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American • Data all points to a slowing US economy despite a soaring
Data all points to a slowing US economy despite a soaring stock market and rising consumer confidence
Posted on 19 May 2013
Is the US economic recovery all hot air? The latest economic data from the US economy all points to a slowing economy, not a growing recovery. That’s what you might expect after tax rises and public expenditure cuts. Just because everybody wants a recovery does not make it happen.
The Philadelphia Federal Reserve Bank’s factory activity report in the mid-Atlantic region fell to minus 5.2 in May, a decisive fall in business though not surprising really as new orders have been falling this year. The housing recovery is also not happening.
Housing starts slump
New US home starts plunged by 16.5 per cent to a 853,000-unit annual rate, according to the Commerce Department. Then again the latest data showed a hike in new claims for jobless benefits which grew at the fastest rate for six months. That might be an early sign that the recent better news on jobs is a flash in the pan.
Indeed, economists are now warning that the first quarter recovery in US GDP is failing and slipping back towards the lousy Q4 figure. This is the time-lagged impact of the New Year tax increases and the March cuts in public expenditure working through. It’s not rocket science.
How could anybody possibly expect anything else than a tough economy under such conditions? It beggars belief. But Wall Street has a well known ability to lose touch with reality for a while only to come thumping back to earth later on, costing everybody a huge amount of money and generating massive commissions for brokers.
Inflation falling
Still not persuaded? Look at the 0.4 per cent fall in the Consumer Price Index, the biggest fall since December 2008 when the US was stuck deep in the global financial crisis. That might sound like an good thing. But deflation is a sign of a slowing economy, not a growing economy. Gas prices at the pumps are down by the most since the gobal economic crisis struck.
So when will US stock market investors wake up and realize that their country is going back into recession or at best sticking with economic stagnation? The economic data is starting to pile up and its widespread, comprehensive and conclusive.
Is there any reason on earth why this should be ignored? Apart of course from that heady optimism that afflicts the popular delusions of crowds?
The best selling opportunity in years? That is what some of the smartest investors are saying right now. What goes up will come down and the higher you go the harder you fall!
http://www.arabianmoney.net/us-dollar/2 … onfidence/
Statistics: Posted by yoda — Sun May 19, 2013 2:50 am
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Agriculture • UK Rural Economy Spiraling Towards Recession – Survey
Survey Suggests Rural Economy ‘Spiralling Towards Recession’
15 May 2013UK – Rising unemployment, shrinking profits and plummeting confidence in countryside businesses has thrown the rural economy to the brink of a further recession, according to a new survey by the Country Land and Business Association (CLA) and Smiths Gore.
Data from the Rural Economy Index for the 2013 first quarter shows that both agricultural and non-agricultural rural businesses are suffering. All eight survey indicators fell across both types of business.
Agricultural businesses are faring worst. The optimism felt in 2012 has gone, due to bad weather, poor harvests and the rising price of livestock feed. The Index’s measure of optimism has fallen by 40 per cent compared with the same quarter last year.
Sales have fallen in the past six months with orders, sales and profits expected to be lower in the next 12 months. Farming businesses also anticipate employing fewer people.
Non-agricultural businesses are less optimistic although they still expect higher profits in the next year despite actual sales shrinking over the past six months and the number of business enquiries falling.
Hopes for higher employment also faded with fewer non-farming businesses expecting to employ more people in the next year.
CLA President Harry Cotterell said: "This comes at a time when the Government’s priority is growth. Therefore, we call on the Government to reduce the negative impacts of over regulation by implementing the MacDonald recommendations as soon as possible, putting in place a broadband infrastructure that is effective, affordable and available to all and encouraging rural businesses to fully embrace the principles of growth."
Dr Jason Beedell head of research at Smiths Gore said: "The Rural Economy Index clearly shows that the rural economy is continuing to suffer. For farming, bad weather, poor harvests and the rising costs of livestock feed have all played a part, which we largely expected.
"More shocking is the fall in expected profitability for non-agricultural businesses over the next 12 months. The rural economy has stalled and further recession is possible."
http://www.thecropsite.com/news/13689/s … -recession
Statistics: Posted by yoda — Wed May 15, 2013 8:57 pm
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Barro and de Rugy on Defense Spending and the Economy
Christopher A. Preble
Earlier this week, Harvard economist Robert Barro and Veronique de Rugy of the Mercatus Center published a short paper assessing the economic effects of defense spending. Their findings are consistent with those of other studies, including one that Cato published last year by Benjamin Zycher. To wit, from Barro and de Rugy’s abstract:
While the impact of across-the-board federal defense spending cuts on national security may be up for debate, claims of these cuts’ dire impact on the economy and jobs are grossly overblown…
[A] dollar increase in federal defense spending results in a less-than-a-dollar increase in GDP when the spending increase is deficit-financed…
[O]ver five years each $1 in federal defense-spending cuts will increase private spending by roughly $1.30
The Barro-de Rugy paper should be of particular interest to Republican politicians and those who advise them. 2012 GOP presidential candidate Mitt Romney and his fellow Republicans attracted considerable scorn (including from yours truly) during a campaign in which they railed against government spending, but also wailed against military spending cuts. His critique was not primarily, or even chiefly, about the potential impact of sequestration on national security; rather, echoing the hardly objective estimates flogged by the Aerospace Industries Association and the National Association of Manufacturers, Romney asserted that cuts in military spending would result in the loss of hundreds of thousands of jobs.
Romney, of all people, should have known better. Government spending extracts resources from the private sector, in the form of taxes and/or debt, and the net effect of this spending is negative over the medium to long term. Barro and de Rugy show that the gains, to the extent that there are any, are particularly short-lived. The reverse is also true: Cuts in spending might result in brief declines in GDP, but Barry and de Rugy conclude that “the adverse effects … will be minor even in the short run.” “In the longer run,” they continue:
when reduced public debt and taxes … are factored in, real GDP should be higher than otherwise. This conclusion is consistent with findings that a smaller share of government consumption in GDP tends to enhance long-term economic growth.
They conclude:
There may be grounds for objecting to defense cuts based on reasoned arguments that these spending reductions would impair national security. But Keynesian arguments that a smaller defense budget will retard economic growth are not convincing.
I would like to believe that such findings would be sufficiently compelling to warn Republicans away from their embrace of military spending as a jobs program once and for all. But, as Tad DeHaven has observed here and here, such situational Keynesianism is a seemingly permanent feature of the nation’s political landscape.
View full post on Cato @ Liberty
Other • Bernanke’s Neofeudal Rentier Economy
Bernanke’s Neofeudal Rentier Economy
May 7, 2013
The Fed has directly created a neofeudal rentier economy and society.
Federal Reserve Chairman Bernanke is a Reverse Robin Hood, robbing from the lower 95% and giving to the financier class. The Real Reverse Robin Hood: Ben Bernanke and his Merry Band of Thieves (August 31, 2012).
It’s worth understanding the mechanisms of this wealth transfer: in essence, the Fed extends low-cost credit (i.e. "free money") to the financier class which then uses this free money to buy rentier assets, that is, assets that generate economic rents for the owners, who add no value and create no wealth.
This is of course the neofeudal model: the financial aristocracy in the manor house own the rentier assets and the debt-serfs toil away to pay the rents and taxes. The financier class (i.e. those that benefit from the financialization of the economy) are as unproductive as feudal lords; they skim the profits generated by the debt-serfs while adding no productive value to the economy.
Financialization and Crony Capitalism Have Gutted the Middle Class (July 13, 2012)
The E.U., Neofeudalism and the Neocolonial-Financialization Model (May 24, 2012)
Why Krugman and the Keynesians Are Lackeys for the Neofeudal Debtocracy (April 24, 2013)
(I separate the bottom 95% from the top 4.5% and the .5% financier class for several reasons: 1) most of the stocks and bonds are owned by the top 5%; 2) the top 4.5% is shedding debt while the bottom 95% are adding debt; 3) the income of the top 4.5% is rising while household income of the bottom 95% is declining, and 4)the top 4.5% have access to lower-cost credit than the bottom 95%, but they do not have access to billions of dollars in nearly-free credit from the Fed or the shadow banking system like the financier class.)
Let’s take rental housing as an example of this Fed-driven rentier economy. The financiers borrow $1 billion in nearly-free money and use these funds to buy thousands of houses for cash. Since they can offer cash, they beat out households with approved mortgage applications.
This is the story one hears anecdotally: potential home buyers have a mortgage application approved, all they need is to have their offer for a house accepted. But the house is sold to an investor with cash.
So while the Federal housing agencies are offering low-interest, low-down payment mortgages to marginally qualified (or flat-out unqualified) buyers, the Fed is enabling the financier class to outbid conventional homebuyers.
Here’s the key dynamic: cash earns no return, thanks to the Fed’s zero-interest rate policy (ZIRP). This means the interest rate paid by the financier class is also near-zero. So the trick is to take all those billions of nearly-free dollars and use them to buy assets returning 3+% annually.
These include rental housing, stocks that pay hefty dividends (for example utility companies), municipal bonds, long-term Treasuries, dividends based on patents and royalties, and everyone’s favorite low-risk investment, state-sanctioned monopolies and cartels. (no wonder Big Pharma stocks have skyrocketed.)
Zero interest rates rob from the bottom 95% who do not have equal access to low-cost credit and transfer that wealth to the rentier-financier class. The bottom 95% provide the capital (pension funds, 401K accounts, checking and savings accounts, etc.) for zero return, but their access to near-zero cost credit is restricted.
The financier class then borrows money from the Fed (or the "shadow banking" non-bank credit system that is ultimately backstopped by the Fed) at near-zero rates, which it then uses to buy rentier assets that yield 3+%. The financier class then skims the rents from the debt-serfs, who have been effectively robbed of trillions of dollars in lost interest by the Federal Reserve.
The Fed has directly created a neofeudal rentier economy and society. Giving the financier class unlimited access to free credit with which to buy rentier assets serves two purposes: 1) it drives the valuations of rentier assets ever higher, creating the useful (in terms of propaganda and perception management) illusion of economic vitality, and 2) it greatly enriches the financier class at the expense of the bottom 95%.
Goebbels would approve of the Fed’s masterful propaganda campaign: rob the bottom 95% to benefit the financier class, all the while piously proclaiming that its policies were aimed at increasing employment for the bottom 95%.
In terms of propagandistic chutzpah, it doesn’t get any better than this. Congratulations, Bernanke, Yellen, et al.
http://www.oftwominds.com/blog.html
Statistics: Posted by yoda — Tue May 07, 2013 12:07 am
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What Would War Between Israel And Syria Do To The Already Fragile Global Economy?
War is a horrible thing. Just ask anyone that has ever been in the middle of it. And in this day and age governments around the world possess weapons of such incalculable power that war should be unthinkable. In future wars, we could literally see millions of people killed on a single day. Nobody should want that or look forward to that. Unfortunately, the next major regional war in the Middle East appears to be closer than ever. But nobody should want it to actually happen. During the next major regional war in the Middle East we will likely see death on a scale that is unprecedented. It won’t be like the wars of 1967 or 1973. It will likely be a fight to the death where nothing is held back. You see, the truth is that most Americans have no idea what is really going on in the Middle East. There are ancient grudges and ancient hatreds that go back for thousands of years. There is no “peace plan” that is going to suddenly make everything okay. The Middle East is a simmering volcano of hate and resentment that could erupt at any moment. That is why what is happening in Syria right now is so important. An Israeli airstrike in Damascus that reportedly was attempting to destroy a shipment of Fateh-110 missiles that Iran was sending to Hezbollah has brought Israel and Syria to the brink of war. In fact, Syria is calling the airstrike a “declaration of war” and is vowing retaliation. The Syrian government is saying that “Israeli aggression opens the door to all possibilities“, but they have not provided any specifics about what they plan to do. Meanwhile, Israel has made it very clear that they will do whatever is necessary to keep Fateh-110 missiles from getting into the hands of Hezbollah. With those missiles, Iranian-backed Hezbollah would have the capability of striking the heart of Tel Aviv with a very high degree of accuracy. So it is definitely understandable why Israel would not want Hezbollah to have those missiles. Just think about it – would you want Russia or China to deploy highly advanced missile systems in northern Mexico which could rain down hell on Los Angeles and Dallas in less than five minutes? Unfortunately, this gives Iran the perfect way to provoke a war between Israel and Syria. All they have to do is keep rolling trucks loaded with Fateh-110 missiles through war-torn Syria toward Hezbollah bases in Lebanon. Israel will feel forced to intervene, and the rest of the Islamic world will get angrier and angrier.
The explosions that rocked northern Damascus on Sunday were absolutely massive. It is being reported that they registered about two or three on the Richter scale, and enormous balls of fire that lit up the sky could be seen from all over Damascus.
The following is how the Washington Post described the attack…
Israeli warplanes bombed the outskirts of Damascus early Sunday for the second time in recent days, according to Syrian state media and reports from activists, signaling a sharp escalation in tensions between the neighboring countries that had already been exacerbated by the conflict raging in Syria.
Videos posted on the Internet by activists showed a huge fireball erupting on Mount Qassioun, a landmark hill overlooking the capital on which the Syrian government has deployed much of the firepower it is using against rebel-controlled areas surrounding the city.
So why did Israel do this?
Despite what the anti-Israel crowd is suggesting, Israel did not do this just to be mean. As Reuters is reporting, Israel was specifically targeting Fateh-110 missiles that were on their way to Hezbollah…
Israel does not confirm such missions explicitly – a policy it says is intended to avoid provoking reprisals. But an Israeli official told Reuters on condition of anonymity that the strikes were carried out by its forces, as was a raid early on Friday that U.S. President Barack Obama said had been justified.
A Western intelligence source told Reuters: “In last night’s attack, as in the previous one, what was attacked were stores of Fateh-110 missiles that were in transit from Iran to Hezbollah.”
These missiles would significantly change the balance of power if they got into the hands of Hezbollah. According to the Times of Israel, Fateh-110 missiles would be a very serious threat not only to Tel Aviv – these missiles would also threaten cities all the way down to Beersheba…
Uzi Rubin, a missile expert and former Defense Ministry official, told the Associated Press that if the target was a consignment of Fatah-110 missiles, then such weaponry did constitute a “game-changer”: Fired from Syria or south Lebanon, these missiles, he said, could reach almost anywhere in Israel with high accuracy.
Rubin emphasized that he was speaking as a rocket expert and had no details about the reported strikes.
“If fired from southern Lebanon, they can reach Tel Aviv and even [the southern city of] Beersheba,” Rubin said. He said the rockets are much five times more accurate than the Scud missiles that Hezbollah has fired in the past. “It is a game-changer because they are a threat to Israel’s infrastructure and military installations,” he said.
So that is why Israel carried out these airstrikes. They feel like they simply cannot allow Hezbollah to have these weapons. And with Hezbollah’s track record, that is very understandable.
Unfortunately, these airstrikes have also brought the Middle East much closer to the next war.
According to the Jerusalem Post, Syria is positioning units for a potential conflict with Israel…
Syria has stationed missile batteries aimed at Israel in the aftermath of alleged Israeli air strikes in the country, the website of Lebanon’s Al Mayadeen TV, considered close to the regime of President Bashar Assad, quoted a top Syrian official as saying on Sunday.
In response, Israel has deployed two Iron Dome batteries to northern Israel, they have closed off airspace in northern Israel to commercial traffic, and Israeli embassies around the world have been put on high alert.
But Syria may choose not to retaliate against Israel directly. According to WND, Syria may decide to allow jihadist groups to carry out their vengeance for them…
The Syrian government will soon declare it is opening its borders with Israel for Palestinian and other jihad groups to carry out attacks against the Jewish state, a senior Syrian official told WND.
Separately, informed Middle Eastern security officials said the Syrian army held a meeting Sunday afternoon with the leaders of the military wing of the Iranian-backed Islamic Jihad terrorist group to discuss retaliation against Israel for the recent air strikes near Damascus.
According to those officials, Islamic Jihad and the Iranian-backed Hezbollah are coordinating a possible reaction to Israel’s reported strikes.
In any event, things are definitely becoming more unstable over in the Middle East.
So what would a war between Israel and Syria do to the already fragile global economy?
Well, a war between Israel and Syria would likely paralyze the entire region. Hezbollah and Hamas would almost certainly jump into the war on the side of Syria, and there is the potential that nations such as Iran, Egypt and even Jordan could get involved as well.
In such a scenario, the flow of oil from the Middle East could become interrupted for an extended period of time, and that would have serious consequences for the global economy.
But the bigger threat to the global economy would be the fear that a regional war in the Middle East would create. Global financial markets respond very badly to fear, and right now the world economy is already teetering on the brink of disaster. Much of Europe has already descended into a full-blown economic depression, and there are signs that the greatest debt bubble in the history of the planet is starting to burst.
The next major wave of the economic collapse is rapidly approaching, and a major regional war in the Middle East would greatly accelerate our economic problems.
Unfortunately, it appears that such a conflict is inevitable.
I don’t believe that it will happen yet though. For the moment, I believe that cooler headers will prevail.
But as tensions continue to rise, I believe that we will see tempers boil over and the Middle East will descend into full-blown warfare at some point within the next several years.
Of course I could always be wrong about this. We will just have to wait and see what happens.
So what do you think?
Do you believe that we will see a regional war in the Middle East soon?
Please feel free to post a comment with your thoughts below…
View full post on The Economic Collapse
International News • Britain is a ‘crisis economy’, says Mark Carney
Britain is a ‘crisis economy’, says Mark Carney
http://www.telegraph.co.uk/finance/econ … arney.html
Mark Carney, the incoming Bank of England Governor, has described the UK as a “crisis economy” as he sought to play down hopes that he could ride to the country’s rescue.
Mr Carney said: “The US is breaking out of the pack of crisis economies that include the eurozone, the UK and Japan.” Photo: Reuters
By Philip Aldrick, Economics editor6:25PM BST 18 Apr 2013291 Comments
Speaking on the fringes of the International Monetary Fund’s spring meetings in Washington, he said: “The US is breaking out of the pack of crisis economies that include the eurozone, the UK and Japan.”
His words came just days after the IMF slashed its forecasts for UK growth this year and next, and urged the Chancellor to scale back his £130bn austerity programme to aid the recovery.
Christine Lagarde, the IMF managing director, signalled that the Fund will demand the UK ease off at its annual Article IV update on the economy next month.
Asked whether she agreed with IMF chief economist Olivier Blanchard that the Chancellor was “playing with fire” with his economic plans, she said: “We have said that should growth abate then there should be consideration to adjusting by slowing the pace.
“The growth numbers are certainly not particularly good. So, in a sense, this is a continuation of the position. What has changed is clearly the quality of the numbers.”
Ms Lagarde’s comments dealt a damaging blow to the Chancellor, whose policies she has previously championed. Her support has been critical to shoring up George Osborne’s credibility in the face of Labour’s attacks.
Asked specifically about his opinion on the UK reovery, Mr Carney said he would reserve his opinion until he starts at the Bank in July. However, he added that “the flip side [of the UK’s problems] is the tremendous opportunity that is there”.
In comments that will further disappoint Mr Osborne, Mr Carney stressed that governments should not be looking to central banks to return countries to prosperity.
“Can central banks provide sustainable growth? No. They can help with the transition, but they can’t deliver long term growth. That needs to come through true fiscal adjustments and necessary structural reforms… Sustainable growth comes from the private sector.”
Mr Osborne is counting on Mr Carney being more radical than Sir Mervyn King, who has refused to consider aggressive measures such as giving the market firm guidance on future policy movements and using quantitative easing to buy assets other than gilts.
The contrasting positions of Mr Carney and Sir Mervyn, whose second five year term ends in June, were exposed by one exchange over the US Federal Reserve’s decision to set an unemployment target alongside inflation. Mr Carney defended the US stance and rejected Sir Mervyn’s argument that it could hold policymakers hostage to unachievable goals.
A separate Treasury Select Committee report on Mr Carney’s appointment said his commitment to end Sir Mervyn’s allegedly autocratic management style was welcome.
Andrew Tyrie, TSC chairman, said: “In evidence to the Committee, Mr Carney set out his preference for a consensus-based approach to leadership; this will be significant if it leads to a meaningful change of culture within the Bank.”
At the Reuters Newsmaker event in Washington, Mr Carney stressed that his influence over policy at the Bank could be overstated. “It’s an honour and responsibility [to be Governor] but it’s a responsibility that can be overplayed as these powers are vested in committees. I’m a member of these committees. Policy is not mine.”
Mr Carney also launched a withering attack on tax avoiders, acknowledging the public outcry against multinationals in the UK. He said tax policy needed global co-ordination, but added: “On a personal or corporate level, if there is a persistent ability to avoid tax that means the burden of fiscal adjustment falls on those who are paying their fair share – and they have to pay more than their fair share.”
Statistics: Posted by DIGGER DAN — Sun Apr 21, 2013 3:21 pm
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American • Food service workers at a record high in US economy:
Food service workers at a record high in US economy: Record percent of Americans now employed in food services as a share of total employment coupled with peak food stamp usage.
Posted by mybudget360 in economy, Employment, food stamps, government, recession
One of biggest contributors to jobs over the last few years has come from the low-wage food service sector. A record 7.6 percent of Americans now work in food services and drinking places. Given that we have 47+ million Americans on food stamps and this figure has boomed in the last decade, it should come as no surprise that as Abraham Maslow would have it, people are reverting to the basic necessities of life. Yet there is a larger story of our economic recovery. There was a McDonald’s hiring a cashier but looking for someone with a college degree. Welcome to the low wage recovery. A large part of America is simply trying to get by and this population is growing. Those that frequent financial sites on the net are probably a very small part of the overall population. So I know it comes as a surprise to some readers when they realize the per capita wage in the US is $26,000. I’m sure this record percent of Americans in the food services industry must come as a shock as well.
Record employment in food services
The record figures regarding food service employment doesn’t surprise me. The growth has been steady for the last few decades:
First, you cannot outsource food services. There is no off-shoring Taco Bell and your ability to order a burrito. There is no off-shoring Pizza Hut delivery. In a way, food services is an industry that is built to stay in a local area. Unfortunately the pay isn’t the best but fits into the new low-wage American economy. We’ve discussed that under the illusion of profits, many firms are driving stock values higher by cutting employee wages, slashing benefits, and basically squeezing all the productivity they can muster out of the current workforce. This might be attractive when it comes to the stock market but little stock wealth is in the hands of most Americans. In fact, the top 1 percent controls over 42 percent of all financial wealth.
With the rise of people working in food services we also have a peak number of people on food stamps:
We now have a record percent of our population on food stamps and a record percent of our workforce employed by food services. Not exactly the ideal recovery many had in mind. You wonder what kind of economy we will have where workers are largely demonized in the media and many have lost their voice. In fact, some in the middle class actually advocate for policies that systematically go against their own interest and the interest of the country if they believe in having a healthy middle class. Ultimately we are on the quick road to fully converting our economy into a low-wage system. Peak food service employment and peak food stamp usage are merely symptoms.
The case of the McDonald’s in Massachusetts looking to hire a cashier with a college degree is an anecdotal example of where things stand with our economy:
“(Huff Po) Hopefully “Do you want fries with that?” is a phrase they teach in college classrooms.
A McDonald’s in Winchendon, Mass., is apparently requiring potential cashiers to have a bachelor’s degree, according to a recent job posting. The ad, posted on jobdiagnosis.com, also says that applicants should be “friendly” and able to “smile while serving lots of guests daily.”
The job opening is with an “independent franchise,” but it also appears on the McDonald’s corporate site, albeit with no note of the bachelor’s degree requirement. McDonald’s corporate headquarters didn’t immediately return email and phone messages seeking comment.”
So you have young Americans paying incredibly high costs for going to college and diving into debt simply to work at a fast food restaurant? You might write this off but given our record level of food service workers, maybe this is an unfortunate trend of our new low-wage economy.
http://www.mybudget360.com/food-service … #more-4756
Statistics: Posted by yoda — Tue Apr 09, 2013 10:59 am
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Gold and Silver • The Hidden Factor in the Economy
The Hidden Factor in the Economy
Kenneth J. Gerbino
Archives
Kenneth J. Gerbino & Company
Posted Apr 5, 2013
What the boys and girls at the Fed and the U.S. Capital don’t know: A hidden factor will dictate the economic future.
If you are holding gold or precious metal mining shares your future is brighter than you may think. Even with all the obvious logical reasons to own these assets, there is another compelling reason to own precious metal mining shares.
The current slow economic rebound in the United States and the persistent high levels of unemployment will not be solved by: 1) more government spending; or 2) printing more money. The reason is buried in the 1950-1975 time period.
The employment rate (not unemployment), which was the percent of the population that held a job in the 1950-1975 time period averaged only 31% of the United States population. From 1976-2012 the average employment rate jumped to 44%.
The U.S. economy was relatively doing very well during those 25 years from 1950 to 1975. The economy had its ups and downs, especially from the Arab oil embargo and a severe 1974-75 recession, but the country managed to right itself. But the 50’s and 60’s were great decades of growth and prosperity.
During this period the country got by with only 31% of the people working. There were no shortages. Life was pretty good. Butchers and bakers and candlestick makers could afford a home and a new car every 3-4 years and send kids to college, especially in the 50’s and 60’s. Wages and salaries went a long way.
Because of the huge distortions in the economy created by higher paper money infusions from the late 60’s onward, the entire U.S. economy was thrown into a slowly evolving disguised prosperity from this easy money. It finally unraveled in the crisis of 2008-2009.
Look carefully at this graph.
We do not need 44% employment in the U.S. We only need 31%. Therefore there is a huge employment gap. This gap cannot be maintained and that means very high unemployment rates for years to come. This is what will throw the politicians into a frenzy because we have too many employed to begin with and very high persistent unemployment. Many employed have been working in jobs that have been artificially created by all the paper money printed. Since the unemployment rate is so crucial to politicians, they are trying to get the unemployment rate below 5% which is proving to be impossible. Why? Again look at the graph. The big change between the two time periods was enormous amounts of paper money injected into the economy creating distortions by massive misappropriation of economic resources.
Proof of this massive distortion is in the numbers. In the 50’s and 60’s the money supply (M1) needed to satisfy a growing economy where people had plenty of spending power was an average of $125 billion during these 20 years. That was it. There was no shortage of money or progress. Times were good. Today the money supply is 20 times higher at $2.5 trillion and most people are stretched financially.
The difference between a 44% employed artificial economy and a 31% employed normal economy is an unsustainable 13%. This extra 13% of the American population working is not needed to provide the goods and services needed. Therefore the actual and non-disguised unemployment rate in the U.S. should be and will be closer to 20%. There are really not that many jobs needed to maintain the level of goods and services required by the population. When one factors in the cheaper goods from China and other countries and the labor and time savings of computers and robotic technology this problem becomes even more acute. This presents an untenable situation for politicians.
Therefore the solution to this “hidden” problem is going to be for the powers that be to continue to print and borrow as much money as is needed to accomplish getting people back to work. It means providing extraordinary amounts of new money and high debt levels by the government. This will create even more economic distortions – all in the hope of finally handling the unemployment problem, which cannot be handled at this time and to increase “economic” activity.
Politicians and the Federal Reserve, in order to “revive” the economy and bring unemployment back down to the 4-5% level will continue to print more and more money to no avail and this will bring on an inflationary economy beyond what anyone is expecting sometime in the future. This inflation will further erode the purchasing power of the lower and middle income wage earners as well as most white collar workers. Inflations can start quickly and violently.
The result of this situation will lead to one of the greatest inflationary periods the United States has ever experienced. It means that precious metal investments are going to respond to this dramatically. It also means the bond market will become the next crisis point. High inflation means higher interest rates, the death knell for medium to long term bonds and most annuities.
There has been much talk about how relatively low inflation rates are in the U.S. compared to the massive money supply increases the last ten years. One thing we know is almost all everyday items we all buy are up significantly in the last five years. The official inflation numbers are tweaked and “quality adjusted” as disclosed by the Bureau of Labor Statistics, the official government agency tasked with reporting this economic indicator. Inflation always catches up with the new money, so that time is coming.
The argument that most of the new money is not really “in the economy” but sitting in bank balance sheets, propping up their liquidity and solvency is not true. Think about it. If a bank needs $10 billion from the Feds to stay solvent because they have $10 billion in bad loans, what does that tell you? They lent out the $10 billion already! That money has been lent out earlier and has indeed been circulating in the economy. Whatever is sitting in bank balance sheets from bailouts is there because a similar amount of money went out the door already.
All the new money created in the United States has not created prosperity.
You do not have to be an economist to recognize that a 900% increase in per capita money supply since the 1960’s has not even come close to a 900% increase in the amount of goods and services a wage earner can afford. In fact, this graph is an indictment of paper money and its negative consequences on the common man’s take home pay.
The printing of paper money has destroyed the purchasing power of the lower and middle class because of this 900% increase in per capita money supply. Economic life was good in the 60’s for the average blue and white collar worker in the United States. The purchasing power of “take home” pay was significantly higher at that time. The increase of paper money has robbed them of the purchasing power of their savings and hard work. More money printed per person has created more poverty, not less. It has created more waste in government and more people dependent on the government for help. Workers used to be able to buy homes and send kids to college and save money in the 1950-1970 period. Today they are stressed out, working two jobs and having a tough time making ends meet.
The printing of paper money has given free enterprise and capitalism a bad name to the lower and middle class wage earners as well as most white collar workers since they are all having a tough time getting by. Socialists use this as an argument against capitalism and free markets, when the real target of their discontent should be the printing of fiat paper money – which ironically is the socialist solution! The commercial banking system and the government are to blame for this fiat money travesty, not corporations, private business and some Wall Street investment houses. Get rid of the printing presses and the ability of the government to borrow money created out of thin air by the Fed and banking system and you will have once again a prosperous nation. The Federal Reserve has committed to buy $85 billion of new mortgage and federal debt every month in 2013. That is another potential trillion dollars that will be added to the money supply.
What To Do
The first thing to realize is that the world is not coming to an end but it is going to become very expensive. Owning gold and silver mining companies will be an important investment sector for investors. The discounted values for the mining companies are about to end and a major and unprecedented bull market for companies that have quality precious metal deposits is coming.
So let’s recap:
We are overemployed in the United States, therefore, the unemployment level will be high for a long time to come.
Politicians will help the government spend more and print more to try to get the unemployment rate down and the so called “economy” moving again.
Along with the past paper money created the amount of new money needed will be extensive and set the wheels in motion for a high inflation rate future that could last many years.
The price of gold and silver should go up dramatically.
Bond investments of maturities past 6-7 years will be hit very hard as will annuities.
Investments in mining stocks with accredited resources in the ground should be accumulated.
###
Ken Gerbino
http://www.321gold.com/editorials/gerbi … 40513.html
Statistics: Posted by yoda — Sat Apr 06, 2013 2:19 am
View full post on opinions.caduceusx.com
Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers
Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.
The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.
We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.
The following is the global financial pyramid scheme by the numbers…
-$9,283,000,000,000 – The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to “guarantee” those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.
-$10,012,800,000,000 – The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.
-$10,409,500,000,000 – The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.
-$15,094,000,000,000 – U.S. GDP. It is a measure of all economic activity in the United States for a single year.
-$16,749,269,587,407.53 – The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 – The total amount of money that the global elite have stashed in offshore banks (that we know about).
-$50,230,844,000,000 – The total amount of government debt in the world.
-$56,280,790,000,000 – The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.
-$61,000,000,000,000 – The combined total assets of the 50 largest banks in the world.
-$70,000,000,000,000 – The approximate size of total world GDP.
-$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
-$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
Are you starting to get the picture?
Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.
What we witnessed back in 2008 was just a little “hiccup” in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.
Next time it won’t be so easy.
The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.
The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.
And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.
The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.
But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.
The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.
But when you are tempted to believe that everything is going to be “okay” somehow, just go back and look at the numbers there were posted above one more time.
There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?
View full post on The Economic Collapse
Other • Why Is The World Economy Doomed?
Why Is The World Economy Doomed? The Global Financial Pyramid Scheme By The Numbers
By Michael, on March 20th, 2013
Why is the global economy in so much trouble? How can so many people be so absolutely certain that the world financial system is going to crash? Well, the truth is that when you take a look at the cold, hard numbers it is not difficult to see why the global financial pyramid scheme is destined to fail. In the United States today, there is approximately 56 trillion dollars of total debt in our financial system, but there is only about 9 trillion dollars in our bank accounts. So you could take every single penny out of the banks, multiply it by six, and you still would not have enough money to pay off all of our debts. Overall, there is about 190 trillion dollars of total debt on the planet. But global GDP is only about 70 trillion dollars. And the total notional value of all derivatives around the globe is somewhere between 600 trillion and 1500 trillion dollars. So we have a gigantic problem on our hands. The global financial system is a very shaky house of cards that has been constructed on a foundation of debt, leverage and incredibly risky derivatives. We are living in the greatest financial bubble in world history, and it isn’t going to take much to topple the entire thing. And when it falls, it is going to be the largest financial disaster in the history of the planet.
The global financial system is more interconnected today than ever before, and a crisis at one major bank or in one area of the world can spread at lightning speed. As I wrote about yesterday, the entire European banking system is leveraged 26 to 1 at this point. A decline in asset values of just 4 percent would totally wipe out the equity of many of those banks, and once a financial panic begins we could potentially see major financial institutions start to go down like dominoes.
We got a small taste of what that is like back in 2008, and it is inevitable that it will happen again.
Anyone that would tell you that the current global financial system is sustainable does not know what they are talking about. Just look at the numbers that I have posted below.
The following is the global financial pyramid scheme by the numbers…
-$9,283,000,000,000 – The total amount of all bank deposits in the United States. The FDIC has just 25 billion dollars in the deposit insurance fund that is supposed to "guarantee" those deposits. In other words, the ratio of total bank deposits to insurance fund money is more than 371 to 1.
-$10,012,800,000,000 – The total amount of mortgage debt in the United States. As you can see, you could take every penny out of every bank account in America and it still would not cover it.
-$10,409,500,000,000 – The M2 money supply in the United States. This is probably the most commonly used measure of the total amount of money in the U.S. economy.
-$15,094,000,000,000 – U.S. GDP. It is a measure of all economic activity in the United States for a single year.
-$16,749,269,587,407.53 – The size of the U.S. national debt. It has grown by more than 10 trillion dollars over the past ten years.
-$32,000,000,000,000 – The total amount of money that the global elite have stashed in offshore banks (that we know about).
-$50,230,844,000,000 – The total amount of government debt in the world.
-$56,280,790,000,000 – The total amount of debt (government, corporate, consumer, etc.) in the U.S. financial system.
-$61,000,000,000,000 – The combined total assets of the 50 largest banks in the world.
-$70,000,000,000,000 – The approximate size of total world GDP.
-$190,000,000,000,000 – The approximate size of the total amount of debt in the entire world. It has nearly doubled in size over the past decade.
-$212,525,587,000,000 – According to the U.S. government, this is the notional value of the derivatives that are being held by the top 25 banks in the United States. But those banks only have total assets of about 8.9 trillion dollars combined. In other words, the exposure of our largest banks to derivatives outweighs their total assets by a ratio of about 24 to 1.
-$600,000,000,000,000 to $1,500,000,000,000,000 – The estimates of the total notional value of all global derivatives generally fall within this range. At the high end of the range, the ratio of derivatives to global GDP is more than 21 to 1.
Are you starting to get the picture?
Every single day, the total amount of debt will continue to grow faster than the total amount of money until the day that this bubble bursts.
What we witnessed back in 2008 was just a little "hiccup" in the system. It caused the worst economic downturn since the Great Depression, but global financial authorities were able to get things stabilized.
Next time it won’t be so easy.
The next wave of the economic collapse is quickly approaching. A full-blown economic depression has already started in southern Europe. Unemployment is at record highs and economic activity is contracting rapidly.
The major offshore banking centers in Cyprus are on the verge of collapsing. It was just announced that they will now be closed until Tuesday, but nobody really knows for sure when they will be allowed to reopen. And there is already talk that when they do reopen that there will be strict limits on how much money people can take out.
And now the IMF is warning that the three biggest banks in Slovenia are failing and that a billion euros will be needed to bail them out.
The dominoes are starting to tumble, and the United States won’t be immune. In fact, the greatest financial problems that the United States has ever seen are on the horizon.
But you can just have faith that Ben Bernanke, Barack Obama and the U.S. Congress know exactly what they are doing and will be able to save us from the coming financial collapse if you want.
The mainstream media will provide you with all of the positive economic news that you could possibly want. They are giddy about the fact that the Dow keeps hitting all-time highs and they would have us all believe that we are in the midst of a robust economic recovery. You can listen to them if you want to.
But when you are tempted to believe that everything is going to be "okay" somehow, just go back and look at the numbers there were posted above one more time.
There is no way that the global financial pyramid scheme is going to be able to hold up for too much longer. At some point it is going to totally collapse. When that happens, will you be ready?
http://theeconomiccollapseblog.com/arch … he-numbers
Statistics: Posted by yoda — Wed Mar 20, 2013 5:54 pm
View full post on opinions.caduceusx.com