Monday, April 8, 2013

Is The U.S. Economy In Serious Trouble?

The Federal Reserve should continue buying bonds through this year due to a "scarring" of the labor market, and even more aggressive policies may be warranted if unemployment remains persistently high, a top Fed official said on Friday.  - Eric Rosengren, Boston Fed Head from Reuters  LINK
That an insider from a high level in the Federal Reserve would remark in response to Friday's jobs (or rather, "jobless") report that more QE may be needed kinda makes you wonder what the "insiders" are seeing that is not being accurately reported by politicians, Wall Street and the media.

I took a stab at looking at some of the data that might not make it into your daily mainstream media news regimen in order to shed some light on the "real" economy:
With the ability of the consumer to spend as represented by retail gasoline sales, the likelihood of a plunge in U.S. exports to Europe and the high probability that the real estate "boomlet" is ending, the U.S. economy could go into a tailspin.
You can read my analysis here:  Is The U.S. Economy In Trouble

Subsequent to writing and publishing that article, it occurred to me that, in addition to the negative GDP-effect from the pressure put on U.S. exports to Europe by a recession there, most you know that Japan has implemented an extraordinary money printing policy designed to push the yen lower vs. the dollar.  This will have the effect of boosting Japanese exports to the U.S., decreasing U.S. exports to Japan and depressing manufacturing further in the U.S.

This situation with the yen makes my analysis even more relevant and probably explains why the Fed is terrified by the state of the U.S. economy.  Otherwise why is the Fed adding money to the money supply at a parabolic rate (see my article)?   Obviously this makes the argument for gold even stronger, as now it's the U.S.' turn to fire a shot in the ongoing global currency war...


  1. "Rosengren, a dovish voter on the Fed's monetary policy committee this year, highlighted the difficulties that less-educated Americans face in the search for work in the wake of recession."

    BULLSHIT! Many laid-off Americans are skilled and even went back to College to sharpen those skills and still won't get hired. many businesses were being run on the same cheap-credit scam that the housing market was doing. You didn't have to worry about making a profit cause you would simple refinance your debts every 3 years and end up with more money in your pocket. Until the crash came and your business went under from its debts crushing it.

    Then bigger businesses laid workers off while giving top Execs big bonuses - was this to give them an advantage so they could secured themselves when the real crash come? You would have businesses with billions in debt while tripling Execs salaries before the business went bankrupt and then ask the bankrupt judge for MORE bonuses.

    "Is The U.S. Economy In Trouble?" was very well written. Highly recommended.

    There's more to the whole story that just the FEDS and Congress. There's a whole group of characters involved and, the sooner they kill each other to stay alive on top of the mountain, the better.

    1. What did Marx say some 150 years ago: added value in products will not fill the pockets of the workers, but directly enriches the capitalist financiers. Accumulation of capital at a minority, poverty for the majority.
      Jobless growth and billion of dollars to the bonus accounts of the ceo's is the best proof Marx'theory is still alive. Unemployed people of the world need to unify and stand up against this enriching layer!

  2. you know, Dan and God love you, but these currency situations are so much horseshit that I laugh/ to wit, back when i was at clayton brokerage in st. louis, i asked the wizards why mercedes and bmw's did not come down in price and nobody gave me an answer; today, i called around and found out Lexus prices have not budged even though the Yen has collapse since Thanksgiving; i am long term bullish silver/gold and short term very bearish; the ratio is horrible; grains, energy all bearish; we had assassinations of great men in the 60's you know?

  3. Vinik Hit With $1.5 Billion In Redemptions

    The withdrawals also coincide with investor fears that Vinik himself is stepping away from day-to-day management of the firm. Vinik recently moved from Boston to Tampa, Fla., to be closer to the hockey team, the Tampa Bay Lightning, he bought three years ago. He also last year took on the role of chief investment officer and hired a new investment team, and consolidated his firms' funds, each previously run by its own manager.

    Some of Vinik's difficulties, however, are due to investment decisions he made, notably increasing exposure to equities at the end of last year. His new investment team also made a money-losing investment in gold.

  4. The race to debase is not a beggar thy neighbor policy, it's a bugger thy neighbor policy.

  5. I can't understand a world where Bitcoin can be at $200 and PMs just stagnate. I hope we don't see this trend continue for another two years.

  6. Obama budget to take aim at wealthy IRAs - The Hill's On The Money

    Obama is still using the Wealthy this us pure excellence.

  7. Introducing the 97-Month Car Loan

    Last month Nakisha Bishop took out a loan to buy a $23,000 Toyota Camry and pay off several thousand dollars still owed on her old car. The key to making it work: she got more than six years—75 months in all—to pay it off.

    "I had a new baby on the way, and I was trying to keep my monthly payment a little bit lower to help afford child care," Ms. Bishop, a 34-year-old sheriff's deputy in Palm Beach County, Fla., said recently. She pays $480 a month for the 2013 Camry, just $5 a month more than the note on her old car. The car won't be paid off until her 1-month-old daughter is heading to first grade.

    Ms. Bishop's 75-month loan illustrates two important trends rippling through the U.S. auto industry. Rising new-car prices and competition among lenders to attract borrowers is pushing loans to lengthier terms. In part, banks see the longer terms as a way to attract buyers, by keeping monthly payments under $500 a month.

    Such long term loans can present consumers and lenders with heightened risk. With a six- or seven-year loan, it takes car-buyers longer to reach the point where they owe less on the car than it is worth. Having "negative equity" or being "upside down" in a car makes it harder to trade or sell the vehicle if the owner can't make payments.

    Few lenders were willing to discuss the move to longer loans. Ally Bank, the largest car financier, declined an interview request but said in a written statement: "Generally, the current economic and consumer environment is more favorable for longer terms as compared with prior periods... The used vehicle market remains strong, current vehicle quality also helps to maintain appropriate values, and consumer credit profiles are improving."

    How do you like the way they're selling this ?

  8. Kyle Bass Is "Perplexed" At Gold's Low Price

    "The stress is beginning to show," Kyle Bass warns during a wide-ranging interview with Bloomberg TV. "The beginning of the end," is here for Japanese government bonds as he notes that while quantitiavely it is clear they are insolvent, "the qualitative perception of participants is changing." But away from Japan specifically, there is a lot more on the Texan's mind. "Things go from perfectly stable to completely unstable," very quickly; even more so after 20 years of exponential debt build-up and Keynesian cover-ups; and it is this that he warns complacent investors that it is "really important to think about the capital at risk in your strategy." For this reason he prefers to hold gold rather than Treasuries, as, "when you think about the largest central banks in the world, they have all moved to unlimited printing ideology. Monetary policy happens to be the only game in town. I am perplexed as to why gold is as low as it is. I don't have a great answer for you other than you should maintain a position." His discussion varies from housing's recovery to structured credit liquidity "money is being misallocated by the printing press" and the future of the GSEs, concluding with the rather ominous, "at some point in time, I would much rather would own gold than paper. I just don't know when that time is."

  9. Comex Gold Inventories Collapse By Largest Amount Ever On Record

    Over the last 90 days without any announcement, stocks of gold held at Comex warehouses plunged by the largest figure ever on record during a single quarter since eligible record keeping began in 2001 (roughly the beginning of the bull market). See chart below.

    Total drainage of physical inventories reached nearly 2 million oz.’s of gold, which at today’s prices represent roughly $3,000,000,000 dollars.
    According to chart sage Nick Laird, this data indicates that, “Eligible stocks which are owned in LBMA/Comex good delivery form are being drawn down—which means they are being removed from the warehouses. As to how and why they are [being] removed, that is a mystery. [Up until now], eligible stocks were on the continual increase throughout the bull market. Now that trend has changed.”

  10. "Don't Expect Consumer Spending To Be the Engine of Economic Growth It Once Was".

    Federal Reserve Board of St. Louis/ Jan. 2012

    1. Andy Kessler: The Pension Rate-of-Return Fantasy
      Counting on 7.5% when Treasury bonds are paying 1.74%? That's going to cost taxpayers billions.

      Federal bankruptcy judge Christopher Klein ruled on April 1 that Stockton, Calif., can file for bankruptcy via Chapter 9 (Chapter 11's ugly cousin). The ruling may start the actuarial dominoes falling across the country, because Stockton's predicament stems from financial assumptions that are hardly restricted to one improvident California municipality.

      Stockton may expose the little-known but biggest lie in global finance: pension funds' expected rate of return. It turns out that the California Public Employees' Retirement System, or Calpers, is Stockton's largest creditor and is owed some $900 million. But in the likelihood that U.S. bankruptcy law trumps California pension law, Calpers might not ever be fully repaid.

      In the long run, defined-contribution plans that most corporations have embraced will also be adopted by local and state governments. Meanwhile, though, all the knobs and levers that can be pulled to delay Armageddon have already been used. California, through Prop 30, has tapped the top 1% of taxpayers. State employers are facing 50% contribution increases. Private equity has shuffled all the mattress and rental-car companies it can. Buying out Dell is the most exciting thing they can come up with. Expected rates of return on pension portfolios are going down, not up. Even Facebook FB +3.14% millionaires won't make up the shortfall.

      Sadly, the only thing left is to cut retiree payouts, something Judge Klein has left open. There are 12,338 retired California government workers receiving $100,000 or more in pension payments from Calpers. Michael D. Johnson, a retiree from the County of Solano, pulls in $30,920.24 per month. As more municipalities file Chapter 9, the more these kinds of retirement deals will be broken. When Wisconsin public employees protested the state government's move to rein in pensions in 2011, the demonstrations got ugly—but that was just a hint of the torches and pitchforks likely to come.

      Meanwhile, it's business as usual. California Gov. Jerry Brown released a state budget suggesting a $29 million surplus for the fiscal year ending June 2013 and $1 billion in the next fiscal year. Actuarially anyway.

  11. Cyprus To Sell €400 Million In Gold, About 75% Of Its Total Holdings, To Finance Part Of Its Bailout

    Curious why every bank and their grandmother, and most recently Goldman today, has been lining up to push the price of gold as low as possible? Here's why:


    Or about 10 tons of gold. But... the bailout was prefunded and there was no need to provide any additional cash? What happened: was the deposit outflow discovered to have been even greater than the worst case scenario and thus Cyprus needed even more cash? As for the buyers? We will venture a guess: central banks buying at the lows.
    Finally: congratulations Cypriots. You are now handing over your gold for the one time, unbeatable opportunity to remain a vassal state to the Eurozone.

  12. If Bullion Were Not a Threat Government Would Not Attack It- Paul Craig Roberts

    By Greg Hunter’s

    You want to know why gold and silver prices are down? Listen to former Assistant Treasury Secretary Paul Craig Roberts. He says, “When gold hit $1,900, the Federal Reserve panicked because they realized with the dollar deteriorating so rapidly, compared to bullion prices, that soon it would also deteriorate its exchange value with other currencies.” So, Dr. Roberts contends, “The Fed had to cap the price of gold and stop the rise. . . . If bullion (gold and silver) were not a threat, the government would not be attacking it.” Not only is the Fed debasing the dollar, but the Fed and IMF encourage other countries to do the same thing. So, gold will continue to be acquired, and Dr. Roberts, who holds a PhD in economics, goes on to say, “They can’t forever suppress the gold price because if you look at actual demand for physical possession of the metal, it continues to rise. . . . They are desperately concerned about the dollar.”

  13. Is The U.S. Economy In Serious Trouble?

    Well let's see,

    Is unemployment at an all time high ?

    Are there more foreclosers then any other time in U.S. history?

    Is America's largest export the U.S. dollar?

    Has the Federal Reserve produced/Q-E'd trillions of U.S. dollars?

    Is the U.S. government working from within to set up future policing of it's own people ?

    Is this list of questions pertaining to ongoing catastrophes seemingly forever
    continuing on, present day ?

    YUP ! I guess that answers the opening question !!

  14. Canadian Broadcasting Corp. to air 'The Secret World of Gold'

    The documentary, "The Secret World of Gold," will be broadcast on CBC's premier investigative program, "Doc Zone," and it seems to have a clue about market manipulation.

    The CBC's announcement of the program says in part: "Some claim that much of the gold held by the Bank of Canada, the Bank of England, the Federal Reserve, and Fort Knox is gone -- that for every 100 ounces of gold traded, there exists only 1 ounce of real, physical gold. So where is the gold -- and who really owns it?"

    We don't yet know how accessible this documentary will be outside Canada but we hope that it eventually will be accessible worldwide and we'll keep you posted about it.

  15. Well if the answer in this question is "yes", I think the next question will be, What are the solution of Government to this economic problem?

    economic development

  16. Economies of smaller countries will be affected if US economy encounters problems.