The market is still moving on bailouts and rumors of bailouts, which is interesting given that the uprising that began in the Middle East & Europe has now come to our shores.

It was pretty obvious last year that the worldwide social cycle was shifting during the "Arab Spring" and the first near collapse by Greece.  The strikes, protests, and occasional riots in Europe show what happens when you try and use taxpayer money to interfere with the free market.  You get a large gap between the "haves" and the "have nots".  Many people believe that this was a European problem and that the United States was above this type of unrest.

I disagree.  I've discussed this at seminars for years, but rarely in this blog.  The reason being is that the blog is designed to show our readers what is moving the market over the near-term, while the seminars are more big picture type discussions.  While we do not have any recordings of these seminars (yet) I was on the radio laying out the social cycle and what it could mean for our future last July.  You can listen to the replay by going to our Podcast page and scrolling down to the July 29, 2010 show.

On November 30 I wrote, "It seems like the entire world is in a "bad mood" and looking for somebody to bring down. " Probably the deepest I've delved into the social cycle on the blog was back in January following the shooting of Congresswoman Gabrielle Giffords.

"The 4th period of the cycle is also marked by violence and upheaval, but it is typically much worse than the awakening period 40 years earlier because the problems that built up over the prior portions of the cycle are coming to a head.  There is a tremendous gap between the wealthy and the middle class.  The aging ideological generation is trying to get some last minute things accomplished, which creates a large divide politically.  The generation next in line to run the country is trying to figure out how to fix the mess.  So many people are upset about the situation our country is in and the lack of progress towards fixing the problems.  The country becomes very polarized and it results in outbreaks of violence that we thought were not possible in our life times."

I followed that up on January 31 as we discussed the uprising in Egypt.

"I am often asked if I think the United States could see riots like we are seeing in the Middle East or that occurred last year in Europe.  I typically answer, "No, I think American's are better off and more civilized than all of those countries."

Over the weekend it did get me thinking about adding an asterisk to that answer.  If real inflation continues rising, if real unemployment remains high, if the Fed continues committing fraud with the American people's money, if the gap between the "haves" (Wall Street banks) and the "have-nots" (real Americans) continues to grow, and if interest rates are forced to climb due to the rising inflation, then things could get pretty ugly here in America.  If the demand for our bonds declines, or the ability of the Fed to print electronically create money diminishes serious cut backs in government spending will be required.

Don't believe that it could get ugly here?  Tell somebody that is on Social Security or getting ready to retire that you think benefits should be cut or the retirement age should be increased and watch their reaction.  Tell somebody collecting unemployment that you think the government should stop this program and watch how angry they become.  Tell somebody on a state pension plan that the benefits are too high to continue and that they should plan on future cuts in their pension and watch their face turn red."

On February 23 as violence was breaking out in Lybia, I wrote:

"The problem is that rather than addressing the root cause of the 2008 financial crisis -- too much debt -- central banks across the world have decided to solve the debt problem by adding even more debt.  That has further expanded the gap between the "haves" and the "have nots" and has also sparked a sharp rise in food and energy prices.  The global economy, including the United States remains a giant house of cards.  It doesn't take much to cause it to topple. 

The 17% market drop last spring and early summer started with problems in Greece -- a country that economically doesn't really matter.  The 2008 financial crisis actually started in 2007 when a few unknown subprime lenders failed.  While these smaller problems may seem minor they are warnings to the rest of us that the problems have not been solved by 3 years of money printing across the world.

I've spent years talking about social cycles and how they will help us to understand what is happening around the world.  The younger/poor/repressed citizens have had enough of the older/rich/ruling citizens.  The way they see it is that the older/rich/ruling citizens have achieved their status by using the younger/poor/repressed citizens.  Right or wrong, that is what is happening around the world."

"The people in Washington and on Wall Street may not see it, but these decisions -- to punish the borrowers and reward the lenders is creating a situation where the differences between the haves and the have nots will continue to grow.  We are seeing how that ultimately plays out in both the Middle East and in Europe.  At some point the "have nots" reach a breaking point and revolt against the "haves", creating chaos for all."

That puts us to where we are at today.  While the people on Wall Street continue to ignore the "Occupy Wall Street" protests that are growing in size and spreading across the country.  While initially the protests lacked focus, as the weeks have gone by the overall theme seems to be, "we are tired of the gap between the haves and the have nots."

While I do not agree with some of the people's demands that they are the ones that should get the hand outs, I do not agree with how the government's policies have helped a select few corporations that failed so miserably they would have gone out of business without any government assistance.  At the same time the rest of America has been left to suffer.  It is hypocritical to hear Jamie Dimon, the CEO of JP Morgan-Chase say it is "unAmerican" to impose the strict regulations we are seeing come out following the near collapse of our banking system.  It is equally "unAmerican" to bail out failed businesses and allow the same managers that caused the failure to keep their jobs (or not go to jail for the fraud that was committed.)

[Side note -- JP Morgan was probably the best run Wall Street bank out there, but they still needed TARP money and over $70B in secret loans from the Fed in order to stay in business.]

Business Insider put together a nice presentation detailing why the Occupy Wall Street protestors are so angry.  I'd encourage you to check out the entire presentation, but here are a few of the things that stood out to me.

Check out the "real" unemployment rate:

And compare that to after tax corporate profits:

The protestors also remember that the reason we bailed out the banks was so that they would keep lending to American businesses.  Unfortunately, that has not been the case.

Banks are not lending:

We've documented many times what the banks have done with the money.  Instead of lending, they are investing in government bonds.

What has that done to their profits?  Pushed them to near record levels.

Meanwhile, the median household income continues to fall:

The number of Americans receiving food stamps is at an all-time high.

The percentage of our population living below poverty continues to rise:

This is something that cannot be taken lightly.  The market may be able to rally on the backs of yet another bailout, but all it will do is continue to widen the gap between the "haves" and the "have nots".  Whether or not the countries around the world can come up with policies that prevent economic chaos, the solution to these problems will not be easy, which is why we continue to recommend Active Money Management for any investments that you may need to tap into over the next 10-15 years.

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