Our Economy Is About to Implode
"Beware the Ides of March,” the soothsayer warned in Shakespeare’s play “Julius Caesar.”
A Roman religious holiday, the Ides (15th) of March was the day on which Roman consuls assumed office — and the day Caesar was assassinated.
For the United States, and the world economy, the Ides will be around March 4 this year, predicted Grady Means in October 2012.
Mr. Means isn’t a doomsayer who’s predicted 11 of the last two recessions. He isn’t trying to sell gold, silver or freeze-dried food. He was managing partner of PricewaterhouseCoopers LLP, an assistant to Vice President Nelson Rockefeller and wrote well-regarded books on international finance.
And he isn’t alone in issuing warnings.
“We expect the bottom to fall out by the second quarter of 2014,” Trends Research Institute founder Gerald Celente predicted last October.
Because the dollar is the world’s reserve currency, America is, in effect, the real world bank. Soon there’ll be a run on it, though, because our massive deficits have eroded foreign investors’ faith in the safety of the dollar, Mr. Means said.
The run on the bank “will start suddenly, build quickly and snowball,” Mr. Means said. “Interest rates will skyrocket, businesses will fail, unemployment will go to record levels.”
It will start when we add “another trillion dollars or so” to our debt, Mr. Means wrote in The Washington Times Oct. 25, 2012. The national debt — $16.3 trillion when he wrote those words — is $17.3 trillion now.
The Federal Reserve Board has financed much of our debt by, in effect, printing money. This has kept interest rates near zero, which has been good for banks and the stock market but has clobbered savings and investment and slowed economic growth.
The Fed must stop “quantitative easing” before all our seed corn is consumed. But when it does, “interest rates will go up and the economy will go down,” Mr. Celente said.
The decline in manufacturing orders in January was the steepest in more than 30 years, the latest evidence the U.S. economy is “exhausted,” said David Goldman, who used to oversee bond research at the Bank of America. A little nudge could push it into recession.
Obamacare could provide that nudge — in March.
The entire health-care industry will be at risk if the Obamacare website isn’t working better by mid-March, said the Centers for Medicare and Medicaid Services in December, in explaining why there isn’t enough time to select a contractor to fix it through the normal bidding process.
Healthcare.gov is like “the facade of a house with nothing behind it,” said Larry Kocot of the Brookings Institution. People no longer have (much) difficulty accessing it. But the “back end” — the portion of the website that calculates subsidies and passes on to insurance companies information about enrollees — remains under construction.
Many experts doubt the “back end” can be fixed in time. After the CMS document was made public, Moody’s downgraded the outlook for the health insurance industry to “negative.”
Obamacare has a problem more fundamental than its website. If sign-ups continue at January’s pace, enrollment will fall about 1.4 million short of the 7 million the Congressional Budget Office estimated by the March 31 deadline.
To arrive at her figure of 1.146 million signups in January, Health and Human Services Secretary Kathleen Sebelius counted those who’ve filled out a form but who haven’t paid their first month’s premium, a prerequisite for actually being enrolled. At least 20 percent haven’t paid, according to some reports.
Enrollments fell 29 percent in January from December, with the pace of signups slowing as the month wore on. If enrollments were to continue to decline at that rate, then by the deadline, only a little more than 4 million may be signed up — far short of what’s required to make Obamacare viable.
All of the world’s largest economies are struggling. China is about to prick a credit bubble much larger than the one that subprime mortgages created here.
Deflating so large a bubble gently is tricky, writes Patrick Legland and Wei Yao of Societe Generale. A misstep by China’s rulers could send a deflationary tsunami through world equity markets.
Some folks are passing around a chart of the Dow Jones Industrial Average since July of 2012 that also shows the average for the year and a half before the 1929 crash. They’re eerily similar. The parallels may not continue. If they do, the charts indicate we’re about two months away from the big plunge.
Beware the Ides of March.