19 August 2005

The Consumer-Debt Driven Speculative Global Economy .... Saturated ....

Is the global economy at the brink of a breakdown much greater than its
predecessor in 1929? How do the current imbalances compare to those late
Roaring Twenties' similar circumstances of consumer-level forward
consumption, debt, overvaluation of assets, and industrial overcapacity?
Will the devaluation and asset decay process at the end of the second 70
year sub-fractal - contained within the 140 year Second Grand Fractal cycle
beginning in 1858 - be greater than at the end of its first 70 year

A chicken in every pot and two cars in every garage has been replaced with
eating out three of seven nights at the plethora of fast food and dining
opportunities that 'froth' the highways and typify the service type of
economy the States have become. Three SUV's and a Hummer distributed between
a primary residence and an investment residence have superceded the two cars
in every garage. Buy a radio or washer on credit has been bested with buy
and buy forwardly with abandon everything imaginable with ubiquitously
facilitated debt from refinanced or second mortgages based on the surety of
ever appreciating house prices -the latter caused in part by fed fund rates
1/4 of the rates in 1928.

The evenly balanced number of years with declining and increasing annual GDP
growth rates prior to 1929 have been replaced with continuous string of
positive annual GDP's growth rates during the past 45 years. America's great
creditor nation status of 1929 has been substituted by a beggar man, debtor
country wearing with bravado only the emperor's new clothes. Its treasury is
writing bad checks against future income that can only be guaranteed if the
remaining 57 percent of the US private (nongovernmental) work force becomes
governmentalized allowing a Weimar type of hyperinflation. In short the
consumer saturation point of 1929 looks very appealing against the very poor
economic hand that America now holds. Consider America's current financial
balance sheet and thereafter consider how badly the unbalanced excesses of
1929 unfolded.

In the next nine weeks, data - which has always been there - will be
re-recognized. GM's and Ford's junk bond status and the high probability of
default on their collective 450 billion dollars of debt will reappear. The
thousand mirrors that reflect a single dollar in the derivatives markets
will have key reflecting glasses broken erasing the image in 925. The
housing bubble, that is so historically remarkable in its uniqueness in that
virtually all know it to be a bubble, will crack. The microcosm of forward
consumption in the last two months of the American auto business will
witness the expected necessary microcosm of historically poor follow-on
monthly sales. Major airlines will throw in the towel declaring bankruptcy
and pension amnesty. Declining monthly GDP will receive attention. The real
position of the individual debtor and the debtor country in the face of
declining asset valuations and declining projected tax revenues will get its
due. Fiscally impossible city and state governmental pension funds whose
futures are tied to the equity markets and escalating real estate property
values will have a viability reality check. For the first time in many years
the concept of consumer retrenchment will be seriously and widely explored
as a probable scenario.

The comparative initiating decay fractals at the secondary summit, with
respect to March 2000, of US equity indices suggest a very remarkable
primary revaluation. Watch the general trend and descent of the long term US
note (TNX) and bond (TYX) debt markets as exiting money from equities and
commodities flows into these long term debt instruments driving interest
rates lower. Gold has potentially only one more week before completing its
maximal 12/30/30 weekly growth cycle with an abrupt devaluation. Opposite to
gold, the dollar - which began its third weekly growth fractal last week:
7/17/2 of 11-14 weeks - will transiently trend well. Expect the unexpected.
Within this quantum fractal decay process, expect nonlinearity.

 G. Lammert