Monday, December 31, 2012

What's In Store For The New Year?

We have a Congress that can’t seem to get anything done. And the funny thing is if they do nothing, all of the previous laws start to expire. It reminds me of Cinderella at the ball with the prince and the approach of Midnight. In this case, we get the pumpkin.

Remember the Bush tax cut passed in 2001? In the house, 211 Republicans and 28 Democrats voted for it and 153 voted against it. In the Senate, 12 Democrats voted for the bill as did 45 Republicans. Two Republicans McCain and Chaffee voted against it with 31 Democrats. Bush signed it, no big deal. Now, today just trying to extend the tax cut has become a herculean effort. If you examine the Congress of 2001 and today’s Congress, they’re pretty comparable. Rumors have it, that Obama has said “My way or the highway.” It tends to support the idea that the square cog in the gears could be Obama as far as getting a deal in place.

Some mutton head decided that we needed to spread Democracy to the Arab world. I look for Syria’s president to get the Noble Peace prize this coming year. Egypt could have the first Islamic Democracy (that’s where you get to choose which trash can to throw your amputated limb in). Libya could have a new dictator in place with lots of military toys for sale (Got Stingers). Look for a new PBS documentary called “The Mushroom Cloud” shot on location in Iran and Israel, with a cast of millions.

In Europe, look for the Greek government to be overthrown—talk is cheap and the country is tired of the political rhetoric. The financial pain in Spain, Portugal and Ireland might spread to France. The economic problems facing the Euro is kind of like trying mix Ex-lax and Kaopectate ---you have to go when you don’t want to and can’t go when you want to. If the Euro goes kaput, look for unemployment rates to drop drastically in Europe.

In the US we could have one or two states (Illinois comes to mind) become insolvent and figure about 20 cities to file for bankruptcy.

Look for interest rates to keep artificially low. Common senses suggest that some loans are riskier than others (the reverse mortgage is no more). Of course credit card debt interest rates are a different story 20 percent rates for Visa and Master Card. But if you want to buy a home, 3% interest no down moves you in. And a lot of the government programs will give you upfront money for move in repairs (like a motorcycle and/or widescreen TV). Think I'm kidding, read this from 2008 A Dollar Down Moves You In

Consumption should plug along, no incentive to save money at these interest rates. This will be the year that we get used to living with less and spending more for it. The stock market is kind of an unknown item. Nobody can figure out what’s been holding it up for the last 4 years.

Obama care is starting to kick in. I went to a coin dealer the other day and found out that there is a provision in the bill that requires a 1099 on gold sales over $600. What part of health care is involved in gold sales? In an unrelated item that ties into the above, PayPal wants my Social Security number so they can issue me a 1099 for my eBay sales. That’s not my hand I feel reaching for my wallet.

Then if you’re familiar with the school lunch program in California, Obama’s wife has screwed that up royally. Kids aren’t crazy over whole wheat bread or skim milk, and fruit, euck, it goes in the trash, give me some fries and a burger. This smiling wife with great concerns has no idea that the kids think her school lunch menu sucks. The schools have to serve the stated menu to get reimbursed by the government. What do you do with a dozen trash cans of food that the kids won’t eat? My suggestion; the fat kids don’t get the free lunch!

More than one commentator has suggested that Obama take a course or two on Economics. I believe the suggestion comes from puzzling over his current economic policies.

The New Year will ring in with a different tone this year. It’s Republicans against the Democrats. Cash or Credit will be the issue. Congress and the President can pass all sorts of wonderful new laws. Paying for them will be the problem. The battle to raise the national debt limit could be the fight of the century. The country is divided, but it isn’t rich against poor as Obama would suggest, it's about living beyond our means.

Have a Happy New Year everyone.

Copyright 2012 by Jim Brubaker


dearieme said...

Happy New Year, Jim.

The oddest thing about the US in 2012, odd to my ears at least, is learning that employers are expected to pay for their employees' contraception. Good Lord!

Jim in San Marcos said...

Hi Dearieme

I don't see a solution on that one, the church vs womens lib.

Here's hoping the New Year brings out the best in us.

Thank you for your comments. Happy New Year to you and your family from mine.

Anonymous said...

This is not about living beyond our means.
In effect, this is about neofeudalism.
Centuries ago, there was feudalism: serfs vs masters of land. Now the serf-master relationship has been elevated to a much more abstract level. Financial instruments have now replaced the land to impose slavery. That's the debt: mortgage, car loans, credit cards, student loans, you name it. The masters now have new tricks to effectively control people, aka debt serfs. And the American Joe 6-packs are dumb enough to enjoy their democracy now.

AIM said...

Hi Jim,
Happy 2013 to you as well.

Ineffective, incompetent, unwilling, ignorant and self-serving is the best way to describe our leaders and representatives.

It's all baked into the cake... increasing deficits, higher taxes and inflation. It's unstoppable.

The Fed has completely lost all control for what they have caused. They will continue to add to their balance sheet and print and Congress will continue to borrow and spend in order to keep things afloat... until the boat finally sinks. (Same for Japan and Europe.)

If you know the fundamentals and axioms of economics, and know economic history, and can remain uninfluenced by the MSM, false statistics and the errant spoutings of economists... you know how this is going to end.

The only burning question is WHEN will the boat sink... i.e., how long do we have to deal and trade in US dollars, to amass any further wealth in preparation for our futures and older age, before we have to convert to tangible, hard assets to at least salvage some of our wealth when the boat sinks?

Jim in San Marcos said...


Thank you. I am preparing a bit on gold, silver and platinum for tomorrow that touches on your fears. You are not alone.

Anonymous said...

I believe that gold and silver are a non-issue. We live in a fiat world. All central banks are in cahoots. And any emerging countries will have to follow the fiat model if they want any chance of growing via being involved in global trade.

I really wonder about gold bugs and their thinking.

The US government confiscated and controlled gold back in 1934 or whenever FDR did it. The same will happen again on a more stringent level. What is the point of owning gold or silver if you can't pay your income and property taxes with it, can't buy pure water with it, can't buy groceries with it, can't pay the doctor or dentist with it, can't pay your rent or mortgage with it, can't get your car repaired with it, can't buy gas and oil with it, etc? Wealth is only wealth if you can trade it for something else, right?

The whole international banking/central banking/government/taxing authorities must operate on fiat or paper money always (and are in the process of transferring it all over to electronic money for total efficiency so it, and we and all of our transactions, can be monitored and controlled). These guys are winning big time. What makes you think they are going to be deposed or turned around any time soon? And even if so, by whom?

It's fiat and then electronic digits at least until civilization collapses and a new one is begun (and we can't assume the new one would be based on learning from the previous errors of empires, governments and economies).

Face the fact that it is gonna be paper for a long time, because that is all there will be. Make a lot of it and convert it into water, food, land and income properties and stable businesses that have demand in any economy—because that is wealth. That is all there is that will get you through hard times.