Interesting read from the Dream Machine Board-Posted by: pcNews
In reply to: None Date:1/3/2008 9:43:02 PM
Post #of 18187
Though I surf in the valley of the coming apocalypse,
I fear no evil, for I have physical gold & silver in my possession.
Seven Things That Might Surprise You in 2008
As 2007 ends, and 2008 rather ominously begins, what possibilities await us? Changes now come at near-warp speed. The subversion of Constitutional rights, the tightened reign of the Working Groups on Financial Markets (PPT), and the concentration of power at the Executive branch of government are but a few of the breathtaking developments recently witnessed. A failing economy is always fertile ground for corruption, high crimes, and stunning developments. This time will be no different. In light of such rapidity it may be best to come to grips with the following possibilities.
1) The U.S. dollar index will be reformulated, or eliminated altogether.
It was easy for the Fed to eliminate M-3; it will be just as easy for them to eliminate this thorn in their side. Rather than having a dollar index at 42 it will feel better to either not know what it is, or reformulate it, much like the CPI. Maybe they will finally come up with some amalgamated North American fiat. Might I suggest the "Ameraloonie"? Like gold, the dollar index shines like a klieg light on the putrid dollar. Further propping of the dollar index with other people's fiat (OPF) isn't a viable game plan. It is ultimately hard to come up with a dollar index number when nobody trusts the digital counts. There are valid places for ephemeral thought; finance just doesn't happen to be one of them. Ephemeral dollars will make indexing impossible. Feds of the West unite! You have only your worthless pieces of paper to lose!
2) Rioting and protesting no longer will be confined to third-world and unstable regions.
We are accustomed to watching rioting on the nightly news in far away places like Kenya and Pakistan. There may soon be posh middle class U.S. suburbs where Americans will no longer need to be inside watching riots on TV; they can instead watch the action from their front porches. Millions of homeowners are about to get foreclosed and evicted, and millions of others will get mind-blowing property tax increases. This will foment unrest and chaos in the burbs. It is one thing to mess with the God-given right to watch football on plasma TV screens. It is entirely different if those big screens are getting smashed out on the street. The entitlement generation will not go away quietly. The blame game will crescendo as neighbors unite to battle their common oppressors: the loan officer and appraiser down the street. After all, these guys talked them into all of that stupidity! This time around the barbarians may be inside the gates… or rather, inside gated communities.
3) The Comex will convert gold and silver contracts will to cash settlements.
I figure once open interest in the gold contract hits about 2 million it will become apparent there's no legitimate hedging going on. Snowball in hell will then describe the chance of any physical metal going out the Comex doors. The Comex gold and silver contracts will have to mimic weather futures; betting on numbers going up or down, without any real connection to an underlying product. Freed of the pesky requirement to come up with real gold, Goldman Sachs can finally short to its heart's content. Physical gold and silver will skyrocket, and the Comex, if it survives, will become a figment of bullion banks' imagination. When artificial price discovery ends, the epiphany moment for many will begin. GATA was right, and bonehead analysts like Jon Nadler and Leonard Kaplan have been blowing smoke up investor's posteriors for years.
4) At least one big-box store chain will crash and burn.
I have a personal favorite, but will keep its name to myself. The over-building and over-leveraging of all retail stores cannot be unwound without casualties. The rocket fuel of Wall Street investing has ended, and box stores are saddled with high lease payments, soaring utilities, puny sales, and lower margins due to surging import prices. Add an aging baby boomer population unable, or unwilling, to navigate the miles of aisles and this "crash and burn" prediction is a no-brainer. The cheering of local city governments as they heralded box store arrivals will turn to horror as shuttered behemoths blight the landscape, and tax revenue plummets. Additionally, local merchants routed out by box stores will no longer be there to pay taxes and sustain the manufacturers. The receivables a typical box store owes to manufacturers and vendors on any given day are enormous. Many manufacturers and distributors could not survive a box store bankruptcy.
5) Municipalities, local governments, and pension funds will be blindsided by staggering losses.
Wall Street will ladle heaping helpings of financial toxic soup to all. Many heretofore unwitting recipients of the toxic soup will have the pleasure of opening an envelope and reading, "we regret to inform you that as of last Friday there are no funds to distribute, and your account has been closed". This will lay to waste the fallacy of diversified portfolios consisting of 70% stocks, 25% bonds, and 5% cash. With muni-bond issuance now DOA local government everywhere will have the gut-wrenching decision of whether to keep paying teachers, or keep sewage plants running. (Ed. note: I like the metaphor of financial toxic soup threatening the sewage plant.) Many others will understand health insurance for what it was: a luxury. So-called "good corporate citizens" will have to fess up to the truth that their pension funds were in fact quasi- Ponzi schemes. The odds of them actually ever paying out to all pensioners are similar to the odds of the Kahoutek Comet striking Earth. It may feel like a comet has struck a pensioner's household when the true losses are reported.
6) Flipping houses will take on a whole new meaning.
Flipping used to be lively cocktail conversation a few years ago. It, as you know, referred to buying a home and quickly re-selling it for profit. Flipping will once again become fashionable, only this time around it will have an ominous tone for lenders and creditors. Flipping off might be a more appropriate term. Once the tidal wave of foreclosures hits full force it will be fashionable to just walk away, or flip off, your lender. In fact many will feel justified in their rebellion. After all, it wasn't their fault that Sir Alan coaxed them into these moronic adjustable rate loans, was it? There will be wall-to-wall coverage of banking scandals on C-Span and CNN. Nauseated by the thought of a banker ripping them off, they will wisely choose eating, and putting gas in the car over pouring sand down a rat hole. There will be more flipping off going on than in a Kid Rock video. Mr. Potter in "It's a Wonderful Life" will look benevolent compared to the public's perception of bankers before this is all over.
7) Fannie and Freddie will fold into JPM
This is the ultimate marriage of derivative houses from hell. As Congressional inquiring minds (I realize "Congress", and "inquiring minds" are oxymoronic), and prying eyes from opportunistic prosecutors (it will play well in the rioting suburbs) bear down, Fannie and Freddie will flee to the safety of obscurity, i.e., derivatives giant J.P. Morgan. Rats hate bright lights, and the dark corners of derivative secrecy will get a little more populated with vermin. We may never know what the ultimate cost Fannie and Freddie will be to the taxpayers. We will only surmise as we all play along in a little game called "hyperinflation monopoly". Not the Parker Bros. version; this is a Fed board game. When financial instruments are measured in the quadrillions there is one thing to keep in mind: old derivatives never die; they merely retire to the House of Morgan.
There are obviously other possibilities for 2008. If even one or two of those described here come to fruition it would be wise to have gold and silver in your possession. As you may have noticed these are exclusively domestic issues. Really, do you think the world's economic and social problems will be getting any better in 2008?
I didn't think so either.
James McShirley
January 3rd, 2008
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