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The Great Fiscal Cliff of 2012-13Martin D. Weiss interviews Charles Goyette Recently by Charles Goyette: ‘Fiscal Cliff’ … an Illusion or Reality?
A growing list of authorities are now warning that one of the deadliest financial crises in U.S. history is set to level the U.S. economy beginning this coming New Year’s Day. JP Morgan says that, barring a miracle in Washington, America will fall “head first into the fiscal meat grinder.” Federal Reserve Chairman Ben Bernanke agrees, saying that paralysis in Washington will cause America to plunge off the “fiscal cliff” on January 1, 2013. And former Treasury Secretary Robert Rubin warns that the impact of the fiscal cliff could be worse than the fallout from the 2008 financial crisis, which resulted in the worst recession since the Great Depression. According to these insiders, this new crisis will vaporize millions more jobs in every sector of the economy … Tear $1.6 trillion out of the hands of U.S. consumers and companies … Bankrupt thousands of businesses … And drive the unemployment rate to unimaginable levels. Are they right? Is America’s economy only weeks away from one of the most traumatic collapses in memory? And if so, how can you prepare? In a very timely online briefing last week, my team and I provided answers: The Great Fiscal Cliff of 2012-2013 Martin Weiss: As you know, ours is the only firm that specifically named – well ahead of time – nearly every major company that failed in the last debt crisis. And as you also know, we have been warning about a fiscal disaster for quite some time.
But now, two important things have changed:
Now, let me introduce you to a man who knows more about the Fiscal Cliff and its consequences than anyone I have ever met. He will issue five forecasts on how these impending events will impact your income, the economy, corporate profits, your stocks, your gold and silver and more. He will give you a clear roadmap of the coming crisis to help you invest wisely NOW so you can preserve your wealth – and so you can even grow it substantially. Plus, before the end of this briefing, he will NAME three Fiscal Cliff investments to help you start immediately. His name is Charles Goyette, and I am pleased to welcome him here today as the newest member of our Weiss Research team. Charles has been an investment professional for over three decades – since the 1970s. He’s the author of the New York Times bestselling book, The Dollar Meltdown and he has recently released a new volume, Red and Blue and Broke All Over. Lew Rockwell, the chairman of the prestigious Ludwig von Mises Institute, says:
Former Congressman Barry Goldwater Jr. asks:
And Congressman Ron Paul says:
Charles, congratulations! The Von Mises Institute! Goldwater! Ron Paul! Those are some big names singing your praise!
Charles Goyette: Thank you! Martin: Until recently, you were among a tiny handful of observers warning about a fiscal disaster. And now, here we are, months later, and look who’s adding their voices: Fed Chairman Bernanke, JPMorgan, Former Treasury Secretaries and other credible sources saying these incredible things. Is it as bad as they say? Charles: No. It’s worse because it’s the culmination of MANY years of Washington’s gross mismanagement of the economy. America will have no choice but to pay the piper, to suffer the consequences, to have its own financial judgment day. This conclusion is based on my own research and that of Safe Money Report editor Mike Larson. We looked at the “heads up” you gave us of your questions. Then we worked together to provide our answers. But today, I am presenting our joint conclusions from my perspective. Then, he’s going to do the same from his perspective as well. Martin: I like that team approach! But tell me what’s unique about the fiscal crisis right now. Charles: What’s unique now is that, unlike past brushes with disaster, we know precisely when this financial apocalypse is scheduled to begin: At one second after midnight, this coming New Year’s Day. And what’s also very unique is that it’s coming at a time when the stock market is near the HIGH end of its big up-and-down gyrations of the last 12 years. Martin: A lot of investors seem to think that’s a good thing. Charles: But it’s precisely the opposite of what they think. It signals overvaluations. It signals extreme complacency among investors, and extreme VULNERABILITY to the looming fiscal crisis. All this could not be happening at a worse time for the U.S. economy. Let me show you how and why – based on my own research and also based on Mike Larson’s Safe Money Report. Look at the median wealth of U.S. families! Over the past five years, it has plunged more than 30%.
And look at how many families are still under water on their mortgages! Nearly a third! Instead of a great retirement asset, our homes have become huge liabilities. Next, unemployment! The official unemployment rate remains stubbornly above 8%. It’s been there ever since February 2009, the longest stretch in the 64 years that the government has been keeping track! Martin: And that’s just the official unemployment. Charles: Correct. The real unemployment rate – including all underemployed and discouraged workers – is nearly three times higher: A staggering 22.9% and rising, according to Shadow Government Statistics. Martin: Inside the Beltway, some politicians may get away with calling 22.9% unemployment “a recovery.” But to the 12.8 million jobless Americans who wonder where their next meal is coming from, this is a flat-out depression! Charles: Plus, among the jobless, a whopping 29.5% are now out of work for more than a year, the worst in history. That’s 3.9 million Americans in near-permanent limbo – more than the total population of Chicago and San Francisco combined.
This is why America’s middle class is shrinking rapidly. A staggering 43.6 million Americans, many formerly from the middle class, are now living in poverty – more than at any time since the government began keeping records. Nearly one-fifth of U.S. household income now comes from government assistance of some kind. A record one in every seven Americans is now living on food stamps. Martin: It boggles the imagination. And what’s most ironic is that they call this a “recovery.” Why do you think things have turned so sour? Charles: Primarily because of debt and the dramatic changes that society must make to adapt to the huge debt burdens. But we owe our huge debt burden to … The red and blue wings of the Washington political party … The Republicans AND the Democrats … The Tweedledums AND the Tweedledumbers of deficit spending! They have buried us under the largest mountain of debt in world history. Martin: You blame them both. Charles: It’s not me – it’s the facts! When George W. Bush came into office, the federal debt ceiling was less than $6 trillion. When he left office, it was nearly double that – over $11 trillion. But while Bush presided over seven increases in the debt ceiling and added $5 trillion to the national debt after eight years in office, Obama has presided over five increases and added more than $5 trillion in debt in just three years in office. The official federal debt of nearly $16 trillion works out to $211,000 for a family of four. Add in obligations for Social Security, Medicare and veterans, and you have a total government debt of $120 trillion! Martin: And you believe even that number could be greatly understated. Charles: Yes. Boston University economist Laurence Kotlikoff, a former senior economist with Reagan’s Council of Economic Advisers, demonstrates that the debt is much larger. He shows how Washington’s total debts and obligations are now $222 trillion. That’s about $2.8 MILLION for every family of four in the nation. And now, with the fiscal cliff, THREE FISCAL TIME BOMBS are set to explode on New Year’s Day – each of which has the power to wipe out what’s left of our so-called economic recovery: Fiscal
Cliff Time Bomb #1: Remember the summer of 2011: Washington was dead broke; out of money. Unless something was done – and done quickly – the United States of America, the most powerful nation on Earth, would have had no choice but to default on its debts for the first time in history. That’s why Standard & Poor’s revoked Washington’s triple-A credit rating. And that’s why, at the last moment, Congress reached a makeshift compromise – The Budget Control Act of 2011. That new law raised the debt limit by $2.1 trillion – enough to keep the government from collapsing until the end of 2012. But in return, it imposed spending caps that will slash spending by $109 billion per year for nine years, beginning on January 1, 2013. Martin: Run through those for us. Charles: Defense – $54.7 billion in cuts Health and Human Services plus other discretionary program – $38.6 billion in cuts. Medicare and other entitlements – $16.2 billion. Total: $109.5 billion pulled out of the economy and out of people’s pockets, starting this coming New Year’s Day and every year thereafter. According to a recent university study, these and other cuts will destroy more than two million jobs throughout the economy. Martin: The hardest hit sector? Charles: The U.S. defense industry! A whopping 49.9% of the cuts will come out of America’s military budget. In fact, in preparation for these cuts, thousands of military personnel are already being let go and being added to unemployment rolls. Martin: My father, who was a Wall Street analyst in the late 1920s, not only lived through the Great Depression but actually predicted it. And if he were here today he’d be dumbfounded. Because after the Great Depression, it was thanks to massive increases in defense spending, for World War II, that the unemployment rate finally dropped. This time around, it seems the government is doing just the opposite. The real unemployment rate is over 20%, and Washington is cutting defense spending – laying off civilian and military personnel. Charles, lay out for our viewers how this impacts everyday Americans? Charles: If you or a family member has a job with the government or the defense industry, that job’s at risk. Defense contractor Lockheed Martin has warned that most of its 100,000-plus workforce is at risk of being laid off. Other defense companies say they’re set to send layoff notices to “hundreds of thousands” of employees this coming November. Plus, if you have family members or friends working in an area that benefit from government or military spending – construction, manufacturing, retail sales and many others – they could also find themselves without a paycheck. And of course, millions of investors own defense stocks – Lockheed Martin, Northrop Grumman, General Dynamics, and others – that are likely to fall sharply due to these cuts. Martin: Before the actual fiscal cliff deadline, or after? Charles: Well before the deadline. Smart investors don’t wait. They sell in advance of the deadline. Martin: Right now, Congress is sharply divided and deadlocked, especially during the presidential election campaign. But many investors are hoping that, between the election and year-end, they could reach a compromise to cancel all these spending cuts. Charles: That is possible. But even if some of these spending cuts are delayed, many experts are warning that there’s another, larger blow to the U.S. economy hitting on New Year’s Day. I’m talking about … Fiscal
Cliff Time Bomb #2: It’s a $440 billion tax hike on the entire Middle Class … on every wealthy American … on retirees … on every employer in the nation, and on YOU! That’s why The Washington Post calls it “Taxmageddon”: Tax cuts in seven different categories are scheduled to expire. Martin: Please tell our viewers how that impacts them. Charles: Right off the bat, your basic income tax rate – the percentage of your money that goes directly to Washington – will rise significantly. Plus …
Make no mistake: If these tax increases go forward, it will NOT be just a tax hike on the rich. It will be the one of the largest tax increases in history on nearly EVERY American company and family. According to the nonpartisan Tax Policy Center, a whopping 96% of all middle income earners will see their taxes rise an average of $1,800 per year. Martin: If the so-called “recovery” were robust, maybe we could survive this. Charles: Exactly. But the recovery is fragile, probably more so than in any recovery in over 100 years. That’s why so many experts are saying these tax hikes alone could cause massive damage. And even if Congress is able to come together and delay some of these tax increases in the nick of time, Americans will have to start paying the equivalent of five NEW taxes under Obamacare on January 1. September 4, 2012 Charles Goyette [send him mail] is the author of the New York Times bestseller The Dollar Meltdown. His new book is Red and Blue and Broke All Over: Restoring America’s Free Economy. He is also editor of Freedom & Prosperity Letter, a monthly political and financial newsletter dedicated to revealing the truth about the U.S.'s political scene and economic climate. To learn more, go here. Copyright © 2012 Charles Goyette
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