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Play the IRA Game Smart - When planning for your retirement it is always wise to do it in the right order so that you have the plan with the...

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Recession News

Posted On: 2006-08-02
Length: 40:44

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Alright, a new intro there, threw me off a little bit. This is the forth official Vigilant Investor / Vigilant American Podcast. And I want to thank everybody for listening in, if you have been listening in. And I encourage folks to take a look at some of the past episodes. I've been notified that our last show, a week ago on the 26th was a little bit on the quiet side, and some difficulty, the feedback was that people were having difficulty hearing actually the host, and everybody else sounded just fine. So, hopefully this will be a little bit louder, and if you have trouble hearing me, let me know through e-mail or just through a post on our web site, which is vigilantinvestor.com. Also at ernharth.com where you can take a look at any one of the Podcast discussions there that are posted up on Wednesdays, and put your own two cents in there as to what you're hearing. And we're always looking for a little feedback there. In the meantime, word is out among some of the Talk Shoe staff that in about a week's time, hopefully, I'm not saying we can promise that, because it's a lot of work to get this sort of stuff together. But we are hopefully going to be able to have a live stream cast going forward, where you don't necessarily have to call into the 724 area code number to listen to the show live, which is at this point, probably a little difficult for some people if you don't want to consume your good cell phone minutes and so forth during the prime time hours. The other thing that we're going to do is also move our showtime to a more advantageous time. We might even go to a more frequent, we're still kicking this around a little bit, a more frequent show, a couple days a week, verses just one long one a week, where we have more opportunities for people to chime on in and condense things a little bit because we definitely, I know sometimes the subject matter can get a little heavy, and unless we have a lot of input from callers and so forth it gets to be just us droning on a little bit, which we don't want to necessarily have the show just to be us talking, we like to have some people involved. But in any event in the meantime we'll be letting everybody know when our next shows are, and we'll be definitely going to a post five o'clock slot where folks can tune in and ideally where east coast and west coasters can tune in simultaneously in a convenient way, where it's not interfering with work. It's been brought to my attention that basically a noon time show is best for the teen demographic, which is not necessarily the subject matter teens want to be tuning into, But anyway, enough about all the material there, lets get on to what's happening out there and the subject of the show today was, Are We Already in Recession? And if we take a look at what we talked about the past week and a half, we've been seeing a lot in the news about just how, we'll maybe the economy is not as strong as some people suspect it would be. And that's been of course causing some issues for well, heck Ben Bernanke at the Federal Reserve apparently, dealing with a lot on his plate. And just a couple of weeks ago, the past Federal Reserve chairman from back in the early 80's, Paul Volker, late 70's early 80's who helped pull the U.S. economy back out of the skids that it had attained thanks to a tremendous amount of mismanagement in the late, oh God, through the 60's and the 70's, basically destroyed the dollar value where the U.S. government essentially had to default on the U.S. dollar. Paul Volker, the Federal Reserve chairman made a lot of tough decisions and had things, you know, turned around in the early80's. Of course when you make tough decisions, sometimes they're painful and that's what needs to be done and the pain was through a pretty severe recession. And especially the local folks here to our community when we are, we broadcast here from Pittsburgh, the Pittsburgh area, we know first hand with all the steel mills that were closing. Boy, I was pretty young then, I'm a thirty-seven year old now, but you know, boy when I was a young kid, I remember watching the news every night and seeing protesting going on a lot of pickets out there, a lot of people upset just about what was going on with their jobs. And I watched as a lot of towns, the smaller towns, community towns around the Pittsburgh area, closed up during that recession simply because the U.S. steel industry had gotten to such a point where it was just not efficient enough to sustain itself and survive through a recession, and the reality of that is that you know Paul Volker had to do the things that made that clean itself up and force the steel industry, what's remaining of it in the United States, to clean itself up. But it also benefited on the flip-side what was maybe painful for steel workers and those who were involved in the industry; it benefited the U.S. consumers tremendously who were able to suddenly, you know, thanks to all those policies Federal Reserve wise, it freed up some of the higher cost production and allowed consumers to get better deals with other suppliers. And some of that also came through of course with some of the changes and regulation and a removal of trade barriers, which just basically provided efficiencies to the U.S. economy that had not been there before. Well, anyway, back to my point about Paul Volker. Paul Volker was saying, about a week and a half ago, two weeks or so, that the current Federal Reserve governor, the man in charge appointed by President Bush basically, you know he's got a much, much, much harder time ahead of him and a difficult situation than did Paul Volker during his tenure, because the variables today are so much more complicated than what he had and as Volker put it, at least he know the enemy he had to fight, and how to fight it at that point. Basically inferring that today's situation just has so many different angles that you could be taking a look at. And, how do you adjust the economy so it will track appropriately. Of course, now I would step back and say is it the business of the Federal Reserve to even be tracking the economy? You know if you take a look at, or are trying to control the economy, if you take a look historically going way back when, and it's a little difficult to assess it fully, but if you go back, way back in time and look at what's been going on pretty much since the Federal Reserve was created you see the advent of really what is the super bubble and the big boom, turning a bubble, into a bubble burst and into a crash often times. And, we've experienced that in the 20's, we've had a couple other less, less severe bubbles that burst that didn't necessarily result in a severe depression like we had in the 30's. But we've also seen a brand new phenomenon that came in to existence thanks to the Federal Reserve. And that is the, basically ingrained institutional inflation, where you constantly are seeing your purchasing power and the dollar eroding. If we go back in time we could take a look at the essential purchasing power of the dollar and go back to, you know pretty much 1800 through 1911, which was when the Federal Reserve was legislated into existence. I guess 1913 or 14 was when if finally got in action. We look at the dollar's purchasing power, and the dollar purchasing power pretty much maintained is parity is didn't lose it's purchasing power, it was backed by gold in those days, where really what the dollar represented was not something different than gold, it was gold. It was a receipt for gold. And the dollar by definition was about one-seventeenth of an ounce of gold per dollar and you cold go to the bank and pretty much get your ounce of gold for seventeen dollars, every seventeen dollars you showed up with. Now the bottom-line with that is that prevented people from printing dollars out of thin air, from pretty much counterfeiting. And the idea was to keep that from happening. But once the Federal Reserve came into existence, the precursor, basically preventing banks from, well gosh you have to kind of go back a little bit further not to get off on a super tangent here, but banks basically exempted themselves from the rules of counterfeiting. And, I think it was the 1850's, I'd have to double check that, but it used to be that banks were prohibited by law from, you know, essentially fraudulently issuing notes or receipts for gold that they did not have on deposit. Essentially you know, you would trade their notes with, as an easier way of making purchases verses carrying around lots of gold. We look at what a dollar says on it, it says a Federal Reserve note. And that's the legacy of, you know, when the Federal Reserve came into being, they were issuing these and it was redeemable in gold. You went to any bank and it was redeemable in gold, it was a note backed by gold. Now, when the 1850's rolled around banks exempted themselves from the rules, legislatively, congress basically enabled that to happen. And that's a fight that was, boy that started pretty much from day one, once the United States became a country and had its own constitution. Banks have been hammering on having the ability to, you know, print money that, print notes for which they did not have anything to back up those notes. In other words they wanted, they had so many ounces of gold, technically prior to that they were only allowed to issue enough notes through that one, seventeen dollars per ounce of gold; they were only allowed to print enough of those notes that they had the gold to back up. Once that law was changed, they were able to issue more, and that was the advent of what they call the fractional reserve banking. And, of course there are a lot of arguments on the economic front as to why that made sense and why that was good for the economy. But, primarily it was good for bankers, I mean, wouldn't we all like to be able to print money in our basements and lend it out to people and earn interest? Wouldn't that be nice? We could just have our own personal dollar printing press. I mean you're essentially printing profits out of thin air and that's what bankers wanted to do. But every now and then what would be realized is if a bank got carried away, people who were holding that bank's notes would recognize that, you know what if I go back there and I try to get my gold out of the bank, you know, the actual wealth that this note represents, if I want to get that returned to me, the bottom line is the bank does not have enough gold to supply that. And if everybody were to go at the same time to get their gold out, you'd find that there'd be a run on the bank. Because the bank had issued more notes than which they had to support in ounces of gold. So, bottom line is that the Federal Reserve came into existence as supposedly the way the back up that system to prevent the banks from failing and in the event that a bank had a run on, the Federal Reserve would [...] isn't that a great thing? And in reality all it really did was back up a fraudulent system that was, you know, much to the benefit of the bankers and the people who had a tremendous amount of money. But if you look at the big names who were behind all that stuff it is of course the lost child though the House of Morgan, Morgan Banking, J.P. Morgan. The Rockefellers of course were involved, and the modern Citibank is now an offshoot of the Rockefellers and all that. But the bottom line is the Federal Reserve came into existence. And, let's wind this all the way back to where I got off on this tangent. The dollar up to that point maintained parity, where pretty much it didn't see a tremendous amount of inflation because banks were always held in check by a threat of a run on a bank. They could not print too crazily, and counterfeit too crazily because eventually people would catch on and stop using your notes. And there would be a run on the bank and then all the bankers would go bankrupt and they would be disgraced. And even if it wasn't illegal, they'd go belly up. Bottom line is the Federal Reserve came in and if we were to look at a chart of purchasing power for every one hundred dollars, it maintained itself steadily though the 1800's with a dip entering the War of 1812, as well the Civil War, where the United states actually had to do some printing of notes and had to do a lot of inflating in order to pay for war debts and finance the war. But pretty much within a couple of years that corrected itself and parity was restored back to the initial one hundred dollars of purchasing power. 1914 the Federal Reserve starts getting into the act and immediately, immediately you see the advent of loss of purchasing power on an institutionalized steady basis. And to the point where in 1914 a hundred dollars gets only about two dollars and ninety cents of purchasing power today. It's a crazy, crazy, crazy ratio. But, that never existed before and yet Americans and frankly every country has a central bank, you know across the world. All citizens of the world have been kind of duped into this belief that a central bank is out there managing the currency, when in reality what they're doing is printing money and making a lot of profits. I think what a lot of other people don't understand is the central bank in the United States, the Federal Reserve is not some federal institution, it is not a government entity. It is a conglomerate, a cartel of private banks. But, bottom line is that we have this institutionalized inflation in the system, it's built in, it's programmed in there. And it's designed to every year, you know, increase the money supply and correspondingly if we look at the core premise behind printing money out of thin air, you're not creating anything other than a piece of paper and there's nothing to back that up. There was no labor, there was no production, nobody did any savings, nobody invested anything nobody built anything to create any wealth. It simply is, you know, out of thin air. And I mean today you don't even have to print the paper, you just simply add a couple of digits, a couple of zeros and a decimal point in a computer and you have a billion, two billion, three billion new dollars. And what the Federal Reserve has essentially done, is it gets the wealth from those from existing note holders. The only way those note holders, those new notes those new dollars have purchasing power is at the expense of everybody else who already is holding their wealth and storing their wealth in existing U.S. dollars. I could get on in more depth about the racket that the Federal Reserve is; I think it is a real sham on the U.S. citizen. And I think central banks generally there are really a bad idea. But, apart from you know, beating that horse, I think what I'm going to try to do is get a show and bring in a guest who has a specialization on the Federal Reserve and what it has been doing. We can talk about that more in depth. But lets go fast forward to my whole point. Here we have Ben Bernanke today dealing with a potential recession, and we're seeing the numbers showing a slowdown. The latest economic data is showing a rapid cool off in the housing sector and consumer spending has died down. And, we're kind of chuckling at ourselves at our firm over at Ernharth group, you know. And, of course at the Vigilant Investor, just taking a look at this, you know everybody is puzzled as to why this is happening. And largely that's because largely out of favor these days, there's a phenomenon over the last 25 years or so that people stop paying attention to the Federal Reserve's monetary inflation policy. That they are constantly printing money, and moreover that in the last 10 year or so they have really cranked up the pace at which they print money. The whole concept of inflation is thought to have been beaten and licked and so forth. And the reality is that it was merely vented and converted into something that was less identifiable than conventional inflation. And I say inflation with almost, you know, the parenthesis around them in that inflation today, everybody kind of use that as the rising prices, and they no longer actually look at the real definition of inflation which was increasing your money supply. The rising prices are merely a symptom of the effect of, they're an effect of inflation. So if you increase your money supply, invariably you're going to have rising prices. However in a globalized world like we have today, a lot of inflation is vented off shore, it's done off the dollars spent abroad into the trade deficit, it's a large reason why the trade deficit is so massive. It's come back to us in the form of really, really cheap goods manufactured abroad. But the only reason that's happening is because were we not to have open borders, the prices of all goods in the U.S. would have hyper-inflated long ago. Because we've essentially, I mean, from 1995 to 2002 for example we doubled the money supply. And since then, 2000, that pace has increase even more rapidly. But back to our point for this week is are we already in a recession, and I would say, yes we are dipping into that. And largely we're seeing the head scratching at this point, which is wow, boy, you know housing prices are coming down and consumer spending is going up. And if we watch Ben Bernanke in front of Congress last week or whatever it was, a week and a half ago, he's getting questions from California Congressmen saying, "hey you know we need to have, we've got problems. Our prices are rising in energy, gas prices are going up, food prices are going up, what are you going to do to stop that? And, we're also having a problem in California with our real-estate prices dropping. What are you going to do to stop that?" And you know, here you have Ben Bernanke up there and you know granted he's to blame for the scenario or rather his institution is to blame for the phenomenon that we're seeing here rolling out. But, what's most alarming, is that you have Congressmen believing that they can have their cake and eat it too. What you are really talking about here is, here is a guy who wants prices not to go up, but then he wants prices to go up. Viewing housing and energy as two different types of things, as if they're not related. And it just shows that, granted they are two different things, but prices going up is a related phenomenon, and what he's missing is the connection to the money supply issue. And the reality is that that housing in California, the LA areas and San Francisco areas, you can go to Florida, go to Boston, New York - the break neck pace at which houses have increased in price has been the direct beneficiary, was directly consequent to the super low interest rates, which is a product of the banking system and increasing money supply. So as long as those interest rates have remained low, that money has vented into the housing market and has driven prices up. But at the same time, all that money then, after it's been spent in the housing market starts circulating around in the economy. You know, maybe it's just going directly to the home builder, or people who are you know, in the housing business or a lot of it actually has come through home equity loans as well, where people have seen their house price go up you know, a 150 grand, so they decide to take a home equity loan and dip into that, and start spending money. That's all great, and it makes you feel good that your house is going up in value but simultaneously, you start spending that money and it starts circulating around the economy. Not just around the U.S. but around the globe and eventually it's going to start driving up prices. So, the consequence now is that we see gas prices going up, we see college prices going up way ahead of pace. Largely that's because people borrow from their home equity or they take loans at super low or below market rates for college. We see medical expenses going up higher and a lot of other things. And lately we've been seeing the food go up a lot more. And that's largely because this money is sloshing around. When you more than double your money supply in about seven years, seven, eight years, you're looking at, invariably prices are going to increase. And, even in the face that China is building things more cheaply than anybody ever dreamed possible. Now, the consequence of all that is that in the U.S., we cannot manufacture things and keep prices low anymore, like we used to be able to. It's just impossible. We're we to close our borders, we're we to put up protectionist barriers to prevent the Chinese or anybody else from selling to us, immediately prices would go up 20, 30 percent. Who knows how high. But the bottom line is that we would have inflation contained in the United States and that would begin reverberating around it very quickly. So you have a problem there. The other thing is that over the past couple of years is that our economy has largely grown dependent on people borrowing at these super low interest rates, and then, spending on that borrowing. Actually, our savings rate in the United States is, has dipped as low as negative 2 percent in personal savings. It's hovering right now between negative 1 and 2. And the debt level is just going through the roof as well. If you go to our web site again at the vigilantinvestor.com, you'll see from last week on July 26th, we posted up total credit market debt as a percentage of U.S. GDP. And the latest figures we wrote in there about 9-30, September 30th of 05 was about 308.1 percent of debt to GDP, meaning that our debt level verses our GDP, which is our economic growth is just, you know, going through the roof. And the problem there is that the U.S. consumer is beginning to, we've been saying for a long time on our, on Vigilant Investor is that the consumer is basically beginning to cave under the pressure of not being able to afford any more spending. They've got to start servicing their debt and moreover, we're now seeing rising interest rates out there, where that existing debt is getting more expensive to service. And as that debt gets more expensive to service you know, you better darn well hope that you have it locked in, in some form that's not going to see that the interest rate increasing as rates start increasing. Because you know, adjustable rate mortgages or you know, revolving credit type debt, you know, sees the interest rated go up over time and then the payments get bigger and bigger and bigger on a monthly basis just to maintain the existing debt. And that means less spending. Now that's on one hand just to maintain current debt. Now, if people also want to start cleaning up their balance sheet, and get rid, start to get rid of this record amount of debt that's just unprecedented, and any, in the history of the world let alone the history of the United States, you're going to start seeing that you know, even a marginal decrease in spending is going to result in a recession. And that's what we're beginning to see now, is that, yes, we are actually dipping into a recession because people are starting to tighten up. Either out of the fact that they're having a gun pointed at them, or just because you know what, they're starting to realize, you know I probably ought to start paying down this debt, and I don't need to be spending as much as I was before. What we also are seeing now is that even the give away interest rates are not getting people to jump at debt like they were, like, it worked well for the past couple of years. 0 percent financing is no longer floating peoples' boats for cars. And adjustable rate mortgages of course, where you get below market rates for a couple of years just, you know people are recognizing that just to deal with the devil, where you might get a low rate for a couple, but boy you're really rolling the dice there. It's hyper-risky. And I still can't believe that, well actually I do believe, I mean it happened all the time, I was getting calls from mortgage brokers trying to forge relationships with our firm, where if were to get our clients to cash our their home equity they would suggest to us that they would invest in equities in the stock market. So you can imagine that. And that was a common, you'd get one of those calls, you know once every couple of weeks with somebody trying to work a relationship. And they'd say of course they'd refer their clients that walked in their door to us if we could work a relationship. And thank God, I mean, you know, that you know, a good number of advisors out there who don't jump at that kind of opportunity, but I'll guarantee you this much, that you know, there are a lot of people who were jumping at the opportunity to get their clients to borrow at you know, maybe 4 percent or 3.5 percent with the intent to invest you know into the stock market and get and average of 10 percent. And of course anybody who has been monitoring the stock market over the past couple of years, those of you that have opted for that deal, you're probably you know, lucky if you're breaking even because the market has not be a lot, it remains somewhat of a secular bear market. But in any event, moving on, what we are seeing now, we think is a recession. Now, let's also take a look at something else here, and then we're going to wrap things up a little bit with a shorter show today. We often times gripe, at Vigilant Investor, about how the official numbers, the statistics coming out of the government are getting manipulated. And, in the past we've talked about CPI, that's the Consumer Price Index, which is supposedly an official indicator of inflation in the economy through rising prices, how that's getting manipulated. GDP, Gross Domestic Product is an offshoot of trying to gather enough information to determine, you know, how's the growth in the overall economy doing. What kind of growth are we experiencing in the U.S. and is it good or is it bad and so forth. The official numbers we've been getting out of Washington have suggested that the economy has been you know, growing reasonably well. 3.5 percent in 2005 was the number that we heard, 2004 it was 4.2 percent. 2003 when we were emerging from our little dip into recession and it was [2.7] percent. As we suspected, they probably would, they've just come back and done some after the fact revisions, which is very, very common these days because they are overstating these numbers. 2003 dropped from 2.7 to 2.5, not huge there, 2004 dropped 4.2 to 3.9 and in 2005 dropped from 3.5 to 3.2. But even in the face of those revisions it still remains heavily overstated and that's largely because GCP is the beneficiary of an understated CPI number. And, on one level, or for one reason that that's why it's overstated, CPI, if you're rigging that number and inflation is really running at seven percent, but you're telling everybody it's running at three percent, well, you know, you'd subtract 3 percent from your gross GDP number to come up with a net GDP number that looks a lot better. And then it's much better to subtract a smaller number, it's going to make your economy look even, look like it's a lot better. We've talked about CPI before, you know they're doing all sorts of statistical manipulation to adjust what used to be a simple static basket of goods. They now replace items in it so it doesn't look so bad. If the price of chicken goes up they'll replace it with hamburger, or if the price of steak goes up or what have you, they'll replace it as well. The other thing that they will do is hedonically manipulate where they will adjust downward for improvements in quality. So they'll say, "you know what, your product last year was not as good as it was this year, and even though the price went up or the price stayed even we're going to subtract from that number an assumption that actually the price was that you got that benefit. So we'll add a deflator to it." And a great example that we often talk about is one that I learned from John Williams, Shadow Government Stats., great web site out there. But it's basically when we were in the 1990's, the U.S government passed a law, Congress passed a law that required an additive to gasoline to be added in order to reduce emissions. And that additive made the price of gas go up about 10 cents a gallon. And consequently though, when it came time to gage it's contribution in a CPI format in the Consumer Price Index the statisticians argued that, "well because we have an improvement in the environment, the price of gas really didn't go up 10 cents." You have that hedonic manipulation going on. They'll do the same thing with GDP, of course subtracting a fudged CPI number makes your GCP look good. And at the same time, if you were to take a look at the GDP fudging that goes on, and again we've talked about this before, but you know, if you bought a computer last year for 1000 dollars and now that computer is still 1000 dollars, but let's say it's 10 percent faster just to keep the numbers simple, you got a 10 percent boost in your performance in your computer even though you spent the same dollar amounts. So, in reality, as far as GDP is concerned, you actually spent 1100 dollars. That extra 100 dollars reflects that extra 10 percent of horsepower you got in your computer. It doesn't work exactly like that, but they're manipulating to the upside to give the GDP a boost in a lot of ways. These are things they did not do 20 or 30 years ago. CPI prior to the 1970's when we had the hyperinflation then was a lot more genuine number, very simple basket of goods. If prices went up, they went up. Economic growth was simply, you know, what are people doing, or not? And that was worked into the equation. It's not to say that these numbers aren't complex, statistic calculations are, not to say we should oversimplify it but there are things going on that are problematic. So, we take a look at real GCP, it's very likely that if you go back and calculate it, and there are some services that will do this, they'll calculate GDP in a way that it used to be calculated without the manipulation on it. And you're looking at a number that is very much more likely in a negative 0.5 percent. So, a half percent in the negative column right now. And, that means a contraction of a half percent, once you start removing all those inflation gimmicks. That's, you know, pretty much where we suspect that things would be about 9 months ago, we started saying that we expected us, the U.S. to drop into a recession and we just kind of felt it was inevitable, all these other issues going on there with debt loads...The fact that the recession of 2001, nothing really was cleaned out of the economy, all those problems that were there were never cleaned out. And here we are, four years later, five years later and what do we have to show for it? We did a lot of spending, people have spend more than they probably should have for housing, but for you know, thanks to the fact that below market interest rates, emergency market interest rates were created. The money supply was cranked up. And what we really do is paper over a lot of problems and merely enable them to not, not get better but rather get worse and now here we are facing the next stage which is okay, now what, with a recession on our doorstep. The last number that we probably ought to look at related to recession is the number that is unemployment. And that number is, is largely fictitious these days. If you look at the unemployment stat., what's not accounted for is the fact is that they literally statistically remove people who have decided to not work. Able bodied people who simply are not out there looking for jobs are not considered part of the labor pool, and are manipulated under the unemployment number. So, while you hear politicians pelting you know the greatest economy of all time, you know, 4 percent unemployment or 5 percent unemployment, the reality is it's probably closer to 12 percent if we were to use, the unemployment, you know, the basic way of calculating unemployment as you are able bodied and you are not working, you are therefore unemployed, whether you're choosing to do so or whether you just can't find a job. Bottom line is if you are unemployed, and we're not going to pretend that you know, inner city areas shouldn't be tested and included or that just because you decided you don't want to work, you're not part of the labor force. You know that's just ridiculous. Bottom line is that you know, the question is, again, are we in a recession? And we would say yes we are, we believe we are in a recession already. And while you will hear in the news right now discussions of, you know, is the economy slowing down too much, should the fed raise interest rates and so forth. The reality of that, I don't think there's a whole lot they can do one way or the other that's really going to improve the economy. What needs to probably happen is rates need to go up or better yet be allowed to float freely. The Federal Reserve needs to get out of the business of printing money as it has. But that's going to result in a very painful correction if they do that. And, instead what I suspect what they are going to do is crank up the money supply and try to inflate our way out of this problem [...] scale, and even on a global scale because with the way the international economies are intertwined today, if the U.S. consumer breaks down, I guarantee the global consumer is going to break down. Global production is going to start falling given that, you know, the United States percentage wise contributes so much demand to the world wide economy, and that invariably, if the U.S. consumer buckles under pressure you're going to see the global economy going to a [...] The last point that I would like to make, and this is a lot of people who say that, you know what, we don't have to worry about the U.S. consumer slowing down because waiting in the wings are U.S. businesses, which usually step up at this point and start spending based on what these analysts who are, proponents, are seeing on their balance sheets. And that's, largely, U.S. businesses have been going through a lot of changes in improving their cash flow, they've cut oil out of fat, they're sitting on a lot of cash generally, they've gotten a lot of efficiencies, albeit largely through off-shoring a lot of labor, and doing some things that basically have if anything are symptomatic of why, you know, the economy having a lot, much deeper problems than a lot are willing to admit. But, bottom line is that if you were to take a look at what motivates a business to invest capital and [...] therefore contribute to GDP and pick up where the consumer now is buckling and leaving off. You've got to ask yourself this one question: why on earth would a business want to invest in the U.S. economy to expand or to grow or to remodel or what have you when the U.S. consumer is in a position where they're basically getting really, really tight, and they need to get their balance sheet in order? The worst time to probably you know, do that kind of investment is when U.S. consumers are really uptight, and, not uptight in a personality way, but rather up tight against the limits of what they can spend, their wages are stagnating and debt levels are so high and prices are going up and they are watching their discretionary income vanish. I'm a businessman, and I'm selling TV's or whatever the heck I'm selling, I'm not banking on the U.S. consumer to be there for a least a couple of years, and I'm going to hold off on investing today because it's just going to be a losing battle. So what I'll probably do is instead, I'll, you know, put that money aside and try to maintain my purchasing power for when the dust finally settles afterwards. And that, ladies and gentlemen is classic recession 101. Where recession starts getting going, people start tightening up, more people start tightening up, the recession gets worse, people tighten up more, the recession gets worse until finally the cycle works itself through. And the only open question in my mind is how deep will that recession go? Will we get into a soft depression? And last question in my mind, which I think is the answer I'm pretty certain of is that, will this be a heavy inflationary or stagflationary recession. And I'm tending to lead towards stagflationary because they way the U.S. works today, what the people want, the people get. And usually, the latter phase of that kind of democratic ideal is "the people get what they want and good and hard" to quote H.L. Mankin. And it's not to be crass, it's not to be all smug, it's simply to point out the reality is that politically right now, you're not going to find a lot of politicians saying, "oh, lets go through a fiscal responsible cleaning up of the balance sheet..." a) it's against their nature, politicians are out there to buy your vote, and they're out there to give you free lunches and that's why we have these massive federal trade deficits, or excuse me, massive federal deficits and it's why Social Security is unfunded, but nobody wants to deal with it, they just keep punting those problems to the future. But, on that note, because of tech problems that we had earlier, we were a little late and also, we just don't have a lot of listeners today, whatever the reason may be for. We're going to be closing up our show for today, coming in at just a little bit, you know, under 40 minutes, a little bit shorter than it has in the past, been. But, what we're going to do folks is again, we're going to try to move the show to an evening slot where more people can tune in, and we're also going to try to do maybe the [...] frequently and please come back and also check out, because we're going to start getting some guests on board here. And our goal is to have everybody from people who are managing hedge funds on the contrary standpoint to experts on, like I said before, the Federal Reserve and so forth. So, we'll be hitting those kinds of issues. But also, we're going you know, to make sure to not just be focusing purely on the economic front. A lot of people like the economic side of things and we get a lot of positive feedback on the Vigilant Investor site, but in a more broad sense we want to make this discussing overall [...] you know, politics as a whole, history as a whole and what this means to you. Not just as an investor, not just as a, you know, somebody who might be the head of a family, or a husband and wife trying to make sure that you are navigating the environment correctly. But, we think it's really important because if some of this stuff comes to really hit the fan, you just don't want to be, you know, unaware, that you want to have your eye firmly on the ball, and be [prepared] or, at least not get blindsided by it. So, that's really the purpose of our show is, you know, our slogan is, "Don't Be a Fall Guy." That's largely because we don't want you to get blindsided. So, tune in, and please tell your friends about Vigilant Investor and please, please, please call on in and try to attend our live streamcast, and dial in our call in number, we want to make this a dynamic show. We did get questions in the past, and you know what, we're new. But we have got questions in the past that really livened things up and we look forward to those. So, tune in and we'll discuss and go forward. So, thanks very much everybody, and that's all for today. And, definitely go to Vigilant Investor and look for our next show as well as our ongoing posts and please visit other Talk Shoe live shows. A lot of good material out there, and it's a great service, you may want to check it out yourself. So, take care everybody and we'll talk to you soon.

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