Don’t give up the fight to save the American economy
Posted June 19th, 2008 by jzneff
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There seems to be a trend I’ve found…and I don’t know if it’s Ron Paul supporters in general, or if it’s simply the one’s I find on Dailypaul.com. I’ve found that many of you are very perrimistic about our immediate future and are simply bracing for a complete economic collapse, perhaps only in the US, or across the world.
I am a Ron Paul supporter, in fact he’s defined everything I’ve ever looked for in a leader. I will compare every man running to represent me against him, and forever vote for whomever I think comes the closest. Ron Paul owns my vote for 2008, even if he doesn’t want it, I decided almost a year ago that I would vote for this man. I feel sometimes I have to qualify how strongly I believe in the good doctor.
I however, do not feel we are on the edge of a collapse proportional to the great depression, or worse as many supporters do. I feel we are looking at no worse than the days of the late 1970’s, I would argue not nearly as bad.
We are currently in the most painful economic times…the end of an economic bubble collapsing. The housing bubble, which began strongly in 2003, has pushed pain and misery into the economy, but I would argue that we are just finding the bottom of the housing market, and normalcy will return shortly. I’m attaching a file of average housing prices for 20 major metro areas in the US.
Follow the slope of the market before 2003, and the increases seen shortly after. Prior to 2003, you were looking at sustainable growth in housing (growth which looks quite nice until you factor inflation) but this was real growth nonetheless.
When the loose money policies and loans to anyone at any price began, the prices began to rise at a much higher rate…this is what created the bubble. If this had not been done, the price increases seen prior to 2003 would have continued…and for most of the markets, we have reached that point. This argues that the bubble has popped in most of these markets, and a few cities have a little more to shed, but we are nearing the end. Times are still bad for the construction industry, but the decline seems to be nearing an end.
Inflation is another pain of our time…but we are still not near the levels seen in the 1970’s. Using honest methods (like the ones used to measure the inflation of the 1970’s) we’re looking at around a 7% annual inflation rate currently. This is compared to inflation of almost double that rate in the late 1970’s. We are feeling the burn of almost a decade of increasing inflation, but we are not printing nearly enough nearly fast enough to bring about a hyperinflation event. The only two things that could cause hyperinflation in America are 1) A giant depression, contracting our GDP to a fraction of what it is today, or 2) A massive printing spree, generating 10’s of trillions of dollars in a few years. Save either of these two scenarios, we are not going to experience hyperinflation.
The biggest pain of our time is commoditiy pricing, or the recent rapid jump in the price of all commodities, especially oil.
Bubbles are caused by malinvestment and misinformation, driving an unnatural amount of money into a particular market which drives up the price, for a time. Bubbles burst, and I believe that the current market on oil is no exception. It’s hard to identify bubbles sometimes, even when the proof is staring you in the face. Re-look at the graph for housing prices I posted earlier, and ignoring everything after Jan-06, tell me what you see?
You’ll see what appears to be parabolic increases in many markets…this is what the oil price chart looks like today, and it appears that the price will never stop increasing at this rate. People never thought the dot.com market would crash, and they never saw the housing market crash, because when you’re in a bubble, common logic is thrown out the window and is replaced by the beliefs of the day. Bubbles pop, always will because we have experienced unsustainable growth.
Also on oil…it is quite a lagging commodity as far as discovery. We are to a point in drilling depths that it often takes 8-10 years from the time you start looking for a well until you get crude yielded. The price of oil in 1998 was less than $20 per barrel, and had increased to around $30 only 2 years later. This is when new oil discovery began, because the price was finally at a level where it made drilling profitable.
The lag in discovery is a very often overlooked phenomenon…the price of oil dropped fairly constantly from 1991 to 1998, so discovery level was likely pretty low during that time…fast-forward nearly a decade, and we’ve had a fairly steady drive for higher prices from 2001-present. People see the short term production leveling we’ve had in the last few years and think “peak oil” but what they should be thinking is oil companies weren’t looking for oil a decade ago, when oil was $17 per barrel. We are not nearing the end of crude on Earth, and won’t be for quite some time.
So, in short, these are 3 of the biggest reasons I believe we are not in for good economic times in the near future, as we’ll be feeling the effects of this for quite a while…but we certainly aren’t on the edge of a total system failure.
I’m with Ron Paul that this system of economics must be changed, and changed soon. I’m with Dr. Paul when he says that we are headed toward bankruptcy. I’m a firm believer in the teachings of the Austrian School of Economics, and think that fiat money is nothing more than a hidden tax on savings. We are headed toward bankruptcy not due to Keynesian economics, but merely because our government is spending 3 trillion dollars per year. The government uses Keynesian economics as a tool to outspend their revenues, and THIS is what is going to push us over the edge if we don’t stop it soon. We have promised an unsustainable amount of “entitlements” on the backs of our children, and to avoid a system collapse, we must begin breaking those promises and getting rid of entitlements. The government should not be in the position of head charity for the needy of this country, and that’s where almost 2/3 of our federal spending goes. It’s programs like SS, like Medicare and Medicaid, it’s unemployment, it’s disability, it’s food stamps, crop subsidies, all of these charitable giveaways must stop and soon.
After we rid our government of this wasted charity, and after we’ve put them on a strict diet limited to the bare essential federal spending, is when we can begin to change the unfair Keynesian nonsense like fiat, like fractional reserve, and perhaps someday we can rid ourselves of the shackles of the Federal Reserve.
Why do I paint a rosier picture than most? This is to make sure that we’re all fighting hard to save what we’ve built in this country. I don’t want this movement to begin hoarding and preparing for the end. By all means, be prepared for the worst, but don’t be the guy on the corner with the “end is near” placard on.
To win this revolution is to truly convert enough people so that we’re not a small but persistent movement, but one of a majority of the nation uncompromising what we believe. We have to convince our friends and family to at least begin the process of walking down the path which brought us to the revolution. People will not join us out of panic, they will join us because they are inspired by our vision of what this country can be.
Dr. Paul tapped into that vision when he talked of eliminating the income tax, of bringing our troops home permanently, of shrinking the federal government in a drastic way, of ending the war on drugs. He didn’t gain traction by warning people of the cliff we’re about to dive off, but what we could achieve if we knew what needed to be fixed.
Please, when you’re trying to convert, leave the ancillary things you fight for on the side, at least until you’ve set your loved ones down the path. By this, I mean the myriad of things that are discussed on dailypaul.com on a daily basis. I’ll go without naming the subjects for now, but please, when you’re trying to convince, focus on the messages that resonate with your “average Joe.”
Educate yourself on Austrian economics, but also in Keynesian economics. Learn about the gold standard, but also learn about fiat. To defeat your enemy, you must know your enemy.
Don’t lose faith in this movement, but look at what we’ve accomplished thus far. People weren’t ready to hear us in masse yet, but as long as we can keep the enthusiasm and determination that I’ve seen from you fine people in the last year or so, people will eventually hear us.
I’ve recently imposed a self-exile on myself from this site due to frustration in bringing different viewpoints to the table. We must be uncompromising on our values, this much is true, but be respectful of other viewpoints and be open-minded…because this is how we truly learn and grow.
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I think it's good to be
I think it's good to be optimistic about things, if that's your intent. Nothing wrong with thinking positive. But reality is reality, and I believe I am far better served playing the hand I've got rather than the hand I wish I had. Poker player may disagree, but I digress.
The reality is the dollar is still falling which is amplifying inflation. They are two different things. The price of a barrel of oil is going up all other things being equal. So more dollars are required to purchase a barrel of oil. Add to that it takes more dollars to equal spending power, and you've got a compound effect. The rise in oil prices drives up the price of everything, and the falling dollar requires more dollars ... it's a vicious cycle. No one is doing anything to break this cycle, in fact US policy is only fueling it.
Once we left silver coinage, the US economy became a house of cards destined to fall sooner or later. That time is coming soon, and that is reality. You would be foolish to deny it.
Also ... who says an economic collapse will be a bad thing in the long run? If you know someone who develops a drinking problem, you might hope they get a DUI, or get whooped in a bar fight - something to shake them and wake them to the seriousness of their problem. America is hooked on debt and consumerism. A collapse might not be any more fun than getting arrested for DUI, but it may well be a necessary step in the process of getting free.
But one who looks intently at the perfect law, the law of liberty, and abides by it, not having become a forgetful hearer but an effectual doer, this man will be blessed in what he does. - James 1:25
like a person with 10 credit
like a person with 10 credit cards who slowly charges everything up- at some point you run out of credit, resources, and the whole things collapses. maybe we are there now, time will tell. Its crazy how much prices have gone up in the last year!!
jz I respect your right to express your opinion
and I hope you're right. But the fundamentals of our economy and financial system are so jacked up right now that it would take nothing short of divine intervention to save us from the consequences of the mess that has been created. Stick around because if you're correct, and I really hope you are, I will be one of the first to say that you were right all along and most of us were clueless.
I second that Gil....
I second that Gil.... next spring if everything is recovering I will jump for joy and I will buy JZ a huge steak dinner and a case of his favorite beer!
I don't want to see things get as bad as some say i have a wife and 3 kids-- my parents and friends, and my brothers and their families! the last thing I want to see is this crap happen! AND I WILL PUT ON THE DAILY PAUL THAT I WAS WRONG AND THAT JZ IS THE MAN!
as for me and my home, we shall worship the LORD
Well good.
In the mean time I am growing a garden, hooking my car to run on HHO
and learing how to live off the grid. =]
jz's true intentions! as for
jz's true intentions!
as for me and my home, we shall worship the LORD
this economy cannot be
this economy cannot be saved... the day of reckoning can only be delayed further.... the longer the delay, the worse the day of reckoning becomes.... the best way to protect yourselvs and your country is to accumulate real wealth. real money for the far side of the crisis.. the debt can never be paid back..
http://www.silverstockrep...
as for me and my home, we shall worship the LORD
Prepare yourself the signs are everywhere.
The dollar being devalued on a daily basis.Federal reserve is still turning the printing pressThe worst part about the devaluing of the currency is that is intentional ; done by those who are charged to protect the peoples currency.They should be hung for what they are doing.
.American self sufficiency is a thing of the past for most americans.Crime is on the rise and will get much worse if the the crumbling of our country continues.
Corn crop failure in the midwest in the midst of subsidies for ethanol,more wars,less high paying american jobs, the price of everything is going up.If you prepare and we are wrong then you will at least have bought things at a cheaper price than what they will be in a few months.A gallon of milk is over 5 dollars a gallon--do you think that is a problem? Airlines are going bankrupt,truckers are getting screwed,and the average american is starting to get pissed. I can assure you something big is coming.I just hope we can restore it to the constitutional form of government but I don't think the masters are going to let us we must force them to.There definitely is a big mess on the horizon.
You're wrong
No...the federal reserve is not printing money as fast as the 1st quarter, in fact, the MZM growth has fallen to below 10% back to historical norms. Yes, they went on a printing spree, but it's over now. Look at this chart.
http://www.bullandbearwis...
A gallon of milk is over $5??? Where do you buy your milk? I paid $3.19 the last time I bought milk...in fact, there's a sale at Kroger's this week where you can get 2 gallons of milk for $5.00. You're either lying or getting ripped off very badly.
Yes, there is a good amount of misery in our economy...this is what the downside of the Keynesian cycle looks like. People in the 1970's thought the end was near...the end of the dollar, the end of oil, the end of the world. It isn't here, for there is plenty to be optimistic about.
Where people buy there milk is relevant
If someone lives say ... on the north side of Chicago, everything is more expensive that say ... Peoria or one of the small towns in between. I'm sure many millions of people in high priced urban areas are paying $5 for milk.
Please, read this.
http://www.dailypaul.com/...
"first by inflation, then by deflation, the banks...will deprive the people of all property" -Thomas Jefferson
Proposal of Preparation
I understand and respect your views regarding our nation's economy -- in that I know that your statements have been thought out and reasoned. I do, however, believe that there are various aspects that you have not considered that make our current events unlike any in recent history. We may have to look all the way back to the fall of Rome to find a similar comparison.
However, I do not want to open this debate at this point. Rather, I would like to propose a compromise for those of us uncertain of what we should do.
First, you are absolutely correct that we need to fight to save our economy. We need to continue to campaign and support strong candidates dedicated to the freedom movement and restoring a sane government to our nation. We need to continue to apply pressure to our elected officials to vote correctly on current legislation. No matter what the realities of the future are, this is essential. We must start the process of restoring the values and principles of our country so that we can even have a chance of avoiding the collapse or, barring this possibility, be able to institute a proper recovery plan to rise up from the collapse.
Second, eliminate your debt where ever possible. This is always a good idea, and should you lose your job, there will be fewer obligations to eat up your precious savings.
Third, I would recommend at the very least to buy up to six months worth of nonperishable food. If you are right, you can still eat what you have purchased and are out little. If you are wrong, you will have food to sustain you through the hard times ahead -- it could very well save your family. A six month supply of food is probably a good idea anyway since you can always lose your job even in the best economy.
Fourth, if you feel more strongly that the trend is downward -- if nothing else, that inflation will continue long-term -- consider purchasing gold and silver as a hedge against the over-spending of our government.
We shouldn't cower in our basements, but we should also prepare for what could be the worst economic collapse our nation has ever seen. We need to continue to fight for our nation, but we also need to be sure that we have the means to sustain ourselves through this fight.
I would like to add one last recommendation, and this may be the most important: get your house in order. Prepare yourself mentally, physically, emotionally, and spiritually for the battles ahead. No matter what the timetable actually is, it will take a revival of our nation's morals and character to turn ourselves away from the brink of disaster, and it is never too late to get your life in order. We will need every ounce of goodness and character to face the challenges ahead and avoid the pitfalls that will destroy us as a nation. It was this very lapse in our morality that has brought about the greed, corruption, injustice, and hatred that is ravaging our nation today.
I won't disagree
I've been prepared in the manner that you're describing for 2 years now.
Just a note...Top Ramen may be the best survival food there is. You can probably live off 3 packs per person, per day...and at 12/$1.00, that's only $0.25 per day. I have cases of this stuff, and I think it lasts forever.
Also...stock on wine and liquor. You'll probably be amazed at how valuable it will become in a barter and trade economy.
It's always a good idea to be armed and prepared for the worst, whatever that may be.
I say
hope for the best plan for the worst.
Problems run deep
I don't believe were are anywhere NEAR the bottom.
Inflation (like we have had for decades) causes malinvestment throughout the economy - not just in the bubbles. Billions of dollars have been invested in productive capacity that is not supported by real consumer demand. That malinvestment needs to be wrung out of the economy. That means unemployment. LOTS of unemployment. We are just getting started with the increase in unemployment from this correction and even the massaged numbers from the government are horrifying. A 10% increase in unemployment in one month? Worse than that, really, because the massive losses in manufacturing, construction and retail sales were masked by gains in government jobs and the highly subsidized areas of education and health care.
The drop in employment has already caused a substantial drop in government revenue. Governments at every level are in budget crisis mode. And the revenue drop is going to get much worse before it gets better.
Because americans have a NEGATIVE personal savings rate and massive amounts of debt that is either unsecured or under secured, there is no safety net for the unemployed. Never before in this country have we lived hand to mouth the way we do now. As never before, unemployment means nearly immediate default on outstanding loans.
And built on top of this feeble structure of debt is a massive derivative market, the bounds of which are still unknown, but which threatens to topple the financial industry in its entirety at any moment.
And this is just the beginning.
The Federal government's debt has grown to a staggering size. And the rate at which the deficit has been growing was increasing even BEFORE revenue started to fall as a result of the downturn. And the government's response is - drum roll please - MORE spending. The government is taking in less and spending more. The government is hiring people while the people who have to pay the new salaries are losing their jobs.
And the people who have been loaning us all the trillions of dollars the government needs to keep its programs running are begging off.
So here is what is going to happen. Unemployment will continue to rise. Government revenue will continue to fall at every level. State and local governments that do not have the luxury of printing money will face bankruptcy or massive layoffs (causing the unemployment rate to spiral). The Federal government may step in with new currency to keep local and state governments afloat. Or it may allow the layoffs. So you will either have more inflation or more unemployment and loss of revenue.
As the Federal deficit rises, interest rates will rise and the governments ability to borrow will be curtailed. The government, loath to cut jobs or programs will have no choice but to inflate the money supply just to pay the bills.
This inflation will drive interest rates higher and will cause holders of US treasuries to sell them off. The flood of dollars from former holders of US notes and the flood of dollars from the government presses will cause a deluge of fiat money that will drown the the economy.
Inflation will exceed by far anything we have ever known. Misguided attempts by government to control surging prices will cause shortages.
The massive inflation will cause huge market distortions.
We might go on for a long time in this inflationary depression. Or the dollar might go into hyper-inflation and collapse. Either way, the ugliness is just beginning.
Even if Ron Paul were sent to the White House with a mandate and a cooperative Congress, there is still going to be Hell to pay.
Sorry.
Ok
First...revenues are not decreasing, in fact, revenues are increasing...the federal revenue has increased from 2.2 trillion in 2006 to 2.6 trillion for the current fiscal year. State governments, many of them, are losing revenues because of falling property values, but they are not allowed to run deficits or print their way out of trouble, so they'll be going on a big diet soon. This is a good thing.
Unemployment is a very well known lagging indicator. When you look at job losses, you're looking at the results of 3-6 months ago. It takes time to rationalize job cuts and what we're seeing now are the results of the dubprime meltdown and subsequent downturn in the economy. This is not a surprise, and unemployment shouldn't get out of hand in the near future.
We've been living hand to mouth in this country for the better part of 30 years. The numbers look worse due to upside down mortgages, but make no mistake, people are running up less unsecured debt than they were 10 years ago.
The derivative threats are greatly overstated. Case in point...I make $100 bet on the Yankees next week, then sell that bet to a bookie, who sells that bet to a booking firm, who sells that bet to another booking firm. Since there are now 5 bets involved, it's a $500 total value, but a single person will win $100 and a single person will lose $100. This is why the derivative market numbers look so inflated. Out of around 600 trillion in total derivatives, you're looking at 15 trillion risk...and that's absolute worst case meltdown scenario, and that's spread worldwide. The derivative market is poorly understood by most.
The federal debt is large, but by no means unprecidented in American history. If you compare it as a function of the GDP, we're not in over our heads compared to the 1950's. No one is stopping from lending the US federal government money...they have depegged and talked of divestiture, but American Treasury debt is some of the most secure debt you can own, every major debt ratings agency still rates it AAA or equivilent.
The feds won't bail out state governments...never have and won't anytime soon. They'll let them figure out for themselves how to cut costs.
The federal spending problems you're predicting are real and valid consequences in we continue our spending increases...but you're talking about scenarios that are years or decades off. Nothing of this magnitude is happening soon. The fed is printing madly as of late (actually, the printing spree just ended...look at MZM growth, below 5% now) but they are not printing anywhere near the magnitude to cause hyperinflation. Hyperinflation requires money growth several times the current supply in a few years, and we simply haven't printed that fast.
The ugliness we're seeing will be with us for a few years at least, but I believe worst case scenario we're looking at 1970's era stagflation (inflation perhaps getting to the 10-15% level at worst). I think inflation is likely to slow in the near future (currently about 6-7%) and if oil falls like I've predicted, we'll be well into economic recovery by mid-late 2009.
The bankruptcy of American isn't coming soon...but it is coming if we don't change course and soon.
Your opinion
You are entitled to your opinion. I won't go through and refute your mistakes and distortions. By mid-late 2009 not only will we not be in recovery, we will be in a panic with inflation around 15% and unemployment still climbing. But let's not wait that long for you to be proven wrong.
You tell me when you think unemployment in manufacturing, construction and retail sales will stop falling?
Ok
Unemployment in manufacturing will begin to shrink within the year...our falling dollar has made imports more expensive and exports more viable.
Construction will stop shedding jobs towards the end of 2009, as commercial contstruction slows, homebuilding will pick back up. We won't be adding a significant amount of jobs in this sector until 2011 at least, but the bleeding will stop.
Retail sales...by the end of 2008, we'll be adding retail jobs.
Hahahaha!
Is that the best you can do? If unemployment doesn't stop rising for a year, as you predict, we are screwed!
I'm not sure what your agenda is. But you really belong with Arthur Laffer in the Whistling Past the Graveyard Club.
lol you keep beleiving
lol you keep beleiving everything those talking heads on CNBC TELL YOU...
they shot down peter schiff 2 years ago when I was watching that show.. everything peter schiff said is happening today.. now go see what peter schiff says.. it exactly opposite what you and your 4 languages that you speak and your highly educated brain are telling everyone here... and its not just peter schiff.. Jim Sinclair, and many others who have degrees in economics are saying the same thing! anyone listening to you I think is not being prudent in preparing.. like one gentleman said above.. PREPARE FOR THE WORST AND HOPE FOR THE BEST.. MY GRANDFATHER who lived during the great depression told me that to! with all the debt, all the derivatives over 1 quadrillion ( no matter what you say) .
a war costing 14 billion per month which is printed money... ain't no way they can pull out of this without some MAJOR pain! Depression is going to happen... the big problem with that is, will that also come with violence?
there are so many other factors in this economic quagmire i don't even want to try to type it.. but you have better be telling people to get ready for harsh, very harsh times, instead of giving them hope that things wilkl get better.. by Christmas time I think we will know the answer! there is not much time to get your houses in order.. The people mocked Noah for building an ark out in the middle of the desert.. when it started to rain they were not laughing at him anymore!
as for me and my home, we shall worship the LORD
well said
I think there are many of us that feel the way you do.
Just not on this website....LOL. :)
Good
It's just depressing to think that millions of Ron Paul supporters are cowering and hoarding everything possible instead of fighting like hell to save this country.
hoarding??? what is
hoarding??? what is hoarding? if its for sale and you buy it when it is plentiful thats hoarding? nthe time it is hoarding is when there is a shortage and you go and buy everything and not allowing others to have any.. are you now going to say that people who prepare far in advance are hoarder??? wow jz your socialist mindset is now starting to show threw! it only takes a little time for a zebra to show his true stripes!
Hoarding.. the word people use against those who foresaw tough times
coming and prepared for their families... what a joke it is to use that word!
as for me and my home, we shall worship the LORD
Fine
When the government stops stealing my life to fund things I have no interest in, then I will be happy. When the government stops persecuting and prosecuting people who aren't harming anyone, then I will be happy. When the government stops destroying the medium of exchange to fund excesses based on their perception of the 'common good', then I will be happy.
Until then I will NOT be 'painting a rosy picture' of my slavery. I will be speaking out against oppression. I will be speaking out against tyranny. I will be speaking out against the forced monopoly that is stealing my life from me, and, if not stopped, will be stealing the lives of my children as well. And believe me, sir, it is NOT going to get better unless we make it better.
When the government stops, I will be happy.
'Live for yourself, there's no one else more worth living for,
Begging hands and bleeding hearts
Will only cry out for more...'
Never
Never be happy or satisfied with being stolen from, never be content with the way things are.
All i'm saying is fight for this country as if there's still something left to fight for, don't be content to let it collapse and pick up the pieces.
Hang on.....
it's going to be a rough ride!