Monday, December 21, 2009

Some 2010 predictions.

Several ezines, blogs and writers are posting economic predictions for 2010 and beyond. Just for fun, I have decided to recast excerpts from some of these for the Jewish community. Hope you have some asprin handy...here goes nothing!

Dimitry Orlov predicts:

...The decade will be marked by many instances of autophagy, in business, government, and in the higher echelons of society, as players at all levels find that they are unable to control their appetites or alter their behavior in any meaningful way, even in the face of radically altered circumstances, and are thus compelled to consume themselves into oblivion, as so many disemboweled yet still ravenous sharks endlessly gorging themselves on their own billowing entrails...

I think this one should be recast as a prediction about the UO/Chereidi/RWMO Jewish dayschool system. It is clear that those running the schools are completely incapable of restructuring the system so that tuitions are lowered to something that actually fits with the number of kids most families have and the median wage of $55,000 a year. Without a radical overhaul of the education system, more and more families will be forced to drop out, while the schools devour those few resources they have left trying to enforce the unsustainable status quo instead of transitioning to a new, much less expensive, model of operations.

...Governments will find that they are unable to restrain themselves from printing ever more money in an endless wave of uncontrolled emission. At the same time, rising taxes, commodity prices, and costs of all kinds, coupled with a rising overall level of uncertainty and disruption, will curtail economic activity to a point where little of that money will still circulate. Inflationists and deflationists will endlessly debate whether this should be called inflation or deflation, unconsciously emulating the big-endians and little-endians of Jonathan Swifts Gulliver's Travels, who endlessly debated the proper end from which to eat a soft-boiled egg. The citizenry, their nest egg boiled down to the size of a dried pea, will not be particularly vexed by the question of exactly how they should try to eat it, and will regard the question as academic, if not idiotic...

Here we will have another form of economic suicide - Jewish communities will not "shop smart," and scale back their buying appropriately (in such a way that relocalizes their spending), but will continue to cling to dangerously outmoded consumerist globalist disposable-society standards, yet bewail the fact that Jews aren't supporting each other. This while simultaneously firing all their Jewish employees to hire cheap aliens, ordering their supplies from cheap goyish companies that do the same, and then will have the nerve to complain that Jewish businesses are failing.

...Distressed municipalities throughout the country will resort to charging exorbitant fees for such things as dog licenses. Many will experiment with imprisoning those unable to pay these fees in state and county jails, only to release them again as the jails continuously overflow and resources run low. The citizenry will come to regard jails as conveniently combining the features of a soup kitchen and a homeless shelter. Some towns will abandon the idea of having a fire department and decide that it is more cost-effective to just let house fires run their course, to save on demolitions. In an effort to plug up ever larger holes in their budgets, states will raise taxes, driving ever more economic activity underground...

We can expect to see more Jewish landlords and property owners going to jail, because "distressed municipalities" will crack down HARD on unlicensed daycares and schools, building code and zoning violations of every sort, etc., etc. - and the fines will be exorbitant. Failure to pay will mean jail time (though not long, due to overcrowding). Jewish community leaders will cry "anti-semitism" instead of actually bringing their businesses and properties up to legal standards.

...Investors around the world will finally be forced to realize that the best way to avoid losses is to not have any money to start with. Despite their best efforts to diversify their holdings, investors will find that they are all long paper, be it stocks, bonds, deeds, promissory notes, or incomprehensible derivative contracts. They will also find that, in the new business climate, none of these instruments make particularly formidable weapons: as the friendly game of rock-paper-scissors turns hostile, they will discover that rocks stave in skulls, that scissors puncture vital organs, but that the paper, even when wielded expertly, just causes paper cuts...

As I saw today at Orthonomics (post dated Sat Dec 19th), there are still far too many people who don't understand that investments and the stock market are worse than gambling now - they are literally throwing your money away. Not that regular savings accounts are any better, but the markets will never recover, especially when the US defaults on its sovereign debt.

...Several countries around the world will be forced to declare sovereign default and join the swelling ranks of defunct nations. There will be a mad shuffle to find safe havens for hot money, but none will be found...

Perhaps not 2010, but the US will be amoung these. There is no doubt about it amoung any serious commentators - the US is actuarily broke, as numerous articles posted here show plainly. We have far more debt than can ever be paid off - some sort of bankruptcy is inevitable at this point.

Various financial industry analysts agree:

...Sovereign concern, "for the next at least two to three years, will definitely be a risk factor in the marketplace that investors will be paying attention to," Jonathan Xiong, a director and senior portfolio manager at Mellon Capital Management, said at the Summit in New York.

Major world economies responded to last year's steep downturns spawned by the financial crisis with big stimulus packages and by underwriting private debt obligations, causing deficits to balloon. While this helped stave off an even worse recession, high debt has the potential to strain economic resources in coming years.

The United States and United Kingdom are not immune from this threat. Moody's earlier this week suggested that the countries' triple-A ratings could face downgrades in coming years.

The United States and UK are "the two most grievous examples of irrational exuberance from the standpoint of a national economy," said Bill Gross, who runs Pacific Investment Management Co., the world's biggest bond fund...


What this says is that even those who stand to profit most from a "business as usual" type coverup can no longer hide how screwed up the US and UK economies are concerning national debt. There are no more tax revenues, assets or resources available to cover these debts.

The National Inflation Association predicts:

4) The U.S. Dollar Index will see short-term bounce, then huge crash.

We are at a point where there are more people who are bearish on the U.S. dollar than ever before, which means from a technical standpoint it is overdue for a short-term bounce. However, we would not consider going long the dollar even as a trade. A huge crash in the U.S. dollar could occur at any time.

The world has become flooded with U.S. dollars. Foreigners currently hold over $10 trillion in dollar-denominated assets that can be dumped at any time. With the Federal Reserve continuing to expand its monetary base to record highs, as soon as banks begin lending their excess reserves we could see a spike in consumer prices and a rush to get out of U.S. dollars.


A hyperinflation or a sovereign debt default would cause US dollars to be worthless anywhere outside the US. This is a problem because we are NOT by any means self-sufficient in food, clothing, household goods, or anything else for that matter. What this means for Jewish communities is that people who remember the Wiemar currency collapse need to be hauled out, dusted off, and listened to while they're still alive. Those who survived the more recent Argentinian collapse should also be consulted. Barter may become the main means of transacting business for a period of time, as overseas suppliers refuse to ship us anything until we find something else to pay them with, like, say, gold or real estate.

...5) Oil will rise back above $100 per barrel.

We expect oil's next rise above $100 per barrel to be fueled almost entirely by inflation. This time around, it won't matter if there's another substantial decline in oil demand from the U.S. We expect oil prices to rise regardless of if Americans can afford it or not.

NIA believes any decrease in demand from the U.S. will be more than made up for by increasing demand from China and India. There hasn't been any major new oil discoveries made in decades and the Federal Reserve's printing of money will surely outpace the discovery of new oil fields.


Jewish communities rely heavily on automobiles for getting anything done, and that's going to be difficult when gasoline is back in the $5.00 a gallon range, working it's way up to $10 when oil is $200ish in a few more years. Yet we have made no real efforts to re-arrange our lives to not need automobiles. Oh, well.

...9) Major Food Shortages.

For the past several decades, most Americans went to college to get a non-productive job on Wall Street and nobody went to school to become a farmer. There is currently a major lack of farmers in the U.S. and to make matters worse, the Real Estate bubble destroyed immeasurable amounts of farmland to build houses we didn't need and couldn't afford.

Inventories of agricultural products are the lowest they have been in decades yet the prices of many agricultural commodities are down 70% to 80% from their all time highs adjusted for real inflation. Catastrophic food shortages are possible in 2010, not just in the U.S. but all around the world.


As was mentioned recently in another post, food is poised to shoot through the roof. And have we planted victory gardens, established urban community gardens or greenhouses, developed Jewish CSAs or sustainable agriculure projects? Nope.

Writing for Fortune Magazine, Nouriel Roubini predicts:

...Things are going to be awful for everyday people...For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments...It's better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It'll be hard and challenging enough...

I hope someone at Orthonomics reads that, twice.

Clean Slate (real estate industry analyst) conservatively predicts:

...#5) Energy costs

* Gasoline up 30 – 40 cents per gallon
* Natural gas up 15%
* Heating oil up 25 cents per gallon
* Propane down about 10 cents per gallon due to plentiful supply

Implication
There is an ever-increasing need to continually re-examine budgeting for energy costs...


Gasoline prices could stay that low if the recession continues and unemployment remains high. The reason gas prices are not already now higher (based on the price of oil) is due to the fact that so many millions of people are stuck at home twiddling their thumbs instead of traveling to and from work five or six days a week. Eventually, reduced US demand will be mitigated by increased demand in developing nations, as was mentioned above (and in numerous other posts).

The underlying costs of oil and natural gas will, of course, drive up energy costs to Jewish families (and everyone else's family, for that matter). Together, oil and natural gas generate a considerable chunk of the electricity generated in the US as well as providing direct power to HVAC systems. Without already having taken steps to seriously re-insulate and weatherize your home, you will simply have to suck up the increases in energy bills by forgoing spending somewhere else.

Well, I think that's enough depressing news for right now - don't you? Some more thoughts on new year's resolutions in a day or two might offer some ideas on places to start mitigating the above predictions - so stay tuned.

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