Archive for November 7th, 2012
Has the consumer really deleveraged? Has the housing market really corrected and are home prices coming back into line with incomes? How do we REALLY fix the deficit spending? What is the truth about why our health care costs are utterly outrageous and getting worse every year? Wonder no more. Watch as Karl Denninger sits down with Louis St. James of Casey Research and discusses all these things in very plain, easy to understand language.
The sell-off is largely due to this — Fitch is now warning that unless the US Government stops running deficits it will be downgraded.
And there is no credible plan to do that, because doing so means that you must admit that the so-called “growth” and “recovery” of the last four years has been an intentional lie.
Removing the 10% deficit spending means that GDP instantly contracts by that same 10%. This is arithmetic and cannot be avoided, evaded, or bargained away. GDP = C + I + G + (x – i)
Reduce “G” 10%, GDP contracts 10%. Period.
Increase taxes and either “C” or “I” contracts by the same amount. Period.
There is no path out of this box without recognizing what we have done and accepting the accumulated damage and pain that we have taken on over the last four years, and continue to accumulate each and every day.
If we do not address this the market will. This is the fallacy of the Libertarians, Republicans and Democrats.
We are watching the start, here now and today, of an all-on meltdown in the markets as the promise of lies is meeting with the reality of arithmetic.
The other day I wrote a Ticker in which I asked how Rochdale could put on a $700 million position in Apple with $3 million in capital. The answer is that in an honest market it could not do so as it could never clear the trade. The fact is that it is reported they did, which means the market is not honest, and this is just the latest bit of evidence.
The entire market and political system are one gigantic scam. The market is now calling the bluff on the politicians and this will continue right up until someone tells the truth.
Where does it end? It doesn’t, if this isn’t stopped. It doesn’t end until all of the accumulated damage in the system, more than $5 trillion over the last four years and close to $25 trillion since 2000, comes back out.
It can either happen via the truth or the market will start to force margin calls on everyone who has those trades on and we will then find out who doesn’t have capital behind them.
The answer is, quite likely, literally nearly everyone.
Today the ‘crisis level’ indicator in our right sidebar has been moved from 2 to 1. What is this, you may ask? It’s a measurement of the current threat level that exists in the economic system.
Here are the time limits (such as they are) and the readiness standards that apply to Tickercon. Please note that Tickercon is US-centric although it may be of use to others.
- 5: No special conditions. Low state of readiness. Specifically, this means that markets are normal in FX, equity and debt. Interference, if any, by government is low. No special programs being overtly operated by the US Federal Reserve or Congress. The economy is stable, although this does not mean “booming” – just stable. Interest rates are positive against GDP growth throughout the curve. May be maintained for an unlimited amount of time.
- 4: Awareness Raised. Intelligent people are “awake.” The first stage of “alertness”, implying some evidence of tampering with markets but no evidence of distress. Interest rates remain positive throughout the curve, but may approach zero at one or more specific points. No immediate risk of financial distress has been identified. May be maintained for an unlimited amount of time.
- 3: Caution Advised. Intelligent people are actively preparing for economic, geopolitical or social trouble that may be ahead by a short to moderate length of time (up to one year in advance.) FX, debt or equity markets are showing signs of distress and distortion through intentional acts. Interest rates are negative in real terms through some material part of the curve and/or there is evidence of intentional tampering with both FX and credit markets. Equity positions are subject to large and unforeseen swings that are not individual-event linked. This status may be maintained for an extended period of time before either being upgraded or downgraded.
- 2: Prepare. Intelligent people have or are in the final process of completing preparations or have completed them. Credit, FX and equity position exposures should be hedged. There is evidence of overt manipulation and stress which has at least a one-in-three chance of leading to a severe dislocation event within the next six to twelve months. This status may be maintained for six to twelve months before being upgraded or downgraded.
- 1: Locked-and-cocked. Preparations should be complete. Evidence exists suggesting that a financial, geopolitical or similar event is likely within the next several weeks. Wide-spread economic, geopolitical or social distress has a reasonable probability (better than one in five) of occurring during the above time period. This status will not be maintained for more than thirty days as extraordinary vigilance is required to do so.
- Boom: Execute on your plans. Nothing further needs to be said. This status is not necessarily ‘”fatal” but it indicates that a severe dislocation event is occurring. This is similar to a Tornado warning - the funnel has been spotted. It may not hit you, but if you’re in the way of it you’re going to get run over. This status will be maintained for however long the actual condition lasts at which time it will be downgraded to the appropriate level.
Please plan accordingly.
It’s hard to believe how little Americans know about the real issues facing them after $6 billion was spent by both parties getting their message out (a record $2 billion for President alone). I don’t blame the politicians in this or any election cycle. After all, why talk about tough issues and choices if you are not pressured to do so. I blame the mainstream media (MSM) for acting more like cheerleaders and spin doctors than arbiters of truth for the public. The MSM ignored the real issues while spending hours on things like the Trayvon Martin tragedy. I do not know who is at fault, but I do know the MSM’s wall-to-wall coverage inferred there was a national problem of white on black murder when there is none. According to the latest FBI information, around 90% of blacks are killed by black people (likewise for the white on white murder rate).
The U.S. faces a financial storm of biblical proportions; I am talking a Noah’s Ark tsunami. The real fiscal cliff isn’t what is coming at the end of the year. It is the debasement of the U.S. dollar at the hands of the Federal Reserve that is printing $85 billion every month in “open-ended” currency creation. According to experts, it is only a matter of time before the U.S. bond market collapses with an interest rate spike that money manager Michael Pento says will turn into “an interest rate shock that will make the Great Depression look like the days of wine and roses.” Not a word in the debates or questions by the MSM to the candidates about money printing on a scale that has never been done in human history.
The 2008 financial meltdown was caused by a housing crisis created by big banks. They sold “liar loans,” packaged those loans into mortgage-backed securities, they were rated “Triple-A” when they were “toxic;” and when it all blew sky high, the bankers committed forgery, perjury and fraud that was politely called “robo-signing.” According to Professor William Black, who was also a top regulator in the Savings and Loan crisis of the 1980’s, more than 1,000 financial elites were successfully prosecuted in the aftermath of the S&L calamity. The 2008 meltdown was 70 times larger. There has not been a single financial elite charged with a crime. This fraud and crime is one of the main reasons the economy is still in deep trouble. According to Fabian Calvo of TheNoteHouse.us, “We haven’t even scratched the surface of being at the bottom of the housing market.” (His company buys and sells $100 million a year in real estate and sour mortgage debt.) $40 billion of the $85 billion the Fed prints every month is going for continued banker bailouts. You can talk all you want about raising taxes on rich, but the real money is in the banker bailouts. No meaningful discussion or questions were asked of the Presidential candidates on this subject either.
It has been widely reported the U.S. used al-Qaeda terrorists to help overthrow the Libyan government. It is doing the same thing in Syria. We all saw the results of this policy on 9/11/12 in Libya where four Americans (including a U.S. Ambassador) were killed in an al-Qaeda terrorist attack. Calls for help went unanswered, even though there was a live Internet video feed going into the White House situation room. No questions were asked by the MSM of either candidate of the logic and danger of this kind of foreign policy.
The President can legally order the execution of any U.S. citizen without due process. The President did just that last year when he ordered drone strikes in Yemen that killed three suspected American born terrorists. Relatives are suing the U.S. government for wrongful-death. According to a New York Times story, “The killings violated fundamental rights afforded to all U.S. citizens, including the right not to be deprived of life without due process of law,’ the complaint says.” (Click here for the NYT story.) There was not a single question asked of either Presidential candidate by the MSM about Presidential “license to kill.”
Finally, the National Defense Authorization Act (NDAA) was signed into law by President Obama on New Year’s Eve 2011. It allows for the indefinite detention of suspected terrorists which includes U.S. citizens. This law overrides due process contained in the Constitution. The President’s signing statementsays, “I want to clarify that my Administration will not authorize the indefinite military detention without trial of American citizens.” But that didn’t stop President Obama, a Constitutional scholar, from signing it into law anyway. The American Civil Liberties Union (ACLU) called this act “. . . a stain on our nation’s history – one that will ultimately be viewed with embarrassment and shame.” (Click here for more on the story.) You can’t get more liberal than the ACLU; and, yet, the left and right were silent and asked no questions of either Presidential candidate about this Constitutional atrocity.
The general public is blind to the great danger to the economy and our Republic. I lay the blame squarely at the feet of the MSM for not doing its job for the public good. PIMCO chief Bill Gross summed it all up in a tweet on Election Day that said, “Gross: Whew! It’s over. To the victor belongs the spoils of political power but to the US voter only continuing frustration will accrue.”
Greg Hunter USAWatchdog.com