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Are we being tricked…again?
Government spending is what governments do to get the economy moving again. So why is Obama announcing a spending freeze, yet continuing to push for of a second stimulus at the same time?
Isn’t that an oxymoron of a plan?
It is. But it’s not what you think.
The Fed has already announced that we are out of a recession. Last quarter, GDP growth in the US hit 5.7 – the highest ever in the last six years! Everything is going great right? Wrong.
Official unemployment continues to remain above 10%, with the real unemployment rate at over 20%.
That’s a staggering 1 out of 5 Americans who are jobless!
The numbers of the GDP growth are also a false indicator and not a number that can continue to sustain itself as they are derived from an inventory cycle. If you exclude net exports, the actual final spending by U.S. consumers, businesses and government actually grew slower in the fourth quarter than in the third. As a matter of fact, economists are calling for a significant drop in GDP growth moving forward – which, at the very least, will ease inflationary pressures for the time being.
In order to continue and sustain growth, it’s obvious the US needs to do what they have always done best: spend and consume.
But in order for this to happen, it needs jobs. And that’s why Obama recently announced a new proposal aimed directly at creating jobs. Think of it as a second stimulus, except the government won’t call it that. Using the word stimulus would mean that they would be admitting guilt to the $787 billion stimulus failure. But they don’t have to admit it…we already know.
History speaks for itself
When the first stimulus bill was passed, the Obama administration made it clear that without spending $787 billion dollars of stimulus, the level of unemployment in the US would rise to 9%. But if they spent $787 billion in tax payer’s money, then unemployment would stay under 8% which would save the economy by escaping a depression.
So the bill was passed and the inflation-inducing spending spree continued.
But unemployment didn’t stay under the 8% – as their administration had promised. It didn’t stay under 9% either. It rose past 10%! (see “Have No Fear, Obama is Here.”)
Take a look:
As you can see by the chart, not only did unemployment rise above the 8%, it surpassed the 9% that was anticipated without spending!
So where did the $787 billion dollars go? Perhaps you should ask the Whitehouse…
The Whitehouse calls it a stimulus, we call it a path to Big Government. (see “The Obama Restructuring”)
It’s no longer a secret that Obama has been under enormous scrutiny for his actions and reckless expansion of the monetary base. He knows that people are upset and angry with the amount of useless spending the US has been executing under his leadership.
With his approval rating dropping and the political races coming up, he needs to do something and fast. And what better way to do it than to use word play to trick us yet again?
That’s why he is proposing a “freeze” on discretionary spending
Obama claims that this 3-year plan to freeze discretionary spending will save the US $250 billion over 10 years. It approved, this policy will start next year.
But as Charles Krauthammer said, this new freeze on discretionary spending is a fraud to trick Republicans and ourselves by overshadowing all of the spending the Obama administration has already done and continues to do.
You see, Obama had raised the spending level for the category of the discretionary budget last year an average of 20%! Some agencies got even more, such as the E.P.A., whose budget Obama increased 35% last year.
In a normal economic situation, these increases in discretionary budget should average no more than 2-4% per year.
In short, this so-called “freeze” just means they won’t raise spending anymore than they already, but it allows Obama to say, “Hey, we’re not wasting anymore of our taxpayers’ money.”
Nice wordplay, huh? That’s like putting perfume on a hog. You can mask the stench, but it’s still there.
In addition, the freeze does not encompass the largest portions of the Federal budget such as social security, Medicare, and security-related agencies, such as Homeland Security and the Department of Defence.
Saving $250 billion over 10 years, combined with inflation, is practically nothing compared to the current deficit of $1.35 trillion. (see The Impressive News Release)
We’ve said it before, and we’ll say it again. The Obama government is really good at hiding their true intentions.
It’s Halloween all over again. Only this time, we’re not the ones playing dress up.
But there’s no reason to panic
We know the Obama administration has already spent and printed more money that anyone could ever imagine. We already know that inflation is imminent. We know what is going to happen to the value of the dollar (see A New World Currency). We know how to protect ourselves. (see What the Fed Doesn’t Want You to Know)
Now all we’re waiting for is Obama to strike out
Back in 1993, President Bill Clinton proposed
a health care reform plan. That plan was met with major opposition and the Clinton Health Care Bill was declared dead in the fall of 1994.
That’s when the markets took off.
If none of Obama’s major social policies, such as his health care reform, gets passed during his next three years, the markets will rally. Combine that with the anticipated rate of inflation and we should expect new highs in the markets within the next few years.
If Obama’s social policies gets passed, we’ll be looking at shorting stocks and diving deeper into the precious metals markets and hard assets.
In last week’s newsletter “A Clear and Present Danger” we had asked our readers to let us know if there is a company that they felt was undervalued.
The response was overwhelming
We received over a thousand emails and close to one hundred different company recommendations for our next featured company. We are still sifting through them and arranging interviews with corporations that may fit our strict criteria.
In the midst of our search, we did come across a few unique situations that caught our attention. These companies aren’t necessarily near term producers nor do they have significant 43-101 resource calculations.
So why would we be interested?
Simple. We like diversity. More importantly, we like big returns.
If one of these unique situation companies hit on what they are expecting to find, we could see their market cap and shares rise over 500%+ almost instantly.
The recent market crash has created a lot of opportunity for investors. Many great projects were sidelined in 2008-2009 because of lower commodity prices and limited financing availability. But with the recent correction, some of these companies and projects now have a great shot at moving forward.
These unique situations are very different from our regular features, but the potential of a 5,10, or even a 20 bagger has us intrigued.
More on that as the story unfolds…
As always, if you know of a company that deserves more attention, please let us know!
Until next week,
Call Us Toll Free: 1-888-EQUEDIA (378-3342)
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