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Cliffs: Fiscal And Real

January 2, 2013 by  

Cliffs: Fiscal And Real
PHOTOS.COM

It seems our elected representatives in Washington celebrate the English tradition of Boxing Day. That would explain why Congress took off Dec. 26 before coming back last Thursday, even though the Nation is facing an economic catastrophe.

Like most of you, I was working on Boxing Day and read that President Barack Obama cut short his Hawaii Christmas break to get back to Washington to deal with the impending fiscal cliff.

Monday was the deadline for $600 billion worth of tax hikes and spending cuts.

Economists predict these tax increases and spending cuts could send the U.S. economy back into a recession by the end of next year. Americans will see their January paychecks shrinking as they pay higher taxes that automatically engage unless the George W. Bush tax cuts are extended.

It is expected that the average middle class family will see its tax bill go up by about $2,000 a year.

Regardless of whether Congress was able to cut the mustard before yesterday, a second economic shoe may have already dropped. The United States may have already fallen into a renewed recession. This would make Congress and the President a day late and a trillion dollars short by the time something meaningful is done.

It is already being reported that U.S. holiday retail sales this year were the weakest since 2008. That was the Christmas the Nation was in its deepest recession since the Great Depression.

There is already a litany of excuses as to why retail sales were weak this past Christmas, including bad weather (as if the United States always has good weather in December).

In the final analysis, millions of Americans didn’t spend what they typically do this time of year because they fear that the wheels on the American economy have already slipped over the edge of a very steep precipice.

The Log Jam Of 1983

My Dad, Vern, had a tradition to cut lumber off his acreage at the start of the new year. So it was on Jan. 1, 1983. My best friend, Dave, and I were riding on the wheel covers of Dad’s red Massey Ferguson 35-horsepower tractor, which had a front-end bucket to load logs on after they were cut down with a chain saw.

Men of my generation like to golf or ski, but Dad had been through the Depression and, regardless of any financial success he earned, he was determined to be self-reliant even through his later years. That meant growing a large garden in the summer, canning vegetables in the fall and cutting wood in the winter. He kept a potbellied woodstove in the kitchen and functional fireplace in the living room.

He had 80 acres of land near Chattaroy, Wash. Half of it was on a plateau; that’s where he grew Northwest poplar trees and had a corral for his two horses. The other 40 acres was on a steep slope facing north; it was full of wild ponderosa pine trees.

While he loved the outdoors, my father’s mind typically wandered as he thought about where the economy was headed and, therefore, where his subscribers should invest their money. You can imagine that in cases with machinery and gravity, this could be a hazardous combination.

Besides the gears, the Massey had a high drive and a low drive. We were only in second gear as Dad pointed the tractor toward the steep slope. While I was not nearly as experienced with machinery as Dad was, I had grown up around tractors and I knew we were in high drive as we headed down the steep trail that twisted and turned between the 50-foot high pines.

“Dad,” I shouted over the engine, “we’re going too fast!”

He must have had his mind on the markets. On what was a grade of more than 10 percent, he made a critical error. He forgot the tractor didn’t have a synchromesh transmission. You couldn’t gear it down like it was a sports car. So when he put his left foot on the clutch and tried to shift to low, the 2-ton tractor began to freewheel.

Immediately, we were going dangerously fast, perhaps 20 mph, with Dave and me holding on for our lives.

Dad had the presence of mind to hit the brakes — specifically, the left brake. The Massey had a single brake for each back wheel. That allowed the operator to pivot it. In case of an emergency stop, both brakes should be applied by landing your foot squarely on both of them.

The left rear wheel bit hard, but the right rear wheel continued to spin. The tractor did a sharp pivot. For a moment, I thought it was going to roll.

We got lucky that day. The tractor came to a complete stop. Dad put the gearshift into low, and we slowly continued down the trail to the fallen pines that needed to be culled. A few hours later, the firebox outside the house was full and the fireplace was ablaze.

No Such Happy Ending For America

It would be one thing if America had to endure the fiscal cliff that was presented Monday. But the Nation is so deeply in debt that we face a continuous series of cliffs. The President and Congress are either unable or unwilling to see that the Nation safely navigates this trail. Sooner or later, that means the odds are going to catch up with America, and there is going to be a wreck. In this case, it won’t be just three people; it will be 300 million.

Yours in good times and bad,

–John Myers
Editor, Myers’ Energy & Gold Report

John Myers

is editor of Myers’ Energy and Gold Report. The son of C.V. Myers, the original publisher of Oilweek Magazine, John has worked with two of the world’s largest investment publishers, Phillips and Agora. He was the original editor for Outstanding Investments and has more than 20 years experience as an investment writer. John is a graduate of the University of Calgary. He has worked for Prudential Securities in Spokane, Wash., as a registered investment advisor. His office location in Calgary, Alberta, is just minutes away from the headquarters of some of the biggest players in today’s energy markets. This gives him personal access to everyone from oil CEOs to roughnecks, where he learns secrets from oil insiders he passes on to his subscribers. Plus, during his years in Spokane he cultivated a network of relationships with mining insiders in Idaho, Oregon and Washington.

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