The scam & the skinny — it's time to duck & cover
Some mornings I don't have a prepared topic, I just let the winds take me wherever they will. There was a gale blowing today. For your convenience, I have divided this post into two parts.
Fed chairman Ben Bernanke testified before Congress that the outlook for the economy was "unusually uncertain" and full of "downside risks," which in Fed Speak means, for the little people Outside the Beltway and the Money World, that it's time to Duck & Cover (see part II below). Bernanke has zero credibility, given his curious optimism about the economy before, during and after the Housing Bubble. For him to admit that he has no idea where the economy is headed now is tantamount to an End of the World prophesy.
Yes, the consensus of Fed officials calls for 3-3.5% GDP growth this year, but the Fed (like the IMF or any other bureaucracy) would forecast such "moderate" growth if the supervolcano underlying Yellowstone Park had blown up just last month. The economy would then achieve a healthy growth rate as we cleared the volcanic ash and buried the dead. See my post The Stimulus of Last Resort for a list of the economic indicators signaling that we're up shit creek without a paddle. Add to that list the growing trade deficit.
It wasn't just "Helicopter" Ben who caught my eye this morning. Dean Baker, a highly respected economist and liberal think-tanker from Inside The Beltway, told Tech Ticker's Aaron Task that deficits simply don't matter. As in Why would anybody care about our debt? The market has spoken, and the market wants to buy Treasuries. Baker thinks Obama's committee to study—study!—how we might lower our debt is a total waste of taxpayer's money.
Baker criticized one of the committee's members for saying that the interest on the national debt would be $2,000,000,000,000 (trillions) in 2020, whereas Baker learned from the Congressional Budget Office that the interest on the debt would only be $900,000,000 (billions) in 2020. What a relief! (That's about 1/3rd larger than the current budget of the Defense Department.) Baker even advocated that the Fed print money and buy Treasuries until we have spent our way to full employment. He did not specify when we might achieve this magic outcome.
This is a good time to quote Will Rogers (1879-1935).
It's almost been worth this depression to find out how little our big men know
Who also said—
An economist's guess is liable to be as good as anybody else's.
If stupidity got us into this mess, then why can't it get us out?
The bottom line is that Nobody In Charge knows What The Hell they're doing. That's what you need to know now. Central bankers, liberal economists at Washington think-tanks, subsidized thieves on Wall Street, federal regulators, etc.—they're all worthless but they've also got secure, good-paying jobs. Perhaps you don't. It is likely that you don't.
You need to prepare for a long economic siege. It won't be pretty. I don't tell people what to do because I couldn't possibly know what people should do. But here are some general things for you to consider—
- What is your income compared to your outlays? How secure is your job? (if you have one)
- Are you in debt? If so, how much? What are your debt service costs? How do these compare to your income? At your current service costs and income, how long will it take you to get out of debt?
- Where are you living? How pricey is it? Is that the best place for you to be?
- What do you own (rent, make payments on) that you don't really need? What constitutes the Good Life for you? What is essential? What is fluff?
I recommend that you go through this kind of exercise to get a handle on where you stand. And then create a plan to put yourself on a less risky footing—if that's possible. Many people are already living on a paycheck-to-paycheck make-it-up-as-you-go basis (unemployed or not). I say Good Luck to those in this position.
As they told us in the 1950s, it's time to Duck & Cover. The advice we were given in case of a nuclear attack then is just as realistic as the solutions to our economic problems put forward by the Powers That Be today. Enjoy the film.
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