Tuesday, February 12, 2013

The Road to Plutocracy Accelerates

With all eyes on the state of the union speech by President Obama with the speech focused mostly on the economy, more evidence continues to emerge that the gap between the top 1% and the bottom 99% continues to widen at a very fast clip. The internals continue to be consistent with being in the second phase of "The Great Deflation".

The real story of President Obama's economic policy is gold, which was at around $600 an ounce at the start of the Obama Administration Period, which then rose to a high of $1921 an ounce before entering a long consolidation period. Gold is getting ready to explode higher, poised to go to $2000 an ounce and beyond in the very near future. The intermediate term chart of gold illustrates where we are with a leading diagonal in progress:

Gold has been recognized as money for thousands of years, going all the way back to past civilizations such as the Roman Empire, the Babylonian Empire, and the Assyrian Empire. There is a reason why gold has been on a tear on President Obama's watch : trillions of dollars of economic stimulus that has been pumped into the system since 2009, starting with the $787 billion stimulus package passed in February 2009, has devalued the dollar, therefore resulting in chronic inflation. In the aftermath of the state of the union speech, platinum shot up over $10 an ounce to over $1700 an ounce and palladium shot up over $2 an ounce to over $770 an ounce, a 17 month high.

Trillions of dollars of economic stimulus could not stop the nominal GDP from going into the red with a 0.1 % annual rate of decline in nominal GDP (GDP / $ ratio) during the last quarter of 2012. We are in the declining portion of the business cycle, with the low point to be reached in the 2016 - 2017 time frame. Factoring in the actual rate of inflation as per shadowstats.com, the real GDP (GDP / actual CPI ratio) declined at a rate of around 5.1% a year in fourth quarter 2012, and production of goods and services in the United States has fallen below 1982 levels.

For all the economic stimulus pumped into the system during the Obama Administration Period, the money has pretty much stayed at the top of the pyramid. Last year (see this post), the top 1% had captured 93% of nominal GDP growth since the false recovery (that does not exist in real terms) started in late 2009. As evidence that the top 1% continues to pull away from the bottom 99%, the portion of the nominal GDP growth that has been captured by the top 1% since the start of the false recovery is now at 121%. Not only has the road to plutocracy continued during the Obama Administration Period, but the process is accelerating. The rate that the gap between the rich and the poor is widening in the United States is accelerating as evidenced by the top 1% capturing 121% of nominal GDP gains. This means that the middle class is on the road to extinction with 35 statistics to prove the point.

Inflation will continue to reign during the second phase of "The Great Deflation" with the second phase, Cycle wave b or x within Supercycle wave (a) down (2000 - 2042) to continue until 2021. While the second phase is in play, inflation will continue to accelerate. Look for President Obama to push for more economic stimulus in the future with all the stops pulled out starting in 2014, especially as the nominal GDP and the job market goes farther into the red. This is very bullish for precious metals, especially gold. Gold is in the midst of Cycle wave V up (2001 - 2021) of a larger supercycle degree advance. It is quite possible that President Obama will pull all the stops out in terms of pumping economic stimulus into the system in the 2014 state of the union address, vowing to take all necessary steps to prop up the economy --- this could easily correspond to the center of Cycle wave V up in gold in which a powerful "third of a third" event takes place in which gold shoots up as much as $400 an ounce in a single day.

Chronic inflation is also expected to result in rising unemployment, now at 23% (according to shadowstats.com) as businesses and corporations take steps to remain profitable. With a large degree bear market unfolding, the mantra for businesses and corporations continues to be "limits and conservation", and the latest development is the use of robots to perform tasks in the place of human workers. As robots continue to go down in price and become more advanced, it will be more and more intuitive for businesses and corporations to replace human workers with robots in a corporate culture dominated by a "limits and conservation" mentality. Science fiction, as depicted in Phantom 2040, I Robot, and Borderlands 2, which all feature the use of robots in the corporate work force, is fast becoming science fact. The replacement of human workers with robots will also have the effect of widening the gap between the top 1% and the bottom 99%.

 A plutocracy is still in the forecast for the United States, starting in 2042 and continuing until 2076, consistent with the expected character of Supercycle wave (b) of Grand Supercycle wave [IV] in terms of economic internals in which only a very small cross section of the populace takes part in the return to prosperity after "The Great Deflation" climaxes in 2042.