Saturday, January 01, 2011

2011 Predictions

In what has become a mainstay here at the Real Effect, I strive to offer my readers with an excellent view of what is coming down the current events pipe by offering cutting-edge and usually provocative predictions.

Let us look at the past successes -
  • 2010 (1,2,3) - After a three year absence, the predictions returned with a stunning 95% accuracy in part I, part II will be along shortly.
  • 2007 - 2009 - Due to time constraints on research, the predictions became distributed throughout the year, peppered inside various articles. I leave the collection of those predictions to the reader for the time being.
  • 2006 - The first incarnation of the annual predictions saw an accuracy rating of 69% and stunning prognostication of the following major events:
    • Housing market collapse
    • Democratic Congressional takeover
    • Iran war targeting (Resulting in the resignation of Fox Fallun)
    • China and North Korea identified as potential threats
    • Oil/Gasoline price explosion
    • Religious demonizing and marginalization
    • Israeli Ariel Sharon's health issues

However, we here at The Real Effect are not in the business of rehashing the past, which is a matter best left to other parties. Presently we shall stick to our strength of making future predictions. So it is without further adieu I present the 2011 predictions! (Keep in mind, that all of this is barring what has become commonly called a WTSHTF scenario.)

  • Europe detonates, especially in the east -
    • Eastern Europe sinks to crisis level with reports of food shortages, rioting and widespread Depression.
      • Hungary (10 Yr 8.02%) may be the first to go.
    • Western Europe contracts massively, putting extraordinary pressure on the Euro. But the call out of Belgium isn't about revoking the Euro, rather about the preservation of the European Union and the need to 'pull together'. I would expect that we could begin to see propaganda calling for a United Europe in the face of "x" (economic crisis, terror, war). Ultimately in the endgame, foreign creditors feel the massive pinch as they try to protect their investments, but the lack of a favorable response by the people will lead to war with the far east, but not yet.
      • Bonds play an absolutely critical role with the European Financial Stability Facility taking center stage.The days of "free money" are coming to an end.
        • Germany  (10 Yr 2.958%)- Notice how they refused to implement stimulus and now they are recovering? Yet in order to achieve a United Europe that involves Germany bailing out everyone else. This will probably lead to massive protests by the Germans over forced foreign austerity.
        • Greece (Bonds - 12.01%) Still in a world of hurt
        • Ireland (10 Yr 9.058%) was once the economic jewel of Europe, but recently Moody's slashed their rating by five levels. (How does that EU bureaucracy taste, eh?)
        • Portugal (10 Yr 6.682%) - Dying on the vine, they will need foreign intervention.
        • Italy (10 Yr 4.8%)
        • Spain (10 Yr 5.453%), France (10 Yr 3.32%) and Belgium
  • United States
    • No recovery. The public is aware, but the media begins to be aware that all of the so-called recovery talk was nothing more than statistical nonsense.
    • Consumer spending hits a wall and continues to decline moderately.
      • Almost all classes are spending significantly more on food at home. (Sales at fast foods down?) Esp The poor (below $19,301)
      • Housing costs have gone up significantly for the poor.
      • Health insurance costs are exploding for all classes, esp middle - rich.
      • Education costs have gone up for all but the poor. Unemployed students will build the coming revolution. (What else do they have to do?)
    • The country faces the worst Christmas in at least 25 years. It is very possible that this not be immediately realized because of nominal reporting but the devil is hidden in the details like margin compression, something Karl Denninger has been adamant about for quite some time.
      • As this plays out throughout the first quarter, this kills off many struggling chains or at a bare minimum, (barring "bailouts") sets the stage for later Corporate Death.
    • Massive Unemployment U-3 goes to 11%, U-6 to 18.5%  (Yes, I know I'm asking for it)

    • The Employment rate continues to plunge

      • Millions more people fall off the unemployment rosters.
  • Actual Inflation is rampant and MASSIVE (+10-20%)
    • Commodities - MASSIVE increases in cost
      • Oil becomes a political issue again (Due to being dollar driven) It will easily top $100 a barrel and probably aim for $150 again. (In line with last year's prediction that it will become an issue again later.) Yet people are using far less oil.
      • Gold - $1800 - $2000, Silver - $40 - 60
        • Expect a massive rally in the first quarter of 2011, cooling off for the summer and then another strong rally at the back half of the year.
        • Silver becomes especially difficult to physically source as the Comex cracks and demand goes up. (Perhaps hitting $40 in Q1, then cooling down until winter)
      • Cotton - Clothing becomes expensive. This will eat away at many "cheap" clothing alternatives like Wal-Mart and Target.
      • Food becomes more expensive, shortages continue.
      • Denninger -
        The lowest quintile - the poorest Americans - are spending 23% more on food, 8% more on housing, and 9% more on health insurance.

        What's worse, they're not spending less on food away from home.

        This is the key. They're not shifting spending (as you can see in the above table) they are being forced to spend more even as their income decreases.
  • Local governments collapse
  • State governments stagger
    • Deficits swell as many budgets were predicated upon the "summer of recovery" which turns out to be less of a recovery and more of a flat-line.
  • Federal government surges nominally. While appearing to die, the federal government starts consuming everything in a dire attempt to stay solvent. (Sink or swim mentality)
    • Currently the budget deficit is $202 Trillion (Including unfunded liabilities)
    • Pensions are gradually shifted to state/Federal funds.
    • Bond rates collapse further
    • FDIC is still insolvent and its line of credit at the Treasury Dept. legally runs out
    • Food stamp rates will continue to soar.
  • Foreclosure-gate rocks the world
    • Housing prices decline nominally by at least 5% (As Vox Day points out this is the amount of the 2009 tax credit) more likely 10% and perhaps it gets as bad as 20%.
      • Please note that previous bubbles do not lead the way of the next economic expansion.
    • H.R. 3808 is resurrected by the Republicans and signed into law. (This will be seen as bipartisanship)
    • Individuals and companies attempt to protect their capitol by investing in anything that is inflation proof.
      • Minor to moderate bank runs
  • Stocks sell off nominally, finally.
    •  Many of these institutions are holding a certain "value" on their books with regards to housing prices. If these values start plummeting, the banks will either be forced to seek another bailout or get crushed.
    • The markets were propped up by MASSIVE injections of liquidity in POMOs and QE 1 and QE2.
    • HFT (High Frequency Trading) becomes a mainstream term due to increasing exposure to the concept by the mainstream media. (Adobe)  

With much of the fallout from "The Currency War" devastating the global economies, the action leaves the banks and hits the courts eventually ending on the battlefield. (More towards 2012)
  • Worldwide, America is blamed for the global economic fallout.  (CDS, MBS securities)
    • This stokes anti-American/liberty resentment which will find a place to mature later.
  • A world war by the end of 2012 (See the Religious War Series for details) 
  • North Korea/South Korea trade volleys, but do NOT go to war. I don't believe this particular feud is at a fever pitch quite yet.
Having swept into power in 2010, the American populace's stomach for shenanigans is limited and the parties know it.
  • The neoconservative version of the Tea Party takes its seats and promptly sells/blows out.
    • To be sure there will be plenty of grandstanding about "austerity", but sacred cows like defense spending, corporate welfare and education will be supported by the NeoTeas.
    • Critical legislation and opportunities (Like an End the Fed bill) are torpedoed by the appropriate sides.
    • I will go so far as to say that a major 'patriot' will betray the movement.
  • January - A lot of rhetoric, but not a lot of results. Talks by Republicans will resume of obstructionism and "dirty politics" by Obama.
  • Presidential Race heats up - May?
    • The third party "change" meme becomes more palatable, but not yet as frustrations lead to a party that will eventually become the Global Party
    • The cry will go out that 'In this hour, we cannot afford to be divided.'
After a massive downturn over the last 5 years, the remnants of much of the "religious right" get fed up with the left's "societal engineering".  This leads to the following -
  • Nationalistic denominationalism - The Christians return to the forefront with a vengeance as the Glenn Beck rally/Palin crowd embrace "Americana" nationalism and go after the infidels. 
    • The "founder's intent"/"What this country was founded on" ends up fueling a nationalistic religious fervor that seeks to incarcerate and make war anyone who doesn't see their light.
But the rub lies in the fact that the left and the right are destined to destroy one another and lead to a new left/right party.

  • Worldly obsession with 'otherworldly' entities picks up steam but does not reach critical mass. Such items will include:
    • Aliens/Project Bluebeam
    • Angel/Demon gates
  • In reaction to rampant criminality, virtues become fashionable/marketable again.
  • Crime increases - The desperate lower class sees the upper class as the reason for their suffering. Except the middle class will be their target, not the bankers.
As Obamacare takes hold, in order to make the "system" solvent, the Government moves to do the following:
  • The licensing and eventual banning of vitamins and nutritional supplements. (Competition is a sin)
  • Healthcare shortages are realized as workers retire early en-masse in order to avoid being part of the system. Doctors especially become more scarce as new recruits refuse to enter the field.
    • A black market for health care becomes viable.

I've also decided to link to Vox and Karl's 2011 predictions for the reader's benefit. While they share many similarities, I can assure the reader that I have been writing these for at least 3 months now. (As the blog articles will attest.)

(Note: In my haste to get some of these out by the first of January, I might have left off some links or inadequately explained some of the  predictions. I reserve the right to edit some of the information until January 7th, 2011)

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