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Happy July 4th!

When an American says that he loves his country, he means not only that he loves the New England hills, the prairies glistening in the sun, the wide and rising plains, the great mountains, and the sea. He means that he loves an inner air, an inner light in which freedom lives and in which a man can draw the breath of self-respect.

~Adlai Stevenson

Remember to thank God for our great country and the freedoms we enjoy as Americans.

“Every good and perfect gift is from above, coming down from the Father of the heavenly lights, who does not change like shifting shadows.” James 1:17
 

Asked if North Korea is likely to conduct a July 4 Taepodong-2 test, as occurred in 2006, Gen. Renuart said in an interview this week with The Times at Northern Command headquarters at Peterson Air Force Base, "I think we ought to assume there might be one on the first of July and continue to be prepared and ready."

Gen. Renuart said North Korea's leaders are unpredictable and their "decision logic does not always follow in the same vein as ours does."

U.S. missile defenses are prepared to try to knock down the last stage of a Taepodong-2 missile that North Korea is expected soon to launch if sensors detect the weapon threatens U.S. territory, the commander of the U.S. Northern Command told The Washington Times.⁹

General Renuart reiterates the sentiment of the GPUpdate when he says we should “be prepared and ready.”  As a country, a church, or a family, we should live in a state of preparedness so that the “unexpected” does not cause us to panic.

Prepare your home, church, and business with enough food, water, and emergency supplies to last at least 30 days.  If you have already done that, start building your inventory to accommodate 90 days.  This not only gives you more time, but it also allows you the opportunity to share with others who may be in need or who were unable to get prepared.  Remember: Prepare to share!

The California controller began printing i.o.u.’s in lieu of cash to pay taxpayers, vendors and local governments.  It was only the second time the state had adopted the emergency payment method since the Great Depression. The National Conference of State Legislatures had no record of any other state’s ever using them.¹

Once the US’s richest state, California now has the dubious distinction of having the worst credit rating in the country.

“On Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression,” said John Chiang, the state controller. “Unfortunately, the state’s inability to balance its checkbook will now mean short-changing taxpayers, local governments and small businesses.”²

The US economy shed another 467,000 jobs last month, signaling that aggressive government stimulus measures are failing to unshackle the labor force from the grips of the recession, official figures showed on Thursday.

The result was worse than economists expected and pushed the unemployment rate from 9.4 per cent to 9.5 per cent, a 26-year high.³

“The numbers are indicative of a continued, very severe recession,” said Stuart G. Hoffman, chief economist at PNC Financial Services in Pittsburgh. “There’s nothing in here to show that the economy and the market are pulling out of the grip of recession.”⁴

U.S. housing prices will fall by a double-digit percentage from already beaten-down levels, resulting in an overall 40 percent plunge by the time foreclosures peak in the second half of 2010, Barclays Capital economist Michelle Meyer said.

"Home prices are likely to continue to fall, albeit at a slowing pace, even after the economy technically emerges from the recession." Home prices have fallen 32.6 percent from their peak three years ago, S&P/Case-Shiller said.  On that basis, they would need to fall another 11 percent for an overall 40 percent peak-to-trough decline. Further declines could imperil metropolitan areas that have yet to experience the worst of the nation's housing slump.⁵

China has asked to debate proposals for a new global reserve currency at next week's Group of Eight summit in Italy and the issue could be referred to briefly in the summit statement, G8 sources said on Wednesday.  The debate centers on proposals by some emerging powers that an alternative should be found to the U.S. dollar as the global reserve currency, to reflect the shifting balance of power in the globalized economy.

China's central bank governor said in March the world should consider using the International Monetary Fund's Special Drawing Rights (SDRs) as a super-sovereign currency. The SDR is an international reserve asset allocated to IMF members and its exchange rate is determined by a basket of dollars, euros, sterling and yen.⁶

The American Clean Energy and Security Act (H.R. 2454) passed the U.S. House of Representatives on June 29, 2009 by a vote of 219 to 212.  This bill is more commonly known as Cap and Trade.  Unfortunately, most US citizens do not understand the long-term ramifications of this bill.

What is Cap and Trade?⁷

The goal: To steadily reduce carbon dioxide and other greenhouse gas emissions economy-wide in a cost-effective manner.

The cap: Each large-scale emitter, or company, will have a limit on the amount of greenhouse gas that it can emit. The firm must have an “emissions permit” for every ton of carbon dioxide it releases into the atmosphere. These permits set an enforceable limit, or cap, on the amount of greenhouse gas pollution that the company is allowed to emit. Over time, the limits become stricter, allowing less and less pollution, until the ultimate reduction goal is met. This is similar to the cap and trade program enacted by the Clean Air Act of 1990, which reduced the sulfur emissions that cause acid rain, and it met the goals at a much lower cost than industry or government predicted.

The trade: It will be relatively cheaper or easier for some companies to reduce their emissions below their required limit than others. These more efficient companies, who emit less than their allowance, can sell their extra permits to companies that are not able to make reductions as easily. This creates a system that guarantees a set level of overall reductions, while rewarding the most efficient companies and ensuring that the cap can be met at the lowest possible cost to the economy.

The profits: If the federal government auctions the emissions permits to the companies required to reduce their emissions, it would create a large and dependable revenue stream. These financial resources could be used to achieve critical public policy objectives related to climate change mitigation and economic development. The federal government can also choose to “grandfather” allowances to the polluting firms by handing them out free based on historic or projected emissions. This would give the most benefits to those companies with higher baseline emissions that have historically done the least to reduce their pollution.

Please don’t overlook to the “profits” part of the explanation…because that’s what it’s really all about: creating a huge revenue stream for the government.  Let’s call it what it is: another tax.

Its centerpiece is a "cap and trade" provision that has been rightfully derided as "cap and tax." It is in fact a tax on energy everywhere it is consumed on everything it is used to make or provide.

It is the largest tax increase in American history — a tax on all Americans — even the 95% that President Obama pledged would never see a tax increase.

Capping emissions is capping economic growth. An analysis of Waxman-Markey by the Heritage Foundation projects that by 2035 it would reduce aggregate gross domestic product by $7.4 trillion. In an average year, 844,000 jobs would be destroyed, with peak years seeing unemployment rise by almost 2 million.

And what would we get for all this pain? According to an analysis by Chip Knappenberger, administrator of the World Climate Report, the reduction of U.S. CO2 emissions to 83% below 2005 levels by 2050 — the goal of the Waxman-Markey bill — would reduce global temperature in 2050 by a mere 0.05 degree Celsius.⁸

Write to your U.S. Senators and tell them how you feel about “Cap and Trade.”  You have a voice and you have a vote.  Find your state Senator’s contact information here.

Concise, well thought out letters to Congress are one of the most effective ways to influence law-makers.  Personalize your letters and use logical comments, not inflammatory rhetoric, to drive home your point.

Stocks came crashing down Thursday as the jobs number showed hefty jobs losses in spite of all the stimulus and government bailouts over the past few months. The job losses would have been even greater if not for some fictional adjustments with the "birth" of new jobs such as construction and hospitality jobs. These jobs amounted to the number being inflated by 171,000 jobs.

As I have warned many times, do not believe the "green shoot" propaganda campaign that the government and media are running. I am not a pessimist but a realist who will give you good news when I see it. For now, the economy is still losing too many jobs to foster in any type of recovery. States are going broke which is going to increase the strain on everyone. Do you think your grocery store would accept IOUs for groceries?  Be prepared to hear about another stimulus package coming soon. Stocks appear to be correcting the huge run up since the March lows. I expect this correction to last a couple weeks.

The bond market was supported by the sell off in stocks and the basic uncertainty of the financial health of the U.S. The short-term treasuries are where investors looking for safety are heading. With the dollar fundamentals, I would avoid any long-term treasuries like the plague. If California can't pay its bills, how long before the Federal government loses its credit rating? Would we have already been downgraded if the ratings agencies weren't American companies? The treasury market is on "borrowed" time. Please forgive the pun.

I hate to sound like a broken record but, every week I report that the Chinese continue to call for a new reserve currency. Guess what? At least 3 mornings that I read my morning news, Chinese officials were beating the new reserve currency drum. It appears to me that it is getting louder by the week. Folks, this is not jaw boning. They are giving you ample time to move money out of dollars into something tangible.

The timing is not the important issue. I would rather be 6 months early than 1 day late. The Chinese are now giving tax breaks to companies that do business in local currency. Doesn't that sound like they are getting more serious? I do believe that we will be facing a dollar crisis before the end of this year.

With that crisis comes everything that we have warned about and tried to prepare you for. Shortages of goods of every kind and a loss of purchasing power are what to expect if the value of the dollar goes plunging. The state of California can't pay their bills and many other states are close behind. Does this sound like a healthy economy? Where are the green shoots in that news? The government will attempt another stimulus which will only put another nail in the dollar's coffin. By the way, the dollar was fractionally higher on the week.

Gold and silver were lower on the week as commodities got hammered when investors realized the economy wasn't so robust after all. It was a general sell off across the board. Gold was off $9 and silver was off just over 60 cents. The longer term remains bullish especially with the outlook for the dollar being so negative.

¹http://www.nytimes.com/2009/07/03/us/03calif.html?th&emc=th

²http://www.ft.com/cms/s/0/1940d18e-64cf-11de-a13f-00144feabdc0.html

³http://www.ft.com/cms/s/0/6ac5f4e0-66fe-11de-925f-00144feabdc0.html

⁴http://www.nytimes.com/2009/07/03/business/economy/03jobs.html?th&emc=th

⁵http://www.cnbc.com/id/31713614

⁶http://www.reuters.com/article/usDollarRpt/idUSLAG00356720090701

⁷http://www.americanprogress.org/issues/2008/01/capandtrade101.html

⁸http://www.realclearmarkets.com/articles/2009/06/26/the_cap-and-trade_bill_is_an_economic_disaster_97284.html

⁹http://www.washingtontimes.com/news/2009/jul/02/us-ready-for-n-korean-missile

¹⁰Market commentary is provided by Mr. Steve Meyers of Grainbelt Commodities, Marco Island, FL