Monday, October 22, 2012

What Economic Recovery? Your Taxes At Work?

I'm going to do a post on the bogus housing "recovery" but it will require some extra work. As a teaser, based on the data and analysis I've looked at - in conjunction with and confirmation of my own thinking - the so-called "housing recovery" as its being promoted in the media is as phony and manipulated as any other economic statistic. But for the amount of time I have to post something today, I wanted to unload some news reports that irritate the crap out of me, which means you'll have to read them if you decide to read my post today.

To begin with, lets shoot down this notion that the economy is regaining health. I saw an article on the Financial Times blog this morning that suggested that the U.S. economy was the only relatively bright spot around the globe. I'm scratching my head on this one. Here's how John Williams ( summarized last weeks main economic reports: Quarterly Industrial Production Contracted for First Time Since Official Recession, Quarterly Pace of Inflation Picked Up, With CPI and PPI Topping Market Expectations, September Year-to-Year Inflation: 2.0% (CPI-U), 9.6% (SGS), Real Average Weekly Earnings Continued to Tumble, Inflation Provided Half of September Retail Sales Growth. CPI-U is the Government number and CPI-SGS is Williams' alternative calculation of inflation. I know my own spending experience is a lot more consistent with the SGS measurement.

To be sure, the massive Government and Fed stimulus initiated in late 2008, and continuously administered since then, somewhat stabilized the economic shock from the 2008 banking system collapse. However, if you apply a true inflation measure rather than the Government-rigged CPI metric, there is a very valid argument that the economy never achieved real growth (real growth = nominal GDP minus real inflation). Based on many factors, including the data I posted on Friday, it would appear that the economy is heading back into tailspin. Caterpillar announced its earnings this morning and, like the major GDP/infrastructure companies that reported last week, it reported earnings that fell short of expectations and had to lower future expectations: LINK

 A big part of how the Government has created a tenuous safety net for the economy has been to take your tax dollars and heavily subsidize automobile manufacturing and ramp up welfare spending.  Everyone knows about the massive bailout of GM and Chrysler.  But check out this news item from a local Michigan newspaper about the "success" of the Government's Chevy Volt program:
Workers at LG Chem, a $300 million lithium-ion battery plant heavily funded by taxpayers, tell Target 8 that they have so little work to do that they spend hours playing cards and board games, reading magazines or watching movies.
Here's the LINK  Speaking of the Volt, I saw a report about two weeks which had calculated that the Government was spending something like $40,000 per car to produce the Volt, which has been a colossal failure.  You can probably use google to find the report if you think I misread.

In addition, everyone knows that entitlement spending on student loans and social security disability has started to go parabolic since Obama took over the Government (please note:  I believe that Government spending and debt accumulation would have ramped up like this regardless of which Party controlled the Oval Office).   It was reported  last Thursday that Federal welfare spending has increased 32% over the last four years.  In fact, Federal and State welfare combined is now $1.03 trillion:  LINK  That number is over 25% of total Federal reported spending (as opposed to "off-budget" spending).  But that's okay.  Even though private sector wages are declining on average, Obama wants to make sure Government employees are well taken care of:  LINK

Make no mistake in thinking that any of the above numbers would have been any different under a Republican administration.  Look at Government welfare and union-industry bailouts as "insurance" payments against widespread revolt.  If the Government were to cut back on any of its spending, without real private-sector growth replacing that Government spending, our economy would collapse into the worst depression in the country's history.  I'm not defending it, I'm just telling it like it is.

The bottom line is that this is completely unsustainable.  And neither Presidential candidate has clarified with specifics as to how they would address the above mess.  I have heard plenty of grandiose political platitudes and promises, but no workable solutions.  I don't think there are any.  I have no idea how or when this is going to hit the wall, but I do know it will be most unpleasant.  You can soften the blow to yourself and your family by moving as much of your fiat-based wealth out of the system and into precious metals...I plan on switching between the NLCS game and the Monday Night Football game tonight - the Presidential debate will go unwatched by me - the first two were just not entertaining enough...


  1. We must, and we will, sustain this huge recovery to infinity ... and beyond!
    /s btw

  2. This what the world's biggest bubble truly is, the "confidence" bubble. It is propped up with the equally absurd misinformation propaganda-stream which fuels the bubble. When the confidence bubble bursts, there will be ZERO trust in anything, as there should be today, but our confidence mania is supported by normalcy bias, as well as self-interest at many levels.
    There will be BIG surprises as to where the gold actually is versus where it is supposed to be.
    As gold is truly a store of CREDIBILITY, the demand for credibility will go parabolic.
    Dave, these very same words have been expressed in different terms. Yes, the bond bubble is very close to the confidence bubble in nature due to the perceived confidence in it's store of value function. But when fear and panic take hold, it will truly be seen that it was the confodence bubble that burst, and the lies that fueled it, will lead to an historic distrust as never before seen in all time. Think about it. You heard it hear first, as far as I can tell.

  3. "Workers at LG Chem, a $300 million lithium-ion battery plant heavily funded by taxpayers, tell Target 8 that they have so little work to do that they spend hours playing cards and board games, reading magazines or watching movies." -- Sounds like my local shire government employees!

  4. Dave, I'm with you on this one, MNF & NLCS for sure. Two bozo's that are bought and paid for just can't take the hits of the NFL or hit a MLB fastball. I say sack one of them and bean the other.

  5. Times are never different. I should listen more to the newsletter writers who actually get paid - their track record is better than the cultish people. Clive Maund has been very accurate.

    and times are never different - when the Dow and S&P tank then everything tanks - the sheeple get bamboozled always by some saying it's different. Jim Sinclair saying there will not be a big correction.

    I will not buy an ounce of Silver anymore. Bill Murphy was nicely set up by his "Contacts" wasn't he, and so he is taking his readers with him. Bill Murphy is worth rubbish.

    The London Trader has consistently been wrong - every time he comes out the prices really tank. $10 away from commercial failure in gold. What crap.

    china buying all this physical etc - it means shit.


    1. Disagree. Don't know how long you've been doing this sector but I was reading Maund from 2001-2003 until I realized he was nothing more than a glorified simpleton chartist. He occassinally gets the tops right, but he almost always misses the biggest part of the big moves higher.

      Murph's contact in London has been pretty accurate, though not 100%. No one is 100%. We employ our market timing trades using a lot of information, but mostly our 11+ years of experience trading this sector and our 60+ years of combined experience with the securities markets.

      Newsletter writers are the biggest slime because they sell snake-oil analysis, use revisionist history freely to distort their results and NEVER USE THEIR OWN FUCKING MONEY.

      If a newsletter writer had ANYTHIHG worth selling, he wouldn't sell it. He would use his own money and grow more money on trees, so to speak.

  6. Rep. Peter King Says Presidential Kill List “Totally Constitutional”

  7. Memo to Central Banks: You’re debasing more than our currency

    At its most fundamental level, economic activity is no more than an exchange between strangers. It depends, therefore, on a degree of trust between strangers. Since money is the agent of exchange, it is the agent of trust. Debasing money therefore debases trust.

    Yet inequality has surged. While a record number of Americans are on food stamps, the top 1% of income earners are taking a larger share of total income than since the peak of the 1920s credit inflation. Moreover, the growth in that share has coincided almost exactly with
    the more recent credit inflation.

    These phenomena are inflation’s hallmarks.

  8. Will the Apocalypse arrive online?

    Last week, Panetta addressed the Business Executives for National Security, an organization devoted to creating a robust public-private partnership in matters of national security. Standing inside the Intrepid, New York's retired aircraft-carrier-cum-military-museum, he offered a hair-raising warning about an imminent and devastating cyber-strike at the sinews of American life and well-being.

    Yes, he did use that old alarm bell of a "cyber-Pearl Harbor", but for anyone interested in US civil liberties and rights, his truly chilling image was far more immediate. "A cyber-attack perpetrated by nation-states or violent extremist groups," he predicted, could be as destructive as the terrorist attack of September 11, 2001.

    Panetta is not the first official in the administration of US President Barack Obama to warn that the nation could be facing a cyber-catastrophe, but he is the highest-ranking to resort to September 11 imagery in doing so. Going out on a limb that previous cyber doomsayers had avoided, he mentioned September 11 four times in his speech, referring to America's current vulnerabilities in cyberspace as "a pre-9/11 moment".

    The UN Calls for Aggressive Internet Censorship
    The United Nations is calling for more surveillance of Internet users, saying it would help to investigate and prosecute terrorists.

    A 148-page report (PDF) released today titled “The Use of the Internet for Terrorist Purposes” warns that terrorists are using social networks and other sharing sites including Facebook, Twitter, YouTube, and Dropbox, to spread “propaganda.”

    “Potential terrorists use advanced communications technology often involving the Internet to reach a worldwide audience with relative anonymity and at a low cost,” said Yury Fedotov, executive director of the U.N. Office on Drugs and Crime (UNODC).

    Furthermore, how does the UN define “propaganda?” While I call out the government for its use of propaganda I don’t advocate making their speech illegal. This is the UN clearly demonizing free speech and it is quite clear that their definition of “propaganda” is anything that isn’t in line with the banker-political oligarchy’s version of reality.

  9. Before the Election was Over, Wall Street won

    Before the campaign contributors lavished billions of dollars on their favorite candidate; and long after they toast their winner or drink to forget their loser, Wall Street was already primed to continue its reign over the economy.

    For, after three debates (well, four), when it comes to banking, finance, and the ongoing subsidization of Wall Street, both presidential candidates and their parties’ attitudes toward the banking sector is similar – i.e. it must be preserved – as is – at all costs, rhetoric to the contrary, aside.

    Obama hasn’t brought ‘sweeping reform’ upon the Establishment Banks, nor does Romney need to exude deregulatory babble, because nothing structurally substantive has been done to harness the biggest banks of the financial sector, enabled, as they are, by entities from the SEC to the Fed to the Treasury Department to the White House.

    The most consistent political platform is that big finance trumps main street economics, and the needs of the banking sector trump those of the population. We have a national policy condoning zero-interest-rate policy (ZIRP) as somehow job-creative. (Fed Funds rates dropped to 0% by the end of 2008, where they have remained since.)

    We are left with a regulatory policy of pretend. Rather than re-instating Glass-Steagall to divide commercial from investment banking and insurance activity, thereby removing the platform of government (or public) supported speculation and expansion, props leaders that pretend linguistic tweaks are a match for financial might. We have no leader that will take on Jamie Dimon, Chairman of the country’s largest bank, JPM Chase, who can devote 15% of the capital of JPM Chase, which remains backstopped by customer deposit insurance, to bet on the direction of potential corporate defaults, and slide by two Congressional investigations like walks in the park.