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Are you better off today than you were four years ago?  If not, then you are just like most other Americans.  According to a CBS News/New York Times poll that was released a few days ago, 80 percent of Americans say that their financial situation is not “better today” than it was four years ago.  But if you turn on the television and listen to what the “pundits” are saying, you would be tempted to think that we were in the midst of a robust economic recovery.  You would be tempted to think that the U.S. economy is in great shape and that we are heading for a really bright future.  But the fact that the stock market is soaring does not mean much to most Americans.  In fact, most Americans couldn’t care less that the Dow is well above 13,000 and that the NASDAQ is above 3,000.  What most Americans care about is having a job and being able to provide for their families.  If you haven’t paid the mortgage in three months or if you don’t have enough money to take your daughter to go see the doctor it really is not going to matter to you how well the boys and girls over on Wall Street are doing.  Right now most American families are doing worse than they were doing four years ago, and no amount of media hype is going to change that fact.

Yes, the stock market is doing really well for the moment, but the truth is that more than 50 percent of all stocks and bonds are owned by just 1 percent of the U.S. population.

Good for them.  It looks like the trillions of dollars that the Federal Reserve poured into the big Wall Street banks is really paying off nicely for the financial community.

Meanwhile, much of the rest of the country is deeply suffering.

It was recently reported that 1.5 million American families live on less than two dollars a day (before counting government benefits).

That is horrifying.

According to the U.S. Census Bureau, the percentage of Americans living in “extreme poverty” is now sitting at an all-time high.

All across this country poverty is exploding.  Food banks are experiencing more demand than ever before and those offering free healthcare are absolutely swamped.

And every single measure of government dependence has gone way up since Barack Obama entered the White House.

For example, since Barack Obama became president the number of Americans on food stamps has gone up by 45 percent.

Just think about that.

At this point the federal government is helping to feed an all-time record 46.5 million Americans every month.

Oh yeah, times are good.

According to the U.S. Census Bureau, 49 percent of all Americans live in a home that receives direct monetary benefits from the federal government.

That is much higher than it has been historically.

For example, back in 1983 less than a third of all Americans lived in a home that received direct monetary benefits from the federal government.

The big problem is that there are simply not enough jobs for everyone.

Listening to the media, you would be tempted to think that the U.S. economy is now pumping out huge numbers of good jobs.

But that is simply not the case.

Right now there are 5.6 million fewer jobs than there were when the last recession began back in late 2007.

So where are the millions of jobs you promised us Obama?

The federal government is trying to convince us that the unemployment rate is going down, but that is not really true.

The key is to look at the percentage of working age Americans that actually have jobs.  During the last recession that percentage fell dramatically as you can see from the chart below.  After every other recession since World War II the employment to population ratio has always bounced back.  But it has not happened this time.  Instead, the employment to population ratio has remained between 58 and 59 percent since the end of 2009….

We have not had a jobs recovery.  Hopefully we will have one before the next recession hits, but we are running out of time for that.

Tonight there are millions upon millions of hard working Americans that are staring at their television screens and wondering why they can’t find good jobs.  The pretty people on television are telling them that the employment situation is getting much better but they can’t find work no matter how hard they try.  It is a cruel joke on them.

When Barack Obama entered the White House, the number of “long-term unemployed workers” in the United States was approximately 2.6 million.  Today, that number is sitting at 5.6 million.

Thanks for the improvement Obama.

Meanwhile, the average duration of unemployment continues to hover near a record high.  Just look at the chart posted below.  Does this look like a “jobs recovery” to you?….

But of course Obama and those that support him want to make things sound like they are getting better.  They want people to run out and vote for him again in November.

If things are going well for you right now, be thankful, and also remember the millions upon millions of Americans out there that are deeply hurting in this economy.

If you gathered together all of the workers that are “officially” unemployed in the United States at this point into one nation, they would constitute the 68th largest country in the entire world.  It would be a nation larger than Greece or Portugal.

That is a lot of people.

Obama promised us that the Wall Street bailouts would make everything better.  He promised us that if we poured gigantic mountains of money into Wall Street that it would end up helping “Main Street”.

Well, the last time I looked Goldman Sachs was doing just fine.

So where is the help for Main Street?

In the United States today, the wealthiest one percent of all Americans have a greater net worth than the bottom 90 percent combined.

How much wealthier do they have to get before they start creating more jobs for the rest of us?

Obama (like most of our politicians) is a complete fraud when it comes to the economy.  He is all saddle and no horse.  He talks a good game but he doesn’t have any game.

As Wall Street has recovered, the rest of the country has actually been in decline.  Median household income in the United States is down 7.8 percent since December 2007 after adjusting for inflation.  Millions of American families are reaching the breaking point and millions of other families have already reached it.

Incomes have been declining but the cost of living has not.

For example, health insurance costs have risen by 23 percent since Barack Obama became president.

Has your paycheck increased by 23 percent?

The average price of a gallon of gasoline in the United States has increased by more than 90 percent since Barack Obama became president.

Has your paycheck increased by 90 percent?

Millions of American families have lost their homes while Obama has been president and millions more will soon lose their homes.  At this point there are more than 6 million mortgages in the United States that are overdue.

It is a horrible, horrible feeling to know that you can’t pay your mortgage and that you will soon lose your home and your family will be put out on the street.

None of us would ever want to end up in that situation.

And the housing market sure has not shown any signs of recovery under Barack Obama.

In January, U.S. home prices were the lowest that they have been in more than a decade.

Weren’t home prices and home sales supposed to be turning around by now?

Under Barack Obama, new home sales in the United States set a brand new all-time record low in 2009, they set a brand new all-time record low again in 2010, and they set a brand new all-time record low once again during 2011.

That trend is not going in the right direction.

Of course Barack Obama is not solely responsible for the performance of the U.S. economy.  Congress should share part of the blame as well, and the Federal Reserve is more responsible for our economic performance than anyone else is.

But one area where Barack Obama has had a huge impact is in the area of government spending.

While Barack Obama has been president, the U.S. national debt has risen from 10.6 trillion to 15.5 trillion.

Thanks Obama.

During the first three years of the Obama administration, the U.S. government has accumulated more debt than it did between 1776 and 1995.

So is Obama planning a change of course?

Of course not.

At this point, our national debt is increasing by about 150 million dollars every single hour.

So should we be thanking Obama for stealing 150 million dollars from our children and our grandchildren every hour?

Should we be thanking Obama for ruining our future?

I think not.

But you know what?

According to the CBS News/New York Times poll mentioned above, about half of America would actually vote for Obama if the next presidential election was held today.

That alone is a clear sign that this country is in a massive amount of trouble.

The truth is that the leaders we elect are an accurate reflection of who we are as a country.

And when you look at the collection of misfits in Washington D.C. right now, that does not say a lot about the character of this nation.

So where does America go from here?

That is up to you America.

The Economic Collapse

I’m getting rather defensive up here.

The squeeze is starting folks, although you certainly wouldn’t know it from the move in the stock market yesterday.  That move was all driven by the financials, with JP Morgan leading when they “broke embargo” with their mid-afternoon announcement that preempted The Fed.

Incidentally, doesn’t anyone think that’s a bit odd?  Jamie Dimon basically shoving Bernanke down on his knees and unzipping in front of him?  And the banks, incidentally, knew the results before we did, which begs the other question — why are they permitted to trade when market-moving news will be in their possession before the rest of the market has it?

You don’t think they were out in the market buying futures and such in the few hours before the press release blitz started, do you?  Why of course they were.  But not only would proving insider trading be difficult the SEC was too busy watching porn to care.

Now, however, the fun begins.  See, the TNX moved up strongly — the 10 year yield.  This in turn will force The Fed to sit on its bond holdings to maturity, lest they take a market loss (and given their thin capitalization that would bankrupt The Fed instantly!), which in turn ties Bernanke’s hands to a large degree.

I know many will argue that The Fed can always “print more”, but that’s not how it works.  This is a negative feedback situation and triggering a run out of the long end of the bond curve isn’t so much a problem for The Fed as it is for the Federal Government’s financing and deficit numbers.

Take a look at the FVX (5yr Treasury Yield) and you see a materially-more-frightening thing.  Yields have backed up from 0.7% to 0.97%.  Sounds trivial.  It’s not — it’s a huge move, close to 40% on yield since the end of January!

This matters because the Federal Government’s deficit spending in February is what has been driving the “improving” economic numbers, just as it has been for the last three years.  This is a pincer move; while yields have to normalize if and when they start to move in this direction that move will also choke off federal deficit spending capacity.

The Depression featured this sort of attempt at “repression” by The Fed and government and it was unsuccessful.  It looked successful for a while, but eventually the math caught up with them and we slumped back into the morass.  Our “exit” was war; we blew up all of our industrial competitor’s output capacity and by doing so rejiggered demand.  That’s a rather bleak way of looking at what was “death by all forms” for the common man, but from an economic perspective that’s what happened.  But “war as a solution” since that time hasn’t “worked” (and in fact can’t) since small-ball wars run into the broken-window fallacy; you can’t “win” by breaking windows as the economic damage from a war exceeds the benefit.  For war to be a “winning” strategy you have to literally flatten your economic competitors so that even with the economic damage you wind up with a net benefit.

Such a conflict in the modern era has a high risk of turning nuclear and then everyone loses.

In the next few days the market is likely to trade on euphoria from the financial sector, but I don’t buy it at all.  Repression destroyed net interest margin in gross earnings terms irrespective of the spread and makes earning a profit much more difficult.  Most of Europe is in recession now and that’s a huge market.  The ECB has no room to maneuver and further QE by The Fed will declare that the so-called “recovery” is false.

Bernanke, Obama and Congress have swam into the jaws of the shark and now the trick is to try to get back out before the teeth clamp down on all of us.  The problem is that extrication in one area will produce undesirable moves in another.  If the Federal Government pulls back on deficit spending then the economy softens materially, unemployment goes back up and with a falling labor participation rate tax receipts collapse, adding to the problem.  If The Fed pulls liquidity then interest rates go up, the deficit goes up, Congress finds itself up against the debt ceiling again in short order and a pullback on deficit spending will become inevitable.  If The Fed engages in aggressive acts to try to prevent the yield curve from backing up on them then oil will likely skyrocket, gas prices will go through $5 and we all know what comes next.  Finally, the corner we’ve painted ourselves into has occurred into a cyclical profit cycle peak.

Finally, the parade of pumpers on CNBC and elsewhere that are all on their knees before Bernanke performing obscene acts of thanks is nauseating — and historically, is almost always wrong.  Anyone remember Mozilo in his gaudy suits and ties on CNBC just before it all went to crap in the mortgage market?  I sure do, and yet a large number of people bought into his BS and wound up broke when Countrywide detonated shortly thereafter.

Meh.  Yeah, the market is up some 11% this year thus far.

It’s certainly possible that the can-kicking will continue to work in some form or fashion, but eventually when you’re playing with the spinning plates on sticks you put one too many up there and they all come down.  The election season is a prime time for mistakes of this sort as well, as despite the so-called “common logic” that “they’ll never let it happen during the election” the fact of the matter is that elections tie hands as the scrutiny level goes up a lot and the temptation to press into excess to try to jigger the election, when you’re the Federal Government and close to a quarter of the economy, is just too great to resist.  2008 is just one of many examples — 2000 was another when “happy days were here again” and we all know what happened in 2000, right?

Finally, last night the Shanghai index collapsed in the last bit of trade when China said it was not going to back off on halting property speculation.  The move was huge — about 4% straight down right at the end of the session, and it drew almost no notice in the media here and no reaction came through in our markets either.

This may look like a beautiful dawn but that thing over on the horizon is in fact a rolling wall cloud.

As the U.S. dollar strengthens against other currencies, the phantom corporate profits  generated by a devaluing dollar will vanish.

One of the dirty little secrets of the stock market rally is that the rising corporate profits that powered it are largely phantom profits.  Why are they phantom? Because they are artifacts of currency devaluation, not an increase in efficiency or production of goods and services.

Though few domestic observers make mention of it, the large, global U.S.-based corporations  are now dependent on non-U.S. sales for about 40% of their revenues (50% and up for many companies) and virtually all their profit growth. Overseas sales are made in the local currency: the euro, yen, renminbi, Australian dollar, Canadian dollar and so on, and the profits are stated in U.S. dollars on corporate profit and loss statements.

In 2002, 1 euro of profit earned by a U.S. global corporation equaled $1 in profit when converted to U.S. dollars. That same 1 euro profit swelled to $1.60 in 2008 as the U.S. dollar depreciated against the euro.  That $ .60 of profit was phantom, an artifact of the depreciating dollar; it did not result from a higher production of goods and services or greater efficiencies.

This is why profits earned in non-U.S. markets have risen so dramatically even as domestically earned profits have stagnated.The U.S. dollar has declined dramatically against the currencies of our major trading partners, boosting phantom profits across the board when the non-U.S. profits are converted to U.S. dollars on corporate profit and loss statements.

The Federal Reserve has actively pursued a policy of devaluing the dollar, supposedly  in the hopes of expanding exports as it became cheaper to buy goods and services denominated in U.S. dollars.  While exports have nudged up as the dollar lost value, the truly significant result of this policy was boosting foreign exchange-generated profits of global U.S.  corporations.

Now that the Federal Reserve has lowered interest rates to zero, trying to depreciate the dollar further is like pushing on a string.Short of direct foreign exchange (forex) intervention–buying other currencies in bulk and selling dollars to flood the market  with USD–there is little the Fed can do to manipulate the $2 trillion-a-day foreign exchange markets.

The strengthening dollar is putting these vast phantom profits at risk.Were the U.S. dollar to return to its 2002 relative value in other currencies, virtually all the phantom (forex-generated) corporate profits that have justified the stock market rally  will vanish.

Though very few consider it possible, much less likely, the U.S. dollar could actually rise significantly as other currencies price in the currently understated risk to their economies.  Were that to happen, U.S. corporate profits earned in other currencies would actually decline, even if revenues remained constant.

If the global economy is indeed sliding into recession, then maintaining revenues will be a challenge.  More likely, sales will drop and so will profits as the dollar  reverses and overseas profits plummet when converted to dollars.

In other words, if the dollar continues strengthening against other currencies, say good-bye to rising corporate profits–and the stock market rally based on ever-expanding corporate profits. Is it any wonder that the Powers That Be look upon a strengthening dollar (recall a rising dollar increases the purchasing power of all who hold it, i.e. U.S. residents and those holding dollar-denominated bonds) with fear and loathing? Alas, the Federal Reserve is not all-powerful in forex markets, despite its gargantuan hubris and absurdly inflated reputation.

Charles Hugh Smith – Of Two Minds

The global “shadow” banking system is unraveling, with dire consequences for  financial assets and failed policies.

We’re not used to things falling apart, and so our first reaction is disorientation.What we’ve been trained to expect by constant intervention in supposedly “open” markets is that Central States and central banks will “save the day” with a new intervention: an interest rate cut, a new round of money-printing, emergency loans, new bailout funds, the list has been almost endless since the initial evidence of the Great Unraveling  appeared in 2007.

So when official interventions are announced to great fanfare and then fail to goose the market, we’re disoriented.  John Hussman neatly summarized the insanity of a market propped up only by constant official manipulation:We represent the Lollipop Guild:

Frankly, I am concerned that Wall Street is becoming little more than a glorified crack house.Day after day, the sole focus of Wall Street is on more sugar, stronger sugar, Big Bazookas  of sugar, unlimited sugar, and anything that will get somebody to deliver the sugar faster.  This is like offering a lollipop to quiet down a 2-year old throwing a tantrum, and  expecting that the result will be fewer tantrums.What we have increasingly observed over the past decade is nothing but the gradual  destruction of the ability of the financial markets to allocate capital for the benefit of  future growth. By preventing the natural discipline of the markets to impose losses on  poor stewards of capital, and to impose interest rates high enough to force debtors to allocate the capital usefully, the world’s policy makers are increasingly wrecking  the prospects for long-term economic growth.

The problem with depending on intervention “sugar” for sustenance is that the market slowly loses its sensitivity to the mechanisms of control (insulin), and at some point the sugar no longer generates a response.  We are very close to that point  now, as the expected “grand EU treaty agreement” is duly issued as expected and global markets are holding their breath, hoping that some new intervention will keep the teetering financial system from falling over the edge.

This is desperation.In market after market, participants don’t really have any faith in the future resilience of the fundamentals which supposedly underpin global markets; rather, they are desperately hoping the next intervention will work better than the last one. But  like insulin insensitivity, the market is on a one-way slide: every intervention works its magic for a shorter period of time, and markets respond with increasing torpor to the “fix.”

The next phase is chaos, as participants finally grasp that interventions will no longer save them.Then the mad rush to the exits (selling) will begin, and many will be trampled, as the bid will disappear across entire spectra of assets.

We should recall that nothing fundamental has changed since 2007.Here are two fundamentals of many which haven’t changed at all: wealth is still concentrated:

and the global financial system is still overleveraged and over-indebted, meaning that every decline in asset valuation triggers a “reverse wealth effect.”

As I type, the morning injection of hopium crack into the market’s veins is already wearing off. We are still in the desperation stage, as central bank manipulators and Central State apparatchiks are rushing around in a panicky search for some new supply of “sugar” intervention to prop up what has been unsustainable since 2007.

The manipulations have one ironic accomplishment: the resulting crash will be larger and more chaotic than the one in 2008 because the faith that State/central bank interventions are limitless magic will have been irrevocably lost.

Charles Hugh Smith – Of Two Minds

The EU summit “deal” is noise; we knew going in there would be no “grand bargain” and there isn’t.  Britain said “stuff it” (rightly so) along with a few others; those who went along did so pretty much at gunpoint.

The vassal state model may look attractive as an alternative to Mekosy, but they’re nuts.  What they’ll ultimately get out of this is a war.  Oh Archduke, is that you over there somewhere?

The internal issue for America is more-acute in the market sense.  Texas Instruments last night warned on weakening demand and got clocked in the aftermarket.  This morning Dupont issued a warning.  Either standing alone could be looked at as company-specific.  The two together cannot.

I said a bit over a year ago that PPI pressures would eventually filter through and hammer margins directly, and likely would result in cost-push pressures that ultimately would hurt the top line — although perhaps not at the firms that had the cost pressures.  In other words the deteriorating standard of living would eventually have to show up somewhere — “charge it” only works for a while.

It appears that it now is showing up.  This sucks, to be blunt, but it is very unlikely to be contained.

My macro-level view has not changed much; timing is everything in the markets and I still believe we’ll more-or-less hold together until late in December — another couple of weeks, and perhaps into early January, but in 2012 it’s going to come apart.

Those who think that we’ll get through the election will be wrong — I’ll go out on the limb and put that out there right now.  No chance folks — there’s not that much dry powder available to anyone.

As such consider your positions carefully if you’re long the market — the wild gyrations are a warning — overall “bullish” markets don’t behave this way, but ones that are about to fall apart sure as hell do.

I expect a very profitable 2012 — and not on the long side either.

Uh, that last story about Barnhardt exiting the business?

You better think again if you think you’re not at risk.  You are.

LONDON — The London Stock Exchange is becoming the lender of last resort for many banks in Italy as concerns over the country’s debt levels squeeze liquidity out of the Italian financial market.

With cash increasingly hard to come by, Italy’s banks are turning to CC&G, the L.S.E’s Italian clearinghouse, for short-term lending. That includes some of the country’s largest financial institutions, including Unicredit and Mediobanca, according to a person close to the situation.

….

The money, which comes from collateral that traders must put up to complete financial transactions, is deposited with the banks to cover shortfalls in liquidity. CC&G earns a profit by charging banks interest on the money that they borrow.

One inconvenient question: What happens when the bank can’t pay it back?

“Financial entities are making money in new and different ways,” he said. “Just because times are bad doesn’t mean they’re not looking for profits.”

Right.  They’re lending your so-called “margin deposit” out to someone, making the entire premise of depositing margin against your position a bad joke and guess who the joke will be on if anything goes wrong?

Got a mirror handy?

The Market-Ticker

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