Saturday, February 20, 2010

Wealth Disparities Approach the Levels of the 1920's

This graph was an eye opener for me(not that I should be surprised):

My Take:

What a time to be an oligarch! All I wanted to do was vomit when I saw this chart.

Folks, there is no way we can have economic prosperity in this country when the top 1% has all of the money. The middle class is basically being destroyed right now in front of our very eyes. Consumption economies die when the consumers have no money to consume!

I am starting to see signs of growing signs desperation and anger as the wealth of this nation continues to get transferred to the elite of yhis country.

Middle class Americans are starting to "lose it "as a result. This weeks airplane event in Austin Texas was a disturbing developement IMO. I must admit that I really am not surprised. The government shouldn't be either.

Things are only going to get worse in the violence department as the taxpayers continue to get violated and more desperate as a result of this economic cataststrophe. The news media tried to downplay the actions in Austin but I don't think it worked.

It appears that Washington was both surprised and concerned about what took place in Texas.

I can't help but ask why? Should the government really be surpised that an American flew a plane into an IRS building in a fit of rage as we all get repeatedly fleeced by the political and financial elites of this country?

Let me preface all of this by saying violence is not the answer here. However, why shouldn't every American be infuriated by what has ocurred since this crisis began?

All the government has done is bail out Wall St continuosly since 2008. My guess is the disparity of wealth in this chart would look even worse if it included 2009.
Main St. has basically been ignored throughout this crisis minus a few housing programs to help lower mortgage payments. This of course didn't work because these homeowners couldn't afford the house in the first place.

The fact that Main St. has been ignored is what has infuriated everyday Americans.
They are now recognizing the fact that they have been completely ignored by the governemnt.
They are now facing the fact that all of the steps that have been taken by the government to help fix this crisis has involved throwing more and more money to the financial elites of this country. I mean christ, the examples are endless: TARP, AIG, Bank of America, Citi, Freddie, Fannie....Need I say more?

The sheeple are now also finally realizing that the money is not trickling down to them like Washington had promised when they explained why they threw billions to the banks. Main St.only seen things get worse while Wall st has prospered and they are angry.

Lets face it: J6P has seen no benefit to the FED's actions since this all started in 2007. For the most part they have gotten screwed as they have watched the yields on their CD's drop to 0%. Perhaps some that have money can now borrow at lower rates but who wants to borrow when you don't have a job?

Let's not forget that the sheeple/middle class were also victimized by Wall St. as they were gamed into buying homes they couldn't afford. When this fantasy came crashing down they were again violated as they saw their 401k's get cut in half.

The people of this country can only take so much before they start going postal!

The Wall St Journal has an article out today around the increasing threats of violence against against the IRS:

"WASHINGTON—The federal agency charged with ensuring the safety of IRS employees said it has seen an uptick in the past several years in threats against agency personnel.

In the past four years, there appears to have been a "steady, upward trend" in the number of threats against IRS employees, said an official with the Treasury Department's Inspector General for Tax Administration. That assessment, offered in response to an inquiry from Dow Jones Newswires, is based on preliminary data, the official cautioned."
Quick Take:

After all of this abuse, I believe that we are all starting to feel like that pledge in the movie Animal House who says "thank you sir may I have another" after getting repeatedly paddled by his brothers.

American's are slowly beginning to realize: If you are not part of the 1% club in this country you are nothing but a victimized pawn as the elite continue to line their pockets with our nations income.

The average American now finds themselves struggling to survive as the economy continues to plunge. Nothing has gotten any better despite what the media pundits tell you. Jobs continue to evaporate and foreclosures continue to soar as the the middle class in this country continue to get pummeled.

Meanwhile, Wall St is busy counting their near record year end bonuses after making billions gambling the taxpayers money in 2009 as the sheeple find themselves on the brink of collapse.

Folks, the citizens of this country are slowly reaching their breaking point. When Ted Kennedy's Democratic senate seat goes to a Republican you know the people have had it. Teddy is now probably rolling over in his grave after seeing a guy from the right take over his office.

The Bottom Line

We are now three years into this crisis and nothing the government has tried has worked. The market may have recovered(for now) but THE PEOPLE haven't . How much pain do these dopes in Washington think we can take before we start rising up and begin hanging bankers from the lamp posts?

These idiots need to remember that EVERYONE has a maximum threshold of pain. If there was no such thing then you wouldn't see a MMA fighter "tap out" in the UFC. This country is just about there.

The plane crash in Texas should be taken as a shot across the bow in Washington. I am getting really concerned that you are going to see severe social issues in this nation if we continue down the same path in the very near future.

I would hate to see this because violence is not the answer folks. We need solutions and fast. I don't have all the answers but I know where we can start.

We can start by putting an end to the bailouts of the financial elite. Washington needs to start listening to Main St instead of the top 1%'ers on Wall St. If this creates an economic crisis so be it. At least it will keep this country solvent.

The government needs to realize that SELLING $118 BILLION IN T-BILLS LIKE WE HAVE PLANNED NEXT WEEK IS NOT THE ANSWER! This simply cannot be maintained over a long period of time. Ponzi schemes never work and they don't solve financial crisis. They end in tears.

Washington needs to wake the hell up because we are headed straight off a cliff. Take one more look at the chart above and look what happened the last time the disparity in wealth in this country got this high.

Can you say Great Depression? Remember, the only way an economy can thrive is when the majority of people involved in it are prospering. We are about to drive off the same cliff that we did in the 1920's as the middle class is turned into a group of SERFS. Be prepared.

I need to end it here because I feel my blood pressure rising.

Disclosure: No new holdings at the time of this publication.

Wednesday, February 17, 2010

The Long US Dollar Trade Appears Overdone

Currencies have been the talk of the markets this week.

The dollar vs. the Euro has been all over the place since Monday. Gold soared as the dollar sold off yesterday. Today we have seen the dollar come screaming back.

I can't help but notice that gold didn't sell off with the dollar rise today. Is this a just fluke or the beginning of a new trend? Time will tell.

When it comes to currencies the world seems a little undecided following the dollar's huge move.

Recent events in Greece as well as trouble in Portugal and Spain have strengthened the US dollar considerably.

However, as our economy continues to suffer you need to wonder: Are investors buying the US$ because they think it's a strong currency or are they flocking to it because they believe the Euro is weakening.

This is a distinct difference in my view because this trend could violently reverse if investors are buying the US$ out of fear versus confidence. I say this because it won't take much for Europe to reverse this trend.

There are signs that Europe may be starting to wise up which could be very bearish for the US$.

I say this because it appears more and more evident that Germany will not bailout Greece. Looking at the most recent poll numbers, it would be political suicide to do so:

"A majority of Dutch people want Greece to leave the euro, Dutch daily De Telegraaf reported on Wednesday based on a poll it commissioned.

The poll among 5,300 Dutchmen showed some 92 percent felt Greece should leave the euro currency, while more than 90 percent of the respondents are also in favour of the Netherlands and Germany exiting the euro zone and getting their own currency back, the paper said.

Based on the poll, more than 60 percent of the respondents are worried about developments in Greece, because banks which have bought Greek debt may run into trouble and cause a new crisis, the paper said."

My Take:

I have seen similar poll numbers in Germany. I can't see how they can touch Greece right now with the polls looking like they do. Germany also knows that if a handout is given to Greece, Spain and Portugal will be knocking on there door the next day looking for the same.

The issue Germany has here is they do not have the funds to bailout all three. Portugal and Spain's economies are too large for Germany to bailout. Germany also doesn't have a currency to inflate even if they wanted to do so. As a result, the chances of a Greek bailout are slim.

The dollar has soared as a result because many fear that the Euro may collapse or be damaged by the cost of bailing out the PIGS. I think the odds of either of these two events occurring are slim to none.

The aftershocks of bailing on the Euro would be felt worldwide ,and I don't think the world leaders would consider such a move with the economy being as weak and vulnerable as it is. A bailout seems unlikely because they can't inflate the Euro which means the money simply isn't there for a bailout.

So what would these events do to the dollar rally?

Many think it will create more instability which will only further strengthen the dollar. I disagree.

Ask yourself this question: If the Euro holds together(a risk) and they say no to a Greek/PIGS bailout doesn't this strengthen the fiscal position of the countries that back it?

Could Europe's fiscal responsibility then cause the dollar to plunge?

Let's take it a step further: If Greece or another one of the PIGS then threatens to leave the Euro in a hissy fit won't it only make the currency stronger?

Many are long the dollar right now and it's worked but I am starting to think that this trade may be overdone.

My reasoning for this moving forward is Europe is much more disciplined than the USA when it comes to cleaning up financial messes.

Before I explain why, let me preface this by recognizing that during the good times, the leverage used in Europe was much higher than it was here. Their banks are a mess and in many ways are in much worse shape then our insolvent banks here in the US.

That being said, the million dollar question as we look forward is who will be more disciplined with their regulation when it comes to cleaning up the excesses of the worldwide 30 year credit bubble?

So far I believe Europe has far better policies set in place to begin the cleanup versus the US.

I mean heck...We are still trying to play Ponzi finance over here!

The crooks on Wall St are still allowed to leverage up and make billions as they continue trading taxpayer dollars. If they lose and go broke after taking on too much risk? No problem! The taxpayer is here to clean the mess up.

Washington refuses to stop Wall St's games. This of course will eventually lead to another financial crisis.

Meanwhile over in Europe they have nationalized many of their banks, and they appear to be ready to say no to huge sovereign bailouts. This is a huge step in the right direction in my view.

In England, its the queen who tells the banks how they are allowed to spend their money! The banking criminals in the city have been put in their place.

Meanwhile over here in the US its still the wild wild west on Wall St.

The Bottom Line

The US dollar still reigns supreme as Europe and its currency find their way through their own debt crisis. Greece is Europe's version of our "Subprime Crisis".

However, unlike this country, they seem to be actually trying to contain it by forcing Greece to work through their own problems.

Will Germany stick to their guns and continue to say no to a Greece bailout? Time will tell. If they do, I think there is a good chance Europe climbs out of this mess before the US does unless we decide to stop the madness on Wall St.

Our reputation as the world's "safe haven" will only last so long without real financial reform. All of the talk around reform in this country has been just that: TALK!

If we continue the gunslinger mentality when it comes to our policies on bailouts and financial reform there is no doubt that our economy will once again crash and our currency could very well go down with it.

Disclosure: No positions in any currencies. Long gold and silver via GLD and SLV.