Monday, July 18, 2011
The Real Double Dip Versus Debt Ceiling Dilemma
If the market collapsed over Lehman Brothers can anyone believe it would not totally collapse if the United States Government failed to meet its obligations. The answer is of course it will. The Republi-can'ts and other idiots who say it will not are not the sharpest knives in the drawer. The real question is when will it happen. My guess is that the speculators who lost their butts in 2008 will not wait for the market to fall. Rather than get caught with their pants down my bet is they will bail out early. With Gold over $1600 and stocks down, timing will be everything. The rush may start early, if it hasn't already. If the government fails to make its payments August 3rd, a run on the banks is almost inevitable. People will try to get what is theirs before they loose it. The Baby Boomers and retirees who have the money are first generation Great Depression offspring. What is the significance of that? They were told by their parents to hold onto what they have. They were taught to save and be prepared for the worst of times. That is part of what is holding the economy back. That mindset and the uncertainty in the economy is what guides them. All the time they were growing up they heard the Great Depression horror stories and now their goal is to avoid living that experience. However their unwillingness to spend their money may be what is turning it into a self-fulfilling prophecy. Once the collapse starts efforts to stop it will be like trying to fight a forest fire with a water pistol. Nothing will not stop it till it has run its course. Most market crashes require a trigger. A bursting housing bubble, a major market adjustment, the collapse of a European economy or maybe just an oil shortage or instability. As nervous as the markets are it is safe to bet someone or something may try to beat the August 2nd deadline. Only time will tell, but saying nothing will happen as the Republi-can'ts are doing is living in denial. They better wake up and realize they live in a real world. The World Trade Center could never be destroyed by a couple of nuts. No one could ever attack Pearl Harbor. Oh! Yes!! The Titanic could never sink. The stock market collapsed in 1929 and many were still denying its significance in 1932. Of course hindsight is 20/20, while foresight is almost non existent, except to historians who love to say I told you so.