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What Ever You Do; Don't Do the Math:

By       Message Mike Folkerth     Permalink
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I wish for one day that I could write nothing but good news in this space. But if I did, that would be a day that I couldn’t ask you to prepare for your future and every day counts.

As I watch all of my past predictions continue to unfold, I have to consider future predictions that could help us to see the best way to proceed.

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I was accused of being Chicken Little when I predicted the housing collapse. Some two years ago I wrote the following. “Housing cannot and will not continue to increase at the current maniacal pace. It is just not a logical or mathematical possibility.”

“There will be a significant decline in home prices, and the effects will be far reaching. Interest rates will increase and prices will go down. Affordability for larger homes will be out of reach for the average person.”

“The perfect financial storm is brewing from years of inflation and socially induced illogical housing choices. The end result will take its toll on the wealth that you believe you have accumulated in personal housing.”

I went on to give advice to those nearing retirement, “If your plans for retirement include selling your present home in order to cash in on the equity, do it NOW. Even if you have a few years before you had planned to sell, inconvenience yourself a little now and clip the coupon.”

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You don’t know how much I wish I had been wrong. But the point now is that I wasn’t.

The job reports on Friday revealed the loss of 80,000 jobs in March. I believe that April will also report a net loss of jobs as normal spring construction fails to occur.

I’d like for you to consider something while we are on this subject. The U.S. has annual immigration increases, which between legal and illegal entry, amount to a conservative 1.5 million people. That means 125,000 people per month enter the country.

It also means that these immigrants need employment; post-haste. So if we have reported layoffs of 80,000 people…what are these immigrants going to do? What? You mean that wasn’t covered on the evening news?

At the same time that the U.S. economy is turning down, the first of 78,000,000 baby boomers are eligible for Social Security. In three years they will eligible for Medicare. Yet, in this year of 2008, Medicare will pay out more than it takes in.

As millions of Americans take retirement, they not only draw out of the entitlement programs, they quit paying in. Tax collection goes lower and lower to the point of insolvency.

The governments own figures say that Medicare will be insolvent by 2018 and Social Security will go bust in 2041. I don’t buy that. The whole enchilada was based on growth. A recession is the opposite of growth and that is where we find ourselves.

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I believe that Medicare, if not totally overhauled (which I see no earthly way to accomplish) will turn turtle as early as 2012. When growth is replaced by contraction, the results of the race to the bottom are nothing short of astounding.

The total burden of these two programs alone, whose total unfunded debt represents a greater amount than all combined wealth in the U.S., will devastate the U.S. economy. That is why so many U.S. Corporations with the assistance of our elected officials are getting out of Dodge.

Wake up Middle America, Dodge is going to be ghost town.


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Mike Folkerth is the author of "The Biggest Lie Ever Believed" and is not your run-of-the-mill author of finance and economics. The former real estate broker, developer, private real estate fund manager, auctioneer, Alaskan bush pilot, (more...)

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