With special thanks to Mad4Clark's recent blog post It's Not Just Detroit!, for bringing to light just how destructive the gwb administration's fiscal policies are to the vitality of our economy and country's security. Amazing this story actually ran in the wimpy USA Today!

But this destruction has been going on a long time and there have been impending signs of Economic DOOM for years; these policies are coming home to roost now, as we're seeing in the airline industry, manufacturing (think General Motors and Delphi) and Wal-Martization of America. One of the biggest problems has been Fed Chariman Allen Greenspan's manipulation of the money supply and interest rates. Let's go to the "videotape" as it were, from The Great Mogambo Guru's Medicinal Silver from Oct. 26, 2005:

As a little Mogambo perspective (LMP), in June of 2002, just three short, teensy weensy years ago, the Gross Public Debt was "only" $6 trillion. In three years, the federal government borrowed and spent two trillion dollars! The federal government, the boneheads that we install in Congress by actually voting for them, increased the national debt by a third in only three years! To give you a sense of the awesome size of this one debt, the entire Gross Domestic Product, the GDP of America, which is the sum total of all the goods and services produced in the whole freaking country in a whole freaking year, is less than $12 trillion!

And this is just federal debt, and does not even include state and local government debts, which soared by hundreds and hundreds of billions of dollars, nor business debt or personal debt, which altogether soared by trillions and trillions of dollars in just three stinking little years!

And it was all created by the damned Federal Reserve and that horrible little jackass Alan Greenspan. In fact, the total federal debt of the United States government doubled- doubled! -under Greenspan's 17 years! It took since the founding of the damned country to amass three trillion dollars in debt, and then this Greenspan weenie comes along and more than doubles it in seventeen years!

I am so furious that by now I am choking in rage and gasping for breath, and can hardly get the words out that the amount of government securities bought outright by the Federal Reserve is up more than $500 billion- almost triple where we started! -since Alan Greenspan took over! This is actual money of the people of the United States that the Federal Reserve (which is NOT part of the government and is, in fact, just a cartel of private bankers), now owns! And how do they own it? They printed up money for themselves, and used it to buy the debt! That's how! And now we taxpayers, every year, have to pay taxes to pay the interest and (theoretically) the principal on all of that debt that the Federal Reserve owns! My God! How stupid can one nation be and still manage to not poop in its pants?

But, if you think Greenspan has been bad, don't look for his soon-to-be replacement, Bernard Bernanke, to be any better. Mogambo Guru adds:

This is the same Bernanke moron that is infamous for saying that he WANTS inflation, and actually refers to his stupid idea of fostering continual, simmering inflation as the benign-sounding term "targeting inflation"! Hahahaha! One moron praising another one! Hahaha!
~snip~
So more and more inflation is guaranteed now that we have a mental defective as chairman of the Federal Reserve, who is actually going to consciously work to keep inflation at some "low" level, about 2%, instead of at zero, like it is supposed to be at maximum.
~snip~
But listen to the New Age economics as espoused by Ben "Call me Butthead" Bernanke, the next failure as chairman of the Federal Reserve. This Bernanke guy, whom I will now refer to as Ben "Big Bozo Butthead" Bernanke in a fit of gratuitous and vicious disrespect mixed with irritating-yet-pointless alliteration, is already on record as saying that the Federal Reserve stands ready, to buy stocks, bonds, houses, other assets, and even raw land, to keep deflation from happening! The Federal Reserve has already bought up, for its own enrichment, $725 billion in US debt, so what's another few hundred billion dollar's worth of assets disappearing into the greedy maw of the Federal Reserve? Hahahaha! We're idiots!

But let's not take all our advice from "The Angriest Guy in Economics". Jim Willie CB's article The Green Ben Bernanke of Nov. 14, 2005 explains why Bernanke may make things worse!

The named appointment of Ben Bernanke (green from inexperience) represents a promise for continued dependence upon inflation for economic growth. He might possibly be the critical agent for unbridled acceleration in money supply growth which rivals the Weimar Republic. A green light for massive monetary inflation can be obtained by an incompetent targeting of inflation using fallacious statistics. His printing press will surely be dripping green ink, once it revs up in the Fed basement. One should note that before 2003 Bernanke had no banking experience, no business experience, and no financial market experience. His apprentice post for several months and Fed Governor experience counts for something, as do his clear speaking style, friendly manner, and less craggy visage. His academic roots are a huge negative, where theory is preached and arguments offered as justification for a system gone badly awry, horribly dependent upon debt and a fiat currency. The academic arena is not the place to test reality, take my word, from a guy with a doctoral degree who has seen many a doctor totally clueless about the real world.

~snip~
Trade-offs must be made on inflation versus employment, on continued consumption versus debt burdens, on growth versus foreign trade gaps. A sick byproduct of outsourcing is the accumulation of trade gaps and foreign ownership of US Treasury securities. These onerous symptoms are direct byproducts of the Greenspan legacy and his inflationary dependent policies. When a nation cannot obtain wealth through legitimate means, it must resort to inflation as a tool.

~snip~
Bernanke could easily become the worst central banker ever as steward for the economy, but the best monetary drug dealer ever as provider of easy money. Just think how Greenspan has presided over a big economic collapse of the manufacturing sector, huge debts, housing bubble, and bubblicious false income. Bernanke will surely be forced to learn on the job, and react to conditions beyond his control.

~snip~
(Stephen) Roach (of Morgan Stanley) is warning that Bernanke will be challenged right out of the gate next winter after being sworn into office. Look for the USDollar to go into decline at that time, and for gold to rise then also. A discontinuation in interest rate hikes by the young Bernanke Fed might be the unfortunate invitation of such a market challenge. Look for Bernanke, despite talent and Princeton pedigree, to be challenged outside his field of expertise, namely price inflation. Bernanke will take over the USFed helm when it faces a "unique confluence of domestic and international imbalances, the asset bubble, and current account nexus." In other words, he instantly must face a housing bubble and monster trade gap. By condoning and creating one bubble after another, in true inflation engineer fashion, Greenspan has led the United States into negative savings territory. A case in point is 401k pension accounts. The average 401k account is a paltry $57k. For workers over 55 yrs of age, only 26% have over $100k saved in a pension, and fully 34% have under $50k saved in a pension. That condition induces households to rely upon home equity for spending.

This brings us to the "where we've been - where we're going - what to do" portion of our discussion. Let me introduce Richard Benson, President of Specialty Finance Group, LLC.

When looking in my rear view mirror, I have to admit that profits made on Wall Street have been great. Indeed, as a percent of GDP, profits are pushing a record. Following are some reasons why this has occurred:

1. Making money in banking and finance was a breeze when the fed funds rate was 1 percent and the yield curve was steep;
2. The housing bubble has created economic growth and job gains through the building of new homes, the hiring of mortgage bankers, and the issuance of 400,000 more real estate brokerage licenses (America now has over 1.2 million real estate agents who make over $60 billion in commissions a year);
3. Home equity extraction (in 2004 alone, Americans took out $600 billion);
4. The Trade deficit in the United States has given the Chinese, and the rest of the world, mountains of dollars with which to buy oil and other commodities.

Next year, however, could be a totally different vehicle as this profit engine runs out of gas. Much too much profit has been made in energy and finance. These profits won't last. In addition, the high cost of gas, heating oil, and natural gas (especially as we approach the home heating season), will drag down consumer spending, while increased producer prices dig into corporate profits. Quick energy profits today will come at the expense of every other industry's profits tomorrow!

~snip~
It's really hard to keep profits growing when consumers don't have the money to buy the goods and services. The consumer, who has been spending more than they make and living off home equity extraction for the past two years, is tapped out. Their debt service is already a record - over 125 percent of disposable income - and is still rising. Borrowers will also be getting hit by higher monthly credit card minimum payments by year-end, and homeowners with adjustable rate mortgages can certainly count on higher interest rates.

Wages and salary growth obviously affect consumer spending and corporate profits in a big way. However, wages haven't kept up with inflation, and high paying manufacturing jobs are still heading to Asia. A clear indication of this is Wal-Mart's announcement for an increase in the minimum wage. The cynics view this request as a ploy to raise the payroll costs at Wal-Mart's competitors. The realists clearly see this move is intended to increase Wal-Mart's sales because their core customer base would be taking home a bigger paycheck and, thus, spending it in their store.

~snip~
If the outlook for corporate profits weren't bad enough, evidence is mounting that many housing markets peaked in June and July and home sales are now at prices 5 percent below the peak! When home prices are rising, taking out a home equity loan is equivalent to a homeowner giving themselves a bonus or winning the lottery. When prices decline, taking out a home equity loan is clearly an act of desperation needed to raise cash to pay the bills! Housing has truly driven the U.S. economy.

~snip~
Falling corporate profits and rising interest rates at this stage of the economic cycle are not a "wall of worry" to be climbed, but rather a brick wall that investors are headed for at high speed.

So, if you understand that profit growth and the level of interest rates are important for stock prices, any year-end rally looks like a great time to sell stocks! (Just as our own Joe has advised many times! -Ed.)

So, in summary, we see that the economy is tanking BIG TIME, jobs are STILL being siphoned off to Asia, interest rates and inflation are climbing and it looks like we're in for some really stormy economic weather. What to do?

1. Benson says, "Cash under the pillow or in the bank is the only rational place to leave those dollars"
2. Dr. Clive Roffey (professional independent commentator on gold markets since 1969) says, "...bull markets are for investment, and gold shares are in a long term bull market." See his most current charts HERE
3. Jack Chan at www.traderscorporation.com says, "But what is really special about the current buy signal, is that it follows the first weekly BSBS (bullish support buy signal) ever produced since this new bull gold market began five years ago." See his Special Report Buy Signal in Gold Stocks
4. The Mogombo Guru points out (from above link), "Typically, as we have seen, people gravitate to gold when these kinds of things start happening. Not surprisingly, David Chapman, of the International Forecaster says "Now, all your money should be in gold and silver related assets, oil and gas stocks, short positions and a small amount of cash. If you do this five years from now you will be multimillionaires. This is a lock ­ you cannot lose." Now this is certainly good news to those people who are already long in gold and silver and oil and gas. But why is it a "lock", meaning that we cannot lose this bet? Mr. Chapman explains, "There is no way out for the world economy." "

You should read ALL the articles above in their entirety, for the whole picture and "full effect" . Also visit www.kitco.com for the latest prices on precious metals. Be sure to check out their "pool" accounts!

London Spot Prices
Nov 15 2005 Gold am:$467.55 pm:$468.25 + Silver $7.7700 -
Aug 15 2005 Gold am:$442.60 pm:$443.50 - Silver $7.0650 -
May 16 2005 Gold am:$419.90 pm:$419.25 - Silver $6.8850 +

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