Monday, May 27, 2013

Possible False Start to Systematic Failure in the Economy

As my readers know, the Pimpernel tries to keep up with things in the economy. Last week there were some odd things in the markets, Japan's stocks losing 10% being a big one. All weekend I have been reading stories on what is going on and the trend seems to be that even the mainstream media is reporting that this week may be important and that markets may see major corrections (losses). Here is the thing, if the stock market dropped 10%, it is still only the beginning of the real corrections. When banks fail, people should put their money in non-bank stocks. Let me repeat something I have said before, stock market volatility is to get the average person out of the market and it is a time when the average person should do the opposite and get into the market. We should be long term investors and not day traders.

Here are just a couple of warnings from over the weekend.

NBC News - Week ahead: Watching for signs of a too-strong economy

The Motley Fool - Is the Stock Market Overdue for a Big Plunge?

There have been plenty of articles warning that this week could be very volatile; but, it has also been stated that this is the week when the big players take their vacations. Whatever happens this week, if anything happens, is just the beginning of what is coming. The financial system needs to be restructured and the plan that is in congress will not do it properly. The "Derivatives" market cannot be allowed to operate without controls and the people that run the market are the same ones that just wrote the new regulations that are being voted on and they exempted themselves from regulation.

I shall tell a true story, something I actually experienced. When the housing bubble was in full swing, I was asked to meet with some mortgage brokers. I told them that the housing market was going to crash. I told them all of the indicators that are traditionally watched in the real estate market, I told them how we were going to see a severe recession. This meeting happened about a year and a half or so before the housing bubble crashed. They looked me dead in the eye, said my analysis was well thought out and then they told me that I had to be wrong because things were going so well in the economy and this was how they made all their money.

Money is a drug and those who have the most are the least likely to believe the gravy train will ever end. Our markets are run by money junkies and they will do anything to get their next fix; but, it always ends badly. Quite awhile ago I wrote about how the movie "The Hangover" was the perfect analogy for our over-indulgence since 2002. Did you really need televisions in the backseat, did you really need spinner wheels or that Lincoln Navigator? People went crazy spending money that they had not earned and that went away as fast as it came. Now is the time to check out of the room, leave the maid a nice tip and start over.

The current economic system has been unwinding for a bit, no one event does it all. The Bank of England and FDIC said they are looking at "systematic" failures. This not about a bank failing, no matter how big. It is not about stock markets crashing. It is about all of the system failing because it is all rigged.

Lets say that this week is really bad on Wall Street, it doesn't matter. The purpose of all the turmoil is to bring in a new economic and financial control system that is international in nature. That is the end game.

When "it" comes, the new economy folllows

You may think that what is happening in the worlds economies may all work out; but, it will not. The world is going to set up new rules for financial transactions and the west will be less wealthy. Warren Buffet saw this coming for over 20 years. I am going to talk about what the United States looks like after the world goes off the dollar and how we have been preparing for it.

Here is a fairly good take on what is going on by someone that I just read. Godlike Productions - The Grand Finale: Here Is What Is About To Happen To You...An Economic Love Story, or Fifty Shades of Green? While I may not agree with everything the author said, it is a pretty good summary of things.

It is very possible that we will see some big shakeups on Wall Street this week, if you have stock do not sell, hold onto it and wait out the ride. The stocks to stay out of are financial companies and banks. The FDIC and Bank of England's plans to conduct "bail ins" in the future for banks that fail means that if you have stock in those companies, you lose it. The stock will be turned over to the depositors.

We can see the warning signs. Yahoo - Reuters - Wall Street sags, but ends off session lows; HP hits 52-week high.

They are warning us all the time. The Federal Reserve - Ending "Too Big to Fail". Banks as you know them will no longer be needed in the same way and they are going to be broken up into neighborhood piggy banks.

For the past couple of years they have been printing new $100 bills and they are about to release them. NewMoney.gov - Federal Reserve Announces Day of Issue of Redesigned $100 Note. They begin circulating on October.

After the coming economic tsunami, things will be different. For people in the United States expect the following things to be the new normal.

1. Fewer and fewer people will go to true universities.
2. Fewer and fewer people will own personal cars.
3. You will live in smaller spaces or share a home.
4. The suburbs will become the new ghettos.
5. You will have to work longer.
6. You will have healthcare; but, will be penalized for personal choices like smoking, drinking and what you eat.
7. You will not get tax benefits for being married, having children or buying a house.
8, There will cease to be any anonymity on the internet.
9. You will have to report your health to your doctor or get no insurance. Mail Online - The real-life tricorder: The gadget that can measure all of your vital signs in just TEN seconds
10. It is not going to get better.

Sorry, but that is the truth. The fall has been delayed so that we can get accustomed to doing with less. Just assume that I might be right about what is coming. There is nothing you can do to avoid it. The thing to remember is that the United States has some of the best contingency planners ever. We plan for everything, all possibilities, well, most. A plan was put in place years ago, just in case our currencies ever collapsed. A plan was put in place in case the world went off the dollar standard. I assure you plans for responding already existed. Don't panic when things get weird. Don't worry that the world will end, don't worry that we will live with less.

Mail Online - Global markets plummet after US Fed threatens to cut emergency cash support to economy


Market Watch - Bernanke out by August, QE ends, rates up: Crash

Yahoo - Reuters - How the Fed could ruin your summer holiday

Wall Street Journal - New Zealand, China in Talks on Convertibility of Currencies

Sorry if this wasn't uplifting and cheerful, it is what it is. Peqce.