The question many of us are asking is this: When is the you-know-what (economic event) going to (finally) hit the fan?
In my opinion, TSHTF Event will occur in (plus or minus a few months) January 2017. Roughly 31 months (two and a half years) from now.
Political junkies will instantly recognize that January 2017 is the month a new U.S. president will be sworn in.
January ‘17 will be eight years from the month President Obama was sworn in for his first term. Political and economic junkies will also remember that the last economic crisis that hit the U.S. occurred just before Obama was sworn in in the final months of the presidency of George W. Bush.
My prediction is therefore based in part on historic symmetry and a hunch that history will repeat itself. Not being able to see the future, I don’t really know of course, but this is what I’m predicting and expecting.
But symmetry or nice, eight-year electoral increments is not the only reason I’m picking August 2017 as the month (plus or minus) where Everything Changes.
I’m picking this month because I’ve looked out my window at my country and have become convinced that the clock is running right now.
Inflation - I believe - is here right now and is happening to such a degree that it can’t help but trigger a chain reaction of other unpleasant economic events.
As of the end of May 2014, food prices are soaring. I challenge anyone (including financial journalists) to go grocery shopping, check their receipts against those from six months ago, and tell me this is not the case.
Because of this, every family that needs food (an estimated 100 percent of families) now has less disposable income than they previously had. Those of us in the middle classes are going to have to buy food before we purchase anything else. Those things we might want to buy, we are going to put off.
Thus simple, mundane “food inflation” will affect demand for everything else.
Not just food inflation ...
But inflation is not just evident in food prices; it’s evident in almost all the goods and services consumers must buy.
This past week I purchased some carpet for a rental house I own. While at the flooring center, I struck up a conversation with one of the owner’s of this small family business. I shared with her my theories on inflation.
Not only did she agree with me that prices are soaring, she pulled out a recent letter from one of the company’s vendors. The letter announced yet another price increase that had been passed on to customers and provided reasons for the price increase.
Such letters are becoming common, she told me. Needless to say, her company had to pass this price increase on to me and, needless to say, I will pass this increase on to future tenants in the form of higher rent. This $50/month increase in rent represents $50 less my tenant will have to purchase food and clothing for their children.
As disposable incomes (the money we hope to have at the end of each month after we’ve paid all of our expenses) are shrinking, the price of things we HAVE to buy are increasing.
This is a lethal combination - a micro-economic development in our own lives that cannot be indefinitely masked by bogus macro economic data.
Watch restaurants ...
Restaurants - the source of many jobs in our burger-flipping economy - are already starting to struggle. As fewer families dine out (which is or will happen), more restaurants will close.
This, I suspect, is why President Obama and the Democrats are not pushing too hard for a hike in the minimum wage. They know, or have been told by those in this industry, that a mandated increase in wages will result in more layoffs and more business closings. Such a development would provide conspicuous “evidence” that the economy might not be as healthy as we’ve been told
Further price inflation will kill the restaurant sector and very well might also kill the retail sector. Again, food - not trinkets or “stuff” - will become the household budget priority.
Do not believe what the mainstream press is reporting. Or in this case, not reporting. The above is happening right now.
As for the press corps, the organizations that employ journalists are already Dead Men Walking. That they don’t know this is either irony at its finest or macabre poetic justice.
To the press, the stagflation that has settled over the nation is non-existent and “recovery” remains just a quarter away.
Apparently no reporter stops to think, “Hey, didn’t we have more bodies in the news room 12 months ago ... last month? Wasn’t that recovery supposed to have kicked in by now?”
Maybe when The New York Times files for bankruptcy protection (or offers itself for sale for $1 like Newsweek did), the rest of the press corps will finally notice that something is going on.
Until then, I’m counting on the press corps to continue to trumpet the government press releases that discount inflation, trumpet 6-percent unemployment rates and positive GDP growth.
And those press releases will continue to be printed with rose-colored ink. Because:
A big mid-term election is coming up and, after that, a big presidential election is coming up.
“The State of Our Nation is, ah, okay, but things will soon get better,” these releases will essentially say.
These two upcoming election cycles represent one reason I think the moment of truth will be extended at least past these events (elections in 2014 and November 2016).
But prices will keep going up - for our own lunches and for all of the free and reduced lunches and breakfasts that public school students require.
Fed and government economists may discount “inflation” as a concern, but it’s a 100-percent truth that food stamp debit cards will not buy as many groceries as they once did. And more Americans - already roughly 1 in 6 of us - will have to depend on these cards in the future.
As prices continue to soar, will mothers remain silent about the hungry children in their households?
I also predict that the tens of millions of Americans who have “voluntarily” dropped out of the labor force will stay (involuntarily) dropped out, and will be joined by millions more.
More people - civilians and former military - will go on disability. Also in 2014, 2015 and 2016, millions more Americans will retire and begin to draw their first social security checks and use Medicare for the first time.
Also, Obamacare will fully kick in, making medical care less affordable and giving potential employers more reasons not to employ new people.
More unemployed will begin to default on the vehicles they bought at sub-prime rates with payments spread over six or seven years. Banks will be stuck with cars that are worth a tiny fraction of their note value.
Even more former college students, with fewer burger flipper and retail jobs to provide spending money, will move back in with Mom and Dad and default on their student loans.
Again, all of this is starting to happen right now. The only businesses that are proliferating are temp employment agencies and title loan businesses.
On the positive side, oil and gas fracking projects are providing jobs and wealth in a few states, although the federal government, dominated by “environmentalists,” of course frowns on these jobs (even, no doubt, as it secretly gives thanks for them).
Drive around your city and look out the window. Strip malls and traditional malls are dying right in front of us. Property crimes, unless I’m completely off base, seem to be increasing as well (although this is a story local governments might want to de-emphasize.)
Follow the gold ...
And every month China keeps adding as much physical gold to its vaults as it can. Russia is starting to do the same thing. Both nations, one suspects, are laboring furiously to implement a strategy to conduct trade and business, and protect their own wealth, absent the U.S. dollar.
For years now, America’s economic and monetary central planners have managed to kick the day of economic reckoning down the road. It’s been a Herculean task and a job brilliantly performed.
The easiest and most important component of this task has been the effort to kill sentiment for precious metals. This vital (and recurring) exercise protects the dollar, which in turn protects and preserves the status quo.
History tells us that investors flee to precious metals when inflation becomes a serious concern. Our central planners know this of course. If they cannot control inflation, central planners can at least (try) to control the way it is measured and reported. Which they have done.
Similarly, when unemployment begins to rise (or at least not fall), the definition of “unemployed” can be altered. Which has occurred.
When it comes to the question of whether an economy is growing or shrinking, the public similarly relies on data the government provides. Maybe this data is accurate; maybe it’s not.
I say it’s not. My guess - as someone who pays the bills in his family - is that inflation is at least four times higher than the “official” rate.
The government also tells me that 94 out of 100 people I see in a given day (people capable of and interested in earning a living for themselves) are indeed employed. That only 6 out of 100 who are not.
Is the government telling me that if I go to, say, Wal Mart and randomly pick 100 people of working age that only six of these people will be without a job?
Good gracious. Seriously, some TV news reporter ought to perform this employment “test.”
For every one business I see that is opening, I see two that have recently closed their doors. Given this ratio, how could the economy be “growing.”
If the economy was really growing, wouldn’t bankers be making numerous loans to entrepreneurs who want to start a business, or to existing businesses that are seeking to expand? Are they doing this?
Prices for just about everything are going up and more and more people are trying every way they can to save money.
Just because the MSM has not caught on to this does not mean it’s not happening. Right now.
This will lead to this will lead to this ....
Inflation, which will probably get worse, will lead to more layoffs, which will lead to fewer tax receipts at the same time more Americans will need to rely on government welfare.
All of which will lead to the need to borrow and print more money, which will lead to more inflation and higher interest rates, which will lead to even less economic activity.
All of which represents a terrifying economic spiral, aka a SHTF scenario.
I recognize some economists and pundits fear “deflation,” but until I start seeing more money left in my checkbook at the end of each month, inflation is the poison I’m concerned with.
What we’ll see ...
And, folks, I don’t care what anyone else says: it’s here right now. And it will lead to bad event after bad event. Right now, Americans comment about it on Facebook and on reader posts at the bottom of Internet articles that say inflation doesn’t exist.
Somewhere in the next 31 months, though, this is going to change.
You’ll see it in the number of empty tables at restaurants, you’ll see it in the number of empty seats at sporting events; you’ll see it in the number of cars foreclosed upon and the number of cars you see on the road with dents that go unrepaired. You’ll see it in the proliferation of “For rent or lease” signs in the windows of previously occupied businesses.
At some point, believe it or not, you’ll even read about it in a Time cover story or watch a correspondent on “Sixty Minutes” talk about it.
“The economy is crashing all around us and people are suffering,” the story will conclude.
This mass-media acknowledgement of the obvious will come out of the blue, just like the last financial crisis seemed to come out no where.
The journalists might even ask, “Is it possible the government was lying to us all along?” Or: Have we inadvertently been reporting untruths all these years?
Of course by this time it will be too late to do anything to reverse course. Indeed, the requisite panic will make things even worse.
Those of us who have been acquiring precious metals will be in better shape than others, but all of us will likely suffer major declines in our standard of living and quality of life.
It will be a sad day when you know what finally hits the fan. As far as I’m concerned, rapidly increasing inflation and economic data that millions of Americans increasingly view with skepticism are already telling us that the clock is running.
The Powers that Be will use all their skills and powers to manipulate opinion through this upcoming mid-term election and then the next Big Election (Hillary’s coronation?). And probably succeed in keeping stock markets stable and gold markets depressed for just a little while longer.
But Atlas is so very, very tired. The chain-reaction of economic events is working on him even as I write. I give him 24 to 31 months before he staggers and then collapses to the ground.
Then everything changes and the truth will set each of us free .... to make do as best we can on our own.
January 2017. My timing may be off a tad, but this is about as long as the Status Quo can realistically survive given what I see happening around me right now.
Until then, all I can do - all any of us can do - is prepare for the worst. If I’m wrong, I’ll celebrate and breathe a sigh of relief. I’ll also be more than happy to write a column laughing about how wrong my May 2014 prediction was.
If I’m right, I’ll try to be as strong as I can for my family, but I’ll probably still privately weep for a country that had so much promise that somehow went so very wrong.
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Bill Rice, Jr. is managing editor of The Montgomery (AL) Independent. He can be reached by email at bill@montgomeryindependent.com.
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