Dismal Again

It seems that I was on the right track last month when I forecast that November retail sales, behind a stronger Black Friday, would be followed by a poor overall Christmas season.  While Black Friday didn’t prove to be as big as I expected with a modest .5% gain over 2008, December sales were truly dismal again as huge sales promotions, extended holiday hours, last-minute shopping and gift-card redemptions failed to turn around lackluster performance in the largest sales month of the year.

The Commerce Department said retail sales fell last month, a 0.3% decline from November.  The silver lining was that year-over-year December sales increased 5.4%, but those figures were helped by a miserable December 2008 that was easy to beat.

Here are from charts from that illustrate the points mentioned above:

This graph shows monthly retail sales since 1992.

This graph shows the year-over-year change in retail sales since 1993.

Diversion?

By now we all know the story: Al Quaida sends this young rich kid from Nigeria, Umar Farouk Abdulmutallab, to blow up an American bound international flight from Amsterdam to Detroit.  The explosive is somehow sewn into his underwear and he successfully boards the plane but fails in a burst of flame when the bomb fails to detonate.  Whew!  Another close call.  Can you imagine the effect on our already fragile national economy if this attack had actually succeeded? 

 

So, let me get this straight.  Al Qaida has studied our security methods over the past decade and have come to the conclusion that the best way to get a bomb onboard a US-bound airliner is to have a young muslim man whose name already appears on a government terrorist watch-list show up just prior to departure with no checked luggage or passport and pay $3000 cash for a one-way ticket to America. Oh, and coincidentally his father had recently appeared at a US Embassy to warn of his son’s radical Islamic tendencies.  It almost seems like they were trying to make every mistake in the book to draw attention to Abdulmutallab.  I’d say that’s a pretty poor plan.  Which makes it all-the–more embarrassing that this mission came precariously close to success.  I’m almost surprised that he wasn’t wearing a sign inscribed with TERRORIST in large block letters when boarding the aircraft.

Moving on to the bomb itself, things get even more ridiculous.  The explosive in Umar Farouk Abdulmutallab’s underwear was Pentaerythritol, which is a building block for PETN. To make PETN, Pentaerythritol must be mixed with concentrated nitric and sulfuric acids. It is assumed that these acids were in the syringe that the bomber was attempting to inject, under the cover of a blanket, into his underpants. He then attempted to ignite the newly prepared PETN with some kind of a fuse. He was apparently unaware that PETN requires a shock wave rather than heat or flame to detonate, and a shock wave is best provided by an initiator explosive.  Somehow, I would expect an Al-Qaida operative to have had more explosives knowledge than this before being sent on a mission.  Especially when we consider how much training and planning went into the 9-11 attacks. 

Abdulmutallab is reported to have proudly boasted to the U.S. Federal Bureau of Investigation, “I am one from a production line of terrorists that has been trained in Yemen by al-Qaeda.  There are more just like me who will strike soon.”  An ominous warning of more to come.  It didn’t even take waterboarding to extract this information from the more-than-willing-to-talk would-be terrorist.  Or perhaps it was just an effort to make sure our attention stays on airline security.

In short, the whole enterprise was doomed to failure from the beginning.  It almost seems that this attack must have been a diversion to get us to focus exclusively on airline safety.  Abdulmutallab was supposed to fail.  He wasn’t aware of that aspect of the plan, but his Al-Qaida superiors had set him up to fail, to purposely get caught by air security as a grand diversion.  They probably figured that if he did happen to get through to attempt the attack then that was an unlikely bonus, but the diversion of our attention would still be accomplished with or without a successful explosion.  Why the diversion?  To attack us somewhere or somehow else, while our attention is on air travel safety.  Perhaps, Al Qaida means to attack us elsewhere using a method that does not involve the airline industry.  Hopefully, our government recognizes the use of diversion as a tactic, since they often employ this same tactic themselves.  When it comes to terrorism we face the unknown.  Where and in what form will the attack take place?  Scanning luggage, taking our shoes off, pat-downs, and x-ray vision do nothing to solve the problem, although paying attention to the obvious might help.  We can only protect against those methods of which we are aware or can imagine.  The real danger lies in the unknown.

Discouraged and Marginally Attached

Happy New Year!  I know I’m a little bit late but as I get older it takes me longer to recover from the holidays.  I see that not much has changed with the economy.  The government continues to tell us that the recovery is right on schedule and those of us who are looking at the underlying stories behind the data keep shaking our heads and wondering when reality is going to rear its ugly head.  It’s coming.

Unemployment numbers were up again but coincidentally a massive exodus of discouraged workers from the job market kept the unemployment rate from rising above 10%.  Let’s take a closer look at these numbers.  First, the civilian labor force participation rate fell to 64.6% in December.  What this represents is the percentage of eligible, working-age people actively seeking work in the past 4 weeks.  Notice how drastically this number plummeted throughout 2009.  This is the lowest level since 1985, meaning that we are witnessing a historic and remarkable decline.

 Next we have the long-term unemployed (those jobless for 27 weeks or more) continued to aggressively trend upward, reaching 6.1 million last month.

 

When people give up looking for work, they are no longer part of the civilian labor force and are not considered by the government as unemployed, but as a ‘marginally attached worker’.  How convenient.  About 2.5 million people were marginally attached to the labor force in December.  These are people who were not in the labor force, desired and were available for work, had looked for work sometime in the last year but were not counted as unemployed because they had not searched for work in the 4 prior weeks.

Discouraged workers, is a subset of marginally attached workers.  This figure represents those who want to work, but are not actively seeking work due to weak economic conditions.  This number continues to climb as well.

Taking all of this into account we can easily see that the true unemployment numbers are much worse than the government is admitting.  The share of the population in the labor force has fallen to its lowest level in 24 years.  1.7 million workers dropped out of the workforce from July through December, marking the biggest six-month loss since 1961.

You do the math.  Do you really think that because someone is discouraged or marginally attached, they are no longer unemployed.  I’m sure we can both agree that they’re still unemployed.  Your government doesn’t see it that way.  Why?  Because, frankly, they don’t think you’re very bright, and they’re pretty sure you won’t figure it out, and they’re even more confidant that if you do figure out they’re lying to you, you won’t lift a finger to object.

Domestic Enemies of the Constitution

Here I sit, thousands of miles across the country from my home, visiting relatives on the east coast writing this post.  Instead of finishing up last-minute Christmas shopping or spending time with family and friends I find myself sending letters to Congress and imploring you to do the same.  Tomorrow the Senate will vote and most likely pass this trillion dollar health-care legislation.  This Christmas Eve vote will go unnoticed by most Americans, too wrapped up in holiday shopping and parties to even notice that our government doesn’t care what they think.

This time of year is often a time when Americans end up sinking themselves deeper in debt, and this year will be no different.  Many of us may have cut back and reduced our spending because of the poor economic conditions that have left many homeless and unemployed.  But our government continues to spend.  Last week it was a $1.1 trillion spending bill followed by a $636 billion defense appropriations bill.  In Washington, no matter how bad things get, the spending never stops.

While polls and surveys continue to show that most Americans oppose this health care bill, Democrats and Independents are oblivious to the wishes of their constituents.  The keys to blocking this legislation lie with the Independents as it is unlikely that any Senate Democrats will diverge from party lines, especially when bribes are being offered with taxpayer money to sway the vote.   Senator Mary Landrieu of Louisiana was bribed with $300 million of incentives for her state to change her vote and Senator Ben Nelson of Nebraska was able to negotiate an agreement in which Nebraska is permanently exempt from paying for its expansion of Medicaid, shoving that cost onto taxpayers in every other state.  This agreement is clearly unconstitutional.

Please, do your homework.  Our government is out of control.  Be responsible citizens and protect our nation from these domestic enemies of the Constitution by making your views known.  The two Independent Senators whose votes could stop this bill from passing are Senator Bernie Sanders from Vermont and Senator Joe Lieberman from Connecticut.  I urge each and every citizen to email or call these key Senators and demand that they vote against this legislation.  I have provided the links above.  Please use them.

More Shameless Spending

Once again our government has skillfully managed to spend over a trillion dollars with the majority of Americans unaware and locked in a comatose oblivion of mind-numbing entertainment.  Please people!  Put down your iPhones for sec and pay attention!

A $1.1 trillion spending bill was unceremoniously signed into law this week by our illustrious Spender in Chief, President Obama.  Last weekend our Congress managed to avoid a Republican filibuster and throw another bundle of dry kindling on the flames of debt that threaten our nation.  Think I’m being dramatic?  Take a look at the debt we are accumulating, research what it means, understand what it means and then sit back and consider the implications for your children and grandchildren.

This bill bundles together six of the twelve annual federal spending bills into one massive 1,088 page bill that will finance ten Cabinet-level agencies and help fund the Medicare and Medicaid health care programs in the coming year.  The bill, formally known as the Omnibus Fiscal Year 2010 Appropriations Bill (HR 3288) was signed into law on Wednesday.  I urge each and every citizen to view this bill and understand how our government is wasting your money.  Only the $636 billion defense bill remains to be passed and should make it to the President’s desk by next week bundled with an extension of unemployment benefits.  Here is a list of the major provisions and highlights of the spending bill:

$519 billion in routine payments for Medicare and Medicaid

$109.6 billion for veterans programs

$68.2 billion for the Education Department

$41 billion for highway construction.

$18.7 billion for NASA

$7.9 billion for the FBI

$7.3 billion for the 2010 census

$5.1 billion for heating subsidies for low-income people

$3.7 billion for grants to state and local law enforcement

$1.6 billion to subsidize Amtrak

A pay raise for federal employees averaging 2%

In addition, this measure contains over 5,000 earmarks totaling almost $4 billion.  Both Democrats and Republicans shamelessly share in the spending as usual.  Below is a small sample of the earmarks included in this bill:

$700,000 for a shrimp fishing project in Maryland

$30,000 for the Woodstock Film Festival Youth Initiative

$200,000 for a visitor’s center in a Texas town with a population of about 8,000

$200,000 for the Washington National Opera

$1 million for renovation at the Portsmouth Music Hall

$150,000 for educational programs and exhibitions at the National Building Museum

$400,000 for renovation of the Brooklyn Botanical Garden 

$150,000 for exhibits at the Theodore Roosevelt Inaugural Site Foundation

$500,000 for exhibits at the National Mississippi River Museum and Aquarium

$2.7 million for the UNL Medical Center, to support surgical operations in space

$292,200 for the elimination of blight in Pennsylvania 

$750,000 for exhibits at the World Food Prize Hall of Laureates

$1.6 million for a tram between the Marshall Flight Center and Huntsville Botanical Garden

$655,000 for equipment at the Institute for Irritable Bowel Syndrome Research

$500,000 for intelligent transportation systems in Texas

$250,000 to buy surveillance cameras and deploy them in high-crime areas

Remember the Boston Tea Party

On this day in 1773, a group of Massachusetts colonists, some disguised as Mohawk Indians, boarded three British merchant vessels in Boston Harbor and dumped 342 chests of tea into the water.

The “Boston Tea Party,” was mounted to protest the Tea Act of 1773.  The bill had been enacted by the British Parliament with the aim of saving the faltering East India Co. by lowering tea taxes and granting the firm a virtual monopoly on the American tea trade. Many colonists viewed the Tea Act as another example of tax tyranny imposed from London. The raid proved to be a key event in the unfolding of the American Revolution.  Samuel Adams, an American patriot leader, organized the tea party with about 60 members of his underground resistance group the Sons of Liberty.  This act of patriotism later led to the calling of the first Continental Congress and ultimately the American Revolution and the War for Independence.

In today’s America we fight our own battle against unfair and unconstitutional taxes and spending.  Once again, we have been led by modern-day patriots to form Tea Parties to protest the actions of our government.  Sadly, our modern news media and politicians now ridicule and ignore these American patriots.  Is this what America has come to?  Will we stand idly by and do nothing while our government shreds the Constitution, dishonors our citizens, and leads us into further debt and disgrace?

While the Tea Party turnouts have been encouraging, we will need many more American patriots to show up for these rallies if we want this administration to take us seriously.  Thousands and hundreds of thousands have met with President Obama’s contempt but millions will need to march to ensure that he cannot just ignore us or ridicule us as radicals.

Americans unite!  And fulfill your duty as citizens to your country and your family.  It’s time to send Washington a clear message that enough is enough.  Stop the spending!

BILL OF RIGHTS (1791)

Today is the anniversary of the ratification of the Bill of Rights which took place on December 15, 1791.  President Franklin D. Roosevelt declared December 15 to be Bill of Rights Day in 1941 just eight days after Pearl Harbor.  The Bill of Rights is the name by which the first ten amendments to the United States Constitution are known. The Bill of Rights limits the powers of the federal government of the United States, protecting the rights of all citizens, residents and visitors on United States territory.

Bill of Rights

Amendment I

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the government for a redress of grievances.

Amendment II

A well regulated militia, being necessary to the security of a free state, the right of the people to keep and bear arms, shall not be infringed.

Amendment III

No soldier shall, in time of peace be quartered in any house, without the consent of the owner, nor in time of war, but in a manner to be prescribed by law.

Amendment IV

The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no warrants shall issue, but upon probable cause, supported by oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.

Amendment V

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Amendment VI

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the state and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the assistance of counsel for his defense.

Amendment VII

In suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by jury shall be preserved, and no fact tried by a jury, shall be otherwise reexamined in any court of the United States, than according to the rules of the common law.

Amendment VIII

Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted.

Amendment IX

The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

Amendment X

The powers not delegated to the United States by the Constitution, nor prohibited by it to the states, are reserved to the states respectively, or to the people.

Restoring Fiscal Responsibility

Did you know that one of the central goals of the Obama Administration is restoring fiscal responsibility?  In his speech at the Brookings Institute earlier in the week, President Obama outlined his plan for fiscal responsibility by promoting his patented “spend our way out of this recession” policy.  Soon to be implemented highlights of this policy include a near trillion dollar healthcare overhaul, an out-of-control trillion plus dollar budget, a new multi-billion dollar jobs stimulus program, more government spending on infrastructure projects, a “Cash for Caulkers” program for homeowners, an extension of the $700 billion bank-bailout TARP program, and a variety of spending to polish off any unused funds from the $787 billion stimulus package.

I was almost surprised that the President actually used the words “spend our way out of this recession” but at this point almost nothing surprises me.  Last year it was President Bush saying, “I’ve abandoned free-market principles to save the free-market system,” this year it’s President Obama spending us into oblivion.  It’s obvious that these politicians think the American people are so stupid that they don’t even have to lie to us anymore.  They basically just stand up there and tell us the sad truth with a smile, knowing that most Americans aren’t conscious anyway.

In his speech, the President touted his administration’s success, “We can safely say that we are no longer facing the potential collapse of our financial system and we’ve avoided the depression many feared.  Our economy is growing for the first time in a year, and the swing from contraction to expansion since the beginning of the year is the largest in nearly three decades.  Finally, we’re no longer seeing the severe deterioration in the job market that we once were. In fact we learned on Friday that the unemployment rate fell slightly last month.  This is welcome news, and news made possible in part by the up to 1.6 million jobs that the Recovery Act has already created and saved according to the Congressional Budget Office.”

It all seems a bit premature to me.  I think we can safely say that we have managed to spend massive amounts of borrowed money to put off the inevitable for another day.  Whether the economy is actually growing is debatable as you may remember from my earlier posts, the governemtn seems to be cooking the books in regard to the nation’s GDP.  As far as the revised jobs data, once again, you know how I feel about government statistical manipulation.  Check out this article from The Business Insider, which sheds new light on these shady numbers and President Obama’s proclamation that “we’ve reduced the deluge of job losses to a relative trickle”:

TrimTabs: The Real Job Loss Number Was 255,000
by Joe Weisenthal

Just about every time the monthly jobs numbers comes out, economic research firm TrimTabs comes out and slams the government’s methodology, usually honing in on the Birth/Death model of new businesses entering the market.

This week is no exception.

Frankly, we’re not sure what to make of their arguments. We’ve been hearing about this Birth-Death issue for a long time, but unless you believe they’re changing their methodology from month to month, then that issue only goes so far.

We welcome your thoughts.

————

TrimTabs’ Estimates 255,000 Jobs Lost in November, While BLS Reports a Decline of Only 11,000

BLS Revises September and October Results Down a Whopping 45%

Something’s Not Right in Kansas!

 TrimTabs employment analysis, which uses real-time daily income tax deposits from all U.S. taxpayers to compute employment growth, estimated that the U.S. economy shed 255,000 jobs in November.  This past month’s results were an improvement of only 10.2% from the 284,000 jobs lost in October.

Meanwhile, the Bureau of Labor Statistics (BLS) reported that the U.S. economy lost an astonishingly better than expected 11,000 jobs in November.  In addition, the BLS revised their September and October results down a whopping 203,000 jobs, resulting in a 45% improvement over their preliminary results.

Something is not right in Kansas! Either the BLS results are wrong, our results are in error, or the truth lies somewhere in the middle

We believe the BLS is grossly underestimating current job losses due to their flawed survey methodology.  Those flaws include rigid seasonal adjustments, a mysterious birth/death adjustment, and the fact that only 40% to 60% of the BLS survey is complete by the time of the first release and subject to revision.  

Seasonal adjustments are particularly problematic around the holiday season due to the large number of temporary holiday-related jobs added to payrolls in October and November which then disappear in January.  In the past two months, the BLS seasonal adjustments subtracted 2.4 million jobs from the results.  In January, when the seasonal adjustments are the largest of the year, the BLS will add anywhere from 2.0 to 2.3 million jobs.  In our opinion, trying to glean monthly job losses numbering in the tens of thousands or even in the hundreds of thousands are lost in the enormous size of the seasonal adjustments.

In November, the BLS revised their September and October job losses down a surprising 44.5%, or 203,000 jobs. In the twelve months ending in October, the BLS revised their job loss estimates up or down by a staggering 679,000 jobs, or 13.0%. Until this past month, these revisions brought the BLS’ revised estimates to within a couple percent of TrimTabs’ original estimates. 

The large divergence between the two results begs the question of what is causing the difference.  While we don’t have an answer today, we will be poring over the data in an attempt to answer that question.

A comparison of TrimTabs’ employment results versus the BLS’ results from January 2008 through November 2009 is summarized below.

Source: TrimTabs Investment Research – www.trimtabs.com and Bureau of Labor Statistics – www.bls.com

Several other employment related data statistics support the conclusion that the labor market is not as robust as the BLS is reporting:

• Automatic Data Processing reported on Wednesday that 169,000 jobs were lost in November.
• The Institute of Supply Management (ISM) Non-Manufacturing Survey reported that the majority of companies surveyed were still shedding employees.
• The ISM Manufacturing Survey reported weaker employment conditions in November.
• Weekly unemployment claims were 457,000 in the week ended November 27, 2009.  While last week’s results were below the important psychological level 500,000, the weekly claims are still uncomfortably high and point to a contracting labor market.
• The TrimTabs Online Jobs Index reported lower online job availability in the past three weeks.
• The Monster Employment Index declined in November.

We will have the opportunity to truth our employment model estimates at the end of January 2010 when the BLS releases its annual benchmark revisions.  The BLS revisions are based on actual payroll data for March 2009.  The BLS revision is then divided by twelve to correct prior month’s data back to April 2008.  We also use the March 2009 revisions to adjust our model inputs and make any necessary corrections. 

For a complete analysis of the current employment situation and economic conditions, refer to TrimTabs Weekly Macro Analysis published this coming Tuesday, December 8, 2009.

Warnings from China

Our current national debt now stands at over $12,000,000,000,000 (twelve trillion dollars).  Our trusty dollar, once the mainstay of reliability for the economic world appears to be stumbling toward a historical low.  Gold, a historical hedge against the fluctuating value of fiat currencies, sets new records daily.  Silver, which has been lagging gold’s recent performance, appears poised for a breakout amid whispers of a new worldwide reserve currency.

Today, China’s Commerce Minister Chen Deming warned that the world should pay more attention to the stability of the US Dollar.  This is the latest in a series of warnings from Chinese officials since President Obama’s inauguration in January.  American’s would do well to heed these warnings and pay attention to how other world governments view the actions of our own government.

January 2009 – Barack Obama is inaugurated as President of the United States.

February 2009 - Chinese Premier Wen Jibao issues a warning against the rise of protectionist sentiment after Treasury Secretary Nominee Timothy Geithner accuses China of manipulating its currency.

March 2009 – Speaking at a news conference at the end of the Chinese parliament’s annual session, Mr. Wen said he was “worried” about China’s holdings of Treasury bonds and other debt, and that China was watching United States economic developments closely.

“President Obama and his new government have adopted a series of measures to deal with the financial crisis. We have expectations as to the effects of these measures,” Mr. Wen said. “We have lent a huge amount of money to the U.S. Of course we are concerned about the safety of our assets. To be honest, I am definitely a little worried.”

He called on the United States to “maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

April 2009 – The New York Times reported that Beijing is becoming increasingly nervous about its high stakes in America’s economic well-being.  Reversing its role as the world’s fastest-growing buyer of United States Treasuries and other foreign bonds, the Chinese government actually sold bonds heavily in January and February before resuming purchases in March, according to data released by China’s central bank.  Chinese officials have expressed growing nervousness about their country’s huge exposure to America’s financial well-being.

One of the Chinese government’s top monetary economists, Yu Yongding, stated that he believes that the balance of financial power between the two countries is “mainly in favor of the United States.”  “If you owe your bank manager a thousand pounds, you are at his mercy. If you owe him a million pounds, he is at your mercy,” he added.

May 2009 – Senior officials of the Chinese government warned a top member of the US Federal Reserve that they are increasingly disturbed by the Fed’s direct purchase of US Treasury bonds. By the end of June, China’s holdings of US Treasury Bonds (T-bonds) totaled 776.4 billion USD, down 25.1 billion, or 3.13 percent compared with the country’s 801.5 billion USD T-bonds holdings in May, indicating China’s first massive offload of US debt in 2009.

July 2009 - Beijing “will make the request that the U.S. side should adopt responsible policies to ensure the basic stability of the exchange rate of the U.S. dollar and protect the safety of Chinese assets in the United States,” said Zhu Guangyao, an assistant finance minister, at a news briefing for the United States-China Strategic and Economic Dialogue held in Washington.

August 2009 – U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt ceiling so that the United States can continue its insane spending spree, saying that it could be breached as early as mid-October. “It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations,” Geithner said in a letter to Senate Majority Leader Harry Reid.

September 2009 – Chinese government official Cheng Siwei, said China was dismayed by the United States recourse to “credit easing”.

“We hope there will be a change in monetary policy as soon as they have positive growth again,” he said. ”If they keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies. 

“The US spends tomorrow’s money today,” he said. “We Chinese spend today’s money tomorrow. That’s why we have this financial crisis.”

“He who goes borrowing, goes sorrowing,” said Mr. Cheng, borrowing a quote from US founding father Benjamin Franklin.

October 2009 – The official Chinese news agency, Xinhua analyzes US monetary policy in an article entitled, “U.S debt dilemma, no better solution?”: “The U.S. government is without doubt facing great challenges, among which the debt dilemma is the biggest test… Simply speaking, the U.S. government’s method is to borrow money from the world and devalue the dollar, the dominant reserve currency of the world currently.” The article ends with the warning, “Foreign investors are not ATMs without limit either. No wonder many experts worry that the debt bubble will be a greater crisis some day in the future.”

November 2009 – The Reserve Bank of India (RBI) increases their national gold reserves by 55% with the purchase of over $7 billion of gold from the International Monetary Fund (IMF).  Gold launches into a huge rally and the US Dollar continues to fall.

December 2009 – China’s Commerce Minister Chen Deming warned that the world should pay more attention to the stability of the US Dollar.

The Big Picture

Why should we care about Dubai?  Over the past decade, Dubai has flaunted it’s wealth and vigorously pursued a worldwide reputation for great feats of construction and lavish spending, including a slew of man-made island properties for the rich and famous and the world’s tallest building, among many other notable projects.  But, last week world markets were sent reeling after Dubai World, a state-run investment conglomerate at the heart of this massive construction agenda, announced that it was requesting to postpone payments on approximately $60 billion of debt. What is concerning about Dubai are the lingering questions: Who else? If a shamelessly wealthy Persian Gulf nation could potentially default, what about the myriad of countries with rising debts, huge deficits and shaky recoveries?  What is the chance that Dubai is just the first of more possible defaults to come? How many foreign banks have exposure to Dubai’s debt crisis?

American’s should be sitting up and paying attention. Our economy is still on shaky ground after decades of irresponsible spending in an effort to prop up a ridiculous standard of living.  Perhaps things are getting better for the moment but our huge national debt casts a long shadow over our nation’s future.  Yes, increased sales on Black Friday and Cyber Monday seem to have provided momentary relief, but there is a danger in being unable to step back and look at the big picture. It is time for We the People to stand up and demand that our government defend the value of our currency now and stop this endless cycle of bailouts, inflationary policies and dependence on debt, before it is too late.  The signs are present and obvious. The nation continues to shed jobs, gold is setting new records every day, the dollar continues to fall, the stock market swings erratically from day to day, and yet our government continues to pursue new spending projects when it is clearly apparent to everyone that we are over-extended beyond our means. Meanwhile, China watches with interest and issues monthly warnings and lectures to the U.S. administration about honor and debt.