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In September of 2008, a lot of emails started showing up in my Inbox from folks that were upset with the state of the U.S. economy. In short, the financial debacle was "hitting home" and many folks were darn-right mad about what was going on - and they are getting even more upset as the ugly details about how the current financial debacle was orchestrated and sold on Wall Street; while Uncle Sam was, apparently, oblivious to the writing on the wall.

In response, I wrote a brief article, exactly one year ago, proclaiming that Americans' assets, equities, and incomes were under siege by a government super-structure that was desperate for more money. I told people to expect higher costs, higher fees for government services, higher fines and penalties, higher interest rates, higher taxes, and higher prices. A lot of folks told me I was "over-reacting." Here's the article I wrote in October of 2008 and you be the judge:

"...The essence, and result, of what's happening is that everyone's assets and equities are declining at an alarming rate; being gobbled up to subsidize the short-comings of a financial hierarchy in the federal government that is out of control. Just the devaluation of homes all over the country has rendered hundreds of thousands of homeowners to be technically bankrupt. Even those who aren't so highly leveraged are being forced to dip into retirement funds, savings, and other equities to absorb the sky-rocketing prices for just about everything.

The financing of U.S. Government operations is fast-becoming the most extraordinary "ponzi-scheme" history has ever seen (the insanity of which is demonstrated by the fact that taxpayers who are losing their homes to foreclosure are "forced" to help pay for the $700-plus billion bailout so that the Wall Street crowd can buy their foreclosed homes - i.e. the "troubled assets" - at highly discounted prices); telling the taxpayers that there is a high likelihood that they might even make a profit on the deal! Tell that to the taxpayer who has just gotten thrown out of his or her home. [Note: While there are certainly many homeowners who could have avoided foreclosure by better financial management and decisions, AVFR has many documented cases where homeowners are facing foreclosure due to extraordinary increases in costs with no increases in income - none of which they caused or could have reasonably anticipated. For example, one Southern New Hampshire commuter recently lost his home primarily because his commute to Boston has been costing almost $500 per month for gas alone which, coupled with other price increases and a loss of over-time, ultimately spelled disaster.]

Now, after the stimulus package and bailouts - now totaling around a trillion dollars in cost (some say a lot more), Uncle Sam is also realizing the urgent need to immediately prop up the small business community with access to readily available short-term funds for working capital... Who, in the final analysis, do you really think is going to pay for this?

The bottom line is that Uncle Sam can not afford his current mode of operation (and/or the proposed national agendas set forth by either McCain or Obama) without unfettered access to your assets and equities - no matter how poor and wealthy you are. It's that simple and, therefore, you have to plan accordingly. In this respect, the greatest danger may lie in the belief that the economy will automatically recover - and the values of your equities will automatically bounce back if you just hold on and weather the storm.

Don't count on it. In fact, be aware - and be warned - that we've arrived at the point where Uncle Sam and his entourage of financial gurus can't even make the numbers work on paper.

So now what?..."

It's a year later now and, with all due respect, I believe the current state of the economy demonstrates that Congress has failed miserably.

What do you think?

- Ed Smith, Publisher
The EHS Letter Manual