2012 Economic Dangers

Tea Party Dilemma

How do we explain to you, how much trouble we are in. If you believed, as we do, that we will suffer multiple Meltdowns larger than the one in 2008, because of U.S. government actions taken since 2008, you would need some idea of what we are talking about.

The Banks

We believe Europe is failing to cut their government spending, because they expect the European Central Bank and the U.S. Federal Reserve to bail them out. Therefore, they are in no hurry to cut their spending. The banks holding their bonds are European Banks, backed by European governments, mainly Germany. Our banks do not own these Bonds, but bank and sovereign debt defaults in Europe would cost our banks $10 trillion in collateral damage, because our banks have investments in the Eurpoean banks. Our banks already hold an equal amount of toxic assets like foreclosed mortgage-backed securities, so a $10 trillion hit will sink them.

Thanks to Dodd Frank, the U.S. government will pay most of the $10 trillion as they close these banks and we all wander off to find a local state bank or credit union nearby. We may get new charge cards or not. If we have credit card balances, those bills will come due.

U.S. Federal Spending

We are borrowing 40 cents of every dollar the federal government spends every year and there appears to be no plan to stop this soon, or at all. If the banks going out of business wasn’t enough, we have a federal government that is broke. Obama plans to spend an extra trillion or two more than the government receives in revenue for the next 10 years, when the National Debt is planned to go from $15 trillion to $26 trillion. Unfunded liabilities and loan guarantees are now over $100 trillion. This is more than the U.S. would be worth if we sold it. We thought a Republican House would hold the debt ceiling, but that has not been the case.

Investors Pull Out

Investors have been pulling out of Europe and the U.S. for some time. Many continue to have investments in Europe and the U.S., but all are easily liquidated just before the music stops. They like to surf with sharks, so they aren’t worried; they bought all the gold and silver and other commodities. Better yet, they bought hedge fund bets the European and U.S. economies would tank.

Inflation

So far, the Federal Reserve has increased the money supply by 300%. This liquidity is sitting in the big banks in the U.S. and Europe. The published amount is about $5 trillion, but another $20 trillion is suspected to exist as well. The Fed will obviously bail out Europe and the U.S. to allow government spending to continue. This printed money is sure to be used for cash-flow. The entry of this 300% increase in the money supply to the markets will dilute the dollar as it enters. We could have 300% inflation in one year, 30% a year over 10 years, or 10% a year over 30 years. The trillion dollar increases in the debt ceiling will add to this inflation beyond the 300%.

One Chance

If we can get Greece, Italy and Spain to cut their spending to match their revenue and we can do the same, and we can repeal Frank Dodd to end the promise of a funded “wind-down” (last bailout) of the banks and get the Fed’s printed money back from the banks before the crash, we would have a chance. Even if we do all of this, we will have more layoffs, foreclosures, asset value declines and stock market crashes. We will have a 90% drop in the markets and 50% unemployment. Then we will be ready to rebuild.

When will the Music Stop ?

Like a tsunami, we may see the ocean retract from the coast, before it returns and crashes into the shore. We may get the news that European banks are unraveling and know we are in for a hit. At the last minute, the stock market will tank.

In Aftershock, the authors noticed real wages going down and housing prices going up and predicted that the housing price bubble would burst as soon as buyers dried up. Some of us were suspicious when we got 5 telemarketer calls per day to refinance our homes, but the music stopped when banks stopped lending to each other, because they suspected each other might fold because of too many bad loans and bad securities.

What’s a Good Plan

Whoever is elected to the Presidency or the Congress in 2012 will need prepare to handle all the meltdowns. The obvious course the federal government should take is to cut spending to match revenue and refuse to spend any more, or add any loans, aid or loan guarantees to unfunded liabilities.

The cleanest way to deal with this is to cut spending to match revenue immediately. We should suspend legal immigration, deport illegal immigrants and close the border. To ensure that the same agencies won’t be around to ever do this again, we should end the Fed and implement full compliance with the Constitution and 10th Amendment as written. This would end all foreign involvement in the responsibilities that will be given back to the states and the people.

Several things will help our private economy begin to recover. First is to repeal all laws and remove all regulations that prevent us from restoring all land to productive use. Lowering corporate tax rates, especially for manufacturing done in the U.S. will help.

What’s a Bad Plan

A bad plan is for the U.S. to print money and have the fed make up the losses in all U.S. and European banks. This adds more U.S. and European sovereign debt. This will turn into more inflation. It will get worse if nobody cuts spending enough to set up a debt repayment plan.

It is likely Obama would confiscate our savings, retirement, bank accounts and property and turn us into the USSA, comrade. This plan has been published, it’s U.N. Agenda 21. Obama is spending his extra trillion a year implementing Agenda 21 with EPA, Interior, FDA and USDA hostile actions, land confiscation and public transit grants to get local government to do stupid things under the guise of environmentalism.

Norb Leahy, Dunwoody GA Tea Party Leader