Posted by: Sanity Rules | November 5, 2009

The Recession Has Just Begun!

One Quarter of Growth does not constitute recovery, especially when this growth was achieved through Federal deficit spending.

The problem that precipitated the current economic crisis was the collapse of the housing market.  The fallout from this collapse was made worse by the interference of the Federal Government in the form of bailouts.

Our Congress as well as both Presidents Bush and Obama were quick to take action to limit the damage caused by the housing crisis.  Who was the damage limited for?  Not their constituents the American people, but instead the sources of their campaign funding.  As a result large insurance and financial institutions were given funds that the United States Government did not even possess to spend.  The government borrowed the money of the taxpayers to obtain liquidity for their fat-cat clients.   The taxpayers themselves were thrown to the wolves by members of both of the major political parties and not one party stepped in to challenge the constitutionality of this action.  If the board of directors of any corporation suddenly decided to take out loans in excess of it’s assets to bailout some other company, they would end up in prison.  But of course Congress makes it’s own laws and therefore is above the law.

In the aftermath of the bailouts, we are left with a staggering Federal debt that devalues our currency.  This devaluation drives up the cost of basic commodities like gasoline because when our dollar is worth less, more dollars are required to purchase a barrel of oil.

Jobless rates remain high and no amount of government intervention is going to significantly change this unless millions of men are required to go and fight a war.   Instead of giving tax breaks and government backed loans to spur business, we are taxing and regulating companies out of business.

As a result of the economic crisis, millions of small businesses that comprise most of the jobs in this country have closed their doors, or severely cut back on hours and positions in order to survive.

The next wave of this crisis is about to hit the beach.  By January 20, we will see a large sell off in the stock market due to a number of factors,

1. Christmas Retail Sales.  Retail sales will be dismal as the consumer does what Washington cannot do, cut back on spending.  Those stores that see large sales will be those that discount aggressively and to the detriment of their bottom line profitability.  This is good news for consumers, but bad news for those who are out of work.  The “Evil” corporations that do not make healthy profits, cannot afford to hire new employees, increase pay or improve on their benefit packages.

2. Continuing devaluation of the Dollar.  The devaluation of the dollar is going to hit hardest this winter when higher fuel and heating costs will stretch the budgets of businesses and families alike.  In addition, since the Sun is not burning as hot as it normally is, we are in for a cold winter for the next two years at least.  Yes, Global Warming exists, but it is the result of a previously active Sun.  The current Solar Minimum has lasted much longer than usual and this will have a dramatic cooling effect on the Earth.

3. Our current congress is one of the most corrupt organizations on the planet and they are not up for re-election for another year at best.  They are out of touch and too beholden to the special interests to put the needs of the county first.

4. The Democrats in Congress are truly a delusional pack of wolves!  They actually think that the last election was a mandate from the people!  They disregard the fact that the popular vote was very close and that Obama’s popularity brought a lot of voters to the polls who would not otherwise left their TV’s and beer.    Most of  the gains by Democrats were not an endorsement of their party platform, but more the result of the unpopularity of Bush.   The average American voter did not know even one point of  either party’s platform and the election was nothing more than a sort of football game amusement to them.  The Reids, Pelosi’s and Schumer’s of the party took the results to be a mandate while totally disregarding  the extremely poor congressional approval ratings.  As a result, we cannot look to congress for any sensible economic relief and instead are likely to see more feel-good programs such as “stimulus” checks passed out on borrowed funds to a class of people who don’t even pay taxes.

For the Economy, the bottom line is that if you are invested heavily in the latest “Bull” market, GET OUT NOW.  Don’t think about getting back in until well January if at all.  In the meantime purchase tangible assets such as vintage cars, antique furniture or other well chosen items that will increase in value during the coming inflationary times.   To date, inflation has not reared it’s ugly head as “productivity” (also known as job cuts) has increased.  This cannot continue.  In order to remain in business, businesses will start to increase costs in order to survive and coupled with a declining value of the dollar, increased taxation and regulation, the prices will start to climb dramatically.

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