The Growth Myth of Economic Recovery

Lately, it seems like the message du jour from mainstream media and talk radio hosts, is that the solution to our economic problems is being able to "grow" our way to recovery. That sounds nice on the surface, but I don't think it's feasible looking at the gargantuan amount of debt in America in the public and private sectors.

Our "official" national debt has passed $16 trillion and rising. When you factor in unfunded liabilities, estimates range from over $50 trillion, up to Lawrence Kotlikoff's latest estimate of $222 trillion. Even in more "normal" economic circumstances - with a lot less public and private debt in the system - we'd be hard-pressed to achieve this lofty-sounding goal.

With a GDP of around $14 trillion, even if you took every penny of economic activity and applied it to these liabilities, it would still take almost 16 years to retire this debt. When you do the math, there's no easy economic way out.

Neither Romney or Obama have plans that include the honest-to-Pete spending cuts and tough choices that will need to be made sooner, instead of later. Before we can see a true economic recovery in the US and Europe, this 900-pound gorilla in the room (known as DEBT) will have to be dealt with. The majority of it will probably be defaulted on instead of repaid - especially national sovereign, state and municipal debt.

I don't hold out a lot of hope that either party will "get religion" and make the tough choices before we have another crisis on our hands like we had in 2008. Frankly, I don't see much difference between Socialist Party (D) and Socialist Party (R). The Rs have better limited government rhetoric, but haven't done anything significant to fix the budget deficit and debt problems.

I have a lot of friends who are "true believers" that if elected, Romney and Ryan will (really!) reduce the size of Fedzilla, cut spending and bring us closer to a balanced budget. Unfortunately, I don't share their optimism.

I think another economic crash is coming, and the best thing to do is to brace for impact. Forget about waving signs, making multiple political Facebook posts, or trying to argue your point about why your candidate is best. Our political system is broken, and it won't be fixed working within the rigged political game.

Corporations, lobbyists and special interests rule DC with an iron fist, and to a lessor extent at the state level. I still hold out some hope for change at the local level, but its also difficult to make positive change in large metropolitan cities.

I think the best thing most Americans can do is focus on their job or business, and prepare friends and family for the next crash to come. I don't paint a very rosy picture of the future, but I think it's a realistic one. Hope for the best, and plan for the worst. And for the sake of you and your family, I hope that you'll do the same.

Debt Deal Was a Dud and a Fraud

Not much to say about this fiasco - this just "kicks the can" of debt and spending down the road and prolongs the financial day of reckoning. There were no actual spending "cuts" made, just reductions in the amount of proposed spending increases. In Washington-speak, we won't spend as much as we planned to spend, so that's a cut and will help reduce the deficit.

In reality, it does nothing except maintain the Beltway status quo.

It's like giving a drunk two more shots of vodka and Red Bull to keep him partying later into the evening. In the short-term, he can keep partying... but in the longer-term, when he wakes up the next morning or afternoon, that hangover will be a doozy.

That's the best analogy I can think of to describe the cause of the American economic boom, and the following bust. Commodities and stock markets don't like the Debt Deal at all - gold has gone up $50/ounce since Monday, the Dow tanked 275 points on Tuesday. Europe still has major financial challenges with the amount of debt carried by Greece, Italy and Spain - frankly, I don't see the European Union or Euro as a viable entity or currency in the longer-run.

This financial "hangover" that America is facing will be really nasty. We got a taste of it from the stock market and real estate Crash of 2008. How bad will it be? Think of your worst hangover in college, where you're dry-heaving over the toilet late into the next afternoon.

When you swear "you'll never get that hammered again," only to go out next weekend and party it up. Unfortunately, the consequences to Americans' wealth and standards of living will be much more severe than acute alcohol poisoning. This hangover will take years - and probably a decade or more - to work through.

I doubt that America will re-gain it's standing as an economic superpower, because most of the success was fueled by debt, having the world's reserve currency, speculation... and ultimately confidence in our country, economy and financial system. The real collateral and support for financial paper assets and nations is in the public's confidence in those assets, countries and governments.

Once the confidence goes, it takes a very long time to recover - and sometimes it never does. Think Enron... MCI Worldcom... Global Crossing stocks; or failed nation-states and empires throughout history. We're in for major paradigm changes in politics, culture and economics as the Greater Depression unfolds. There will be many fortunes lost, but some will be made in the chaos, confusion and mis-information.

Wealth will NOT be made by investing in stocks like Sitting Bull - or buying and holding forever and ever. Information moves too quickly, industries and companies change at a faster pace, Wall Street and governments manipulate markets. For an average individual stock investor, you're playing in a financial casino that's rigged against you.

Wealth WILL be made by people with vision, foresight, and a willingness to serve and provide VALUE. Forget about flipping houses or day-trading stocks, it's more about old-fashioned values and good business fundamentals - just like many of our parents and grandparents did it. That's the silver lining in this massive economic storm, that our country will (hopefully) get back to basics and common sense business and moral values - Lord knows, our country definitely needs them now more than ever.

SNL Obama-Hu skit speaks volumes about US debt problem

I was at a friend's house Saturday night, talking about business and life when SNL came on the TV. I don't watch much television, so we took a break from the conversation and watched one of the skits.

I remember SNL from the 70s and 80s when Bill Murray, John Belushi, Dan Akroyd and Eddie Murphy were cast members. Maybe it was because I was growing up and didn't pay that much attention to politics, but I never remembered SNL being really political.

However, I was taken aback when I saw this skit that showed Chinese Prime Minister Jintao Hu accusing President Obama of being a liar and trying to screw him and his country with the enormous debt that the United States owes China.

It was funny when the actor playing Prime Minister Hu said: "Why you not kiss me before you do sex to me?"

If Saturday Night Live realizes the American debt problem is this big and virtually unmanageable, I'm pretty sure that China and every other nation-state on the planet understands this as well. Under George W. Bush, it was apparent that the federal government had no intention of being fiscally responsible or getting close to a balanced budget.

Under President Obama, it's doubly apparent that the political inmates (Republican, Democrat and Tea Partiers alike) are running the asylum and want to do what's politically in their self-interest, instead of what's in the best interest of American citizens.

Even if Benny and the Feds don't "officially" implement QE3, it looks certain they'll continue to print large sums of money to try and inflate their way out of this debt problem and keep the economic party going as long as possible. Based on this SNL skit, it looks like the credit/debt/currency keg is just about dry - and the party's almost over.

Got gold and silver?