Here’s my answer to your question of “what’s coming.”
The economy is going to get worse. I know that’s hard to believe considering that in the past 15 months Americans have lost over 2 trillion dollars of retirement savings, that Iceland which has a GDP of $14 billion and liabilities in excess of $100 billion held by its banks and is on the brink of bankruptcy and the International Monetary Fund has just warned of a global “major downturn” in 2009.
A Second Great Depression?
Just how bad will things get? Recently, I had an off-air conversation with one of the titans in the business community. He has been in the thick of what’s happening on Wall Street, the credit crisis and the economy. I’ve been speaking with him about these issues for about two years and he has always been an optimist. Every argument I would make about how bad things were going to be he would counter with an equally optimistic economic prognosis. For the first time he’s now told me that our economy is in for a very “rough landing, at best” and that if our politicians don’t get the bailout exactly right we could see our GDP (a measurement of the total value of all the goods and services produced every year) falling between 15%-20% in one year.
So what does that really mean? A 15%-20% reduction of GDP would be like wiping out between $2.1 to $2.8 trillion dollars from our $14 trillion GDP. To show you how big that number really is, consider that in one year we spend about $583 billion to run the entire Defense Department, $43 billion to fund the entire Department of Homeland Security and have spent less than a trillion dollars fighting in Iraq since that war began.
By way of comparison, in the Great Depression, our national GDP fell 29% over a four year period (1929-1933) and in that period we saw 7000 banks fail, a 25% unemployment rate and a Dow Jones industrial Average suffer an 80% decline. And that was when the pain of a shrinking GDP was spread over 4 years!
About three weeks ago I had the opportunity to walk with very successful billionaire who has spent over seven decades doing business in America. I asked him what it would mean if our economy suffered a 15% reduction in GDP in one year. He stopped mid-stride, thought for a few minutes before saying, “I can’t begin to imagine how bad things would be if that ever happened.”
Credit Card Debt and Greedy Politicians will Prolong our Problems
All the financial ‘experts’ are telling us that whatever is coming our way will be short-lived. Yes, times will be tough, but we’ll quickly emerge and be stronger. I agree that we’ll survive and that we’ll be stronger, but I don’t think it will be a quick recovery.
Unlike the Great Depression we don’t have a large industrial base that will assist in our recovery and too many people don’t have the savings to help them weather the storm. Instead, the average American household carries at least$8,000 in credit card debt. Lastly, our political leadership will be a burden, rather than a help, in getting us back on track. Barney Frank, Chris Dodd, Nancy Pelosi, President Bush and Secretary Paulson wake-up each morning and gobble-up larger pieces of the economy and American businesses. They tell us that ‘we need to do this or things will get bad’ but none of them have gone on record and told us that if we follow them we’ll be better off.
The Great Depression showed us that government intervention, at best, will only delay the eventual belt-tightening and pain that must take place to bring the marketplace back into balance. The overbuilding and liquidity excess of the past 10 years has to be brought back into balance. Despite 10 years of government programs under Hoover and Roosevelt accompanied by massive government spending it was not until World War II began that unemployment fell below 10%. It was not a coincidence that the stock market finally regained the strength it had in 1929 only when the prospect of global war appeared to be inevitable in 1939.
How Hedge Funds Could Make things Much Worse
If the government regulated banks can be in as much financial trouble as they are now, just imagine the problems lurking in the unregulated hedge fund world. Hedge funds are a 2 trillion dollar industry. That 2 trillion has been leveraged by several multiples giving it much more influence than the 2 trillion would suggest.
The super-rich invest their money in hedge funds because of their traditionally higher returns. Along with the super-rich, teacher unions, government employee unions and large mutual funds invest in hedge funds, in short, if you have money invested in the market there’s a good chance some of it is held and managed by a hedge fund.
In September, hedge funds around the world recorded their biggest drop since August 1998. Investors that wanted to pull their money out were prevented from doing so by mandatory ‘lock-up’ periods imposed by hedge funds that prevent investors from pulling their money out without giving advanced notice, typically 60 or 90 days. I can only imagine that lots of people have given notice and when they can, will be pulling out their money. When that happens the smaller hedge funds will be wiped out and the larger ones will take big financial hits. The next big test for hedge funds will be October 23rd when an estimated $400 billion in Lehman related credit-default swaps will have to be auctioned and settled, those hedge funds that can’t come up with the money will be wiped out.
Our Politicians keep Playing Politics while our Country is on Fire
Look for our politicians to take advantage of this crisis to promote their own agenda. They keep treating this like a game and are taking actions only after weighing whether their action will help or hurt ‘the party’ at election time. Our country is at the edge and our politicians are worried about elections. This can’t be about Democrats or Republicans. This has to be about saving America.
It’s shameful that Obama and McCain haven’t told the American people that there is no money for all of their proposed spending plans. No, our candidates continue to promise us new plans when we don’t have enough money to pay for the ones we already have.
During the last debate Obama told us that America is the richest country in the world and that we need universal health care. Maybe one of his advisors should tell him that this richest country in the world is borrowing 2 billion dollars a day from foreign countries because that’s how much more we spend than take in, and that was before we started bailing out Wall Street, Main Street and homeowners.
Obama is unbelievably still planning on redistributing wealth in the middle of an economic crisis by taxing those who earn in excess of $250,000 and then redistributing that money to those who make less than $200,000, including sending people who don’t pay any taxes at all $1,000 check. His plan has been called a New Tax Welfare Plan. Call it what you want, we don’t have the money to pay for it.
McCain’s plans for revamping our health care system and his support for a carbon-tax plan are also unaffordable. He should come clean with the American people and tell us that. His failure to so demonstrates that he really doesn’t understand what is taking place in our homes and businesses.
Congress wants in on the action too. Nancy Pelosi, Harry Reid, Barney Frank and Chris Dodd will flood our country with new programs. The progressive ultra-left has taken over the Democrat Party. They are so liberal and so out-of-touch with mainstream America that Senator Lieberman, a longtime Democrat, left the party and is now an Independent who is publicly thinking about no longer caucusing with the Democrats. Longtime Democrat and chief fund-raiser for Hillary Clinton, Lynn Forester de Rothschild, has said that her party is too far leftand is now actively campaigning for John McCain.
Politicians Waiting to Exploit the ‘Right’ Tragedy
Too many politicians are anxiously waiting for the right moment to expand government. They’re waiting for the “Megan Law” moment. That moment when the stars align so politicians can pass legislation over any objections, whether it’s good or bad.
Megan’s Law is named after a 7 year old girl who was kidnapped, raped and murdered by a repeat violent sexual offender. The public had finally become so outraged that the politicians had to act. Megan’s Law requires the posting of information about sexual offenders to the public. Passing Megan’s Law was the right thing to do but it shouldn’t have taken this tragedy to do it—but it took Megan’s tragedy in order to overcome the opposition from the ACLU and other groups who kept screaming about the rights of the accused.
Pelosi, Reid and the progressive left as well as many Republicans still don’t believe that our very survival is at stake with what is going on today. They still look at this meltdown as just another opportunity to score political points. If the Democrats in the House of Representatives really believed that our country’s economic security was at stake then they would have passed the bailout bill. They didn’t need any Republican support. They had the votes. But Pelosi and the Democratic leadership didn’t want to risk a massive voter backlash so they didn’t push the bill through. That is playing politics. If the Senate believed that our country’s economic security was at stake they would have passed a bailout bill without the $100 billion in ‘goodies’ attached. That is playing politics. Do the right thing for the country, stop playing politics.
As the crisis worsens and takes a higher emotional toll on the public we will see tragic stories. We will see more stories about people giving up hope, losing focus on what’s truly important and ending their lives and the lives of people they love. And when the ‘right’ story comes along, it will be exploited to take away more of our freedoms, to shred the Constitution just a little more and grab more money for the government from the people who earn it.
We can also expect our international/foreign enemies and competitors to take advantage of our current economic crisis.
Inexpensive oil is the lifeblood of our economy. It helps us plant our crops, is needed to make the clothes we wear, and keeps us moving freely by car, plane, and ship. America benefits when oil prices are low. Russia, Iran and Venezuela (along with several other countries) benefit when oil prices are high. Iran recently misreported that it forced a U.S. military airplane to land (it turned out to be a Hungarian plane carrying relief supplies). This was an attempt by Iran to spike oil prices temporarily, and it worked, until the truth came out.
Russia’s invasion of Georgia wasn’t about South Ossetia. It was about sending a message to the West that our efforts to build and maintain an oil pipeline through Georgia relied on the good graces of Russia and they didn’t want the West to forget that. Iran has continually petitioned OPEC to cut back on production in order to keep oil prices high and Venezuela is using its petro-dollars to spread his form of socialism.
Russia is also using its massive petro-dollar supply to buy influence on the international front. Remember all those banking problems Iceland is experiencing? Russia is now working with Iceland on a bailout package in an attempt to leverage this crisis into strengthening its international influence. Russia is also reaching out and strengthening its ties to Syria and Iran. Syria announced that it is dredging its fishing port of Tartous so it can accommodate Russian warships.
Iran will continue to develop its nuclear program. The countries of the world will increasingly be focused on reviving and in some cases, saving, their economies. Iran will take advantage or our collective distraction. I am increasingly in the camp that thinks Israel will have to take unilateral action against Iran before it develops a nuclear weapon and that would explain why we’ve decided to sell Israel 1,000 bunker busting bombs.
In the past four weeks Venezuela hosted two strategic long-range Russian bombers, and held joint navy exercises with a fleet of Russian ships, including a nuclear-powered missile cruiser. President Chavez has also been busy working with Columbia’s FARC terrorists and last week renewed his goal of building a ‘civilian’ nuclear program and has called for revolution throughout South America.
These countries will increasingly use more aggressive methods to drive up the cost of oil and expand their sphere of international and regional influence by generously spreading around their petro-dollars.
Meanwhile, North Korea doesn’t have any oil so it’s using the next best thing, the threat of nuclear weapons to get what it wants. It wasn’t too long ago that President Bush was touting a new ironclad agreement between America and North Korea. Well, after promising to verifiably dismantle its nuclear power plants in exchange for financial aid and fuel, the North Koreans have vowed to resume their suspended nuclear program. You can expect the guy with the crazy haircut and glasses to demand more money, fuel and aid for him to play nice again.
Closer to home you will see that Americans are increasingly feeling isolated and detached from their government. Part of the reason is that we don’t think politicians care what we think anymore. The $700 billion bailout bill passed the Senate at a time when only 30% of the country supported it. We felt that a giant stick was poked into our collective eye!
59% of Americans would vote the entire Congress out of office but due to the self-serving way the politicians have drawn their election districts it’s just this side of impossible to do it. Only 49% of the people believe that this congress is currently doing a better job than a group of individuals selected randomly from a phone book would do and 33% of us actually believe the group selected at random would do a better job!
Politicians play Politics with our Economy by Playing Politics with Energy Policy
But our politicians just don’t get it. Look at energy. We need inexpensive oil to make our country work and maintain our standard of living. To be perfectly clear: without inexpensive energy our economy doesn’t work and our standard of living dramatically falls.
You would think that our politicians, who understand this, would put our national interest above their petty desire for re-election, but they don’t. Look at what happened with offshore drilling. The federal moratorium on offshore drilling legally expired at the end of September. In theory, oil companies could have started drilling the first week of October but instead no oil company is even drafting plans to drill, why? Because they know that the politicians aren’t serious about offshore drilling. They know that too many congressmen are servants to the extremist environmental movement and as soon as the election is over will vote to either prevent offshore drilling or impose onerous conditions on any drilling. So the politicians will go home to their districts and tell the voters they are for drilling and then turn around and collect big fat donations from the environmental lobbyists who oppose drilling.
The same thing can be said about coal and nuclear power. Obama tells a national audience during his nomination acceptance speech that he and Joe Biden are for clean coal. Less than 90 days later Joe Biden is captured on tapetelling a woman that coal isn’t going to play a role in an Obama Administration energy plan.
Obama and McCain have talked-up nuclear power on the campaign trail but have done little to actually make it happen in their many years of service in the U.S. Senate. Meanwhile China plans on building about one nuclear power plant a year up through 2020.
There’s a real disconnect between our elected leaders and the people, but the majority of Americans are willing to work through this disenfranchisement. We want to reform government. We want to improve our country and communities but there is a fringe that is actively trying to exploit this disenfranchisement. I have someone on my staff that monitors the extreme blogs—stuff that most people, thankfully, haven’t even heard of. These blogs contain a call to revolution. One writer said that we need to “join with your brothers in arms and through force, return what is rightfully the peoples to the people” and another entry encouraged the reader to “rise up and join us before our nation is taken from us by the crooks and *******s that waste our air, one nation, taken back by the force of the peoples militia…”.
Guys, I told you that this was going to be a sobering letter. We are on the edge of a giant abyss that could swallow not only our economy but the freedoms and security we have enjoyed for over 200 years. Believe it or not, I don’t think that this letter captures the urgency that I feel, but I didn’t want to include wild speculation because I can’t see into the future but I wanted to give you a sense of the Perfect Storm that I have talked about and how the pressures that our economy and country face at this time are once again placing our “lives, fortunes and sacred honor” at stake.
Source: Glenn Beck
