Economy: Enjoying the Pre-Game Show?

Sorry to be missing from the Angry Bear scene – but I have had several long and serious medical outages in 2008. Good health insurance was my best investment – picking up a six-figure tab.

So far as other investments are concerned — in some of my 2007-2008 HALOSCANS I had mentioned that my biggest position was with Prudent Bear Funds [BEARX] which made enough to cover all losses on the long side of my portfolio and then some – and I did not need to spend my time shorting individual stocks.

Target Conservative Portfolio for 2009: 50% Canned Goods / 50% Ammo.

But first a brief detour to one year ago:


I continue to stand by the (very general) ideas that I put forward as themes for 2008. I do not see our current situation as a “downturn” – I see it as a COLLAPSE. A downturn – a normal part of the business cycle – does not usually include a banking-broker/dealer-insurance-derivatives meltdown that requires trillions in support to prevent insolvency of virtually all of major financial institutions.

In the long run, we would be better off without many of those institutions. My buddies on

Wall St.

used to tell me that they were “creating wealth” – I would correct them and tell that they were “making money” (and participating in massive mal-investment and un-economic activity). The BailyBuilding and Loan Assoc. (of BedfordFalls) somehow didn’t need billions in leveraged speculation, proprietary trading or derivative bets.

There seems to be a lot of talk in AB and elsewhere about this thing called “solutions”. Solutions are not my department – predictions are. Any reasonable solution is by definition politically impossible – our political process is about putting out today’s fire and leaving the water damage issue to another day.

Since our society cannot go forward carrying every currently existing debt ($50T++) – (this figure does NOT include unfunded liabilities) unwinding unwise credit expansion means insolvency or inflation. There are few true creditors in our society – being a debtor is far more universal. The Federal Government, State Governments,

Wall St

., Banks, homeowners, consumers, leveraged investors and many other groups would benefit (in a lesser of various evils sense) from the debt reducing power of inflation.

Inflation is on vacation at the moment – but it is the end game. Fiat money requires at least some net positive inflation and a determined Central Bank can Quant-Ease (plus Gov fiscal) some of our problems away – with many side effects to be sure – but someone has to go over the top rope – and it is going to be savers and not debtors.

At some point we will have what may be called A Recovery – but it will really turn out to be A Reflation and collapse again – just like in the late 1930s. Inflating our way out of trouble may also crash into Peak Oil – creating Check Mate and Lights Out.

Obama recently pointed out how so many “different” economists – were in lockstep about the need for massive “stimulus” – funny how a counter-cyclical idea can seem sensible – but the same people advocate pro-cyclical “stimulus” as we chase one free-lunch after another.

My long-term view is dimmer than my short-term view — so as we enter this New Year, let’s all try and fondly recall how affluent our society once felt – as you will not see that again in your lifetime.

Regards to All !

Edward Charles Ponzi Jr.