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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Aubie Baltin
September 26, 2011
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The markets are pricing in an almost 100% certainty of a Greek default and the rumors in trading circles of a default coming shortly are rampant.  Bloomberg (and everyone else) reported that German is making contingency plans for the default.  Of course, Greece has issued three denials.   While Greece may default, it is my opinion that the EU will kick the can down the road at least one more time.  Germany is assuming a 50% loss for their banks and insurance companies.  Sean Egan (head of the bond-analysis firm Egan-Jones) thinks the ultimate haircut will be closer to 90%.  And that is just for Greece.  What about the rest of the PIIGS?

Anyone reading my letters for the past few years cannot be surprised that Greece will default.  “Why it is just elementary school arithmetic, my dear Watson.”

Was anyone surprised that the Greeks announced a state fiscal deficit of 15.5 billion Euros for the first six of 2011, vs 12.5 billion Euros during the same period last year?  What else would you expect from increased austerity?  If you reduce GDP by as much as Greece attempted to do, of course you get less GDP and thus lower tax revenues.  You can’t do it at 5% a year, as I have pointed out time and time again.  These are the consequences of allowing debt to get out of hand.  Are you listening Mr. President?  We have come to the end of the game.  “There is no such thing as a free lunch.”  But that does not also apply to the USA or does it?

If (when) the U.S. goes into recession, have you thought about what the result will be?  A recession means lower GDP, which in turn will mean higher unemployment.  Which will also mean dramatic increase costs across the board and sharply lower tax receipts; which in turn means ever higher deficits:  certainly over $1.5 trillion, but most likely in the $2 to $2.5 trillion range.  Governments have much less control over spending than they think, especially since the government has not even attempted to make a budget in over three years.

As Greece or any other country in a debt crisis how well they predicted their budgets.  The Greeks were off by over 25%.  If we are off anywhere close to that, it will guarantee Depression in very short order (whether we use the word or not).

The Greeks are now in a debt death spiral.  There is now way out, short of Europe simply bailing them out; which is not likely for more than three months at the most.  Then what? None of the causes of the problem would have been fixed.