Global recovery? The real dimension of external debt

Global recovery? The real dimension of external debt

Posted using ShareThis

U.S. Decline, Sloth Look a Lot Like End of Rome: Mark Fisher - Bloomberg.com

U.S. Decline, Sloth Look a Lot Like End of Rome: Mark Fisher - Bloomberg.com

Posted using ShareThis

Economy Outlook - Marc Faber: We Have a New Gold Standard - CNBC

Marc Faber recommends:

Gold
Oil
Oil companies
Mining companies
XOM
CVX
SLB

Invest - 50% of your portfolio in emerging markets

Avoid US $, US Treasuries and Euro

Economy Outlook - Marc Faber: We Have a New Gold Standard - CNBC

Posted using ShareThis

Are you ready? Begin With This List.

From Gary North....

Kicking the can has worked for years and decades.  People think short term and are linear in their views.  What will happen tomorrow will be a repeat of yesterday.

People miss the changes and really, do not want to see them.   They hide their heads in the sands and then become trapped.  People feel more comfortable not thinking about risks, or the downside, they rather think all is well and will continue to be well.  I had someone tell me, don't tell me it, I do not want to know.  "Positive" thinking is not realistic thinking.  We do need to be aware of the situation and yet, be positive to do something about it vs giving up.

Right now is the large financial restructuring that is going on, something which has not happened in the past 70 years.  It is unfolding right before our eyes.  There will be changes, and I expect some significant changes coming.  Changes that will surprise us all.

What will be the outcome?    We need to think about the risks and right now they are high and plan accordingly.

Here is an article from Gary North....

Make a List of The Most Valuable Assets You Own. Begin With This List.

Posted using ShareThis

Seeds of War

Good article.....the seeds have been sown.  History does repeat.

What sort of leader will again make the promises that he can fix the problems.  Those that did in the past, made a pretty big mess of it.  But remember, the people wanted change.

Seeds of War

Posted using ShareThis

Municipal Deflation: Consequences of the Greatest Speculation

Mankind is not very smart.  They repeat the past mistakes.  We have done it....and will continue to follow the same path as 1930's and 1940's.

Things could get messy, if things are not changed.  We are in a state of denial.  The people do not want to hear the risks and the problems that need to be fixed and the changes that it requires.  The politicians play along promising what they can not do. ......the problems grow deep and bigger each day, week, month and year.  At sometime, there will be a breaking point.  It will be fast and hard.

Remember the fall of 2008....the financial melt down.  Very few saw it coming, and it was fast and hard.  That was the first shoe that dropped.

Municipal Deflation: Consequences of the Greatest Speculation

Posted using ShareThis

Top ten countries in freedoms

Canada beats the US and the UK in freedoms. I think so.

Canada word wide ranks number 9.

Check out which countries beat US, UK and Canada.

Here is the link.

The Sabotaging of the American Economy

Where are going? How did we get here? What could happen next?

Here is a few comments by Dr. Robert McHugh in his article called The Sabotaging of American Economy. See link for complete discussion

Since 2000, the US economy has been managed differently than in the past. A top-down approach (or Central Planning approach) to economic stimulus became the policy.

By top-down, it has pretended to stimulate the real economy by flowing capital down from a few large money center banks, rather than a bottom up approach where money flows from households up to small and large businesses, and eventually toward large money center banks and then local, state, and federal governments in the form of tax receipts.

The bottom up approach, was the economics of Kennedy, of Ronald Reagan, and to a lesser extent, of Bill Clinton, largely thanks in Clinton's case to the Contract with America bottom up economic revolution of the 1994 Congress.

We entered the age of economic oligarchy in our nation, and it started in a big way in 2000. The shift that took place was to equate the economy with Wall Street. Main Street was no longer considered the key cog determining economic growth. Wall Street, mega-money center banks and mega corporations, were considered to be the relevant drivers of economic prosperity. If Main Street benefitted, great. But if they did not, so be it. The goal was to make sure Wall Street financial firms made big money. Bigger was better. Industry consolidation was considered a good thing where mom and pops were bought out so the mega firm could control local markets. If a few large firms could control commerce, the government could control all commerce through partnering with the few mega-firms. As this incestuous relationship grew throughout the decade, it became increasingly unclear whether it was government controlling the few large firms, or the other way around. It hasn't mattered whether a Republican or a Democrat occupied the White House, the same top-down economic policy has been enforced since 2000. The mantra has been, simply, if it is good for Goldman Sachs, it is good enough for everyone. Obama was elected to change all this, but has done just the opposite. His administration and Congress have taken the Master Plan to new heights, to Central Planning. But the question remains, is Obama leading or is Goldman Sachs, AIG, et al? Trillions have been spent to fix this economy, but all that has been fixed is Goldman Sachs and the rest of the Corporate Oligarchy running this country. Targeted economic stimulus programs have been an abject failure, such as cars for clunkers, the token $10 a week drop in income tax withholding requirements ...

The results of the current policies of over the past 10 years - the fundamentals:
- The US federal deficit could approach $2.00 trillion dollars this year, 15 percent of GDP.
- Construction Spending fell in November for the 7th month in a row,
- 1.43 million bankruptcy filings in the U.S. in 2009, a 32 percent increase
- Jobs ? - 27 million people, or 17.6 percent of the labor force, were either unemployed or involuntarily stuck with part-time jobs
- The average workweek came in at 33.2 hours, near record lows

What has worked?
- Goldman Sachs is slated to earn about $10 billion in 2009, with Citicorp already showing $6.0 billion for the first nine months of 2009, and even Bank of America doing fine, thank you ma'am at $3.0 billion for the first nine months of 2009
- The Central Planners' policies have in fact worked!..... for the big boys.

Investments - stock market results during past 10 years
- Dow Industrials remain down 8.25 percent
- S&P 500 remains down a whopping 24.1 percent
- NASDAQ Composite remains down a huge 43.69 percent

Monetary Policy
- Money supply has increased 4 times over the decade to achieve this
- The US Dollar lost half its trade weighted value

Given that the government policies for past 10 years has failed, the article then discusses what needs to be done which is to change the approach from top-down economics to bottom-up. In addition, the article goes on to review the current technical market conditions.


For the complete article see

The Sabotaging of the American Economy

The recession is over but the depression has just begun

The recession is over but the depression has just begun >

Are we heading the right way?

From Robert McHugh
https://www.technicalindicatorindex.com/Default.asp

The Labor Department reported Friday that Unemployment for September rose to 9.8 percent. One out of ten Americans who are seeking work, are out of work. If laid off full time workers settling for part-time work are included, the unemployment rate in the U.S. is now up to 17 percent. If we include discouraged workers who are no longer seeking employment (they are not included in the Labor Department's unemployment figures), then the unemployment figures rise to 10.1 percent and 17.3 percent.



The problem is getting worse, and evolving into a crisis of Family Household income. Consumers account for 70 percent of all spending, of GDP. The Labor Department reported Friday that 263,000 more people lost jobs in September, non-farm payroll job losses, but actually the number was even worse than reported because the Labor Department reduced the actual number of job losses by "let's pretend" jobs that they imagined in their deepest melatonin dreams were created, they think, by start-up businesses to the tune of 34,000. The actual number of non-farm jobs losses were 297,000 if you ignore this fantasy and get real. The U.S. needs to add 150,000 new jobs each month to simply accommodate population growth. So the short-fall from break-even in September was actually closer to half a million jobs. Even government jobs fell 53,000 in September.



At this moment, 36 million Americans are on Food Stamps. One out of every six jobs in the U.S. feeds off the Health Care Industry. One sixth of our Gross Domestic Product is spent on sickness, either prevention, detection, treatment, or insurance. Is this a formula for prosperity in any nation?

The Great Reflation Experiment

From John Mauldin - July 31, 2009


By Tony Boeckh and Rob Boeckh

The Crash of 2008/9 should be seen as yet another consequence of long-term, persistent US inflationary policies. Inflation doesn't stand still. It tends to establish a self-reinforcing cycle that accelerates until the excesses in money and credit become so extreme that a correction is triggered. The bigger the inflation, the bigger the correction. Once a dependency on credit expansion is well established, correcting the underlying imbalances becomes extremely difficult. Reflation has occurred after each major correction, and this one is proving no exception. Return to discipline in the current environment would be too painful and dangerous. Once on the financial roller coaster, it is very hard to get off. Moreover, the oscillations between peaks and valleys become increasingly large and unstable.

Policymakers, money managers, and most forecasters have argued that the crash was a "black swan" event, meaning that it had an extremely low probability of occurrence. That is grossly misleading, as it implies that the crash was so far beyond the realm of normal probabilities that it was unreasonable to expect anyone to have foreseen it. That argument has been used to justify the widespread complacency that prevailed in the years leading up to the crash. Policymakers are still failing to recognize the systemic causes of the crash and seem to believe that enhanced regulation will prevent history from repeating. While it is true that regulators were asleep at the switch or looking the other way, they were not the cause.

The Debt Super Cycle

The real culprit is the US debt super cycle, which has operated for decades, mostly in a remarkably benign manner.

Link to article

Yardeni: Rising Yields Threaten Economy

Economist Edward Yardeni says the rise in bond yields and mortgage rates threatens to stall any economic rebound.

The founder of Yardeni Investments coined the term 'bond vigilantes' in 1983 to describe bond investors who dump their holdings when huge budget deficits threaten to spark inflation.

The bond market is full of concern that the government's huge budget deficit "eventually might lead to higher inflation," he points out.

Others agree. Economist James Bianco tells The Wall Street Journal, that the market figures the $1 trillion-plus deficit can't be financed without Fed assistance.

But that assistance has sparked the inflation worry, he says. "We're caught in a vicious cycle."

Gold bugs at last have their perfect trinity

From the UK Telegraph Will it be inflationary or deflationary and what is the direction for gold?

***************

China has doubled its bullion reserves and left us in no doubt that it will spend more of its $40bn monthly surplus on hard assets rather than the toxic paper of Western democracies.

...It is striking how many of those most alert to the deflation danger are either veterans of Japan's Lost Decade or close students of it: Albert Edwards at Société Générale, Russell Jones at RBC Capital, Nobel laureate Paul Krugman, the Fed's Ben Bernanke, and Athanasios Orphanides, who helped draft the Fed's study on the Japan trap. "People always thought Japan's bond yields had to rise, but they kept falling and Japan is still not really out of deflation," said Mr Edwards. Indeed, 20 years after the Nikkei peaked at over 39,000 it stands today at 9,280. Interest rates are 0.01pc. The yield on two-year state bonds is 0.34pc. Still there is not a whiff of inflation.

....America's debt-gearing has exploded, as it has in the UK and Europe. This looks awfully like Irving Fisher's "debt deflation" trap of 1933. It will be a long slog for households to bring their debt-to-wealth ratios down to manageable levels.

......Still, we think it is highly significant that both China and Russia – two of the biggest holders of foreign reserves – are both buying gold," he said.

...out of fear that the most corrosive phase of this crisis lies ahead. There are two more boils to lance: Europe and China. As the IMF keeps telling us, Europe's banks are still covering up their vast toxic debts. Nor has the G20 begun to address the root cause of the global crisis, which lies in excess exports from East (aided by currency manipulation) to an over-spending West. China is putting off the day of reckoning with its crisis response, which is to build yet more plant to flood the world with yet more over-capacity.

The Economic Future Just Does Not Look Great

By Porter Stansberry in the S&A Digest: April 23, 2009

Watching the government rack up debts that will be impossible to repay while narrowing the tax base (at least 50% of Americans pay zero federal income tax) at the same time is very scary. It seems more and more certain the deficit will spiral out of control. Not only has the government gone mad with spending and corruption, but it also expects about 10% of the population to pay for essentially all the costs. The math simply doesn't add up: 10% of the population can't (and won't) pay for all of the costs of a socialist federal government.

And, by the way, before you respond with the typical Democrat vs. Republican nonsense, this problem has nothing to do with traditional politics. Both parties have grown the size and responsibilities of government. Both parties have added to the national debt. And both parties support the narrowing of the tax base - because that's what makes good political sense in an unlimited democracy. Promise the voters they can live at the expense of their neighbors - and the next five generations.

Unfortunately, we know from history this kind of political system can't last for long - for lots of reasons. One important reason: The rich will leave. Or they will stop working. They will hide their incomes or only invest in tax-protected vehicles. And we know the political response will be tougher laws on emigration, taxation, more money printing, and eventually, capital controls that make it impossible to protect yourself from a massive currency devaluation. That's the script. We've watched the same things happen dozens of times around the world following World War II and the introduction of a global paper currency standard, which allowed governments to run huge deficits and finance their activities through inflation and devaluation. We just never thought we'd see it happen here.

Today, the idea of leaving America in search of freedom and financial security seems like absolute madness. But it won't for long. And by the time most people wake up to the very real threats to their standard of living, it will be too late. Again, before you respond with some crazed invective about how this isn't OBAMA!'s fault, blah, blah, blah - save yourself the trouble. The trends I'm talking about are cultural and fiscal, not ideological. Read the original Communist Manifesto. It's nearly identical to today's government policies. Any politician who tries to oppose the landslide of modern entitlements is immediately labeled a kook and is unelectable.

Whether you think we ought to have free health care and drugs for retirees, more military spending than the rest of the world combined, a bankrupt retirement scheme based on government debt, government guarantees for the banks, etc. doesn't matter to me. I'm not interested in pie-in-the-sky ideas about how the world should work. I write about how the world does work. And I can tell you this with 100% accuracy: You cannot support the world's reserve currency when you are the world's largest debtor, when you plan to finance annual deficits exceeding $2 trillion with progressive income taxes and money printing. Our economy is a charade. And when it falls apart, the consequences will be devastating.

An Alarming Trend

Be afraid. Be very, very afraid.

That appears to be the Obama Administration’s latest tactic to achieve greater government control over liberty, the economy, and mankind’s ability to tread water. And again, it’s with phony science. Anxieties were raised last week to the highest levels yet about islands sinking into the sea, the elimination of entire nations, and even the reduction of coastlines to certain U.S. states if, of course, carbon emissions are not immediately reduced.

According to Energy Secretary Steven Chu, the earth's temperature is rising so fast that a “very, very scary” scenario will unfold. Island nations, especially those in the Caribbean, may disappear. Portions of Louisiana and Florida will go underwater, reducing the size of those states. New Orleans will be flooded. Said the Secretary, “I think the Caribbean countries face rising oceans and they face increase in the severity of hurricanes. This is something that is very, very scary to all of us. The island states in the world represent—I remember this number—one-half of 1 percent of the carbon emissions in the world. And they will—some of them will disappear.”

Fortunately for the American people, the fragile economy, and beachgoers everywhere, Mr. Chu’s alarming prediction is based upon a faulty hypothesis: Melting ice caps would cause sea levels to rise. They would not. This is scientifically falsifiable claim. It is, in fact, provably false.

As a matter of fact, ice displaces more water than does its liquid counterpart. According to Chemistry.About.com, “Ice floats because it is about 9% less dense than liquid water. In other words, ice takes up about 9% more space than water…” Therefore, ice—which expands when it freezes—takes up less space when it melts, and could not result in sea levels rising.

One could even prove it. If Mr. Chu’s hypothesis is correct, then one should be able to fill up a glass of water, add some ice, place it in the sun, and then watch as the glass overflows. But it does not. In fact, the volume decreases. Therefore, Mr. Chu’s claim is falsified by a simple experiment. He would not even pass a 7th grade earth science exam.

The only way for the sea levels to rise is if enough water melted off of land masses. To make matters worse for the Hot Earthers, some 97.5 percent of the water is already in the seas and oceans. And for the remaining 2.5 percent to find its way to the oceans is actually impossible, since much of that will always be water vapor trapped in the atmosphere. Also, topography plays a role: Given the presence of lakes, it is clear that not all water has an outlet to the sea. Another obstacle is plate tectonics: How far will mountain ranges be raised by rising plates, thus trapping more water in the form of snow and ice on mountain peaks?

These are all factors that make sea levels rising at an alarming pace impossible. There is no cause for governmental policies to turn back the tides. King Canute could not do it, and neither can Uncle Sam.

More on this from GetLiberty.Org

House Prices Finally Approaching Fair Value...

As goes housing, so goes the rest of the economy. So where do things stand? After two years of precipitous declines that have taken prices down almost 30% from the peak, house prices are finally approaching fair value (which is perhaps 10% below today's level).

That doesn't mean that house prices will only fall another 10%, however. On the contrary, given the tendency for prices to overshoot, it would be startling if house prices stopped at fair value. More likely, they'll drop at least 10% below fair value before they finally trough. Although the rate of decline is likely to ease over the coming months and years, therefore, prices will likely keep falling through at least 2011. And there's at least 20% downside left.

See link for more relvent data on Clusterstock.

5 Reasons House Prices May Never Recover

House prices will eventually stop falling, probably in about two years. But will they ever recover to the levels we saw during the heights of boom? In some areas, prices might climb that high again. But for most markets, such a recovery will probably never happen, and would take decades it were to occur.

In an essay published today, Charles Hugh Smith explains that the bubble vaulations are probably never coming back.

Stock Market Disconnect

From The Dr Housing Bubble - April 19, 2009

The stock market at least in its current form is a horrible indicator of the actual economic carnage falling upon the majority of Americans. Most Americans are witnessing the current rally and wondering why the massive run up (largely in financial related stocks) is going forward while they are getting called into supervisor offices behind closed doors and being laid off or seeing their hours cut back. Wall Street has completely disconnected from Main Street. It is also hard for many to understand how they are having their limited income being taxed to finance the bailouts of Wall Street and financial cronies while they are asked to do more with less. They are seeing these same institutions, alive because of the massive funding from the American people since our government ideally should reflect the will of the majority, shut off credit lines and raise rates while the government through the U.S. Treasury and Federal Reserve showers the banks and Wall Street with easy low rate financing thanks to the American taxpayer. Welcome to the new America. Where unemployment is good news for Wall Street and bailouts are now seen as a new source of revenue for financial companies. New accounting students will learn how to incorporate bailout funds as a new source of revenue.

Why We're Not at the Beginning of the End, and Probably Not Even At the End of the Beginning

Robert Reich was the nation's 22nd Secretary of Labor and is a professor at the University of California at Berkeley. His latest book is "Supercapitalism." This is his personal journal.

....everyone with a stock portfolio wants to see it grow again. But wishing for something is different from getting it. And cockeyed optimism can wreak enormous damage on an economy. Haven't we already learned this?

Hanging Tough

Managing the down turn. Some companies do it well. Others don't. Good article in the New Yorker on Kellogg vs Post.

You’d think that everyone would want to emulate Kellogg’s success, but, when hard times hit, most companies end up behaving more like Post. They hunker down, cut spending, and wait for good times to return. They make fewer acquisitions, even though prices are cheaper. They cut advertising budgets. And often they invest less in research and development. They do all this to preserve what they have.