Since January 20, 2009 the dollar has lost approximately 10% and gold has gained approximately 10%. I could be more precise, but you get the picture. We are spending money like lunatics, and the politicized economic hackery coming out of the White House OMB (office of management and budget) is breathtaking given their latest mea culpa on their debt forecast being off by a mere $2 trillion.

The debt is rising and it has to be paid for. The administration has to get money from somewhere, and even if they raise taxes big time, it still will not be enough. This means money printing, monetizing the debt, and more borrowing from foreign countries.

The dollar looks very weak right now and could break down. However, if there is another dramatic sell off in the market, or a double dip recession, the dollar will ironically rally as people look for safety. You might remember the dollar doing quite well as we were in the worst parts of the economic crisis. After a quick fall, it recovered quickly as the safety trade was on. Currently, the trend is still down though. We will see if it changes.

Keep an eye on it.

On Friday the Obama economic team fessed up to their incompetence when they delivered the news that they were a bit off in their debt forecasts. A bit, in this case, was a mere $2 trillion. They underestimated the debt their budgets will cause by $2 trillion.

My $20 trillion minimum debt prediction is looking just about guaranteed now. What a shame.

If you have been reading this blog since early this year, you would have known this was coming as I predicted it many times. I hope the current economic team gets their sea legs soon (they won’t), or this nation will be in for a world of hurt (we are).

This is page 114 of President Obama’s budget, and an annotation I made about debt created from 2009-2019.

Current USA debt = $11.686 Trillion

New debt to be added over next 10 years (Obama numbers) = $7.550 Trillion 

Total USA debt in 2019 (using Obama numbers) = $19.236 Trillion

These debt levels are based on optimistic growth for the economy, therefore when these numbers are revised they will be much higher. I am feeling charitable though, so I will round it off to the grand total of $20 Trillion.

So, 10 years from now if President Obama’s budget is followed we will be living in a country that is $20 Trillion in debt. Let that sink in for a moment. You should also know that these are not my numbers. These are Obama’s numbers. They are found right in his own budget, so I am not making anything up here or estimating anything. If anything, I am being too easy on him by not factoring in his growth assumptions. These numbers also do not take into account the cost of the national health care bill or the cap & trade energy tax bill. If these things happen, then the numbers will be even worse.

Where will you be in 10 years? Will you be putting a child through college? Will you be running a business? Will you be looking to retire? Will you be finishing school and looking to get out on your own? 

Well, regardless you will be looking at higher taxes, lower economic growth, and inflation that saps your buying power. The interest payments alone on this debt will eat up a huge part of the annual federal budget which means less money for everything else. Lets face it, the government for decades has not been very good at managing money, but this budget reaches a new low as these numbers show.

We can get out of this, but it will be very difficult. We need strong economic growth and budget cuts. This problem cannot be addressed without doing both of these things. I have mentioned Sarah Palin twice before on this blog. Once in a post about being unorthodox and one other time in passing about higher taxes. From the time she took office in Alaska, she cut the overall budget by approximately 9%. We need someone to kick ass and do the same thing in Washington DC. We need this federal budget to be taken out back, and shot!

She can do it, if given the chance, but regardless of who is in the White House we need the budget slimmed down in a big way unless you want to be staring down the barrel of $20 Trillion in debt 10 years from now.

Figures themselves cannot lie as they are mere numbers on a page. However, the people telling you about them lie all the time. I will write more about this in the future on a variety of government numbers, but right now I would like to briefly discuss the unemployment rate.

For example, the current “official” unemployment rate is 9.4%. However, a more broad indication of unemployment or U6 is almost 17% and rising. This U6 rate is higher because it takes more things into account.

Say you were working 40 hours per week but due to the poor economy your hours at work are being cut so now you only work 32 hours per week. In this scenario, you still show up as “employed” and therefore will not impact the 9.6% number, but you could very well impact the 17% more broad definition of underemployed.

Now, as I often like to say, here comes the real problem.

When the economic “recovery” occurs businesses will not hire more workers for some time. They will not because they have tons of workers whose hours they can just increase back to normal levels. The 32 hour worker will become the 40 hour worker again. This will not impact the 9.4% number at all since these underemployed people were never dropped from that rate to begin with. This screams “jobless recovery.”

You should also know that many people have been unemployed for so long that they have fallen off the unemployment rolls and therefore are likely not being counted at all by the government.

That is why the unemployment rate dropped this month. IT IS A SHAM! The only reason it dropped is because 422K people left the labor force! People have been out of work so long that the government is not even counting them anymore. This is not good.

Bottom line, take all these government numbers with a grain of salt since they are filled with holes that you could drive a truck through.

Today, economic advisor to President Obama Christina Romer declared that the stimulus recovery plan is working.

Remember, this is the same woman who said that if we pass the stimulus bill, (that she helped design) the unemployment rate would top out at 8%. Today it is 9.5% and will rise!

This woman advises the President. That should scare the hell out of you. She is an idiot and should resign. She helped author a stimulus plan that with interest will cost us $1 trillion, while failing to stop job losses. 

Bear that in mind, when she gives you more numbers in the future. Where she is pulling them from, I have no idea.

Just a quick update since I posted “Look Out Below” on July 22. The S&P 500 was 954.07. Today it closed at 997.08.

As I said, I still think the rally could have more to go, but I am not worried about it either way because I said I have kept my core dividend paying holdings. This way, I take advantage of the rally while protecting myself with cash on the sidelines.

I said then that I was taking off my trading positions, so I did miss out on 5% or so of positive market action but that is really small potatoes after I said I was getting back in on march 13 in the post “What I’m Doing Now.”

I am perfectly fine to wait til the fall with my core holdings taking advantage of any market move up. I have made good money from March 13 with my trading positions so I am ready to buy if there’s another drop in the fall.

I DO NOT CHASE STOCKS. If I miss a big run, then I sit and say “damn,” then I move on to the next thing. Prior to having the ability to do that, I was undisciplined. I made and lost a fortune many times, but now I never lose big because I never make the same mistakes twice.

If you want to latch on to try and get another 10%-15% out of this rally then go for it, but I am not doing it. I am not doing it because I already made my money on the 50% run from the March lows that I told you about here at the Solitude Blog.

If you missed the run, do not feel bad! I have missed countless runs that I still snicker about to this day, so do not worry. Remember, the market can stay irrational a hell of alot longer then you can stay solvent!