All of my friends who know me well know that I love World War II history. As a matter of fact, I wish I had lived at that time rather than now except for the fact I never would have met my dear wife Elena!!!
My mind goes back to 1941 and Singapore. A couple of Japanese armies were moving down the Malay peninsula to capture the city. The Royal Navy had been rendered helpless with their major capital ships sunk by Japanese air attacks. The RAF had been reduced to a few planes with no fuel or ammunition. The RAF pilots were being evacuated by ship to Australia. The small British garrison knew that it had no hope of defeating the massive Japanese armies.
Were the people of Singapore like the people of London or Stalingrad? Were they prepared to fight to the last man or woman to defeat the Japanese? No they were oblivious to what was going on nearby. There were grand parties being held all over town. People were dancing in the streets. You know the old saying: "Nero fiddled while Rome burned."
Now let us move forward 67 years to now. Let us focus on the finances of the USA as follows:
1) A deficit approaching $9 trillion dollars. In addition you have trillions of dollars in unfunded Social Security, Medicare and pension liabilities.
2) A gigantic trade deficit that averages $168 billion per year or more.
3) State and local liabilities going into the trillions.
4) A war that will end up costing trillions.
5) A subprime loan crisis that could end up with bank losses of $1 trillion US dollars.
The whole thing is now a house of cards waiting for somebody to pull one card out of place. The whole thing would collapse. The dollar would crash. We would no longer have the reserve currency of the world (The Euro would take that honor). We would slip into sovereign bankruptcy, as Argentina did in 2001.
Asian investors buying US government bonds keep the whole charade going. It is mutual assured destruction. If they stopped US dollar investments, they would suffer massive losses.
David we have not seen any of the three major presidential candidates "come clean" with the American people and say the following:
"Folks we are broke. We have to roll up our sleeves and work together to recover our money."
Everyone in the market hopes that this mess will quietly "blow over" and the American economic machine will "right itself." They grab onto to any piece of good news as proof that everything is going to be all right. They move out of the safety of gold in the false assumption that everything once again is OK.
As I work on putting together my new company all day long, I listen to Bloomberg TV in the background. Yesterday there were several experts, most saying that Gold was passed it prime. One major investment manager admitted all of his funds were in gold and cash because he wanted safety. Need I say more?
with kindest regards,
-JackW
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