Aftershock Economy’s Wiedemer Comments Regarding Immediate Economic Choices
Robert Wiedemer stated the US now can choose to take a mild recession or kick the can down the road, increase budget deficit to $2 trillion up from $1.2 trillion to avert a recession. Consequences of Option #2 (increasing debt to avert recessions and to continue increasing entitlements) were extensively analyzed in Wiedemer’s last 3 books with last one being Aftershock Investor. – https://economics501.wordpress.com/2012/10/21/aftershock-investor-book-review/
In sum the consequences are that by artificially keeping the economy afloat by inflating bubbles such as the dollar, government, real estate, and stock bubbles, the ultimate later economic suffering will be much more severe. For example, the pain Americans will feel with a total debt of $19.5 trillion total debt possible by end of 2014 will be much more severe than a $17 trillion debt mid 2013.
Wiedemer has long argued that lack of political courage to address our debt will lead to a severe inflation, dollar and economic collapse. Hence, Option #2 will lead to more pain later.
Given fact the Fed has pumped over $2 trillion since 2008, the huge increase in Federal spending, and private corporations having been running lean and leaner past few years, Wiedemer believes that the 2013 recession will be mild (1st link below – video). I am certain that Wiedemer would rather choose Option #1.
A Better Option:
In the video, the discussion does not center on the current fiscal cliff. Hence we are lead to believe that Option #2 would be to bypass the fiscal cliff by artificially stimulating the economy via Gov spending and the Fed $ printing press. Would Option #1 be to allow the fiscal cliff which select Congressional committee last year agreed to last year which would lead to $1.6 Trillion tax increase over 10 years and similar cuts? Yes it can be but a better option would be to focus on cuts as follows:
- Freeze all entitlements, not per personal but for what was spent in 2012; then means test all and prioritize the poor.
- Eliminate useless depts. Such as Energy, Education, HUD
- Sell off PO, Amtrak, Fannie Mae, Freddie Mac
- Keep the Defense cuts; defend leaner and smarter as corporations do in tough times
- Limit tax deductions to $17,000. This results in almost $200 billion per year savings. Most tax deductions have little if any and may have a negative impact on GDP growth. Then reduce tax rates to make this measure revenue neutral. However by decreasing taxes on income (success) expect more of it and grow the economy.
- Drill for newly found natural gas and oil on fed land, IBD estimated that this by itself will generate over 1-2 million new jobs per year and may add 2% to GDP.
Wiedemer may still expect an economic debacle greater than the 2008-9 one, even if we implement the above (per his 3 books). However the above may cushion the impact if our creditors at some time soon balk at financing our debt. This is gloom and doom – yes. But after this dollar collapse the US, minus a Nanny State may be free to prosper again – a Wiedemer conclusion.
In 2nd link below, Wiedemer advises on investment choices and provides his reasons (consistent with his book Aftershock investor). He makes a strong case for owning gold.