The morning after the election I went
to my favorite coffee shop in town.
The sign and windows were covered
up. They had just officially closed that morning due to bankruptcy. A
chain of over three stores and some of their site locations were virtual
money machines because they were so busy. And the ultimate bankruptcy is the
personal bankruptcy of the owner of the chain. This man was one of the
most prominent and wealthy citizens in town. Owned a bunch of other
previously successful businesses. Now bankrupt. Too much debt that he
could no longer sustain especially due to the present financial
meltdown. Where was our government to bail this fellow out in his direst
need?
Are you happy to see the government
bailouts?
I know I am. It’s about
time the government recognized the importance of industries that are
suffering & need billions of dollars to sustain their business. Where
were the government bailouts when so many other worthy industries in the past
were dying and struggling for their very existence?
Where were the government bailouts
when the horse and buggy industry was fighting to keep up with the newly
invented automobile? Where were the bailouts when the US textile industry all went east and west and every other direction but home? To my
understanding, today, there is not one shirt manufactured from scratch in the
US.
Remember the prosperous whaling
industry just a century ago? Whales provided the oil for every lamp in
every home and business. The whaling industry employed over 70,000
people. Those were real jobs, but the government refused to prop up the
industry and today not a single lamp uses whale oil to light the night sky.
Look at the print industry. The
newspaper and magazine are going the way of the dinosaur. Replaced by
digital print. And who is there to care? And what happened to
typewriters and Smith Corona? Smith Corona was a staple name just 30
years ago.
“…finance executives in
challenged industries are in a precarious position. Publicly, they must tout
their companies' commitment to innovation and long-term goals. Yet instead of
investing in new technology, they can become enamored of their current
business model—especially if it is successful. And their unrelenting
focus on shareholder value can blind them to the fact that they may be facing
a Waterloo moment.” cfo.com/printable/article.cfm/3786531
The typewriter probably represented
American industry more than any other tool. And again, the government
refused to step in to prop up the industry. And today? No more
typewriters.
“In November 1992, the company's
(Smith Corona) CEO, G. Lee Thompson, told the Wall Street Transcript,
"Many people believe that the typewriter and word-processor business is
a buggy-whip industry, which is far from true. There is still a strong market
for our products in the United States and the world." When asked what
new products and services the company planned to introduce, he replied,
"Nothing right now.” cfo.com/printable/article.cfm/3786531
But who needs industry and factories
any way? Right? Our wealth is measured in our 401K plans and our
homes. And for the really dirty work we just import cheap labor from south of
the border. I’ll tell you another dying industry that needs
desperately government help. Have you noticed the lack of public pay
phones today? Well, there aren’t any and this fact is a crying shame. Lots
of jobs for coin collectors no longer exist. A tragedy.
But, seriously. Getting back to the
horse and buggy issue.
So now, thankfully, we are at last
finally seeing our government learning to support institutions that have
failed. The financial institutions that created this mess are being bailed
out and propped up to make even more mistakes down the road. Plenty of
time for them to fail again. But maybe now that the government has
learned to stabilize dying industries perhaps they could revive the most
important industry we need to see rise again. Yes, the horse and buggy
industry must be brought back and nationalized. As the oil supply declines
what better and proven transportation device can replace the oil guzzling
automobile?
Blacksmithing, wheel wrights,
wagoneers, stagecoach drivers… These were real jobs and real
payrolls supporting generations of workers. And because the government
failed to help with even a single dollar all these professions disappeared
into the dustbin of history.
This important national industry
disappeared 80 years ago. In the 1890s, the Alliance Carriage Company
of Cincinnati made more than 10,000 horse & buggy carriages a year.
The Studebaker Carriage Company
manufactured more than 10,000 horse buggy vehicles in 1873 and they tripled
this number to 30,000 a mere ten years later. And by 1900 this single
transportation company was producing 100,000 carriages a year. In 1910
the Durant-Dort Carriage Company produced 56,000 vehicles. This past industry
was creating real jobs and helping to support the economy of a nation.
The automobile could have been merely
a passing fad had the U.S. government had the wisdom to keep the horse and
buggy industry afloat.
And back to reality. Can you now
relate to the humble working class who go into the grocery store and
debate whether to buy a half gallon or a full gallon of milk? Can
you empathize with those families who are struggling to make ends meet and
fighting each day rising prices and a shrinking paycheck? Or maybe even
no paycheck.
The growing disparity between the rich
and the poor. Between those struggling financially to overcome too small
a paycheck and that other class with money flowing out their ears. Today
as never before a growing gulf exits between the haves and the have
nots.
This financial meltdown has revealed
just how fragile many households were. Lots of folks who thought they were
doing pretty well in just a short moment of time watched their hard earned
retirement savings plummet to the ground. Many portfolios are down over 60%.
And house valuations are down by as much as 50% in some areas of the country.
How many over the past 20 years have come to measure their wealth in the
rising appraisal of their home and the increasing value of their stock
portfolio? Yet, in just a quick breath all this disappears in a heartbeat. These
are the times that try a soul. These are the times when you fall easily
between the cracks and struggle to hold on by a thread.
The vast majority have been
indoctrinated for over 20 years that debt is OK and that asset prices can
only go in one direction. Up. And because of that impaired
thinking so many are “up side” down with their mortgage loans,
bank accounts and personal finances. This is the land of perpetual
& unlimited prosperity. Unlimited opportunity. Enough to go around
for all. Just max your credit. The middle class is finding its
“class” to be quickly dying. I think we are closer to
another French Revolution than we realize.
But the brainwashing continues. I
watched Larry Kudlow and other money gurus take hold of the recent stock
market rallies this past week or so and wipe their brow. Happy that the
bad times are over and the economy is climbing back to strong health. I
don’t think so. The hedge funds continue selling every asset class to
raise cash. Over 50 trillion dollars worth! Washington is trying to save the
economy in its usual convoluted way. Support the failures and ignore the
winners.
Washington is now pumping billions of dollars into
institutions that have clearly failed. These collapsing institutions
haven’t invested in America. If these banking, insurance and brokerage
companies were adding so much value to our economy then where are the jobs? Where
is the new industry? Where are the new factories? Successful investment is
that which brings real growth to an economy. Not just an inflated stock
portfolio whose value can disappear over night.
Our financial community sure
hasn’t been bullish on America. Just every where else. The
bullishness focused on greed and complicated financial instruments that only
generated more paper. It’s interesting. GM made the decision years
ago to concentrate more on the loan business than making cars. And now they
are close to bankruptcy.
But hold onto your gold and silver. The
worst is still ahead down the road waiting.
Click
here to order Gold Letter
David Vaughn
Editor,
Gold Letter, Inc.
www.goldletterdv.com
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