NO WAY OUT - US FACING POSSIBLE COLLAPSE BY 2012 - 15 MAJOR PROBLEMS SET TO STRIKE SIMULTANEOUSLY
By Stephen Leeb, Ph.D. - Senior Editor, The Complete Investor - Chairman, TCI Enterprises
It was a great run, but after 232 years, we're on the ropes and getting wobbly in the knees.
As late as 1965, we could have made some better decisions and kept the country on course, but we were too short‑sighted, too madly in love with free government benefits, and frankly, just too pathetically dumb. Now we're in the hole $81 Trillion, and no one in either party has a clue about how to pay it off.
Yet we urgently need to find another $10 Trillion or so for roads, defense upgrades, and most urgent of all, inventing a replacement for gasoline. I'm sorry to be the one to tell you, but it's not going to happen.
It's twilight in , and suddenly we find ourselves fighting to keep the lights on:
> The dollar is dying, and the world will likely dump it. Soon!
> The planet is almost completely out of some essential metals.
> Within ten years, the trading floors of Wall Street will dwindle by 70%‑80%, becoming a bit like ghost towns.
> Global warming (real or not) is turning into a fiscal black hole that could suck in every spare dollar for the next century.
> Worst of all, the traditional fixes for these problems simply aren't working anymore.
For the past 20 years, I have been optimistic and bullish, and perhaps I’ll be a bull again someday. But for right now, you can call me the Bad News Bear. Most of the long-term financial indicators are going absolutely in the wrong direction.
As a bull, I looked on gloom & doom scenarios with scorn all my professional life. They usually had holes you could toss your hat through. In the past, the country has always been able to muddle through.
Not this time. We are heading straight for the Crash of 2012 which we may never fully recover from because we no longer determine our own destiny. For the first time since the War of 1812, exactly 200 years before, we will face a world almost totally out of our control. I believe there are 15 major problems that now threaten to put America into a kind of "receivership". Any one of these problems might be manageable by itself, but please note that they will erupt almost simultaneously, and that is what makes this situation so different from any in the past and so catastrophic.
I know this sounds like scare mongering, but let me be clear: You may be seeing the last great years of prosperity of Western Civilization. It's the end of the line, and there is no way out for the U.S. and the West apart from some very painful repair work on our budgets, our government, and our lifestyles.
THE 15 CALAMITIES WE HAVE TO FACE, AND WHY LIFE WILL NEVER BE THE SAME AGAIN
Past crises were largely invented by the media. Today’s are real and intractable.
Here is a brief survey of 15 reasons why there is no longer a way out, no way to detour around our problems. From now on, we must learn to face every challenge, whatever it takes.
The Actual Facts
1. We're almost out of 12 essential minerals. At present consumption rates, the Earth would completely run out of indium, lead, silver, antimony, tin, uranium, and tantalum in the next 4 to 20 years. Within 40 years, we'd be out of zinc, copper, and chromium. Platinum and nickel would soon follow.
2. By about 2025, gas and diesel fuel will not be made available for cars or trucks. We won't run out of oil, but eventually gas won't be worth the time and effort to retrieve it. That is, a dollar's worth of gas will cost $1.01 in salaries and drilling rig fuel to locate, drill, pump, refine, and transport it to market. At that point, the global pinball machine will flash its final message, GAME OVER, and (by international law) remaining pools of oil will be used only for goods like plastics and polyesters, whose price can be bid up infinitely.
3. China and India have become a juggernaut. With billions of U.S. dollars in hand and an annual growth rate of 8% for India and 11% for China, they can no longer be dismissed as minor players in the worldwide bidding war for commodities. The total savings rate for Indians is 28% of GDP, and for the Chinese it's 42%. How on earth are we going to compete with them when they outnumber us eight to one and out-save us by an average of 35% a year? They're going to eat our lunch and the rest of the developing world will dine on our dinner.
4. Inflation will reach 25%-30% a year. Causes: the commodity run-out, massive Third-World competition, federal and personal debt, the trade deficit, runaway Medicare growth, the always-nagging threat of a mega-depression, and other multi-trillion-dollar necessities. Inflation will touch levels Americans have never seen before. For example, if the S&P 500 were to rise by 8 percent a year over the next generation, your purchasing power would decline by nearly 98 percent. Losses in the purchasing power for investors in bond market and T‑Bills would be as bad or worse. For the foreseeable future, unless you are willing to think far outside the box, you are facing utter financial ruin.
For the past 20 years, I have been known on Wall Street as a rather consistent bull, but the above factors have changed the world picture drastically. So with the mailing of this bulletin, I am going on record as a bear. I wish it were not so, but until some miracle happens, the raw numbers give me no choice.
Eleven More Problems That Won't Go Away Anytime Soon
5. Total future federal obligations (debt + Medicare, etc.) are now over $60 trillion. We don't have it, and there's no way to get it.
6. The 5 billion people in the developing world now want TVs, cell phones, cars, and computers . . . and they're going to get them, come Hell or high water.
7. The U.S. trade deficit has rocketed to $6.8 trillion. These dollars have been coming home to buy U.S. Treasuries, but that will end shortly.
8. As soon as the dollar grows weak enough, OPEC nations will cheerfully dump it as the world's reserve currency.
9. The delicately interlaced derivatives market is an unimaginable $681 trillion house of cards.
10. The stock markets will fade to gray. Within ten years, the nation's major exchanges will become a shadow of themselves as trading volume falls by 70%-80% simply because investors won't be able to make much money.
11. Iraq or no, defense spending will rise as the US attempts to secure access to vital minerals in unstable countries.
12. We must immediately find and begin spending $2 to $5 trillion to locate alternative energy sources for cars and electricity plus $500 billion more for highway repairs and LNG projects.
13. For the next century, any remaining money will be sucked up by global warming (real or not), which is turning into a fiscal black hole.
14. Our complex, information-based economy will flatten badly and revert to a more industrial one. Eventually, assuming that our civilization survives at all, the social order will morph into simpler forms in which income differences shrink dramatically. Simply put, money will be scarce; $900-an-hour lawyers and S&P 500 CEOs (who now average $15.2 million a year) will find themselves on much the same level as skilled blue collar laborers.
15. We can't buy our way out of the above problems because we are fatally overloaded with both private and corporate debt.
Sincerely,
Stephen Leeb, Ph.D. - Editor
The Complete Investor
2 comments:
Stephen, I agree wholeheartedly with this post. Overpopulation and our trade deficit lie at the heart of these problems. And while these two issues may seem to be unrelated, they're actually tied closely together in a way you may not suspect.
At this point, I should introduce myself. I am author of a book titled "Five Short Blasts: A New Economic Theory Exposes The Fatal Flaw in Globalization and Its Consequences for America." To make a long story short, my theory is that, as population density rises beyond some optimum level, per capita consumption begins to decline. This occurs because, as people are forced to crowd together and conserve space, it becomes ever more impractical to own many products. Falling per capita consumption, in the face of rising productivity (per capita output, which always rises), inevitably yields rising unemployment and poverty.
This theory has huge ramifications for U.S. policy toward population management (especially immigration policy) and trade. The implications for population policy may be obvious, but why trade? It's because these effects of an excessive population density - rising unemployment and poverty - are actually imported when we attempt to engage in free trade in manufactured goods with a nation that is much more densely populated. Our economies combine. The work of manufacturing is spread evenly across the combined labor force. But, while the more densely populated nation gets free access to a healthy market, all we get in return is access to a market emaciated by over-crowding and low per capita consumption. The result is an automatic, irreversible trade deficit and loss of jobs, tantamount to economic suicide.
One need look no further than the U.S.'s trade data for proof of this effect. Using 2006 data, an in-depth analysis reveals that, of our top twenty per capita trade deficits in manufactured goods (the trade deficit divided by the population of the country in question), eighteen are with nations much more densely populated than our own. Even more revealing, if the nations of the world are divided equally around the median population density, the U.S. had a trade surplus in manufactured goods of $17 billion with the half of nations below the median population density. With the half above the median, we had a $480 billion deficit!
Our trade deficit with China is getting all of the attention these days. But, when expressed in per capita terms, our deficit with China in manufactured goods is rather unremarkable - nineteenth on the list. Our per capita deficit with other nations such as Japan, Germany, Mexico, Korea and others (all much more densely populated than the U.S.) is worse. In fact, our largest per capita trade deficit in manufactured goods is with Ireland, a nation twice as densely populated as the U.S. Our per capita deficit with Ireland is twenty-five times worse than China's. My point is not that our deficit with China isn't a problem, but rather that it's exactly what we should have expected when we suddenly applied a trade policy that was a proven failure around the world to a country with one sixth of the world's population.
If you‘re interested in learning more about this important new economic theory, then I invite you to visit my web site at OpenWindowPublishingCo.com where you can read the preface for free, join in the blog discussion and, of course, buy the book if you like. (It's also available at Amazon.com.)
Please forgive me for the somewhat "spammish" nature of the previous paragraph, but I don't know how else to inject this new theory into the debate about population and trade without drawing attention to the book that explains the theory.
Pete Murphy
Author, Five Short Blasts
Holy Crap! That's one of the more amazing shots from nowhere this blog has ever seen. I will read the referred items at some point. Thanks for reading us.
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