Predicting the Market – The US Economy in 2009

Jim Rogers



Legendary investor, Jim Rogers, really understands the market. He is the guy that always seems to be on the winning side of the bets he places on Wall Street. Rogers has an uncanny ability to predict long term trends in the market.




Peter Schiff

Peter Schiff is a respected market savant who runs an investment firm. He authored a book “Crash Proof” which predicted with terrible accuracy, the mortgage bubble bursting and the current economic climate.

Predicting the Weather

So how do these guys always get it right? Expert economists tell us our market is extremely complicated. Except for a few exceptions, none of them seem to be able to predict any market trends to meet the accuracy of a meteorologist. What is going on?

There is a lie spread by the media and educators. They tell us that we are in a free market. In a free market, events such as market recessions and upswings are difficult to determine. They are based on the uncertainty associated with production and demand.

However, the truth is that our market is controlled.

In a controlled market, forces that have control over the market determine large scale trends. This makes the market predictable as long as you understand the controlling forces.

The Federal Reserve

So who or what controls the US economy? The Federal Reserve is the single most powerful factor in our economy. It owns the right to lend the United States our currency.

Simply, the Fed is the master of the US dollar. Its actions are the most powerful force in our market.

If you understand the Fed, you will be able to predict the market. It is that simple.

The Current Climate

Let’s look at the symptoms of the current US economy.

Financial giants have been dropping like flies. Lehman Bros. declared the largest bankruptcy in US history on Monday August 15^th. Also on that same day, Bank of America bought out Merrill Lynch - saving the giant from a similar fate. On Wednesday (August 17^th), the Fed loaned $85 billion to AIG saving them from certain financial doom. All eyes are on Washington Mutual for their upcoming bankruptcy.

The Fed and congress are currently planning an $800 billion bailout of other financial institutions that are expected to crash. The total value of bailouts locked into this month is likely to exceed $1 trillion.

The Consequences

What is the media saying about this? They are praising this “bold” move saying it will save the US economy. Both presidential hopefuls – Obama and McCain – say they are for the bailouts.

However, they are all ignoring the consequences of these actions. The threat these bailouts pose to the economy is twofold.

First, it will accelerate inflation. Anytime the Fed releases more money into circulation the value of each dollar drops. Inflation is already spiraling out of control, with prices on raw goods rising as much as 100% over the past two years. Expect prices on everything to drastically increase over the next year.

Inflation also has the effect of destroying people’s savings. With less capital, it will be more difficult for private investors to fuel a bounce back of the economy.

Second, it undermines foreign faith in the dollar. For the US economy to function, foreign countries must be willing to take on more US dollars in their reserves. When the Fed abuses our dollar, it severely hurts the US dollar reserves of those nations. If we continue down this path there will come a point where foreigners will wise up and choose not to take on any more diminishing dollars.

If this were to happen, it would bring our economy to a screeching halt.

The media tells you that the bailouts are helping you by maintaining the stability in the market. The bailouts do nothing more than temporarily patch up some holes in the market.

However, they do nothing to fix the flawed foundation upon which these companies failed. These companies are failing and will continue to fail until the financials of these companies are free of bubble assets. By some estimates, there is over $100 trillion of air in the derivative bubble that has still to deflate.

Patching holes in the market while sacrificing the integrity of the dollar will have severe consequences. The US currency and the American people simply cannot afford to take the hit. We already have a negative savings rate, millions are losing their homes, and families are asking for government assistance to feed their families.

The better move would be to let these institutions fail and preserve the value of the dollar. The US economy can weather large corporate bankruptcies – it has hundreds of times before throughout its history. What it can not endure, however, is a dollar collapse.

The Fed is backing the losses of the poor financial choices of the financial elite at the expense of the dollar and the US people.

The Market Seers

Jim Rogers recently moved his family to Singapore and has withdrawn his investments from the US market – except for a few bets against the financial institutions. When asked why, he says because the Fed is destroying the dollar.

Peter Schiff invests in an avid foreign investor who finds value in commodities and foreign markets. He avoids the US economy and urges anyone who will listen to do the same. Schiff is commonly called Dr Doom because his predictions include a collapse of the US economy and the dollar. The scary part is Dr Doom has yet to be proven wrong on any of his predictions.

Introduction

"Beware the leader who bangs the drums of war in order to whip the citizenry into a patriotic fervor, for patriotism is indeed a double-edged sword. It both emboldens the blood, just as it narrows the mind. And when the drums of war have reached a fever pitch and the blood boils with hate and the mind has closed, the leader will have no need in seizing the rights of the citizenry. Rather, the citizenry, infused with fear and blinded by patriotism, will offer up all of their rights unto the leader and gladly so. How do I know? For this is what I have done. And I am Caesar."

- Julius Caesar


America is currently the victim of a dupe that has been used by would-be-dictators since the time of Julius Caesar. It has been used more recently by dictators such as Hitler to create Nazi Germany and Mussolini to create Fascist Italy. And it is being used right now by George Bush and the Neo-Conservatives here in America. In these blogs, we will explore the full scope of America's precarious situation.

Here is a snippet from Wikipedia:

"On 29 September 2006, the House and Senate approved the Military Commissions Act of 2006 (MCA), a bill that would suspend habeas corpus for any person determined to be an “unlawful enemy combatant" engaged in hostilities or having supported hostilities against the United States”^[3][4] (...) President Bush signed the Military Commissions Act of 2006 into law on October 17, 2006. The declaration of a person as an "unlawful enemy combatant" is at the discretion of the US executive branch of the administration, and there is no right of appeal, with the result that this potentially suspends habeas corpus for any resident, citizen or non-citizen, of the USA.

(...)

There is, however, no legal time limit which would force the government to provide a Combatant Status Review Tribunal (CSRT) hearing. Prisoners are legally prohibited from petitioning any court for any reason before a CSRT hearing takes place."

Clarification: The executive branch now has the power to imprison anyone it pins as a "suspected terrorist" indefinitely and without a trial.

The government is also broadening its definition of terrorism. The Animal Enterprise Terrorism Act was signed into law on November 2006. It expands the definition of terrorism to include animal rights and environmental activists.

With the signing of the USA PATRIOT Act into law on October 26, 2001, the FBI was given the expanded power to use National Security Letters. National Security Letters allow the FBI to search telephone, email, and financial records without a court order. With their "sneak and peek" operations, the individual would never even know they were being investigated. The FBI has since issued tens of thousands of these NSLs. They used some of these NSLs to seize over one million financial, credit, employment, and health records of customers of Las Vegas businesses.

Our federal government has given away our right to privacy. It has given the executive branch the power to detain indefinitely - essentially eliminate - anyone it sees as an enemy with the Military Commissions Act. These laws were passed through congress with almost no opposition or debate. They were presented as a way to ensure the safety of the US citizens in the post 9/11 world. In reality, these laws are a direct attack on the rights of US citizens.