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Friday, April 29, 2011

If I'm right and economic conditions are degenerating - Why do things seem okay?

Debt is accumulating in all sovereign nations at a fantastic rate. But so what? We all have enough to eat, and nice places to live, and running water, and heat in the winter (Well, everyone you and I know. anyway.) So why the Chicken Little routine? It gets old fast.

Really, who would read this garbage except for the high price of gold, and the off chance of gleaming a few investment tips?

And, really, if that's your attitude, I'd say this is a great time to sell all your gold and go buy stocks - or real estate, that's really been beaten down.

But still, there's that nagging doubt. Why is George Soros and John Paulsen and a half a dozen other top hedge fund operators still loading up on Bullion? Why are the central banks selling paper for gold? Maybe there's a little something to this. Enough to warrant five or ten minutes of consideration.

The real problem, of course, is one of attention span. I've written before that Disposable Money leads to Disposable culture. And Disposable Culture leads to diminished and ultimately dysfunctional attention spans. Without a developed attention span it's terribly difficult to see things that are clearly developing a little farther out on the horizon.

It's great fun (I suppose, since it's very popular) to watch buffoons like Snooki and Donald Trump and the Housewives of Whereverthehell makes asses of themselves on TV. It's certainly easier than reading War and Peace. I will say, without fear of snobbery, that reading War and Peace (If you have an attention span) is more fun and more thrilling than any other entertainment activity. Anyone who's done it knows this is true.

And it leads to conversations that force you to ponder the horizon, like "How about when Andre is lying wounded on then battlefield and he sees his idol Napoleon and realizes what a little insignificant man he really is..." As opposed to: "Did you see when that bloated self important putz fired that washed up slack jawed moron..."

The difference is simply attention span. And it takes a little work to develop the attention span required to sift through a well reasoned three hundred page book on the history of Credit Crises.

It's far easier to listen to economic analysis by Economic Reality TV Buffoons like Jim Kramer, and Larry Kudlow, and Jim Varney and Neil Cavuto whose entire mission is to convince you that things are basically OKAY - and if you keep watching you'll get some little Info-factoid-Investment-tip, that will help you win the investment lottery.

But the fact is, there are plenty of very serious people writing about the serious nature of this developing crisis. Martin Wolf at the FT. John Mauldin in his new book "End Game," David Stockman who was Reagan's OMB director, Paul Volker who was chairman of the Fed, Professors Reinhart and Rogoff, John Williams at Shadow Stats, the list goes on and on.

The trouble is it takes a lot of concentration to understand what they're saying. Darn it.

And let's add Martin Armstrong who used to be the CEO of Princeton Financial Group to the list. He writes (sorry, this will take some concentration:)

"There is nobody with a balanced budget and nobody who is reducing the national debts. This means that the debt bubble is just going to grow larger and larger. There is no intent to actually balance the budget no less reduce its national debt. Thus, the problem is percolating as we enter this new 8.6 year wave. By the time we reach the end, well we should see the most interesting times separating a fool and his money.

"The statistics on the US National Debt show that the decline in interest rates (From Quantitative Easing) has had a profound effect on buying more time. The lowering of interest rates to virtually zero, and the flight to quality that drove government short-term rates negative, allowed for reducing the debt as a percent of total accumulated interest expenditure. This has been largely overlooked. Money that would have gone to interest went to TARP. Nevertheless, this has purchased more time before the Sovereign Debt Crisis manifests: but it did not cure the problem since the interest expenditures now concern a largest debt historically.

"With the End of QE2: What happens with the rolling debt going forward? If interest rates begin to rise AFTER QE2, will the National Debt then resume its rise as interest expenditure increase as a percent of total national debt? This would mean that all the efforts to reduce spending will be minimalized by the rise in interest expenditure. All the hype now will be just noise....

"The big breakout in GOLD still does not appear to be now. The PHASE TRANSITION to exceptionally high prices will be in the NEXT WAVE, not the conclusion to this wave. We still face the readjustment in the economy and it will take some time just yet for the DEBT crisis to explode that appears 2016-2020."

If you'd like to read the whole thing click here:

The Next Wave MartinArmstrong pdf

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