The Massive Momentum Of 2009

Posted 25 Jan 2010

The great monetary scientist Isaac Newton, who served as England's Master of the Mint for 24 years, also did some ancillary work in physics.  The laws of Newtonian physics are known by nearly everyone and are often used by analogy to apply logical reasoning in other fields.  

In this case, a few of these laws are particularly applicable in discussing the impending state of the economy in 2010 based on the massive momentum of 2009.


Stated in layman's terms the three great Newtonian laws of motion are:

1.  A body persists in a state of uniform motion or of rest unless acted upon by an external force.

2.  Force equals mass times acceleration" or "F = ma.

3.  To every action there is an equal and opposite reaction.

In regards to human action a body seems to stay at rest rather than work unless acted upon by some type of force.  The force can be either internal such as hunger, the desire for self-actualization or anywhere in between on the Maslow hierarchy of needs or external such as a saber-tooth tiger, boss or customer.  To sustain life the human body must consume fuel.

Capital is the means of production and the difference between production and consumption flows into or out of the store of capital.  Out of this dynamic human society has attempted to efficiently allocate capital to produce more and this has resulted in institutions, large and small, where individuals work in the attempt to produce in order to meet their needs and wants.  Of course, the great fiction of government is that everyone can live off someone else's production.


The chains of habit are too weak to be felt until they are too strong to be broken.  The mass of the economy times its speed in the Information Age has resulted in a tremendous force.

 But this mass has largely been built from the atomic level upon something which is inherently unstable and undefinable leading to chronic fingers of instability.  What Is A Dollar?

The problem is debt and because psychology is changing, The Great Credit Contraction has begun and the rate at which the mass of the economy is evaporating is truly scary.  While many attribute the ongoing financial crisis to the subprime mortgage mess, which is surely a contributing factor, the problem is much more systemic than a few defaulted mortgages.


But now the second wave of Option ARMs are getting ready to reset at the same time the Federal Housing Administration is requiring higher down payments.  But where are these renters going to find a job when over 6.1M people have been unemployed for 27 weeks or more?

And what about all the discouraged workers who are not included in the labor force because they have ceased looking for non-existant jobs?  The Detroit News reported:

Despite an official unemployment rate of 27 percent, the real jobs problem in Detroit may be affecting half of the working-age population, thousands of whom either can't find a job or are working fewer hours than they want ...

Mayor Dave Bing recently raised eyebrows when he said what many already suspected:  that the city's official unemployment rate was as believable as Santa Claus.  In Washington for a jobs forum earlier this month, he estimated it was "closer to 50 percent."

With so many unemployed almost all of the States, with California being the poster child, are under severe financial pressure.  For example, 40 state unemployment insurance funds are either broke or moving in that direction.  While there are people starving in the chaos of Haiti about 37M Americans are now on welfare state food stamp programs, the rate of acceleration is expanding at about 20,000 per day and 1.4M Americans filed for personal bankruptcy in 2009.  And this is a rosy situation considering the FRN$ is still the world's reserve currency!


The Baby Boomer generation has driven trends their entire lives because of their mass and acceleration.  From Gerber baby food to the housing booms and busts caused by costumed government officials gallivanting in genocide which caused serious aberrations in demographics and are now getting increasingly explosive politically as the 2016 election will see 78M Baby Boomers pitted against 112M Millennials.

Social Security and Medicare are out of control kudzu that are strangling the economy.  Additionally, virtually all pension funds in the United States are massively underfunded with epic games being played with the discount rate.  As Forbes reported:

The GAO study found that states' cumulative unfunded liabilities were $405 billion, while Novy-Marx and Rauh figure $3.2 trillion is a more accurate number.

All those tax eating costumed government officials are going to be extremely happy when they realize their retirements evaporated.  But with unemployment benefits draining the capital of the economy like vampires while the productive members of society are punished via increased taxation and regulation the entrepreneur has either learned how to vanish or been turned to stone by the local Gorgons.

The result has been massive declines in State and local tax revenues.  Even Federal corporate income tax receipts were down 55% for the fiscal year ended 30 September 2009.


So like a classic Ponzi scam the answer has been to attempt to bailout the State and local governments via Federal resources.

For example, a chief bailout recipient Citigroup is accepting California IOUs indefinitely at face value; a surreptitious Federal bailout of California in a preemptive attempt to keep them from seceding monetarily by taking the next step of unconstitutionally decreeing the IOUs legal tender for all debts public and private.  The Euro faces the same type of structural issues.

But if the States unconstitutionally decree FRN$ legal tender then why not their own little colored coupons? With 13% of US GDP a $30B deficit California should have nothing to worry about with a mere $30B+ cash-flow issue.  After all, the California Dollar could have a bear on it; the Florida Dollar an alligator, the Texas Dollar a long-horned bull and the New York Dollar a vampire squid.  They would be such fitting symbols!

And so the adjusted monetary base has exploded.

The FRN$ is destined to evaporate and the increase in debt is only hastening the rate.


Despite propagandist cheerleaders on television the economy is in horrible condition.  The Obama administration's attempt to alter the speed and direction of the economy is textbook action for intentionally exacerbating the greater depression.  Like in the recently released movie Daybreakers soon the starving vampire squids of Wall Street, Washington DC, State and local governments will run out of their productive human livestock and only a few understand their true predicament.  They think they can 'save or create 3M jobs'.  Seriously?

No one knows how this ginormous mess will play out.  But the massive momentum of 2009 has largely shaped the direction for 2010.  While the FRN$ may rise in the short term it is an extremely risky play because of how fast hyperinflation could strike the FRN$.

Of course, among the chief uses of silver and reasons to buy goldplatinum and lead are to keep you and your property safe from the costumed vampire tax eaters who will likely spring Obama's retirement trap by nationalizing retirement accounts and forcing purchases of US debt to bolster Treasuries.

Using force or intimidation against innocent people or their legitimately acquired property is unfair, immoral and unsustainable.  The current state of the economy and where it is headed is merely the result of cause and effect from economic law.

 George Mason, the father of the Bill of Rights, observed this principle hundreds of years ago in his writings contained on page 966 of The Papers Of George Mason:

As nations cannot be rewarded or punished in the next world, so they must be in this. By an inevitable chain of causes and effects, Providence punishes national sins by national calamities.

Please, leave your thoughts on how you think 2010 will play out.

DISCLOSURE:  Long physical gold, silver and platinum with no interest the problematic SLV or GLD ETFs, the platinum ETFs or Treasuries.