Our Worst Nightmares Unfolding

The Ministry of Truth:  war is peace; freedom is slavery; ignorance is strength. 

A complete failure of democracy and Rule of Law is happening in epic Orwellian/Randian proportion as I write this.  The truth of this statement hit me hard when I was reading through the latest economic report by John Williams, which can be procured at http://www.shadowstats.com/.  Caution:  only read his work if you are willing and desire to know what is really going on this country.  After reading through it, I commented to a long-time colleague: "how can you do anything except slit your wrists after reading this? lol."

It had occurred to me that the portrait of our system as fabricated by the Government and Wall Street becomes more distorted from reality by the day.  Williams describes meticulously why the recent data on key economic data released by the Government is highly inaccurate. The Government is surely aware of the problems with their data series if an outsider like Williams can figure out the problems.  And yet the Government does nothing to correct the problem. Complete Government deception:  this is one of the crucial aspects of Orwell's dire warning as presented in "Animal Farm."

"When the truth is found, to be lies..." Let's look at housing. I almost fell off my chair howling in laughter when I saw that Alan Greenspan gave a speech in which he proclaimed that the value of housing in this country needed to increase by 10% in order for a sustainable economic recovery to happen.  Who slipped him some LSD? 

At the same time, a report was issued by Zillow.com, which maintains a comprehensive nationally-based real estate database, which stated that close to 30% of all homes are now underwater vs. the mortgages on them.  What would be even more interesting to see is a breakdown of how much these homes are underwater.  And even more interesting would be to see the true percentage of homes that are underwater using rigorous mark-to-market values for these homes. 

For instance, there was a report in the Denver Post two days ago that home prices rose in Denver by over 7% from Jan 2010 to Jan 2011.  I would bet the ranch that the values used to calculate the Jan 2011 are egregiously incorrect.  I can't tell you how many "price reduced" signs have sprouted up on top of "for sale" signs all around the metro-Denver area, and in every neighborhood based on wealth demographics.  Maybe the Denver Post is using the "offered" price to caculate its metric rather than the ultimate "short sale" or "negotiated much lower" actual closing price.  I also know that the now-prolific "closing concessions" from the seller are never factored in to the closing price that is reported.  These include real dollar items like broker fee concessions, money spent on required physical improvements, seller financing deals, etc.

The fact of the matter is that the housing situation in this country gets worse by the day, despite the fictitious fabrications of economic vitality ("green shoots") and low inflation ("geez the CPI shows 2% inflation this year, that's too low" - Bernanke) conjured up by our Government, Wall Street and the media - collectively known as our Ministry of Truth.  And to make matters worse, it appears as if this country's largest housing banker, China, is getting ready to pull the plug on its massive holdings of Fannie Mae and Freddie Mac paper.  Get ready for QE3-cubed when the dam holding that flood of worthless garbage breaks.

Speaking of inflation, is there anyone reading this who truly believes that inflation is not a problem? That paraphrase above I tributed to Bernanke is actually a paraphrase of a statement he made during his testimony in front of the House Budget Committee last week. And if you read/listen/watch only to the mass media (even NPR for chrissakes), you would believe Bernanke's proclamation. But if you pay attention to what is happening globally across all commodities or see the reports coming from every single sector of the chain of food production and distribution business in this country, you will know that you will soon be experiencing double-digit price increases at the grocery store, in your utility bills and at the gas pump. Actually, my cost of gasoline has already increased close to 10% since November 2010.

Cotton, wheat, rice and soybean prices are starting to go parabolic globally.  That's the truth.  The real, true, meticulously calculated jobless rate in this country is likely well over 20%.  That would include the whole pool of employed people working part-time who want to work full-time and the pool of people who have altogether given up looking for work, especially since they can sit for 2 1/2 years and collect jobless benefits or qualify outright for food stamps and other forms of Government largesse.  Let's look at hard numbers:  close to 15% of the population is now getting food stamps and 14% of the labor force (those working plus those not working but supposedly looking) are collecting long term jobless benefits.

There is a way to shelter yourself from this brewing economic hurricane if you are fortunate to still have enough money to jump into the game in a meaningful way.  That would be to move as much of your dollar-based wealth into precious metals as possible.  But here's what I said to one of  the largest investors in our fund when he asked me yesterday about safe-havens: 

Panama is good. Brazil, Colombia, Argentina, Peru. I don't really know for sure and I'm not sure anywhere really will be safe. Hopefully this takes longer to collapse than we think it might...I've always told people that I can tell them how to get to "the other side of what's coming," but I'm not sure you're going to want to see the other side...

That is what I said verbatim.  At this point I'm going to continue accumulating precious metals, enjoy what I can while I can and continue to place faith, ultimately, in the ability of the human spirit and ingenuity to figure out a way to get rid of what we have now and start from scratch using the Constitution as platform.  But until that happens, it's going to get a lot more Orwellian/Randian and brutal in this country.  If you want to see how this unfolding, read/re-read "Animal Farm" and "Atlas Shrugged" and then use the lenses of vision provided in those prophesies to see what is really occuring in our system.

I'm going to go skiing for the rest of the weekend with friends and family.  I hope everyone else has plans to enjoy the weekend!  Ciao.