Destroying Confidence – The Last 40 Years

Chart 1:  Confidence in the US congress per Gallup surveys.  The downward trend is clear.

Chart 2:  Same data for confidence in US congress but plotted on an inverse scale so we see an increasing line.

Confidence in US Congress – Inverse Scale

Chart 3:  Official US consumer price index.  This is the official, but clearly understated, increase in prices since 1973.

US Consumer Price Index

Chart 4:  Official US national debt plotted on a log scale so an up-trending straight line indicates an exponential increase – averages more than 9% per year.

Official US National Debt

Summary:

·         The US government spends more than it collects in revenues, so debt increases.  The money supply increases similarly and consequently consumer prices increase.

·         Wages increase more slowly than taxes and consumer prices.  Throw in several stock market crashes, a housing crash, add in a few million home foreclosures, flaunt price fixing and market manipulations, massive banker bonuses, numerous political scandals, and eventually people lose confidence in the system.  That loss of confidence equates to dissatisfaction with congress and the administration.

·         The process is probably similar in the UK, the EU, and Japan.

What to Expect:

1.      Expect more spending, debt, wars, and price inflation.  The middle class will continue shrinking.

2.      Expect higher food and energy costs, a devalued dollar, and less confidence in governments and paper currencies.

3.      Expect more stock market crashes, corrections, booms, and blow-offs.

4.      Expect more “happy-talk” from politicians and financial TV while most of the US, Europe and Japan suffers through what appears to be an on-going depression.  Crushing deflation, hyperinflation, and currency collapse are possible – perhaps inevitable.

5.      Expect long-term economic safety with gold and silver, perhaps ONLY with gold and silver.

GE Christenson

The Deviant Investor