Will 2012 be a lot like 2011? - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 20 December 2011
PRINTER FRIENDLY | ARCHIVES
Will 2012 be a lot like 2011? A  A  A

Baltimore, Maryland

Dow down 100 points yesterday. Gold hardly moved.

Well...will we have a merry little depression Doesn't look like it. The feds are fighting it tooth and nail. They'll probably win. Then, we'll have a Big Depression instead.

But that is in the future...perhaps a year out...maybe two, three or ten.

A financial service asked us for our thoughts on 2012. We didn't have much to say. Anything could happen. But what is most likely? Usually, one year is like the year that preceded it. We have a feeling that 2012 will be a lot like 2011. Except in one important respect.

Our guess is that 2012 will be the year when the real bear market returns.

Corporate profits are at record highs. While consumer incomes are falling.

How likely is that to last? Either incomes will go up...or profits will go down. We don't see anything that is likely to boost incomes, so our guess is that corporate profits will ease off.

Our other guess is that investors will finally realize that this is a Great Correction...that the economy won't 'recover'...and that stocks are much too expensive.

The public sector - government - may be willing to go further and further into the hole. But the private sector is bigger than the public sector. And the private sector is de-leveraging at the rate of about 5% per year.

That means that a lot of investments - in stocks and bonds - are not worth what was paid for them. And a lot of investors are going to lose a lot of money when they realize it.

How much money? Well, the Japanese have been in this de-leveraging mode for the last 20 years. Their stocks went from a high over 39,000 on the Nikkei Dow to a low (from memory) about 8,000. Let's see, that's about a 75% loss. So if you extrapolate that to the US, you would expect the Dow to go to about 4,500.

Are you ready for that, Dear Reader?

'And what about gold,' the reporter asked?

Well, here's something interesting. In a financial meltdown, cash is king...not gold.

How do we know that? Hey...we read the Financial Times. Here's the headline:

"Dollar usurps gold as choice haven."

The dollar goes higher and higher - it's at its high for the year.

Gold has dropped below its 200-day moving average, which traders regard and ominous if not disastrous.

So what's ahead? Most likely, more dollar strength and gold weakness. It's a Great Correction. Cash is king. It could remain on its throne for another few years. Maybe 10. Or more.

Ultimately, the feds control the value of the dollar. Over the last 100 years, they've run it down from $1.00 to about 3 cents. Right now, they're having a hard time getting any traction. Because the banking system is in de-leveraging mode. It makes it hard to inflate a currency. Eventually, they'll find their footing. Or, they might panic and over-print, over fast.

One way or another, when the dust finally settles, gold will be the last man standing.

---------------------------------------- Have an enriching Saturday! ----------------------------------------

Can Europe find a solution to end the current economic crisis?

Will the new economic reforms drive the stock markets?

Are we paying a price for bad democracy?

Get answers for all such complex issues straight from Jawahir Mulraj.

Click here to sign up for J Mulraj's 'Straight From The Hip' e-letter! It's Free!

------------------------------------------------------------------------------------------------------

*** This is the last in a series. We began by wondering how come some people get to boss other people around...

We're not talking about wives and husbands or employees and their employers. In those cases, the bossing is legit. Husbands ask for it. And employees can walk off the job anytime they like.

We're talking about people who have the right - by law - to tell other people what to do. The TSA agent...the policeman...the building inspector...the customs agent...the IRS clerk...the FDA...the CIA...the FBI...

It is a remarkable thing, don't you think, dear reader? It says right there in the Declaration of Independence that 'all men are created equal.' Equality under the law is supposed to be the law of the land. And yet, some people are clearly above the law...some give orders to complete strangers...and some people even claim the right to make laws any way they want.

There are laws that tell you not to murder...and not to steal. In the 10 Commandments given to Moses, God named 10 laws that he considered important. But the folks walking the floors of Congress, the EPA, the SEC, the IRS and a plethora of other government agencies have added 10,000 more commandments. 'Thou shalt' this... 'thou shalt not' that. You can barely go to the bathroom or drill an oil well, without asking permission from a dozen different bureaucracies. 'Ignorance of the law,' is said to be an ineffective defense. But it's a very effective explanation. There are so many laws, rules, regulations, edicts, commandments, prohibitions, interdictions, injunctions, requirements and obligations that you are bound to miss one or two of them. The latest Defense Authorization Bill just passed by Congress shows how far the law-makers and law-enforcers will go. The doctrine of habeus corpus goes back to before the signing of the Magna Carta in 1215. It was an ancient Anglo-Saxon limitation on the power of government. If the feds held a prisoner, a writ of habeus corpus required them to "produce the body." The government had to either release the person or charge him with a crime. For more than 800 years, this gave people some protection against government.

But now, in the Year of Our Lord 2011, the Congress of the United States of America, with the complicity of POTUS, himself, has seen fit to deny the right of habeus corpus to American citizens. Henceforth, the feds can capture you, put you in prison and waterboard you every day for the rest of your life. They don't have to charge you with murder or jay-walking or any crime at all. They don't have to let you talk to a lawyer. Or to your spouse. Or to your Congressman.. They don't have to read you your rights or provide any evidence against you. Like the Argentines in the '80s, they just 'disappear' you. And you're gone forever.

The Guardian reports:

Human rights groups accused the president of deserting his principles and disregarding the long-established principle that the military is not used in domestic policing. The legislation has also been strongly criticised by libertarians on the right angered at the stripping of individual rights for the duration of "a war that appears to have no end".

The law, contained in the defence authorisation bill that funds the US military, effectively extends the battlefield in the "war on terror" to the US and applies the established principle that combatants in any war are subject to military detention.

"It's something so radical that it would have been considered crazy had it been pushed by the Bush administration," said Tom Malinowski of Human Rights Watch. "It establishes precisely the kind of system that the United States has consistently urged other countries not to adopt. At a time when the United States is urging Egypt, for example, to scrap its emergency law and military courts, this is not consistent."

Rand Paul, a strong libertarian, has said "detaining citizens without a court trial is not American" and that if the law passes "the terrorists have won".

"We're talking about American citizens who can be taken from the United States and sent to a camp at Guantanamo Bay and held indefinitely. It puts every single citizen American at risk," he said. "Really, what security does this indefinite detention of Americans give us? The first and flawed premise, both here and in the badly named Patriot Act, is that our pre-9/11 police powers were insufficient to stop terrorism. This is simply not borne out by the facts."

So now the feds, whose salaries we pay, can spy on us with drones we paid for too. They can send a swat team to disappear us... and keep us in prison.

Our question is: 'what gives them the right?' What bread to these people eat? What air do they breathe?

We seen the theories. We've seen them in practice too. The 'divine right of kings'. The 'social contract'. 'From each according to his abilities...' 'The greatest good for the greatest number.'

What they all have in common is that they are not theories, but apologia. One claims to know God's own plan. Another imagines that the powerless masses agreed to be pushed around. Still another pretends that it's for their own good.

Some of the excuses are implausible or unbelievable. Others are absurd. The 'theories' make no sense. But the facts are undeniable. And the fact is that there are always some people who are willing, ready and able to boss others around. Some rulers - the 'insiders' -- are smarter than others. Some are nicer. Over time, you see all sorts. Their goal is always the same - to take power and wealth away from the outsiders. How much? As much as they can get away with.

You may wonder, for example, how come the governments of the developed countries all seem to be in the same deep hole of debt. If you listened to the politicians, for example, you might conclude that France and America were an ocean apart. Actually, overall tax, spending, and debt levels are similar in all OECD nations. And tax levels, generally, are about 10 times higher than they were in the last century. And their forms of government are about the same too - even though the insiders claim to have very different ideas about how to govern.

What happened?

The genius of modern democracy is that it makes the citizen a party to his own enslavement. Rather than give up 10% of his output to his feudal lord and master, he gives us 30% to 50% to his democratically-elected bosses. They tell him what to do. And he believes he is giving the orders!

And then, he believes he has discovered the best form of government in the world. It is so good he can't wait to force others to be democrats too.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Will 2012 be a lot like 2011?". Click here!

3 Responses to "Will 2012 be a lot like 2011?"

N.P. Merchant

Dec 21, 2011

These are the naive belive that we are free.

Apart from outer boss there are internal boss also like our wish, dream, igo, fear etc

And bueaty is the outer boss can play/join hands with the inner boss and rule on you .......

By way of politics, religion,colour, country etc.

Be free, have knowldge, you are your own boss

Like 

Baljit Kumar Mehta

Dec 21, 2011

A very competent historical analysis.
this depicts a universal thought process. The process is more true as far as India is concerned. The values and promises made for the democratic set are more visible in their disappearance . It has been an enlightening reading. Thanks

Like 

M. G. Sharma

Dec 20, 2011

worst form of government and we are happy to be governed by such governments add salt to this stupidity we are strengthning this worst form of governence with our fullmight day & night.

Like 
  
Equitymaster requests your view! Post a comment on "Will 2012 be a lot like 2011?". Click here!

Recent Articles:
Will They Haul Off Trump's Statue, Too?
August 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Farm Loan Waivers: Why Bad Economics Makes for Good Politics
August 14, 2017
It is because the negative effects of the waivers aren't clearly visible.
The Most Important Innovation in Finance Since Gold Coins
August 10, 2017
Bill connects the dots...between money and growth, real money and real resources, gold and cryptocurrencies...and between gold, cryptocurrencies, and time.
The Most Profitable Investment in the History of the World
August 8, 2017
'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'