We just received an email asking where we are headed in 2005, so we thought we would give you some indications. One thing is for sure, tax cuts are over and whatever is in the pipeline is the end of the salad days. The end of mortgage refinancing is in sight removing $150 to $200 billion in fresh liquidity and, of course, interest rates are headed up, not down. We can only hope this massive deficit spending is at an end, which it probably is. We believe the stock market can easily fall 50% or more over the next few years and that interest rates can quickly rise to 8 1/4% based on today’s 4.05% 10-year Treasury note. We have little or no personal savings and record debt so 30% of Americans could go bankrupt and Social Security, Medicare and pensions could be cut 50%. As all this transpires, consumers who make up 70% of our economy will spend less, much less, and they will pay off debt and save more and as they do this our economy will become even weaker. We are not seeing wages increase, nor will we in the future as our economy is torn apart by the continued renewal of manufacturing and services via outsourcing. A war is beginning in the attack against hedonics or the rigging of government statistics and when the public sees how they have been deceived, their attitude toward massive spending will change greatly. The fiction of 5.4% unemployment and 2.5% inflation will end. There is absolutely no way the economy under future conditions will grow at 3.8% to keep unemployment suppressed. By 2007, government will admit to 15% unemployment, which in reality will be much higher. As long as we have free trade, globalization and outsourcing we can never attempt to crawl back out from under depression. Interest rates will rise as the Fed attempts to control the fall of the dollar and keep foreign central banks happy. Eventually as liquidity injections subside, interest rates will fall, probably in 2006 and deflation and recession begin. Tax revenues will fall in 2005 and deficits will flatten out and subside in 2006 and thereafter. The current account deficit will begin to fall in 2005 and if the Fed injects liquidity via M3, you can expect 7-8-% official inflation. That should fall in 2006 as the dollar falls and gold and silver will rise due to debt, inflation and lower stock, bond and real estate markets. From 2006 onward, we will not have the luxury of having the 15-year stagnation, deflation, depression that Japan has had. Our economy is too large and the entire world will be in recession and then depression at the same time. Sir Alan Greenspan’s scam and magic elixir productivity growth cannot save our economy, because foreign producers will simply lower prices. That is why free trade must end and tariff barriers re-erected. Consumers will not be able to rebuild savings they’ll be too busy paying off debt or entering bankruptcy. A weak dollar will increase import prices, which will lower growth until the system has been purged of all its excesses. Credit will get very difficult to obtain after 2005, which will also curtail growth. From 2006 onward comes the real nasty part. Ultimately, even though interest rates go back to their lows, credit will eventually be very tight. This will bring the economy to a very slow pace. You ask, what are the odds of this happening? We’d say about 75%. The next question is, after the shakeout will it get better? If the politicians smarten up, maybe. The chances of that happening are 10%, because almost all of them are on the take. If they haven’t voted right, dump them. Americans under 50 have never had a bad day in their lives. When depression hits they will probably go berserk and lose it. We may have violence in the streets and revolution. The chances of that happening are 50-50. It will not be business as usual for a long time. The reason why is that we have a false elitist leadership and that will be discovered. People will then march on Washington armed and heaven help those who get in their way. We can see no easy, optimistic scenario. America will survive with a lot less people than we have today and all the elitists will be gone.

            The subject is Iraq’s debt to Kuwait. The players are Carlyle Corp., James Baker III, and the Albright Group, headed by Madeleine Albright and George and the neocons. All involved are connected one way or another with Carlyle and our government and all are elitists. Kuwait was informed in August that world opinion is turning in favor of debt forgiveness. Kuwait won’t see its $30 billion or the $27 billion in war reparations from Iraq’s 1990 invasion of Kuwait. In the face of world opposition the Albright Group and Carlyle, the consortium, offers its services. If Kuwait agrees to transfer the debts to the consortium’s foundation, the consortium will use their personal connections to persuade world leaders that Iraq must maximize its debt payments to Kuwait, which would be able to collect the money after 10-15 years. The more the consortium gets Iraq to pay during that period, the more Kuwait collects and, of course, taking a 5% commission the consortium get paid off $2.75 billion due to their connections. This, of course, is thieving and deceitful by all parties. It makes Kuwait lie about getting paid back. The public thinks Kuwait is forgiving the debt when it is not. This means Baker is duplicitous and is a classic conflict of interest. Baker is on two sides of the transaction. He is supposed to be representing the interests of the US, but he is a senior counselor at Carlyle, and Carlyle wants to get paid to use its connections to help Kuwait recover its debts from Iraq. Carlyle and other companies are exploiting Baker’s current position to try to land a deal with Kuwait that would undermine the interests of the US government. This is one of the greatest cons of all time. The consortium is saying, only through us do you have a chance to realize a substantial part of the debt. Why? Because of whom we are and who we know. Its influence peddling of the crassest kind. They are a den of vipers. The key is for Baker to resign as debt envoy then the Albright and Carlyle groups will be free to continue their scam. Watch, Baker will soon resign so he and his elitist cronies can snatch the $2.5 billion.

Over the past 10 years, total US household debt has doubled to $10 trillion. Total debt has risen 8.2% from year-to-year to a record 298% of GDP. That is compared with GDP growth averaging 3.3% annually. The difference of 4.9% represents the rate of debt increase, to which you have to add inflation of at least 5.1% giving you an annual loss of 10%. Not a pleasant predicament.

            Making things more difficult, the Treasury’s debt this past year was $595.8 billion. This official figure does not include the Treasury’s debt to Social Security. If that is included, the debt for the year was over $700 billion. This is what we predicted last November. George and the neocons have simply lost it. If they are reelected, they will bury America financially. There will be no road back for sometime to come. This is what we call high-speed debt. In 2005 the phony façade will be pulled aside and finally we will see America’s financial condition for what it is; a can of worms.

Many people buying homes today have no intention of paying for them. They are in with zero down payment loans. When interest rates rise on the ARMS that are financing their mortgage loans and home prices fall, they will just walk away, leaving the lender to fend for himself. These loans are packaged together and sold to investors, who assume the risk for return. Fannie Mae and Freddie Mac guarantee about 72% of such loans. If they absorb enough of these defaulted loans they will collapse, then the government, which is you and us, will be stuck with the loans. Homeowners who put down 20% and receive no government subsidies with a fixed rate mortgage suffer because when the house next door is foreclosed on the value falls on that house and that drags the value of your home down with it. Presently foreclosures are at record levels and in the immediate years to come they will grow exponentially. The more foreclosures from people who shouldn’t have houses in the first place means snowballing sales and increasing losses for other homeowners in the area. Most Americans wealth is in their homes and as home prices fall their savings vanish.

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