-->Cold Turkey.............

You were no different than anybody else. It actually started quite innocently. Everybody else was doing it. You never knew it would lead to destruction.

You did it to have fun. Your friends were doing it. They were okay. You had to keep up, so you did it too. You were having a great time - the life of the party. And best of all, you did things better and faster. What could be wrong with that?

Soon you found yourself having fun with fewer and fewer friends. To your amazement, you found out some of them have stopped altogether and didn’t tell you. What was wrong with them? You continued on your way with the friends that were still around, they understood you.

Soon you realized you were using more and more. But that was okay, you could handle it. Besides, you had some friends that were using more than you. You found you couldn’t get through the day without using it. You used all your cash to pay for it. You borrowed more, just to pay for it. You mortgaged your house just to pay for it. But you were still okay. You could handle it. Your old friends started to warn you about your excessive use. You didn’t listen to those fuddy-duddies. They were out of touch.

Soon, you found derivatives, a purer version of it. Now this was where the action was. You dove headlong into them. You couldn’t get enough. You had global contacts, all doing the same. You were hip, with-it, cosmopolitan. You were part of the fast crowd that had found a better way. You didn’t ignore the other stuff either, but the derivatives were where you could multiple your exposure to it by factors of 10, 20, even 100 times, for the same cost.

Sure enough, some of your Asian friends overdosed. It was too bad. They were a fun bunch. But, they couldn’t handle it. They didn’t know what they were doing, like you. You had it under control.

Meanwhile, you were going to new sources. You had to feed the need everyday. It got to be impossible to do anything without it. You started to look for faster hits. Your good sources were backing away, so you had to go for lower quality. It worked. The low quality stuff wasn’t all that bad, besides, you found a lot of new friends there that had been users for a long time. With their help, you spread it around like crazy.

Then it happened. You didn’t know how, you didn’t know when. But it happened. You should have seen it coming, but you didn’t. You couldn’t get anymore. Nobody returned your calls. You checked all your sources and they were either gone, or had shut you off. You were in trouble. You depended on it for so long, you didn’t know what you are going to do without it. You had a problem. Then things start to fall apart.

You went for help. But there was none available. Nobody would give you even a little. They told you that cold turkey was the only choice. You asked for an alternative. There was none. You told them you could get it under control if they would only give you a little more. NO. Cold turkey. That was your only option. You had no choice. No options left. No sources. It began.

First you thought it was going to be all right. Then there were the violent tremors. Violent swings of mood back and forth. You lost all equilibrium. Your productivity suffered. Everything fell apart. There was nothing you could do about it, except ride down with it. You lost everything.

The results were unemployment, bankruptcy and depression. You were glad to do the most menial things to get back on your feet. You shunned even the smallest amounts of it, for fear you would fall back into the trap again. You worked hard to make up for the mistakes you made while you were a user. It took you decades to get back to where you were before. You did everything you could to warn the next generation about the evils of it. They listened, but as history tends to repeat itself, the generation after that didn’t, and the cycle started all over again.

What is it? What is this drug that today, entire nations are addicted to, and will eventually ruin them? It is credit. The proliferation and use of credit has become our nation’s addiction. The US economy is an addict. What is amazing is that with such a high use of credit, the economy isn’t doing better! Relatively speaking, it is taking more and more credit to power the economy forward. It is like the drug addict that needs continually bigger fixes to get high. Eventually, he overdoses. The new economy is a delusion, in the same way drugs make one feel better. The excessive use of debt will, as it always has in the past, be the downfall of this economy. Only a strong dose of cold turkey will bring the problem under control. It is not going to be pretty.

A true bull market cannot get underway until this economy has gone through the pain of weaning itself off of its dependence on debt. Don’t look for a fast resolution to the problem. It isn’t there. Just like the drug addict, this economy has to rid it’s system of the excesses and learn to live drug (debt) free. Until then, the market is strictly a drug users’ illusion. - JJR



Below are some charts inspired by Dr. Kurt Richebacher's December newsletter. The data is his work, the format of the charts and comments are by Cornerstone. I would strongly advise anyone that is serious about economic research and investing to subscribe to Dr. Richebacher's newsletter. (Dr. Kurt Richebacher, Editor / Published by The Fleet Street Group / Laura Davis, Group Publisher / Doug Noland, Market Analyst)