“Choices”…without sounding too defeatist, I hate to tell you that there are none (one) left. From a fiscal standpoint, The U.S., Britain, Europe and Japan are all over the edge, they are bankrupt. No amount of tax increases nor spending cuts can ever even balance one year’s budget, much less pay down debt in an orderly fashion over the course of years and years. The Western world’s economies are so addicted to deficits that the economies cannot survive without them. Any amount of tax increase or spending cuts will directly contract these economies and torpedo tax receipts, THIS is the fiscal cliff. We are but months at best, maybe weeks or even days away from going over this cliff and no “choices” taken can avert this.
From a monetary standpoint, again no choices. The Fed has no choice other than to print more and buy whatever amounts of Treasury securities that are offered and not bought by investors (which is a huge amount already). If the Fed does not do this “print” (QE), the Treasury will not be able borrow, they will not be able to roll over maturing securities and even paying the interest will become a problem. Obviously, “printing” will dilute the value of existing Dollars, in the past, the Fed could raise interest rates to “attract” outside capital to “fund” our deficit. Raising rates is no longer a “choice” because higher rates will blow up prices in the teetering asset sectors and expose the Treasury and Fed’s balance sheets for what they are. Don’t get me wrong, I am not saying that higher rates (MUCH higher) are not coming in our immediate future because they are. What I am saying is that these higher rates will come as a panic out of Treasury bonds unfolds, NOT as a policy “choice”.
Savers, do they have a choice? Take someone who played by the mainstream rules all of their life. They saved 10% of their income in their 401K, payed down their mortgage over the years and even built up some banking CD balances, what choices do they have now? Their CD’s pay no interest so these savers are consuming principal, as interest rates dropped over time, they have eaten the fat then the muscle and now into the bone. Those who payed their mortgages down are now more than likely paying more in real estate taxes alone than they were the total mortgage payment when they first purchased. 401K balances? What will happen to these? Well, with recent defaults and judicial rulings, “customer money” may not even be “customer money” unless you have a buffer where the fiduciary cannot claim your assets as a part of theirs, you stand to “lose your balances”.
Some of you may be thinking, “but we have an election coming up, that’s a choice…isn’t it?”. Whether you are an Obama supporter or for Romney, does it really matter? First off, with the current “election system”, does it matter “who” you vote for? Isn’t it more important who “counts” the votes (Diebold)? Have we had an honest election since the year 2000? I have my own personal opinion as does everyone else, I’m just asking a rhetorical question, “Does it matter…who you vote for”? Besides, can anyone turn the current system around without “resetting”? The existing debt already exists…the existing derivatives already exists…the current balance sheets are already upside down across the board. As a metaphor, if you could magically replace the teenage driver (who is 20 yards away and doing 150 mph towards a brick wall) with Mario Andretti, can a crash still be avoided? Other than the final words of “oh $#@*”, I don’t think so.
We used to be a nation of “choices”. Many many choices, good ones, bad ones, whatever, but there were multiple choices at every turn.
Now, do we as individuals have “multiple choices”? Not many. Many are unemployed, many have negative equity in their homes and cannot move even if they want to, many rely on food stamps to eat, savers are being forced to “eat” their balances or take on the higher risk’s of the rigged stock and bond markets. The only “choices” that we as individuals have left are those involved with protecting ourselves and families. It is no longer about living the American dream, living within your means and enjoying your “golden years”. No, it is now about “keeping what you have” or just plain outright survival. I believe that even today’s current circumstances will be looked upon in the future with “too bad it can’t be like it was back in 2012.”
It is not however ALL bad, we will “reset” and hopefully go back to a rule of law and respect where everyone is not looking to rip everyone else off. Right now it is imperative that you be ready for this coming reset because once it happens there will be no “do overs.” You will “have what you have” to start out in the new system and nothing more. Think about it, how many times have you thought back and said “gee, it really would have been nice if my Great Grandfather had invested in oil wells” or “if my parents had invested in coastal real estate or IBM back in the 1950’s.” What if you had the smarts to invest in Gold back in 1971? As I said, there are no “do overs” but it would be nice. What we have coming in our immediate future is not only “one” of these past opportunity moments in time, this era, right now, is THE moment in time where futures will be altered…permanently. You are either locked and loaded…or you are locked out. This as I see it is the last “choice” that investors can still make that will affect the rest of their lives and probably several generations to follow.
Finally, I am sure that most of you have seen a longer term chart of Gold in Dollar terms. Since last Labor Day, the volatility has been pent up and is now almost non existent. This is a “flag” or “pennant” pattern which almost always leads to a violent move in one direction or the other. If you believe that the system will magically “un bankrupt” itself then you will believe that the price of Gold will break downward out of this pattern. If you see that there are no “choices” left except the one to protect yourself and family with, then you will believe that the “breakout” will be upwards. The probabilities are rising that this “breakout” will include the adding of a “zero” or “zeroes” to the Dollar bill. Please make sure that you “choose” to collect these “zeroes” now, ahead of time, when they are “cheap!”