Vol. XVIII, No. 23 Summer Issue • 2010 The History of The Future: Trends 2012 The Second Greatest Story Ever Told Episode VII By 2012, no amount of confidence, hope and optimism could cover up the crash. No country has escaped unscathed; the economic carnage was global. Double-digit unemployment, real estate worth less than half its 2006 peak value, trade flows reduced to a trickle, manufacturing stagnant, retail decimated … how could it not happen? The injection of tens of trillions of stimulus and bailout dollars (euros, pounds, yen, yuan, etc.) into failing nations, banks, brokerages, and businesses to resuscitate the world economy following the “Panic of ‘08” was a bankrupt policy that would bankrupt the world. Back in 2010, with the money fixes kicking in, the economic jolt was widely interpreted as a remedy, rather than just temporary symptom relief. Yet, at the most basic level it should have been self-evident that governments could not endlessly monetize debts, endlessly print money backed by nothing, loan it out for next to nothing, and expect the result to be a productive growth cycle. Taking on new debt on top of old debt only created more debt. The government ploy was transparently unfeasible; it was the equivalent of a distressed homeowner, unable to make payments on a second mortgage, taking on a third mortgage … which in the real world was next to impossible. But in the fantasy world of high finance, when it came to failing big banks and broken big brokerages, what was irresponsible and unthinkable in the real world was deemed necessary economic policy. Lauded as “Titans of Industry” by President Obama and celebrated as “the Best and the Brightest” by the business media, the rescued financiers were, in reality, no more than bookies in Brooks Brothers clothing. Titans of what industry? What railroads did they build? What steel did they manufacture? What oil did they drill? What autos did they produce? HARRY THE HORSE They were bookies. They placed bets for people gambling their money in the hope of picking winners. In the back alleys it used to be called “playing the numbers” or “playing the horses.” On Wall Street it was called “investment strategy.” But unlike the common bookie who only took and placed bets, these “Titans of Industry” were also racetrack touts, suckering clients into betting on a field of “exotic financial instruments.” Paraded as thoroughbreds, they were little more than nags in silks: Credit Default Swap, Esoteric Derivative, Auction Rate Security, Synthetic Collaterized Debt Obligation, Enhanced Special Investment Vehicle — a stable of fancy frauds in full gallop in the Wall Street Derby, “The Race that Would Wreck the World.” With the Wall Street bookies making mega-billions in bonuses and bettors with an inside track winning billions more, the entire world wanted a piece of the easy money action. From playing interest rate spreads in Iceland, flipping buildings in Ireland and buying condos in Spain, to safer bets on Greek bonds and US Treasuries — everything was promoted with an implied guarantee of profit. The underlying assumption motivating the investor was that you could make money by doing nothing … all you had to do was put it in the right place. Regardless of how it is played or pitched — high risk or “… Financiers were, in reality, no more than bookies in Brooks Brothers clothing.” Empowerment — Not Fear With every passing quarter, Empire America digs its own grave deeper. A conspiracy theorist might make a case that evil forces bent upon America’s demise are deliberately pursuing policies to that end. But since I am not a conspiracy theorist, I am forced to conclude that the spectrum of destructive acts-in-progress is the handiwork of the power-mad and greed-driven interested only in themselves and therefore either blind or indifferent to the consequences of their actions. This issue of the Trends Journal® may appear to be America-centric, but since the US is, by far, the dominant economic and military Superpower, its demise and the subsequent power vacuum created by it will be so dramatic that virtually no place on earth will be immune to its effects. The purpose of the Trends Journal® is to alert, inform, instruct and empower our readers. This issue is focused mainly on macro financial and military trends and how they are being (and will continue to be) manipulated. Our intention is to enable our readers to recognize the Grand Scam, navigate through it and not be victimized by it – the sure fate of those who smoke the “optimism opium” pushed by media shills for their power-mad and greed-driven masters. In essence, this Trends Journal® is a lesson in Close Combat martial arts: attack the attacker. Action is faster than reaction. The same holds true for the future. You, our readers, know the future is coming. Attack it before it attacks you! We consider Trends Journal® subscribers to be members of the select “20 Percent Party” — that slice of the public that shows itself capable of questioning authority and thinking independently. The Renaissance that is poised to follow the fall of Empire America — and the attendant global chaos — will happen only if there is a resurgence of the human spirit and a rediscovery of its divine purpose. Prepare! Take action! Spread the word! Gerald Celente Publisher Editor and Publisher Gerald Celente Executive Editor John Anthony West Contributing Editors Alex Silberman Paul Craig Roberts Dr. Mitchell Skolnick Eldad Benary Assistant Editor Laura Martin Subscriptions Manager Nicole Nevin Illustrations Michael Maslin Fine Art Images Eugene Gregan Design Norgaard Advertising & Design All rights reserved. For information on permission to reproduce or translate material from The Trends Journal®, please write or call The Trends Research Institute.The Trends Journal® (ISSN 1065-2094) is published quarterly by the Trends Research Institute. ©2010.Globalnomic,Trends Journal®,Trend Alert, Trends in the News and The Voice of The Millennium are registered trademarks of The Trends Research Institute. The Trends Research Institute P.O. Box 3476, Kingston, NY 12402 845 331-3500 www.trendsresearch.com low — investing is no more than speculation. By definition: gambling. And when gamblers don’t win, they lose. If the game is big enough, the losses can bring down countries. The Iceland meltdown is an example. Bettors from other nations deposited money in Icelandic banks because Iceland offered higher interest rates than they could get in their own countries. While the interest rate was guaranteed, the Institution wasn’t. Although deposits were insured, when the banks failed as a result of high-risk speculations of their own, the Icelandic government lacked the funds to cover the deposits. When the government then tried to rescue the foreign gamblers by forcing Icelandic citizens to make good on the losses, the public refused and rebelled. The foreign investors (gamblers) looking to cash in on the high interest rates had made what they considered a safe bet. Nonetheless, it was a bet! Levels of risk vary, but no matter how it’s rated, no bet is a sure thing. Long or short, there are always risks. Moreover, recent history has shown that the rating agencies themselves are in collusion with the bookies. The game is rigged. (See “Economic News – Economic Future,” Trends Journal®, Spring 2007) THE FIX IS IN On the inside, the game was manipulated by brokerages and banks that paid off agencies to rate their financial junk “AAA,” and also by a wide range of complex finagles (e.g., high frequency trading, dark pools and the range of “exotic” financial instruments) that brought exorbitant The Trends Journal • Summer 2010 profits to insiders. But when the scams were revealed, the elaborate schemes failed; when their mega-bets went bad, the insiders got outside help. While casino rules applied to small-time players who lost at poker, lotto, or flipping condos — or who lost their retirement investments and pensions when the markets crashed — the rules were waived for the big-time gamblers who both played in and owned the casinos. It was their irresponsible and fraudulent schemes that were most responsible for the financial crash. But, instead of being charged with crimes or forced to eat their losses, the casinos (banks, brokerages, hedge funds and assorted “financial institutions”) had the rules changed. Not only were they “too big to fail,” they were “too big to jail.” Government leaders claimed that if the losses weren’t covered, “investors” would lose confidence, lending would dry up, and the entire world financial system would collapse. If the Big Boys went broke, everyone would go down with them. LET THEM EAT LOSSES This had nothing to do with the so-called “Trickle Down” theory. This was “Gush Up.” In Bush/Obama economics, the richest and biggest that had lost billions through bad investments, or were in danger of going bust, had to be rescued. If the Über-Rich weren’t saved, there would be nothing left to trickle down to the population below. By government decree, those taxpayers who had never felt any trickle to begin with, now had to finance the failed financiers. If taxpayers found themselves unable to understand the thinking behind “Gush Up”, it was not surprising. Why should it make sense? Nothing else did. The entire financial system had been hijacked by bandits. It was criminal from beginning to end. For example, in a 2008 interview, hedge fund executive Kyle Bass, who runs Hayman Advisors, described the deceit that was camouflaged by its own complexity as a billion-dollar fraud, “… so complex that The [Wall Street] Journal couldn’t even write about it. That’s how complex it is. It would take teams of lawyers reading indentures, complex flow charts. And then people would look at you with cross-eyes, even if you understood it all. They’d go like, ‘Yeah, well, I don’t see it.’” The experts engineering the schemes were baffled by the complexity of their creations, and yet insisted upon being bailed out of something that they themselves didn’t understand. The implicit rationale was that only those Harvard, Princeton and Yale MBAs, Ph.Ds. and LL.Ds. were qualified to pull the levers of power on Wall Street and in Washington. Only they — who had devised the derivative, and conjured up the synthetic credit default swap, and in vented the enhanced structured investment vehicle – were equipped to deal with the complexities of contemporary business and finance. Thus, those who didn’t know nevertheless insisted they knew best. The Bigs had to be saved. In the dying American Empire, there was no longer a place for the small: n The Mom & Pop shop was as passé as the corner candy store. n The family farm — penalized by big government’s “Get Big or Get Out” policies that subsidized factory farms — had become a quaint curiosity. n The village hardware store was hammered by Lowe’s and Home Depot; Staples and Office Depot stomped out the stationery store. n Across the spectrum … finance, defense, insurance, health, news and entertainment … virtually every business sector had been commandeered by the Bigs. The Trends Journal • Summer 2010 And the bigger they got, the more untouchable they became. TV Money Honeys, fast-talking finance finaglers, Nightly News anchors, Sunday Morning Beltway Blowhards, and Talk Show Tough Guys genuflected, scraped, kissed up and bowed down before those magnificent men in their money machines. When these kings, queens and aristocrats of 21st century commerce spoke, their ex cathedra judgments went unquestioned. Thus, when they warned that if the “too big to fail” were allowed to fail the world financial system would collapse, their conclusions went unchallenged. No evidence was provided, no proof was needed, and no explanation was tendered. Harvard, Princeton, Yale … the White Shoe Boyz had spoken. They who invented the “too big to fail” were “too big to question.” Publisher’s Note: As economic conditions declined worldwide, many blamed the crisis on the intrinsic nature of capitalism. But it wasn’t capitalism that failed — it was human nature that was flawed. Capitalism had been corrupted and perverted by the Bigs who, in collusion with the government and faced with the consequences of their own criminal greed, betrayed the system that had enriched them. The very essence of functioning capitalism that by definition is “… the distribution of goods that are determined mainly by competition in a free market,” was violated and destroyed. Not only was there no hard evidence demonstrating that saving the “too big to fails” was necessary to save the economy, the rescue plans themselves violated the most cherished tenets of capitalism, which hold that: n Failures should be allowed to fail. n The best will succeed. n Competition is healthy. n Market voids created by failures will be filled by competitors. No individual, business, institution, nation or empire is too- big-to-fail. Had true capitalism been allowed to function unimpeded, the bloated, over-extended, inefficient and gluttonous firms and industries would have failed. There would have been hardships and losses but, finally rid of its financial tapeworms, the purged system could be restored to health. No “ism” or “ology” — regardless of purity of intent or moral foundation — is immune to corruption and abuse. While capitalism itself is being blamed for the excesses that brought on financial chaos, prior to the most recent gambling binge, in tandem with the blanket dismantling of safeguards and the overt takeover of Washington by Wall Street, capitalism was responsible for creating one of the world’s most successful and universally admired societies. (See Trend Alert® – “DC Heist: Wall Street Hijacks Washington,” 22 September 2008) As with all “isms,” American-style capitalism had its flaws, excesses and abuses. But nevertheless, at its best, the American Dream was realized in its huge, upwardly mobile middle class. While there were (and to varying degrees still are) racial, gender and ethnic barriers, comparatively speaking, it was the land of opportunity. Anyone could get to the top, and at its post World War II peak, it was economically the most egalitarian of all the industrialized nations. That America became the least egalitarian was not the fault of capitalism — any more than the sins of pedophile Catholic priests are the fault of Catholicism. Nonetheless, by 2012, two of the contemporary world’s most powerful “isms” would be under attack, weakened and threatened with dissolution. Executive Editor’s Note: As a special feature in this Trends Journal® we are pleased to provide an essay by Paul Craig Roberts, distinguished economist. As Trends Journal® readers have been informed, the essence of tracking trends is to know how we got here, and to understand where we are in order to see where we’re going. Dr. Roberts’s white paper addresses critical interlocking economic and geopolitical issues past and present, while providing insights on how they might be reversed or ameliorated. (See Dr. Paul Craig Roberts’s special report, “The US Economy Is On Death Row”) A former associate editor of the Wall Street Journal, columnist for Business Week, and professor of economics, Roberts served on personal and committee staffs in the House and Senate and as Assistant Secretary of the Treasury for The Trends Journal • Summer 2010 Economic Policy during the Reagan Administration. He speaks with an authority bred of experience. As a former insider now on the outside, we welcome his bold, clear and informed input and analysis. Workers of the World 2.0, Unite! Capitalism itself would be held responsible for the “Greatest Depression.” In a reworking of the old Communist Manifesto slogan “You have nothing to lose but your chains,” today’s “Workers of the World 2.0” would be uniting under banners reading: “You Have Nothing To Lose but Everything,” or, “What Little You Have Left, They’ll Take.” By mid-2010, Greek, Irish and Romanian workers were taking to the streets to protest draconian austerity measures — imposed on them by their own governments at the insistence of the IMF and central banks — to ensure payment to creditors holding sovereign debt. By 2012, social unrest had gone global. Initially the strikes, riots and protests by unions, student groups, the unemployed, pensioners, and the outraged were sloughed off as predictable (but short-lived and ineffectual) responses that would either peter out on their own or be stomped down by the police. The official assumption was that, like it or not, once the measures were imposed the populace would learn to live with them. The unofficial reality was that, as Gerald Celente has repeatedly warned: “When people lose everything and have nothing left to lose, they lose it.” In May 2010, although the US mainstream media remained mostly deaf to Celente’s warning of upcoming social turmoil and protests, they were taking heed abroad. Deutsche Welle, Germany’s international broadcaster, among others, were quoting earlier Celente predictions of the wrath to come: “What’s happening in Greece will spread worldwide as economies decline … We will see social unrest growing in all nations which are facing sovereign debt crisis, the most obvious being Spain, Ireland, Portugal, Italy, Iceland, the Ukraine, Hungary, followed by the United Kingdom and the United States.” “There are no organizations behind this response, said Celente, it’s a public response. This is a 21st century rendition of ‘Workers of the world unite.’ The people are fully aware of the enormous bailouts going to the ‘too big to fails’ that they are being forced to pay for. The higher the taxes go, the more jobs that are lost, the greater the levels of protest.” Why should the US mainstream media be listening? Even as the Dow Jones Industrial Average had its worst May since 1940, the experts who hadn’t seen the Great Recession coming were insisting that it was over: Stock Slump is Correction in Bull Market June 1 (Bloomberg) — The five-week drop in the Standard & Poor’s 500 Index is consistent with a temporary pullback within a bull market, JPMorgan Chase & Co.’s Thomas Lee said. Meanwhile, back in the real world, new records were being set. Since the US Labor Department began keeping track in 1948, never had nearly half of America’s unemployed been out of work longer than six months. While home sales were temporarily boosted by generous tax breaks, a record number of homes were lost to foreclosure in the first three months of 2010, and home prices were still down some 30 percent from 2006 highs. Bank foreclosures on US homes jumped 35 percent in the first quarter from a year before, while households facing foreclosure grew 16 percent in the same period and 7 percent from the last three months of 2009. Nonetheless, the tax prop was cel ebrated as a property rebound: “We’re in an oversold [stock] market plus we have economic data such as US home sales coming out ahead of expectations,” said Hank Smith, chief investment officer of Haverford Trust Co. “The fundamentals are improving,” he said as the Dow spiked 2.25 percent in early June 2010. RECOVERY? HOW ABOUT “RELAPSE”? Three weeks later the celebrated property rebound, along with the stock market, ran out of bounce. After the hefty government tax credits that had propped up sales expired in April, May purchases of new homes fell 33 percent to a record low, the fewest sales since 1963. Note that the US population stood at 190 million in 1963, compared to 310 million in 2010 … a 60 percent increase. Rebound? In the first quarter of 2010, private business paychecks shrank to new lows, representing their smallest share of personal income in US history, while government- provided benefits (social security, unemployment, food stamps, etc.) rose to record highs. With private sector jobs being lost, incomes declining and tax bases shrinking, the increases in government spending were both unsustainable and destructive. More was being spent by the government than earned by the private sector. Not only were taxes not covering expenses, impoverished states with insufficient cash on hand to meet obligations were holding back tax refund checks! “… as Gerald Celente has repeatedly warned: “When people lose everything and have nothing left to lose, they lose it.” The Trends Journal • Summer 2010 Editor’s Note: Who, other than government, could pull off such a stunt — issuing IOUs to be paid when convenient? Taxpayers and borrowers who are unable to meet their obligations lose houses, have paychecks garnished and assets seized. Students, saddled with massive loans (often $100,000 or more), earning meager wages or unemployed — and prevented from declaring bankruptcy by the pro- lender federal law — become indentured servants. Some 8.5 million people (7.4 percent of the workforce) lost jobs since the Great Recession began, while local governments cut only 141,000 workers … less than 1 percent. As the private sector contracted, government employment barely declined. By 2010, a record-low 41.9 percent of the nation’s personal income came from private wages. Moreover, government workers, traditionally earning less than private sector counterparts, were now earning double in wages and benefits; $120,000 public vs. $60,000 private. Not burdened with competition, unconcerned with the next quarter’s profit, and with no obligation to satisfy shareholders, governments continued to keep their largely unproductive bureaucracies intact. Only the “too big to fails” — be they Big Business or Big Government — cashed in on the bailout/rescue package/stimulus plan bonanza. As the private sector contracted, state and local spending rose 2.3 percent, and federal spending was up 3 percent. Covertly, the United States, staunch champion of “free enterprise” and harsh critic of Europe and other nations with bloated and entrenched bureaucracies, had become what it so despised: a bloated and entrenched bureaucracy. GOVERNMENT GANGS While lower and middle class private-sector workers were being devastated (pay cuts, unemployment, retirement and pension plans ravaged) equivalent civil servants kept their upper middle class retirement and pension packages intact. When equity markets soured, 401Ks sank and mutual funds tanked, everyone took an economic hit, except government workers whose salaries and benefits were generally guaranteed. Unlike the private sector, where pensions and retirements could be wiped out if the business went bankrupt, when government investment funds made bad bets, the taxpayer would be forced to foot the bill. Further, if a state pension fund ran out of money, in most instances, the state (i.e., taxpayers) would be legally bound to make good on retirees benefits. At the top of the political pyramid — from city to county, “Pay, perks, privileges and offices overstaffed with lackeys, aides and acquiescent interns long remained fully funded.” to state to D.C. — there was neither crisis nor redundancy. Pay, perks, privileges and offices overstaffed with lackeys, aides and acquiescent interns long remained fully funded. It wasn’t until stimulus flows from Washington were reduced to trickles and tax revenues declined that public sector workers along with their unions were forced into making concessions. Trend Forecast: It wasn’t only pay and perks that had to be scaled back; without meaningful cuts, public pension funds would run dry. Realistic unions would negotiate to save what they could to make the system work, rather than risking putting themselves out of work. For the unprivileged or uncivil servant, apart from generous outpourings of pi ous political sympathy, there were only a handful of token programs, such as, mortgage readjustments and extended unemployment benefits. Polls showed that 46 percent of Americans were suffering from debt- related stress. The 136,142 consumer bankruptcies filed in May of “Recovery Year” 2010 represented a 9 percent increase over the 124,838 filings recorded in May of “Great Recession” year 2009. Mortgage delinquency rates in the first quarter of “Recovery Year” 2010 rose to 9.4 percent, up from 8.2 percent for the same period of “Great Recession” year 2009. Home prices continued to fall, and applications for mortgages plunged 27 percent to the lowest level since 1997. This was more than just a “sub prime” crisis attributed to un-credit worthy borrowers and unscrupulous lenders. In “Recovery Year” 2010, foreclosures on the most conservative fixed-rate mortgages rose to 36.7 percent, up from the 29 percent “Great Recession” year low. June of “Great Recession” year 2009 saw 305 troubled banks on the FDIC watch list. A year later, the number stood at 775 banks, and climbing. The 86 banks that failed between January and July of “Recovery Year” 2010 was more than double the number that went down the tubes during the same period of “Great Recession” year 2009. Driving the new, high rate of failure were losses from loans for commercial property and development. LET’S PRETEND Just days after euphoric market fundamentalists had been praising the improved “fundamentals,” and projecting a 536,000 jobs gain for May, the figures came in far below expectations. Of the 431,000 jobs created, 411,000 (95 percent) were census takers — the most temporary of temporary jobs that would disappear over the summer. Yet despite the parlous data, President Obama, speaking at a trucking company outside Washington, celebrated The Trends Journal • Summer 2010 the bad employment news as evidence that “the economy is getting stronger by the day.” But not on that day; the Dow tumbled 324 points. On the global front, the sovereign debt contagion that began with Greece and had infected Spain and Portugal hit already ailing Hungary. In a replay of an all-too-familiar theme, Hungary’s Prime Minister Viktor Orban admitted that the previous administration had “manipulated” figures to disguise the severity of the problem, and said talk of a sovereign default was “not an exaggeration.” In fact, it was an “exaggeration” to imagine anything other than default. But for public consumption, particularly on the environmental and economic fronts, gov those binding rules, pacts, treaties and pledges were summarily unbound. For example, just hours before the European Central Bank reversed its policy of never buying bad debts of troubled countries, ECB President Trichet had pledged the Central Bank would never buy the bad debts of troubled countries, to say nothing of troubled corporations. DOUBLE TALK Two weeks later, with the euro and European equity markets still sinking, Trichet upped the ante with pledges to supply unlimited cash and keep buying government bonds. “It’s appropriate to continue to do what we’ve ernments’ standard operating procedure is to downplay, if not eliminate the negative (no matter how catastrophic), while accentuating the positive (no matter how meaningless, trivial or ephemeral). The invariable public relations strategy is to first play the “confidence card.” The leaders assure “… there were two sets of rules. … For everyday people it was zero tolerance, stiff fines and swift punishment. … The other set of rules was broken with impunity whenever it suited political and corporate interests.” decided” [on purchases of sovereign and corporate bonds],” said Trichet. “We have a money market which is not functioning perfectly.” How about “ready to crash” — while you do everything you promised not to do in an effort to salvage it! The ECB was buying debt and pumping unlimited the populace that they are fully aware of the situation, in control of operations, and have assembled the “best minds” to come up with the ingenious solutions only they are capable of formulating. CON MAN CLAUDE Thus, on cue and as expected, Jean-Claude Trichet, President of the European Central Bank, downplayed the Greek financial crisis when it first hit the world stage in December 2009. With heavy debt loads threatening the Greek economy and the grave prospect of default looming, Trichet declared, “I would say that I fully trust that, taking into account the situation that the new government of Greece has to cope with in terms of the fiscal situation in particular, I have confidence that the appropriate decisions will be taken.” By Spring 2010, the only “appropriate decision” was to break the EMU “no-bailout” rule that had been established in anticipation of just this kind of Greek-style debt problem. Eurozone governments and the International Monetary Fund pledged a combined 45 billion euros for Greece to draw on as needed. As the contagion spread, the 45 billion metastasized to a trillion. But even that, according to German Chancellor Angela Merkel, would do “no more than buy time.” Whether it’s an EMU violation of the Stability and Growth Pact (stipulating no country should run deficits higher than 3 percent of GDP), a breach of the “no-bailout” EMU rule, or a waiver of a “no International Monetary Fund intervention policy” when politically convenient, all funds into the failing banking system, providing banks access to unlimited funds at a fixed rate in July, August and September. Globally, locally, statewide or federal, it made no difference: there were two sets of rules. One set was written into law and enforced to the letter. For everyday people it was zero tolerance, stiff fines and swift punishment; there was no breach of contract, no bending of rules, no changes of mind permitted. The other set of rules was broken with impunity whenever it suited political and corporate interests. When it came to propping up insolvent banks, failed financial institutions and bankrupt nations, none of the rules applied. Governments devised new rules that would force the people to work more, earn less, give up benefits and pay higher taxes in order to cover the gargantuan bad bets made by the biggest of the “investor” class. In White Shoe language they were called “austerity measures.” In street language they were “insanity measures” … guaranteed to drive the burdened populace out of their minds and onto the streets. The ECB, after many weeks of acrimonious public debate, finally promised to provide what was, in effect, unlimited funds to bail out Europe’s banks, governments, and troubled corporations. But they came with a high price tag. To save the Bigs, Europe’s once vaunted social safety net was being slashed; hundreds of thousands of public sector workers fired, social programs were crippled and abandoned. The Trends Journal • Spring 2010 The headlines told the story: n Cameron Warns Britons of ‘Decades’ of Austerity n German Chancellor’s Austerity Measures Recall the Weimar Republic n Spain: Strikes and Protests Greet PSOE Austerity Measures n Greek Parliament Passes Austerity Measures n Ireland: Government to Impose Draconian Austerity Measures with Opposition Support n Portugal Approves Austerity Measures n Italy Becomes Latest to Release Austerity Measures n French Strike, Protest Over Government Austerity Measures n Austerity Cripples Growth, Latvian PM Warns n Hungary Braces For Austerity Measures Trend Forecast: Although the EU was following in the footsteps of bailing out banks and too-big-to-fails, the remedy would prove to be only a temporary financial boost for the top of the economic scale at the expense of all those below. Austerity meant decreased spending. The less spent, the less bought. The Greek Tragedy was just Act I of the “Greatest Depression,” itself the prologue to the first “Great War” of the 21st century. In early scenes, as economies failed, civil protests escalated beyond control. The usual mix of demagogues, rabble-rousers and agent provocateurs attempted to infiltrate, disrupt and radicalize the mass protests, in efforts to hijack or discredit movements born out of legitimate discontent. Desperate to retain power, governments imposed harsh measures, culminating in martial law. Under the pressure of the “Greatest Depression,” coups will be staged and governments will topple. In some countries revolution will be orderly and potentially constructive. In others, regime change will be violent as extreme elements take the helm. Dictatorial powers backed by military might will be promoted as a simplistic solution to complex problems. The new regimes, successful at whipping up patriotic fervor but unable to deliver on their promises, will find scapegoats to shoulder the blame. As ever, the selected scapegoat will become a convenient target whose elimination will be identified with the elimination of the crisis at hand. Scapegoat hunting — for millennia the sport of generals, presidents, prime ministers, kings and queens — will kick off the first “Great War” of the new millennium. (See “Great War,” Trends Journal®, Spring 2010) In 2010, there was still no awareness in the media of a world heading toward war. Connections were not being made between dissolving economies and civil unrest or the growing resentment of the evaporating middle class toward an endlessly expanding and insensitive chauffeured class. Protected by doormen or sequestered in gated mansions, the very rich were far removed from what was going on and what was being said on the streets: Letter from a Trends Journal® Subscriber Dear Mr. Celente: I am strong in gold and coins as well as silver, bullets, guns, seed and water & provisions! I see it already happening — the folks unloading gold to pay for things like food and utility bills. I also see more people getting divorced due to financial hardship. It’s really tough out there and going to get tougher. Biggest cry is lack of jobs. I am planning a strategy of possibly opening up a pawn shop. No one is buying much jewelry except per haps silver because of its lower price points. The above letter from a jeweler is not the sort published in the Financial Times or Wall Street Journal. Nor was this “from the trenches” communiqué the type of story customarily covered by the broadcast media. The world was readying for war and the signs were being ignored. For war to be averted, first the signs had to be recognized and, secondly, the cooler, wiser heads who saw them and understood the motives and motivators would have to mobilize to stop the march to war. (See “20 Percent Solution,” Trends Journal®, Spring 2010) Trend Forecast: The fuse of the 2nd American Revolution had been lit in April 2008, when hundreds of thousands of tax-weary citizens took to the streets to protest taxation without representation and the “Tea Party” was born. Political incumbents and media pundits greeted the Tea Party with ridicule, and characterized it as a fleeting and unsustainable fringe movement. Then, as the Party took root, gaining momentum and notoriety, it was hijacked by a disparate band of political opportunists and broadcast celebrities who jumped on the bandwagon to promote their own name brands. Liberals despised the Tea Party, painting it as nothing more than a consortium of right-wing nuts and Sarah Palinites, and they refused to acknowledge that some of the Party’s candidates championed many of their own most- cherished principles. For example, liberals and libertarians stood together on such critical issues as ending the wars in Iraq, Afghanistan and Pakistan, as well as the “War on Drugs.” They shared positions on breaking up the big banks and putting an end to bailouts. On the other hand, many adherents of the normally rigid The Trends Journal • Summer 2010 evangelical/war hawk right wars of the 20th century, — while opposed to certain the world decreed that Ger key libertarian Tea Party many would never again planks — could overlook their militarize. differences in order to sup- The 1949 Constitution port the general platform. of the Federal Republic of Though chaotic, diverse Germany, amended and ex- and unfocused, the Tea tended to all of the country Party (more accurately, after unification in 1990, Tea Parties) would flour- contains a ban on prepar ish, feeding on the near uni ing a war of aggression. versal outrage and disgust Article 26 reads: “Activities with both traditional par- tending and undertaken ties. Yet, in 2010, neither with the intent to disturb right nor left saw it clearly peaceful relations between for what it was to become: nations, especially to pre- the beginning of the end of pare for aggressive war, are the entrenched Democratic/ unconstitutional. They shall Republican duopoly. be made a punishable of- Trend Forecast: By 2012, less ideologically driven parties appealing to a wider base than anti-tax and anti-big government partisans would form. (See “Progressive-Libertarians,” Trends Journal®, Summer 2009) But the duopoly’s monopoly would not die gently. New legal roadblocks would be added to those already in place to thwart third party competition. As in the past, attempts would be made to rig elections. And with new, fraud-friendly, ballot- less electronic voting systems controlled by political operatives, the process would be more efficient and difficult to detect. Nevertheless, with pre-voting and exit polls confirming dissatisfaction with politics- as-usual in the high double-digits, angry Americans would fight rather than be forced to accept the phony tallies. Election 2012 was not Bush-Gore 2000. It would prove to be a pivotal battle in the 2nd American Revolution. Trend Forecast: With its dozens of failing economies, Europe (East to West) would provide the flash points and serve as a battle ground for the “Great War” — as it had done before. By 2010, there were already signs that history ould repeat itself. Germany, humbled after half a century of waging world wars, was on the march again. But this time, it wasn’t Kaiser or Führer fomented — it was the US, France and England that cajoled and coerced its erstwhile bitter enemy into its hostilities and aggression. STRIKE UP THE BAND It was as though the post-Nuremberg restrictions had never been written. After it had waged and lost the two major “The Germans were at war again — from baby steps in Yugoslavia to goose steps in Afghanistan.” fense.” Similar restrictions applied to Italy and Japan, who were also defeated in WWII, Italy and Japan. Yet, step by baby step, these former adversaries were allowed to arm and build a military presence; and were then invited to actively support whichever war of aggression Western Powers were engaged in … all in the name of “national security,” “liberation” and “bringing and/ or restoring democracy.” Germany’s first military foray since World War II came in 1999, under the cov er of the US-led war against Yugoslavia. Lost in the noise of 38,000 combat missions flown by NATO (and the 23,000 cluster bombs, cruise missiles and depleted uranium shells directed at Serb military targets and Yugoslav civilians) was the sound of the Luftwaffe once again dropping bombs. It was a combination of effrontery and meaninglessness. Just as financial laws were broken by those who made them when they became inconvenient, so too were treaties broken when they didn’t further military objectives. The Germans were at war again — from baby steps in Yugoslavia to goose steps in Afghanistan. By 2010, the German Army had 4,550 troops in Afghanistan, with plans to add another 700. Although some 80 percent of the German people opposed sending any troops, their government, like so many others, ignored the people’s wishes in order to realize the interests of special interests. In May 2010, German President Horst Köehler was forced to resign when he tipped his hand, revealing that the real purpose of putting German boots on Afghan soil was to protect foreign trade and commercial interests. The Trends Journal • Summer 2010 THE “SPEND-STUPID” THEORY While NATO welcomed German participation, all was not quiet on the Western Front. The Afghan War was, as Herr Köehler admitted, motivated by money … as were all other Middle East Wars. Finance — not terrorism, not democracy, not security, not human rights — defined the bottom line. And when it came to money, alliances could swiftly turn adversarial. US Treasury Secretary Timothy Geithner was pushing Germany, with its large trade surplus, to generate “stronger domestic demand growth.” Along with other G-20 nations, Washington criticized the Ger and return to their liras, drachmas and pesetas. Trend Forecast: By 2012, not only would the European Union be in danger of disuniting, individual European countries would be splintering. The persistent examples of Welsh, Scottish and Basque separatist movements would become the norm rather than exceptions as ethnic, racial, religious, economic and regional sentiments came to dominate national political agendas. The forces that had cobbled together nations and alliances — usually spoils of war or marriages of economic convenience — dissipated as economies man government for spending too little on stimulus packages and complained “By 2012, not only would the floundered and governments faltered. Ancient simmering resentments, long em- that the German people were saving too European Union be in danger of bedded in the tribal DNA, could not be much when they should be spending on consumer products … which in turn would spur economic growth. disuniting, individual European countries would be splintering.” engineered out of the human psyche by legislation, coercion or reason. The passion for autonomy would manifest peace- However irrational, Germans were being taken to task for being financially responsible, instead of going deep into debt, depleting their savings and borrowing beyond their means, like so many other countries. Germany was also being assailed for initially opposing the Greek bailout, and cast as a stingy villain for not contributing more funds once it grudgingly agreed to participate. But the bailout was bitterly opposed by the German people, who considered it a tax levied on them to pay for Greece’s profligacy. In the elections that followed the bailout, Angela Merkel’s center-right coalition suffered what she described as “a bitter defeat.” Trend Forecast: A confluence of seemingly unrelated factors was producing conditions that did not augur well for either peace or prosperity. A strong European Union, attractive in theory and feasible in good times, would turn contentious in bad times. The deepening fiscal crisis of 2009–2010 would open a Pandora’s box of ancient, unresolved animosities bred out of centuries of war, religious strife, aggression, oppression and ethnic hatreds. Germany’s aggressive role in the two great 20th century wars that devastated Europe was a memory always bubbling just below the surface of the European consciousness. Germany’s considerable economic clout, vaunted organizational efficiency and a national work ethic that might have served as role models for less gifted and focused nations, instead inspired deep envy. And a substantially re-armed Germany engaged in US-instigated NATO wars would later inspire fear. In 2010, the EU was coming apart at the seams, and by 2012 it appeared to be operating as a union in name only. The poorest debt-ridden nations would abandon the euro fully in secessionist movements and violently in civil wars. Underpinning the seemingly unrelated uprisings was a common cause: a Big Backlash against Big. Big Government, Big Banks, Big Corporations … Big Brother. Trendpost: Leave Europe before it’s too late? In 2010, such a thought was far beyond far-fetched. Make plans to escape Europe before war breaks out? War? What war? 2010 wasn’t 1930. There was no Hitler or Mussolini in sight. Economies may have been troubled, yet there was no real public concern or glaring indicators of an imminent crash. There were, however, tell-tale signs in plain view. Aware of their past, many Europeans who recognized the fragility of the times and the potential for a system-wide collapse became big gold buyers. They knew the history of Weimar Republic hyperinflation and had heard the stories of how gold bought freedom in the buildup to World War II … and even during it. As the world equity markets lost all their 2010 gains and fluctuated wildly, not only were Europeans buying gold, the rest of the world also caught gold fever, pushing the price to record highs. Trendpost: As economies decline in Europe, terrorism increases and Middle East wars spread, nationalistic fervor will make foreigners feel threatened and unwelcome. Already in 2010, anti-immigrant sentiments were running high and nationalist movements were gaining strength. As evidenced by the burqa bans sweeping Europe and the Swiss minaret prohibition, for Muslims, the need to develop escape plans is by no means far-fetched and is already being considered by many. (continued on page 20 ) The Trends Journal • Summer 2010 GAMBLING FEVER For generations, buying stocks in public companies was mostly reserved for the upper classes and wore a cloak of respectability. In those days (before day trading, leveraged buyouts, private equity firms, corporate raiders and hedge funds), shares were bought with the expectation of receiving regular dividends based upon performance. While the gambling aspect was implicit, buying “blue chip” stocks and playing the stock market was something only the wealthy did. In America, apart from racetracks, bingo halls and Las Vegas, gambling was illegal. Cops raided card games, busted bookies and arrested number-runners. Zealous DAs, committed to saving the public from sin, locked up the sinners. But sin became virtue in the 1970s. State governments, recognizing how well crime paid, took the action out of the hands of small-time hoods and put it under the control of political mobsters. It was only a vice when they weren’t making money off it. No longer stigmatized as immoral and destructive, at the stroke of a legislative pen, gambling was sanitized and repackaged as “Gaming.” No longer the province of underworld families of Gambinos, Lanskys and Bonannos, “gaming” was now run by Frank Fahrenkopf. This former Chairman of the Republican party and co-chair of the Commission on Presidential Debates was brought in to front the American Gaming Association. Pulling out every Madison Avenue trick, “gaming” was pitched to the public as a way to get-rich-quick. You had to “be in it to win it.” “Hey, you never know,” all you needed was “a dollar and a dream.” From Lotto to Lucky Seven, from Power Ball to Mega-Millions, the people who could afford it least were suckered into the dream of hitting the jackpot. Barely a day went by without a tabloid tale of Joe Sixpack winning millions. When an individual preaches virtue but practices vice, it’s called “hypocrisy.” But when the government lifts gambling bans to bring in revenue, it’s accepted as legitimate. Gambling, divested of sin and sold by the state as a harmless game of chance, had gone viral. JACKPOT JUNKIES Deposit-bottle scavengers and panhandlers played nickels and dimes cadged on the streets. On the no-collar/ bluecollar end were checkout clerks and construction workers monopolizing cash register queues at convenience stores to spend a big chunk of their small pay on a wide array of wild cards. Church ladies played slots in Atlantic City and retirees played poker on moored retro-riverboats or on Indian “Money Monkey’s Lotto Dream” by Eugene Gregan reservations … a casino was within a three-hour charter bus trip of every major American city. By the 21st century, the whole world had gone Monte Carlo, everybody played. But unlike the old days when only gents in tuxes and bejeweled ladies frequented the Riviera’s chandeliered chateaux, now proles and peasants in the poorest of countries, in T-shirts and flip-flops, packed garish neon gambling halls, losing what little they had. Every day was a day at the races; the world had become one big gambling parlor. No longer confined to low stakes back alley bookies or the occasional few bucks placed on the Irish or other legal sweepstakes, gambling had become a way of life. The time-honored, nose-to-the-grindstone work ethic (in which success was attained only through study, long hours, diligence and commitment) had given way to a jackpot psychosis in which all that was needed was making the right bet. With the world equity markets imperiled and gyrating, sovereign debt defaults and currency crises looming, it was time to try something new and ridiculous: The Trends Journal • Summer 2010 have been formed and the trillions in Betting on the Box Office: bailouts and rescue packages to save U.S. Approves Movie Futures “too big to fail” gambling casinos would not have been necessary. Exchange Which movies will do best at the However attractive for the specu box office? Fans may soon be able lator, low rates left (and continue to to bet on — or against — films with leave) the risk-averse with few safe a new movie-futures exchange. options. Until interest rates rise, which Federal regulators have paved will occur only when they can no lon the way for a controversial new ger be held down artificially, the strat electronic exchange that would egy we at the The Trends Research enable investors to bet on the Institute personally follow (we do not commercial success or failure of provide investment advice) is to hedge upcoming Hollywood releases. currencies and buy precious metals. The U.S. Commodity Futures Trading Commission, or CFTC, Publisher’s Note: Prior to the euro Monday voted 3-2 to approve the crisis I hedged my cash, putting half new futures contracts tied to box- in dollars and half in euros. If one office receipts, to be traded on the Trend Exchange. (AP, 15 June 2010) Trendpost: At the highest level, gambling is glamorized as “high finance.” At the mid-range, it flourishes in the respectable form of “investment” in securities and real estate. At the low end, gambling has been commandeered by the government. Luring players with irresistible mega-payouts, it amounts to no more than a regressive tax on the poorest. But however disguised or spun, all of it is gambling. As long as gambling is accepted as a legitimate and ethical foundation for making money, the global financial crisis can only perpetuate itself. Trendpost: In a period of extended inflationary pressure, the risk-averse seek strategies to keep their money from losing value. Among the safer bets past was parking funds in “Savings Banks.” The risk was low, as was the interest paid. But in those days gone by, the non-speculator could expect savings to keep pace with inflation. However, when interest rates are low, as they were following the Dot-com bubble bust, and lowered again as after the “Panic of ’08,” the availability of cheap money creates ideal conditions for rampant speculation — not savings. For the “White Shoe” high rollers — hedge funds, private equity groups, leveraged buyout firms, etc. — low interest loans provide easy money to leverage big deals. The lower the interest rate, obviously, the less it costs to service the debt. Indeed, low debt service (cheap money) made possible the merger and acquisition frenzy and propelled the real estate and home equity boom. Had interest rates been left to find their natural market level, rather than dramatically slashed following the Dot-com bust and 9/11, the real estate bubble would not went down the other would go up and I would stay even. There was little risk involved since it was unlikely that they would both sink and/or be devalued simultaneously. In late 2009, having predicted that the Greek sovereign debt crisis would worsen and jeopardize the entire European Monetary Union, I dumped my euros in favor of Canadian dollars and Swiss francs. With Europe in financial turmoil, I sought a safer hedge. While the currency hedges keep me even, they don’t make money. To compensate for inflation, I am forced to take risk, but I take it only with gold (others regard silver as similarly sound). In a climate of economic volatility and geopolitical instability, gold has proved to be the safest of havens. In the event of deflation, commodities (e.g. copper, oil, lumber) fluctuate according to supply and demand. Gold is less price sensitive to marketplace pressures. I buy gold not as a speculator or “investor,” but solely as a security measure over the very long haul. For me, this means possessing solid gold for the late retirement years. This is not to be confused with the standard advice from equity market advocates who tell “investors” to ignore downturns and corrections because, over the long haul, the stocks will not only regain losses but turn substantial profits. This is precisely what Wall Street and the business media told “investors” when the NASDAQ crashed from its 5000 high in 2000. Ten years later, the NASDAQ Composite Index was still less than half its former high. When the Dow fell from its 14,000 high, the same advice was given. Investors were assured that “legacy stocks” such as GM, Lehman Brothers, Merrill Lynch, Citi, etc., would recover and fly higher than ever. In mid-2010, with the Dow hovering around the same 10,000 mark it hit 11 years ago, many of the “legacies” The Trends Journal • Summer 2010 are now extinct and the market as a whole is down 30 percent from its 2007 high. Does anyone make money when markets gyrate and fluctuate? You bet! Brokerages do: Goldman Sachs Hands Clients Losses in ‘Top Trades’ May 19 (Bloomberg) — Goldman Sachs Group Inc. racked up trading profits for itself every day last quarter. Clients who followed the firm’s investment advice fared far worse. Seven of the investment bank’s nine “recommended top trades for 2010” have been money losers for investors who adopted the New York- based firm’s advice, according to data compiled by Bloomberg from a Goldman Sachs research note sent yesterday. Clients who used the tips lost 14 percent buying the Polish zloty versus the Japanese yen, 9.4 percent buying Chinese stocks in Hong Kong and 9.8 percent trading the British pound against the New Zealand dollar. The struggles for analysts at Goldman Sachs, which is fighting a fraud lawsuit from U.S. regulators who accuse the company of misleading investors in a mortgage-linked security, show the difficulty of predicting market movements as widening budget deficits, a fragile global economic recovery and tighter financial regulations increase volatility. Stock and currency fluctuations rose to the highest in a year this month as Europe pledged about $1 trillion to stop a debt crisis in the region. Considering the combination of inept investment advice, innumerable reports of financial firms fined for fraudulent activities, and numerous instances of market manipulation by powerful players, the best defense is to avoid placing bets in the rigged games. Publisher’s Note: Ten years ago, when the financial pundits were counseling losers to hold on to sinking stocks for the long haul, they ridiculed timorous souls seeking a safe haven in gold. But anyone astute enough to have ignored the pundits in July 2000 and buy, for example, 100 ounces at $280, would have seen that $28,000 investment in “fool’s gold” swell to around $120,000 by July of 2010. The mainstream media and their business buddies are quick to joke, poke and pounce on any wrong forecast coming from outside the White Shoe Boy’s Club. But when the venerable soothsayers at Goldman miss seven out of nine calls and lose fortunes for their clients, the story merits only a Bloomberg blip. No one called “The Great Goldman’s” charlatans or incompetents — there were no snickers or jabs. n Risk You Can Believe in We understand that there is no aspect of life that is risk free. Beyond the obvious personal risks (mountain climbing, sky-diving, drug running, marriage), every human activity carries some degree of risk. In the extended era of post World War II inflation, money has continually lost purchasing power. Therefore, just staying even involves risk at some level. For business owners and self-employed professionals, the safest and most satisfying investment will be to invest in yourself rather than putting your money in the hands of financial advisors. This means expanding or refining products and services with self-generated revenues rather than by taking on loans and carrying debt. Whatever the trade or profession, the strategies are analogous. Every extra buck and spare minute of time is reinvested in more knowledge, deeper vision, and intensified drive. While it’s not quite true that if you do what you love the finances will take care of themselves, it is true that the more skilled anyone becomes at any trade, art or profession, the greater the odds that life will provide opportunities to practice it at some level. On the most basic, with mouths to feed, bills to pay and wolves to keep from the door, compromises may be necessary, but they need not be permanent or unproductive. In mid-career the pianist Hank Jones, who played with Coleman Hawkins, Ella Fitzgerald, Benny Goodman and other jazz legends, was forced to work as a staff musician at CBS for 15 years during an era when jazz had become unfashionable. “Most of the time … I wasn’t playing the kind of music I’d prefer to play,” Mr. Jones said. Post CBS, Jones resurrected his career, bringing it to new creative heights, gaining wide recognition and recording prolifically until his death at age 91. However unwelcome the CBS experience had been, Jones explained that it had given him “an economic base for trying to build something.” The moral of the story: even compromises and setbacks can be productive as long as the drive to succeed is not lost. “If I miss one day of practice, I notice it. If I miss two days, the critics notice it. If I miss three days, the audience notices it,” proclaimed Ignacy Jan Paderewski, renowned pianist, composer and the third Prime Minister of Poland. n The Trends Journal • Summer 2010 “When The Money Monkey Talks, Wall Street Listens” by Eugene Gregan GOING FOR THE GOLD It seemed as though everyone with functioning financial sensibilities was aware of and understood the many factors driving up gold. Everyone, that is, except America’s top financial expert: Bernanke Puzzled by Gold Rally Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk. In this case, it might instead be a risk against risk broadly. Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes… . “I don’t fully understand movements in the gold price,” Mr. Bernanke admitted. But he suggested it might be another example of investors fleeing risky assets and flocking to assets that are perceived as less risky … ones like gold. (Wall Street Journal, 9 June 2010) Here he was, Fed Chairman Ben Bernanke, the man running the money-printing machine admitting, “I don’t fully understand movements in the gold price.” What was it about the climb in gold (accurately predicted by Gerald Celente back in 2001), that “puzzled” Bernanke and that he did not “fully understand”? (See “Going for the Gold,” Trends Journal®, December 2001) Could gold fever have a connection to the Fed-initiated record-low interest rate policy that began in 2001 and would flood the world with cheap money? Could it have anything to do with the $13 trillion lent, spent and guaranteed by the US and the Fed in stimulus, bailout and rescue packages? Or could the rush to gold be in any way related to the rising levels of US debt? Public debt, standing at $13.6 trillion in 2010, had more than doubled since the interest rate orgy’s onset in 2001, while the debt-to-GDP ratio had risen from 57.4 percent to 93 percent. Debt was forecast to reach nearly $20 trillion by 2015, putting the anticipated ratio of debt-to-GDP at an estimated 102 percent. Or could Bernanke’s bafflement over rising gold prices be attributed to an inability to acknowledge the strong probability of sovereign debt defaults and the implications of an imminent commercial real estate collapse? Why should it be a story in the WSJ that Bernanke was unable to grasp the factors driving up the price of gold? In November 2007, as America was entering the Great Recession, Bernanke predicted the US would not enter into recession. In 2008, with America deep in recession, Bernanke denied America was in recession. Of course he wouldn’t The Trends Journal • Summer 2010 understand what was driving up gold prices! Editor’s Note: If economic expansion is strong enough to cover the interest on debt, the debt-to-GDP ratio is not critical. But in the US, with debt ballooning, interest rates poised to rise and economic growth weak, the once unthinkable prospect of America defaulting on its international financial obligations became thinkable. (The Maastricht Treaty, which established criteria for membership in the European Union, mandated a debt-to-GDP ratio no higher than 60 percent for would-be members.) Not only was Bernanke, the former Princeton Professor of economics, unable to tabulate the economic data adding up to a gold rush, he appeared unable to factor in or even acknowledge the powerful outside-the-economic-box components (mounting social unrest, escalating, treasury- depleting wars and probable terror strikes) that made gold so compelling. But no matter how self-evident the drivers behind the gold rush, if the Fed chief couldn’t see them, how could any one else? When Gerald Celente called the beginning of a “Gold Bull Run” in 2001, with gold at $275 per ounce, Wall Street stock hucksters called it nonsense. In the decade since Celente’s prediction, gold has risen nearly 500 percent, while, according The Wall Street Journal, “The Standard & Poor’s 500 stock index has fallen at an annualized rate of 3 percent a year over the past 10 years, including dividends and controlling for inflation.” With its trademark combination of smugness and arrogance, America’s self-designated “paper of record,” The (behind the times) New York Times, has finally, if grudgingly, bestowed its imprimatur on the investment value of gold: Financial Uncertainty Restores Glitter to an Old Refuge, Gold It is the resurgent passion of the doomsday crowd, a bet that everything will go wrong. No matter what has you worried, they say, the answer is gold. Inflation, deflation, government borrowing or the plunging euro — you name it — the specter of these concerns has set off a dash to gold, driving the precious metal to new highs and illustrating how fears of economic turmoil have moved from the fringe to the mainstream. And gold bugs, often dismissed as crackpots who hoard gold bars in the basement, are finally having their day. (NYT, 14 June 2010) Ten years too late and $1000 behind the curve, rather than praise the prescient investors who bought gold early (rather than buying into the stock-and-real-estate hype pitched by its own financial snake oil salesmen), the Times denigrates Trend Tracking Tip The New York Times’ snide and unrepentant coverage of gold, a major financial trend, enshrines three important lessons: 1. Read with care. Beware of the “weasel words” conveying information that is meant to appear objective but actually slants the story. Use of the words “doomsday crowd” and “crackpots” should alert the careful trend tracking reader to an underlying agenda. 2. Those waiting for the Times (or any mainstream source) to identify and put its seal of approval on a trend are guaranteed to be behind the times. 3. When the Times and other media miss a trend, rather than admit failure, they invariably cop a plea: “No one saw it coming.” What that actually means is no one among their exclusive circle of experts saw it coming … and if their most trusted sources didn’t see it, no one could see it. By extension, when actions and policies lead to unwelcome outcomes, those who initiated the policies (and the media that initialed them) refer to the results as “unthinkable.” In fact, those outcomes were both thinkable and predicted but not by their sources. And the predictions were therefore dismissed since they could not be made to fit into their wishful thinking scenario. n them as “the doomsday crowd” and “crackpots.” Genuine praise is reserved only for George Soros and the “soberminded Wall Street types,” whose belated jump onto the bandwagon establishes gold’s legitimacy now that it has “moved from the fringe to the mainstream.” Trendpost: Investing in gold, as with any investment, carries a risk. But unlike stocks or other financial securities, gold retains a value even when it falls from a particular peak. We forecast gold will reach at least $2000 an ounce, stabilize and then trade in that range. Some forecasters predict it will go much higher. In any event, whatever gold’s trading range may be, at its worst it will be more secure than portfolios filled with once-blue chip, but now worthless stocks. No matter what its price, even if it should lose half its value, there is still no risk that gold-holders will suffer the same fate as did shareholders in Lehman Brothers, General Motors, AIG or Bernie Madoff. n The Trends Journal • Summer 2010 Getty Images Getty Images The picture that is not only not worth a thousand words … it’s not worth any words at all. THERE’S NO BUSINESS LIKE SHOW BUSINESS When were the people going to wake up and realize that Washington was little more than Command Central for Failures- in-Chiefs and their legions of dutiful underlings? Skilled only in turning a gold purse into a sow’s ear, with access to a bottomless money pit, whatever they touch they bungle: Katrina, BP Gulf disaster, No Child Left Behind, War on Drugs, War on Afghanistan, War on Iraq, War on Pakistan, Mid-East Peace Process, to name a very few. With this almost unbroken track record of incompetence and disaster, how could the public, despite its misgivings, look up to its leaders and expect solutions? How? Because despite the tragic consequences unfolding in the real world, the entire process is presented to the public as a form of entertainment. It is theater … second-rate theater at that. Politics is show business for ugly people. Literally: 1. Story Line: Both Hollywood and Washington deal in fiction. In Hollywood, glamorous people play starring roles in movies with plots that are typically fiction. In Washington, unglamorous people play starring roles in real life by pitching fiction as if it were fact. In legal parlance, the definition of fiction is “an assumption of a possible thing as a fact irrespective of the question of its truth.” The passages quoted on page 19 from Leon Panetta and other officials demonstrably conform precisely to that definition. 2. Sets and Staging: Both Hollywood and Washington use elaborately crafted sets to stage their respective fictions. In Hollywood the sets are often wonders of imagination and creativity. In Washington, they are endlessly and eternally the same. Rose Garden, Capitol Hill, Oval Office, White House Lawn, Flags Fluttering. And when off the set and on location, the staging is equally repetitive: sitting on bunting-draped hay bales, sleeves rolled up for disaster area visits, eating hot dogs on the 4th of July, making an ice cream cone all by themselves, on the factory floor wearing hard hats. 3. Costume and Performance: Both Hollywood and Washington actors dress their parts and rehearse their roles. Apart from looking better, Hollywood actors generally play their roles more convincingly since they have the mental capacity to remember their lines without recourse to the teleprompter. 4. Star Power: Both professional actors and professional politicians are accorded and assiduously court celebrity status. Whether making an appearance at a nightclub, ball game, restaurant or special event, they get VIP treatment. Treated deferentially, with egos inflated, celebrities come to believe they deserve the adulation and attention, while those that defer to them accept and enhance that sense of entitlement … which in turn furthers the distinction between the celebs and the hoi polloi. 5. Red Carpet Treatment: The symbol par excellence of the status of both Hollywood royalty and Washington aristocracy is the red carpet. “Now my beloved, step down from your chariot, and let not your foot, my lord, touch the Earth. Servants, let there be spread before the house … a crimson path.” (Aeschylus, 458 BC) In Hollywood, sexy stars in $25,000 gowns and hunks in tuxedos strut their stuff on red carpets at award ceremonies, galas and movie premieres. For political performers, every time a President, Prime Minister or Secretary of This-or-That shows up for an “official” visit, by the time they’ve finished waving from the jumbo jet door and descended the gangway, the obligatory red carpet has already been unrolled. Does anyone, anywhere in the world, actually want to watch Angela Merkel, or Nicolas Sarkozy, or Hu Jintao, or Hillary Clinton getting off a plane? The predictable for- The Trends Journal • Summer 2010 malities unfold as well: 7. Paparazzi: In both the band plays, the Hollywood and Wash- honor guard salutes ington, paparazzi come and the hosting digni with the territory. taries grin and bow. For the millions of With sirens blar- Hollywood fans who ing, mile-long mo dote on their stars’ ev torcades of black, ar ery move, the paparazzi mored SUVs flanked play an important role. by squadrons of mo- For stars, paparazzi are torcycle escorts whisk a mixed blessing; wel the honored guest, the come when they gener entourage, and accom ate publicity, unwelcome panying press corps off when they intrude upon to the seat of power. privacy. Highways closed, On the other hand, traffic stopped, snipers with no loyal fan base to White House Photo on roofs, shops shuttered, lives disrupted, plans scuttled — all for a diplomatic tête-à-tête guaranteed to produce no consequential result … beyond a lavish banquet. 6. Box Office and Ballot Box: The trappings and hype, the pomp and circumstance are not in vain. They work! The results show up at the box office in Hollywood and the ballot box in Washington; both are quantifiable. In Hollywood, glamour is the product and in a not-sosubliminal sense, behind the glamour is sexuality. The “stars” are sex symbols. In Washington, while there may be Monica Lewinsky moments, the product is power. Without the staging, lighting, and marketing blitz heralding the next big coming attraction, Washington power brokers would otherwise be mistaken for insurance salesmen, mid-level corporate managers, real estate agents or heads of the local Parent Teacher Association (PTA). But given 24/7 red carpet homage, that necessary air of authority is bestowed upon actors whose talents otherwise wouldn’t take them through the first cut of a Hollywood casting call. Even George W. Bush — endless butt of late night comedians for his bumbling delivery, awkward presence and uncertain grasp of his material — could get away with his impersonation of a President when behind the desk in the Oval Office. So potent are the symbols, that those empowered by them are able by the sheer weight of their status to sway the public. For example, any criticism of Bush’s policies was denounced as “Bush Bashing.” A common refrain during his administration was “He’s the President, respect the office.” Without those “red carpet” accoutrements, Presidents would have much more difficulty generating the respect necessary for the nation to follow their lead. satisfy, a mob of political paparazzi jostling each other for a better shot of some unglamorous “official” sitting behind a microphone at a table serves no discernible purpose other than to stroke the ego of the subject of attention. THE IMMORAL OF THE STORY However different the Washington and Hollywood show biz games may first appear, they produce similar results. The combined onslaught of attention, endless deferential treatment, and access to all the perks and pleasures that money can buy invariably produce outsized egos. Only the manifestations and implications are different. On the Hollywood side, when celebrity excess ends up in ruined lives and ravaged families, the damage is restricted to those directly affected. And while fans may become disillusioned, rather like the sports fan upset by his team’s loss, convalescence comes quickly. But in the political theater those inflated egos have life and death consequences on the world stage. As brilliant at playing politics as their Hollywood counterparts are at playing their movie roles, politicians confuse their ability to maneuver, brown-nose and manipulate with wisdom, competence and knowledge. Yet, in point of fact, most of them are singularly unexceptional, uncreative, unoriginal, superficially informed, philosophically undeveloped and spiritually bereft. Once entrenched in positions of power they become imbued with a sense of entitlement and even infallibility; they can do no wrong, they know best, and if given free rein, all major problems will be solved. However, if their policies fail, no matter how catastrophically, they are incapable of acknowledging they were to blame. “No one saw it coming.” And when found guilty of not telling the truth, it’s never a lie; they “mis- spoke” or “misremembered.” The Trends Journal • Summer 2010 In abnormal psychology, such levels of obsessive self- absorption and total inability to admit error are traits common to the psychotic personality. In plain language, the people customarily referred to as “leaders” or as “lawmakers” are, from a clinical point of view, delusional and emotionally defective. Able to surmount any combination of defeat, humiliation and degradation — conscience-free and rhino-hided — when the curtain goes up for the next act, they are ready to rise and run again. Ladies and gentlemen, it’s show business for ugly people. Publisher’s Note: In their everyday private lives, people would never put up with the sort of failures, lies and scandals typical of politicians were they committed by family, friends, or co-workers. Ordinary people get called out on the carpet for virtually every transgression, but only rarely do politicians get called out on the red carpet … which retains its magic aura of power and respect. Even when polls say the public has lost all faith in its “leaders,” it still expects them to act effectively on their behalf. Ironically, those politicians willing do anything (grovel, “misspeak,” outspend, “swiftboat”) to get into public office are the very same people who, back in high school and college, would do anything to get elected class president or head of the student council. Everyone who was not one of them remembers them well. Teachers’ pets, self-serving, insincere, over-achieving, know-it-all tattletales, they were a clique closed to outsiders. Now, decades later, those class presidents and heads of the student body have attained their career goals. As legislators, statesmen, judges and diplomats, in positions of power, they are now telling everyone else what to do and what’s best for them. And the people submit. The prestige of office, with its symbols of authority, serves to make the general public forget that these legislators, statesmen, judges and diplomats are the very people they disliked, distrusted and wanted no part of not so very long ago. Editor’s Note: Whether Hollywood or Bollywood, the White House, Rashtrapati Bhavan, 10 Downing Street or the Kremlin, the showbiz/politico psyche is essentially the same, albeit with cultural differences and nationally specific trappings. Executive Editor’s Note: A personal friend, in his Harvard days, was a classmate of Al Gore. When I asked what Gore was like back then, my friend thought a moment and choosing his words carefully, replied, “Well, he was the sort of guy who, if the professor had not given us homework, would raise his hand and say, ‘Sir, I think you may have forgotten to give us an assignment’.” n LOSERS, LIARS, LOST CAUSES The Afghan War: Here was the mighty US military — that destroyed the Germans at the Battle of the Bulge and planted the stars and stripes through the heart of the Japanese at Iwo Jima — incapable of beating barefoot mountain men fighting with rifles and roadside bombs in dusty outpost towns. And nine years later, after hundreds of billions spent, and tens of thousands of civilians and soldiers dead or maimed, still missing in action was the elusive Osama bin Laden; the face that launched the Afghan War. To justify a 30,000 troop surge, the overall Obama strategy — conceived and publicly lobbied for by General Stanley McChrystal, commander of the Afghan campaign — was to secure Afghan population centers while strengthening the homegrown police and army. First tested in Marjah in the spring of 2010, the battle for the farm town was quickly hailed as a success. But by summer, it had been downgraded into a drawn-out effort. “The indicators are moving in the right direction,” said Admiral Mike Mullen, chairman of the Joint Chiefs of Staff. “It gets darkest right before the dawn in these kinds of operations.” LOSERS From the onset the surge was imperiled. McChrystal’s promised “government in a box” was not delivered to Marjah. By May, unaware that weatherman Mullen’s dawn was breaking over Marjah, McChrystal described it as “a bleeding ulcer.” Step Two, the battle for Kandahar (linchpin of the Obama war effort and the heartland of the Taliban forces), was contingent upon success in Marjah. “Many people talk about Kandahar,” McChrystal said at the onset of the Marjah campaign, “We are absolutely going to secure Kandahar.” But as Marjah turned rancid, so too did General Stanley McChrystal himself. In late June, following a Rolling Stone story in which McChrystal disparaged members of the Obama Administration and even questioned the war effort itself, the General was fired by the President, setting The Trends Journal • Summer 2010 off a media firestorm of controversy. Suddenly, subtly, the Afghan War language went from unshaken confidence in ultimate victory to a cautious resolve hedged about with conditionals. The firing of McChrystal would prove to be the turning point: the beginning of the end of the Afghan War and another humiliating step in the decline of Empire America. No matter how carefully you were following the news of the military shake-up and its implications, you wouldn’t have seen it unless you could read between the lines. With the handpicked Afghan Commander kicked out and his once highly acclaimed war strategies failing, Admiral Mullen disavowed the man but advised staying the course. “The leadership has changed, but the policy hasn’t changed. And we are very much committed to it,” he said. “As goes Kandahar, so goes Afghanistan.” LIARS Also in defense, Secretary of Defense Robert Gates, attempting to quiet the commotion caused by the General’s dismissal and counter growing concerns about the war in general, described the war as “… hard but not impossible … I do not believe we are bogged down,” he said. “I believe we are making some progress. It is slower and harder than we anticipated.” Maybe slower than the Secretary of Defense anticipated, but not slower than The Trends Research Institute anticipated! The US wasn’t “bogged down.” It was getting beaten. It was losing the war. In a martial equivalent of the economic mantra of “hope, confidence and optimism,” the US military was not spilling blood in a losing cause. The public was continually reassured that “progress” was being made; all that was needed was more time, more men and more money. The media, Congress, the Pentagon and the Administration all were reading the same lines from the same script. When done by totalitarian regimes, it’s derided as toeing the state-controlled party line. But when Washington does it, it’s “damage control.” Sending out every flunky, flack and hack in the stack, the White House flooded the airwaves and Op-Ed pages conning the public into believing that they and the military knew what they were doing. In a June 27 interview on ABC’s “This Week,” CIA Director Leon Panetta said the US was making progress in Afghanistan, but, “It’s harder, it’s slower than I think anyone anticipated.” Editor’s Note: There they were again! Everywhere you looked. All those “anyones” not “anticipating” … they were close cousins to the myriad “no ones” who “didn’t see it coming.” Translated into clear English, what this means is that if members of the Harvard/Princeton/Yale White Shoe Boy Club didn’t see it coming and/or didn’t expect it, no one else was capable of seeing it coming or expecting it. They, and only they, had the credentials and the capacity to make correct assessments, decisions and forecasts. Asking rhetorically if their strategy was “the right strategy,” Panetta answered, “We think so,” although he admitted, “We are seeing increasing violence.” “I think … the key to success or failure is whether the Afghans accept responsibility, are able to deploy an effective army and police force to maintain stability. If they can do that, then I think we’re going to be able achieve the kind of progress and the kind of stability that the President is after,” Panetta said. “If they can do that”? Only those in positions of power interviewed by docile and housebroken “journalists” could bluff their way through such transparent double talk. (Click here for a study from Harvard’s JFK School of Government about how the American media serves as a government lapdog rather than fulfilling its role as the people’s watchdog) LOST CAUSES “If”! That was the trend word to heed. “If” wasn’t about to happen in Afghanistan. After nine years of warfare and bloodshed, it was 100 percent clear that the corrupt, American-installed puppet government was incapable of deploying “an effective army and police force.” How then, in a climate of “increasing violence,” was it possible to achieve what hadn’t been achieved and couldn’t be achieved when there was less violence? “This is going to be tough. This is not going to be easy,” concluded Panetta. “Tough”? “Not going to be easy”? How about “impossible” or “not going to happen”? But then again there was always that big, ever-present “If.” Publisher’s Note: Since the onset of the McChrystal-designed Afghan surge, I have been forecasting its failure. So delusional was his scheme that, in the broadcast media and elsewhere, I often referred to him as General “McChrystal Meth.” In the weeks leading up to his dismissal, reports of his Afghan strategy going “agley” were increasingly common media features. McChrystal’s abrupt departure, which generated many days of headlines, was attributed solely to his gross public relations gaffe. Given his years of demonstrated media savvy and keen political infighting skills, it is suspect that he would devote so much time to wining and dining a stringer for a famously left-wing and outspoken magazine simply for the opportunity to express dissatisfaction with the President’s men and the war effort. The Trends Journal • Summer 2010 I submit that McChrystal was not unaware of the fire- storm his comments in Rolling Stone would create, nor was he unaware that they might result in his being fired. I believe it is not implausible that he used the press to deliberately set up the conditions for his dismissal. Knowing the Afghan policy he publicly lobbied for and bullied through was failing, rather than suffer the massive humiliation of professional defeat, McChrystal opted for the lesser humiliation attached to a professional indiscretion. Moreover, with his four stars, full pension and military reputation intact, Gen. Stanley McChrystal (Ret.) was in prime position to go and fight another day; this time, as a highly paid defense contractor executive, think tank expert, or military commentator for TV. n The Second Greatest Story Ever Told (continued from page 10) The Obamablame Name Game Who could forget the euphoria greeting Barack Obama’s presidential victory in 2008? Headlines around the world trumpeted the historic moment in American politics. A nation that just 50 years earlier had enforced racial segregation had now swept a black man into the White House. America’s true colors were shown. No one could ever again call it a “racist” nation. Were there racists in 2008? Of course, and there still are in 2012. What nation was without them? But the United States demonstrated to the world the efficacy of democracy. A rookie half white/half black Senator from Illinois knocked out his veteran Republican “war hero” opponent in a clear-cut victory. The majority had spoken. Color didn’t matter. Promising “Change We Can Believe In” and haloed in “Hope,” a political savior was born. With a preacher’s cadenced oratory, candidate Obama fed the hungry flock visions of peace, prosperity and global cooperation. No modern Election Day victory had been celebrated with as great fanfare and worshipful adulation as that lavished on their messiah by Obama’s devotees. Breaking the ballroom victory speech tradition, Obama whipped a crowd of 500,000 supporters into a “Yes We Can” frenzy in Chicago’s Grant Park. Beyond making history through his victory, Barack Obama would reign over a unique historical epoch: The Second Greatest Story Ever Told. Although it had been a long work in progress, historians would oversimplify the four years of Obamarule as the beginning of the end of Empire America, and he would also be remembered for leading America into the first “Great War” of the 21st century. To understand what led to both of these monumental dramas, it was necessary to know how the stage was set before Obama made his entry. Unlike so many presidential elections past, where it was a choice between the lesser of two evils, the situation in 2008 was quite literally black and white. But history won’t remember it like that. BYE, BYE BUSH Either forgotten or blurred by the passage of time were the prodigious failures of George W. Bush, and the commensurate antagonism directed at him and his supporting staff. The “Book on Bush” would detail eight years of Murderous War, Economic Cataclysm, Torture, and Wholesale Dismantling of Constitutional Rights. It would be difficult to find another American president in recent history who failed so spectacularly at so many things simultaneously. (See The Siena Research Institute’s “Survey of U.S. Presidents,” ranking Bush the worst of the modern era and the fifth worst in US history) Bush had become so great a liability that Republican candidates kept him off the campaign trail in 2008 to avoid being tainted by any association with him or his policies. So despised was Bush, a crowd (estimated between one to three million) attending Obama’s Inauguration booed him off the stage. But by mid-2009, with Obama just months in office, the opposition, initially muted by the enthusiasm following his election victory, were becoming emboldened. First there were the April 15th Tea Parties, then the 4th of July tax protests, followed by nationwide town hall confrontations against Obama’s health care reform and the September 12th march on Washington against “Big Government.” The protests appeared to spring up out of nowhere; one demonstration after another and they kept building, year after year. What would become a mass movement was initially considered so unlikely it was seldom actually considered. Again, it was one of those “no one saw it coming” media moments. With the unpopular health care reform legislation rammed through Congress and the man-on-the-street’s economy un-stimulated by the stimulus packages, by 2010, anti-Obama forces were gaining traction. While health care The Trends Journal • Summer 2010 was an Obama initiative, he was also being castigated for continuing and escalating the costly bailouts and rescue plans that began under George W. Bush … which many core conservatives had always opposed. RACE CARDS On all fronts — economic, geopolitical, military — Obama was blamed for the state of the nation, though on almost every major front (excepting health care and cap and trade) Obama was actually out-Bushing Bush. His most virulent (conservative) critics were giving Obama no credit at all for carrying out and amplifying those Bush policies they had so strongly supported: depriving suspected terrorists of habeas corpus, torturing them, escalating the Afghan War, ramping up the Pakistani campaign, and continuing the Iraq War. More than just ideological, the virulence was turning personal. It was not only directed at the man, but at his race as well as his Muslim roots and childhood years spent in Indonesia. While the race and religion cards are always present in the deck, had Obama turned the economy around the chances are those cards would never have been played. But the undeniable fact was that, promising “Change We Can Believe In,” Obama changed next to nothing and made most things worse. Now in 2012, after four years of Obamarule, the blame — justified or otherwise — was laid squarely upon the President’s shoulders. Wrapped in the flag, ADD-afflicted conservatives with memories extending back only as far as 20 January 2009, were incapable of remembering the decades of incompetence, mistakes and atrocities leading up to both the “Greatest Depression” and the “Great War.” For them, the eight years preceding Obama’s Inauguration Day were recalled in a haze of nostalgia — a mythic fantasy world of prosperity and conquest presided over by a courageous, benevolent, philosopher-President. A BALSAMIC SMILE In the far left corner, sipping wine and eating quiche, were the incorrigible Obamapologists. Anything Obama did (which was just about everything) that was contrary to their liberal beliefs or in violation of his own campaign promises was shamelessly explained away. As the bailouts got bigger, wars escalated, budget deficits grew and more jobs were lost, they insisted that all of the nation’s problems had been inherited; that none of them were of Obama’s making or avoidable — even when they were indisputably of his own making and completely avoidable. In the beginning it was, “Give him time.” As time passed, it became, “There was only so much he could accomplish.” Then, having accomplished little beyond taking measures they would have bashed Bush for, they argued, “His hands were tied and he was doing the best that If Obama Can, I Can Historians will judge the Obama presidency largely for its many failures, and even more critically for his broken promises and missed opportunities. Nevertheless, there were unique positive facets to the Obama candidacy and presidency that, while not ignored, were under appreciated. Achievements that he, and he alone, had set in motion would resonate long after he was out of office. Under the radar, beneath the surface, the confidence, hope and optimism that Obama could never capitalize on in the political arena were alive and well in the hearts and minds of millions of nameless kids and struggling adults. No one would ever know how the election of Barack Obama and the wild jubilation it set off would alter the life of innumerable ghetto kids inspired by the example set by America’s first black president. By breaking the final color barrier, Barack Obama, along with his wife and children, proved to black people in particular (and by extension other minorities) that in America, nothing and no one, except themselves, could prevent anyone from realizing his or her full potential. While the last five decades of civil rights movements had resulted in enormous strides in equality for blacks and minorities in virtually every field of endeavor, both symbolically and actually, the election of Obama was proof positive that nothing was impossible. His example would reverberate through the ages. n could be done under the circumstances.” And ultimately, though always quick to mock any conspiracy theory as right wing paranoia, Obamapologists would theorize that his flagrant betrayals and turncoat policies were not really of his own making either, but rather of nameless and sinister forces he was compelled to obey. Failure to comply could result in his assassination or deaths of family members. It was never, ever that Obama was just another insincere, deceitful, arrogant, self-serving, incompetent politician beholden to special interests. Intellectually capable of weighing the facts and the evidence, but emotionally incapable of acknowledging they’d been had, Obamapologists could not admit they had invested all of their emotional, spiritual and political capital in a fraud. The Trends Journal • Summer 2010 Civil War to “Great War” In the summer of 2012, as the world moves ever closer to the “Great War,” the immediate threat to America looks more like civil war. The two political parties, themselves fractured, are more polarized then ever. The schisms that began with Tea Parties and Tax Protests in 2009 would culminate in disuniting the United States into multiple irreconcilable factions. With most revolutions, civil wars and world wars, there is no single defining cause. Politics always plays a role, but not necessarily the defining role. The 2nd American Revolution contains elements of both the War for Independence and the War Between the States. As with both, there was more than one issue behind the chaos and discontent. With civil war brewing and politicians playing one faction against the other, the media will oversimplify the discontent to paint it as a clearly defined “North vs. South” ideological battle. It is not. Yes, the Union itself is in jeopardy, but on a grander scale. The too-small-to-saves are rising to confront the too-big-to-fails. Champions of State Sovereignty are challenging Federal Rule. It’s the police state vs. mass civil disobedience; martial law vs. Constitutional Law. Trend Forecast: Just as many nations were defaulting on sovereign debt, so too, would many states. With taxes already raised to incendiary levels, states were refusing to finance federal programs which returned little or nothing to them (e.g., education) and/or ran against the wishes of their constituencies … wars, foreign aid, subsidies, the huge, ever-increasing defense budget, etc. The Second Vermont Republic, virtually unknown in 2009, was no longer a long-shot nor a joke. Their manifesto made sense to many. And they weren’t alone. Calls for secession and regionalization would reach ballot boxes by 2012. Rebelling against dictates that had been imposed by the Federal government but opposed by the people, single states and regional movements were fomenting secession. Empire America was under siege. That was the real news. But with a black man running for reelection and immigration a complementary front-burner issue, swarms of “useful idiots” would be suckered into a politically engineered and media promoted racial propaganda trap — making it appear a “black and white” issue. Back In The USSR The world was coming apart at the seams, but to the US, still living in its “We’re #1” illusion, “over there” was a world away. America’s leaders and media, with their ingrained sense of moral superiority, were incapable of contemplating even the possibility that the great Union could suffer the same fate as the Soviet Union. While the many glaring differences between the two political systems had been exhaustively publicized — especially in the United States — the glaring similarities went unnoticed. As in the disintegrating USSR, the USA infrastructure was as rotten as its political system. Having forced through globalizing legislation that turned a once vibrant nation of tradesmen, craftsmen, farmers, shop keepers, blue-collar workers and manufacturers into a low-wage service society of health care aides, shelf-stockers, cashiers, office serfs and clerks. Even America’s work ethic was beginning to turn Soviet: “We pretend to work. They pretend to pay us.” Similarities did not stop there. Corporate executive or Communist commissar — the names, faces and uniforms were different, but they were economically and politically much the same. Pay, perks and power were increasingly concentrated at the top, while below, resentment seethed and mounted. The USSR, in its waning days of Empire, squandered its finite resources fighting and losing a Cold War while running a losing arms race. The USA, in its waning days of Empire, squandered its greater but still finite resources on a gargantuan defense budget, fighting unwinnable hot wars and feeding an insatiable military stationed on hundreds of bases worldwide. In an ironic twist of history, both Empires would be brought down by sipping from the same Afghan final straw. (See “Losers, Liars, Lost Causes,” page 18) UNCLE SAM, UNCLE JOE Of course, outwardly, 20th century Soviet Russia and early 21st century USA appeared centuries and worlds apart. The Trends Journal • Summer 2010 Under Stalinist communism there was no pretense to freedom of speech or movement, while in the US democracy, the First Amendment was a cherished tradition and people have always been more or less free to criticize at will. In Russia 2010, investigative journalists digging too deeply might have been digging their own graves. Dissenters, whistle blowers and opposing interests, as in the old days, did so at their own peril. In the US, although freedom of speech and dissent may have been tolerated, in practice the end result was no different. Regardless of who was in power — Republicans or Democrats — the people had little say in any matter of consequence. The government did as it pleased. The President’s harshest Republican/Conservative political and media critics were labeling Obamarule as Marxism/Communism/ Socialism. But Uncle Sam did not look at all like Uncle Joe. His descent into totalitarianism wore the face of Fascism. “Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power,” opined Benito Mussolini, generally regarded as an authority on the subject. Americans were spoon-fed since infancy the Gospel of Capitalism: “An economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market.” While the capitalistic reality never quite lived up to its definition, America had been, more so than any other nation on earth, the land of opportunity. While there were always race, gender and religious barriers, realizing the American Dream was a possibility open to all willing to work for it. However, long before 2012, though still packaged with its same Red, White & Blue label, the ingredients bore no resemblance to the original recipe. While the principles of equality may have prevailed in many sociopolitical fields, in the US, all men were not created equal. The economic formula had changed even though the words had not. It was now, “The bigger you are, the bigger the breaks.” Too-big-to-fail? What fascist made that up? Tax breaks for the richest. Loan guarantees and grants only for the connected. Sweetheart deals and subsides only for the biggest players in the richest industries — Big Oil, Big Pharma, Agribusiness, Big Airlines, Defense Contractors, Big Banks and Brokerages and Big Insurance — not only was everyone else on their own, Big Brother took their taxes to enrich Big Friends. After the rounds of bailouts, rescues and stimulus plans that bailed out, rescued and stimulated only the Bigs, pub “The bigger you are, the bigger the breaks.” lic anger was rising. Determined to keep playing the game, cover their losses and retain Big Bonuses, Congress again came to the rescue, but with a deft Orwellian sleight of nomenclature, concealed its true identity from the public. It was called the “Restoring American Financial Stability Act of 2010” and was peddled to the public as a bill that would improve accountability and transparency in the financial system, protect taxpayers by putting an end to bailouts, and protect consumers from abusive financial services practices. Absent from the “peddle” (in the Congressional synopsis) was the itsy-bitsy, minor little detail of the $4 trillion earmarked as a guarantee to bail out troubled institutions should the need arise. Despite the Act’s name, it was no more than another pledge to soak the peo ple and bail out the Bigs. Every government measure taken ben efited only the Biggest, consolidating busi ness and industry at the top. Through a combination of deregulation and political favoritism, freedom was taken out of the free market, making it next to impossible for the entrepreneur to compete. At every level, the Bigs kept getting bigger. For example: in 1994, the six biggest financial institutions held assets equivalent to 20 percent of the US economy. When the “Panic of ’08” hit, they held 58 percent. By 2010, they held 62 percent. Three Big Banks controlled two-thirds of the legal extortion racket otherwise known as the credit card business. The same drive to consolidation at the top applied to every major aspect of the American economy. These were not academic percentages divorced from daily life. When the richest 10 percent of the country have or control 93 percent of all financial wealth, there is only 7 percent left to divvy up between the remaining 90 percent of the populace. By 2012, the garish imbalance was no longer a soulless statistic or a thin slice on a pie chart. Heavily taxed, foreclosed, harassed, working for little or unemployed … that beleaguered and increasingly resentful 90 percent wanted a bigger piece of the pie. SQUEEZE THE LITTLE PEOPLE Variations of the same story were playing out around the world. Turmoil in Thailand. Worker strikes in China. General strikes in India. From the streets of Greece, Hungary, Romania … to plantations in Panama, across the globe the people were protesting. While the motivations appeared different, at the core, a common thread linked them: the rich were getting richer, and everyone else was being squeezed or starved. But in the summer of 2010, the universal rumblings were either not being heard, were misinterpreted as isolat- The Trends Journal • Summer 2010 ed and unrelated incidents — or dismissed by purveyors of optimism opium as fleeting phenomena that would cease as the economy recovered: Jobs Will Give Boost as Stimulus Ends, Greenlaw Says July 6 (Bloomberg) — Job growth will sustain the U.S. economic recovery even as government fiscal stimulus ends, according to David Greenlaw, Morgan Stanley’s chief fixed-income economist in New York. Morgan Stanley expects “moderate, sustainable growth, a rebound in private credit demands, a bottoming in inflation and a Fed that begins to implement its exit strategy.” By any recognized measure, the data would not justify such optimism — or any optimism. Of all of the indicators, the most prominent from Wall Street’s perspective is the stock market, which in 2010 began on a modest down note and remained essentially flat. The old adage, “As goes January, so goes the year” was living up to its reputation. Historically, it is one of the year’s strongest months. Nearly 80 percent of the time, if January is positive the markets will rise over the course of the year. By putting the most positive possible spin on the data, the brokers and touts were promoting the stagnant stock market as a “buying opportunity.” Their own livelihoods depended on keeping the gamblers inside the casino. After plummeting from its 14,000 high in 2007, the Dow had recovered to its 1999 trading range of 10,000. But 10,000 in 2010 was not the same as 10,000 in 1999. In the intervening decade, the Consumer Price Index had risen by some 60 points. For the market to be worth in buying power what it had been worth a decade earlier, the Dow would have been trading above 14,000. It wasn’t as though this was some actuarial secret, but if you were following the financial news you would have been hard put to find an expert talking about the Dow indexed for inflation. “The market is very oversold,” said Paul Zemsky of ING Investment Management, which oversaw $550 billion when the market tipped past 10,000 in early July. “The improvement in retail sales numbers was enough to get some people back in. Over the next few weeks, we’ll probably get both economic and earnings data that will show that we’re not going to go back into recession.” ECONOMIC ALZHEIMERS Multi-billionaire Warren Buffett, regaled as the “Oracle of Omaha” and revered by the business media for his insatiable lust for ever more money, in early summer made the recovery official. “The economy is coming back, no question in my mind,” he said. Yet, with all the stimulus, with all the trillions in bailouts, tax incentives, “cash for clunkers” … the best that could be said for the market in mid-2010 was at least the worst hadn’t happened. But the worst would happen by 2011. And as always, those that didn’t see the crash coming would claim that since such people as Buffett the “Sage” didn’t see it coming, “No one saw it coming.” Stricken by Economic Alzheimers, all the media and political “recovery” boosters would forget what they had forecast, insisting they had predicted a crash all along. Many who had obediently gone along with the experts, now, jobless and desperate, tried to console themselves with the thought that everyone had done their best, and if only there had been more stimulus money pumped into the system, the bad times might have been averted. Then there were the others — the 20 percent who could think for themselves. Unlike the vast majority, they were unafraid to face the inevitable consequences of the undeniable socioeconomic and geopolitical facts. When the future came, the prepared and empowered were ready for it. n PUT YOUR MONEY WHERE YOUR MIND IS® NAME TITLE COMPANY STREET ADDRESS CITY STATE ZIP PHONE E-MAIL I would like to subscribe to the Trends Journal.® Each year I will receive four (4) issues plus intermittent Trend Alerts.® Online Edition: q1 year $99 q2 years $175 q 3 years $225 Print & Online Edition: q1 year $185 q2 years $249 q 3 years $349 Outside the US, please add $25 per year (for print edition subscription only) To renew online, go to www.trendsresearch.com and click “Trends Journal.” To renew by mail, send payment to: The Trends Research Institute P.O. Box 3476, Kingston, NY 12402 845.331.3500