N.B., Acknowledging the fact that some Americans probably think Gerald Celente is a nut – those who are familiar with him at all – just as, for many people, Peter Schiff is seen as an extremist or nut – I think that, given their analytic track records – which you have to admit, have been better than the prognostications chirped out through nationwide media from Ben Bernanke and Henry Paulson – it is important to take their hypotheses seriously and plan accordingly. It’s Pascal’s wager, plain and simple. What would happen if they were right and you *didn’t* plan? With that in mind, I think it’s prudent to consider the worst-case scenario and make sure one is prepared anyway.
If Trends Forecaster Gerald Celente is right, like he has been with so many economic forecasts since 1980, then you’ll need to do a lot more than just protect your money over the next 2-5 years.
Simply put, Celente is predicting a total US economic collapse. He has told ABC that he feels as certain about this forecast as he has about any other forecast he has been assured of. How might he know this? His company, the Trends Research Institute, gathers and analyses over 300 independent global variables and generates prognoses in over 20 different categories – from food, to consumer spending, home sales, entertainment trends, political and environmental trends, baby boomer trends and military spending. And he doesn’t just analyse the USA. His company looks at data all around the world. As Celente is famous for saying, he’s “a political athiest.” He doesn’t care to take political sides, his data just follows “the facts.”
“People like Warren Buffett, you know, “I want more money, I want more money….” him being lionized as well, you know? What has he contributed to society other than his ability to put deals together and make money? So the country has just become a bottom-line country, and in this bottom-line society, cheap is best. Everyday low prices; but what people don’t understand is with everyday low prices comes everyday low-paying jobs.”
Gerald Celente’s Predictions for the US Economy
Tent cities. Ghost malls. Widespread strikes. Gang warfare. (wait a minute. we’ve already got some of these…)
1. No Real Economic Recovery In Sight. Companies like UPS’ earnings have dropped 49%. Stock market “green shoots” have been fueled by magical accounting – less costs and layoffs, not increased sales. Export demand even in Asia is down around 30%. These are Depression-era numbers. No one can print their way out of it by using phantom money without destroying the economy and the dollar.
2. Unemployment. According to Celente’s numbers, “the effective unemployment rate in the U.S. is 18.7%.” This includes only part-time jobs and those who are no longer looking. This number will grow. We’ve lost 2.5 million jobs since Obama has become president. The stimulus package at best so far has only created 150,000 new jobs.
3. Education. We have 50% highschool graduation rates in urban centres; where will these people get jobs? The manufacturing jobs are no longer there. Forecasts for new job creation going ahead lies largely in jobs that will pay less than $30,000/year. As a result, Celente predicts individual crime levels to significantly rise. “When people have nothing left to lose, they lose it,” as he likes to say. And the next big bubble is the “college bubble; they’re going into debt now for jobs that aren’t even going to exist.” (Another good reason not to go to grad school).
4. Problems To Occur this September and October. Traditionally August is a thin month for trading. Everyone is on vacation, especially in Europe. This month, U.S. Congress is out until Labor Day. Federal budget numbers were due to be released this past week, but they’ve rescheduled these to be released after Congress adjourns for the summer. This is a big signal for Celente. Numbers released mid-month will not have as much of an impact as they will in the beginning of autumn (there’s a reason previous market collapses have occurred in Sept-October). “After the summer break, reality sets in in September.”
5. January 2010. If the shoes haven’t dropped already by then, they will in January. When Christmas sales are tallied, they will be worse than 2009. Will open year on down note. In 2009, these were the only things that bought some economic time before more bailouts and the Obama stimulus came into effect.
6. Taxed to death. After the “printing scheme” runs out and the dollar sinks considerably, as Celente thinks is starting to happen again now, the only other option will be more taxes. He sees rising taxes on such things as parking tickets, charges for spitting on the street and other “petty acts” that all pale in comparison to the “great heist” which is that of the government taking taxpayers’ money to bailout banks and pay executive bonuses. Surtaxes; green taxes; sin taxes etc. The tea parties and tax protests are just the beginning.
7. California one of the first to collapse. California is already completely bankrupt and looking at budget cuts and significantly higher crime levels. Its system of roadways and cheap-oil infrastructure will not be able to withstand the higher oil prices ahead.
“The gap between the rich and the poor is the widest in the U.S. of any of the industrialized nations. We have a huge underclass in this country… you can’t print phantom money out of thin air, backed by nothing and producing practically nothing…we’ve all heard from China, India, Brazil and Russia they all want to bail out of the bucks. So where’s it all going? The decline of empire America.”
What To Do To Protect Your Money Going Ahead
The principles of wealth protection themselves never change (spend less; save more; invest, etc.), but the strategies do. If you’re expecting a certain sort of outcome, or at least a possible range of outcomes, it can change the priorities you have in place for the type of savings and protection strategy you adopt. With that in mind, consider these wealth protection basics which Celente is recommending (what he’s doing; he’s quick to say he doesn’t give investment advice).
1. Save more money. There’s many vehicles and strategies for saving your money. But there’s a difference between keeping it in US dollars in cash in your ING account versus holding other currencies and physical metals and metals stocks. Either way, it’s a good idea to cut back on expenses now so that you will have more leverage and flexibility going into an uncertain economic climate.
2. Buy physical gold (and silver). Already, certain types of coins are no longer available. Other dealers are simply on backlog and it’s going to take a a few weeks to get your delivery. Celente is 80% invested in gold and he’s still buying gold. TRI predicts gold at $2000. It’s hard to tell when because the markets are being highly manipulated right now. Gold is an important hedge because there are so many wild cards out there.
3. Diversify out of the US Dollar. The sinking US Dollar is approaching its index lows again at 71.18. Better to hold Euros and Swiss Francs. “To me, the Swiss are the money cockroaches of the world. They never go anywhere,” Celente jokes.
4. Have an emergency plan. Think for yourself and create an emergency plan based on the realistic scenario you come up with. It might include a stockpile of goods, it might just be a significantly sized emergency fund. It might include setting up contingency plans and places you can travel to if you need to evacuate your home.
5. Stay updated on the news. Celente reads 4 hours a day – global newspapers and in many different fields. Economics is only one factor contributing to future trends. Put together many different perspectives – don’t just read US papers or your favourite gurus. The difference between even the US media and the UK media is significant.
There’s no question that Celente holds some extreme beliefs which, in all fairness, have little to do with his company’s actual forecast. It’s best to look at the bottom line and look at what he has forecast in the past and the basics of what he — as well as others such as Jim Rogers and even Nouriel Roubini — are forecasting coming up. Tailor it to your own situation, but give it real consideration. It’s always good to be prepared, and whatever happens in this economic scenario, one doesn’t want to be caught surprised about it, or waiting until it shows up on the front page of the New York Times before talking about it and what to do next.
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{ 14 comments }
I’ve been trying to wrap my head around what is going to happen in the next 20 years but I cannot seem to find an answer that I feel comfortable with. it does seem that there are cycles/trends that are constant since the beginning of statistics.
I do find it crazy he is invested in 80% gold, some cycle analyst predicting we are experiencing a commodity bubble…even though I do believe there will be inflation at some point I just don’t know when.
Still think the best solution is hedging everything, you can think you know everything then the government throws a curve ball and next thing you know your wealth has been destroyed. Just my 2 cents
@Atlas – 20 years, yeah, who knows, but Celente is really talking the next 1-2-3 years. There could be a government curveball, but then that’s why it’s good to invest in foreign stocks, too. I think 80% gold is too much based on my understanding and what I’m comfortable with, but I really should have more of it. It is the best hedge (unless the gov’t makes it illegal to own again).
This Buffett hate is really the craziest disease. The man hardly goes to work every morning because he “wants more money”. He does it because he is the trusted custodian of many, many other people’s money and because he likes making his company run smoothly. He just likes doing what he’s good at, like any true craftsman the world has ever produced. He’s not an angel, but he’s a better man than most in any career. It’s like everyone jumping on Google for anything they can cast as being “evil”, simply because Google is successful and admired and sets a high standard for themselves. It all comes crashing down when you objectively compare them to any of their contemporaries.
What we should have learned out of all this economic mess is to distrust our government, or perhaps to distrust ourselves *AND* our government. Instead people somehow learned to bash free market capitalism. Which is bizarre, since we didn’t have free market capitalism to begin with.
If government wants to fix the economy, for now and the future, they should do away with minimum wage and many other requirements for employers. You can’t legislate quality-of-life while maintaining free trade with other nations who don’t, or who legislate a lower quality-of-life. Bringing back manufacturing is easy: let the market dictate what labor is worth. The only other option is to shut down most imports. But if you don’t take either path, manufacturing will continue to leave the country. And we’re just not all cut out for white-collar work.
As much as this pulls on my internal panic lever I view this guy with skepticism. He proclaims he has nailed so many predictions in the past.
If that were the case and he could literally see the future:
1. Why wouldn’t he have acted to a point that he would be Buffett?
2. He doesn’t say how many things he has gotten wrong. I can throw darts at a wall and some of them through pure statistics will be high scoring shots.
3. What does he have to gain by scaring people? Hey look, gold went up — good for his investment portfolio.
That having been said I think some of the things he says are spot on. Will America fail? I don’t know. If it does we will all have bigger problems than the value of our investments going down.
@NoDebtPlan – “internal panic lever,” yes, I have one too:) I view Celente not quite with full-on “skepticism,” but more just with cautious realism – I separate out his own personal extreme views and try to take his company’s findings for what they are. It’s possible there’s some ego involved in his appearing on media show after media show, but I doubt he’s trying to rally up gold or anything for his own benefit. But yes, if the extreme end of what he says happens, there will be bigger probs than just our investments!
@Jordan – I didn’t know there was “Buffett hate” going around but I didn’t mean to contribute to any… I guess that’s just Celente’s polemical opinion. I agree with your general point about people vilifying whomever/whatever sticks out from the average…
Wow, that’s the most depressing thing I’ve read all day! While I have been wanting to diversify my portfolio with foreign currencies. If the US is really going to burst into flames I’m not sure what hoarding gold, francs, and canned goods will do for you unless you plan to jump ship to a new country.
@Penny – sorry, wasn’t trying to depress anyone!:) it is worrisome, though, you’re right!… I always think it’s better to look at all the possible facts; I know that Celente has had plans to leave the U.S. if he thinks he needs to; that is extreme. But I still think it’s good to diversify into other currencies, etc. – I wouldn’t call it “hoarding” which makes it sound like one is a crazy hermit or something – all hedge funds and institutional investors do it – individuals should too!
Right off the bat he’s asking what Buffett has done for society. Does he realize Buffett is giving away most of his money not to his heirs but to charity? This was highly publicized. Makes me question anything else this guy says.
I do wonder where the US will be but we have a knack for re-inventing ourselves too!
@FFB – yeah, his Buffett comment is probably stupid and better directed at someone else. However, that is the first time I’ve ever heard him say anything about Buffett, so it’s probably not very reflective of Celente’s other conclusions or his company, really. Celente would have made the comment about any Wall St. banker, I think.
There is the off chance that the democrats in office get whacked hard enough by their constituents during their August recess that they see the incumbent death notes on the wall and reverse course in regards to their insane spending proposals. This may allow the markets to shore up and find the bottom so a true recovery can start.
I have many doubts about what any expert in Fox News says (I think it is not hard to understand why). To be honest I don’t have many savings and just try to keep them on my bank account but if I had really huge amount of money I would put them in few places to be certain that if one thing will go bad, others will assure me that I’m not broke :) I would use few different bank accounts, I think that is the safest way of not loosing money. I would not risk playing in stock market next few months, I’m too nervous :)
The only for sure thing is that we are going to be paying more taxes to pay the debt off…as far as the US going down the tube…if we do so does everyone else…the world felt this last debaucle…its a world economy not a US economy…GOLD…LMAO…can you eat it and besides when the economy does right itself the value of gold will plummet too…money currency is just a way to keep score…if you really want to protect yourself buy some land where you can grow plenty to eat and raise livestock like our forefathers did 100s of years ago…and remember its only life dont take it too serious as no one gets out alive anyway…quit worrying and enjoy simple life.
1. US Govt debt is 13 Trillion dollars. GDP is 14.5 Trillion. The Financial Sector (which doesn’t actually *produce* anything) is 8% of GDP or 1.16 Trillion. So if you take away the useless and blood sucking financial sector you get 13.34 Trillion, which is the same as the debt, which means that the national debt is basically 100% of GDP.
2. There is still 1.5 Trillion dollars in mortgage default WAITING TO OCCUR (good summary here: http://tinyurl.com/29ct2qm). When that hits, it will take everything else down with it.
3. Ever since your kind government supported so many fascist dictators in Latin America, Latin Americanos have been heading your way to become your maids and slaves. They now do all the menial jobs and live within their means on 3 bucks an hour. To stop an unemployment free fall, you would need to round up all 12 million of them and kick them out. This may not happen peacefully. (oh, and you would need to do your own cleaning again).
4. US manufacturers can no longer compete in a global market. Your education system has funnelled your best and brightest to a casino in New York. Your current generation of entrepreneurs were born in Russia, India and China.
Ultimately, it doesn’t really matter when the crash comes. It might come in 2010, it might come in 2012, what really matters is that the economic fundamentals (save, invest, research and prudence) no longer exist in the USoA, so the economic decline was inevitable anyway, but as you are an Empire, you think you can shoot your way out of it. This has led to a worsening of the situation, as you use your military to enforce petrodollar hegemony, delaying the inevitable collapse of your currency by some years, but not for much longer.
@Tom – the point about the financial sector not actually “producing” anything is a good one and this point is going to become more and more important. It’s not to say the financial sector is useless – it is needed to facilitate financing, after all – but it has grown too complex and out of proportion to the real needs of a real economy. Read up on how hedge funds and private equity funds actually work and you’ll see what I mean.
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