- Published on Friday, 13 April 2012 08:00
- Written by Sara Nunnally, Editor, Inside Investing Daily
- Hits: 908
The election in November does not mean a thing for this economy. Unless Washington gets the political guts to slash our debt, there is no chance of recovery.
I want to ruin your Happy Hour... It's Friday, and I know you're probably looking forward to the five o'clock bell. Maybe you'll head down to the corner pub with some of your co-workers and have a beer or two.
Maybe you'll even clock out a little early.
Don't worry... I won't rat you out. But I am going to disappoint you.
This recovery and market rally everyone's talking about is nothing more than a campaign slogan.
You see, our president is going to do everything he can to try to make sure he gets re-elected. He's been touting improved unemployment numbers and increased manufacturing as proof that his economic policies are working.
But here's the big rub.
The Republicans wouldn't be doing any better if they were in the Oval Office. If you're pinning your financial hopes and dreams on a regime change in Washington, you're blind to the one thing that could actually save your wealth and prosperity.
That is, the government can't stop the economic winter. Nor should they!
You've all heard the term creative destruction, right? This gets at the heart of laissez-faire markets... the very life force of capitalism.
This is the opposite of what our government -- even before President Obama -- has been doing. Think back to U.S. Treasury Secretary Hank Paulson forcing the $700 billion bailout down banks' throats... and the Federal Reserve's bond rescues.
Not only have these actions not improved our economic outlook, they've actually hurt future growth!
I'm not an economist, but I can see that adding more government debt and taking more money from taxpayers to fund it is only making things worse.
The only thing these bailouts are good for is greasing the wheels of major campaign donors so that these Washington hacks can keep their job.
These government handouts are nothing more than multibillion-dollar bribes.
And Wall Street is more than happy to go along with the charade. After all, they're getting cheap money and empty regulations. Is it any wonder that Goldman Sachs is able to settle with the SEC over allegations that it allowed sensitive information to make its way to high-end clients?
Goldman and the SEC have agreed to a $22 million settlement for what amounts to insider trading. That's a paltry sum! It's less than 1% of the company's net income for the last quarter of 2011. What kind of deterrent is that?
But what should we expect from a government that allows its own members to trade on insider information?
Senators routinely pocket thousands a year using a legal loophole we call the Rule 37 Privilege. Rule 37 legally allows members of Congress to trade stocks on non-public information.
A recent academic study tracked over six years of stock purchases by U.S. senators. They found that senators beat the overall market by 12%... and beat the average investor's gains by more than 13-to-1.
If that doesn't prove to you that Wall Street and Washington are in bed together, I don't know what will.
These backdoor deals on Capitol Hill continue to add to our economic woes. We're in for a very long -- and very hard -- struggle.
I said before that the government can't stop our economic winter. I believe that.
In truth, we only have two options: Get out of the way of this economic avalanche, or take part in an orderly destruction of our current economic system. The first action for either option is to stop adding debt.
An economic winter cannot be resolved unless debt is unwound.
It doesn't have to completely disappear, but it has to stop growing. Unfortunately, we don't see that happening anytime soon.
And that means, no matter what the markets look like -- no matter how far they've rallied -- we're still in winter, and will be for a long time. Our most optimistic view is that we'll see a turnaround in the next three years... But only if governments start to unwind their debt now.
(That goes for you, too, Europe and Japan!)
In the meantime, the so-called recovery and market rally are making investors more complacent, and more willing to take risks. The S&P 500 has climbed 6% in the past three months. The Nasdaq? Nearly double that.
It's hard to stand in the way of such growth...
But imagine a huge dam holding back billions of gallons of water. A good dam will be constructed out of concrete and steel, engineered from high-quality materials with meticulous design and planning.
This dam, however, is built out of limestone and sand... and water is creeping into its bones, hollowing out the structure until only the far wall is holding back the tide.
That's what this market rally is... a dam of sand, with no real strength to keep standing against the pressures of debt and Washington largesse.
Think a regime change in the White House is all we need to fix this?
P.S. Over the past few months, we've been working overtime on a special report that exposes in great detail the "crimes" the Federal Reserve has committed over the past generation.
It is not quite done yet. It's turned into something more like a mini-book than a typical industry white paper. But if you put your name on our list to receive an advance copy, I'll send you one as soon as it is done.
One of the most shocking discoveries in this report is evidence we uncovered that shows the government knows we are headed for an economic crisis worse than anything ever experienced in our country's history.
You need to see what we've found. You need to be free to make your own decisions. You need to take action right now. Please make sure you sign up to receive it as soon as we make it available.
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