and personal trade will be the norm. While we think the US Dollar survives, it will buy much less. The underground economy will flourish as it cuts-out local, state and federal taxes, rules, and red tape. This business method enables delivery of value at nearly one-half the cost or less. For millions they will have no choice but to participate.

Much of our existing retail will close. They are bankrupt, cannot pay overhead and the newer black market operations basically cut them out of the sales loop. Some big malls will close and many strip shopping centers (already closing) will be boarded-up.

Consumers are saving and not spending, which further accelerates retail failures. Victory gardens are the new thing as folks do not trust the quality of fresh, store-bought food and would rather grow their own saving money and being certain of quality.

Rebuttal: When living in Pennsylvania we became acquainted with the fantastic outdoor markets and trading centers of the Amish. It was amazing how much fun they were as folks were trading goods for goods learning the basics of barter the old fashioned way. We don’t need those markets to exist although they are useful. Neighbor to neighbor trading and cooperation can become quite helpful, too.

The US auto industry will be totally bankrupt with GM and Chrysler history, for the most part in America. Ford can last longer but they will sink with the others. The ‘good times’ auto and truck sales were 17mm annually and are now near 8.5mm. We see that number sliding to a low of 4mm by 2012, or sooner, seeking a bottom.

Rebuttal: There are many ways to move around without a car. You ride a bike, fly, walk, ride a motorcycle, use public transportation, and share rides with friends and neighbors. We all do not need 3-4 cars and trucks in the family with associated heavy costs. Also auto ownership can be substituted with occasional car rentals. New Yorkers have been doing it for years.

Those with cash and resources will abandon larger cities and live in gated-communities and enclaves with armed guards-having their personal army so to speak. Small towns will flourish with new-comers watched suspiciously.

Rebuttal: Let the rich live within their self-imposed gated prisons. A non-descript small home in a small town could probably be safer with neighbors looking after each other as we personally remove ourselves from the rich guy or gal target list. Live below your means and enjoy life.

While the US will not disappear nor will the dollar vanish we see America resembling a third world country in many respects. Our national military will be mostly called back home and several formerly large outposts abandoned due to budgets.

In Asia, China could descend into revolution splitting that nation. Japan will form tighter alliances with China as America abandons them leaving them in the lurch defensively. Israel will probably attack Iran on its own with no help from others and this will set-off World War III. We see most of Europe and Russia sinking into economic failures along with South America.

In the United States, economic disruptions create population shifts away from the Mexican border where unstoppable illegal immigration and violence escalates. Families will double-up and triple-up in one dwelling with most household members unemployed. You’ll see families that had three or four employed people reduced down to one or two feeding everyone.

Rebuttal: The government will have to reduce its military occupation of over 100 nations. They will not have the money. Countries of the world will eventually sort out their own problems one way or the other. As individuals there is little we can do to change these facts. For the most part life goes on one way or the other. Don’t bother agonizing over problems you cannot solve. It’s a waste of time.

Insurance companies will be decimated and pensions destroyed. Big banks throughout the world will be nationalized (many are already) and the renunciation of debts both public and private will be commonplace.

When the dollar collapses to a shadow of its former self the huge international bond market fails with it.

Rebuttal: Phony assets and debts of huge corporations and insurance companies will be written down or written off. So what? We think the dollar survives and can eventually regain some power and stature after the trash is washed out of the domestic and global system. Let it happen and deal with it.

Governmental policies and party shifts will move to bureaucratic-style socialism and more communism. We see Japan going socialist along with America and most other formerly capitalistic countries in Europe. Only Germany might stay capitalistic. It will move to the far right and begin building a new military complex much to the fear of its neighbors. We see this as a normal defensive response to protect the German nation not a move toward external aggression.

Rebuttal: If the US goes pure socialistic, work to stay independent within that framework. Eventually, socialism and communism will fail as patriotic Americans vote in the right policies.

Immigration problems will escalate. Fresh émigrés to western nations will be expelled and denounced as citizens resent their taking jobs and benefits. Others will scream to “send those people back where they came from” out of pure racial hatred. This is going to be a big problem all over the world but especially within Europe and the United States.

Rebuttal: Immigration problems will calm down in a depression. Many illegals could return to their nation of origin to find work as US jobs will not be plentiful. We think California’s problems with labor and water will force vegetable growing into other states and local situations eliminating the middle man and long distance transportation costs. Anybody with a little effort can grow a vegetable garden and exist on its production; even on tiny city lots. We read of a man growing ten tons of food on 1/4th of acre last year. He gives most of it away; running the project for a hobby.

Within certain countries cultural clashes are in our view inevitable. Class warfare will grow economically and culturally. The “Have Nots” resent the “Haves” and want their stuff out of jealousy.

In times of crisis, rogue nations like Iran, North Korea, Cuba, Venezuela, Syria, and similar others will move to expand their dictatorships and attack-plunder. Most will be counterattacked to settle old scores.

Rebuttal: If foreign affairs news is disturbing you turn it off. If class warfare breaks out choose not to be involved. If common sense is employed as individuals and families work daily for pure independence, most of this stuff will not only not be a burden but it clears your mind for productive work, leisure and positive relationships and surroundings.

Are we heading into the dark ages? We think not but see a muddled, messed-up ten years of troubles that can eventually be sorted out after (1) assets are marked down to reality and, (2) economies are restructured on sound economic footing.

The nation who can control energy-crude oil and gas will be the ultimate victor. That victor will be the world’s dominant player as the US was over the past years. Russia and the US are the top two combatants vying for this prize. We think the USSR will lose based upon economics and the fact the Ruble is not the world’s reserve currency.

Government interference created these problems setting-up big banks and hedge funds to flout economic rules. These stupid ideas were instituted primarily for feel-good-liberal-socialistic ideals. While this stuff appeals on a sympathetic level, the reality of free enterprise clashes with it both economically and socially and, creates big trouble. Abolishment of these policy tragedies should set the stage for a new era of hopeful prosperity providing freedom continues to exist.

Rebuttal: Personally, for those in the New York Banks, IMF, US Treasury, SEC, derivative traders, and others who designed and implemented this criminal spectacle, all in the name of major greed, we wish you the worst.  You’ll end-up suffering for it one way, or the other. As for me, I am moving to a safe and beautiful place, am forming new and precious friendships and plan a return to the outdoor life along with my gold and other futures trading and my passion of reading and writing.

This is a perfect time to rid your life of old negative baggage, renounce the stupid materialistic life-style promoted with phony advertising and quit trying to keep-up with the Joneses. That will be easy as they will be in the welfare food line not being able to cope due to a mindless existence stuck in old, broken paradigms. Good Luck! Get busy and change your life. A better one is just ahead. - Traderrog

Heavy Inflation On It's Way

"With the U.S. Treasury monetizing debt through the purchase of $300 Billion in new bonds, there can eventually be only one outcome-massive inflation. Further, there is no question inflation is being further acclerated by the reckless printing-origination of new U.S. Dollars. Stocks have lost 60% of their value since 2000 and the U.S. money base is forecast to increase 500% this year.

The Federal Reserve, U.S. Treasury, IMF, Bank of England, Bank of Japan, and European Central Bank are all moving in concert to produce an economic recovery. The end result will be unbelievably inflationary. With our U.S. Treasury taking this erroneous step, we think they have crossed the line into a space from which they cannot recover. M1 in Euroland grew 17.8% over the past six months and America's measure of new cash has been hidden for some time yet analysts think its averaging over 200%!

The administrations plan to bail out the failing banks and corporations has no chance whatsoever in our view. They need to liquidate all the bad loans and others must markdown assets to reality. Housing, stocks, commercial real estate, autos, banks, and insurance companies are all at risk. Housing and its companion lenders and loans remain well off the price mark of reality. Unless and until these toxic loans are removed from all balance sheets the recovery is delayed. We would suggest only 10-20% of the derivatives mess has been addressed with the balance lurking on balance sheets in back rooms.

Gold and Silver Is The Only Answer

Precious metals were sold-off last year to raise cash to cover bad investments and trades. Gold and silver are now in strong rallies and recovering pretty much as we expected. Our spring forecast for gold is a minimum of $1007 and might reach $1130 to $1260. Silver was behind gold in this rally but has been playing catch-up and has actually been stronger than gold for the past few week. Silver is forecast to rally to between $15 and $16-$17 for this spring. We expect the old high of $21.50 to be easily surpassed this year. New silver highs for 2009 could be $25-$26 and perhaps even $30.

As more bad credits continue to fall, only gold and silver in our view can retain value and earn enough more to post positive investor-trader gains this year and in forthcoming years.

While the old-fashioned idea of portfolio diversification remains popular, we suggest instead that investors and traders focus on physical metal first followed by junior and senior precious metals shares. In our newsletter Trader Tracks, we also recommend futures and commodities trades regularly, with our specialty offering a variety of ways to be in gold and silver. While the average portfolio in 2008 lost -40% according to new reports, we personally finished in the green on 12-31-08 by trading gold.

In our view, time is of the essence as we move into the next trading phase for gold and silver. From 2001 to 2008 phase one showed us remarkable returns. The next phase should show us wider trading ranges in precious metals and much higher prices. We are now seeing the larger funds moving into several trading ideas to buy gold. Some analysts and gold traders are out of all shares unless they are directly related to gold and silver. These are very big traders and investors with long histories of excellence.

Make a personal plan and stick with it. Under the circumstances, economic events are driving the forces of inflation when precious metals perform the best. -Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com

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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. See webeatthestreet.com for more information

Contact Claudio Bassi, at Trader Tracks New York City publishing offices for a free 30-day trial subscription 718-457-1426 Monday through Friday, 9:00am to 5pm or, e-mail Claudio at cbassi@miningstocks.com