I’m sure you got indigestion, like I did, when President Barack Obama said, “Change is coming to America.”
You and I knew it wouldn’t be a good change. But we did know, unfortunately, that he would change things.
Many of these “changes” are going to roll into 2010 and hold back the American economy once again.
Let’s talk about a few of the changes to watch.
One thing that Congress was sure to do before they left for their recess was to raise the debt ceiling — basically extending their credit card limit.
Yes, the Treasury gave out a May Day call and Congress scampered to the rescue. It appears that the $12 trillion in debt that we have now is not nearly enough. We evidently need much more.
They increased the debt ceiling for the Treasury to another $290 billion to get them through February.
They had to do it, or they couldn’t do things like pay interest on the gazillions of Treasurys out there to our foreign creditors.
What if they found out we couldn’t pay our bills? We couldn’t have that. So we had to allow the Treasury to print more money to pay their debtors.
Imagine an individual that doesn’t even have the same income as a couple of years ago, yet their credit card limits keep getting extended.
Is he or she in any better shape?
Or is it just not evident to everyone yet how bad the shape is that they are in?
I’ll say it is both.
They are digging a deeper and deeper hole for themselves and it’s just not evident to everyone under the sun yet.
However, the “day of reckoning” is coming.
And so it is with the U.S. as well.
Imagine if one of your kids were doing this. You’d have a fit.
Yet, for some reason, our government doesn’t think the rules apply to them the same way.
Secondly, it looks like Democratic lawmakers have swapped votes for health care.
You know me by now — I don’t think the Democrats have good intentions.
I think they’re just looking for votes. I believe they think if they give 47 million more people health care that they will get millions of more votes in the coming election.
Obama actually had the audacity to say that the passage of the health care bill would reduce the deficit. Mark my words. It will increase it.
The government doesn’t know how to be efficient or effective. If you want that, you have to go to the private sector where they learn how to compete and innovate. The government has no incentive to do that.
Therefore, you will see this socialist health care system weigh down America financially.
And wait until you see how the hospitals and health care companies deal with these 47 million more people coming into their system. That should be interesting.
I think you’re going to see that the health care system will turn out about as efficient or effective as the Post Office or Amtrak. Government doesn’t run anything on a large scale very effectively or that efficiently.
So this extra weight that America will take on financially will only act like ankle weights on a runner. It will cause our growth to be far more sluggish than it would have been otherwise.
Finally, your cost of living is about to shoot up dramatically.
When I look at the general cost of living, I look to two different gauges: the year over year CPI numbers and the CRB Index.
For the last eight months, America has been in deflationary mode. That means that the prices and costs of goods have been falling. However, in the month of November, the country finally went back into inflationary mode. That means the prices are officially on the increase once again.
As recent as October, the inflation gauge posted a -0.2 percent reading but in November it posted a whopping 1.8 percent increase on a year over year basis. I fully expect this reading to head up to the 5 percent to 8 percent level before 2010 closes out.
The other gauge that I watch is the CRB Index. That index tracks the cost of a basket of commodities. As the cost of goods rises, so does the index. In March, this index was around 180. Just nine short months later, the index has increased a full 100 points to 280.
Inflation is on the rise in America and that means it’s going to gobble up more of your paycheck than in the past.
(Note: It’s too soon for most people to tell it yet, but it will come upon many of them as unexpectedly as a robber in the night.)
What’s going to make these higher costs extremely hard to deal with are:
• Unemployment levels will still be extremely high in 2010.
• Those that have jobs won’t be getting raises or they won’t be getting raises that will keep pace with inflation.
• Americans don’t have the savings that they really need to handle these increases as they should — and their credit limits are tapped on their home equity and credit card lines of credit.
So, with America’s debt levels rising — and you add on the weight of the health care bill and the impact of rising inflation — it’s not a pretty picture.
These massive problems that we have coming are going to cause stocks to correct severely. It will cause commodities to rise very sharply. The dollar will experience a lot of volatility and instability.
Overall, I think this stagflation (low growth with very high inflation) could really hurt the U.S. dollar over the long haul and it could help the commodity currencies like the Australian dollar and New Zealand dollar.
Unfortunately, the economic craziness that we’ve seen over the last couple of years isn’t going to end in 2010.
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