Britain's next crisis is upon them - it is here. The UK occupational pension system shows 65,000 British workers have lost all or part of their pensions as a wave of insolvent employers are discovered to have left their pension schemes severely under funded. Many have been left destitute. This is exactly what is taking place in America. The Pension Benefit Guaranty Trust is in the hole for $23 billion and is headed toward $500 billion. As you can see, we are more socialist than England because we supply inadequately funded insurance, we have to pay 30% on the dollar and still go bust. The employers are the villains in both the UK and here. They stole the money. They should go to jail for a long time.
The result today is, in 2004 alone, 500,000 abandoned private pensions moved back into the state system. Just as many are expected to leave this year. The insurance industries have told private pension owners to opt out and rejoin the government system. In addition, of course, the elitist corporations, Chamber of Commerce etc. want taxes to be raised to cover their theft. The British blew it. We should learn from their mistakes. The insurance and brokerage only want the fees, they could care less if a retiree is broke or not. There is no question that it is cheaper for the government and the people to carry the risk. All that has to happen is that politicians stop looting the $250 billion paid yearly in Social Security taxes and it be put into tradable government securities. This would help government fund its debt, but they would have to reduce spending $250 billion a year. There is nothing wrong with our Social Security; a law must be passed to stop the looting of our retirement funds. There is no crisis except in the unbalanced mind of our President.
In two thousand and five, growth should be 2-1/2% to 3%, oil prices averaging $45.00 a barrel, BLS inflation figures at 5%, up from 3.6%. Our figure will be 11%. Unemployment will reach an official 6-1/2%. Our figure is 14-1/2%. Commodity prices will move higher in the first half of the year and flatten out over the second half. The dollar presently is in a bear market rally assisted by central banks. Eighty on the dollar index will be tested and it could be broken to the downside. Once the dollar rally is over, gold will rise over $500 an ounce and perhaps as high as $850 and silver could move to $10 and perhaps $15 to $20 an ounce. That is because a dollar between 80 and 87 is of little help to the balance of payments deficit. Do not expect any improvement in personal savings with inflation, there are lagging wages and mountains of debt to liquidate. By mid-year we will see an inverted yield curve. That is when short-term rates are higher than long term rates. That will not last long in spite of intervention by the Fed and the Plunge Protection Team. Long rates have to rise to attract $2.4 billion a day from foreigners. By June, and at least by year-end, the US ten-year Treasury note will yield 6% and the 30-year mortgage will be over 7%. That means house prices will be headed down 5% to 15% dependent on location and degree of previous appreciation. The Fed increased M3 7.1% last year and bank loans were up 8.9% or over $1 trillion. You can expect bank loans to rise over 10%, and M3 12% to 15%. The floodgates will be opened again. This will nullify the 1-3/4% plus rise in interest rates, push up inflation and eventually force the dollar below 80 on the dollar index. The industrial base now at 13% of non-farm employment and down from 25% just 20 years ago will continue to shrink. Workers will move into lower paying jobs as they have been and those falling wages will drastically cut consumption. The very core and heart of America is being ripped out of our country by free trade, globalization and outsourcing. This loss of manufacturing capability makes it impossible for us to ever have a trade surplus again. The current account balance will be out of deficit and the dollar will depreciate until we erect protective trade barriers and tax transnational corporations who want to export goods and services into our country. The world economy is going to remain unbalanced indefinitely and that counterweight will be the USA. America cannot export its way out of this, so the only alternative to protective tariffs would be 20% interest rates, which we had in the early 1980s. This again could bring the needed purge of the systems. There are no guarantees that the depression we would enter would solve the problem. It could this time lead to world war or a revolution within the USA. Unfortunately, now there is no way of avoiding these painful consequences. Both tariffs and higher interest rates would bring balance and a level playing field. We also ask when will private foreign investors stop buying dollar assets and how long can we expect foreign central banks to subsidize America