The great monetary scientist Isaac Newton, who
served as England’s Master of the Mint for 24 years, also did some ancillary work in
physics. The laws of Newtonian physics are known by nearly everyone and
are often used by analogy to apply logical reasoning in other fields.
In this case, a few of these laws are particularly applicable in
discussing the impending state of the economy in 2010 based on the massive
momentum of 2009.
LAWS OF MOTION
Stated in layman’s terms the three great
Newtonian laws of motion are:
1. A body persists in a state of uniform motion
or of rest unless acted upon by an external force.
2. Force equals mass times acceleration”
or “F = ma.
3. To every action there is an equal and
opposite reaction.
In regards to human action a body seems to stay at rest
rather than work unless acted upon by some type of force. The force can
be either internal such as hunger, the desire for self-actualization or
anywhere in between on the Maslow hierarchy of needs or external such as a
saber-tooth tiger, boss or customer. To sustain life the human body
must consume fuel.
Capital is the means of production and the
difference between production and consumption flows into or out of the store
of capital. Out of this dynamic human society has attempted to
efficiently allocate capital to produce more and this has resulted in
institutions, large and small, where individuals work in the attempt to
produce in order to meet their needs and wants. Of course, the great
fiction of government is that everyone can live off someone else’s
production.
MASSIVE FAILING INSTITUTIONS
The chains of habit are too weak to be felt until
they are too strong to be broken. The mass of the economy times its
speed in the Information Age has resulted in a tremendous force. But
this mass has largely been built from the atomic level upon something which
is inherently unstable and undefinable leading to chronic fingers of
instability.
The problem is debt and because psychology is
changing, The Great Credit Contraction has begun and the rate at which
the mass of the economy is evaporating is truly scary. While many
attribute the ongoing financial crisis to the subprime mortgage mess, which
is surely a contributing factor, the problem is much more systemic than a few
defaulted mortgages.
UNEMPLOYMENT
But now the second wave of Option ARMs are getting
ready to reset at the same time the Federal Housing Administration is
requiring higher down payments. But where are these renters going to
find a job when over 6.1M people have been unemployed for 27 weeks or more?
And what about all the discouraged workers who are
not included in the labor force because they have ceased looking for
non-existant jobs? The Detroit News reported:
Despite an official unemployment rate of 27 percent,
the real jobs problem in Detroit may be affecting half of the working-age
population, thousands of whom either can’t find a job or are working
fewer hours than they want …
Mayor Dave Bing recently raised eyebrows when he
said what many already suspected: that the city’s official
unemployment rate was as believable as Santa Claus. In Washington for a
jobs forum earlier this month, he estimated it was “closer to 50
percent.”
With so many unemployed almost all of the States,
with California being the poster child, are under severe financial pressure.
For example, 40 state unemployment insurance
funds are either broke or moving
in that direction. While there are people starving in the chaos of
Haiti about 37M Americans are now on welfare state food stamp programs, the
rate of acceleration is expanding at about 20,000 per day and 1.4M Americans
filed for personal bankruptcy in 2009. And this is a rosy situation
considering the FRN$ is still the world’s reserve currency!
RETIREMENT CHAOS
The Baby Boomer generation has driven trends their
entire lives because of their mass and acceleration. From Gerber baby food
to the housing booms and busts caused by costumed government officials
gallivanting in genocide which caused serious aberrations in demographics and
are now getting increasingly explosive politically as the 2016 election will
see 78M Baby Boomers pitted against 112M Millennials.
Social Security and Medicare are out of control
kudzu that are strangling the economy. Additionally, virtually all
pension funds in the United States are massively underfunded with epic games
being played with the discount rate. As Forbes reported:
The GAO study found that states’ cumulative
unfunded liabilities were $405 billion, while Novy-Marx and Rauh figure $3.2
trillion is a more accurate number.
All those tax eating costumed government officials
are going to be extremely happy when they realize their retirements
evaporated. But with unemployment benefits draining the capital of the
economy like vampires while the productive members of society are punished
via increased taxation and regulation the entrepreneur has either learned how
to vanish or been turned to stone by the local Gorgons.
The result has been massive declines in State and
local tax revenues. Even Federal corporate income tax receipts were
down 55% for the fiscal year ended 30 September 2009.
KICK THE CAN
So like a classic Ponzi scam the answer has been to
attempt to bailout the State and local governments via Federal resources.
For example, a chief bailout recipient Citigroup is
accepting California IOUs indefinitely at face value; a surreptitious Federal
bailout of California in a preemptive attempt to keep them from seceding
monetarily by taking the next step of unconstitutionally decreeing the IOUs
legal tender for all debts public and private. The Euro faces the same
type of structural issues.
But if the States unconstitutionally decree FRN$
legal tender then why not their own little colored coupons? With 13% of US GDP a $30B deficit California should
have nothing to worry about with a mere $30B+ cash-flow issue. After
all, the California Dollar could have a bear
on it; the Florida Dollar an alligator,
the Texas Dollar a long-horned
bull and the New York Dollar a vampire
squid. They would be such fitting symbols!
And so the adjusted monetary base has exploded.
The FRN$ is destined to evaporate and the increase
in debt is only hastening the rate.
CONCLUSION
Despite propagandist cheerleaders on television the
economy is in horrible condition. The Obama administration’s
attempt to alter the speed and direction of the economy is textbook action
for intentionally exacerbating the greater depression. Like in the
recently released movie Daybreakers soon the starving vampire squids of Wall Street,
Washington DC, State and local governments will run out of their productive human
livestock and only
a few understand their true predicament. They think they can
’save or create 3M jobs’. Seriously?
No one knows how this ginormous mess will play out.
But the massive momentum of 2009 has largely shaped the direction for
2010. While the FRN$ may rise in the short term it is an extremely
risky play because of how fast hyperinflation could strike the FRN$.
Of course, among the chief uses of silver and
reasons to buy gold, platinum and lead are to keep you and your property
safe from the costumed vampire tax eaters who will likely spring
Obama’s retirement trap by nationalizing retirement accounts and
forcing purchases of US debt to bolster Treasuries.
Using force or intimidation against innocent people
or their legitimately acquired property is unfair, immoral and unsustainable.
The current state of the economy and where it is headed is merely the
result of cause and effect from economic law. George Mason, the father of
the Bill of Rights, observed this principle hundreds of years ago in his
writings contained on page 966 of The Papers Of George Mason:
As nations cannot be rewarded or punished in the
next world, so they must be in this. By an inevitable chain of causes and
effects, Providence punishes national sins by national calamities.
Please, leave your thoughts on how you think 2010
will play out.
DISCLOSURE: Long physical gold, silver and platinum with no interest the
problematic SLV or GLD ETFs, the platinum ETFs or Treasuries.
Trace Mayer
RuntoGold.com
Trace Mayer, J.D., holds a degree in Accounting from Brigham Young
University, a law degree from California Western School of Law and studies the
Austrian school of economics. He works as an entrepreneur, investor,
journalist and monetary scientist. He is a strong advocate of the freedom of
speech, a member of the Society of Professional Journalists and the San Diego
County Bar Association. He has appeared on ABC, NBC, BNN, many radio shows
and presented at many investment conferences throughout the world.
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