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Stock Market Bottom;
Political Convulsion;
Economic Collapse?

by David Stanowski
23 March 2009


Note:
Over the last few months, some people have asked me how bad I think things are really going to get; i.e. what aren't you telling us? For that reason, I decided to write this article summarizing the major issues that we currently face, and this time, I don't make any effort to sugar coat it! It is my attempt to assemble the pieces of the gigantic jig-saw puzzle, that I am working on, to see what the whole picture looks like. I was surprised at how much time and effort it required!

Abstract:
A stock market bottom seems to be in place! Will it be THE BOTTOM that launches a new Bull Market, or just an intermediate-term bottom that temporarily relieves the intense selling pressure and negative sentiment? 

Is this country on the cusp of a violent political convulsion?

Will economic conditions get as bad or worse than the 1870's or 1930's?

The markets and historical cycles have potential answers to these critical questions. Understanding what they are saying may save some from financial ruin, and make things a whole lot easier for everyone in the years ahead!

Doomed

Introduction:
Stock market technicians concentrate on what the market is actually doing, and not on what is going on in the economy, or the political arena, because that has already been discounted by the market. Trying to add an interpretation of political and economic events, on top of an analysis of the market itself, over weights their effect, and usually leads to misinterpretation.

For this reason, this analysis will be split into three parts: The Stock Market, Politics, and the Economy.

The Stock Market

Many people insist that the stock market started to decline in October 2007 "because of Bush", and others say it has continued to fall since the election "because of Obama". By ignoring politics at this stage of the analysis, it becomes clear that this Bear Market started, because it was time to correct all of the excesses that have built up in the market since at least 1932, so blaming Bush and/or Obama completely misses the point!

However, both Bush and Obama have done nothing to mitigate the economic and financial problems, and, in fact, both have/are making it far worse than it has to be; but this Bear Market was due no matter what they did or did not do!

ewt

Dow Theory:
The oldest stock market forecasting "system" in this country was developed by Charles Dow in the late Nineteenth Century. Along with his partner Edward Jones, they constructed the Dow Jones Industrial Average and Dow Jones Transportation Average. Dow's editorials, in the Wall Street Journal, analyzing the interplay of these two averages, became the basis of the Dow Theory, and modern technical analysis.

One of my first "mentors" in this business was Richard Russell, the current authority on Dow Theory. He introduced me to technical analysis, and Dow Theory, over 30 years ago. Russell began publishing Dow Theory Letters in 1958, and hasn't missed an issue in 51 years! Richard has many painful memories of the Great Depression (he is 84 years old), including the suicides of family members after losses in the stock market crash.

Most of the "youngsters" on Wall Street dismiss Dow Theory as an antiquated relic of a bygone era, but Russell called the Bear Market, and got his subscribers out of the market in late 2007, unlike the wiz kids from the Ivy League schools, using their computer programs.

Part of Dow Theory is the "50% principal". It says that if a Bear Market retraces more than 50% of the previous Bull Market; it will usually test the point where that Bull Market began. This "test" may not reach all the way down to the starting point of the previous Bull Market, but it will often come relatively close.

The 1982 DJIA low was 777, the 2007 high was 14,164, the half way point is 7,471. Since the DJIA has already knifed through its half way point, Russell is looking for a test of 777 on the DJIA before this Bear Market is over! Recently, he noted that it also took out the half way point (7102) between the 1932 low (41) and the 2007 high (14,164), so we could test the 1932 low of 41!

Think about that!!
In just the last 17 MONTHS, the DJIA has lost more than half of all the gains it made over the last 75 years (1932 to 2007)!
Stockholders have lost $11 Trillion since the 2007 top! At this rate, in another 17 months, the DJIA could be back to 41!

Does this put this Bear Market into the proper perspective?

For those who think that they can just ride out this Bear Market, without further damage, this is what Russell had to say last week:

"I've asked around a lot, and from what I gather, I'd say that most people have not sold their stocks. Most are convinced that there's a bottom in the days ahead, and that the next "big rally" will recoup at least part of their losses. I think this is hopes and wishes. I don't see anything in my work that hints of an important bottom. The losses in this bear market so far, have served to allow many to reason that "it's been so bad, these loses can't continue, and that it's time for a big recovery."

Since October 2007, when the bear market started, the Dow has given up an amazing 7,640 points. I'm looking at the market now. The Dow is at 6512. At this price, the Dow has lost more than half of all its gains since its lowest point in the Great Depression, which was 41.22 recorded in July 1932.
The stock market doesn't live in a vacuum. This huge decline in less than two years is telling us (me) something. It's a warning. I think it's a warning of very hard times to come, maybe as difficult as those times we saw during the Great Depression.

I know that I stand pretty much alone with this scenario. I don't think most Americans see or even envision the potential danger ahead. They don't believe in the "truth of the stock market." Over 60 years of studying the stock market and the economy, I've learned to believe the "language of the market."

One problem -- If you're 70 years old or younger, you've never seen really hard times. You probably doubt that they even exist. Believe me, they do.

I know that great bull markets and great bear markets tend to overrun at the extremes. Let me leave you with one thought -- prepare for the extremes. Just as the bull market that ended in 2007 rose to the extremes, I believe this bear market will go to the extremes. At the end, the market and the economy will be worse than even the bears envision. The worst thing you can do now is to be complacent. Most Americans at this point have done nothing to change the same complacent, "normal" life they have been living over recent years. If today you are relatively debt-free, stay that way. If today you have no savings and much debt and you're living over your head -- change something, do it now while most Americans are still innocent and complacent."
Richard Russell, Dow Theory Letters

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Elliott Wave Principle:
It didn't take long before I found Dow Theory too pedestrian for my tastes and moved on to the far more robust and complex Elliott Wave Principle as my primary market analysis tool. To compare the Elliott Wave Principle to Dow Theory is like comparing Quantum Mechanics to Newtonian Physics.

The foremost authority on the Elliott Wave Principle, Robert Prechter, has been a "mentor" for about 25 years. Like Dow Theory, the Elliott Wave Principle is far from infallible, and relies heavily on the skill and experience of the practitioner, but it did get everyone out, or short, the market in late 2007, so it was one of only a handful of methods that saw the Bear Market forming a long time ago.

"The Case for a Super Bear Market", published on 05 February, stated that the ideal bottom for the first leg of the Bear Market would be 6,500 on the DJIA. Now that this target has been met, on 06 March (6470), and wave patterns and market indicators support the fact that the first wave down ended at this point; there should be a strong Wave 2 rally.

This will NOT be a vote of confidence in Obama, and his bailout and stimulus plans, anymore than the 33% plunge since election day was a reflection on these issues. This rally will simply happen, because sentiment can only decline to a certain extreme of negativity before it needs the relief of a Bear Market rally. (Look at the charts of the DJIA between 1929 and 1932.) The potential trap of this Bear Market rally will be the extreme positive sentiment that should develop as it draws to an end. By that time, the consensus will be that Obama has "saved the country", and it's clear sailing ahead. That is what should trap the unsuspecting Bulls, so they don't take their profits, and get out.

The graph below is a chart of the way that the five Elliott Waves, that make up a Bear Market,  typically unfold; with possible target prices. This method requires that the projections be updated as the actual waves are completed, and major deviations are certainly possible, but its most important message is that, even though there will be two major Bear Market Rallies, the DJIA is projected to be in the vicinity of 777, or lower, before it is all over; probably sometime in 2012.


Elliott Wave Targets

Summary:
Arguments were presented in "The Case for a Super Bear Market" that valuation levels are nowhere near a final Bear Market low. Both Dow Theory and the Elliott Wave Principle are projecting lows possibly near 777! This means that if the market plays out anywhere close to the projection shown above, the upcoming Wave 2 rally will offer the last chance to get out with "acceptable losses" for those still sitting on their stock portfolios!

However, don't take my word for it! Don't rely on the financial "experts" who told you that "the bottom was near" for the last 17 months. Do your own homework, and trust your Common Sense!
This rally will probably last 4-6 months which allows the time to do the research, and make an informed decision on whether to sell, or continue holding, as the rally unfolds.

When the stock market enters wave 3 down, the real estate market will probably join it, so the next few months could be the last chance to unload stocks and real estate, if this forecast is correct!
EVERYONE should read Conquer The Crash; it warned of today's devastating Bear Market when it was published in 2002, and forecasts what will likely happen as this Bear unfolds further!


Politics

Disclaimer:
Many people have voted for Republican and Democratic candidates, over the years, for reasons other than supporting the dominant policies and views of these parties. In fact, one of the most likely reasons to vote for a candidate is that he/she represents the lesser of two evils, which is hardly a ringing endorsement of their platform. It is not unusual to be horrified by some of the actions of the politicians that you supported, after they are elected. Therefore, the comments that follow are a commentary on the parties and politicians, and to a much lesser extent on most voters.


Introduction:
If I ever write a book on the decline of this great nation, a large share of the blame will be placed squarely on the shoulders of the Republican Party.
The following is a brief synopsis of how the GOP has betrayed this county, and why it should be disbanded! With the political convulsion that is on the horizon, it is essential to find an authentic alternative vision to the one currently being followed by the ruling class of this nation! This will NOT be forthcoming from the Republican Party!

ewt

1860:
The Republican Party was founded in 1854 by anti-slavery expansion activists and modernizers. It quickly surpassed the Whigs as the principal opposition to the Democratic Party, and first came to power in 1860 with the election of Abraham Lincoln.

The two major issues of the 1860 election were tariffs and slavery:
The more populous North had been able to dictate taxation policy to the South since the Constitution was ratified. The South exported and imported more than the North, so by running the federal government on import and export tariffs, the North was able to get the South to pay far more than its fair share of the costs! Lincoln pledged to maintain this high tariff policy, if elected.

Lincoln did not advocate the abolition of slavery before the War. His speeches and writings portray a man who saw Blacks as inferior and believed that there was nothing wrong with slavery. The Republican Platform of 1860 only opposed slavery in new territories (a political move to limit Southern power), but upheld the right of slavery in the South!

In 1860, there were four candidates running for President. Lincoln received the majority of the electoral votes, but only 39.9% of the popular vote! He had no mandate to govern, but his political troubles had only begun, because he had campaigned on a platform of raising the federal import and export tariffs. Southern States saw his election as the last straw! One by one, they began to secede.

Lincoln withdrew Northern forces from most Southern forts and bases, but refused to remove the troops from Fort Sumter. Many people in the North believed that the South had every right to secede, but as time wore on, they saw the loss of tariffs from the South as potentially fatal to Northern finances. Most Northerners blamed Lincoln putting them in this predicament!

After the Southern States seceded, they lowered their tariffs to 10%, far below the 30-40% that the North was still charging. If this competing tariff structure were to remain as it was, it would divert most foreign trade away from the principle Northern ports in New York and Boston to the Southern ports, particularly Charleston and New Orleans.


"That either the revenue from duties must be collected in the ports of the rebel states, or the ports must be closed to importations from abroad, is generally admitted. If neither of these things be done, our revenue laws are substantially repealed; the sources which supply our treasury will be dried up; we shall have no money to carry on the government; the nation will become bankrupt before the next crop of corn is ripe. There will be nothing to furnish means of subsistence to the army; nothing to keep our navy afloat; nothing to pay the salaries of public officers; the present order of things must come to a dead stop."

The New York Evening Post, 2 March 1861

Lincoln continued the stand off at Fort Sumter until it was running out of provisions. When he sent in a supply boat on 09 January 1861, the South moved to block it from landing, and shots were fired in the process. After many more weeks of attempts to get the Northern forces to go home, on 12 April 1861, Confederate batteries finally opened fire. The next day, the fort surrendered and the troops were evacuated. No Union soldiers died in the battle!

Even though the South had every right to demand a withdrawal of Foreign troops from their soil, Lincoln used the standoff and what turned out to be a harmless artillery exchange to whip up sentiment against the South, which unified the North, and bolstered his very weak political position! This gave Lincoln the pretense and support to invade and conquer!

Many people believe that Lincoln went to war to  end slavery, but they over look the fact that the War began on 12 April 1861, but he did not get around to issuing the Emancipation Proclamation until 01 January 1863! Of course, his real motives were confirmed by the fact that he only freed the slaves in territory actually held and controlled by the Confederate States, not in areas held by the North. The Emancipation Proclamation was in fact a purely political move which sought to incite a slave uprising against their owners (which did not happen), and to keep the British from normalizing relations with the Confederacy; not an act of humanitarianism.

Lincoln's war against the South had nothing to do with slavery and everything to do with solidifying his political position, increasing his power beyond what any previous president had enjoyed, and establishing more federal government control over individuals, and local and State governments. He took unprecedented action (war) to end the State's Rights guaranteed in the Constitution. His invasion of the South lead to the deaths of 600,000-720,000 Americans, which was about 5% of all the White males at the time; equivalent to about 8.25 million casualties if it happened today! The causalities from Mr. Lincoln's War were greater than those from all of America's other wars combined, and he destroyed 2/3 of the Southern economy!!

Lincoln also suspended the Right of Habeas Corpus, i.e. unlawful detention, for his Northern subjects, on 27 April 1861, and imprisoned tens of thousands of Northern citizens without due process (as many as 38,000 by one estimate in the Columbia Law Journal). Those sent to prison were overwhelmingly just regular citizens, from all walks of life, who simply expressed doubt over the administration’s unconstitutional and despotic policies, including the shutting down of more than 300 opposition newspapers, and the mass arrest of political dissenters by the military. Tens of thousands of Northern political prisoners spent months in a series of gulags, such as Fort Lafayette in New York Harbor, which came to be known as "the American Bastille."

The Lincoln administration cast a very wide net in rounding up any and all political opponents in the Northern states. Anyone overheard questioning virtually anything the administration had done, let alone publishing critical articles or editorials in newspapers, could land in prison without any due process. In fact, Lincoln himself even argued that those who simply remained silent, and did not actively support his administration, should also be subject to imprisonment.


In his own words:
"The man who stands by and says nothing when the peril of his Government is discussed cannot be misunderstood. If not hindered, he is sure to help the enemy; much more if he talks ambiguously – talks for his country with buts and ifs and ands." (Collected Works of Lincoln, vol. 6, pp. 264–265.)

Thus, in Lincoln’s opinion anyone who did not openly and publicly support his administration and its policies was a traitor, susceptible to being prosecuted as such, and hanged if found guilty.

Had he lived, many of these Northerners would have written a far more accurate history of his atrocities! It may have become common knowledge to future generations that he was the most despotic, dictatorial, and evil President in American history!! Unfortunately, Americans like to pretend that their martyred politicians are saints, and fail to objectively consider what they did during their lives.

This is the initial legacy of the Republican Party!


1860 versus 2008:
There are many frightening parallels between the conditions surrounding the elections in 1860 and 2008. In 1860, those who wanted to continue the existing tariff system, which forced the South to pay a disproportionate amount of the cost of the federal government, were pitted against those who wanted a fairer method of taxation. The battle over taxation, in 2008, was between those who wanted to use income tax to force those individuals who earn high incomes to pay
a disproportionate amount of the cost of the federal government, including the redistribution of income to those who had not earned it; versus those who wanted a fairer tax system.

The cultural battle in 1860 was slavery versus abolition; in 2008 it was the Counter Culture of San Francisco, Los Angles, Manhattan, and Washington, D.C. versus the Traditional American Culture of most small towns and rural areas, and the cities of the Heartland.

Has anything really changed?

Just like in 1860, the battle lines in 2008 were drawn primarily between the Blue States of the North and East, plus the West Coast, versus the Red States in the South and West. The first group is mostly urban, secular, and Liberal; they want strong central government control and "social programs". The second group is mostly rural, religious, and Conservative; they want control at the state and local level. The Red States seek to be self-reliant and have the ability to exercise their freedom and independence; free from the "programs" that the Blue States want to impose on them.

Of course, our new President sees himself as the reincarnation of Lincoln which should be chilling to anyone who knows the truth about this President! It is no coincidence that as many as 20 states now have active sovereignty movements which could allow them to withdraw (secede) from any further over reach by the federal government. Clearly they are aware that electing the reincarnation of Lincoln is not good news for personal liberty and individual freedom.

Walter E. Williams
One of my "mentors", Dr. Walter E. Williams, summarized the lessons of the Republican Party's role during this period in one paragraph:

"President Obama can be forgiven for celebrating the hypocrisy of Abraham Lincoln because the victors of wars write their history and glorify the winners. The recognition that slavery is a despicable institution does not require hero worship of a president who made the largest contribution to the unraveling of our Constitution. After all, when it is settled by brute force that states cannot secede, as they thought they had the right to in 1787, then the federal government can ride roughshod over states and their people's right -- in a word make meaningless the Ninth and Tenth Amendments."
A Minority View

ewt

1913:   
In the 1860's, the Republican Party ruled the country with an iron fist, however, by the dawn of the 20th Century, it had been relegated to an almost permanent minority party in the Congress. It found itself in the role of opposition to the now dominant Democratic Party.

In 1913, Democrat and Progressive Woodrow Wilson lead his party to create the Federal Reserve System and income tax, and he promoted the growth of labor unions. Wilson was also the first President to take steps towards a "one-world government" with the League of Nations.

Ironically, this Progressive also segregated the federal government workforce.

Although some of the things that Wilson, and the Democratic Congress, did were advocated by more than one political ideology, two of the ten Planks of the Communist Manifesto were accomplished in 1913:

2. "A heavy progressive or graduated income tax."
5. "Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly".

Karl Marx considered Socialism to be a transitory or intermediate stage in the transition from Capitalism to Communism. According to the "Communist Manifesto", all the Planks were prior conditions for this transition. In 1913, we were well on our way!

The Republican Party was in the minority during this period, so they can not be blamed for failing to defeat these measures, however, as the opposition, they failed miserably when they did not continue to oppose these changes until the time came when conditions were more favorable to get them repealed. If the public had been properly informed about what these steps truly represented, history could have been very different! The GOP's failure to mount an effective counter attack has played a major role in our problems ever since then, and certainly contributed to today's financial crisis.  

ewt

1932:
After the Federal Reserve engineered a massive credit bubble in the 1920's, and Republican Herbert Hoover failed to guide the American public through the fallout from the crash, his bungling attempts at bailouts set the stage for the election of FDR.

The New Deal was the Democratic Party's first real chance to inject Socialism into many aspects of our daily lives through economic and social programs, which was the mechanism used to redistribute income, and hand out favors to political cronies. By the time it ended, after WWII, armies of shock troops steeped in the New Deal belief system had moved on to positions in the media, entertainment industry, academia, politics, government bureaucracies, and government school systems to implement a dramatic and permanent change in the character of the nation.

The Democratic Party maintained a strong majority in Congress throughout the New Deal years which made it impossible for the Republican Party to defeat FDR's New Deal programs, but once the War was over, they failed to provide any serious opposition to these programs, and just accepted them as part of the new American landscape.

In stark contrast to the Republican Party, the Socialist Party presidential candidate in every election between 1928 to 1948, Norman Thomas, was very successful in influencing political opinion even though he lost every election! If the Republican Party had just copied his methods, they could have been much more effective in advocating a return to the Constitutional Republic that existed intact prior to 1860.

During the 1944 presidential campaign Thomas said, "The American people will never knowingly adopt Socialism, but under the name of Liberalism they will adopt every fragment of the Socialist program until one day America will be a Socialist nation without ever knowing how it happened."
He went on to say: "I no longer need to run as a presidential candidate for the Socialist Party. The Democrat Party has adopted our platform."

Learn Purchase Real Estate for Cents on the Dollar!

1932 versus 2008:
There are obvious parallels between the conditions surrounding the elections in 1932 and 2008; a stock market crash and an economic depression. However, the election of 1932 was held a few months AFTER the stock market crash had already ended, on 07 July 1932. It would take many years before the economy would fully recover, but the worst of the financial crisis was over. In contrast, at the time of the 2008 election, the stock market collapse was still in its first leg down, so the worst was yet to come.

Obama sees himself as the reincarnation of Abraham Lincoln, but he is also very willing to accept the mantle as the new FDR. Even though the stock market and the economy were in the process of bottoming before FDR took office, in March 1933, his New Deal programs stifled a full recovery until after WWII. At that point, America found itself in the enviable position of having built up its industrial capacity, to fight a war, even as its competitors had seen their factories bombed into rubble. It wasn't difficult to launch a new age of prosperity, under these conditions, once industry switched to civilian output.

As Obama seeks to fashion another New Deal to "save us" from the current crisis, he refuses to acknowledge that it is very unlikely to do anything but drain the economy of whatever strength it has left, unless he is going to go as far as bombing the factories of our foreign competitors! 
Obama's Choice: FDR or Reagan


New Deal

1964:
LBJ's election with a strong Democratic majority in Congress was the opportunity for the Second New Deal; the Great Society. Its two main goals were the elimination of poverty and racial injustice. New major spending programs 
were launched during this period to address education, medical care (Medicare and Medicaid), urban problems, and transportation.   

Unlike the first New Deal, which was a response to a severe economic calamity, the Great Society emerged during a period of prosperity. The War on Poverty and Civil Rights Act have done more to shape the world we live in, and cause the problems we have today, than most other actions of the federal government.

Star ParkerReflecting on the legacy of the Great Society, Star Parker recently wrote: 




"A benevolent Uncle Sam welcomed mostly poor black Americans onto the government plantation. Those who accepted the invitation switched mindsets from "How do I take care of myself?" to "What do I have to do to stay on the plantation?"

 
Instead of solving economic problems, government welfare socialism created monstrous moral and spiritual problems -- the kind of problems that are inevitable when individuals turn responsibility for their lives over to others.
 
The legacy of American socialism is our blighted inner cities, dysfunctional inner city schools, and broken black families.
 
I thought we were on the road to moving socialism out of our poor black communities and replacing it with wealth-producing American capitalism. But, incredibly, we are going in the opposite direction.

Trillions of dollars later, black poverty is the same. But black families are not, with triple the incidence of single-parent homes and out-of-wedlock births.
"
Back on Uncle Sam's Plantation

Earn a Safe 14% to 24% on Your Investment - Attorney and Investor Shows You How!

1964 versus 2008:
There are parallels between the conditions surrounding the elections in 1964 and 2008. Obama doesn't seem to identify himself with LBJ in public commentary, but his wish to finish the work that the Great Society started with new and expanded "social programs", particularly taking Medicare and Medicaid all the way to full blown Socialized Medicine is frighteningly clear.

What was the Republican response to the Great Society? Both Richard Nixon and Gerald Ford expanded many of the programs started by LBJ!!

This is an opposition party?


ewt

2008:
It is not clear how Woodrow Wilson, FDR, LBJ, and many other leading left-wing Democrats found their way onto the path to Socialism, but by 2008 they had paved the way for the first candidate who was raised and groomed to lead us on our final fatal step to a Socialist Worker's Utopia.


"During Obama’s campaign for the 2008 presidential election, he portrayed his mother as a conservative girl from Kansas; however in reality she was a radical leftist and cultural Marxist. She  spent her teenage years in Seattle coffee shops with other young radical leftists.

The school Ann attended, Mercer Island High School, was a hotbed of pro-Marxist radical teachers. Board Member John Stenhouse told the House Un-American Activities Subcommittee that he had been a member of the Communist Party USA, and this school had a number of Marxists on its staff. Two teachers at this school, Val Foubert and Jim Wichterman, both Frankfurt School style Marxists, taught a critical theory curriculum to students which included; rejection of societal norms, attacks on Christianity and the traditional family, and assigned readings by Karl Marx. 

Dunham has been described by her friends as a 'Fellow Traveler’; meaning ‘a communist sympathizer.’" Stanley Ann Dunham
 
In his 1995 memoir, "Dreams From My Father", Barrack Obama wrote, "...she was a lonely witness for secular humanism, a soldier for the New Deal, the Peace Corps, and position-paper liberalism."

Turning now to Barrack Hussein Obama, Sr., we find:
"His father's critique of Kenya's economic policy was published in the East Africa Journal under the title "Problems Facing Our Socialism." One discovers — after reading just a few pages into his eight-page tract, where he waxes quixotic about "communal ownership of major means of production" — that he wasn't criticizing the government for being too socialistic, but not socialistic enough."


"Obama Sr. described his own economic plan, his counterproposal, as it were, as "scientific socialism — inter alia — communism." Yes, Obama's father was a communist who wanted to put socialist theory into action — by force."

"Media accounts portray Obama's father as being completely out of his life after leaving his mother and him at age 2. But Obama's first book, "Dreams From My Father," reveals that he remained an influential force in his life."

"Obama wrote in "Dreams From My Father" that he was trying to impress his father by taking a low-paying job organizing and agitating in the Chicago ghetto right out of college. "I did feel that there was something to prove to my father," he said."

"Yet, suspiciously, he does not once mention his father's communist leanings in an entire book dedicated to his memory. No doubt he wanted to keep that hidden. All he tells readers is that his father was pushed out of the Kenyatta administration. He does not explain why."

"However, the son who would lead the U.S. learned from his father's mistakes and keeps his mouth shut. Obama learned that revealing his real beliefs can jeopardize his quest for the power needed to put his "redistribution" plans into action."  
Like Father, Like Son

In addition to the influence of his parents, while he was growing up, Obama sought out Marxist teachers, mentors, and advisers:

"The seeds of his far-left ideology were planted in his formative years as a teenager in Hawaii — and they were far more radical than any biography or profile in the media has portrayed.

A careful reading of Obama's first memoir, "Dreams From My Father," reveals that his childhood mentor up to age 18 — a man he cryptically refers to as "Frank" — was none other than the late communist Frank Marshall Davis, who fled Chicago after the FBI and Congress opened investigations into his "subversive," "un-American activities."

As Obama was preparing to head off to college, he sat at Davis' feet in his Waikiki bungalow for nightly bull sessions. Davis plied his impressionable guest with liberal doses of whiskey and advice, including: Never trust the white establishment.

"They'll train you so good," he said, "you'll start believing what they tell you about equal opportunity and the American way and all that sh**."

After college, where he palled around with Marxist professors and took in socialist conferences "for inspiration," Obama followed in Davis' footsteps, becoming a "community organizer" in Chicago.

His boss there was Gerald Kellman, whose identity Obama also tries to hide in his book. Turns out Kellman's a disciple of the late Saul "The Red" Alinsky, a hard-boiled Chicago socialist who wrote the "Rules for Radicals" and agitated for social revolution in America."
For more on the tactics of "community organizers"
whose outward purpose seems to be providing material help to the downtrodden, but whose real objective is to draft poor people into service as revolutionary foot soldiers: see Cloward-Pliven Strategy

It should come as no surprise that the Mainstream Media failed to bring Obama's background to light during the campaign, because he was the candidate that they had been waiting for. When news of his relationships with Fellow Travelers like
William Ayres and Jemimah Wright leaked out, they lead the defense with the argument that "a man should not be judged by the company that he keeps"! Their job was to make sure that he wasn't seen as too radical by the middle class and a few of the elites who might balk if they knew the truth.

While the Mainstream Media, and other elite opinion makers, repackaged Obama as some kind of enlightened centrist, where was the Republican Party? The 2008 election was simply a referendum on Obama. If they were really a party with the goal of restoring limited government under a Constitutional Republic (Democracy versus Republic), they would have told the country who Obama is! But, they were afraid to offend the elites by telling the truth. The Republican Party sold out many years ago! They had decided that it was too risky to oppose the "social programs" that were the foundation of the Socialist foothold in America, and dispensing special favors, through these programs, became a source of their political power, too.

At some point, early in the last century, the Republican Party abandoned whatever principles they may have once embraced and merely pretended to oppose the Socialist empire that the Democrats were assembling. Even Ronald Reagan made no attempt to dismantle the FED, income tax, Social Security, or the Great Society. 
It was all pretense! America's decline into full-scale Socialism is nearly assured unless an authentic opposition party replaces the GOP!!
Republicans Sell Out

For more on Obama's background, click on this button:



Socialism:
Socialism is a very seductive belief system to people of weak character. The lure of getting something for nothing is very tempting.
Once you have accepted this premise, it easy to embrace the redistribution of income scheme that makes it all possible. After people start receiving "free benefits", it is very difficult to convince them that it will undermine and eventually destroy their lives in ways that they refuse to acknowledge.

The widespread acceptance of Socialism is similar to the national embrace of the pharmasutical industry. Any society that refuses to take personal responsibility for its own physical, mental, emotional, and spiritual health and well being, because it finds it easier to take drugs to deal with every personal problem it faces, will be very easy to seduce with Socialism. Socialism is the drug that will solve all of our problems; right up until the point where we OD!

Many of the elites also find it much easier and more profitable to enrich themselves in the Socialist system than in private enterprise. They may be smart, but many don't know how to make money unless they are taking it from the taxpayers by running social programs, or receiving favors from their friends in government. They are the Nomenklatura (the self-appointed ruling class) of this country. The idea of an elite and privileged Nomenklatura to staff the civil service of the Soviet state originated with its founder, Vladimir Lenin.

Many, like the two people shown below, railed against the evil materialism of the corrupt Capitalist system, in the 1960's, even as they dreamed of becoming rich and famous through "public service in government"!


Bill and Hillary

Does anyone think that these two could have earned millions writing books, or through any other activity in the private sector, without using their connections in government? Could Bill Clinton have earned over $100 million, in eight years, in any honest pursuit, instead of selling access to government connections and favors to foreign countries?   

There is little doubt that most Americans have now embraced Socialism. Its most enthusiastic supporters like to call themselves Liberals or Progressives rather than Socialists, and use more politically-correct terms like "public assistance", when describing their system, but their beliefs are based on Marxist theology — "from each according to his ability, to each according to his need", so it doesn't really matter what you call it, it is some variation of Marxism. 

Some people, like Dr. Walter E. Williams, refer to the process of using the government to forcibly take money from one person to give it to another simply as Theft! Ayn Rand's character, John Galt, said that regardless of the purpose, such behavior is immoral. It's a form of slavery. After all, what is the essence of slavery? It's the forceful use of one person to serve the purposes of another person.
What has been lost is the understanding that money given to private charities to do "social work" is VOLUNTARY, but taxes collected for government social programs certainly are not!

Of course, many Republicans, Independents and even "Conservatives" are happy to get whatever benefit they can from this twisted system, and make someone else pay for it, too! It doesn't matter what you call it, the evil of this belief system is obvious in what it has done to the character of the American people!


"The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance."  Cicero - 55 BC

We're All Socialists Now!

What happens politically, over the next few years, may depend in large part on the actions of those who still believe in limited government and a Constitutional Republic. Will they organize around some authentic party that will begin to actually oppose what is happening? Will they go John Galt and reduce their economic output to starve the bureaucracy and the dependent class? Or will everyone simply sit passively as we slide into the Socialist abyss?

In the 1770's, the relationship between the colonists and King George grew more and more strained. Finally, on 19 April 1775, the British marched on Lexington to confiscate their guns. "The shot heard 'round the world" was fired that day, and the First American Revolution had begun.

In the 1850's, the relationship between the North and the South grew more and more strained. Finally, the South seceded, and when Lincoln refused to withdraw his troops from Fort Sumter, on 12 April 1861, Confederate artillery opened fire, and the Second American Revolution had begun.

Today,
the relationship between those who believe in the redistrution of income and those who do not is growing more and more strained. With the ongoing Culture War coupled with the financial and economic collapse, are the conditions in place for a Third American Revolution? That is THE political question of our time!


Economy

One of the great fears that is overhanging the markets and the economy is the threat of hyperinflation. Many people are talking about "all the money that the Fed is printing" to fund the bailouts. The Fed is not actually "printing money"; it is expanding credit. Therefore, the parallels being cited to the hyperinflation in the Weimar Republic from 1921 to 1923, and Zimbabwae today are not on point.

Much of the credit being created for bailouts is just replacing money already destroyed through the current deflation process, so it is not actually entering the economy as "more money chasing the same amount of goods and services".

Bond markets act as an "emergency brake" on hyperinflation. When hyperinflation occurs, bond markets collapse in price to push their yields very high which offsets the lost purchasing power caused by extremely high inflation.

The U.S. government, and the Fed, finance their operations in the bond market, so they always try to produce a moderate amount of inflation which allows them to pay off their debts with cheaper money. However, if they push too far, so that it spirals into hyperinflation; bonds will plunge in response. This will make it so costly to fund their operations, that they would have to reverse course, even if they don't want to.  

The hyperinflations in the Weimar Republic and Zimbabwae were/are currency inflations, as opposed to credit inflations, which are quite different situations. 

The current manic buying in the gold market is primarily due to investors who mistakenly think that we face a pending currency hyperinflation, although some are buying as insurance against a deflationary collapse; which is much more likely. However, even though gold will always have some value, in a deflationary collapse its value could be less than holders expect. Most measures of inflation show no sign of hyperinflation, so most buyers of gold are buying for the wrong reason, and their purchases may not turn out in their favor. 
 
One Way Debt Deflation

The economy and the financial markets are separate, but highly interdependent. The economy does not function well without commercial credit, but companies can operate profitably even if their stocks decline. Many companies will survive the current financial calamity, even as their stocks plunge as much as 90%!

Many of the industries that have become dominant in the post-war boom, may be unnecessary in the new Age of Frugality, which will force massive restructuring. The most critical economic issue is unemployment. Unemployment rates in the 1930's reached 25%, and they could top 30% before this crisis is over, at least as measured by the broadest metric, U6. Even worse, the number of unemployed could remain high for many years!

The Perfect Storm that could create the Third American Revolution is the financial collapse, America's move to full-scale Socialism, and unprecedented unemployment. If things turn really bad, it could even be a repeat of the French Revolution!

Unemployment rates of 30% could find as many as 30 million people out of work which would have a profound impact on every aspect of our lives. Many government resources would have to be allocated just to take care of the homeless. Government policies such as higher taxes, new regulations on the economy, and the costs of mandating Green energy will just aggravate this problem, and must be avoided at all costs.

The first picture shown below is a 1930's era shanty town. The next one is a 2009 tent city in Sacramento, CA.

   1930's Shanty Town

2009 Tent City

"Those who have lost their jobs and homes and have nowhere else to go are constructing makeshift shelters on the site, which covers several acres. As many as 50 people a week are turning up and the authorities estimate that the tent city is now home to more than 1,200 people.
 
In a state more known for its fantastic wealth and the glitz and glamour of Hollywood, the images have shocked many Americans. Conditions are primitive, with no water supply or proper sanitation. Many residents have to walk up to three miles to buy bottled water from petrol stations or convenience stores."
Like the stock market, the economy is currently in the process of correcting all of the excesses and the mis-allocation of resources that have built up in the system since at least 1932! Once the stock market collapse began, and the economy started to implode, no individual or party could have saved the country from an economic depression. The bill was due and needed to be paid.

If students of free-market thinking, such as the Austrian School of Economics, were currently in charge of our government, the fallout could at least be successfully minimized, and a recovery could begin without a long delay.

Unfortunately, with the party
that has been slowly but surely marching us into a Socialist Workers Paradise, in control of the federal government, the outlook for the economy is truly frightening! How are they possibly going to devise programs to "save our Capitalist economy" when they have been working to replace it for 100 years?

Of course their dilemma is how to fund all of their "social programs" without a robust Capitalist economy! This will make things very difficult and confusing as they attempt to discover which areas of the economy they will control, and those that they must allow to be relatively free.

Obama Money

Conclusion

In the early 1970's, I became aware of three "issues" that I came to believe would shape the course of our country in the years to come:

1. Our financial and economic decline due to creeping Socialism, fiat money (no gold backing), and the resultant unrestrained expansion of credit. 
2. The decline of the Traditional American Culture.
3. The ascendancy of the environmental movement. 

It has been distressing to see how these issues have played out over the last 30+ years.

The discussion and debate over the escalating financial crisis was primarily confined to a group of my fellow Libertarians, and drew little interest from the general public. It was not surprising that the political class would ignore this issue, because they relied on the flaws in this system to fund their growing Socialist schemes and programs. The general disinterest from the public, and pretense of ignorance by the political class is the reason why most people were so surprised by the current manifestation of the financial crisis.

Dealing with this crisis must be our top priority, at the present time!

The decline of the Traditional American Culture, and its domination by the Counter Culture, has become so persuasive and obvious that we allow ourselves to wallow in deviancy and coarseness to a degree unimaginable 40 years ago. Everyone,
except those too young to have experienced what existed before the Counter Culture took over, is painfully aware of this decline, but most have become numb to our new definition of "normal", and have simply accepted that this is our fate. It is difficult to do much about our cultural decline when the elites constantly broadcast the message that the Counter Culture is a more enlightened state of being than what existed before it. A handful of Conservatives have lead the resistance to this trend, but they have been largely unsuccessful.   

When I first discovered the environmental movement, the idea that we should reduce our pollution and investigate alternative energies had a lot of appeal. The claims that we would quickly run out of resources and enter a new Ice Age were a little more problematic.

"In 1968, Professor Paul Ehrlich, Vice President Gore's hero and mentor, predicted there would be a major food shortage in the U.S. and "in the 1970s ... hundreds of millions of people are going to starve to death." Ehrlich forecasted that 65 million Americans would die of starvation between 1980 and 1989, and by 1999 the U.S. population would have declined to 22.6 million."
Environmentalists' Wild Predictions

At the first Earth Day celebration, in 1969, environmentalist Nigel Calder warned,
"The threat of a new Ice Age must now stand alongside nuclear war as a likely source of wholesale death and misery for mankind."

As I did my own research into the threat of a new Ice Age, I was fortunate to discover the work of Dr. Raymond H. Wheeler. In the 1930's, Wheeler began a study that analyzed world climate and cultural activities for the last 20 centuries; back to the dawn of recorded civilization. Dr. Wheeler's data clearly demonstrated regular and predictable cycles in climatic conditions long before the start of the industrial revolution, casting grave doubts on any current claims to the contrary.

"He found that the Earth's climate shifts from warm-wet phases to warm-dry phases, then from cold-wet to cold-dry in continual cycles. There is a 100-year cycle, a 170-year cycle, and a long cycle of 510 years, and the end of all these periods coincide with the end of the 20th and beginning of the 21st centuries, causing weather extremes which will occur for between 25 to 30 years. This period began around 1995."
U.K. Daily Mail

Wheeler's predictions that naturally-occurring weather extremes would take place from about 1990 to 2020, were published in 1984, and his findings were well known in environmental circles which did not prevent their spokesmen from making claims that their "computer programs" were predicting "weather extremes" due to man-made Global Warming.

Man-made climate change can be used to drive political change where naturally-occurring climate change cannot. And thus began the great hoax being perpetrated by the Green movement! The "certainty" of man-made Global Warming became an ideology promoting a cultural and political vision that had nothing to do with the facts about climate change! Facts supported by data; not computer models! 
No one in the environmental movement has ever explained how the same computer models that had "guaranteed" a new Ice Age, suddenly shifted to "guaranteeing" man-made Global Warming, and as the data has failed to confirm the predicted levels of Global Warming, the buzz words have  shifted to "Climate Change".

The muddled musings of the environmental movement would have been relatively harmless if they had just been confined to their "followers", however, since this issue is the darling of the Liberal/Progressive/Socialist elites that dominate public policy, it is a big part of their toolbox for the transition to full-scale Socialism. Therefore, even though predictions of Ice Age; Global Warming; Climate Change is a cruel hoax, the government will spare no expense to the taxpayers to implement policies that will force the country into a very expensive change from fossil fuels to Green alternatives; which also gives them another opportunity to redistribute income.


"Here are a few facts: Over 95 percent of the greenhouse effect is the result of water vapor in Earth's atmosphere. Without the greenhouse effect, Earth's average temperature would be zero degrees Fahrenheit. Most climate change is a result of the orbital eccentricities of Earth and variations in the sun's output. On top of that, natural wetlands produce more greenhouse gas contributions annually than all human sources combined."
Environmentalists' Wild Predictions

The political sponsorship and biases surrounding these three issues have focused nearly all of the support
of the Mainstream Media and elite opinion makers onto Global Warming which has compounded the current calamity, because the first two are real, and deserve attention and appropriate action, while the latter is merely a Convenient Invention being used to gain political power. Unfortunately, the pursuit of "solutions" to Global Warming "crisis" could burden the economy with enough unnecessary extra costs to accelerate the decline and prevent any meaningful recovery! 

Selling Apples

There are few bright spots in the years ahead. We could easily be entering the most traumatic crisis in our nation's history! In addition to the potential troubles outlined in this article, historical cycles indicate that famine and pandemics are also quite possible, in the next few years, as well as a world-wide war. The message of the cycles is independent of the President or Party in power, but there is little doubt that Obama's pacifist stance during the campaign, as well as moves to make light of the threat of terrorism, will embolden terrorists to attempt another attack on U.S. soil, and could make other countries more secure in moving against us, or our international interests, on a larger scale.

In reality, there is little choice but to let the financial system complete its collapse to cleanse it of its current problems. Doing nothing would minimize the damage and allow a recovery to begin sooner, but our politicians are determined to make things much worse with all their meddling.

Things are so bad politically that we may be on the cusp of a Third American Revolution. It will be very unwise to rely on politicians of any pedigree at this time. Those who voted for Obama, because they wanted Socialism, may be happy with how things turn out, but others who were swept up in his Cult of Personality, or just hated Bush; may already have buyer's remorse. A President who actively cultivates a Messianic worship by his followers is a dangerous figure in these volatile times, because there is no telling what some may willing to do to please him.
Anyone who looks to the Republican Party to lead us out of this mess has not been paying attention to what has happened over the last century, as they went through their Kabuki Dance of pretending to oppose the Socialist agenda being constructed by Democrats. Some other type of opposition party or organization is the only hope of providing an authentic alternative vision, but we must be careful of extremist groups that spring up to fill this void. Now is the time to fall back on self reliance and building networks with like-minded people that can help us survive until things stabilize.

There are a few potentially positive developments on the political horizon. Sovereignty movements are developing in many states, and there is a growing backlash against the heavy-handed steps into Socialism currently being implemented by the one-party rule in Washington. This is energizing many people to re-discover their connection to the original principles of the Founding Fathers. If any of the states actually declare their sovereignty from the federal government, this has the potential to defuse much of the overreaching at the federal level.

It is also possible that the ultimate goal of our current leaders is a less extreme form of Socialism than many expect. The economies of the U.S.S.R and Cuba were complete failures, and even Communist China has seen the wisdom of allowing a relatively free private sector to flourish. If this is the case, the federal government may pursue less draconian measures than we now anticipate. 

Finally, it is not very likely that the military will intervene in the workings of the federal government, no matter how un-Constitutional, but if Obama does something that triggers civil unrest and disobedience by the middle class, I am confident that the military will not follow unconstitutional orders to move against them. The fact that our military is more loyal to the principles of the Constitution than most other groups in this country is a source of great comfort when comparing what might happen here to historical events in other countries. 

See:
Oath Keepers: Military, Veterans, and peace officers who will honor their oaths to defend the Constitution, will NOT “just follow orders,” will stand for liberty, and will save the Republic, so help us God. Our motto is: "Not on Our Watch!"
Orders We Will Not Obey


Selling Apples

It may only be a matter of a few months before the next leg down in the stock market begins, so it is time to start making the necessary changes and preparations. However, many are still in shock and denial as the reality of what probably lies ahead is just too frightening and painful to face.  
The Modern Stealth Depression

As the economy deteriorates, some will vote with their feet and leave. Many illegal aliens from Mexico have already returned home as the opportunities in this country diminish. There are also reports that highly-educated and experienced Indian and Chinese immigrants are leaving the U.S., and returning to their homelands to pursue better opportunities.

As the security in our cities and small towns disintegrates, prosperous immigrants will probably find it safer to live in their home countries, where the people are accustomed to poverty, rather than trying to wait out an ongoing and increasingly violent devolution in a traditionally richer location.

Most Americans are simply ill-equipped to deal with a destruction of their present lifestyle without becoming angry, frustrated, and too often violent.
People who lived through two similar periods in our history, the 1930's and 1960's, were more independent, self-reliant, and tolerant of uncomfortable conditions, than those of us who live here today, but there were still violent demonstrations and riots in those times, so it may be even worse before this is over. 

Some native Americans may also begin to relocate to foreign countries for safety and/or better economic opportunities. Well-known trader, Jim Rogers, has already moved his family to Singapore, so everyone may want to start developing a Plan B in another country, if future conditions make that advisable. 

It will be very tempting to get drawn into the volatile politics of the times ahead, but probably much more prudent to focus on your own survival by preparing for the conditions and issues discussed in Operation Lifeboat.

It has been painful to live through the decline of this great nation, over the last 40 years. In some ways, it is even sadder that so many don't even realize what we have lost. I am very grateful that it was my fate to live through the time in our history when we were at our best; a privilege that fewer and fewer can claim. We have little chance to reclaim those lofty heights, unless we return to the ways of the Founders, which is very unlikely with our declining national character!

I won't miss the rampant consumerism of the last 40 years.
Our technological advances brought us many wonderful gadgets and toys, that made our lives more comfortable, but they helped us lose our way politically and spiritually. The Buddhists teach us that all suffering is caused by desire, so the ones who will fare best, in the difficult times ahead, will be the people with the fewest wants and needs.

Even though I am more immersed in this unfolding crisis than most people, I am usually fairly detached from the events that are unfolding, when they are isolated to the financial world. Sometimes it still seems unreal when events that were forecast some time ago finally materialize. However, every time the focus turns to unemployment, or I see pictures like these, it reminds me how devastating the human toll of this crisis will most likely be; materially, politically, and spiritually; and it is truly frightening!

This is what the picture of my jig-saw puzzle looks like when it is all put together:


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