Reading time: 7,319 words 23 pages, 18 to 30 minutes.
Governments’ and the presstitute’s propaganda are pathetically pretending global economic improvement. Don’t believe it because it’s as phony as a three dollar bill. I have never seen so much fakery I can’t cover it all without writing a book so I’ll try to keep it as brief as possible.
“You can avoid reality, but you cannot avoid the consequences of avoiding reality.” — Ayn Rand
Let’s examine this matrix of fakery. Knowledge is power. The more you know, the better you’ll be equipped to recognize the BS rather than swallow it and have it mislead you. Financial analyst Dr. Pippa Malmgren says, “Although no one can predict the future, we can be better prepared.”
Fake Government Statistics
Dr. Tim Morgan Global Head of Research for Tullett Prebon calls it the “Perfect Storm”;
“how policies have been blind-sided by distorted data. The reliable data which policymakers and the public need if effective solutions are to be found is not available. Economic data (including inflation, growth, GDP and unemployment) has been subjected to incremental distortion, whilst information about government spending, deficits and debt is extremely misleading.”
Let’s examine fake inflation, unemployment and Gross Domestic Product (GDP) in more detail and then briefly review a few more areas of fraud and deception. Our world has indeed become a fantasyland of fraud and fakery.
Fake government inflation statistics needs to be examined first because it underlies much of the other fakery. Governments use fake accounting gimmickry to under-report the actual inflation numbers. This is significant because inflation is the basis for calculating GDP, wage increases, pensions and benefits. Understating real inflation not only cheats wage-earners and pensioners, but it undermines the calculation of the ‘real’ cost of credit (interest rates and bond yields) and largely contributed to the rapid escalation of indebtedness during the past credit boom.
Numerous times in previous commentary I’ve mentioned that John Williams’ ShadowStats calculates statistics like inflation, unemployment, GDP, etc. the way the government did until 1980 before they embarked on their propaganda campaign of distorting the numbers through creative accounting gimmickry like hedonics and substitution and other forms of accounting fraud.
For a more detailed analysis, see Pulling Back the Curtain on Phony Government Statistics where John Williams is a guest contributor for Casey Research. According to the government’s cooked statistics we are supposed to believe that, “a deep recession began in December 2007, hit bottom in June 2009, and that business activity has been in recovery since.”
And, it’s not just governments that are playing with the numbers to disguises the real inflation rate. It is also masked by manufacturers and retailers in a variety of ways. To avoid increasing prices they make package sizes smaller. To avoid increasing prices, McDonald’s removes a slice of cheese from their quarter pounder. And so on …
Here are a few comments from The Burning Platform. “The BLS put out their monthly CPI lie last week. They issued the proclamation that inflation is dead. Did you know your costs are 0.1% lower than they were one year ago. They then used these deflation numbers to proclaim your real wages soared last month. It’s all good. The American consumer is so flush with cash, they decided to spend less money for the second month in a row. The Wall Street shysters are so happy with declining consumer spending, declining corporate profits, and a global recession, they pushed the NASDAQ up to 5,000 for the first time in 15 years. Hey!!! That was the year 2000. Things really got better after that milestone.
“The price of oil and gas has certainly declined by the 30% or so in the BLS figures, but it doesn’t come close to covering the price increase in food and other living expenses. The BLS declares we are experiencing deflation and our wages are expanding in real terms. It’s a bold faced lie. The other items declining in price are mostly discretionary items which might be purchased every few years. Furniture, appliances, computers and TVs are falling in price. I didn’t buy any of those items in the last year, so the lower prices had ZERO impact on me.
“And now for the BIGGEST LIE in the entire report. The have the balls to tell you that health insurance only makes up 0.753% of your entire annual budget and it has FALLEN by 0.5% in the last year. This must be some cruel Obamacare joke perpetrated by these government apparatchiks. I haven’t met anyone who has seen their health insurance costs go down in the last year.”
The chart below shows fourteen decades of U.S. price inflation. Notice the declining purchasing power of a dollar after the creation of the Federal Reserve in 1914.
Also, notice the steady decline after Roosevelt goes off the gold standard in 1934; the second time the U.S. defaulted (the first was the Amerikan Revolution’s “Continental”). The third default was Nixon closing the ‘gold window’ in 1971 ending the dollar’s gold redemption.
A U.S. twenty dollar bill once read “twenty dollars in gold coins payable to the bearer on demand”.”
That was changed to “Payable to Bearer” and now reads “Federal Reserve Note” which is simply redeemable with another Federal Reserve Note.
On the price inflation chart above, notice too, how the frighteningly steep decline in purchasing power was only slightly lessened with the BLS creating fraudulent Consumer Price Index (CPI) accounting gimmicks in 1982 and again in 1990.
I’ve written about statistical manipulation of GDP before, but it’s time to re-visit it. In July of 2013, the Amerikan government brought accounting gimmickry to new heights of Kafkaesque absurdity in re-calculating Gross Domestic Product (GDP). The U.S. Bureau of Economic Analysis will rewrite history by adding about 3% to the gross domestic product, all the way back to 1929.
Now Research & Development, previously treated as an expense will be added to productivity whether anything is eventually produced or not.
GDP will also be credited with the non-existent interest earned by non-existent (unfunded) pension funds. In other words, the fictitious interest on 100% of Detroit’s bankrupt pensions will be added to GDP although pensioners will be lucky to get 16% of what they were promised. GDP even includes the fictitious rent you would have paid, if you were renting the house in which you’ve paid off the mortgage. Even the latest Hollywood bombs increase the GDP based on estimated future TV broadcast revenue.
To great ass media fanfare, the U.S. GDP in the 3rd Quarter of last year was trumpeted as 5%. To no fanfare whatsoever, the final quarter 2014 was reduced this February from 2.64% to only 2.18%. However, and this is very important, when you subtract the REAL rate of inflation the U.S. economy is still shrinking despite the new accounting gimmickry because the REAL U.S. inflation rate is understated by about 7% (5% in Canada).
Pretending and propaganda might prevent civil unrest for now, but it doesn’t create jobs or fix a broken economy. The U.S.debt to GDP ratio was under 70% when Barack Obama was first elected, but today it’s well over 100%. Some recovery!
Economists Reinhart and Rogoff demonstrated that no country ever recovered when its debt to GDP ratio exceeded 90%. The U.S. is long past the point-of-no-return as are most other nations as we shall see later.
Congressional pressure on the U.S. Financial Accounting Standards Board (FASB) in 2009 allowed the banksters to change the value of their failing assets from “mark-to-market” (the price at which something would actually sell) to “mark-to-model” (the original book value aka ‘mark-to-myth’). This destroys centuries of contract law regarding property and title and legalizes criminal behavior.
The fakery continues unabated. Simon Black (Sovereign Man blog) writes “Bloomberg showcased one such technique last year, exposing the way that many US banks are rebooking their assets from “available for sale (AFS)” to the “held-to-maturity (HTM)” designation … a highly effective way of concealing losses they’ve suffered in their investment portfolios.” Instead of showing a loss in the AFS category, the banksters simply shuffle it into the HTM category and pretend everything is good.
It doesn’t stop there. “The Federal Financial Institution Examination Council recently told banks that, ‘if a particular asset . . . has features that could place it in more than one risk category, it is assigned to the category that has the lowest risk weight.’ … Bankers can now arbitrarily decide that a risky asset ‘has features’ of a lower risk asset, and thus they can completely misrepresent their investments.”
Can you trust your money with Shylock shyster-shuffling banks that overstate their capital ratios and understate their risk levels? As Jim Sinclair says “Get Out of The System (GOTS).”
The official unemployment rate is also BS. One of the gimmicks the BLS uses to estimate fictional jobs is the “Birth/Death Ratio” of small businesses which create more jobs than corporations do. The BLS imagines hundreds of thousands more small businesses are born every year than die.
However, Benjamin Ryan reports “Business startups have been declining steadily in the U.S. over the past 30 years … The percentage of new businesses created that year was smaller than the percentage of businesses that closed down. In other words, the birth rate of new businesses dropped below the death rate for the first time since these metrics were first recorded”
Elliott Management’s Paul Singer’s letter to investors reads “The headline currently reported unemployment rate … is deeply misleading. A 35-year low in the workforce participation rate, a policy-driven transition from full-time to part-time jobs, and the transition from high-paying jobs to relatively low-paying service jobs, all combine to make the headline rate a poor measure of employment health.”
On March 5, Zero Hedge reported “Initial Jobless Claims surged last week (after a big jump the week before) to 320k (far worse than the 295k expectation) to the highest since May 2014. Non-seasonally-0adjusted claims surged 29,361 to 310,000 making 2015 the worst start to the year for claims since 2009. Continuing Claims also rose. Since the end of QE3 and the end of the government’s fiscal year, the trend of improvement has clearly ended and a new regime of weakening labor markets has begun.”
A week later, Zero Hedge reports “Despite a 36k drop week-over-week, the less noisy four-week average initial jobless claims remains above 300k for the 2nd week in a row – something we have not seen since in 6 months.”
Here’s the news from MarketWatch on Thursday, March 5.
U.S. jobless-benefits claims jump to highest level since May 2014
03/05/2015 08:40:24 AM
By Jeffry Bartash
“WASHINGTON (MarketWatch) – The number of people who applied for U.S. unemployment benefits shot up to 320,000 in the seven days from Feb. 22 to Feb. 28, marking the highest level since last May … Also, the government said continuing claims increased by 17,000 to a seasonally adjusted 2.42 million in the week ended Feb. 21. Continuing claims reflect the number of people already receiving benefits.”
And here’s the news, also from MarketWatch, just one day later.
U.S. economy adds 295,000 jobs in February
03/06/2015 08:32:12 AM
By Jeffry Bartash
“WASHINGTON (MarketWatch) – The U.S. created a robust 295,000 jobs in February and the unemployment rate fell to 5.5% from 5.7%, but wage growth remained sluggish and more people dropped out of the labor force, the government said Friday.”
However, we peons have such short memories; we’re not supposed to remember the previous day’s news. Oh, and just in case we’re uncertain, here’s the propaganda mothership, the New York Times telling us all is good in fantasyland by quoting Mark Zandi, chief economist for Moody’s Analytics, “It feels really, really good out there.” So, drink your Kool-Aid, children.
Below, James Howard Kunstler, one of my favorite wordsmith’s describing the latest jobs report. I wish I could turn a phrase as eloquently as JHK and still be as tall, dark and handsome as I am (I’m kidding about that last part).
“Can an empire founder on sheer credulousness? After last Friday’s jobs report, I think so. For a culture that luxuriates in statistical analysis (and the false idea that if you measure enough things, you can control them), it is rather amazing that we absolutely don’t care whether the measurements are truthful or not.
“Apparently the US Bureau of Labor Statistics missed the job bloodbath in the oil industry, especially over in Frackville where the latest western phenomenon is the ghost man-camp (along with ghost pole dancing parlors). It’s a veritable hemorrhagic fever of job layoff announcements…”
Government unemployment statistics are fraudulent, but they haven’t yet cooked the labor force participation rate in the chart below.
In the words of Paul Craig Roberts “How does an economy grow when the labor force is shrinking? The labor force participation rate has declined since 2007 as has the civilian employment to population ratio.
“How can there be a recovery when nothing has recovered?”
Fake Great Depression Unemployment
As there were no labor statistics during the Great Depression, it was afterwards estimated at a maximum of 25% by the Bureau of Labor Statistics (BLS) economist Stanley Lebergott. He INCLUDED government employees (for reasons not explained). As government then employed about 6% of the workforce, this means that the revised ‘consensus’ unemployment during the Great Depression would have been 19%, not 25%.
This means that today’s REAL unemployment rate as calculated by ShadowStats is 23.2% which is greater than the maximum of 19% during the Great Depression.
Some Wreckovery this is!
The so-called ‘global recovery’ was supposed to kick-in in 2013. When that didn’t happen, it was supposed to be in 2014. Ditto for 2015. Don’t hold your breath. Canada, the U.S. and the global economy are examined below.
Even in Canada, retailers Sony and Target are closing all their stores as retail sales continue to collapse. In both the preceding reports, the CBC cite numerous reasons for failure except the most obvious; we’re in a depression caused by demographics and debt. Boomers are retiring and don’t need to buy more stuff and most everyone else is broke and dangerously over-indebted.
Much like the Great Depression of the 1930’s, Canada has soup kitchens and ‘bread lines’ except now they are out of sight. Ominously, Wood Business just reported “Canadian housing starts are lower for the fifth consecutive month.”
Here are a few revealing snippets from Canada’s Financial Post. “Canada’s economy — one that contracted 0.2% in November – had been quietly tanking, which contributed to the Bank of Canada’s surprise move … when it cut its prime setting rate [in January]… manufacturing output, which accounts for 10.5% of GDP, fell even further than the energy sector, declining 1.9% … wholesale trade slumped 0.6% in November, a second consecutive decline following a decrease of 0.2% in October, coupled with a surprising drop in output of 0.4% in the finance and insurance sector … the International Monetary Fund added its voice to the dire warnings about Canada’s overheated housing market … Despite the relief that cheaper crude has delivered for drivers at the pump, Canadians are still carrying record levels of household debt levels…”
Last month, Canada’s Globe and Mail reported “As Canada’s economy begins to slow, the country’s growing household debt burden is raising new concerns as it outpaces that of most developed countries … In fact, Canada had the second-biggest jump in household debt-to-income ratios of any country other than Greece between 2007 and the second quarter of 2014 … Canada and Australia along with a number of countries in northern Europe “now have larger household debt burdens than existed in the U.S. or the U.K. at the peak of the credit bubble …”
Just as falling oil prices are devastating Canada’s oil patch and the economic fall-out has just begun, the Houston Business Journal reports “Clouds are gathering over west Houston. That sentiment was not only the theme of the West Houston Economic Development Summit held on Feb. 13, it was the headline of the event’s press release.”
In the U.S., factory orders of consumer goods have been declining every month since July 2014 according to the Federal Reserve Economic Data (Fred).
Notice also that the long-term trend is clearly down.
Zero Hedge states “one can’t blame either the west coast port strike or the weather.”
Even using the U.S. Census Bureau’s own numbers
cooked adjusted for phony inflation statistics, U.S. household incomes are declining as you can see from the chart below.
Declining incomes explains why U.S. retail sales, flat-lined in the chart below from ShadowStats using REAL inflation numbers vs. BS government statistics that have now been declining the last three months.
Econointerest reports that “U.S. household continues upward climb while student loan delinquencies worsen … outstanding household debt increased $117 billion from the third quarter  … delinquency rates for auto loans and student loans worsened”
Regular readers know I’ve ranted about the declining Baltic Dry Index as a leading economic indicator forecasting global economic malaise. Zero Hedge quotes Søren Skou, Maerk container lines CEO, warning “that global trade growth could slow this year from recent 4% growth ratnes, as Chinese, Brazilian and Russian economies disappoint.” Skou says, “The economies in Europe are still very sluggish. Brazil, Russia and China: those three economies used to drive a lot of growth, and right now we are not really seeing that to the same extent … There is nothing in container volume numbers that suggest that the global economy is just on the verge of starting a new growth trend.”
We are more than six years into near-zero interest rates. Phoenix Capital writes “How do we know the US is not in recovery? It’s really quite simple. If it were, the Fed wouldn’t have any issue with raising rates. Take a look at the below chart. Every other recession going back to 1954 saw rates begin to rise a few years into the recovery.”
According to CNSNews “30.3 percent of 18- to 34-year-olds are living with a parent, according to data from the Census Bureau.” They also report that food stamp beneficiaries exceed 46 million people for 40 straight months. And, Zero Hedge reports 50% more New Yorkers sleeping in shelters than in 2010.
Below is Zero Hedge’s list of reports from the start of February that MISSED expectations …
1. Personal Spending
2. Construction Spending
3. ISM New York
4. Factory Orders
5. Ward’s Domestic Vehicle Sales
6. ADP Employment
7. Challenger Job Cuts
8. Initial Jobless Claims
9. Nonfarm Productivity
10. Trade Balance
11. Unemployment Rate
12. Labor Market Conditions Index
13. NFIB Small Business Optimism
14. Wholesale Inventories
15. Wholesale Sales
16. IBD Economic Optimism
17. Mortgage Apps
18. Retail Sales
19. Bloomberg Consumer Comfort
20. Business Inventories
21. UMich Consumer Sentiment
22. Empire Manufacturing
23. NAHB Homebuilder Confidence
24. Housing Starts
25. Building Permits
27. Industrial Production
28. Capacity Utilization
29. Manufacturing Production
30. Dallas Fed
31. Chicago Fed NAI
32. Existing Home Sales
33. Consumer Confidence
34. Richmond Fed
35. Personal Consumption
36. ISM Milwaukee
37. Chicago PMI
38. Pending Home Sales
39. Personal Income
40. Personal Spending
41. Construction Spending
42. ISM Manufacturing
And, here are the few reports that actually BEAT expectations
1. Markit Services PMI
2. Nonfarm Payrolls
4. Case-Shiller Home Price
5. Q4 GDP Revision (but notably lower)
6. Markit Manufacturing PMI
Yeah, that’s some wreckovery! It’s mainly asset inflation brought on by cheap debt, not economic growth.
It usually takes the U.S. National Bureau of Economic Research (NBER) a year or more to announce an economic recession after one had begun. The last one started in December 2007 and supposedly ended in 2009.
On the chart above, it’s easy to see the long term trend.
On the global scene we have all out currency wars, financial war and brazen corruption. The Financial Times reported “The Federal Reserve has vetoed the US capital plans of Deutsche Bank and Santander in a stinging rebuke for the European banks even as US lenders got the green light to launch their biggest payouts to shareholders since the financial crisis.” Sure, we’re gullible enough to believe ALL the U.S. banksters passed the stress tests but foreign banks failed miserably. This is financial warfare.
Depreciating foreign currencies are partly responsible for the surging U.S. dollar. One of the unintended consequences for the U.S. is cheaper foreign goods. U.S. paper producers are seeking countervailing duties on Canadian paper exporters. Other consequences will soon be felt including a decline in U.S. exports, manufacturing and jobs.
If this isn’t a fake recovery, why have 19 central banks around the world engaged in currency war by reducing interest rates just this year as reported by Zero Hedge? “… 19 Policy ‘eases’ so far… (or 24 if Romania’s 2 and Denmark’s 4 are counted)…” They wouldn’t be in this full-scale currency war if this was a real recovery. Instead, they’re racing each other to the bottom with the U.S. dollar the least ugly horse at the glue factory.
Another recent Zero Hedge article reports, “Goldman (Sach’s) Global Leading Indicator (GLI) final print for February affirms the global economy has entered a contraction with accelerating negative growth. Just six months after “expansion”, (it) has collapsed into “contraction” with monthly revisions notably ugly and 9 out of 10 components declining in February.”
MacDonald’s restaurants recorded declining sales over the last 9 months and Caterpillar once the world’s industrial bellwether had “recorded a record 26 months of consecutive declining retail sales, which is now 7 months more than during the Great Recession period” as of January,
So why does Caterpillar stock prices remain so high? Instead of using capital expenditure for investment, Cat is levering up its balance sheet with cheap debt for massive stock buy-backs like so many other short-sighted companies.
And, like so many others, Cat’s short-term gain will produce long term pain with reduced investment and subsequent skyrocketing interest costs when central banks lose control of ZIRP and suicidal NIRP interest rates.
One Zero Hedge reader asks, “Are we ever going to recover from this recovery?” I answered that in a previous article, “No Recovery, Ever”.
Fake Deficit/Debt Reduction
The Deficit is the annual shortfall between revenue and spending while the Debt is the total of all deficits and surpluses (remember them?). Pretending to “reduce the deficit” merely slows the rapid increase in debt but the debt keeps growing.
To actually reduce the debt, needs more than deficit reduction; it needs the elimination of the deficit altogether. It needs a surplus (remember them?). And it needs to do it year after year. The sun will go nova long before debts are reduced. And these debts will go nova long before the sun does.
As mentioned above, the U.S. GDP ratio was under 70% when Barack Obama was first elected, but today it’s well over 100%. Some recovery!
The chart below (courtesy of Zero Hedge) shows the frightening correlation between U.S. debt and major wars. Yes, we’re off to war soon!
And, don’t forget that Reinhart and Rogoff demonstrated that no country ever recovered when its debt to GDP ratio exceeded 90%. It’s not just the U.S. that’s over-indebted. The U.S. and every major nation on earth (except Russia and Indonesia) are long past the point-of-no-return. Do you think it’s coincidence that Russia is demonized and Malaysian passenger jets mysteriously fall out of the sky?
The chart below covers government, corporate and household debt of 39 major nations whose debt exceeds 100%. The U.S. is No. 16. and Canada at No. 21 beat Australia and China.
Zero Hedge chart
The Guardian reports “Global debt has grown by $57 trillion to reach $199 trillion in the seven years following the financial crisis – a 40.1% rise, according to a new report. All major economies are now recording higher levels of borrowing relative to gross domestic product (GDP) than they did in 2007 … Total debt as a share of GDP stood at 286% in the second quarter of 2014 compared with 269% in the fourth quarter of 2007.” Does that sound like deficit reduction to you?
“China’s total debt has nearly quadrupled over the same period, rising from $7 trillion in 2007 to $28 trillion by mid-2014. The rise, say the authors, has been fuelled by real estate and shadow banking – half of loans are linked to real estate, while nearly half of new lending is attributed to unregulated shadow banking. The country’s debt as a share of GDP stands at 282% – higher than that of the US and Germany.”
And Washington’s Blog bi-lines, “Global Debt Is Almost 3 Times As Big As the World Economy”. Some reduction!
Fake Gas Savings
We were told that the drop in the price of gas at the pump will spur consumer spending. However, gas prices have been falling since last summer and, despite that, shopping at Christmas was lackluster and retails sales are still declining.
It’s no wonder. Here’s a chart from (thanks again) Zero Hedge showing where Amerikan consumers are spending their new-found wealth. Hooray for Obamacare! (kidding)
Oh, and notice the last item. Food and Beverages are in negative territory. So, what does that say about all the fake new waiter/waitress and bartender jobs in the food and beverage industry? Why would bars and restaurants be hiring more people if their sales are declining? More BS brought to you by our dear leaders.
Central banks can debt (treasury bonds) which in turn increases the money supply. This essentially turns debt into money (monetization). Ok, let’s call it what it is: legalized counterfeiting.
Our money is created by debt and is no longer backed by any asset. Instead it is backed by the faith and confidence in our politicians. Notice that word starts with ‘CON’. If that doesn’t scare the crap out of you, what does?
The chart shows that it is central banks “who is buying all the government debt and forcing bond yields ever lower, why $3.6 trillion in global debt is trading at negative yields, and why much more sovereign debt will very soon also reside in the terminal twilight zone of interest-bearing securities.” Think of it as trading IOU’s back and forth to create pretend money. Not very CONfidence inspiring is it? We’ll be lucky to get to the end of the year before this house of cards collapses.
Fake Stock Markets
So, if global economies are declining, why are stock markets breaking records? I’m glad I asked.
First, stock markets have little to do with eCONomies anymore. They once reflected investor’s anticipation of future economic performance but, much of the trillions of dollars of counterfeit Quantitative Easing (QE 1, 2, 3 and everything in between) have found their way into the stock markets in a desperate search for yield in a zero interest rate world. Higher stock prices benefit the moneyed-classes but not John Q Public.
Second, is the enormous amount of corporate stock buy-backs that raise the price of stocks. Henry Bonner writes, “US stocks have soared by around 100% since early 2011. Corporate buybacks and debt issuances have surged too. US corporations are piling on new debt and buying back their shares. In 2014, S&P 500 companies are estimated to have spent 95% of profits on buy-backs and investor payouts … These buybacks are in part fueled by historically low interest rates, allowing companies to borrow cheaply. Around $1.7 trillion in buybacks occurred from 2011 to 2014.5 New corporate debt has increased by around $1.4 trillion during that time – as you can see in the chart below.”
Zero Hedge quotes Deutsche Bank’s explanation, “buyback announcements have surged with February ($98bn) posting the largest monthly tally on record. The pace of actual buybacks tends to closely follow that of announcements.”
Zero Hedge also states, “It should thus come as no surprise why the S&P 500 soared to record highs at a time when US economic data tumbled at the fastest pace in years.
“It also explains why, in the absence of the Fed, stocks continue to rise as if QE was still taking place: simply said, bondholders – starved for any yield in an increasingly NIRP (Negative Interest Rate Policy) world – have taken the place of the Federal Reserve, and are willing to throw any money at companies who promise even the tiniest of returns over Treasuries, oblivious if all the proceeds will be used immediately to buyback stock, thus pushing equity prices even higher, but benefiting not only shareholders but management teams who(se) equity-linked compensation has likewise never been higher.”
David Stockman’s view is that Corporate America is cannibalizing itself. Instead of borrowing to “fund plant, equipment and other long-lived productive assets … the only thing being liquidated is their own equity capital … to fund financial engineering maneuvers such as stock buybacks, M&A [mergers and acquisitions] and LBOs [leveraged buyouts], not the acquisition of productive assets that can actually fuel future output and productivity.”
Never underestimate the power of stupidity fuelled by greed and corruption.
The U.S. CONgress is so useless now that Amerika has no real fiscal policy and relies entirely on the Fed’s monetary policy which is reaching the end of its effectiveness. When the inevitable you-know-what hits the fan, it’ll be a repeat of 2008 when the price of everything goes down.
Not knowing the value of their assets, it will again make it impossible to determine which financial institutions were
broke solvent, and lending, already at low levels will stop altogether. Thank you, Congress for enabling the next financial crisis when we haven’t dug ourselves out from under the last one.
Fake Fed & Central Banks
With Zero Interest Rate Policy (ZIRP) or less than zero if adjusted for the real inflation rate or even Negative Interest Rate Policy (NIRP), central banks have boxed themselves into a corner. They need to raise rates to give themselves leeway to lower them again to fight the inevitable next economic downturn. However, raising rates would,
a)effectively destroy what’s left of faltering economies, as well as
b) boost over-indebted governments’ interest costs on their ever-burgeoning debt, and
c) blow up the biggest bubble in history; the bond bubble
Consequently, all the ammunition they’re left with is talk. They’ve been threatening to raise rates for what, seven years now? And, amazingly it’s worked (so far) because there are a lot of dumb people out there. However, as Abraham Lincoln is said to have said, “you can fool some of the people all the time, all the people some of the time but you cannot fool all the people all the time.”
According to Scotiabank’s Guy Haselmann, “It appears markets are on the verge of learning just how damaging the unintended consequences will be from multiple years of extreme central bank promises now that the Fed has run out of the ammunition to keep the utopian market façade alive.”
Here’s some more eloquence from James Howard Kunstler: “Finance is complicated, but not as complex as the wizards employed in it would have you believe. They would have you think it is an order of magnitude more abstruse and recondite than particle physics, when, in fact, it is often not much more than a Three Card Monte switcheroo. The whole ZIRP and QE game, for instance, can be boiled down to a basic wish to get something for nothing, that is, prosperity where nothing of value is created. Now, that’s not so hard to understand, is it? Until the economics wardrobe team comes in and dresses it up in martingales and bumrolls of metaphysics and you end up in a contango of mystification …
“The code of anything goes and nothing matters is turning lethal and the more it is kept swaddled in lies, the more perverse, surprising, and destructive the damage will be …
“The more central bankers intervene in price discovery mechanisms, the more unable to reflect reality all markets will become. The more that the US BLS lies about the employment picture in America, the worse will be the eventual wrath of citizens who can’t get paid enough to heat their houses and feed their children…
“The consequence of this behavior will not be eternal virtual prosperity, but rather a wrecked accounting system for the operations of civilized human life. We’ve stepped across the event horizon of that consequence, but we just don’t know it yet.”
Central banks, including the Fed, can NEVER willingly raise rates. Note the word “willingly”. Once sovereign debt defaults begin, all bets are off. Everyone will demand higher rates for escalating risk and then central banks will have effectively lost CONtrol and we’ll be in freefall. Greater men than me forecast this will occur before too long; likely before the end of the year.
Are you prepared?
Fake Gold Demand & Prices
Koos Jansen reports, “How The World Is Being Fooled About Chinese Gold Demand” because the World Gold Council (WGC) is deliberately under-reporting Chinese accumulation of gold. The Shanghai Gold Exchange (SGE) shows more than twice that volume of gold leaving their vaults.
Koos says he is “open minded towards the possibility there is an agenda that is allowing China to buy as much gold for as little fiat as possible to make them accumulate whatever necessary before a monetary reset.* I see no other explanation for the events unfolding in front of our eyes … If you think about it, the redistribution of gold is the only logical thing to happen given the state the world economy is in. … gold has to go to China in order to equalize the chips.”
* Jim Sinclair is forecasting the ‘Great Levelling’ in 2016 followed by four years of turmoil before the ‘Great Reset’ in 2020; the collapse of the U.S. dollar as the global reserve currency and the issuance of a new reserve currency at least partially based on gold. You can bet it won’t be to your advantage so get out of debt and into hard assets ASAP.
There isn’t enough gold in the world to entirely back a new reserve currency unless gold is valued at some outrageous price between $55,000 and $100,000 an ounce. That would never be allowed to happen without exposing the great Ponzi scheme that our fiat currencies are based upon.
It will be interesting to see whether and when the newly created Chinese Shanghai Gold Exchange (SGE) will influence the spot price of Gold. Unlike the fraudulent U.S. COMEX, the SGE doesn’t allow naked short selling which is one of many ways to manipulate gold prices. The SGE requires settlement in physical gold and actually has the gold to enforce this requirement. China is the world’s largest importer and producer of Gold.
Fake Capitalism & Free Enterprise
I wish all the Collectivist Idiots (Democrats, neo-liberals, socialists, progressives, Marxists, Communists, etc.) would stop whining about the evils of Capitalism. We don’t have Capitalism. We have command economies run by bureaucrats incapable of running a lemonade stand. We haven’t had free markets or free enterprise or Capitalism since most of these brainless Collectivists were born.
Capitalism requires a price and information discovery mechanism. Since everything is fake, the capitalism that once served rich and poor alike is now dead; replaced by socialism (control everything) and a command economy (ask the Russians how well that worked in the Soviet Union).
We don’t have capitalism; we have corporatism aka Fascism. Capitalism’s final death knell was evil governments’ declaration that corporations were “too big to fail.” Under real capitalism there was no such thing; it was called ‘creative destruction’. It punished stupidity, created efficient markets and encouraged innovation and low prices. The only thing we see in abundance now is stupidity.
It stopped being a free market in stocks, bonds, etc. when Too Big To Fail (TBTF) investment banksters and other major corporations (i.e. auto makers) coerced their bum-boys on evil government to the taxpayer to rescue TBTF instead of allowing them to fail in free market “creative destruction”.
Nowadays, markets exist only to be gamed by the moneyed-class. For more detail on market corruption click HERE.
Frank-Dodd was passed in 2010 deregulating the U.S. investment banks while everything else, particularly small businesses which are the real job creators are being regulated to death as reported previously.
Have you ever noticed most of our so-called heroes are government workers like cops and fire fighters and teachers and the underclass dumb enough to go to war (we salute them going off to fight and the government throws them in the trash when they return).
We have Presidents and Prime Ministers and dear leaders’ portraits on our money.
Even our holidays glorify government employees with Memorial Day, Remembrance Day & Victoria Day (both Commonwealth), Veterans Day, President’s day, etc.
A notable recent example is right-winger, Clint Eastwood’s movie “American Sniper”. While entertaining and emotionally moving, it’s pure propagandistic trash and a military recruitment film that played at theatres for more than two months.
It should be called “American Liar” because the real Kyle was a braggart and blowhard. That’s why Jesse Ventura sued for defamation and unjust enrichment. Defamation is very difficult to prove yet Ventura won.
At the beginning of the movie Chris Kyle (Bradley Cooper) had his scope sights on a woman coming out of a house and handing a Russian anti-tank grenade to a young boy. In Kyle’s book there was no child, only a woman. Eastwood makes her evil by sending a child to his death. Also, in Kyle’s book she had a much smaller Chinese grenade. And, the movie goes downhill from there.
The Iraqi sniper named Mustafa who Kyle admits he never saw gets merely one paragraph in Kyle’s book. Yet, in the fictional movie he becomes his over-riding nemesis.
The personal struggle Kyle endures as a result of his four tours of duty in Iraq is not motivated by regrets over the people he kills, including women and children (he considered himself “a cross between a lawman and an executioner”), but on his failure to kill more of what he called savages who were defending their homeland from we invaders.
After returning home, Kyle tried to help a troubled vet Eddie Ray Routh by taking him to a gun range. Routh was deranged and had also been drinking and taking drugs. Kyle texted, “This dude is straight-up nuts.” Yet, Kyle was so convinced of his own legend, he thought he could handle anything and that some ‘gun therapy’ could help the troubled vet.
Routh killed him and has since been found guilty of murder. Of course he was found guilty. If he were found insane, it would make our hero complicit in his own death.
How sad that “the moral depravity into which the US is sinking is shown by the movie American Sniper glorifying the exploits of a racist killer receiving six Oscar nominations, whereas ‘Selma’ depicting Martin Luther King’s struggle against racism has received none.”
A U.S. judge ruled that the price of admission to a sporting event entitles you to entertainment, not fairness (think Pro Wrestling where the outcome is obviously predetermined). If anyone has the link to this story, please leave a comment.
Do you think Pro Wrestling is the only pro sport that’s rigged? Remember 2015’s Super Bowl XLIX? The Seattle Seahawks won the previous year so, of course, the New England Patriots would win this one. Passing from the crowded one yard line with the very real likelihood of interception ending the game! I mean, really?
And, adding insult to injury, that’s after we had to watch what’s-her-face twerking in her frumpy dress …
As much as I enjoy James Howard Kustler’s prognostications, I cannot agree with his “eventual wrath of citizens” as he and others dream of the ‘uprising’ and ‘revolution’ when ‘things get ugly’. However, sheep don’t revolt. Most people blindly follow authority.
That was amply demonstrated in WW II when an otherwise civilized nation like Germany blindly followed their leaders to allow the slaughter of millions.
It was then scientifically proven in the early 1960’s Milgram Experiments conducted by Yale University psychologist Stanley Milgram. He was surprised that 65% (2 out of 3 people) are subject to ‘Group Think’ and will blindly follow the orders of authorities.
Milgram expected less than 1% of people would apply a lethal 450 volt electrical charge to another person. He was so stunned by the outcome that he filmed the last day of the experiments because he felt no one would believe the results.
Human nature never changes. What was true 50 years ago is still true today.
Q: Will the sheeple wake up?
A: No. In fact, of the 1/3 of the Milgam experiment subjects who refused to go all the way, none applied less than 300 volts.
Q: Will the troops fire on their own people?
A: Yes, of course. That’s what they’re trained for. In fact, the police are already brutalizing and executing citizens as you’ll see next.
Many police forces have as their motto: “To Serve and Protect”. The question is to serve and protect whom? It certainly isn’t “We the People”. Here’s a list of a few reports of out-of-control police over the last few months.
I’ve been ranting for seven years now (I can’t believe it’s been that long) about the importance of CONfidence and the CONsequences of losing CONfidence. The more duplicitous fakery that’s created the sooner we cross that event horizon (if we haven’t already). We can only fake it so long before the whole house of cards tumbles down around us.
Just before the Soviet Union collapsed, the joke making the rounds among the workers was, “We pretend to work and the bosses pretend to pay us.” And, then it collapsed! We, too, can pretend only so long.
Are you prepared?
There’s lots more fakery, but I’ll simply list a few otherwise this already lengthy article will turn into a depressing book: fake food, war on drugs, 9/11, healthcare, media, hope, incentive to build capital, concern for real jobs with full time hours & benefits, change, savings, religions, concern about minorities, prisons, equality, reasons for war,
offence defence spending, borders, security, financial stability, income growth, terrorism, borders, etc. etc.
You can’t blame an avalanche on a single snowflake, but on the unstable snowpack and it’s the same with our monetary and financial systems. All this fakery has created such instability that literally any event could trigger the collapse. And, nobody knows when. According to Jim Rickards, “The blunders have already been made. It’s not as if we’re going to do some bad things that’s going to create risks. The risk is already there. It’s embedded. We’re just waiting for that catalyst … it could happen very suddenly — and likely it will — and we won’t see it coming…”
Remember the mantra:
We cannot borrow our way out of debt.
We cannot spend our way to prosperity.
We cannot PRETEND our way out of trouble.
Friday, March 13, 2015
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