GuidoWorld

Years ago most Americans assumed that political decisions regarding elections were decided in private smoke filled rooms. Platforms were constructed running mates selected and alliances formed all out of the public view. This view has somewhat faded and we now seem to think we’ve advanced to a simpler time where individual candidates control their own destinies despite being surrounded by speech writers, handlers and press secretaries.

Yet, as some of my most recent posts suggest I am of the old school in assuming that the media along with political powerlords help decide which candidates will emerge and be taken seriously for the presidency. Why they are selected has more to do with their ability to be elected then their policies and voting record. It has more to do with their ability to serve the status quo than their ability to serve the public. People, like Ron Paul, Howard Dean and Dennis Kucinich, who propose dramatic change from the status quo get marginalized and posed as kooks.

The winner of this election is going to inherit the worst domestic environment since the Great Depression. The people who work behind the scenes are well aware of this and have provided us with a healthy set of potential scape goats. Each candidate and their running mate, though relatively harmless to the status quo, can be used to deflect blame from our recent leaders and policy makers which have created the economic fiasco we will be dealing with for the better part of the next decade.

Though FDR was a popular president he is still blamed by many political and economic historians for reacting poorly to the demands of the depression. Such people state that FDR made the situation worse by inhibiting capitalism through the introduction of socialistic policies and programs. These individuals claim that the economy would have rebounded far sooner had FDR and the government supported big business rather than demonize and regulate it. In essence they have scape goated FDR for the depression because they can easily disassociate themselves from his policies.

Likewise I feel both candidates and their running mates are easy targets for this same kind of assault and scape goating. Though they are not a threat to the status quo, the current candidates can easily be viewed as political fringe and outsiders of mainstream capitalistic powerlords. One does not have to go all the way back to the 1930′s to see this form of political deflection of economic blame being utilized.

The policies of Nixon and Ford created the inflationary nightmare that Jimmy Carter inherited back in the mid 70′s. Yet, Mr. Carter was quickly blamed for much of what happened on his watch. He was labeled a political outsider and his “bleeding heart liberal” tendencies made him a weak leader who punished corporate America rather than work with it. In the long run Mr. Nixon was viewed as a liar and a crook, yet he and his insiders were not viewed as economically incompetent or blamed for the hyper inflation they spawned.

Will George Bush be remembered much the same? Will he and Greenspan walk away generally unscathed as the new administration takes the majority of the blame for how they incorrectly responded to the economic environment they inherited?

Mr. Obama is an easy target for this type of blame. First, he is not wealthy and has no particular economic credentials. Second his populist tendencies could easily be mislabeled as socialistic. Mr. Biden is one of the few remaining liberal icons in American politics so he too is quite an easy target. Mr. McCain though recently being painted as a conservative has a history of being able to work with liberals and make concessions when needed. This, couled with his age, will make it easy to depict him as being out of touch and not an economic insider. Ms. Palin is young, inexperienced and geographically an outsider.

Obama and Palin are additionally easy targets from racial and gender perspectives and could be used to turn back the gains in respect for these “minorities” by decades. This group of candidates almost looks to good to be true from a blame/scape goat perspective. It is for this reason that I believe they have been allowed to win our vote.

Those in the know are not surprised by our emerging economic crisis. They saw the deflationary depression coming long ago. That is why the Fed was lowering interest rates when gold was over a thousand dollars an ounce, and continued lowering interest rates when food prices doubled and oil went to near $150 a barrel.

Those in the know in their smoked filled rooms needed a scape goat.  So they gave us not only one, but four potential scape goats. They have stacked the deck so they once again cannot lose. Once again the rich capitalists will not be blamed and held accountable for their incompetence and greed.

It is my contention that whichever party wins this election will not return to the White House for at least eight years if not more. Well, they may stay in the White House for the duration of the depression, but they will not regain the presidency for a long time after that. Though there really is no remaining substantial difference between the two political parties I do believe the Democrats will be declared the winner of the election. This will prevent all conservatives from being blamed for what is to come, and allow them to come and save the day when the depression has run its course.

Capitalism may not be fair or kind, but it certainly is not stupid or blind. Though I hope we use the coming turmoil to incorporate a better social/economic system, they are certainly setting up the possibility of history repeating itself. Like the last depression the rapist will once again come and save us from our depravity. Once again the capitalistic system will not be seen as the cause of economic hardship and imbalance but as the vehicle for growth, progress and the rise in the quality of life.

Speaking of old school the following is the lyrics for a song I wrote near 30 years ago which goes well with the themes of this post.

Say Boys    Press highlight at left to play song.

Say Boys

God you’re looking neat and you’re talking sweet
Say Boys

Politicians cower at the thought of your fame
Governments move only by your OK
Industrial genius omnipotence so grand
I’ll take your autograph and humbly kiss your hand

Pages, cages
Look at the fads psychoanalytic
Sages, rages
Look how we live and think corporate demarcation

Subliminal satori play the ad mans game
Grab you by your conscience to you plead insane
Seductive and pompous give us all a career
For recreation they gave us pot, lust and beer

Pages, cages
Look at the fads psychoanalytic
Sages, rages
Look how we live and think corporate infiltration

Politicians cower at the thought of your fame
Governments move only by your OK
Industrial genius omnipotence so grand
I’ll take your autograph and humbly kiss your hand

Pages, cages
Look at the fads psychoanalytic
Sages, rages
Look how we live and think corporate subjugation

I say boys I marvel at your ways
I say boys ubiquitous and fey
I say boys, oh, oh boys
I say boys it’s all but decayed

Jim Guido

The title of this post is for all of you US baby boomers out there who remember the old radio and TV commercials for Maxwell House coffee. The slogan closing each ad was “Maxwell House coffee, good to the last drop”. Well, I guess the same could be said for all the international stock markets.

The markets decline has rivaled any thrill packed roller coaster fall with just as many people screaming and up chucking from all the excitement.  Yet, I hate to be the one to tell you, but this ride is far from over. Very soon, like any good roller coaster, the market will rebound with a fury and we will be told that the greatest buying opportunity in decades is here. We will be told that the worst of the financial crisis is over, and that the stock market is a forward looking mechanism which sees better times on the horizon. Many will state the global recession is less severe than first thought and that the growth in developing nations cannot be side tracked for long.

Soon after that, the next round of US economic data will come out and quite plainly show that this recession  has some staying power. At that point in time the next market fall will make our current roller coaster fall look tame in comparison. Who’s ever been on a roller coaster where the first fall is the deepest and most scary?

Another old 50′s coffee advertising campaign comes to mind to illustrate my next point. Who of you remembers the old Folger’s coffee ads where the ubiquitous Mrs. Olsen appeared in neighbors kitchens all over America brandishing a huge can of Folger’s coffee to save people from having a bad coffee day?  Mrs. Olsen seemed to make it her life’s mission to make everyone in her neighborhood into caffeine junkies.

Well, the same focus of purpose can be said for the US financial and stvock market personnel. They need to keep you believing in the market all the way back down to reality.

I know many are losing tons of money right now and feel a need to get it all back as quickly as possible, but trying to do so is very dangerous indeed. If history is any guide we are still in round one of the market correction. Economic history is divided into bull and bear markets. Bull markets are times when the market climbs and bears are when they decline. The good news is that markets go up the majority of the time. The bad news is that when they go down they erase most if not all of the gains from the previous bear low.

Historical records show that the average bear market lasts 3/8 of the bull market that proceeded it. Since our most recent bull market lasted somewhere  between 24 and 27 years long it would indicate that the our fledgling bear will last around nine or so years. Again this is not to say that we will not have some impressive and breath taking rallies, but the overall movement will be down. When people recall the last international depression they focus on the stock market crash of 1929. Yet, few realize that what came next was far worse. After the crash in ’29 the market rallied quite a bit, then the next plunge was far worse. When all was said and done the market had crashed a stunning 86% from its “secondary” high.

If history is any guide the next roller coaster free fall could be almost twice as steep as the current joy ride. This is not a scenario which promises an opportunity to recoup your loses from the stock market. Yet, all is not hopeless.

They say that in a bear market: “Cash is king”. What this means is that while stocks, commodities and even bonds are decreasing in value in a deflationary economic environment, money actually increases in value. If everyone else is losing money and you are not, your relative worth is increasing. In a deflationary economy prices and wages  contract. Therefore, your money is able to buy more. It is very likely that $400,000 will buy more in 2014 than a million does today.

To give you an idea of how long it will take for the value of money and the stock market to return to 2007 levels we’ll take a look at how quickly the market recovered from its 1929 high. Well, it took until 1954, that’s 25 years before the market rose and stayed above its 1929 high. This would mean it will be 2032 before the Dow gets back over 14,000. Yet, since the length and magnitude of this bull is much stronger than the bull market of the 20′s it would seem logical that the climb back up will take more time.

Yet, will we even have a stock market in 25 years? Will capitalism survive? What would replace it? Though I have no answers to these questions I will discuss some of the possibilities in the next few posts.

Jim Guido

In the last two posts I gave reasons why some very wealthy and powerful individuals and economic entities such as the Federal Reserve and Central Banks may desire a prolonged deflationary period. The two major reasons cited so far are to help quicken the pace of globalization, and assist the redistribution of wealth into fewer and fewer hands.

In a deflationary environment many businesses fail and are bought up by well positioned and liquid big fish. The tendency of more wealth and ownership going to a smaller number of individuals has been a hallmark of modern capitalism. In a deflationary economy prices and wages plummet. This would benefit globalization since the American and European workers make far more money than developing nations. A severe deflationary depression would level the economic playing field allowing the East and developing nations an opportunity to have their wages rival the US.

This leads us to consider the possibility that entities such as the central bankers may be attempting to manage a deflationary environment to increase their wealth while at the same time ushering in the new age of a global economy in the fashion of the World Order first envisioned by Reagan and Bush Sr.

It is more than a coincidence that Fed chair Ben Bernanke is known as a deflation and depression expert. If find it intriguing that Bernanke is often cited as a deflation expert and seldom as a deflation prevention expert. A reading of some of Mr. Bernanke’s economic writings on the subject prove to be quite illuminating. He often is very specific in the measures he would take in response to economic situations.

The actions Mr. Bernanke has been taking over the last several months come as no surprise to those that have read his economic papers. He has followed his own script rather faithfully. Yet, what is interesting to note is that each of the actions such lowering iterest rates, economic stimuli and bail out measures are described as means to manage and rectify deflation and not as measures to prevent deflation.

So while Mr. Bernanke and others at the Federal Reserve have been saying that their main concern has been inflation, their actions have been intended to deal with deflation. Even those with the most basic understanding of economics grasp the idea that one raises rates to combat inflation and one lowers interest rates to stimulate the economy to help prevent deflation.

It is not surprising that the Fed has misrepresented their concerns regarding deflation. Saying deflation is present or even probable in a capitalistic society is kind of like yelling fire in a movie theater. Once the call is out all hope of an orderly and sane emptying of the theater are near hopeless. Telling the populace instead that inflation is the danger is less a matter for panic and allows the measures an opportunity to work while the society braces for inflationary tendencies to surface. This keeps money flowing and prevents the economic system from freezing up as it does when deflation is on the horizon. Only recently has the mortgage debt led financial crisis ignited the initial freezing of a deflationary spiral.

It is indeed possible that Fed and Central Banks, as well as others, are attempting to conduct and manage a deflationary depression to accomplish the goals of Globalism. This is not conspiracist theory as much as it is a logical outcome of modern capitalism. The Fed was itself born out of the desire for a few select bankers to work together to maximize profits and insure the continuance of their practices.

One  has to wonder what is the design of this deflationary depression. Is it meant to be organized and measured? Or is to be quick and chaotic? Are their specific events planned to assist in keeping the masses off their trail, and how many insiders around the world are their? Is greed their only motive, or do they feel themselves pressed into a necessary task to benefit all humanity?

Can one truly manage deflation, or once it is unleashed does it take on a life of its own?

I have been predicting a deflationary depression for awhile now based on the history of economic long cycles. I based my predicitions of the Fed and Central Banks actions on the economic practices of the World Bank and the International Monetary Fund. The Fed has done little if anything which has not lived up to my predictions both of their actions and a deflationary depression. If they are not doing this intentionally the coincidences are quite amazing.  Though it is scary to think that people might  be attempting to facilitate a period of econoic hardship and turmoil, it is even more frightening to think that no one is guiding the ship through the storm.

Jim Guido