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The Coming Economic Depression – February 2005 Update

(Click here for a PDF Version)

New Readers: This is a long series that begins here.

“Profits? ‘We Don’t Need No Stinkin’ Profits!”

Earnings statements reported in mid January has shown there are some big troubles in corporate America. Even when great earnings were loudly proclaimed and reported in the mainstream press, under the surface lurked problems. A perfect example is Ford. It did turn a profit. It reported 4^th Quarter income of $104 Million. This is compared to a nearly $800 Billion loss a year ago. Yet even with the profit, its automotive division is till suffering from steep losses, $470 million worth in the fourth quarter. What kept Ford profitable was its Financial services as well as its Hertz Rent-a-car Subsidiary. Ford also has recalled 800,000 SUV's because of an investigation that revealed a fire danger. This cannot help its bottom line.

GM also reported a significant decline in profits. They blamed soaring health care costs as well as big trouble with its European division which includes Opel. It lost $743 million dollars last year. Overall GM's automotive division reported a loss in profits but still remains in the black falling 41% for 2004. GM like Ford is increasingly dependent on its financing division for its profits.

Problems at the automakers are a sign of the loss of market share. In fact Toyota looks to one day soon become the top global automaker, having already passed DaimlerChrysler as the number three US automaker. GM will try to move into the emerging markets to counter the threat and build autos in places that do not have such high employee overhead to undermine its profits.

Delphi posted a $102 million loss. Delphi is America’s largest maker of auto parts and its losses are due largely to US automakers cuts in production and increasing pension and health care costs.

But it is not just US automakers that are having a tough time. Mitsubishi had to take a $3 billion lifeline to keep it from going belly-up. Mitsubishi lost 2.1 billion for the year ending in March 2004. Last April DaimlerChrsyler decide to end its support for the automaker. Now the firm is sacking some of its top management in the wake of some scandals that have hit the firm. The bailout will only serve to add the glut of automobiles made and that is not particularly good news for the industry.

JP Morgan as well had disappointing earnings. JP Morgan Chase bought Bank One and excluding the acquisition charge associated with the merger it reported profit of $2.3 billion. Analysts blame many factors for the lackluster performance. Interestingly, JP Morgan looks for a further fall in new home loans as the refinancing boom cools.

Merrill Lynch and American Express strong profits for profits showing that the money changers can still do well even if the part the economy that actually makes things is being shipped overseas.

Merck saw its profits fall on the Vioxx scandal and subsequent withdrawal of the drug, 4^th quarter income dropped by 20% compared to last year. It also had its debt rating downgraded from AA2 to AA3. The primary concern here that the scandals will affect Merck's 'cash flow'. This is a story that was discussed somewhat in last months update. Now moves are bing made to totally revamp the the EU drug approval system by increasing monitoring independent drug trials. If the US has been slow to respond to the spate of drug scandals, the EU will does not look like it is going to drag its feet.

Delta Airlines lost $2.2 billion in just a single quarter ending in December 2004. The total losses for 2004 were $5.4 billion, the biggest ever sustained by a US airline. “Losses can't be sustained forever,” said Bill Warlick, who works at Fitch ratings in Chicago. Delta will have to undergo a fundamental change in its business model if it is to survive. Soaring fuel costs are just one of the problems the airlines face. There are others as well, on being the excessive security checks that a person must undergo to get on board. Personally I used to fly a lot. I have not flown in a plane since the September 11^th attacks. It is less hassle to drive, even if it takes longer. Who needs to be subjected to searches that were once reserved only for criminals? Who wants to pay hard earned money to be publicly humiliated if by chance you forgot to remove that nail file from your travel bag? Many must fly to do their Jobs and still others are willing to put up with it. This is one hurdle that is hurting the industry weather they wish to publicly acknowledge it or not. I may not be able to point you to any big studies to support this but I can and have asked friends and loved ones and most feel exactly the same way. Yet and still there is at least one airline is still doing well, such as cut rate carrier Southwest which posted a $56 million profit.

Airlines are also looking for other ways to reduce costs, one of course, are the highly public labor negotiations in which employees are asked to reduce their pay in order to keep the airlines from laying off large amounts of people and thus reduce costs. Yet there are other somewhat more troubling moves that are being made. One is the outsourcing of crucial safety tasks to outside contractors. One such contractor which is located in El Salvador, has received a great many airplanes from carrier JetBlue Airways for safety inspections and overhaul. Northwest Flies their jets to Asia for similar overhauls of their aircraft. This is just one more industry that is being outsourced away from the US labor market and Americans who once worked in this important industry are under a very real threat of losing their jobs to foreigners. This is just another industry that is facing the competition from lower cost markets that are not as stringently regulated and do not pay the kinds of benefits that US labor unions struggled so hard for so long to get for their members. Lighter maintenance work is still being completed by the airlines' own employees, but the trend is that the heavier overhauls are going overseas.

Is safety an issue with this kind of outsourcing? That still remains to be seen but it appears that at least one crash has been attributed to substandard work done by overseas personnel. Yet the FAA seems to be considerably less diligent in inspecting the outsourcing shops. The divergence in inspection ratio’s is more 50 times more likely at one particular airlines shop than at outsourced shops. It seems to me that the administration is encouraging this trend to help weaken the unions by coming down hard on union shops and going easy on foreign repair companies. I admit, I could be wrong…but I don’t think so.

E-bay as well as Qualcomm unsettled markets with lower earnings forecasts causing a significant decline in share values. Overall technology stocks look weak and profit margins thin.

Other earnings coming out of Wall Street are also lackluster. It also seems that those that were touted as being great and a sign that the good old days of the 1990’s had returned had other factors that contributed to their bottom lines other than a great business model. For example GE, whose widely disseminated and touted boost in profits was really a story of a massive tax break that made its rate one of the lowest in the industrialized world. It paid just 11.2% of its pretax income in taxes. How many of you would like a tax rate of just 11.2%? GE, is and will benefit from the Job Creation Act and from breaks in its aircraft business. Even some Wall Street analysts were surprised by the very low rate. I’m not. Look at the lopsided coverage of Bush during the elections and the fact that NBC (which is owned by GE) and MSNBC (which are owned by Microsoft and NBC) barely covered any aspect of the massive and verifiable vote fraud in Ohio and the reasons for such a low tax rate are crystal clear.

Payback and ‘quid-pro-quo’ are words that come to mind.

Click image to enlarge

I was struck by the data that the treasury released in Mid January (above) that showed who was buying US assets and thus essentially funding the US current account deficit. While the Treasuries data and the flurry of press releases that hit the financial press portrayed brisk sales of US debt, the actual data that much or the reporting came from was a little more troubling. Let us look above and see who is not buying these Treasures in large numbers.

Japan – Bought only $700 Million in November. This is the lowest amount purchased by Japan for 2004. Japan is the largest holder of US securities. This is a clear signal and it bodes ill for the US.

China – Pretty much kept pace with previous months flows China is the second largest holder of US securities. But a top Chinese economist speaking at Davos’ World Economic Forum stated for the record the China has lost faith in the stability of the US dollar.

"The U.S. dollar is no longer -- in our opinion is no longer -- (seen) as a stable currency, and is devaluating all the time, and that's putting troubles all the time - Fan Gang, director of the National Economic Research Institute at the China Reform Foundation

Also of note Korea, increased its holdings from the month by a somewhat uncharacteristically large $5.6 billion. Korea has long standing defense agreements with the US and needs US troops to protect it from North Korea's militaristic state.

Indeed other ominous signs are appearing around the globe Malaysia stated that it made a $2.1 billion 'revaluation' gain last year from the depreciation of the dollar. Well, the only way that could happen is if you had your money in other currencies that appreciated against the dollar like say... Euro's.

The situation here is a serious one as the US has constantly called on China to revalue its currency and un-peg it from the dollar. Yet analysts are quick to point out that if that occurs, it could spark a massive sell off of dollars as it would no longer be needed the massive amounts of US debt to keep itself competitive.

“The U.S. finds itself in a be-careful-what-you-wish-for situation here. If China tomorrow announced it was letting the yuan float, as the U.S. wants, its central bank wouldn't need anything near the $191 billion of U.S. debt it holds. Massive dollar selling could follow.” - William Pesek; Boomberg

The UK’s purchases increased. Any decision by the UK to increase its holdings of US securities is as much a fiscal decision as a political one, as its financial, corporate and oil interests are closely intertwined with America's. Indeed, in a previous edition of this series I postulated that if the Fed ever got ‘down to the wire’ and needed funding, it could (this is conjecture) funnel freshly created currency through banks in the UK which are partly owned by US interests and the inflows would appear to come from abroad. But when one considers the recent Marine One Helicopter deal that raised many an eyebrow, has a lucrative part of it going to the UK, well... lets just say that the two items are probably not unrelated.

Canada also bought a hefty share of US debt for the period. Once again English speaking and closely aligned politically and economically with the US.

Net foreign purchases of both domestic and foreign long-term securities from U.S. residents were $81.0 billion in November compared with $48.3 billion in October. Net foreign purchases of long-term securities were $827.8 billion in the 12-months through November 2004 as compared to $647.4 billion during the twelve months through November 2003.

OK, sounds real good, maybe too good to be true, but assuming it is true the real story is in the ‘who’ is buying and not necessarily the amounts that the Treasury is claiming in this time of fiscal crisis. Let us keep in mind the increasing importance of China and the trade imbalance with the Dragon. China became America’s number one trading partner last month, surpassing Japan.

Despite the miracle numbers put out by the Treasury, The Financial Times in a news story that seemed every bit to smash the Treasuries glowing report and Wall Streets dutiful parroting of those numbers, ran two articles on the 24^th of January that showed the Worlds Central Banks were shunning US assets in favor of the Euro. The stories are based on a survey conducted of the worlds central banks from September to December 2004. About 65 of the worlds central banks took part in the survey. "The US cannot take support for the dollar for granted," said Nick Carver, one of the authors of the study conducted by Central Banking Publications. To guarantee candidness the survey was conducted to preserve the anonymity of the Bankers.

Bush, as well as the Congress are doing their level best to hide the true state of the deficits. The CBO released their baseline Budget projections on the 25^th of January and omitted billions of dollars in War costs. This is so typical of Washington’s fiscal fraud, it cannot help but to contribute to undermining investor confidence in investing in US assets,. They cannot even give you a straight answer as to how much debt they rack up every year! Why? Fear of the people finding out that Uncle Sam has reached his credit card limit. This is a primary reason for the coming economic depression.

Look, every single day, foreigners must lend us between 3 and 5 billion dollars (depending on whose figures you go by)¹ to keep Uncle Sam in Business. I cannot stress this enough when that spigot gets turned off and from the figures and comments from above, the two biggest investors in US securities are doing that now, Uncle Sam goes broke; no if’s, and’s, no buts. Mysterious and unmanned miracle ‘investors’ notwithstanding.

The US current account deficit as well as problems with the dollar have caused the French to team up with the Germans and request that the G7 intervene to halt its slide.

German Finance Minister Hans Eichel and his French counterpart, Herve Gaymard, said the U.S. current account and budget deficits were the chief causes of the euro's 34 percent rise against the dollar the past three years. – Bloomberg

What does this mean? Well while this won't be reported too widely in America, the fact is central bankers are looking for an alternative to the dollar as a global currency 'anchor', the role the dollar has played for the past 6 decades. But even outside of the G7 nations there is tremendous concern as Asian nations are trying to find a way to keep their central banks from losing large amounts of money, remain competitive and not raise the ire of Washington. What the G7 finally decides is going to be of enormous importance. Frankly they will eventually have to jettison the dollar. This is not going to happen right away, but the patience of the G7 with Bush's irresponsible spending is wearing very thin and I suspect in another year (perhaps sooner) you will hear an uncharacteristically loud call from the worlds central banks that the dollar is dead, long live the Euro. Once OPEC (Saudi Arabia, and Kuwait in particular) realize that they cannot afford to keep taking dollars for their oil, you will see a national crisis like no other.

Another cause of foreigners shunning dollar assets is the fear of inflation and it is causing foreign investors to shift to foreign bonds. Some of these bonds not only protect against inflation but have higher yields than America’s TIPS (Treasury Inflation Protected Securities).

Inflation is a real concern for investors in US assets. While the official CPI figures may seem somewhat tame there are other things that are more troubling. Consumer spending continues to rise, based on credit card debt and home equity loans, but it also appears that real wages are declining while Americans buying spree continues.

Meanwhile, the people in whose name these world-improving efforts are made...and upon whose backs the costs fall like sacks of cement...are getting poorer. Not only are they ruining themselves by spending money they don't have on things they don't need, their incomes are also falling. News reports this morning confirm what we were saying all year: Real incomes went down in 2004. Subtract the CPI from nominal wage growth and you get a negative number - 0.8% below zero. – The Daily Reckoning

Well, none of this is really news. It is just a confirmation of the trend that ha been in place for several years, Make less money, borrow more to keep ones lifestyle while the government assists corporations to ship Jobs overseas. Sounds like a recipe for impoverishment to me, but that is heresy in today’s financial world.

But the deficits are a scary thing because when we get to the point that we cannot service our debt, we are in big trouble.

Even Bill Gates is very bearish on the Dollar and in very concerned about US deficits. “The ol' dollar, it's gonna go down,” said gates speaking at the World Economic Forum. Gates is the world's richest man who has more personal wealth than many of the world's nations. “It is a bit scary,'' Gates said. “We're in uncharted territory when the world's reserve currency has so much outstanding debt.”

Housing

As usual the housing market is red hot. California in particular is seeing very high prices for homes. In the bay area, the median price of a single family home was 532,000 Dollars in 2004, a 17% rise from the previous year. Even Florida, which was hit by four major hurricanes in the past year housing sales have broken records for existing homes in places like Orlando. Overall the market is very hot, but signs of cooling are evident. The National Association of Home Builders – Wells Fargo Housing Market Index declined 1 point in January. This may partly due to the anticipation of higher rates next year which could price some potential buyers out of the market. I look for the housing market to continue to be hot, but to cool somewhat as rates rise. I also look for trouble in some areas as jobs continue to be shipped overseas and homeowners have trouble making their mortgage payments.

But 2004 was truly a record year, and saw previously owned home sales rise 9.4%, an all time high and it is the fourth straight year that sales have hit a record. Yet the is a slight shade of ‘gray’ in the bright and shiny news, sales of existing homes fell in December by 3.3%. Once again interest rates may be the main culprit. Yet it seems that despite the fact that interest rates actually recently declined mortgage applications are also down. This is an anomaly that is not easy to explain because the declines were seen in loan requests, refinancing applications, and sales of existing homes. What does it all mean. Difficult to say, other than this, there does appear to be a slowdown underway.

Deficits

OK, I know I beat this horse to death, but the news is out there with all kinds of contradictory information about how big deficit projections are. Well, whether it’s the White House or even the supposedly non-partisan Congressional Budget Office, I cannot say I have any confidence in either. In my opinion, it is becoming a game of which lie they can get the people to swallow. The real truth here, is that while deficits are a big problem the fall off in revenue as a percentage of GDP (whose calculations are another issue altogether) is falling. Well, what to you expect? The Largest Corporation on the planet, GE, has one of the lowest tax rates in the world and Americans losing their jobs in record numbers and those who do find work making considerably less, what else can you possibly expect?

The kicker here is that GE gets a big tax break from the ‘American Jobs Creation Act’ while at the same time they got a tax break related to the sale of its outsourcing business to India. Talk about getting it both ways! So if the corporations are not paying their fair share, and those Americans who are not paying into the system because they are not working is running just under 10%ⁱ, something has to give. The answer? You guessed it…

Social Security

While I know I have talked alot about Social Security in previous updates, it is clear that my earlier predictions are coming true. Bush’s plan is to ship it over to Wall Street. Thankfully many astute commentators and newsrooms across America are picking up on this and calling a ‘spade a spade’. The Bush plan is not designed to save Social Security, the Bush plan is to steal it, using the Clinton model for the 401(k) retirement plans. Compel people to put their money in Wall Street and then once its there, rob them blind. Pure and simple. The problem for Bush is that many people are still smarting from having their retirement looted by Wall Street. So, I am not at all certain that Bush will be able to get away with it. One of my favorite liberal commentators, authors, historians, Gore Vidal, sees this as an issue that could do something that ‘war without end’, concentration camps, and torture of un-charged and un-indicted people have not done namely, wake up the American people. Vidal may be right. However, it is my estimation that the people are so, (I hate to say it and I am not putting myself on some sort of pedestal when I do say it) but the people are very, very stupid and uneducated. Even many of those with 4 year degrees are as ‘dumb as a rock’ by any standards that exist in the modern industrialized world. This is the primary reason that men like Bush can slither into high office and lead us right down the fiscal toilet; ‘stupid’ and ‘American’ have become interchangeable terms. Let it be known here that Social Security does have some problems and they are not to be understated to be sure, however these problems are being terribly overstated by Bush to once again, scare people into an unwise course of action. That seems to be his M.O.

Listen carefully here. There are many, many old people who depend on this to survive. They paid money into it all their lives and they are entitled to receive their pension. It is a matter of public trust. If this administration does not want to see a wholesale tax revolt… or worse, they would be wise to remember the older Americans who built America into the first rate power that it is today and pay them what the nation owes them of which Social Security is but a pittance. A tax revolt is not an impossibility, while difficult there are many grass roots organizations who can and I suspect, will organize such a revolt should the looting transpire over the objections of most Americans. While demographics make payments to those who are middle aged and younger almost impossible at the current rates, other solutions can and should be found. I and many others could give the administration many alternatives, but they would not enrich Wall Street and thus will not be considered by the Bush administration.

Well there is was quite a bit of news this month and here are just some of he highlights.

Citibank Bond Fraud. Now this is a major story that even a news search using the most popular tools would not pick up.ⁱⁱ This is a story that was covered in an earlier update and essentially entails Citigroup (a US bank) dumping massive amounts of Eurobonds in a matter of moments and then bought them back. These transactions did break an agreement with European authorities that was in place however, it did not appear to be technically illegal. However, now regulators have now found evidence of Market manipulation. This is a black eye on America as this is the same bank that was involved in some irregular activities in Japan and had one of its licenses pulled. Increasingly, people are looking at American companies as corrupt entities.

Indians Protest Coke And Pepsi. Protests drew thousands of people for the express purpose of ejecting Coke and Pepsi from their nation. The American soft drink giants are accused of causing a water famine by drawing so much water for their product out of local areas. They are also accused of having too many toxic chemicals in their drinks.

“The report of the Joint Parliamentary Committee following the disclosure of pesticides in soft drinks by the Centre for Science and Environment, as well as recent studies published in a large number of medical journals have clearly indicated that soft drink manufacturers have been using significant quantities of very harmful and toxic chemicals in their drinks in order to make them more attractive and addictive.” Znet

The Bhopal Disaster is still in the minds of many Indians, as many of the victims have yet to receive any compensation for the catastrophe that took place.

India will be happy to take our Jobs but not much more of the environmental devastation that many of the Corporations bring. Also there is the widely held perception based on past incidents that the lives of India’s people are viewed to be less valuable than that of the corporate titans and their most important shareholders, or even their bottom line.

Yet while many nations love to blast the US and make long speeches about its corporate behavior one the most hypocritical is the French, who are now trying to save Euro Disney, it seems that even while the French showed great concern and consternation for their culture when the clearly American Icon first moved to France, now they don’t want it to leave. Euro Disney is not doing well over there for a number of reasons not least of which is a growing anti-imperialism which is called anti-Americanism in the US.

But Bush may be able to buy Europe off. The recent award of the Presidential 'Marine One' helicopter contract to both US and European contractors is being taken by some as a sign that Washington may try to lure EU defense contractors into its 'fold'. Any future similar deals will almost come with some sort of quid-pro-quo with Bush. This may be in the form of having European's purchase more of our debt in return for these contracts. Look at the UK, they purchased considerably more debt in November and suddenly and uncharacteristically, got a lucrative and important contract that raised more than a few eyebrows.

7000 Jobs To Go At SBC SBC is planning some big layoffs in 2005. It is also planning to buy ATT and reduce its pension obligations.

Oil, Iran and nuclear fears. Showing that Oil is really at the center of Bush saber rattling with Iran, an Iranian is fulfilling a dual role with nuclear talks with the EU and oil contracts with America. Let it be known that if trading with the enemy is the measure of treason, Dick Cheney’s Halliburton appears to be doing just that. Mr. Naseri who is fulfilling this dual role, is a leading board member of Oriental Kish, which has contracts with, you guessed it, Halliburton to extract oil and natural gas from Iran’s South Pars Oil Field. Cheney has made public statements about Iran being at the top of the administrations hit list and 'axis of evil'. Now wait a minute, aren’t there sanctions on Iran? Yes, sanctions that seem to be designed to stifle US competition for the contracts that Halliburton wants, rather than to stop US trade with Iran.

And they call Iran evil! Oh the grasping, bloodstained fingers of illicit commerce!

In fairness to Halliburton, it says it plans to wind down its operations in Iran and sell the questionable subsidiary.

Venezuela Oil Review: Venezuela is on the hot seat again and it beginning to fight back. Venezuela has put on hold a ConocoPhillips plan to develop a new oil field. The government is in the midst of a very important review of 33 operating agreements it has with oil companies made back in the 1990's. Chavez's government is in talks with other nations to find new markets for its increasingly important product. Nations such as Russia, China and Iran are all in talks with Venezuela. A definite change in 'atmosphere' has been noted in Business circles. At the same time it looks to default on an Oil indexed bond payment that was due back in October. Obviously there are some serious issues between Wall Street and the democratically elected (multiple times) Government of Hugo Chavez.

While the world turns its venom of Chavez for 'funding terrorism' let us never forget that American financiers have gone down to south America for decades to do the exact same things that they are now accusing Chavez of doing. It is as though they have not the right to sell their oil to whomever they wish. Wall Street and London hate him because he understands that the poor have rights too, including the right to defend themselves from having their land and homes ripped from under them by Western Corporations, without any compensation. This is not a right Wall Street feels is legitimate. They think that once they buy off a governments officials to steal land from peasants that should end the matter.

Chavez with all of his faults (and he has many) is a symptom of the policies set forth in the US for the past 50 years. When a South American government does not do what Wall Street wants, we send in Guerrillas and death squads to destabilize the nation and repress the poor who are often deliberately given deceptive names like 'communists' or today's new catch all phrase 'terrorist'. These words are then used repetitively in Wall Streets mouthpieces, those huge mega-corporations that are the US press, to poison the minds of Americans against the victims.

Folk's listen please, these are important economic issues insofar as so many in America, especially in the 'bear-market', 'gold bug' alternative financial press, do not want to talk about these issues because they know if the poor down there get a say in these matters, they might have to pay 50 cents more a gallon for gasoline, which is still considerably less than they pay in Europe. Sadly many of them too, would rather see the poor rummage through a garbage dump for food than allow Venezuela (or other such nations) decide for themselves who they can and should sell their oil to. After all, who is it that is always slapping 'sanctions' on nations deciding who can and can't sell to such-and-such a nation standing on the foreign policy foundation of hypocrisy and greed? It is as though when people talk about right and wrong, murder's, pillaging and death squads, they should not be discussed in economic terms as well as political ones.

Well, Chavez is forcing Wall Street to look at these issues in one of the only two ways these men understand. Money. How will the US respond to Venezuela and its democratically elected government?

“The United States is preparing a future invasion of Venezuela to control the petroleum of the South American country as it did in Iraq” - Venezuela's acting ambassador to Paraguay, Elmer Nino.

Well, the ambassador may be overstating the case a little, but there are other ways of changing a government short of invasion that America has used time and time again when the people of a nation begin to actually have some power. It is called a coup, and this has happened once before in Venezuela and the US was the chief suspect in its instigation.

Do you really want to know why so much of the world hates us and uses the word 'America' as a curse word? This is just one of the many reasons why.

Random Thoughts On A Post Crash World

I read an very interesting article in the Financial Times On the 25^th called,“How America Became the World’s Dispensable Nation” by Michael Lind. It was most enlightening. While it was written from a clearly Globalist perspective (pro-free trade, anti sovereignty), it made some important points most important of which was the increasing irrelevancy of America in the world.

“A new world order is indeed emerging - but its architecture is being drafted in Asia and Europe, at meetings to which Americans have not been invited.”- Michael Lind

Lind describes many of the trends that alternative writers have been describing in different terms with his usual eloquence. He describes Europe’s drive in have an independent military force…independent of American support, policy and interference as well as moves around the globe to counter US imperialism. America is becoming increasingly irrelevant and its polices are striking a dissonant chord in capitals around the world. In fact in important areas of global concern in particular human rights, Lind says that America is a follower and not a leader.

All true.

America’s biggest problems is the inability of its policy makers to understand and comprehend the possibility or even the inevitability of the end of American dominance in the world. This includes most importantly economic dominance. It will very soon come to an end, slowly if possible; quickly if the world’s leaders lose control. At this point I still cannot say which scenario is more likely. Though even some mainstream commentators are making it clear that the situation is grave, graver than even most ‘doomsayers’ are predicting. Seeing the capital inflows from China and Japan should give anyone with the slightest economic understating serious, serious pause. Now the news dutifully reported by US media outlets was all glowing; that 80-some billion of new inflows came into the US and that investors were ‘showing their confidence’ in the US economy. That ‘confidence’ was most prevalent in the English speaking world, (if the treasuries numbers weren’t massaged)ⁱⁱⁱ in particular England and is clearly not sustainable for any length of time.

The world is progressing if American is not. Like a slow witted child that throws temper tantrums, America is being left behind in key areas of cooperation and development because of an obstinate, violent and backwards looking administration.

Looking forward to a post crash world puts other nations in the drivers seat and US foreign policy as an increasingly unimportant and counterproductive sideshow. We are not there yet and if the world can avoid a 'systemic event', America's military force will still be an important part of the global scene. But as deficits balloon, and fiscal priorities become a more heated topic, Defense spending will become more and more of a topic as time passes. The US has no choice, entitlements or defense spending, one or the other much be cut significantly. This is one of the reasons that reformation of Social Security is being touted as being a solution to US budgetary problems. Yes, costs need to be controlled, but the real crisis in the eyes of many is defense (better called WAR) spending and the close network of defense contractors who make billions from contracts and the shady accounting that has taken place over the past several years at the DOD and the missing billions that no one seems too concerned about on Capitol Hill. These fiscal problems will never be solved as long as we have the same ruling elite that put this mess in place, trying to fix it. Thus American preeminence will be destroyed under the weight of its own corruption and profligacy.

As anti-Americanism rises it should be no surprise that our Defense Secretary could not go to Germany for the Auschwitz memorial because of fear he would be arrested for War Crimes. Concentration camps and the horrors of the WWII have not been forgotten. In Europe, Rumsfeld is a reminder to the entire world that Nazi style round-ups and concentration camps are a still a constant threat to the civilized world. The saddest irony is that those who liberated Europe from the tyranny of the Third Reich are now the greatest threat to peace, freedom and justice...and why America is about to suffer the coming economic depression.

At least that is the way that I see it.

_________

Finally, to make one thing clear about these pages, they are not copyrighted. Unlike those whose primary goal is to make money scaring people, while they claim not to have money as a primary goal (stop paying your subscription and you will find out how honest they are!), these pages on the Coming Economic Depression are free and may be reposted, e-mailed or printed as often as one likes (or you can afford to replace toner cartridges!) provided it is not sold and a link to the original page is included. My sole purpose is to wake people up, not make money. I know many of you get a little upset over some of the things I say and this is one of the reasons it remains free. I write my own views and am not beholden to subscribers who constantly threaten to withdraw their revenues if I don’t say what they want or offend their notions of political correctness. I try very hard to make these pages informative, relevant and at times a little humorous, laced with a little sarcasm. This is a depressing topic and despite the fact that things look really bad for us, let is never lose our sense perspective or our sense of humor. In respect to so many people in the rest of the world, if you have food to eat, a roof over your head and don't have to worry about armed rebels roaming the streets, or war on your doorstep, you are doing far better than many other people in the world. Be thankful.

Thus, these pages are free of the political correctness that permeates so much economic writing today. I hate political correctness with a perfect hatred. It was political correctness that demonized the Jews in Germany. It became politically correct to persecute them and woe unto anyone who went against the ‘politically correct’ grain and actually hired or helped the Jews in those dark days of enforced ‘political correctness’. Political correctness and social brainwashing are essentially the exact same thing. Thus, because I am keeping this free, I am not beholden to a few fickle readers who pay to subscribe and their often petty, childish or hate-filled notions of ‘political correctness’ Thankfully I don’t even have to deal with the collective ignorance that is called ‘patriotism’ in America today. I have paid my dues to my country and have proved my deep respect for the freedoms and prosperity we enjoy with deeds rather than empty words uttered in ignorance and an alcoholic fog.

Patriotism is not going along with whatever the governments says and waving a flag. Only and idiot always trusts, believes and obey's any human institution without question and one can get a partially trained monkey to wave a flag. One can probably get 'em to do it more often and with greater enthusiasm than most 'patriotic' Americans.

Please understand me, I know this is not remotely true of the vast majority of you, most of you come here to get the story behind the story and are neither narrow minded nor ignorant and do understand what true patriotism is. You are truth seekers. However, I do get the occasional ignoramus who has some important tidbit of poison, hate or ignorance he or she feels compelled to pass on. So in case you were wondering, these pages will stay free as long as God allows.

I thank all of my readers for stopping by!

Mark S. Watson

Anyone interested in purchasing a copy of Conquer The Crash At A very reasonable price can e-mail me at offer-crash@markswatson.com
Only While Supplies Last!!