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Truth and nothing but....
| REAL POWERFUL AND SOPHISTICATED FINANCIAL CALCULATORS |
KEYNESIAN ECONOMICS
Japan's Economy Shows
Limits of Keynesian
Policies...read on
Limits of Keynesian
Policies...read on
| Right of Green Line, Era of Keynesian Economics, Right of Red Line no Gold Standard |
The New Credit Crisis
| .We are in the midst of a 2nd Credit Crisis. .This time the Credit Crisis is centered in Europe . The first was centered in the United States. read on |
•National Debt: $15.4 trillion
.State and Local Debt $3.0 trillion
.Unfunded liabilities $116 trillion.
•Debt to GDP ratio 99.6% (actually much higher).
•Doesn’t include Federal Reserve or Fannie Mae,
Freddie Mac and FHA obligations.
•Debt Ceiling at $16.4 trillion (up to election).
•Budget Deficit for 2011 was $1.3 trillion.
•Estimated Deficit for 2012 is $1.1 trillion.
•2011 Trade Deficit estimated at $538 billion
(dependent on price of oil).
.State and Local Debt $3.0 trillion
.Unfunded liabilities $116 trillion.
•Debt to GDP ratio 99.6% (actually much higher).
•Doesn’t include Federal Reserve or Fannie Mae,
Freddie Mac and FHA obligations.
•Debt Ceiling at $16.4 trillion (up to election).
•Budget Deficit for 2011 was $1.3 trillion.
•Estimated Deficit for 2012 is $1.1 trillion.
•2011 Trade Deficit estimated at $538 billion
(dependent on price of oil).
REAL GDP HAS BEEN
INFLATED BY FED MONEY
PRINTING
.Fed's balance sheet has
increased by $2+ trillion
since end of 2007.
.GDP after revisions was
just over $13.2 trillion
(2005 chained dollars).
.Up about $600 Billion
from bottom.
.Without money printing
would GDP be $11.2
trillion or 16% lower
(comprared to $13.3
trillion in Q4 2007)
.Current dollar GDP is
$15.2 trillion.
Without money printing
would it be $13.0 trillion?
INFLATED BY FED MONEY
PRINTING
.Fed's balance sheet has
increased by $2+ trillion
since end of 2007.
.GDP after revisions was
just over $13.2 trillion
(2005 chained dollars).
.Up about $600 Billion
from bottom.
.Without money printing
would GDP be $11.2
trillion or 16% lower
(comprared to $13.3
trillion in Q4 2007)
.Current dollar GDP is
$15.2 trillion.
Without money printing
would it be $13.0 trillion?
The United States Economy is seriously
broken
.This Recession is much worse than
any previous post-war U.S. recession.
.Policy tools to fix the economy -
easy credit, bailouts, and government
spending - are no longer working.
.Real root cause of problem -
housing market - has not recovered.
.U.S. is drowning in debt and ability to
borrow has already run out.
Money printing is how this problem
will be handled from now on.
.The U.S. banking system is broken
and won't be fixed for years.
.Banking problem is global.
broken
.This Recession is much worse than
any previous post-war U.S. recession.
.Policy tools to fix the economy -
easy credit, bailouts, and government
spending - are no longer working.
.Real root cause of problem -
housing market - has not recovered.
.U.S. is drowning in debt and ability to
borrow has already run out.
Money printing is how this problem
will be handled from now on.
.The U.S. banking system is broken
and won't be fixed for years.
.Banking problem is global.
OTHER KEY ECONOMIC INDICATORS
.October manufacturing PMI U.S. 50.8, China
50.4, UK 47.4, EU 47.1, Brazil 46.5
.US unemployment rate 9.1%?
.Consumer Credit decreasing at 4.5% annually.
.Consumer Confidence at 39.8 worst since
March 2009.
.Retail sales up 8.8% yr over yr, unadjusted for
inflation.
.Official CPI inflation 3.9% yr over yr (Shadow
Stats around 11%)
.October manufacturing PMI U.S. 50.8, China
50.4, UK 47.4, EU 47.1, Brazil 46.5
.US unemployment rate 9.1%?
.Consumer Credit decreasing at 4.5% annually.
.Consumer Confidence at 39.8 worst since
March 2009.
.Retail sales up 8.8% yr over yr, unadjusted for
inflation.
.Official CPI inflation 3.9% yr over yr (Shadow
Stats around 11%)
The Greek default, and this will happen
one way or the other at this point, will
be similar to the demise of Lehman in
2008. Contagion spread throughout the
world financial system. In the U.S. the
close to trillion dollar TARP program
had to be instituted to hold up the
banking system. In total, as much as
$11 trillion in programs (the Federal
Reserve alone had half a dozen major
ones) had to be implemented to patch
things up. The will for such an effort no
longer exists, which will mute whatever
response the authorities come up with,
and will be delayed and muted.
one way or the other at this point, will
be similar to the demise of Lehman in
2008. Contagion spread throughout the
world financial system. In the U.S. the
close to trillion dollar TARP program
had to be instituted to hold up the
banking system. In total, as much as
$11 trillion in programs (the Federal
Reserve alone had half a dozen major
ones) had to be implemented to patch
things up. The will for such an effort no
longer exists, which will mute whatever
response the authorities come up with,
and will be delayed and muted.
•Two of the biggest issues are
whether developed countries
are in recession and how EU debt
crisis will continue to unfold.
•U.S. Q3 GDP does not indicate U.S.
avoided recession.
•EU banks are not going to be made
solvent by recent bailout decisions.
•Even with 50% selective default,
Greece is still not fixed.
Deal in question.
•Portugal, Ireland, Spain, Italy still in
trouble.
.Centrals banks pumping money
into system.
whether developed countries
are in recession and how EU debt
crisis will continue to unfold.
•U.S. Q3 GDP does not indicate U.S.
avoided recession.
•EU banks are not going to be made
solvent by recent bailout decisions.
•Even with 50% selective default,
Greece is still not fixed.
Deal in question.
•Portugal, Ireland, Spain, Italy still in
trouble.
.Centrals banks pumping money
into system.
RECESSION AND EU CRISIS
October Consumer Confidence Well Into Recession Territory
Daryl Montgomery
The October Consumer Confidence number fell to 39.8. It is once again approaching the all-time lows that
occurred at the bottom of the Great Recession. The number has never reached the 90 level since 2009,
which is the cutoff for a healthy economy. ...read on
Daryl Montgomery
The October Consumer Confidence number fell to 39.8. It is once again approaching the all-time lows that
occurred at the bottom of the Great Recession. The number has never reached the 90 level since 2009,
which is the cutoff for a healthy economy. ...read on
.EFSF (European Stability Fund) is
to be leveraged from Euro 440
billion to 1 Trillion euros. THIS IS
BORROWED/PRINTED MONEY
.
EFSF (European Stability Fund)
to be used to buy debt from
PIIGS and for bank
recapitalisation i.e. bailouts.
Banks are to raise capital other
ways first. This will lead to tighter
credit in the EU.
.Dexia Bank already failed,
more to come
to be leveraged from Euro 440
billion to 1 Trillion euros. THIS IS
BORROWED/PRINTED MONEY
.
EFSF (European Stability Fund)
to be used to buy debt from
PIIGS and for bank
recapitalisation i.e. bailouts.
Banks are to raise capital other
ways first. This will lead to tighter
credit in the EU.
.Dexia Bank already failed,
more to come
PIIGS
Portugal
Italy
Ireland
Greece
Spain
Portugal
Italy
Ireland
Greece
Spain
Investors should not be fooled by comparisons of current U.S. bank failures
with the number of failures in the past.
In the early 1900s, there were a very large number of small banks in the
country.
Over the last 80 years, U.S. banks have become much larger and far fewer
in number so only a percentage comparison makes any sense.
During the Great Depression, 9146 banks failed. That would represent over
100% of the 7932 banks that now exist. Even during the Savings and Loan
Crisis there were more than twice as many banks in business than there are
now. The total number of failures for the Depression and Savings and Loan
Crisis are also for a period of up to 15 years.
with the number of failures in the past.
In the early 1900s, there were a very large number of small banks in the
country.
Over the last 80 years, U.S. banks have become much larger and far fewer
in number so only a percentage comparison makes any sense.
During the Great Depression, 9146 banks failed. That would represent over
100% of the 7932 banks that now exist. Even during the Savings and Loan
Crisis there were more than twice as many banks in business than there are
now. The total number of failures for the Depression and Savings and Loan
Crisis are also for a period of up to 15 years.
| We are being starved of one of the most important economic engines of our economy and Western Civilization...OIL |
HISTORICAL INFORMATION SPECIFICALLY FOR A REAL POSSIBLE DEFAULT IN
GREECE - IMPORTANT READ BY REAL E FINANCE
The Friday before the Lehman bankruptcy, the S&P 500 closed at 1251.70. Lehman declared bankruptcy on Monday.
At the end of the week, the S&P 500 closed at 1255.00. The day before however, the S&P rallied off of its intraday low of 1133.50 to a
close of 1206.51 (that's a 6.4% intraday rally -- an enormous move for an index like the S&P). So, the first week after Lehman's
bankruptcy it looked like the market wouldn't be impacted that much. It turned out that the actions of central banks provided investors
with a false sense of security however.
By the end of September 2008, the S&P 500 closed at 1166.36. Then at the end of October it was down to 968.75. At the end of
November, it had dropped to 896.24. It actually closed higher the last day of December at 903.25, before falling to 825.88 at the end of
January. By the close of February, the S&P was trading at 735.08. It finally bottomed at 666.79 on March 6, 2009. All along the way, there
were big moves up that coincided with the latest money injections of the central banks.
While mainstream media reports tend to portray the central bank actions and the big rallies they cause as good news for the market,
they are actually an indication that more trouble is on the way. All investors have to do is remember what happened just three years
ago. Yesterday's central bank action indicates that more volatility and lower stock prices are in our future.
Daryl Montgomery
GREECE - IMPORTANT READ BY REAL E FINANCE
The Friday before the Lehman bankruptcy, the S&P 500 closed at 1251.70. Lehman declared bankruptcy on Monday.
At the end of the week, the S&P 500 closed at 1255.00. The day before however, the S&P rallied off of its intraday low of 1133.50 to a
close of 1206.51 (that's a 6.4% intraday rally -- an enormous move for an index like the S&P). So, the first week after Lehman's
bankruptcy it looked like the market wouldn't be impacted that much. It turned out that the actions of central banks provided investors
with a false sense of security however.
By the end of September 2008, the S&P 500 closed at 1166.36. Then at the end of October it was down to 968.75. At the end of
November, it had dropped to 896.24. It actually closed higher the last day of December at 903.25, before falling to 825.88 at the end of
January. By the close of February, the S&P was trading at 735.08. It finally bottomed at 666.79 on March 6, 2009. All along the way, there
were big moves up that coincided with the latest money injections of the central banks.
While mainstream media reports tend to portray the central bank actions and the big rallies they cause as good news for the market,
they are actually an indication that more trouble is on the way. All investors have to do is remember what happened just three years
ago. Yesterday's central bank action indicates that more volatility and lower stock prices are in our future.
Daryl Montgomery
Real Dangerous Lessons of
1937 -Mises Daily: Tuesday,
February 02, 2010 by
Jonathan M. Finegold
Catalan.....read article
1937 -Mises Daily: Tuesday,
February 02, 2010 by
Jonathan M. Finegold
Catalan.....read article
| THE REAL INFLATION CYCLE CANNOT BE STOPPED .The U.S. has understated its inflation rate since 1983. .Inflation has not been below 5% in the 1990's and 2000's. .Fed claims there is no inflation. |
Dollarization could easily have solved the
problem - let Greece continue to use the
euro, but remove it from the currency union
(Greece would almost certainly have
defaulted on its debt already if this had been
done early on).
The answer of course lies in who is really
being bailed out. French and German banks
together have funded the majority of external
Greek government debt. They also have a
decent chunk of Portuguese government debt.
Just as was the case with the subprime crisis in
the United States, the big banks are the ones
being bailed out.
Most large European banks were already
bailed out is some way, shape, or form then as
well. This would represent a second series of
bailouts for them.
problem - let Greece continue to use the
euro, but remove it from the currency union
(Greece would almost certainly have
defaulted on its debt already if this had been
done early on).
The answer of course lies in who is really
being bailed out. French and German banks
together have funded the majority of external
Greek government debt. They also have a
decent chunk of Portuguese government debt.
Just as was the case with the subprime crisis in
the United States, the big banks are the ones
being bailed out.
Most large European banks were already
bailed out is some way, shape, or form then as
well. This would represent a second series of
bailouts for them.
Solving European Credit Crisis
The problems that have arisen in Greece
are those that occur when a government
borrows too much money relative to its GDP.
Eventually the interest payments on the debt
become overwhelming and default
becomes inevitable. Default can take place
in two ways however. It can be a simple
failure to make interest payments on bonds
or it can result from a major inflation of a
currency. With inflation, borrowers get the
nominal amount of money due them, but
that money doesn't have the same
purchasing power.
Since Greece is part of a currency union
and can't print its own money, it can only
default by not paying off its bonds.
The U.S. on the other hand, can print all the
money it wants too, so it can only default
through inflation.
are those that occur when a government
borrows too much money relative to its GDP.
Eventually the interest payments on the debt
become overwhelming and default
becomes inevitable. Default can take place
in two ways however. It can be a simple
failure to make interest payments on bonds
or it can result from a major inflation of a
currency. With inflation, borrowers get the
nominal amount of money due them, but
that money doesn't have the same
purchasing power.
Since Greece is part of a currency union
and can't print its own money, it can only
default by not paying off its bonds.
The U.S. on the other hand, can print all the
money it wants too, so it can only default
through inflation.
| Debt Crisis Back in Greece, U.S.Has Borrowing Problems Too |
The Unforeseen
Consequences of
Credit Legislation
Mises Daily: Friday, January 22, 2010 by
Jeremiah Dyke read article
Consequences of
Credit Legislation
Mises Daily: Friday, January 22, 2010 by
Jeremiah Dyke read article
Not over
Rumors of Housing's Rise From the Dead Are Greatly Exaggerated...read on
HISTORICAL PERSPECTIVE FYI:
Debt to GDP Japan
229%-2012
The other major development in
Japan during its two lost decades
was a massive bond bubble, which
caused even long-term rates to
approach zero. This same type of
bubble is now developing globally,
although the powers that be are
denying that this is taking place.
When massive government
stimulus causes interest rates to
drop, it is because of a liquidity
trap - money does not flow into the
real economy and so the economy
doesn't significantly benefit from
stimulus. Eventually a steep
depression develops (what has
prevented the depression phase
so far in Japan is that its
population had enough savings to
pay for the last 20 years of stimulus
- sort of like rich people who have
no income, but still manage to live
well by slowly selling off all of their
assets). The only way out of this
depression is to reignite economic
growth with inflation. The
Japanese have yet to figure out
how to do this and U.S. monetary
authorities are still reluctant to
pursue this option.
Debt to GDP Japan
229%-2012
The other major development in
Japan during its two lost decades
was a massive bond bubble, which
caused even long-term rates to
approach zero. This same type of
bubble is now developing globally,
although the powers that be are
denying that this is taking place.
When massive government
stimulus causes interest rates to
drop, it is because of a liquidity
trap - money does not flow into the
real economy and so the economy
doesn't significantly benefit from
stimulus. Eventually a steep
depression develops (what has
prevented the depression phase
so far in Japan is that its
population had enough savings to
pay for the last 20 years of stimulus
- sort of like rich people who have
no income, but still manage to live
well by slowly selling off all of their
assets). The only way out of this
depression is to reignite economic
growth with inflation. The
Japanese have yet to figure out
how to do this and U.S. monetary
authorities are still reluctant to
pursue this option.
Citizens of the fiscally solvent
EU countries are getting tired of
paying to support what they
see as the profligate spending
habits of the EU's weaker
economies.
The bailout efforts have been
lead by German Chancellor
Angela Merkel, but support
within her country has never
been strong for them.
Her ruling party has lost six
regional elections this year,
including one in her own home
state this weekend. Any more
pro-bailout efforts will only
further weaken her politically.
EU countries are getting tired of
paying to support what they
see as the profligate spending
habits of the EU's weaker
economies.
The bailout efforts have been
lead by German Chancellor
Angela Merkel, but support
within her country has never
been strong for them.
Her ruling party has lost six
regional elections this year,
including one in her own home
state this weekend. Any more
pro-bailout efforts will only
further weaken her politically.
A Technical Look at Gold and Silver at the End of 2011- read on
This alternating news flow is repeating over and
over again. Investors should pay attention to
the big picture however and not the noise of
the day. The important thing to realize is that we
are in a second global credit crisis.
.read on
over again. Investors should pay attention to
the big picture however and not the noise of
the day. The important thing to realize is that we
are in a second global credit crisis.
.read on
REAL CREDIT CRISES...FOLLOW
CERTAIN PATTERNS..this is a great
work explaining to you our reader.
CERTAIN PATTERNS..this is a great
work explaining to you our reader.
If you can't win under the existing rules of
the game, simply change the rules. Wall
Street firms were losing big money during
the Credit Crisis, but not only did the
federal government come to their rescue
with truckloads of taxpayer money, but
accounting rule changes were also
instituted to make their financial position
look much stronger. The much improved
earnings for the banks and investment
houses showing up today are the result of
both and not an improved economy.
the game, simply change the rules. Wall
Street firms were losing big money during
the Credit Crisis, but not only did the
federal government come to their rescue
with truckloads of taxpayer money, but
accounting rule changes were also
instituted to make their financial position
look much stronger. The much improved
earnings for the banks and investment
houses showing up today are the result of
both and not an improved economy.
What led to the tragedy of the Great
Depression in the 1930s were major
missteps from the Federal Reserve and the
federal government. The Fed put the
interests of the banking community over
those of the American public and this is
what depression. This was combined with
an ongoing campaign of denial of the
problem on Washington's part. Herbert
Hoover gave a press conference in June
1930 announcing the Depression was over
(it was only just beginning). The similarities
to all the talk coming out of Washington
today about economic recovery should
give investors pause.
Depression in the 1930s were major
missteps from the Federal Reserve and the
federal government. The Fed put the
interests of the banking community over
those of the American public and this is
what depression. This was combined with
an ongoing campaign of denial of the
problem on Washington's part. Herbert
Hoover gave a press conference in June
1930 announcing the Depression was over
(it was only just beginning). The similarities
to all the talk coming out of Washington
today about economic recovery should
give investors pause.
While the Federal Reserve and its
mainstream economist toadies claim
deflation is a problem, the evidence points
to the opposite. Excess money printing has
always led to inflation and things will be no
different this time. The other thing that will
be no different this time is that the
government bodies responsible for
creating inflation will deny that it exists and
when it becomes so obvious that it can't
be covered up anymore, they will then
deny responsibility. Before this continues
any further, you might want to pick up
some hard assets and strong currencies.
mainstream economist toadies claim
deflation is a problem, the evidence points
to the opposite. Excess money printing has
always led to inflation and things will be no
different this time. The other thing that will
be no different this time is that the
government bodies responsible for
creating inflation will deny that it exists and
when it becomes so obvious that it can't
be covered up anymore, they will then
deny responsibility. Before this continues
any further, you might want to pick up
some hard assets and strong currencies.
The Risks to the Global Financial System in 2012...read on
| REAL FINANCE POWER POINT MEDIA TARGETING IMPORTANT FINANCIAL ISSUES |
Keynesian economics became the
almost universal approach for economic
policy in the developed economies after
World War II. Keynes recommended
initiatives, stimulus during a downturn and
paying off the stimulus debt during the
recovery, got horribly mangled to more
and more stimulus during a downturn and
somewhat less stimulus during a recovery.
This is essentially an ongoing
money-printing scam.
Like many scams, it works well as long as it
doesn't get out of control. Eventually
though some huge crisis becomes
inevitable after decades of excessive
stimulus and the economy falls apart.
Stimulus no longer works then. After two
decades, the Japanese have failed to
realize this. The economic establishment
in the U.S. is equally oblivious.
almost universal approach for economic
policy in the developed economies after
World War II. Keynes recommended
initiatives, stimulus during a downturn and
paying off the stimulus debt during the
recovery, got horribly mangled to more
and more stimulus during a downturn and
somewhat less stimulus during a recovery.
This is essentially an ongoing
money-printing scam.
Like many scams, it works well as long as it
doesn't get out of control. Eventually
though some huge crisis becomes
inevitable after decades of excessive
stimulus and the economy falls apart.
Stimulus no longer works then. After two
decades, the Japanese have failed to
realize this. The economic establishment
in the U.S. is equally oblivious.
Consumer spending
accounts for 72% of GDP.
Consumers without
confidence don't spend.
Consumers without jobs
and credit don't spend
either. Nevertheless, the
government has
consistently reported an
increase in consumer
spending taking place
while total wages and
salaries have fallen and
available consumer
credit has been reduced.
accounts for 72% of GDP.
Consumers without
confidence don't spend.
Consumers without jobs
and credit don't spend
either. Nevertheless, the
government has
consistently reported an
increase in consumer
spending taking place
while total wages and
salaries have fallen and
available consumer
credit has been reduced.
Government stimulus programs didn't fix the
housing and car markets, but merely made them
look better. This works for a while, but reality
eventually rears its ugly head. A report from
Europe today said that "the continent's major
banks have more potentially risky government
debt on their books than was disclosed during
stress tests earlier this year." This wasn't exactly a
piece of information that required the skills of
Sherlock Holmes to uncover. At the time of their
release, the stress tests were roundly criticized as
being a phony PR gambit that set the bar so low
that any bank not declaring insolvency in the
next week would pass. Stocks of course went up
on the news back then and today they are going
back down.
housing and car markets, but merely made them
look better. This works for a while, but reality
eventually rears its ugly head. A report from
Europe today said that "the continent's major
banks have more potentially risky government
debt on their books than was disclosed during
stress tests earlier this year." This wasn't exactly a
piece of information that required the skills of
Sherlock Holmes to uncover. At the time of their
release, the stress tests were roundly criticized as
being a phony PR gambit that set the bar so low
that any bank not declaring insolvency in the
next week would pass. Stocks of course went up
on the news back then and today they are going
back down.
Nowhere in the world is the current
interest-rate spread more extreme than in
the Eurozone (the epicenter of the current
credit crisis). Greece is leading the pack
with ever-rising yields on its government
paper, while German rates keep falling.
interest-rate spread more extreme than in
the Eurozone (the epicenter of the current
credit crisis). Greece is leading the pack
with ever-rising yields on its government
paper, while German rates keep falling.
__________________________________________
Road to recovery-2012
Retail Sales and Employment Not as Good as First Reported..read on
REAL HYPERINFLATION
There have been a number of impediments
in how economists look at hyperinflation
that have prevented original thought (and
sometimes any thought at all) in this area.
Here are the necessary ideas:
1. Inflation is a currency losing its value (an
idea most mainstream economist can't
seem to grasp).
2. Severe deflation is a precursor to
hyperinflation. They are not inconsistent
events as is generally thought, but deflation
sets the stage for hyperinflation.
3. Disinflation/deflation and inflation need
not by symmetrical. For instance, if there is
30 years of disinflation, this doesn't have to
be balanced by 30 years of inflation. The
same amount of inflation could take place
in only months or even weeks, let alone 30
years.
4. Inflation doesn't have to be a continuous
phenomenon. The chart can have gaps in it
with prices going up significantly overnight.
Furthermore this can start from a low point
where almost no inflation exists...read on
There have been a number of impediments
in how economists look at hyperinflation
that have prevented original thought (and
sometimes any thought at all) in this area.
Here are the necessary ideas:
1. Inflation is a currency losing its value (an
idea most mainstream economist can't
seem to grasp).
2. Severe deflation is a precursor to
hyperinflation. They are not inconsistent
events as is generally thought, but deflation
sets the stage for hyperinflation.
3. Disinflation/deflation and inflation need
not by symmetrical. For instance, if there is
30 years of disinflation, this doesn't have to
be balanced by 30 years of inflation. The
same amount of inflation could take place
in only months or even weeks, let alone 30
years.
4. Inflation doesn't have to be a continuous
phenomenon. The chart can have gaps in it
with prices going up significantly overnight.
Furthermore this can start from a low point
where almost no inflation exists...read on
The first job loss number was
reported three years ago in August
2007 and after over $3 trillion plus in
deficit spending since then, the U.S.
employment situation has
managed to only reach a state of
controlled bleeding. There were an
estimated 6.6 million students
graduating from school last year
and eventually most of them will
need a job. That implies the
U.S. needs 550,000 new jobs a
month to absorb former students
into the labor force. People are of
course always leaving the labor
force as well because of retirement
and for other reasons such as giving
up looking for a job because none
are available. It has been generally
accepted for a long time that the
U.S. must add at least 200,000 jobs
a month to just accommodate
new people looking for work. Even
after getting to that level, and we
are still losing jobs not gaining them,
there is then an additional 8 million
jobs that have to be created to
replace those lost during the Credit
Crisis. So far, it's just not happening.!
reported three years ago in August
2007 and after over $3 trillion plus in
deficit spending since then, the U.S.
employment situation has
managed to only reach a state of
controlled bleeding. There were an
estimated 6.6 million students
graduating from school last year
and eventually most of them will
need a job. That implies the
U.S. needs 550,000 new jobs a
month to absorb former students
into the labor force. People are of
course always leaving the labor
force as well because of retirement
and for other reasons such as giving
up looking for a job because none
are available. It has been generally
accepted for a long time that the
U.S. must add at least 200,000 jobs
a month to just accommodate
new people looking for work. Even
after getting to that level, and we
are still losing jobs not gaining them,
there is then an additional 8 million
jobs that have to be created to
replace those lost during the Credit
Crisis. So far, it's just not happening.!
UNEMPLOYMENT
Investors should look to Japan for a
lesson on how inept central bank
and fiscal policy can lead to
decades of a failed economy and
low stock prices. The Nikkei closed
at 9213 last night, more than 75% off
from its high around 40,000 on the
last day of 1989. The Japanese
economy has been in the doldrums
for two decades now. In the United
States, it's three years and counting.
lesson on how inept central bank
and fiscal policy can lead to
decades of a failed economy and
low stock prices. The Nikkei closed
at 9213 last night, more than 75% off
from its high around 40,000 on the
last day of 1989. The Japanese
economy has been in the doldrums
for two decades now. In the United
States, it's three years and counting.
Altogether, July durable goods orders
indicate that the manufacturing sector of
the U.S. economy is rapidly turning south.
This is particularly troubling because it
was manufacturing that had the biggest
upturn in the last year (the four times
larger service sector didn't improve
nearly as much). What will provide
economic growth, now that
manufacturing is weakening? An even
more important question is: If some of the
manufacturing numbers are as bad as or
worse than the bottom of the Credit
Crisis/Great Recession and this is also true
of the real estate market, how is it
possible that the U.S. economy is not
currently in another recession?
indicate that the manufacturing sector of
the U.S. economy is rapidly turning south.
This is particularly troubling because it
was manufacturing that had the biggest
upturn in the last year (the four times
larger service sector didn't improve
nearly as much). What will provide
economic growth, now that
manufacturing is weakening? An even
more important question is: If some of the
manufacturing numbers are as bad as or
worse than the bottom of the Credit
Crisis/Great Recession and this is also true
of the real estate market, how is it
possible that the U.S. economy is not
currently in another recession?
The Great Recession began in the
housing market after subprime loans
started to default in large numbers in
2007. The U.S. economy will continue to
have difficulties until all the excesses are
ringed out of house prices. Government
policy has instead been geared toward
stabilizing the market with temporary fixes.
The Federal Reserve instituted a number of
programs to funnel money into the
mortgage markets to protect the banks
that had too much exposure to real estate
loans and the Obama administration has
created programs like HAMP (Home
Affordable Mortgage Program) to lower
the foreclosure rate.
housing market after subprime loans
started to default in large numbers in
2007. The U.S. economy will continue to
have difficulties until all the excesses are
ringed out of house prices. Government
policy has instead been geared toward
stabilizing the market with temporary fixes.
The Federal Reserve instituted a number of
programs to funnel money into the
mortgage markets to protect the banks
that had too much exposure to real estate
loans and the Obama administration has
created programs like HAMP (Home
Affordable Mortgage Program) to lower
the foreclosure rate.
A case can be made however that the
EFSF money isn't really borrowed, but a
form of money printing instead. If
governments borrow without the ability to
actually pay back the money without
inflating their currency, they are printing
money. EU countries are already highly
indebted just like the United States
(Japan is in even worse shape). The fact
that there is a debt crisis in a number of
Eurozone countries is confirmation that
the level of debt is beyond the point of no
return. So a more accurate portrayal of
what is going on with the EFSF is that
money will be printed, this counterfeit
money will be leveraged by borrowing
against it and this will solve the problem
of too much debt.
EFSF money isn't really borrowed, but a
form of money printing instead. If
governments borrow without the ability to
actually pay back the money without
inflating their currency, they are printing
money. EU countries are already highly
indebted just like the United States
(Japan is in even worse shape). The fact
that there is a debt crisis in a number of
Eurozone countries is confirmation that
the level of debt is beyond the point of no
return. So a more accurate portrayal of
what is going on with the EFSF is that
money will be printed, this counterfeit
money will be leveraged by borrowing
against it and this will solve the problem
of too much debt.
Is 3rd Quantitative Easing Spendathon happening right now?
Real e Finance
Meanwhile in Europe, the future stall
engine for the world economy, the UK
announced its plans to eliminate its budget
deficit in five years. Higher taxes and big
spending cuts are the approach it will be
taking. Capital gains taxes will be raised
from 18% to 28% (investing capital will flow
to countries with lower rates) and the VAT
will go up from 17.5% to 20%. Similar
moves are taking place throughout the EU.
Maybe President Ronald Reagan and
Prime Minister Thatcher knew better.
engine for the world economy, the UK
announced its plans to eliminate its budget
deficit in five years. Higher taxes and big
spending cuts are the approach it will be
taking. Capital gains taxes will be raised
from 18% to 28% (investing capital will flow
to countries with lower rates) and the VAT
will go up from 17.5% to 20%. Similar
moves are taking place throughout the EU.
Maybe President Ronald Reagan and
Prime Minister Thatcher knew better.
Consumer spending accounts for
72% of GDP. Consumers without
confidence don't spend.
Consumers without jobs and credit
don't spend either. Nevertheless,
the government has consistently
reported an increase in consumer
spending taking place while total
wages and salaries have fallen
and available consumer credit
has been reduced. The savings
rate is higher than it used to be as
well, which should lower consumer
spending even more. But the rules
of arithmetic and economics are
different in Washington, D.C. than
they are in the rest of the universe
(the only other known exceptions
are in government statistical
offices in other world capitals). For
some reason American consumers
are choosing to view the world as
they see it instead of accepting
fanciful claims from the
Washington con machine. If this
continues, even stock traders
might eventually catch on.
72% of GDP. Consumers without
confidence don't spend.
Consumers without jobs and credit
don't spend either. Nevertheless,
the government has consistently
reported an increase in consumer
spending taking place while total
wages and salaries have fallen
and available consumer credit
has been reduced. The savings
rate is higher than it used to be as
well, which should lower consumer
spending even more. But the rules
of arithmetic and economics are
different in Washington, D.C. than
they are in the rest of the universe
(the only other known exceptions
are in government statistical
offices in other world capitals). For
some reason American consumers
are choosing to view the world as
they see it instead of accepting
fanciful claims from the
Washington con machine. If this
continues, even stock traders
might eventually catch on.
Past Recessions Provide Insight Into
When the Fed Will Raise Rates
The Federal Reserve left the fed funds rate in
the zero to 0.25% range at its March meeting.
This is the 15th month that the Fed has
maintained rates at an all-time low. At the
conclusion of the meeting the Fed stated that it
will keep rates near zero "for an extended
period of time", so no rate increase should be
expected for at least several more months.
....read on
When the Fed Will Raise Rates
The Federal Reserve left the fed funds rate in
the zero to 0.25% range at its March meeting.
This is the 15th month that the Fed has
maintained rates at an all-time low. At the
conclusion of the meeting the Fed stated that it
will keep rates near zero "for an extended
period of time", so no rate increase should be
expected for at least several more months.
....read on
| Real e finance means business Truth and Nothing but... |
Greece-Is a default close?
Like the U.S., the EU has run out of
borrowing power, so debt without
money printing is no longer an
option. Weaker economies mean
more downgrades from the ratings
agencies can be expected
and worse-default
Like the U.S., the EU has run out of
borrowing power, so debt without
money printing is no longer an
option. Weaker economies mean
more downgrades from the ratings
agencies can be expected
and worse-default
THE DECLINE OF THE UNITED STATES OF AMERICA
| NEW |
| Real e Finance means business Truth and nothing but... |
Will Greek Bailout Deal Falter Now or Later?....read on