Where America stands today
July 27, 2009 - 13:24 ET
Dear family and friends,
I don’t like being the bearer of bad news. It’s difficult for me emotionally and mentally to continually bring the message that ‘bad times are coming’ and I know you’re growing tired of continually hearing the message of ‘prepare, prepare, prepare.’ There are times when I wish I could see the ‘green shoots’ that Ben Bernanke says are sprouting up or agree that the Obama Administration has “rescued the economy from the worst recession ever.”
But I have to tell you how I see the world. I’m not an economist or banker and I could be wrong, but I don’t see ‘green shoots’ or long-term stability for America right now. On September 18, 2007 when the Dow Jones Industrial Average was at 13,403 and unemployment was at 4.6% and the ‘experts’ were telling you good times were ahead I had to tell you that, “We are absolutely heading in for a recession. It is unstoppable…”
I wish I could tell you I see better times ahead but I don’t. Here’s a summary of where we are today.
On the Domestic Front
Now, the DJIA stand at 9093, the official unemployment rate has hit 9.5% with non-government economists suggesting that the real unemployment rate is closer to 20% with over half-a-million Americans filing initial jobless claims a week. Unbelievably, the same ‘experts’ that missed the near-collapse of the global financial system are telling us about ‘green shoots’ and more good economic times ahead while are banks remain basically insolvent despite having received hundreds of billions of dollars in taxpayer money and continue to fail without the infusion of taxpayer cash.
The 6.7 trillion dollar commercial real estate market faces hard-times with Wells Fargo reporting a 69% jump in non-performing commercial loans between the first and second quarters of this year. Commercial real estate prices are down 35% from their 2007 peak. Even that great optimist Ben Bernanke was forced to concede that the market for securities backed by commercial mortgages remains “completely shut down.” On the residential front a massive wave of optional adjustable mortgages are coming and the vast majority of these option ARMs are set to re-finance in 2010 and 2011.
The eighth largest economy in the world—which would be the state of California—has been paying its bills with worthless pieces of paper (no, not the US Dollar, but IOUs) that are so worthless that even our insolvent banks won’t accept them. And while the good people of California continued to work hard the politicians there spent their time debating whether or not cow tails should be removed from cows. The politicians worked out a grand solution to their money problems that include letting the sea otters keep their trust fund, sending 26000 prisoners home 20 months early and authorizes the California state government to “forcibly borrow” money from the county and city governments.
It gets better. The California public pension system director has now come out and said (apparently with a straight face) that he wants to make riskier investments in order to make up for the 23% loss it recently sustained. So, if I understand his thinking, the more you lose on risky investments the more money you should invest in even riskier investments—he’s got to get together with Joe “we have to spend money to keep from going bankrupt” Biden—that would be fantastic!
And while California is on the financial ropes the federal government is doing what it does best: taking advantage of their situation by telling state officials that if they close state parks due to budget problems it will seize the land, auction it off or re-sell it to the state. This land grab isn’t an isolated incident. Sarah Palin recently warned the American people to “be wary of accepting government largess. It doesn't come free.”
ACORN and the SEIU are part of this land grab. It’s not just a grab for physical land—but for our freedoms and liberties. These organizations are engaged in a pattern of intimidation and suppression of your rights.
At the national level our political leadership has put their faith in money and not the people. Both George W. Bush and Barack Obama, at their core, think the American people aren’t ready to make the hard sacrifices so they printed money—lots of it. The TARP Inspector General has valued the total TARP monetary bailout commitments at 23 TRILLION dollars.
On the International Front
While President Obama is trying to create an atmosphere in order to have an open dialogue with our enemies, Iran continues to make progress building a nuclear bomb with some diplomats saying they could test one within six months which would set-off a nuclear arms race across the Middle East.
And while Obama is eager to have a dialogue with those who would do us harm his administration is ignoring our allies. Even the leaders of one of our closest allies, Israel, have been forced to discuss and plan what to do if Obama halts or reduces US military aid to their country.
Further east, China has gone from giving vague and cloaked answers about their support for our bonds to having their highest officials publicly call for a new reserve currency to replace the US dollar as the financial global backbone and our economic and military competitors Russia, Brazil and India were quick to endorse the idea.
Closer to home Venezuela is continuing their military build-up by doubling the number of existing tank battalions and following through on its purchase from Russia of 100,000 combat rifles, 24 top-of-the-line fighter-bombers, and 50 helicopters and is using this power to assist Iran and Hezbollah operations in South America. Meanwhile, Mexico continues to struggle against narco-terrorist organizations that seem to have the Mexican military out-manned and out-gunned as they struggle to end their reign of drugs and terror.
The Obama Administration’s response to these events is to continue the Bush Administration approach of “ignore them and maybe they’ll go away.” Adding insult to national security is that while our government has found $1,900,000 for the Pleasure Beach water taxi service project and another $4.2 billion for 341 other pork projects there’s apparently no money for border security and that’s why our politicians have actually requested VOLUNTEERS from the National Guard to serve on the border.
Our Politicians Continue to play Politics While the Country Teeters
So while our economic, domestic and international problems mount what are our politicians doing? Right here in New York City our billionaire mayor, Michael Bloomberg, worked on passing a law to prevent YOU from idling YOUR car while his SUV idles 40 MINUTES at a time throughout the day.
Mayor Bloomberg joins a growing list of hypocrites and elitists who firmly believe they are entitled to live one way while forcing you and your family to live by another more restrictive set of rules. Michelle Obama preaches thrift and cutting-back while wearing $500 sneakers at a food-bank and quipped that $600 wasn’t really a lot of money and could easily be spent on a pair of earrings; Barack Obama, Harry Reid and Nancy Pelosi are working overtime trying to force government health care down our collective throats while absolutely refusing to commit to adopt that same health care plan for themselves and their families; and Al Gore and the green movement ilk continue to make billions by forcing us to change our light bulbs and compel us to bring toxic mercury into our homes. And Charlie Rangel pushes for higher taxes while refusing to pay what he owes. Our youth are ‘educated’ through the propaganda of Americorps and ‘tolerance camps’ that this type of elitist behavior is good and that its okay for ‘them’ to live by a different set of rules than the ‘small people’ have to follow.
Not only are we losing our freedoms we seem to be in a race to do it. The TARP bill under Bush was a “must have rush bill”, the stimulus bill under Obama was a “rush”, the cap-and-trade bill “had to get passed” quickly and the health care bill originally had to be passed out of both chambers of congress before the end of August. Why? It took the Obama family three months to select the family dog—but the restructuring and rebuilding of America has to take place over one summer?
In short, politicians continue to play politics. We have a health care bill that would socialize 15-20% of our economy and add another trillion dollars to our national debt—and what are our politicians focused on? The Republicans are looking to defeat the bill—not based on conservative principles—but to make this Obama’s Waterloo. And Obama’s pushing to pass the bill—not based on a debate involving the benefits of his proposal—but because failure to pass it would “destroy my presidency.”
Conclusion
Our politicians continue to give us a weak anti-biotic when major surgery is required. The anti-biotic will temporarily mask our symptoms but will not address our underlying pathology and condition. In the end the meager dose of medicine we receive will actually make us worse by making our system immune and luring us into a false sense of security when we need to have all our senses heightened to the dangers and threats lurking around us.
Today, I wanted to show you where our country really is. We live in perilous times and we ourselves are in a perilous condition. We will have a period of stability where it looks like things are going well and it looks like we’ll have turned the corner on our problems. Remember, until fundamental changes are made any period of stability will be temporary. Tomorrow, I want to write a bit about how other countries, faced with similar challenges and problems dealt with those circumstances and whether they were successful in meeting those challenges.
We will meet those challenges but it will take commitment and a lot of work from us.
Stay strong,
glenn
America: Past, Present and Future...Part II
July 28, 2009 - 13:30 ET
Dear family and friends,
Yesterday I shared my thoughts on the challenges and threats facing America as I see them. What I’m going to share today are some examples from history of countries, including our own, which faced similar challenges (to greater or lesser degrees) and how those countries faired while confronting those challenges.
I wanted to look at history because too many people call into the radio show or send an email after watching the television show and tell me “not too worry” about America because we’ve faced worse hardships before and have not only overcome them but have emerged stronger.
I understand the American spirit. I understand that we are the country that took on the Nazis, Fascist Italy and Imperial Japan and won. I understand that we stood toe-to-toe with the Soviet Union over 40 years and defeated them in the Cold War. I know that we are a country of fighters and that Americans are capable of conquering any challenge—but the belief that great things happen to America just because we’re America—that’s just plain wrong.
Thrift, hard-work, sacrifice by our parents, grandparents and their mothers and fathers went hand-in-hand with the thrift, hard-work and sacrifice we collectively made as a country—that’s what produced unparalleled strength and success. Today, we face difficult times. We stand at cross-roads as a country. Where we eventually end up will be determined by the decisions each of us makes today and in the weeks and months ahead.
Great countries don’t collapse, they transform. The Soviet Union in 1991 didn’t disappear after its political and economic model collapsed, it transformed and is still transforming. Weimar Germany’s government collapsed as did its economy but Germany continued—at first down the national socialist path—and now as a democracy.
The Soviet Union
For almost 70 years, the Soviet Union was considered one of two world super-powers. At its military peak the Soviet Army enlisted over 5 million men and women and amassed over 30,000 nuclear weapons. With a push of a button it could literally have set into motion a series of events that could have ended life around the globe.
It’s amazing to consider that the political and economic foundations of such a country could collapse, literally overnight, following a meeting in the woods of a handful of political leaders. So what brought down the Soviet Union? It’s budget deficit and foreign debt soared during the 1990s following the price decline of it’s most lucrative export, oil. In the early 1980s oil was about $35 a barrel and by the late 1990s was struggling to stay at $13 a barrel. Inflation was running 20%-25% a month as food and other consumer goods began to disappear from store shelves. The ruble’s international strength declined. Although the official commercial exchange rate was 6 rubles to the dollar, tourists and foreigners could easily obtain a 30 rubles for a dollar.
Despite their economic challenges, soaring inflation and worthless rubles the Soviet people wanted to remain Soviets. They believed in and loved their country. Polls and referendums regularly showed that 76% of the people wanted to remain united as a Soviet Union with some changes taking place, but not a wholesale collapse of their political and economic structure. But despite these feelings, the vast majority of Soviets did nothing as a relatively small but dedicated group of political extremists pushed their agenda forward.
The great revolution that ultimately transformed the Soviet Union really began in a lodge in the woods just outside of Brest (Belarus) with a handful of radicals determined to change their government. Those same radicals permitted only ONE HOUR of debate before calling on a vote to dissolve the Soviet Union and replace it with the short lived Commonwealth of Independent States.
The Soviet Union was transformed into Russia. Initial hopes that Russia would be an ally on global military and economic issues was lost by the arrogance of our political leaders who insisted on putting NATO’s tanks and soldiers closer and closer to their borders even after we promised that would never happen. We saw Russia as weak and broken and sought to dictate how they should live their lives. Joe Biden typifies that arrogance. He recently said, "I think we vastly underestimate the hand that we hold…Russia has to make some very difficult, calculated decisions, they have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they're in a situation where the world is changing before them and they're clinging to something in the past that is not sustainable." Couldn’t they say the same thing about us? Isn’t our situation similar to that of the Soviet Union prior to their transformation—certainly not as grave—but similar. One of our pillars of economic growth—manufacturing represents a mere 12% of our GDP. America is no longer an export powerhouse and we regularly import tens-of-billions of dollars a month more than we export. Our dollar is weaker, not only on the official exchange rates—which are always in flux. But weaker as a symbol of our strength. Russia, Brazil, India and China are now regularly calling for the dollar to be replaced or at least have a reduced role as the world’s currency. Our money supply stands at a staggering $8.3 trillion.
Where We Are Today
Russia is now an oligarchy. It has abandoned communism and socialism as failed doctrines. Now, a small group of political and business elite run the country while getting rich. Those who speak out against their shared interests risk joining the ranks of journalists killed there since 1992 in contract-style killings. Those businesses that don’t play along find themselves losing lucrative government contracts o r have their executives jailed (Yukos founder Mikhail B. Khodorkovsky) or forced to flee (BP CEO Robert Dudley) or publicly attacked and vilified (Igor Zyuzin of Mechel).
I don’t believe that this is our destiny as a country. Once the transformation process begins a lot of factors influence the outcome. I do not believe that the Germans in Weimar Germany knew in advance that the ultimate result of their inflationary policies would create 40% unemployment where a smooth talking and hate-filled Adolph Hitler would find a very receptive audience.
When the Soviet Union was being transformed the vast majority of people there did nothing while it happened. When Hitler wrote Mein Kampf and talked about killing the Jews, the people did nothing.
I am not saying that our political leaders want to take us down these roads. I don’t believe they do. But they have been open to their desire to transform and re-make America. The question we have to answer is will we, like the Soviets and Germans, sit and do nothing while our country is being transformed? Will we too let a relatively small group of radicals transform and re-make America? Or will we take a stand and become a watchdog of liberty, freedom and the Constitution?
Tomorrow I am going to tell you about some questions that you need to ask yourself before becoming a ‘watchdog.’ You need to take a measure of why you are and where you stand.
With love,
glenn
OMD
