Dear Reader,

I know that you are inundated with bad news and apologize for making my own contributions to the incoming.

As I’ve tried to communicate, it’s not that I dwell on this stuff. I really don’t.

Yet in my role as a provider of what I hope is useful information, it would be insincere and counterproductive if I insisted on wearing rose-colored glasses when viewing the world we are now living in.

It’s not that Pollyanna doesn’t have a role to play, too; it’s never a bad idea to look for the good and beautiful, even when times are bad.

But for far too long, government minions, corporate quislings, and the clueless media have been donning cute little gingham dresses, ribboning their hair into perky pigtails, and skipping about while singing happy ditties about an economic recovery and a perfect world that exists just over the horizon.

In my opinion, depending on how they view these happy antics, the majority of citizens of the United States can be divided into five general groups:

  • Mostly skeptical. A recent Rasmussen poll showed that 58% of Americans believe that tax cuts are good for the economy, and 53% think that cutting government spending is helpful. Of course, this flies in the face of the actions and intentions of the government, which is preparing to raise taxes (directly, and indirectly through massive new bodies of regulation) and to unleash a money storm of up to $2 trillion in a new round of quantitative easing. This large category can include people from all sides of the political spectrum, but would probably skew Republican.
  • Useful idiots. The term “useful idiots” was used by the Soviet leadership to describe the misinformed and misguided Western intelligentsia who championed their deeply dysfunctional policies even as the iron grip of the state began to close around the windpipes of the proletariat. In the U.S. context, the U.I.s believe the path to economic salvation is paved with good intentions that, should the deniers and obstructionists just get out of the way, can be expressed by a loving and activist government armed with newly created money for all who need it.

    And that’s just for starters, because in the perfect world that’s within our grasp, if we’ll just embrace it, lays an energy-efficient, reduced-carbon, child-safe, leveled-wealth, no-mortgage-foreclosures future. It’s so easy, they intone with the blank-faced cheerfulness of the Hare Krishna. Until, of course, you ask them where the money for all this largess is going to come from. At which point a bitter note creeps into their voice as they parrot dark fictions about the need for the haves to pay more in taxes so that the have-nots, have more. This is a sizable group, probably well over 25% of Americans, and skews almost 100% toward the Democrats.

  • Blissfully unaware. This group cuts across all the social classes, though most would likely have a job. They have grown up with certain expectations about America and go along to get along. They might not trust politicians, but neither do they worry overly much about such things either. As long as they have a roof over their head, three meals a day, and a working car, they’re good.
     
  • Down and desperate. Today’s unemployment numbers show yet another 95,000 workers hitting the streets, joining 15 million unemployed, of which 6.1 million have been out of work for over 27 weeks… and those compete for work with a record 9.5 million part-time workers who want to work full time. At this point, most are trying to cling to the hope that the government is going to “do something.” Or actually can do something. They are not happy with government, yet most persist in the belief that their problems will be best solved by government action.
  • The hardcore skeptics. This category is not a crowded space, because entry requires coming to the realization that the government is not the solution to pretty much anything, but quite the opposite.

    Despite the bad rap, it wasn’t the free markets that brought the economy to its knees. I say that because no business can force you to buy its product or otherwise part you from the fruits of your labor. And no business can force you to hire staff, accountants, and lawyers to fill out an endless number of compliance forms and otherwise jump through regulatory hoops. (That is, unless those businesses are working hand in hand with a coercive bureaucracy.) Businesses don’t start wars or spend money they don’t first earn by offering a good or service that people are willing to buy. By contrast, the government can do all those things – and more – including knocking your door down in the middle of the night or locking you away without trial.

    In my personal view, not trusting the state or its henchmen is just common sense. And when I hear that the government is rolling out some new program, no matter how well intentioned it might sound, I examine it with squinted eyes – trying to assess the damage it’s likely to do me and mine, in order that I may then calculate how to limit the damage. Perhaps by making an offsetting investment.

In other words, while much of what we discuss could be considered “gloomy,” I believe it’s more accurate to call it “realistic.” It is governments that start wars, levy taxes, and steadily increase the rules and regulations that make doing business so unnecessarily challenging. And then, once their myriad policies have caused business and the economy to become all balled up, they set about trying to fix what they have wrought… by doing yet more of the same.

With that long introduction, I want to share with you a must-watch video of institutional money manager Chris Whalen discussing the dire state of the big banks.

Click the link below, then skip to minute 1:07 when he starts discussing the actual situation with the nation’s banks – which is in stark contrast to the delightful little duet being sung by Bernanke and Geithner. The link to the video is here.

What’s important in this diatribe is that there is no one in this world who is going to look after you but you, and maybe your family. 

As a consequence, it has rarely been more important to be a hardcore skeptic, because being blissfully unaware, or even mostly skeptical, could very well lead you to joining the ranks of the down and desperate.

As for the useful idiots, I’m sorry to say that they are going to get the government they deserve, good and hard. And so will you, if you let them take you down with them.

Speaking of banks and real estate, the situation is quickly becoming positively Alice in Wonderland-like. The latest development being that the president has vetoed a bill updating acceptance of cross-state and electronic notarizations, compounding the challenges the banks are having in foreclosing on non-performing loans.

Forget that people took out mortgages, fully aware they had to meet the terms of the loans in order to avoid foreclosure, but have stopped making payments anyway. There’s no question that economic realities have changed for many, but even so, the game today is, “I’m not going to pay, and I’m not going away.”

Of course it’s a horrible thing to lose a home, and sure, the banks and others involved in securitization of millions of mortgages during the housing bubble have made a proper mess of the paperwork and the process. But do we really think we can come out of this crisis with the financial institutions stuck with something like 16 million mortgages that are either currently in the foreclosure process or that will be by the time this is over, having lately largely become frozen in place by legislative and judicial fiat?

As Chris Whalen explains so well in the video I link to above, despite the government transferring well over a trillion dollars in taxpayer funds and obligations to the banks, they are still sliding toward collapse. Freezing the foreclosure process for political advantage – and a number of members of Congress want to make the freeze semi-permanent – only assures that collapse.

Don’t  get me wrong, if a bank should fail and the bond and equity holders are wiped out, so be it. But, of course, when the big banks start to tumble down, it’s a certainty the government will again bail them out… taking us even more quickly down the path to hyperinflation.

The writing is on the wall, all I can do is point to it and hope you get the message.

On this general topic, I wanted to mention that I had a brief chat yesterday with Andy Miller, our “go to” guy on what’s really going on in real estate and mortgage markets. Andy has agreed to sit for an interview providing readers with a quick update. I didn’t have time to get it done today, but will definitely present it as a special edition of Casey’s Daily Dispatch at some point next week – probably Wednesday.

The End of Cash – a Straw in the Wind

Lately I have discussed the possibility that we will become a cashless society, allowing the government all manner of new controls, including data matching to assure everyone’s expenses line up with reported income… monitoring a newly instituted VAT… doing away with the “black” economy, and perhaps setting the stage for gold confiscation (once cash is eliminated, then it becomes an easy target for its usefulness to the criminal classes in transacting business).

Not to get all paranoid, but Casey Research Washington Correspondent Donald Grove sent along the following Visa card advertisement, which ran on the inside cover of the Congressional Quarterly. Of course, Visa would be among those with the most to gain from going to a cashless society and, from the looks of it, is lobbying hard to make that happen.

Commodities on a Tear

Not only has gold bounced back from the latest quick sell-off, but other commodities are jumping as well, including oil, which is again trading near $83 per barrel. And that’s only for starters. This just in from Bud Conrad…

    Corn is lock limit up 30 cents. Oats up limit 20 cents. Wheat up 55 cents. Rice up 46 cents. Beans up 70 cents. This is truly a huge move.

    A USDA report affected the market. These are inflationary levels. This will affect all of us, especially the lower income bracket.

    I’ve been ignoring food based on good U.S. crop conditions. The bomb shell that I found was cutting the yield per acre for corn so that 496 million fewer bushels will be produced. That was not telegraphed in the crop conditions, so it was a surprise, and it looks screwy. Traders won’t like the USDA doing shocking things like this.

    Bud

Contract (Symbol)

Month

Last

Change

Chg %

Open

High

Low

Time

CORN (ZC Z0)

Dec’10

528’2  

30’0

6.02

497’6

528’2

496’0

11:13:50

MINI CORN (YC Z0)

Dec’10

528’2  

30’0

6.02

528’2

528’2

528’2

11:03:20

DENATURED FUEL ETHANOL (AC X0)

Nov’10

1.988 y

15:53:09

HARD RED SPRING WHEAT (QMW Z0)

Dec’10

759’0  

52’4

7.43

706’4

766’4

705’4

11:13:51

HARD RED WINTER WHEAT INDEX (IH V0)

Oct’10

562’0 y

13:52:25

MILLING WHEAT #2 (EBM X0-ENC)

Nov’10

223.25  

15.25

7.33

208.25

229.25

207.75

18:08:57

OATS (ZO Z0)

Dec’10

369’4  

20’0

5.72

350’4

369’4

345’4

11:15:23

RAPESEED (ECO X0-ENC)

Nov’10

383.75  

8.75

2.33

375.75

388.75

374.75

18:07:01

RAPESEED (CANOLA) (RS X0-WC)

Nov’10

491.10  

17.80

3.76

475.90

500.00

473.90

11:15:26

ROUGH RICE (ZR X0)

Nov’10

1,325.50  

46.00

3.60

1,279.50

1,329.50

1,265.00

11:14:52

SOYBEAN MEAL (ZM V0)

Oct’10

313.50  

21.50

7.36

292.40

327.00

292.40

11:13:45

SOYBEAN OIL (ZL V0)

Oct’10

46.43  

2.64

6.03

46.33

47.10

46.33

10:43:31

SOYBEANS (ZS X0)

Nov’10

1135’0  

70’0

6.57

1064’0

1135’0

1062’0

11:15:46

WHEAT (ZW Z0)

Dec’10

714’6  

55’4

8.42

660’6

719’2

657’0

11:15:40

MINI WHEAT (YW Z0)

Dec’10

710’6  

51’4

7.81

719’2

719’2

710’6

11:00:04

As an aside, Bud is on his way to give the keynote presentation at a large investment event in the Philippines before joining up with Doug, Louis James, and myself at the La Estancia de Cafayate Sights & Sounds Celebration, October 20 – 24 in Cafayate, Argentina. The event is almost sold out, and it’s growing late to make your arrangements if you wish to participate. For more info, at this point the best move is to drop Dave Norden a note at: [email protected]. See you there? 

The March Toward 1984 Continues

As we have discussed on several occasions in the past, it appears that George Orwell really understood the collective psyche of the English people and used that knowledge to his great advantage in writing 1984.

He must have had true insights, because it seems that almost never a day goes by without the English taking another long step towards the dystopian future Orwell imagined.

I was tipped to the latest by one dear UK friend and correspondent. It revolves around a new census initiative, administered by U.S. defense contractor Lockheed-Martin and scheduled for March of 2011.

The census is 32 pages long, with 56 questions about all the stuff you usually expect, including work, education, health, marital status, and so on.

But then it goes on to ask you about your sexual orientation and requires you to disclose which passports you hold. You are also required to provide details on the names, sex, and birthdates of any overnight guests you may have had in your house.

While some Brits might be tempted to slam the door in the face of census workers, that’s not an option. In fact, a failure to complete the census form, or to include false information, could result in a £1,000 fine or even imprisonment.

Here’s a story on the census from the Telegraph.

And this from a census office.

As I have remarked before, as much as I love the British sense of humor, the beer, and the snooker, if I lived in that country today, it would only be for long enough to pack my bags and otherwise settle my affairs in order that I might vote with my feet.

The 10:10 Murder Video

At the Gold & Resource Summit, I played the advertisement by the 10:10 environmental group that showed a teacher executing students who didn’t buy into their carbon-cutting scheme, by pushing a button and blowing them up in a gore-splattered scene. Chris Wood, filling in for me with this missive, showed the same video – and it has received a fair amount of attention since.

Trying to cover their tracks, 10:10 pulled the video, and even the enviro-alarmist movement reluctantly condemned the video, expressing that it was just a matter of humor done poorly, and that no one in the environmental movement could condone such a tasteless and disturbing depiction of child murder.

Well, Anthony Watts, who manages the award-winning blog WattsUpWithThat.com, reveals the disingenuous nature of those claims by running a collection of just some of the horrific ad campaigns the environmentalists have unleashed on the public in recent years. 

As you will see when you follow the link below, not only do they depict killing kids and drowning babies, but have chimps hanging themselves and kangaroos throwing themselves in front of trains in despair over humankind’s degradation of their habitats.

I don’t know what sort of warped psychology you have to have to want to be associated with these sorts of campaigns, but as this is the sort of sociopath now guiding environmental policy around the world, you should be afraid. Very afraid.

Here’s the link.

Friday Funnies

After that, I need a laugh. The following came to me from a dear reader and friend, Ron in Hawaii – mahalo!

The economy is so bad that…

I got a pre-declined credit card in the mail.
 
I ordered a burger at McDonald’s, and the kid behind the counter asked, “Can you afford fries with that?”
 
CEOs are now playing miniature golf.

If the bank returns your check marked “Insufficient Funds,” you have to call them and ask if they mean you or them.
 
Hot Wheels and Matchbox stocks are trading higher than GM.
 
Parents in Beverly Hills and Malibu are firing their nannies and learning their children’s names.

A truckload of Americans were caught sneaking into Mexico.
 
Motel Six won’t leave the light on anymore.
 
The Mafia is laying off judges.

BP Oil laid off 25 congressmen.
 
Congress says they are looking into the Bernard Madoff scandal. Oh great! The guy who made $50 billion disappear is being investigated by the people who made $1.5 trillion disappear!

And with that, I will bid you farewell for the week, thanking you for reading and for being a subscriber as I head for the door.

Until Monday…

David Galland
Managing Director
Casey Research