I fell asleep early last night, and I woke up early to the news that Obama had been re-elected for four more years as the President of the United States.
I believe that the country entered a depression in December of 2007 that it has not yet emerged from. A depression occurs historically about every 75 years, the last one occurring in America in the 1930's.
Before I go on I will say the fact that Obama could be re-elected during a depression under any circumstances is truly incredible. He is one of the greatest "politicians" this country has ever seen.
Our current depression is far different than the last and Obama has been a direct beneficiary of the differences between the two. Americans live in a country where it has become the goal to make things better immediately at almost any cost to the long term. When it comes to health, people would much rather take pills than diet and exercise. When it comes to personal finances, the country has become a nation of buying everything first on credit (car, home, furniture, clothes, etc.) and then spending your remaining years figuring out the best way to pay for it.
Politics and the economic decisions made for the country now also follow the exact same philosophy. All political discussions center around what the government can "do" right now, today, to "fix" the economy. Politicians will pump any sort of stimulus or provide any amount of government transfer payments to appease the populace and just push through to the next election. After we get through the current rough patch they will make the hard decisions. Of course, "after that" never comes.
Americans now live in a country where we entered a depression and those that lost their jobs and were unable to find work in many ways entered a better life than they had previously. This is a stark difference from the previous depression in the 1930's where those that lost work entered bread lines and many people saw their bank accounts closed and money lost that they saved.
Those losing their job today found they received 99 weeks of unemployment benefits for staying at home. Millions of Americans found out about food stamp and disability programs. Many that stopped paying on their homes found out that the banks never came to foreclose. They now collected unemployment checks without the burden of making mortgage payments. They had the ability to spend time with their family that did not exist previously.
As Americans have been living this new lifestyle, they turn on the news and watch the stock market rise relentlessly day after day. It has now more than doubled off the lows of March 2009 and it continues to rise. This has subconsciously confirmed that everything was getting better, even if people knew deep down that it was not.
The topic of Fannie Mae and Freddie Mac, the newly acquired government agencies that along with the FHA insure or purchase over 90% of new home loans in America, were never discussed once during the presidential debate. These monsters control well over $5 trillion in mortgages and they were never even mentioned.
I saw an older commercial leading up to the election which shows the Chinese in the future discussing how they had taken control of America due to their accumulation of our debt. People still refer to the Chinese today as the main buyer of US treasuries. Unfortunately, China stopped buying US treasuries years ago and their holdings have tracked sideways and even fallen recently. It is the Federal Reserve that has become the main buyer, something that was never discussed once during the debates.
Based on this new type of depression we live in today, I understand why people would vote for Obama. For many things don't really seem that bad. As much of the trouble as possible has been masked and pushed back with deficit spending and a printing press.
With Obama's re-election confirmed the stage is now set for the absolute worst possible outcome for the United States in the long term. Soon the stock market will find out what happens when the cost to produce products begins to rise and the ability to cut costs further begins to fall. The bond market will find out what happens when either inflation begins to rise or the world wakes up from its coma and realizes that the United States has no possible way to pay back any of the money that it has borrowed. I believe one of those two scenarios will occur over the next four years.
I long for the day when I can re-invest my personal investments back into the country in the form of stocks, bonds, or real estate, but unfortunately that day is now a long way away.
The Obama re-election creates the perfect storm for the precious metals markets. Not only does it put safety into the job security of Ben Bernanke, it confirms that as the real economy continues to weaken there will be no hesitation in adding another massive stimulus program.
I assure you that there will be a day of reckoning for a country that runs trillions in annual deficits that are paid for with printed money. This day of reckoning could come this week, or it could be years away, but it is coming.
Please enjoy every temporary fall in precious metals as a tremendous opportunity to continue to accumulate physical positions. Please enjoy, just as the Chinese are today, every day where over priced dollars provide you the opportunity to purchase under priced metals. There will come a day when gravity sets in and this imbalance no longer exists.