Bicycle sale-price skyrocket -Ominous Warnings and Dire Predictions of World's Financial Experts -

Ominous Warnings and Dire Predictions of World's Financial Experts -
Part 3

By Dudley P. Baker, Jr.

June 1 , 2006

www.preciousmetalswarrants.com



As I have mentioned in previous articles, I have the most informed,
intelligent and savvy subscribers one could ask for. One of them, Lorimer
Wilson, previously wrote me with his insights on "Our Worst Nightmare - the
Puncture of the Current US Housing Bubble." It was very well received when
published by me recently and he has just sent me more information which I
think you will find timely and of particular interest.

Together we have compiled a remarkable summary of the ominous warnings, dire
predictions and perceived devastating consequences that the vast majority of
economists, financial analysts, economic research firms and financial
commentators are saying about our current economic situation and what is
most likely to unfold in the months and years ahead. It is a must read to
more clearly understand and appreciate the financial state of the union, the
impact it will likely have on various investments, and how better to
allocate ones assets.

Nobody has a crystal ball, but to just ignore the following warning signs
and hope that everything will turn out okay would simply be foolish.

Below is Part 3 of Wilson's 6-part article.

Ominous Warnings and Dire Predictions of World's Financial Experts - Part 3

God-Awful Fiscal Storm

Laurence Kotlikoff, Professor and Chairman of the Department of Economics at
Boston University, Research Associate at the National Bureau of Economic
Research and President of Economic Security Planning, Inc., has served as a
consultant to the IMF and the World Bank, major U.S. companies and the
governments of Russia and Britain and has also authored or co-authored 11
books of which his latest, co-authored with Scott Burns, 'The Coming
Generational Storm,' is particularly troubling in its conclusions.

According to Kotlikoff and Burns, "if our government continues on the course
it has set, we'll see skyrocketing tax rates, drastically lower retirement
and health benefits, high inflation, a rapidly depreciating dollar,
unemployment, and political instability. As they say, bad things happen to
good countries, and we are heading into one God-awful fiscal storm, the full
dimensions of which are hard to fathom.

To eliminate the fiscal gap between the government's future receipts and
future expenditures, assuming future generations faced the same net tax
rates as current generations would require, in combination, a 17% increase
in income taxes, a 24% increase in payroll taxes, a reduction in federal
purchases by 26%, and a cut in Social Security and Medicare benefits by 11%
by 2008. If such a combination was just not possible the same result could
be achieved by immediately either raising federal income taxes by 69%, or
raising payroll taxes by 95%, or permanently cutting federal discretionary
spending by 106%, which, of course, is infeasible, or we could cut,
immediately and permanently, Social Security and Medicare benefits by 45%.
Talk about castor oil! Any delay would add significant cost as there would
be interest on the accumulating debt.

Once the financial markets catch on to the depths of these problems, they
will quickly dump their holdings of U.S. Treasury and other bonds. Precisely
when the markets will wise up is hard to say, which is why long-term U.S.
interest rates could start to soar at any time."

Unwelcome Economic Spiral

Maya MacGuineas, President of the Committee for a Responsible Federal Budget
and Director of the Fiscal Policy Program, has said "We face tremendous
fiscal challenges. We have no plan for how to eliminate the deficit and the
Baby Boomers' retirement, which will only make our fiscal situation
deteriorate more quickly, is just around the corner. The political class has
not yet woken up to the seriousness of these tremendous challenges. Will it
be a financial market meltdown that finally forces their hand?

The United States is now heavily dependent on lenders from abroad to finance
our massive levels of borrowing. Concern over America's fiscal position
would lead to a selling off of dollars, stocks and bonds, rising interest
rates, the bursting of the housing bubble, and a slowdown in not just our
economy, but the world's economy. Another unsettling scenario is that
private rating agencies downgrade the US debt based on our high levels of
borrowing and unfunded liabilities. A downgrade of the U.S.'s debt would
surely cause bondholders to dump their debt, leading to an abrupt jump in
interest rates and potentially setting off an unwelcome economic spiral.

Even if there is no financial crisis, or it is closer to a blip than a
meltdown, ongoing budget deficits drain the economy of investment capital,
lead to lower standards of living in the future and squeeze out other areas
in the budget as interest payments mount. In short, deficits are a
reflection of our spending more than we can afford and forcing our children
to pay the bill. What is required to fix the situation is to raise taxes in
the short-run and rein in entitlement spending in the long-run so that both
are more in line with historical norms."

A Time Bomb

Mike Hoy, an economics professor at the University of Guelph (Ontario,
Canada) and a Ph.D graduate from the London School of Economics, "believes
the public as a whole will be in for some very disappointing times. Over the
last year there have been several events which have developed and continue
to develop which, in my opinion, are the triggers that will bring an end to
many of the commonly accepted practices of our government and financial
system. The end result will change the future and the lives of everyone for
as long as we live. I cannot emphasize enough the importance of
understanding that the way of life the world has accepted as normal for the
last two decades is nothing more than a time bomb whose fuse has now been
lit. For those who do not understand or refuse to accept that the last two
decades ushered in the end of the new economy rather than the beginning;
then the fate of those caught in the path of this blast will not be pretty.

I believe we have now entered the hyper-inflationary cycle. I have no doubt
that deficits and red ink will flow like water over a waterfall. It is after
this hyper-inflationary stage that I expect to see very serious and tough
economic times".

Perfect Financial Storm

Jim Puplava, President of Puplava Securities, Inc. and President of Puplava
Financial Services, states that a "perfect financial storm is developing.
The U.S. is in the process of hollowing out its manufacturing base, while
China is in the process of transforming itself into a manufacturing
powerhouse. We are witnessing the greatest wealth transfer in history - one
that may eventually lead to war as an inflationary hurricane in the U.S.
confronts a deflationary typhoon out of China. Financial atmospherics,
meanwhile, are turning combustible. Rather than targeting the money supply
the Fed is seeding the storm clouds with interest rate hikes. By not
controlling money and credit, the Fed is providing the heat and energy that
will turn a cyclone into a full-fledged storm.

If the Fed persists in raising interest rates much further, it could unleash
another perfect financial storm which could end up producing violent winds,
incredible waves, torrential rains and floods that devastate the financial
markets and cripple the economy. The Fed faces rising inflation rates here
at home, global financial imbalances, especially in the U.S., and excessive
signs of further risk taking and speculation in the financial markets.

Even worse is the shock that falling real estate prices could have on
consumption. What happens to consumption when consumers' ATM machines -
their homes - stop appreciating? Add this to rising interest costs and
ballooning property taxes and it isn't hard to see that a home budget
squeeze is in the making."

Debt-Driven Meltdown

James Shepherd, President of JAS MTS Inc. and editor of the Shepherd
Investment Strategist, has warned that "a perfect storm is developing and
much of this danger has to do with debt. It is the accumulation of this
debt, combined with sharply rising short-term interest rates, added to the
effects of record high energy costs, mixed together with declining real
incomes and a disappointing labor market, that are among some of the
components of this storm that is brewing. This much leverage and debt is
destined to unravel into a black hole of debt driven deflation, and soon.
When a certain saturation point of debt and leverage is reached, only a
minor dislocation will be sufficient to cause a dramatic collapse.

The U.S. economy is slowing and the effects of a slowing economy are always
exacerbated by the degree of debt that exists. Debtors are always punished
more severely in a declining economy because, as activity subsides, they are
less able to service their debt and the value of the assets that have
collateralized are also falling. Once those that own real estate realize
that their neighbors cannot service their mortgages and are forced to sell
at almost any price, thereby driving down the perceived value of their own
property, the conditions necessary for a full-fledged debt-driven meltdown
will be in place.
Like a storm that is forming out across the water no one can see, an
economic storm - a severe recession - is about to sweep over the landscape
and blow away those who are not prepared."

Major Upheaval

Peter Bernstein, a former CEO of a nationally known investment counsel firm
and university professor in economics, author of numerous books including
'Against the Gods, the Remarkable Story of Risk', and president of Peter L.
Bernstein, Inc., has said "Current trends are not sustainable. The
imbalances are now enormous. The linkages of the parts are so tightly knit
into the whole that reducing one imbalance to zero, or even compressing them
all to a more manageable level, appears to be impossible without a major
upheaval. The restoration of balance will be a compelling force roaring
through the entire economy - globally in all likelihood. The breeze will not
be gentle. Hurricane may be the more appropriate metaphor."

Deep-rooted Structural Problems

Warren Buffett, Chairman of Berkshire Hathaway, has expressed concern that
"there are deep-rooted structural problems that will cause America to
continue to run huge current-account deficit unless trade policies either
change materially or the dollar declines by a degree that could prove
unsettling to financial markets.

Indeed, without policy changes, currency markets could become disorderly and
generate spill-over effects, both political and financial. No one knows
whether these problems will materialize but such a scenario is a
far-from-remote possibility that policy makers should be considering now."

Coming Inter-generational Political Battle

Tim Wood, publisher of Tim W. Woods Cycle News and Views, has said that 'the
United States has no choice but to either repudiate its staggering debts and
unfunded liabilities of in excess of $86,000,000,000,000 or inflate its way
through them because entitlement expenditure and interest payments are
consuming ever increasing proportions of the government's take. Pile on
state, local and private debt, plus possible private sector pension
bail-outs, and the actual hole is closer to $115,000,000,000,000. It doesn't
have to be that way, but there is a high probability that it will be. And
the coming inter-generational political battle over gap funds could well
multiple hard asset prices like those of gold.

The current 4-year cycle should top in early 2006. Once this top is made, I
then look for the decline into the next 4-year cycle to be underway with the
Dow approaching its final bear market lows as the 4-year cycle bottoms near
2010."

The above comments are from some of the best minds in the business and what
they have said about our current financial situation and what is in store
for us in the years ahead. We advise investors to listen, to learn and to
recognize the need to be strategically positioned in a wide variety of
assets including precious metals, mining shares and long-term warrants.
Nothing like taking what the experts say to heart and investing accordingly.

June 1, 2006
Dudley Baker and Lorimer Wilson
Email:
Website: PreciousMetalsWarrants

*****


--
"What we're talking about here, is late night, early morning, low
clouds." www.iamthewitness.com
--------------------------------------------------------------
Is Science and Reality still important or has it taken
a backseat to the fictional tales told by western politicians?
http://www.physics.byu.edu/research/energy/htm7.html






--
"What we're talking about here, is late night, early morning, low
clouds." www.iamthewitness.com
--------------------------------------------------------------
Is Science and Reality still important or has it taken
a backseat to the fictional tales told by western politicians?
http://www.physics.byu.edu/research/energy/htm7.html

On Sun, 4 Jun 2006 17:13:30 +1000, "harbinger" harbinger@hotmail
wrote in aus.bicycle:


The current 4-year cycle should top in early 2006. Once this top is made, I
then look for the decline into the next 4-year cycle to be underway with the
Dow approaching its final bear market lows as the 4-year cycle bottoms near
2010."

I went to my Local Bike Shop to get a 4 year cycle but they don't come
in until November


Regards
Prickles

Timendi causa est nescire
This message only uses recycled electrons