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Thursday, April 1, 2010

Top basic economic beliefs

I have been delinquent on my blog postings, hopefully after I get through this funk I'll still have a few readers.

I have been trying to take a step back, and think on multiple levels about the stock market.

There is some basic premises which I still will not give up on, and they are:
1) There cannot be a long lasting sustained economic recovery without returning to honest accounting and enforcing the law.
2) There are huge losses waiting to be recognized. Even through crooked but legal accounting and "Free money" from the taxpayer to support companies, the losses must be eventually recognized. There is no such thing as a free bailout.
3) The US is the worlds largest debtor nation by a longshot. Not only is the US federal government near maximum debt load, individual states are near fiscal disaster, down to the citizens experiencing over 15% unemployment. This will also have an effect.
4) The US is not the worst off country, there are many other countries much worse off, and insolvency across many countries is very real. Countries like Greece would be wiped out if it wasn't for the EU and Euro. The US is experiencing reasonable support due to being better out of a bunch of bad economics in countries.
5) China is NOT the world's economic saviour, they have topped America on mass economic fraud by a longshot. And China is not the friend America thinks they are.
6) Gold is NOT money. There is NO such thing as absolute wealth, with possible exception of owning land and leadership positions. (power=wealth) Gold however I still believe will be the end game of a very long process, and the final bubble to end all bubbles at the end of this situation.
7) As India and china, and eventually africa and asia have growing economic wealth, those peoples will want more "stuff". America consumes a disproportionate amount of "stuff'. When over 2.3 billion people have more wealth, the cost for goods for 300 Million Americans will increase as globally everyone competes for resources.
8) Western population growth is slowing, and for the first time in human history, will be on a GLOBAL population decline starting around year 2027. In the long term play for my own retirement, this will have huge effects on global economics, as much of wealth is based on a ponzi-scheme design. (growing demand raises value) This will eventually affect previous bullet.
9) Taxes and cost of living for Americans will go up, significantly over the next 20 years, providing dampening of economics as American's lifestyle becomes more inline with new 2.4 billion people rising economically.
10) US interest rates is the real game to watch, and when rates become unacceptably high for 30 year bonds, then there will be pressure for the government to start taking responsibilities seriously.

I could possibly list another 10 items as rock-solid concepts to keep proper perspective.
But as I digest the market events over the last 4 months, I am still grasping what next?

Truth is, the losses and changing economic landscape WILL CHANGE as listed above. The question is, how do we get there? Through massive devaluation of the USD to reset costs for American's to survive? Or through the US Dollar keeping its value and US citizens having their balance sheets fixed over time through fiscal discipline?

I may do another poll Thursday. Keep in Mind Friday there is no stock market. So thursday is the day.

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