Archive for June 2nd, 2012
Go back and read my missive of March 12th if you don’t recall it. Especially if you’re a Libertarian.
Then consider the various articles I’ve written over the last five years (yes, it’s really been that long!) about how the path evolved both in the 1930s with The Depression and in Japan.
Remember that after the 1929 Stock Market Crash there was a hell of a rebound rally and everything “seemed” ok. It wasn’t.
Remember that after the Nikkei cracked there was a hell of a rebound rally and everything seemed ok. It wasn’t, and still isn’t 20 years later.
Remember that many people believed that Bernanke saved us and everything is recovering this time….. except that it isn’t. Employment hasn’t recovered, the labor participation rate hasn’t moved upward, median household income is flat but 30% of your purchasing power has been destroyed by monetary and fiscal policy. The engine that was being counted on to make “it all ok” was more and more credit going into the economy but there is sand in the engine as without jobs, along with capacity and willingness to borrow this model cannot succeed.
After 1929 what blew up the world was Creditanstalt.
In 2010 I said “Beware the Eurozone.” I was called a lunatic.
How much of a lunatic do I appear to be now?
There are a handful of us in the alternative media who have been behind the truth since the beginning of this mess in 2007. The Ticker and FedUpUSA stand as two such organizations and media outlets, but we are not alone.
Since this mess began my message has been consistent and unwavering: Those who committed the frauds and excesses that led us to this precipice cannot be successfully propped up, we cannot exit this mess with more credit or “money printing” in any sort of form, and that only restoring credit balance will work – and whether that’s painful isn’t material to whether we must do it.
We’ve done exactly none of the right things and all of the wrong ones. But the fact remains as it was in 2010 — and 2007:
Those who have been responsible for the path taken thus far, which has turned a 15-20% contraction in GDP that had to be taken in 2007 into a likely 40% one, must be held to account for their outrageous acts of wanton and intentional destruction.
I wrote at the start of the year that I expected the detonation would come out of Europe, simply because they’re the place that has the most exposure and we’ve spent all of our powder but we enacted no real banking and credit reforms, and in Europe they literally did nothing in that regard.
We need solid, real financial reform. We must renounce “bubble-nomincs.” We must shut down the fraud-laced “securitization” machine permanently, prosecute those who have unlawfully concealed risks and lied about asset quality and return our economy to stable, productive output instead of financial speculation.
The Banksters all claim that if we were to do this that society would collapse and that our economy could not survive.
They’re wrong, just as Henry Paulson was wrong when he said he had “no choice” when, allegedly (according to his book) the Chinese and Russians threatened to collapse Fannie and Freddie.
Hank had a choice, assuming he’s not lying of course. He could have told the Russians and Chinese to bite him – on national television, with George Bush at his side. He could have told them that if they tried it that the United States Treasury would, by executive order, declare their Treasury Holdings worthless.
Yes, that would have stopped the “gravy train” of being able to spend more than we make in the government. Yes, this would have forced immediate austerity and facing of the truth.
Is that bad?
What have we done since? Added what – $2 trillion+ to the national debt – more debt we don’t have and can’t pay? Emitted another budget proposal, just today, to add $1.6 trillion more? Built yet another artifice – another fraud – on top of the previous ones? Written more “Option ARMs” on our children and grandchildren’s backs to prop up a cabal of banksters on Wall Street who then fawn all over The Senate with their “campaign contributions” so they can keep skimming off huge parts of our economic structure for a few thousand residing on Wall Street?
How’s that going to work out folks?
How will we settle up and ultimately pay this debt load down?
We won’t, of course. Neither will anyone else. Greece, Spain, the UK – all are lessons for us, if we choose to learn them before we get to live them.
Watch those nations. If you think this is just about Greece you’re nuts. The public employee pensions there are ridiculous. Guess what – they’re ridiculous here too. In the closest “little city” to here there are many retired police officers and firemen who have pensions north of $100,000/year. There are many places where six-figure pensions are considered “normal” or “reasonable” – for public safety workers and teachers. We don’t have the money, we can’t afford to gold-plate the steering wheels of the cop cars and despite all the bleating the fact remains that the primary function of the police department is to write traffic tickets and take a report after you are burglarized, raped or robbed.
Are these functions important? Yes. Do they call for better than a middle-class wage? Nope. Is a middle-class wage $100,000 a year? Nope. The 2008 Median Household income for California is $61,021. For Florida, $47,778. For New York, $56,033.
So why are we paying out pensions of double that to what should be middle-class employees in retirement?
Let’s face the facts folks – we can either stop the plundering across society – by both banksters and public employees – or we will face a crisis similar to what Greece is dealing with now.
It will be more pleasant for us to take our medicine voluntarily rather than having it forced down our gullet, but doing so starts with chaining the banksters and their penchant for offloading risk to others and, for those who refuse, jailing them outright, lest the public get ahold of them and not bother with the pleasantries (and constitutional right) of a trial by jury before handing up a sentence.
At the same time we must fix the public employee entitlement mentality, by firing them and replacing them with unemployed Americans if necessary. We have 1 in 5 working-age men between 25 and 54 out of work - there is no shortage of available people to take these jobs.
It is time to pay the check folks, before we are literally forced to eat it.
And we’ve done none of this.
The European economy is in the toilet and China is rolling over. So is the United States.
We used our powder and ball; it’s gone. The common man’s purchasing power “per dollar” has beentrashed to the tune of nearly 30% over the last four years yet the median household income has not moved upward. That’s effectively the same as a monstrous tax increase in real terms and it occurred as a direct result of both fiscal and monetary policy decisions made by the government.
Our “Creditanstalt” moment is here and now; if and when Spain gets locked out of the debt markets with 20+% unemployment they’re finished. Greece’s people are going to elect a no-austerity government in roughly two weeks and should, since essentially none of the “aid” they have received has gone to them – it has all gone to the banksters who lent them money knowing they couldn’t pay in the first place. There’s no reason why the Greek people should pay through austerity for something that brings them no benefit and simply makes good the bad bets of those financiers who screwed them, in many cases through active conspiracy in fraudulent swaps and similar deals intended to hide their budgetary problems. If the Greek government subverts this election the people are within their rights to revolt.
Everyone wants a Unicorn. We all want some sort of magical elixir that allows us to maintain our spendthrift ways, to have our “entitlements” even though there’s no money to pay for them and to continue to run trillion dollar+ budget deficits and 13,000 DOW points.
If you haven’t noticed the DOW is down more than 700 points in the last month and the S&P 500 is off 140 — or more than 10% — from its recent high, basically straight down while at the same time the 10 year Treasury is now yielding 1.58% which is negative in real terms against price.
This may lead some to conclude that the government can borrow “free” since price inflation is higher than that rate, and therefore it should (and spend the money.) This is false. Capital is being hoarded and will continue to be hoarded — unfortunately what’s being destroyed is all the “fake capital” that is in fact credit attached to a debt which cannot be paid.
If we keep deficit spending we are simply debasing the purchasing power of the common man in a puerile attempt to pacify the people and avoid holding the financiers who were responsible for this debacle, including Bernanke, Greenspan, Paulson and Geithner along with both Obama and George W Bush to account. This attempt is mathematically doomed to fail as median family income has not moved which means that we’re shifting an ever-greater part of the population to social programs like food stamps and other handouts while the taxpaying productive population continues to shrink.
This is exactly how Greece and Spain went down the bowl and we’re right behind them unless we stop this crap right now.
We cannot “bend the curve” or look toward the “intermediate term”; that was exactly the siren song in Europe and it has led to catastrophe as “tomorrow” never comes! The “intermediate term” is usually defined as three to five years out — we heard of the “intermediate term” in 2008 but now it’s 2012 and none of the retractions in that spending have occurred — the claim that they would be undertaken was a lie.
We must stop the stupid right now!
Arithmetic is a bitch. It’s politically agnostic and cold-hearted. Exponential growth, as I have repeatedly pointed out, is utterly unsustainable over the long term. It doesn’t matter if you want these sorts of schemes to work or not; the longer you continue to pretend that there is some path forward that achieves these goals the worse the outcome is when you discover that you’re wrong.
Yesterday it was reported that total medical expenditures are expected to expand by nearly 8% this year. Historical rates from 1980 to 2011 have run 9.3% or thereabouts. That 8% “guess” is almost-certainly too low but even if it’s correct it doesn’t matter – we cannot allow this to continue for even one more year as even at 8% it’s over $65 billion in additional spending at the federal government level alone and we don’t have the money!
For five years I’ve warned that we have a limited amount of time to deal with these issues. I’ve attempted to steer not only the major parties (Democrat and Republican) toward the arithmetic and facts, as anyone who passed middle-school math can easily discern the outcome that we will inevitably face if we do not change course, and more-recently I have done my level damndest best to get the Libertarians to listen, including running for and being elected to state and county party office.
But while at a county level this has definitely sunk in and the party here “gets it”, along with the candidate that we’re running for Congress here in the 1st District, on a State and national level the party has utterly refused to make this issue — and resolving it — the centerpiece of its political activity.
In that the Libertarians at a State and National level have joined the Democrats and Republicans in searching for Unicorns and praying for more pretty colored candies out of that Unicorn’s ass — by burying their heads up to their necks.
I will simply note, once again, that there is no such thing as a Unicorn — that is a mythical creature — and what’s coming from its ass are not candies.
Bon appetit mes amis.
The end game of global leveraged debt – double-digit percentage point market declines in Europe and Japan and the danger of refinancing debt with longer term debt.
There is a painful realization that shifting debt around like a game of musical chairs has little merit unless real production is achieved as an end result. May was a disappointing month for markets in general. While the S&P 500 certainly fell, markets in Japan and Europe took double-digit declines. The massive amount of leverage and debt is simply being shifted around via Long Term Refinancing Operations (LTROs) in Europe. The market has little faith in this since a day of reckoning is hard to avoid even though large financial institutions seem to think they can shift away risk via fancy algorithms. To the contrary, these formulas have perfected a system that is simply dismantling the US middle class. A financial crisis built on debt is trying to find a solution in higher levels of debt via these same institutions.
If you take a look at the European banking index you realize that they are in full meltdown mode:
The Euro Stoxx Banking Index is down over 50 percent in less than one year. The fear of contagion is spreading as people pull deposits from countries like Spain and Greece and shift them elsewhere. People need only look at their own balance sheets to realize that very little economic benefit has occurred in this so called recovery. Many countries in Europe are back in recession, again. Here in the US, we have a record 46,000,000 Americans on food stampsand the unemployment figures keep dropping as people simply drop off the employment statistics figures.
Make no mistake that the crisis in Europe is all about debt. In Greece, you have massive government debt backed by very little GDP and big outside banking bets. In Spain, you have giant amounts of debt backed by inflated real estate. The story sounds familiar because it is a path that we know all too well. Every region has a differing flavor but all these massive bubbles are sprouting up like weeds because of our debt based banking system.
Debt to GDP
Many countries are dealing with massive debt to GDP levels:
Spending more than is being taken in can work in moderation. The fact that total global debt now is up to $190 trillion is incredible. Here is one sobering fact:
“The amount of current global debt will never be repaid.”
This is an axiom that is being realized by many across the world.
Read the rest at My Budget 360
Another month, another bad jobs report. For the month of May, the U.S. economy only added 69,000 jobs and the unemployment rate rose to 8.2%. Many are calling this a total “disaster” and are worried that the U.S. economy could be headed back into another recession. Economists had been expecting 150,000 payroll jobs would be added, so the 69,000 number really shocked a lot of people. The truth is that the economy needs to add approximately 125,000 new jobs every single month just to keep the unemployment rate steady. So yes, this bad jobs report is not welcome news at all – especially for the Obama administration. When Barack Obama first took office the unemployment rate was sitting at 7.6 percent and now it is sitting at 8.2 percent. Some “recovery”, eh? But the reality is that this jobs report was really not that “devastating” even though the stock market had its worst day of the year. Unemployment in America is still about at the same level as it was back at the beginning of 2012. The tough stretch that we are going through right now is only a very small taste of the economic nightmare that is on the horizon. If you think that things are a “disaster” right now, just wait until you see what is coming.
At the moment, 53 percent of all Americans with a bachelor’s degree under the age of 25 are either unemployed or underemployed, and there are more than 100 million working age Americans that do not currently have jobs.
But this is only just the beginning.
During the next major economic downturn, the unemployment rate in the United States is going to soar well up into the double digits.
Many Americans will look back on 2010, 2011 and 2012 as “the good old days”.
Right now, there are only small pockets of the country that are totaleconomic hellholes.
In the future, those kinds of numbers are going to become the norm all over the nation.
Sadly, most Americans have no idea what is coming.
Today, I wanted to share with you all a couple of chilling economic forecasts that I have been made aware of recently.
The first is from Raoul Pal. According to Zero Hedge, Raoul Pal “previously co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul came to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe… Raoul Pal retired from managing client money in 2004 at the age of 36 and now lives on the Valencian coast of Spain, from where he writes.”
The following is from a Zero Hedge summary of a recent presentation by Raoul Pal….
- We don’t know exactly what is to come, but we can all join the very few dots from where we are now, to the collapse of the first majorbank…
- With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.
- There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.
- The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives…
- Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations
- From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.
- And then do you think Japan and China would not be next?
- And then do you think the US would survive unscathed?
- That is the end of the fractional reserve banking system and of fiat money.
- It is the big RESET.
- Bonds will be stuck at 1% in the US, Germany, UK and Japan (for this phase).
- The whole bond market will be dead.
- Short selling on bonds – banned
- Short selling stocks – banned
- CDS – banned
- Short futures – banned
- Put options – banned
- All that is left is the Dollar and Gold
It only gets better. We use the term loosely:
- We have around 6 months left of trading in Western markets to protect ourselves or make enough money to offset future losses.
- Spend your time looking at the risks of custody, safekeeping, counterparty etc. Assume that no one and nothing is safe.
- After that…we put on our tin helmets and hide until the new system emerges
So how soon does Raoul Pal think all of this is going to happen?….
From a timing perspective, I think 2012 and 2013 will usher in the end.
You can find his entire presentation entitled “The End Game” right here.
What Raoul Pal is saying lines up very well with what Steve Quayle’s anonymous international banking source is telling him….
There is no stopping this…We are still on track as I have been predicting for a while now for a fall/winter collapse of the Eurozone and naked exposure of all derivative markets the world over. Europeans will go through a major reset, after time they will recover as Europeans do not carry the type of personal debt that Americans do. It is for America that I worry. Look for these signs next:
1- JPM will be bailed out again but it will not stop the coming market crash. More details will emerge about their derivative swap failure $150 billion and counting.
2-BOA (BAC Bank of America) will fold and be absorbed into JPM as a way to prop up the bleeding Giant. JPM will get the best picking of this deal just like they got with Bear Stearns.
3- Massive layoffs at Citigroup and Wells Fargo
4- Goldman Sachs finally pays the piper, look for massive cuts there as well as BIG Losses
5- Bond market bust which leads to freeze of all bond sales
6- Derivative bust the next one will be BOA followed by Citigroup
7- All CDS shorts and swaps will freeze.
8- Total Meltdown
You can read the rest of what that source is saying right here.
As I have been saying all along, there are two keys that you need to be watching right now….
Sadly, the articles that I write about Europe tend to get far less of a response than my other articles get. Most Americans simply do not understand that what is happening in Europe right now is going to significantly affect their daily lives.
And most Americans have very little understanding of derivatives. But as you just read, there are some in the financial community that are warning that we could see the derivatives bubble burst very soon.
Time is running out. This period of relative stability that we are currently experiencing will not last forever.
You better get ready.