The Eve of De$truction

If you happen to believe news reports, all is well  Inflation is under control, so those Social Security benefits do not go up, and the jobless rate is just great, if you are still in the job market in North Dakota. Below is useful bit of news from Porter Stanserry's recent appearance:

...In December 2008, I began warning about the risk that the U.S. could lose its "world reserve currency status," something I termed the "End of America." It's worth looking at what I wrote almost five years ago because so much of what I feared would happen has come true... you should go read that essay.  

...The Fed went on to print and spend more than $3 trillion. The prices of stocks and commodities soared. The dollar fell versus sound currencies around the world. And the prices of U.S. goods and services, even domestically made products, soared.
Now, some folks who have followed my research from the beginning might point out that I predicted the U.S. would begin suffering from severe inflation as early as 2009. With the consumer price index hovering around 1%, isn't that inflation overdue?

That is the set up, continue on:

If you look beyond the government's manipulated numbers and focus on the real prices people are paying… you'll see price inflation is here and getting worse… 

As I've written extensively… inflation is found everywhere in our economy, except in the government's statistics. Corn, the most important food crop in America, is up 75% since 2008. Gasoline is up from $2.25 a gallon to more than $3 a gallon – an increase of more than 30%. The nationwide minimum wage is up by 40%. Rents are up by 25% nationwide and up 40% in most urban markets. 

And my favorite example, the base price of a Ford F-150, the best-selling passenger vehicle in America, has gone from $18,225 to $23,670 – a 30% increase. That's a domestically sourced and manufactured product… its price is completely dominated by the value of the U.S. dollar. 

Meanwhile… the government says there is no inflation… and that continuing to print $85 billion to buy government and mortgage debt is merely "interest-rate policy by other means." What could go wrong?

Buffett:

Billionaire investor Warren Buffett has sagely warned that buying all of those bonds and manipulating interest rates to stupidly low levels will prove to be much easier than selling them. The fact is, the moment our central bank begins to sell U.S. Treasury bonds, the whole world will follow. After all, our dollars aren't needed in trade for most of the big commodity countries. So the free ride will be over. All the traders ...will surely change course the moment it starts to sell.

The New America = The Old Europe

And what, you might wonder, have our noble leaders done with all the money and credit they've created? 

Mostly, they have expanded the welfare state at the fastest pace in history, creating more dependency in your fellow citizens than has ever existed before in the history of our country. There are now almost 100 million people collecting food stamps, disability, or long-term unemployment. Barely 60% of the adult population of America bothers to go to work, even on a part-time basis. 

On the backs of the poor schleps in America who paid their mortgages and still go to work, a gargantuan pile of debts and obligations have been piled higher and higher over the last five years. Total debt now approaches $60 trillion. Federal debt has nearly doubled in the last five years, from $9 trillion to $17 trillion. And our governments (state, local, and federal) continue to take up more and more of our economy – comprising more than 40% of our roughly $15 trillion gross domestic product (GDP) today....

I have long argued that the collapse of the currency and economy is a planned event.  It is supported by the childlike minds of those who confuse academic hopiness with reality.  The tsunami is not a projection, it is only far off shore.  You cannot stop a tsunami, you can only protect yourself and get away from the all the excitement of the beach.  Most people understand there is something seriously wrong:

Gun ownership in America now stands at 47% of all adults – that's near the highest percentage ever recorded by Gallup...The percentage of self-described liberals who own guns has grown from 30% to 40% in that period. So even folks who don't believe you should own a gun have been buying them... 

....And that's why… despite the central banks' efforts to manipulate the paper price of gold down… there are never any gold coins left to buy. That's why the price of farmland has soared (as I predicted it would). That's why more and more wealthy people are leaving America. And that's why… I firmly believe… this ongoing bull market will end very, very badly.

*   so far this year, more than 40% of the exchanges involved the euro. Only 33% involved the dollar.


If you This is the key: there are not many places to put money for safte keeping.  The US Dollar has been OK because Europe is on the front line of collapse. Our system is based upon banking logic, not a real economy. One day traders will wake up and see others selling off out Treasury debt because it is a bad investement. Why?  Because the Fed has been creating money to buy the debt and has decided it better start selling off trillions of dollars of debt

The market becomes flooded and an old fashion run accelerates causing the wave of panic to back upon itself. The film Margin Call gives you a good idea how this works.  Or, Its a Wonderful Life.

Don't be on the beach.

German Economist: Climate Policy is Marxist Action

I have been busy cleaning, painting, and working on a 1.35 million BTU boiler and am still alive. Then, I sleep, so, I don't get to "blog" much.  In the meantime, let me refer you to an article repeating what I have been writing about for quite a few years,now.  Rod, sent this along:

IPCC Official: “Climate Policy Is Redistributing The World's Wealth”

Thursday, 18 November 2010 13:16 Neue Zürcher Zeitung

Climate policy has almost nothing to do anymore with environmental protection, says the German economist and IPCC official Ottmar Edenhofer. The next world climate summit in Cancun is actually an economy summit during which the distribution of the world's resources will be negotiated...

Neue Zürcher Zeitung, 14 November 2010

Here is the interview. 

I wish I could monetize being right, but I don't own a network or the President.

It seems to me no one except television people and public school teachers still say "global warming" or "global change" anymore, but you need to keep up the "I told you so" about really bad ideas like those lest they fester in silence.

A media journalist covering the media on TV (not too inbred) pointed out that since the revelation of the climate panic fraud twelve months ago, there has been an average of ONE story per month on all the major networks referring to email scandal, usually an attempt to dilute it. It was only the biggest story of the world last year - in substance.

Before we learned that it was probably not really true that the terrible end of the universe will be caused by my old car, there were several stories a day.  I recall a news program with some guy complaining his flowers didn't bloom as early as usual - science at work. National Geographic's TV pap had an alleged scientists standing by the edge of a glacier saying it was "sick."

As when all leftist lies die, a new one is raised and the old one ignored. The death is ignored as though it never happened.

Greg sent in an article about the new resurgence of the "where the hell is the birth certificate" and in the article there is a long reference to Orwell's description of "memory hole" in 1984. Marxist's don't change. Things that happen disappear when events prove distasteful. As I recall, people also were deleted. 

So, the goal is not to forget there is no birth certificate and no global warming. (Greg reminded me that the Chicago Climate Exchange has been disbanded so I mention it here. I wrote about the scam often.) Go out tell tell everyone:  "I told you so" and don't let up. The politically correct want silence in the face of their madness. They mistake politeness for acceptance.  

Now, my new car company, Nissan, has an ad where a polar bear makes its way to some suburb to hug a "Leaf" owner.  The idea is that the huge critter is happy because the car won't kill polar bears.  I wonder if most people even get this absurd political reference.

I think most people are already on to some new worry, like starvation and foreclosure. You won't see NYS go into bankruptcy nor the pretend Marxist, Soros supported Governor-Elect (Working Families Party) missing a meal.

Say, have you noticed the gas price is over $3.10 a gallon. It was $2.80 something a month ago. Down the memory hole you will find Schumer, Gilibrand, Frank, etc etc screaming about investigating the administration about rising fuel prices. (I know, I know, the real reason for the apparent "increase" in prices is the devaluation of the dollar being promoted by the United State of Goldman.  They won't talk about printing money causing a new crisis.)

Polar bears are fine, thank you.

More on dominoes

You don't have to believe me.

Mr. Roubini things our time will come in two to three years, but I think he is talking about a major crisis. In the meantime, we will bleed without pause.  

Last update: 08:13 PM ET, Apr 28

Roubini Calls Greek Debt `Tip of Iceberg' for Inflation, Defaults

By Vivien Lou Chen and Gabrielle Coppola - Apr 28, 2010

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Nouriel Roubini, chairman of Roubini Global Economics LLC, speaks at the Foreign Policy Association's Global Financial Forum in New York, on Monday. Photographer: Michael Nagle/Bloomberg

 

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April 28 (Bloomberg) -- New York University Professor Nouriel Roubini talks about government deficits. Roubini says rising sovereign debt from the U.S. to Japan and Greece will ultimately lead to higher inflation or government defaults. Roubini speaks at the 2010 Milken Institute Global Conference in Los Angeles. (This is an excerpt of a panel discussion. Source: Bloomberg)

Nouriel Roubini, the New York University professor who predicted the U.S. recession more than a year before its start in December 2007, said rising sovereign debt from the U.S. to Japan and Greece will ultimately lead to higher inflation or government defaults.

“While today markets are worried about Greece, Greece is just the tip of the iceberg, or the canary in the coal mine for a much broader range of fiscal problems,” Roubini, 52, said today during a discussion on financial markets at the Milken Institute Global Conference in Beverly Hills, California. Increasing tax revenue won’t be enough “to save the day.”

Roubini’s remarks underscore statements by officials such as Dominique Strauss-Kahn, managing director of the International Monetary Fund, that the global economy still faces risks. Credit-rating cuts on Greece, Portugal and Spain in the past two days are spurring investors’ concern that the European deficit crisis is spreading and intensifying pressure on policy makers to widen a bailout package.

“The thing I worry about is the buildup of sovereign debt,” Roubini, who teaches at NYU’s Stern School of Business, told attendees at the Beverly Hilton hotel. If the issue isn’t addressed, nations will either fail to meet obligations or experience higher inflation as officials “monetize” their debts, or print money to tackle the shortfalls.

Michael Milken, founder of the Milken Institute, said the U.S. has the ability to continue selling private and public debt because its markets remain liquid.

“I would say it is individual leadership’s fault if they are not taking advantage of today’s markets,” Milken, the junk- bond billionaire turned philanthropist, said on the panel moderated by Matt Winkler, editor-in-chief of Bloomberg News.

Debt Crisis

The Stoxx Europe 600 Index fell 1.3 percent to 258.24, a six-week low, after Standard & Poor’s downgraded Spain’s debt by one step to AA. The euro traded at $1.3205 at 4:02 p.m. in New York, compared with $1.3175 yesterday, after touching $1.3115, the lowest since April 28, 2009.

Almost $1 trillion of worldwide equity value was erased yesterday on concern that rising public debt will spur defaults, derailing the global economy, data compiled by Bloomberg show. German Chancellor Angela Merkel and the IMF pledged to step up efforts to overcome the Greek fiscal crisis, after bonds and stocks plunged across Europe in the past week.

“The bond vigilantes are walking out in Greece, Spain, Portugal, the U.K. and Iceland,” said Roubini, a former senior economist for the White House Council of Economic Advisers, adviser to the U.S. Treasury Department and IMF consultant.

‘No Willingness’

“Eventually, the fiscal problems of the U.S. will also come to the fore,” he said. “The risk of something serious happening in the U.S. in the next two or three years is going to be significant” because there’s “no willingness in Washington to do anything” unless forced by the bond markets.

Roubini, chairman and co-founder of Roubini Global Economics LLC in New York, said the U.S. probably will need a combination of increased tax revenue and lower government spending, while Europe needs to curb spending.

Both Roubini and Milken supported a carbon tax on gasoline, saying it would reduce American dependence on oil from overseas, shrink the trade deficit and carbon emissions, and help pay down the U.S. budget deficit.

Roubini predicted a bubble in U.S. housing prices during an interview with Bloomberg News in October 2005, months before the market peaked, and said in August 2006 that he expected a “painful” recession.

Education Better Investment

Today, he said the U.S. invested too heavily in housing during the past 20 to 30 years, and that spending on education and technology would be better in the long run.

Milken, 63, is the former high-yield bond chief from Drexel Burnham Lambert Inc. who was indicted on 98 counts of racketeering and securities fraud in 1989, ultimately serving about two years after a plea bargain and sentence reduction. For the past decade, he has focused on philanthropy and running the research institute, which seeks ways to generate capital for people around the world.

To contact the reporters on this story: Vivien Lou Chen in Los Angeles at vchen1@bloomberg.net; Gabrielle Coppola in Los Angeles at gcoppola@bloomberg.net

Heap of observations

Observation on currency that is not from me so it is OK to read:

Fundamentals are all that matter!

I am always astounded when it comes to the price of Gold when people say it is going up in price! To some degree that is correct when considering supply demand of the asset for there are more buyers than there is supply. However the main reason for Gold's rise is because the currencies we measure the Gold price in are inflating or having there supply increased over the longer term.

Every currency on the planet today is fiat paper, it’s backed by nothing but faith in its issuing government. Central banks only job is to inflate these currencies, continue to print them until they collapse or fade into worthlessness, there simply is no other option for them. It is interesting that the average annual growth rate for major first-world currencies is on the order of 7% to 8% annually(according to grossly under reported government statistics). 

So for example let’s say every year, on average, there are 7% more US dollars inexistence than in the previous year. Meanwhile over history global gold supplies have only grown by a little more than 1% a year on average. At a 7% growth rate, it only takes 10 years for the US dollar supply to double. At a 1% growth rate, it takes a far-longer 70 years for global gold supplies to double. Over these same 70 years, at 7% compounded annually the US dollar supply will multiply by 114 times! 

And as you know, there is nothing more certain in financial markets than inflation of paper currencies, which I might add over the last few years is almost impossible to quantify now that certain government statistics have been removed. It is a sure bet. So history’s best and only surviving currency, gold, which cannot be inflated, has to grow in value relative to the US dollar or any other major fiat currency. There is just no doubt the relative scarcity of gold will force its price up in currency terms.

Until next time,

Simon Heapes

Tick, Tick, Tick: 130%

Greg sent in an article I won't recap, just tighten.  Basically, while we are all concerned that our Debt to GDP may reach the crisis mark of 90% in a year or two, it is actually 130% now.  Greece is only 124%. This is a brave new world for the U.S. and we are facing draconian events.  High inflation is certain; a deflation is becoming probable.  Either way, life as we deluded ourselves to accept as normal is coming to an end.

This is a tough scenario.  IF we are looking at high inflation, you want silver or Canadian dollars and be out of the USD.  If we are looking at deflation, you want cash in the freezer because prices will move quickly decrease.  I suppose we have to entertain both notions and monitor what is happening.  I suspect metals will go down some 20%, unless Israel bombs Iran, and then take off in the last quarter, as we approach January 1 of the new future.

I thought oil may work as an investment, but as Greg noted, if deflation hits, the demand and price of oil will also deteriorate.

Note:  stock companies will be forcing income into this year, rather than have it taxed at next year's rates.  In addition, older people, who are smart, are reducing their estate now as the estate tax rate next year will be very high.  Now, it is 0%.  (If this concerns you, start giving away your money to your heirs, now, or set up a trust.)  So, there will be news factoids about how we have turned the corner, don't believe it.  Pick up Art Laffer's new book.

The government doesn't want you to have a realistic anticipation, as that will blunt their games, and the media/broker community is filled with hacks.  There appears breathing room for the time being;  on the other hand, the shoe of crisis isn't dropped slowly - it explodes on your foot

Of course, food and ammunition are always a good buy.

Republicans Pushing To Count GSE Debt Toward Statutory Debt Limit May Be Surprised To Find Real Debt-To-GDP Ratio Is 130%, And That Greece Is Amateur Hour

Submitted by Tyler Durden on 02/22/2010 18:49 -0500

• Congressional Budget Office
 
• Debt Ceiling
 
• Department of the Treasury
 
• Fannie Mae
 
• Freddie Mac
 
• Great Depression
 
• Greece
• Gross Domestic Product
 
• Joseph Stiglitz
 
• Proposed Legislation
 
• Sovereign Debt
 
• Sovereign Default
 
• Stress Test
 

A new proposal by House Republicans, lead by Rep. Scott Garrett (R., N.J.), is seeking to address changes to Fannie and Freddie accounting, along the lines of what has been previously proposed by Zero Hedge, and to not only include the GSE's losses as part of the Federal budget, but to also count the debt from the two mortgage zombies toward the nation's total statutory debt limit. As we stated previously, it is only semantics at this point which distinguish the GSE obligations from other Treasury obligations. Yet it is not just us, but the administration's very own Peter Orzsag who was pushing for consolidated GSE accounting two years ago. Yet with GSE debt most recently at $6.3 trillion, or about half of the existing Treasury debt, this would mean total US debt would not only explode by 50% overnight, but the recently  increased debt ceiling would be immediately breached and America would find itself in technical default (where it really is right now for all technical purposes).

Dow Jones has more:

A memo written by Garrett's office, which was released Monday, states that "now that the federal government has explicitly backed the operations of the GSEs, there should no longer be a distinction between their debt ... and the debt issued by the Department of the Treasury."

The proposed legislation highlights the current uncertainty surrounding the two firms, which have been under government control since September 2008. Federal officials were expected to provide some guidance as to their future plans for Fannie Mae and Freddie Mac in the fiscal 2011 budget released earlier this month, but that information wasn't included.

The Office of Management and Budget, which compiles the White House's annual budget request, did acknowledge in the budget the different ways the government currently accounts for the two firms. The Congressional Budget Office accounts for the two firms "on budget," treating them like any other federal agency. OMB, meanwhile, treats them "off budget," considering them to be private companies.

As we observed some time ago, "It would seem a little presumptuous that an amount representing more than half of the total US sovereign debt is conveniently swept under the rug." Luckily, there are people like Garrett to remind Obama and his henchmen that not every person in America is a zombified purchasing cretin with 10 credit cards and a limitless Centurion in the mail, who couldn't care less about America's sovereign default until 3 days after the fact. ... 

Pop quiz: what is the full faith and credit of a bankrupt entity?

And just in case you were confused, and have yet to recognzie the idiocy of the OMB, and the ruling class in general, here is a paper written in 2002, in which authors Joseph Stiglitz (a Nobel winner no less), and Jonathan and Peter Orzsag, whose opinions rotate by 180 degrees more often than a magnetic needle above true north, claim the following OMB-referential piece of unparalleled garbage:

...This implies that if Fannie Mae and Freddie Mac hold sufficient capital to withstand the riskbased capital scenario, they would likely fare well under any conceivable economic environment.

Ah, the OMB, which less than 10 years ago said the probability of a GSE default was close to zero. With such lunatics in charge of making the decision of whether the GSEs should or should not be considered Treasury debt, can we please just fast forward 10 years to the post nuclear war holocaust already. The constant barrage of daily bullshit is really getting tiring.