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Entitlements or Bankruptcy

The “ Union of American” Advisers came across an article in the September 15th edition of the Wall Street Journal that they felt was very significant. The article was “Obstacle to Deficit Cutting: A Nation on Entitlements”.

In July it was Greece. In August it was Spain. In September, it’s Ireland.

What do all these countries have in common? They are all Socialist Democracies, whose Electorate have voted for entitlements and Socialist Government. What is happening in each of these countries is the fact that their Socialist Governments are not able to pay for the entitlements they have given to their respective Electorates.

Following the disaster in Greece it was interesting to learn that the basic problem was that the Greek Government could not meet the necessary obligations of the nation without reducing entitlements. Believe it or not, the Greek People voted in a government that converted Greece into a ‘Nation of Entitlements’. The Grecian Crisis occurred when the Greek Government cut entitlements in an attempt to avoid national bankruptcy. That’s the first story regarding entitlements.

The second story involves Spain and the entitlements that the Spanish Government gave to the Electorate. The Euro-Community stepped in and assisted the Spanish Government.

We now have Ireland and another economic eruption that will add to the burden that the Euro-Communities have to underwrite in order to avoid a Euro-Recession. Whether the European banks can solve the credit crisis that is evolving is a serious question. Should they fail there is no doubt that the impact on the economies of the world will be affected and that a global crisis will result.

This is all happening at the same time that the Obama Administration has launched an Entitlement Program. The Obama Entitlement Program as a percentage of the Gross Domestic Product dwarfs the three current European crises. As a result it will have far greater impact on the economies of the world then has been experienced to date.

With such earth shaking events taking place it is hard for this author to understand how the United States can avoid re-recession in the months ahead. The problem the American People will face is if not stagflation, certainly inflation.

We’ve noticed various securities designed to protect the investor from inflation and we find that they are all beginning to prosper as a result of the economic trends in the United States. We suggest that each of our “Patriots” check with their own family and those about them as this writer has done. He has found that food prices are taking great leaps as well as other segments of the economy. It seems to be Obama Policy to ignore the threat of inflation as more and more money is printed to finance his Socialist Agenda.

His first step, HealthCare, has yet to take “effect” and have an “affect” on the U.S. economy. But the signs are there, if you want to believe them.

The best measure of inflation and deflation of course are the cycles of the economy that show growth of the GDP, the decline of the value of the dollar and its effect on unemployment (+/- 10%). No one has yet reported the cost of unemployment benefits to the American People, which are growing each month while the job market continues to show only modest improvement. Certainly, the numbers of people checking in for benefits continues to dwarf the numbers of people who remain unemployed.

This writer finds it difficult to shield his holdings against both inflation and possibly deflation. He was greatly disturbed by the rumors regarding the Bond Market and the lack of the Fed’s ammunition to stabilize those negative forces, which are slowly eroding the economy.

We can’t get a reduction in interest rates; they’re at -1% at this point in time. So the only the Fed can do is support the economy by purchasing bonds with newly printed money. This will eventually result in a negative impact on the U.S. economy.

With all of these issues currently affecting the U.S. economy, this author can only ask…. “In October will it be the United States?” ~ Publisher

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