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Where the Markets and Economy Will Head if Obama Has a Second Term
During its first term in office, the Obama Administration thus far has proven itself in favor of increased Government control and Central Planning. That is, the general trend throughout the last four years has been towards greater nationalization of industries (first finance, then automakers and now healthcare and insurance), as well as greater reliance on our Central Bank to maintain our finances.
Last year the US Federal Reserve bought over 70% of all US debt issuance. During this period we saw decreased buying from both China and Russia. That is a big problem because as noted before, hyperinflation unfolds when a country loses credibility in the global markets. The fact that foreigners are increasingly shunning US Treasuries is the first step in that direction.
If the Obama administration gets another turn in office, there is no indication that this trend will end. We must recall that regardless of what is said, it was Obama who re-appointed Ben Bernanke as Fed Chairman. And it was under Obama’s watch that QE lite, QE 2, Operation Twist 2, and now QE 3 were launched. It was also under Obama’s watch that the US reached a Debt to GDP ratio of over 100%.
Indeed, at no point in history has the US had this much debt during peacetime. And the fact that we’re overspending by this amount at the exact time that other countries are showing signs of shunning US Treasuries is a formula for disaster.
The line to watch is identified below. Whenever the 30-year Treasuries break below this line, we’re in ENORMOUS trouble as the 30+ year bull market in US bonds is over.
The Obama administration has used debt to finance its various programs and overspending. If Obama wins a second term, I see no indication that this will change. There have been no actionable plans proposed by the Obama administration on how to tackle the debt or deficit issues. And it’s highly likely that should Obama win in 2012, he will surround himself with the same Keynesian economists who believe that a country can spend its way back into growth.
With that in mind, it is highly likely that the US would enter a currency crisis during Obama’s second term should he win. In preparation for this, investors will want to focus on the following investment themes:
- Inflation hedges based on continued spending and money printing.
- Gold and Silver as an alternate currency based on the US Dollar falling further.
- Productive assets (foreign real estate, apartments in specific markets, businesses, essentially anything that produces cash).
- Preparing for an eventual US Debt Default.
These are the big picture broad strokes of what is likely to pass if Obama wins a second term. I’ll detail the impact of a Romney candidacy tomorrow.
In the meantime, if you’d like more information on inflation and protecting yourself from it, we feature a FREE Special Report detailing the threat of inflation as well as two investments that will explode higher as it seeps throughout the financial system. You can pick up a FREE copy of this report at:
http://gainspainscapital.com/gpc-inflation/
Best Regards,
Graham Summers
PS. We also feature a FREE report concerning the threat of a European Banking Collapse. It’s called What Europe’s Collapse Means For You and it explains exactly how the coming Crisis will unfold as well as which investment (both direct and backdoor) you can make to profit from it.
This report is 100% FREE. You can pick up a copy today at:
http://gainspainscapital.com/eu-report/
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Well let's say obama wins again ( the medias the big finance the big corporations wANT HIM, AND AVOVE ALL THE FED MONTHLY ALLOWANCE OF 40 B.US $ ).Now let's face the fact that for the last 10 years the USA splashy lifestyle has been funded by the foreign T bonds buyers ( Asia China Oil rich kingdoms Russia etc.).You are one of those foreign holders of US T bonds, a 10 years T bonds gives you 3% /year but CPI is at 4 % and PPI at 7 %.So you lose 1% a year of your purchasng power.And since you are the chinese govt.you also note that the Producer Price inflation is at 7% ( due to higher wages , higher energy cost ) so your producers are earning less and you recxeive less taxes to buy again the US T bonds : those facts are two strong reasons for rushing to the exit , selling your US T bonds now when their price is still up in the sky.
Now the Fed sees that danger very close and can the Fed buy against the whole market selling ? US T Bonds price will crash. The US govt will run dry , no more foreign injection of US $ ( exactly as the Greek tragedy unfolding for the last 4 years ).
So the Fed will face a suicidal choice: jack up the interest rate ( Paul Volcker Style 1994 ) or ramp up the printing press ( QE 4-5-6- ad N ..)
I doubt the fed with Bernanke will do the opposite of their actual policy which leave us with HYPERINFLATION resulting from pure paper printing and no more foreign investors.
HYPERINFLATION at 20% /year totally destroys your capital ( or purchasing power ) in 5 years.
So far for the working class and middle class who blindly cling to Obama as their saviour.
A second Obama presidency will hammer down the nails in the coffin of the american profligate lifestyle of the bourgeoisie and signify the starvation (hunger ) of the middle class.By starvation I mean the middle class - the jobs holders, the workers will be left without jobs . Since they will not consume anymore they will lose their jobs too very quickly.When 70% of your GDP is due to consumption thanks to financial credit ,and that the foreign lenders are out , you are on your own.
Obama's policy has just helped the big financial sector to AVOID the necessary purge,, the ditching of the rotten apples, but has reached its limit.The foreign money will stop to buy the US T bonds . Obama's re-election is a way to keep the agony going on but the foreigners will not anymore give him a lending hand.
The Romney alternative is a little bit better, since iit will purge the financial sector (Paul Volcker ) , the US will suffer another 2 years of recession but will emerge again stronger and leaner
You state: "jack up the ineterest rate (Paul Volcker Style 1994)"
Really? Not to discredit your hard work typing... but...
My facts are: - Volcker was appointed by Carter in 79 - raised interest rates to 20% in 1981.
Perhaps you can clarify - Dont get me wrong... Fore more years on the golf course and we are dun...
Volcker raised interest rates from 11 up to 21% in order to fight inflation.
What I mean is that face with a rush to the exit by foreign holders of US T bonds the next Fed president will also have to raise up considerably the interest rates in order to retain the foreign investors.Differents causes will provoke the same effect. I hope I am clear ?
20% is NOT hyperinflation, it is simply high inflation and 4-5 years of that will magically erase a whole lot if debt, savers and general population be damned.
Hyperinflation is a completely psychological phenomenon. It is the refection of the currency by the public in that currency zone; it's not predictable; it's usually a surprise. it usually ramps up very quickly; it's an act of the mass mind. 20% a year inflation is not something the American Populace; or our foreign creditors are psychologically prepared for; and the such a reality; even for one year could easily cause mass revulsion against the currency and the spiral into currency destruction; which in modern times, and it has happened many, many times results in government anouncements; over the weekend; that we have a "new dollar", whcih is "worth" such and such. I can only understand your comment as an attempt to pretend that things will be tolerable in such a situation; they will not.
Well if you are on fixed income , 20% inflation will destroy your capital in 5 years or the contrary if you are a debtor it will ease your refunding.
Now let's have clear that the population and the State ( Givt.+Federal reserve bank ) have exactly opposite interests
The population tries as much as it can to deleverage, to reduce consumption, to reduce spending and credit while
the State practice the opposite ( extreme leveraging, unlimited financing of banks through bas assets purchase , etc..)
so at some point ( very close ) now this totally opposite behaviour will stop , because an exteranl factor ( the foreign financment through US t bonds purchase )
will quickly dry .
So the only possibility left for the state ( to finance itself ) is tio ramp up the printing press.
immediate effect: the foreign will totally close the money spigot.You in the USA will have high inflation and soon hyperinflation.
I call it the death spiral of a currency.So it's up to you americans to choose your destiny; either a quick agony with Obama, or a severe cure and recovery with Romney.
Only if you get raises. Otherwise you get fucked.
Love the Yahoo finance... ' basic charts'...with 'trend line'.
The election doesn't matter. Red Blue distraction.
False Statement. This is ignorance pretending that ignorance is okay; because even if you do your homework and find out what the facts are; the election results won't matter. They will matter. One candidate is essentially a shoeshine boy who can only say, yessuh massa, how high should I jump? the other one speaks the language of business and power and can get some portions of the agenda to back off, in order to buy his second four. The most obviously stupid thing about your mindless statement, is that a chief executive on his last four, has no further deal to make with the electorate and can go all out on the puppet masters program; collecting his payoffs in whatever carefully manicured foreign accounts they're accumulating in. Romney will have to get you, the people, some kind of relief, to "buy" his second four. This is so obvious a child could understand it.
shoeshine boy? what is that plantation noise? are wearing a pointy sheet?
speaks the language of business & get some portions of the agend to back off? WTF are you talking about? Romney is a leveraged debt specialist... this idea that he's a big fixer smart business man is myth for public consumption..... he pillages. His allies are other pillagers....Kochs, Adelson, et al. its gangster capitalism, who have collectively offshored 50,000 factories....Bain Capital's 1st capital raise was done through offshore investors, people with something to hide, Salvadoran elites, British fraudsters, from accounts in Panama.
the rest of your metaphor is unintelligible.
Wow! What a great system! Count me in!
I agree the only difference will be where they spend about 5% of the deficit, military or social
You do not know this. It is a complex situation; a great deal could be done that would be beneficial to you and your family and you would be able to understand this starting about two years in.
Really. Obama or Romney will save us?
Surely those two are the best and the brightest!
False equivalence. Military and police state spending is about TEN TIMES social spending, regardless of the PROJECTED "entitlement" obligations used to scare the shit out of people. In REAL, ACTUAL, PRESENT BUDGET EXPENSES, entitlement expenses don't amount to a hill of beans!
And there is only a downside in MIC spending with trauma injuries, debilitating psychological conditions and increased crime and domestic violence from veterans. Those are REAL COSTS that you cannot get around!
Social programs are, when some corporation doesn't step in to funnel some government swag to private hands through "administrative costs", almost all upside. If everyone had guaranteed health care, productivity would go up ACCROSS THE BOARD in every business BECAUSE mental health, crime and domestic violence would decrease.
Stop making believe social and MIC costs are equivalent. One builds a nation with a tenth of the capital expense the other (perpetual wars) uses to DESTROY it!
totally concur. Chalmers Johnson made a career out of this critique of US empire & its 400 bases around the world http://en.wikipedia.org/wiki/Chalmers_Johnson
Major categories of FY 2011 spending included: Medicare & Medicaid ($835B or 24%), Social Security ($725B or 20%), Defense Department ($700B or 19%), non-defense discretionary ($646B or 19%), other ($465B or 12%) and interest ($227B or 6%).
http://en.wikipedia.org/wiki/United_States_federal_budget
very disingenous editing of the Wiki article. here's the rest of it that pertains to MIC, which if you add in the emergency appropriations for wars, + VA + HS + don't forget Black Budgets, est'd $50B...you're pushing $1.2Tr /yr...+ interest on that debt, gets to be real money, to say nothing of lost opportunity costs for nation building at home.
"$740 billion in expenses for the Department of Defense (DoD), $141 billion for veteran expenses, and $48 billion in expenses for the Department of Homeland Security, for a total of $929 billion.[37] The U.S. defense budget (excluding spending for the wars in Iraq and Afghanistan, Homeland Security, and Veteran's Affairs) is around 5% of GDP. Adding these other costs places defense spending between 6% and 7% of GDP. The DoD baseline budget, excluding supplemental funding for the wars, has grown from $297 billion in FY2001 to a budgeted $534 billion for FY2010, an 81% increase.[38] According to the CBO, defense spending grew 9% annually on average from fiscal year 2000-2009.[39] Much of the costs for the wars in Iraq and Afghanistan have not been funded through regular appropriations bills, but through emergency supplemental appropriations bills. "
I was not impling that the costs were the same, but that the difference between the candidates. One would take 5% from social and give it to the military, the other would take from military and give it to social.
Precisely correct. The military-industrial complex, as Eisenhower warned us, has gotten way too much spending authority. If you want to understand the situation study Kandahar Airfield in Afghanistan; where they have two competing private coffee shops; one English and One American. The description of this operation, this one element in the military complex, Kandahar Airfield; which you will never see in the major media is available in print; it will make your brain explode. It's a gigantic black hole to pump money into; for what? for nothing. To support the military burecracy; to promote officers; to generate opportunities on all fronts for kickbacks and gladhands from contractors. I watched a video of a general trying to explain to some young soldiers why their friend had been killed there; what the purpose was; what they were doing there; he failed. he simply failed. It can't be done; there is no purpose. Sixty percent of the serving military want to vote against Obama; according to recent poles. /but if you precious educated liberals who are too cool and too smooth to actually get your ass out to the polling booth and vote, don't wake up and do your duty; you're going to be very, very, unhappy.
perhaps the problem was in USING the Military Industrial Complex? (never was a direct war with Russia.) Certainly fits the facts. "Absolute power corrupts...absolute power corrupts absolutely." the question for me is "can the collapse be called" and "if so, how." natural disasters have historically been triggering mechanisms for great social upheaval. we certainly have the hardened "divisions" in our society. neither side is looking for...nor wants, needs or desires...compromise. our freedoms have been curtailed if not outright eliminated. our money is stolen from us in broad daylight now. i've called numerous shots over the past many years...but i've missed the collapse time and time and time again. somehow the system resets itself. still...ZERO failures? strikes me as a statistical impossibility.
phonix the amazing seer of future events .. either romney or obummer will find debt to be excessive .. Q3 will be grinding on. for it to stop the economic game will come to a screeching halt .
phonex makes guesses with out a shred of understanding .. like his no Q3 was a complete bust .. now he tries to foster the illusion he has a clue .. for only $250 one can find he not only does not have a clue but will be out the $250...
"Indeed, at no point in history has the US had this much debt during peacetime."
At this point I stopped reading. Graham, these clowns have given us better than a decade of neverending war. The War Pigs have been eating themselves silly at the trough. I'm sick and tired of my tax dollars funding military campaigns overseas so we can stick our hands in other people's cookie jars. I'm also sick and tired of my tax dollars being used to surveil US citizens with fancy new toys and scanners. Peacetime? What have you been smoking?
I did too.
Excepting that since the war on terror is a permenant war ... Then QE Eternity makes sense ... if you're an arse hole anyway.
The implication is that after the election that government statistcis will suddenly no longer be manipulated. Ha ha ha ha ha.
A manufactured market drop to provide cover for the further down the river selling of the American people as CONgress lumps together a grand bargin that isn't a bargin at all.
What a crock of odiferous material.
You (and I) have the fortunate geographic advantage of living in a part of the country that one can hide in plain sight. Arkansas was the site for the Japanese internment camps of WWII. Hide away and become invisible. Within a 5 mile radius I have all the skills needed to tap for survival: machinist, mechanic, farmer, carpenter, on and on. It's a well kept secret -- or was anyway.
Your tax dollars? Taxes have been banished in favour of dilluting the currency and passing the bill down the generational line, who are even less inclined to pay up than the war pigs.
EXACTLY!
The problem IS the war profiteering swag pushed day in and day out by Bernanke and Geithner through broker dealers getting a cut of the counterfeiting operation that fraudulently jacks up stocks, keeps the fed fat with interest debt that we-the-people are saddled with and nutures the police state tyranny.
That said, it is correct to envision less and less traction from the dollar as a world reserve currency. Is anyone here aware of the fact that there are now more euros in circulation than dollars (see Wisegeek)? Yes, that other fiat currency with poor prospects, as of this year, has a greater physical currency presence in the world than the dollar. Sure, the yuan will probably win over the euro for reserve currency status eventually BUT the bottom line is that both the euro, and even more so the yuan, DO NOT have the massive drag of a parasitic MIC sucking the life out of their economies.
We may not be Zimbabwe yet but our "strong" MIC parasite is getting us there REAL FAST. This wet dream of the Israel firsters of full spectrum tube steaking the planet has turned into the demise of the dollar as a world currency.
The markets will continue, in inflation adjusted terms, to go south. Just look at the price of gold from 2001 until now to see how far the dollar and the markets ACTUALLY have declined.
We are HISTORY if we don't stop these fucking wars and start paying savers a decent amount of interest on their savings.
dollar/yen strikes me as a big deal. i think we're just going to have a reset anyways. 4 more years of the Bush Administration? yikes. I think 12 is enough...
If obama wins I would go with gun manufacturers or food stamp bankers like JP Morgan
Which Corporations Profit from Food Stamps?
http://www.allgov.com/news/where-is-the-money-going/which-corporations-profit-from-food-stamps?news=844629
Food Stamp Growth 75X Greater than Job CreationSturm, Ruger & Company (NYSE:RGR) Blows Away Expectations: Gun Sales Surge Ahead Of Presidential Election
http://marketdailynews.com/2012/11/01/sturm-ruger-company-nysergr-blows-away-expectations-gun-sales-surge-ahead-of-presidential-election/#hAdsdQPSpMLYMsFW.99
Depopulation Through Planned Governmental Starvation of U.S. Citizens