Memorial Day Meltdown...
by Doug McIntosh
23 January 2002
There's nothing like one of my doom and gloom essays to bring out the flaming emails. No problem though cause I'm tough. Several of you aren't convinced an economic crisis faces the globe and the United States in the next six months. Fair enough. I will now spell it out clearly and provide a reasonable scenario to get to my May 31st date. It doesn't phase me in the slightest that the mainstream, court economists, media shills and assorted bulls are now saying the recession ended in December. Hmm, proclaim it in October, say it started in March and now is over. And some of you think I'm given to bouts of fantasy!
For those of you not inclined to think the United States has serious economic problems I think a dose of reality is in order. Up here in Oregon the official unemployment rate is 7.5%. In Washington State it's 7.1%. Coming soon to a state near and dear to you. The United States is averaging the loss of 100,000 manufacturing jobs a month. Unemployment claims fluctuate between 350,000 and 500,000 a week-not a month, a week. Entire sectors of the economy lie shattered in the dirt: hospitality, airlines, manufacturing among them. I don't see them recovering anytime soon, especially not by April 1st. Our economy is contracting, things are getting worse not better and it's about time people woke up.
In my opinion, I think there are four major reasons the blinders will come off within the next six months. The first is Enron. Enron is currently the focus of the Security and Exchange Commission, the Labor Department and the Justice Department. Enron is also the focus of three separate Senate and three separate House committee investigations. And it isn't even the end of January yet! I'm now going to say some things with my usual blunt candor that enthralls most of you, annoys some of you and enrages a few of you. The reason Enron is going to take down the American economic system is simple. It cost people money, threatens their 401k retirement/stock market illusions and exposes the corrupt, oligarchic banking cabal running the USA for what they are. The vast majority of the American people don't give a #### about scandal. They didn't care when Reno burnt the children at Waco; they didn't care when Reno sent in armed thugs to kidnap Elian Gonzales ; they didn't care when Clinton renamed the Oval office the Oral office. They didn't care about the Red Chinese buying the elections, or stealing our nuclear technology or TWA flight 800 being shot down by a missile. Most Americans can't be bothered on issues of honor, truth, treason, character or evil. Oh, but this debased two thirds of our great Republic can be bothered when it costs them money. They can rise up in a howling horde and shred politicians so completely DNA testing will be required for identification, IF scandal interferes with their illusions, greed or retirement plans. People are incensed when Lay lies in an e-mail about stock value to employees while he dumps it himself. They are incensed the "fail safe" system failed to protect them. They are stunned the government didn't protect them. Folks, corruption IS the system. I'm sorry you just found out, but hey, don't say I haven't warned you for a while.
The next few months will show the American people that Enron is the logical result of their political and economic system. To all those people whining about how the system "didn't work" I say to the contrary, it worked perfectly. A sleazy company like Enron, corrupts the accountant firm, bribes all the politicians, judges and regulators it can find, buys off the media and rigs the stock market. Sounds like the 1990's in a nutshell to me. But hey, I'm just a doom and gloomer so what do I know? It's the two thirds of my fellow Americans who believed these delusions that will be surprised. And in that surprise they will doom the United States economy. President Pretzel, our 1500 Florida vote winner, won't be able to save us. The genius of Enron was that it corrupted nearly half the House, Senate and nearly all of Texas. Sheer genius!
Mark my words on this one people. The decadent left, their media allies and Democratic Party mob bosses are going to keep Enron in the headlines until November 7th. And the result of that constant media barrage will be to create a crisis and thus destroy the Republicans. The above groups are perfectly willing to use Enron for their own goals. Think the economy, consumer confidence or the stock market will do good under those conditions? If you do, you're like a Japanese soldier planting a rice paddy while a US battleship shells his island for nine months. Enron is big, and even if it wasn't, certain entrenched groups will make it big for political purposes. Now, if the Republicans wise up we could get dueling scandals, say Clinton indicted for PardonGate. Face it: we're in the early phases of a bona fide political scandal that will shake every "new economy" idiotic idea from the tree. ####, it's going to uproot the tree. A rigged economic system on the way up isn't the same thing as a rigged one on the way down, you know.
Guys and gals, it's the debt. To pay off the debt you need a job. To pay off the house you need a job. Look at the amounts owed. Look at the default rates. Look at the implications for the economy. It's the new year now and reality is kicking America in the posterior. Enron is number one and the debt service/unemployment problem is number two. The mainstream hasn't figured it out yet. Either you pay off your house mortgage, credit card bill, auto loan or you default on them. Eventually, say by May 31st, the system begins to have to deal with all those unemployed people who aren't paying their debt bills. Can they ignore them? Perhaps, for a while, but not for long. The debt crisis is now and will be in full flower this spring and summer. Remember corporate earnings, profits and all that jazz. Fannie Mae's 11% late rate will eventually have to come out of the system. Foreclosed houses will be dumped on the market, or perhaps a Savings and Loan type liquidation system will be set up. Either way, the system will have to deal with it in the next six months. I listen to these so called pundits and they blow off the default rates, the unemployed; underemployed, the no profit sales, the no earnings companies and the fantasy stock market. So much blindness and arrogance. Just like Mr. Lay and his stock emails, they are all liars.
Reason number three is Japan, Argentina and other global economic issues. Isn't it amazing how quiet the largest bond debt default has become? Except for a few stories about chaos and anarchy in Argentina you wouldn't realize between 132 and 228 billion dollars had vanished. That's the nice thing about the mainstream press. If they feel a story is too dangerous to the status quo it simply vanishes. All the banks that loaned them the money become no problem. The investors shutting off the flow of money and the political implications of that become no problem. Ah, Argentina, I remembered you well, before you were sent down the memory hole. Think any investor will loan any money to ANY country thought to be even slightly a "risk"? I don't. Pay off the Argentine debt, #### they can't even count it right! Hasn't anybody figured out that if America doesn't import stuff from overseas, then those economies based on exporting to us, like Mexico, Malaysia; China, will start to slow down? Every country in the world is either now in recession or starting to slow down. The United States import vacuum cleaner bag is now full. Global chaos isn't far behind. If we don't buy their exports, who will? If they don't recycle their dollar profits into our financial markets, what happens? If the American people withdraw psychologically, start to pay their debts off, or default, what happens? If the American people feel the stock market and 401k plans are corrupt and rigged, like Enron, what happens? Yo Bulls, I'm waiting for an answer. Email Mr. V and it will get to me. Come on all you Fed Reserve, or CNBC types, that is if you can tear yourself away from your stunning Enron analysis. You elitist system, whores got the money, but I got my honor and credibility.
As for Japan, the following should have been front page news on every media outlet in the free world. Instead, it's buried at the bottom of the inside business page. A few salient quotes: Headline- Standard and Poor's Asia director says Japan's banks "technically insolvent." "Japan's banks have insufficient assets to cover their liabilities-including ordinary savings accounts- and require a giant infusion of public money just to stay in business."
It gets better. "he expected a government bailout of the nation's banking system to come before the Japanese fiscal year ends on March 31st, and S&P has decided not to downgrade Japan's government debt again." "His comments highlighted the deepening crisis in Japan's financial system and the failure of previous reform and bailout efforts to rescue the economy from stagnation and deflation, or falling prices."
Where to begin. Do you understand what you just read? The mainstream economic consensus is that the United States will start a recovery on April 1st. The day after the Japanese government "bails out" the banking system we will start our recovery. 155 billion in Argentina, a few hundred billion in Japan?? and pretty soon you are talking real money. The S&P refusal to downgrade Japanese government debt now is the same game Arthur Andersen played with Enron. I guess this will just be ignored also. Japan's bad bank loans are estimated at 1.5 Trillion dollars. The Japanese government total debt is 130% of GDP, equal to a US national debt of 13 trillion dollars. Stop and think about the economic implications of a US government, with a debt of 13 trillion dollars, announcing it was going to borrow tens or hundreds of billions of dollars to bail out the banking system. What would happen?
Yet, these media whores and their economist, politician shills are predicting a new bull market. Based upon what says I? The interesting thing about the Standard and Poor announcement is what it didn't say. It didn't say Japanese banks would liquidate foreign assets to balance their books by the end of March. It's a fact the entire Japanese banking system is "technically insolvent." It's a fact there are only two ways to balance the books: either a government bailout-from a massive deficit ridden central government, or the emergency, rapid selling of foreign assets within the next 70 days. Praytell, my dear GOLD-EAGLE.com reader, exactly what foreign assets would the Japanese banks be selling under duress? Could they be United States stocks, bonds, or real estate? Just a thought for you lunatic bulls to chew on. Apparently, this simple economic reality was so horrifying it wasn't even mentioned in the news blip. Mr. Magoo knows what will happen to his "recovery" and stock market if Japanese banks dump 500 billion in United States assets.
Before I move on to my final economic argument, I should also add we still are in a war on terror that will last the rest of my lifetime. Didn't want you to forget that in all the feel good we are on our way to recovery stuff. It's going to be a long war. The European airport security system is way better than our lame, politically correct and incompetent one; yet, Mr. Reid got through it. The only reason Mr. Reid, a certified Bin Laden operative, wasn't martyred along with 200 others, were his explosive shoes got wet from his sweaty feet. The other factor was Mr. Reid didn't have a lighter and used matches to try and light the wet fuse. I'm not sure relying on the operational shortcomings of Mr. Bin Laden's organization qualifies as a terrorist detection system. A Bic lighter and Mr. Bin Laden would have permanently shattered our air transport system. Mr. Bin Laden is a strategic genius, with an effective tactical, logistics and communications infrastructure system in place. Very fortunately for the West, his operational abilities are subject to wild variations in execution. I wouldn't count on that to last for long however. If you want to bet you or your families life on it go ahead. As for me, there is no way I'm setting foot on a plane in the foreseeable future. Period.
Finally, we come to something I wasn't even aware of when I wrote my earlier essay. It seems nearly 1 trillion dollars in stock market "goodwill" will be written off by US corporations in 2002. Experts say that it's likely the entire amount will be written off in the first 90 days, by March 31st. It seems the company mergers at those insane prices weren't really such a good deal after all. Oh well. So let's see here. We have Japan bailing out the banks and the US stock market writing off incredible amounts of money. We have no corporate earnings, rising unemployment, debt defaults and the list goes on and on and on. Yet, the official consensus is magically, mysteriously and instantly on April 1st the American economy will recover. It will not recover. It will not recover by June 1st either. And when the dull, dazed and 401k ravaged hordes finally realize that, oh say by May 31st, I expect a depression to start. Since the stock market went down over 200 points recently, perhaps the news is starting to be believed. And there you have it: the official McIntosh doom, gloom and economic depression prediction for Memorial Day 2002.
One more thing, Qwest Communications, the one writing off $34 billion of goodwill this quarter, announced it won't lay any more fiber optic cable until it uses what it has already laid. Qwest estimates that will be sometime in 2007. Go Bulls. Go economic recovery. Am I the insane one for thinking that perhaps we will have to digest our 1990's economic orgy before we go out for desert?
Impending Doom takes all the fun out of decadent living- Iago
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