Thinking About Intermission

by Fred Cederholm
Our ongoing crises aren't over by any means, but for now we can enjoy a merciful little break.

I’ve been thinking about changes, the weather, the Illinois budget, the US budget, our economy, the equity markets, Egypt, the Middle East, perceptions—and intermission. We've been moving along at a pretty good clip. A lot has been happening around us all over the globe. Yet, just how much has really changed? Our recession/ depression is not gone. The world is still at war, with US occupations and deployments on virtually every continent. The banking/financial/money dislocations have not been fixed despite TRILLIONS thrown on the problems. Uncle $ugar is still buying large amounts of his own new/recycled debt instruments each week. It is like the old saying: “the more things change, the more they stay the same.” Yet, last week saw a lull, a possible turning—a respite from our travails. Things appear to have leveled off, and we are in a holding mode.

You see, the anomalies on the planet in 2011 are still in effect. But...“more of the same” seems to have taken a break. Most immediate on the local fronts, our weather has once again made a shift. The arctic cold bulge which has dominated our weather patterns and given the US record massive snow dumps from West to East, and from North to South, has subsided. Last week’s record cold, here in Illinois, of negative 28 degrees will be replaced with temperatures in the 40’s. We may even reach 58 degrees by Thursday. Snow will melt, but the seven- to eight-foot piles by the streets, the driveways, and the parking lots will be with us for quite a while. Nothing raises hope and spirits like a positive change in the weather. I’ve even seen people out walking their dogs! Winter is not over, but we have been given an intermission.

Illinois Governor Quinn will be presenting his “budget” on Thursday, the components of which have been kept from the some Democrats and most Republicans. Recent revelations have informed the public that the state owes the pension funds, the universities, the schools, the hospitals, the nursing homes, and sundry suppliers a couple hundred BILLION. That will not change. The state will borrow roughly $8 BILLION from China, mainly because the Chinese have given the Prairie State the best terms. We are being forewarned of major cuts, but will they be enough? State expenditures are a huge part of the Illinois economy. The statewide crisis is not over, but we have been given an intermission.

The Obama administration is working on the US “budget,” the components of which have been kept from the some Democrats and most Republicans. We know there are going to be massive cuts, but will these be in areas that will make any real difference to the deficits and the national debt? I have strong doubts about this. Recent revelations have informed the public that the unemployment is “officially” at 9%, while the real number is probably closer to 22%. That will not change for a long while. The Federal Government continues to finance $2 BILLION of new debt each and every day. Under QE2, almost all of that is funded by new fiat money printed by the Federal Reserve Bank. Federal expenditures are now running more than a third of GDP (Gross Domestic Product)—a huge part of the US economy. The national crisis is not over, but we have been given an intermission.

The equity markets are in a temporary holding pattern at 52-week highs, and have been for over a week. Since shares are now priced at double to triple the traditional multiples of “earnings” per share, stocks are overpriced. Will the shares use this current basis as the floor for another Bull market, or the ceiling for another bear one? We have been given an intermission.

The Egyptian protestors have left Tahrir Square, Mubarak is gone, and the “elected” officials have been sent home. A military “government” is in control and things have stabilized (after a fashion). We are told that a new constitution (modeled after the US one) is in the works and that free elections will occur within six months. All eyes are now on a dozen of the other Middle Eastern countries. Will they follow the Egyptian example, or be more violent? The world depends on the oil and gas from the region, and any dislocation of the energy flow will have major negative impacts on the precarious world economies. The Middle East crises are not over, but we have been given an intermission.

Things in the Euro zone do not even appear in our news media right now. The economic maladies in Greece, Ireland, Portugal, Spain, Italy, Belgium, and the Netherlands are not fixed; but the German bailouts have bought Europe some time. The earlier “solutions” to these are currently unraveling. Will Germany change its current subsidy inputs to the Euro zone economies and continue to save the Euro? Will that give the Euro a renewed chance to replace the US Dollar as the world’s Reserve Currency? We have been given an intermission.

It is often said that “reality is not based in truth, it is based in perception.” That observation is so relevant to our times today. Our world is literally on hold. We have been given an intermission. Now the “fun” can begin. Make some popcorn and get a milk and Dr. Pepper. Will the coming act see “ups?” Or “downs?”

I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

Copyright 2010 Questions, Inc. All rights reserved. Fred Cederholm is a CPA/CFE, a forensic accountant, and writer. He is a graduate of the University of Illinois (B.A., M.A. and M.A.S.). He can be reached at

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This story was published on February 14, 2011.