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A Prediction On The American Economy

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Friday September 4 2009

Letter Re: Some Economic Indicators to Watch

James Wesley,

I just had lunch today with a senior bank executive in Chicago. He confirmed much of what I have been seeing in the economy. After picking his brains, I have put together a few economic indicators to watch:

- Christmas will be a financial disaster - people are reluctant to spend their cash. Weak sales will be a tipping point for many retailers

- Commercial real estate is the next “shoe-to-dropâ€

- Small businesses continue to struggle – their problems will broaden and deepen as credit is strangled – SBA loans are off-the-street, defaults may be as high as 50% and growing, banks are not lending (see rutledgecapital.com – banks holding record cash reserves from Fred Reserve)

- Consumer Credit Cards – the second next-shoe-to-drop – Piled high and deep – longer unemployment means people can’t keep up payments

-Bankruptcies increase – especially in construction industry and real estate-related industries

- Joblessness – watch the U-6 column (the BLS report on a more “real†unemployment number.) Unemployment, according to Dept of Labor is over 16.5%

The big imminent threat? Inflation – “too much money chasing too few goods†as Milton Friedman warned. The government printing money, and inventories are falling –[ a classic inflation precursor].

Economic recovery? At least 18-24 months from now. Media reports about "recession end in sight" are nonsense.

Federal leadership is a “nightmare†– making all the wrong moves. Look for higher taxes, inflation, increased joblessness (as small businesses fail).

Outlook? Grim.

Best Advice – Avoid bonds (higher yields which are needed encourage buyers of US Treasurys = lower bond prices)

Avoid stocks – look for a "W" market move – stocks to go lower ([Dow] 3,800, H.S. Dent says) Why? Corporate earnings are very weak.

What to buy? Farmland and ammunition

And remember, I am an optimist.

Blessings, - Jeff E.

Linky http://www.survivalblog.com/

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- Christmas will be a financial disaster - people are reluctant to spend their cash. Weak sales will be a tipping point for many retailers

The big imminent threat? Inflation – “too much money chasing too few goods†as Milton Friedman warned. The government printing money, and inventories are falling –[ a classic inflation precursor].

I still dont see how these two square. Yes, money is being printed, but as far as i can tell banks are just depositing it back at the BoE.

I see inflation as likely too, but more due to a currency collapse than anything else. Afterall we keep getting told the US consumer is rediscovering thrift.

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- Christmas will be a financial disaster - people are reluctant to spend their cash. Weak sales will be a tipping point for many retailers

The big imminent threat? Inflation �" “too much money chasing too few goods†as Milton Friedman warned. The government printing money, and inventories are falling �"[ a classic inflation precursor].

I still dont see how these two square. Yes, money is being printed, but as far as i can tell banks are just depositing it back at the BoE.

I see inflation as likely too, but more due to a currency collapse than anything else. Afterall we keep getting told the US consumer is rediscovering thrift.

the article was for the US...they are months ahead of us....and Uk is well placed for the recovery...as we are always told. for example, houses are going up? always a precursor to instability.

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