Friday, July 29, 2011

The Essential Rules Of Tyranny

Q2 GDP 1.3%, Gold Surging On Imminent QE3 Resumption

I'll add the USDollar tanked on such "unexpected" news of a stagnant economy.
A simply unprecedented miss in Q2 GDP well below the consensus range, with the official number printing at 1.3%, giving it upside room for revisions in case QE3 does not pass, although at this point it is more than obvious that this number is goalseeked to give Bernanke the carte blanche to start more easing any second. This number follows an epic revision to prior data, with Q1 plunging from 1.9% to 0.4%. The GDP internals were simply appalling: Personal Consumption tumbled from 2.1% to 0.1%, on expectations of 0.8%! The US consumer is dead despite not paying mortgage payments. Lastly, US PCE Core printed at 2.1% on expectations of 2.3%. As we have been expecting since December, the US is on the verge of a triple dip recession within the bigger depression. With a deadlocked Congress, the Fed has no option but to do another monetary stimulus as seen by the surge of gold to near record highs on the data in the $1.625 range and the implosion in the USDCHF to fresh all time lows.

And Wall Street Does Its Traditional "Nobody-Could-Have-Foreseen-This....Nobody" Dance

Shit Just Got Real: Primary Dealers Called To New York Fed For Emergency Noon Meeting

It could be a myriad of problems which prompted this emergency meeting called by the NY Fed, but since it involves all 20 Primary Dealers, I'm gonna guess the US Treasury bond auctions are about to implode, so the powers-that-be must be working on a strategy to further manipulate US Treasury bond prices up (and yields down).  Operation Twist 2, bitchez!

Thursday, July 28, 2011

Football Legend Cristiano Ronaldo To Be Used As ECB Collateral

It’s another assault on retirement accounts

The End of the Growth Consensus
This month marks the two-year anniversary of the official start of the recovery from the 2007-09 recession. But it's a recovery in name only: Real gross domestic product growth has averaged only 2.8% per year compared with 7.1% after the most recent deep recession in 1981-82. The growth slowdown this year—to about 1.5% in the second quarter—is not only disappointing, it's a reminder that the recovery has been stalled from the start. As shown in the nearby chart, the percentage of the working-age population that is actually working has declined since the start of the recovery in sharp contrast to 1983-84. With unemployment still over 9%, there is an urgent need to change course.

Some blame the weak recovery on special factors such as high personal saving rates as households repair their balance sheets. But people are consuming a larger fraction of their income now than they were in the 1983-84 recovery: The personal savings rate is 5.6% now compared with 9.4% then. Others blame certain sectors such as weak housing. But the weak housing sector is much less of a negative factor today than declining net exports were in the 1983-84 recovery, and the problem isn't confined to any particular sector. The broad categories of investment and consumption are both contributing less to growth. Real GDP growth is 60%-70% less than in the early-'80s recovery, as is growth in consumption and investment.

In my view, the best way to understand the problems confronting the American economy is to go back to the basic principles upon which the country was founded—economic freedom and political freedom. With lessons learned from the century's tougher decades, including the Great Depression of the '30s and the Great Inflation of the '70s, America entered a period of unprecedented economic stability and growth in the '80s and '90s. Not only was job growth amazingly strong—44 million jobs were created during those expansions—it was a more stable and sustained growth period than ever before in American history.

Economic policy in the '80s and '90s was decidedly noninterventionist, especially in comparison with the damaging wage and price controls of the '70s. Attention was paid to the principles of economic and political liberty: limited government, incentives, private markets, and a predictable rule of law. Monetary policy focused on price stability. Tax reform led to lower marginal tax rates. Regulatory reform encouraged competition and innovation. Welfare reform devolved decisions to the states. And with strong economic growth and spending restraint, the federal budget moved into balance.

As the 21st century began, many hoped that applying these same limited-government and market-based policy principles to Social Security, education and health care would create greater opportunities and better lives for all Americans.

But policy veered in a different direction. Public officials from both parties apparently found the limited government approach to be a disadvantage, some simply because they wanted to do more—whether to tame the business cycle, increase homeownership, or provide the elderly with better drug coverage.
And so policy swung back in a more interventionist direction, with the federal government assuming greater powers. The result was not the intended improvement, but rather an epidemic of unintended consequences—a financial crisis, a great recession, ballooning debt and today's nonexistent recovery.

The change in policy direction did not occur overnight. We saw increased federal intervention in the housing market beginning in the late 1990s. We saw the removal of Federal Reserve reporting and accountability requirements for money growth from the Federal Reserve Act in 2000. We saw the return of discretionary countercyclical fiscal policy in the form of tax rebate checks in 2001. We saw monetary policy moving in a more activist direction with extraordinarily low interest rates for the economic conditions in 2003-05. And, of course, interventionism reached a new peak with the massive government bailouts of Detroit and Wall Street in 2008.

Since 2009, Washington has doubled down on its interventionist policy. The Fed has engaged in a super-loose monetary policy—including two rounds of quantitative easing, QE1 in 2009 and QE2 in 2010-11. These large-scale purchases of mortgages and Treasury debt did not bring recovery but instead created uncertainty about their impact on inflation, the dollar and the economy. On the fiscal side, we've also seen extraordinary interventions—from the large poorly-designed 2009 stimulus package to a slew of targeted programs including "cash for clunkers" and tax credits for first-time home buyers. Again, these interventions did not lead to recovery but instead created uncertainty about the impact of high deficits and an exploding national debt.

Big government has proved to be a clumsy manager, and it did not stop with monetary and fiscal policy. Since President Obama took office, we've added on complex regulatory interventions in health care (the Patient Protection and Affordable Care Act) and finance (the Dodd-Frank Wall Street Reform and Consumer Protection Act). The unintended consequences of these laws are already raising health-care costs and deterring new investment and risk-taking.

If these government interventions are the economic problem, then the solution is to unwind them. Some lament that with the high debt and bloated Fed balance sheet, we have run out of monetary and fiscal ammunition, but this may be a blessing in disguise. The way forward is not more spending, greater debt and continued zero-interest rates, but spending control and a return to free-market principles.
Unfortunately, as the recent debate over the debt limit indicates, narrow political partisanship can get in the way of a solution. The historical evidence on what works and what doesn't is not partisan. The harmful interventionist policies of the 1970s were supported by Democrats and Republicans alike. So were the less interventionist polices in the 1980s and '90s. So was the recent interventionist revival, and so can be the restoration of less interventionist policy going forward. 
Mr. Taylor, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis" (Hoover Press, 2009).

The Dow-Gold ratio

The Dow Jones Industrial Average dipped below 8:1 recently.  During the Great Depression, the ratio dropped to 2:1, and plummeted to its all-time low of 1:1 in 1980, when gold peaked around $850/oz.

The DJIA is currently at 12,375.  The price of gold is $1,607.  Draw your own conclusions.
Click on image to enlarge.

Dagong Says Will Cut US Rating As Early As Monday

In the latest game of finger-pointing, Chinese credit rating agency Dagong threatens to lower its rating on US debt next week.  My question is:  what took them so long?

Blast From The Past: "Is There A Risk The US Could Lose Its AAA Rating?" Tim Geithner: "No Risk"

Liar, liar, pants on fire!  Of course, this interview occurred all the way back in April, 2011, so all is forgiven--or at least forgotten.  Hey, did you hear JLo and Marc Anthony are splitting up?  The world is coming to an end as a result.

Presenting America's "Fresh Start" Currency

Speaking of banana republics:

Going Bananas

Monday, July 18, 2011

Phone Hacking Scandal Turns Tragic: NOTW Whistleblower Found Dead

Silver Surge #2 Imminent?

Dick Bove's Hist(o/e)rical Bank of America Price Targets

Dick Bove, "expert" banking analyst should just hang it up.  He's destroyed enough portfolios with his bullish calls on bankrupt banks.

Gold Rallies to Record in Best Run Since 1980

I laughed at those who called gold a bubble when it crossed $900/oz.  I laugh at those who are calling a top now.  Sure, it will correct, perhaps back-and-fill within a consolidation period.  After all, nothing goes up or down in a straight line.  But until reckless central bankers turn prudent, and until shiftless politicians acknowledge the painful but necessary measures in order to solve our huge structural debt problems, all is not well.

Moody's suggests U.S. eliminate debt ceiling

The theater of absurd gets absurder.

Thirty years of the debt ceiling in one graph

The Only Thing You Can Count On

It Ain't Money If I Can't Print It!

Russia selling US Treasury debt and buying gold

Well, the Russkies certainly aren't making secret that they are dumping US Treasuries and buying gold.

Egan-Jones downgrades US credit rating
Real GDP increased at an annualized rate of 4.0% in Q1 2011, following an increase of 3.5% rise in the prior quarter. Personal consumption expenditures, exports, and nonresidential fixed investment contributed positively to growth during the quarter. Meanwhile, imports rose sharply. In the March 2011 quarter, trade in goods and services resulted in a deficit of $562B, many because of the high price of petroleum. However, the major factor driving credit quality is the relatively high level of debt and the difficulty in significantly cutting spending. We are taking a negative action not based on the delay in raising the debt ceiling but rather our concern about the high level of debt to GDP in excess of 100% compared to Canada's 35%. Nonetheless, since the US's debt is denominated in dollars, a hard default is unlikely.
Nota Bene

History has proven that defaults on domestic public debt do occur. In fact, seventy out of three hundred twenty defaults since 1800 have been on domestic public debt (1). Egan-Jones does not view a country's ability to print its own currency as a guarantee against default. Additionally, Egan-Jones generally views cases of excessive currency devaluation as a de facto  default.

Saturday, July 16, 2011

Flashback: Previous Debt Limit Votes Have Not Been Good Ones

This flashback is too important to not re-post, as it shows hypocrisy is alive and well in the District of Corruption.
“The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the U.S. Government can't pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government's reckless fiscal policies. … Increasing America's debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.” - Senator Barack Obama, March 20, 2006, after voting against a debt limit increase.
What has changed since?  Then-Senator Obama became President.

Unemployment with and without recovery plan (and fictitious actual)

This chart explains the Obama Administration's complete failure to reduce unemployment, which, by the way, is actually 22%, according to, not the official 9.2%.
Click on image to enlarge.

Friday, July 15, 2011

Parabolic move in precious metals around the corner?

After badgering him for two years, one of my best friends finally caved and bought some gold and silver a few months ago.  Within a few days, he was glad, and even tracks precious metals prices more closely than I do now.

Today, the manager at the local supermarket asked me where he could buy gold, after I had been talking to him about precious metals for the past year.  I asked him what prompted him to finally look into it.  He said his finance professor began discussing gold as an asset class.  Better late than never, as the American public slumbers through one global crisis after another.

Treasury To Stop Funding Its Market Manipulation Fund To Delay US Bankruptcy

The ability of the Treasury to manipulate equities, bonds, foreign currency, and commodities markets will be greatly diminished due to US Treasury suspending reinvestment in the Exchange Stabilization Fund.  Volatility will spike, in my opinion.

Jim Sinclair - Gold Milestone at $1,764 Paves Way to $12,000

Return of the Gold Standard as world order unravels

Thanks to Dick for finding this article.

Thursday, July 14, 2011

California Weighs Contingency Loan as Debt-Limit Turmoil Looms

So this is a "contingency loan" on top of last year's bridge loan.  Sure sounds like California's bankruptcy is imminent to me.  It looks like Meredith Whitney's prediction on munis is right, as was her call on the subprime mortgage crisis.

Bernanke: Gold Isn’t Money

Wednesday, July 13, 2011

Moody's adds pressure to stalled debt talks

Okay, we get Moody's is itching to downgrade the US credit rating if the debt ceiling isn't lifted.  But this?

Obama abruptly ended a tense budget meeting with Republican leaders by walking out of the room, a Republican aide familiar with the talks said.

The aide said the session was the most tense of the week as House of Representatives Speaker John Boehner, the top Republican in Congress, dismissed spending cuts offered by the White House as "gimmicks and accounting tricks."

Embry - Mining Shares Will Be Like Internet Stocks in the ’90’s

Moody's warns it may downgrade US credit rating

Hyperinflation during modern times

Speaking of hyperinflation, these countries have suffered through it during modern times, according to Jim Sinclair:

Angola, Argentina, Belarus, Bolivia, Bosnia-Herzegovina, Brazil, Bulgaria, Chile, China, Congo, Free City of Danzig, Georgia, Germany, Greece, Hungary, Israel, Japan, Madagascar, Mozambique, Nicaragua, Peru, Philippines, Poland, Russia, Taiwan, Turkey, Ukraine, United States, Yugoslavia and Zimbabwe.

Ron Paul : Why do central banks hold Gold? Bernanke : Tradition

This is exactly why the USDollar is doomed (see Youtube video below).  Our Fed Chairman doesn't even understand what money is.  You want to know why gas at the pump has almost tripled in two years?  Or why commodities and food prices are soaring?  Or why people in poor countries are rioting in the streets?  Here's a hint:  It's not about evil dictatorships or oppressive governments.  Many have lived under totalitarian government regimes for centuries and decades.  The reason why they're taking to the streets is because they cannot feed themselves due to soaring food prices.

Food may represent 5% - 15% of typical American household incomes.  When food prices rise, we complain to our neighbors.  But food makes up 80% of Libyan or Egyptian household income.  When food prices rise, they literally starve.  That's why they are rioting.  Otherwise, why would they risk life and limb?

The sources of worldwide rising inflation are the easy money policies of central banks from the European Community, the UK, Japan, the Fed, and even China.  They are all turning on the printing presses in order to paper over their own economic and fiscal problems.  They're also bailing out bankrupt institutions and sovereign nations.  In doing so, they debase paper currencies, causing prices to rise all across the spectrum globally.

During previous testimony, Fed Chairman admitted he was "puzzled" by surging gold prices.  <click here> Today, he tries to explain why.  He still doesn't get it.  Or maybe he does, but can't say.  And he doesn't understand his unintended primary role in causing currency-induced, cost-push inflation.  The end result is hyperinflation and a loss of confidence in a currency.

"Gold is money, and nothing else." - JPMorgan, 1913

Gold Goes Parabolic As Chairsatan Resumes Vendetta With US Dollar, Middle Class

UC seeks to raise tuition another 10%

The Strategic Advantages Of Community Building

Tuesday, July 12, 2011

Papuan strike halts world's biggest gold mine

This is just another reason why the price of gold is gapping up.

It's yuan for the money for Twiggy Forrest

There was Russia, Brazil, and now Australia.  China is forging bilateral trade agreements with these countries, bypassing the USDollar as the transactional currency in the process.   The days of the US petrodollar as the global reserve currency are numbered.

Geithner says hard times to continue for many

Finally,  a kernal of truth from our Secretary of Treasury.  Perhaps that is why he considered resigning from his post previously.
Treasury Secretary Timothy Geithner (GYT'-nur) says many Americans will face hard times for a long time to come.

He says President Barack Obama rescued the United States from a second Great Depression and will keep working to strengthen the economy. But Geithner says will be some time before many people feel like the country is recovering.

Geithner tells NBC's "Meet the Press" that it's a very tough economy. He says that for a lot of people "it's going to feel very hard, harder than anything they've experienced in their lifetime now, for a long time to come."

Something More Important than the Debt Limit

3D Printer

My nephew told me about 3-D printing a couple months ago, and my friend Brian found this video on the technology.

Monday, July 11, 2011


In the "no $hit, Sherlock" category:

Leaders to face penalties over local govt debt

It appears cash-rich China has severe debt problems of its own.  I will print the contents in case, well, the article gets censored.
BEIJING - Local government leaders may find their career outlook dimmed and themselves liable for penalties if debts under their administration have "excessively mounted".
Yuan Shuhong, deputy director of the Legislative Affairs Office under the State Council, said local leaders should receive deductions in their job evaluation, if local debts exceed a certain limit.
Yuan failed to specify how much debt could negatively impact on a local governor's performance appraisal, but said if the situation was serious, the governor may also be penalized.
He said this would be part of efforts to change from a GDP-oriented model of growth to a sustainable and environmentally friendly one.
Yuan's remarks followed China's first announcement last month of its local debts.
Liu Jiayi, the country's top auditor, said in a report to the National People's Congress that local governments had an overall debt of 10.7 trillion yuan ($1.65 trillion) by the end of 2010, and some were at risk of defaulting on payments.
The scale, amounting to more than one-quarter of China's GDP in 2010, which stood at 39.8 trillion yuan, raised concerns that local government debt could destabilize the financial system of the world's second largest economy if it is not managed properly.
Although some analysts argued that concern over local government debt was unnecessary as long as the country maintained its rapid economic growth, some international investors have lowered their outlook on China's long-term local-currency rating.
Leading rating agency Moody's said on Tuesday that China's local government debt could be even larger than the official number, which may set off loan defaults.
"Banks' exposure to local government borrowers is greater than we anticipated," Yvonne Zhang, a Moody's analyst, told Reuters.
The agency also said that unless China comes up with a "clear master plan" to rectify the problem, the credit outlook for Chinese banks could turn negative.
Apart from a potential banking system breakdown, Yuan admitted local governments' somehow straitened circumstances could also trigger social problems, such as forced land seizures and shortages of farmland, since governments will be heavily dependent on land sales to finance debt repayments.
Yuan made the remarks at the second annual session of China's Administrative Reform Research Society in Beijing on Sunday. The society, which was founded last year, aims to investigate issues raised by the discrepancy between China's fast-growing economy and its relatively sluggish administrative reform.
China Daily

Geithner on TV – Keynesian economics has failed
We don’t have the ability (because of the overhang in housing and the problems in the financial sector) to artificially engineer  a stronger recovery. - Tim Geithner, Meet the Press, July 10, 2011.
It's a rare moment of honesty, but he continues to defend Keynesian economists in the rest of the interview.  Good luck, Timmy.  You're going to need it.

Jim Cramer, Gold: the running of the bulls

Now I'm worried.  Jim Cramer and I agree on this.

Sunday, July 10, 2011

Rep Paul Kanjorski Reviews the Bailout Situation

This is a reminder on how close we were to a bank run during the 2008 financial meltdown.

The Value of Silver

Oil to climb on growing demand, reduced spare capacity: Goldman

It appears Goldman Sachs believes in the peak oil theory.

Several Inconvenient Truths About The Debt Ceiling And "Deficit Reduction"
The Global Financial Crisis (GFC) is said to have been precipitated by the Lehman failure in 2008 which froze inter-bank lending on a global basis and almost brought down the system. It is said to have been prevented by a massive and global increase in new money creation. In reality, had economic nature been left alone to take its course, there is a good chance that the world would be fast emerging from its financial black hole by now. At a minimum, most of the malinvestments would have been discounted to the point where they would no longer act as a dead weight on future savings and investment.

Economic “miracles” (so-called) have happened before. The US emerged from a deep recession in 1920-21 because the government and the central bank did NOT interfere. Germany emerged from the actual physical rubble of WW II for exactly the same reason. So, to a lesser extent, did Japan. In all these cases, debts which could not be repaid were not held on life support by central banks, they were written off. In all these cases, creditors took very severe “haircuts” indeed while many debtors literally had to start again from scratch. In all these cases, the LACK of government impediments or government largesse meant that a recovery took place in a much shorter time frame than would otherwise have been the case.

Economic distortions today are HUGELY bigger than they were then. That means that the recession will be deeper and the recovery phase possibly longer. But until it is allowed to begin, there is no way out.

EU calls emergency meeting as crisis stalks Italy

David Stockman: Ben Bernanke is finished!

Saturday, July 9, 2011

Iran says fires missiles to Indian Ocean for first time

Comparing The 2007 Topping Pattern To Now

Time to hedge? Shorts have been scalped since the March 2009 lows.  Maybe they were just early. Proceed with caution.

See disclaimers in the side bar.

Disclosure:  long DXD (UltraShort Dow 30).

Boiling frog alert: Congress wants automatic wage deductions to pay down the debt

Every American should read this--now.

Poor jobs data stuns Wall Street, politicians

Stunned?  Who the mainstream media?  Government economists?  Wall Street?  Politicians?  The cheerleaders on financial TV?  Whatever happened to the "green shoots" back in 2009?

QE 3.0, or some other stimulus policy obscured by another name is a given.  All we need is a 5000 point drop in the Dow Jones Industrial Average, and it's off to the races.

How bad is it? Pawn shops, payday lenders are hot

Swiss Parliament to discuss gold franc

When Swiss bankers talk, one should listen.

Friday, July 1, 2011

Selling gold teeth to make ends meet in Greece
"I'll see you again soon," she says, slipping the bills into her purse. Behind her, a grey-haired man shuffles toward the counter. "Do you buy gold teeth?" he asks.

In the Greek capital, gold is marking a divide between the "haves" and a growing number of "have nots."

Shops like this one have mushroomed in downtown Athens and are doing a brisk business. They offer cash for gold by weight and sell it to foundries.

Many ordinary Greeks who prospered after the Mediterranean country entered the euro a decade ago are now being forced to sell their family treasures just to make ends meet.

With the worst recession since the 1970s grinding into its third year, fresh belt-tightening measures to appease international lenders are driving many middle-class Greeks to desperation.

Unemployment has climbed to more than 16 percent and real wages are down by around a fifth since the global financial crisis struck three years ago.

With average salaries less than 1,300 euros ($1,900) a month and inflation running at more than 3 percent, many Greeks say they do not have enough money to pay for the basics.

"A lady came to me the other day crying because she needed to sell her gold jewels and didn't know what they were worth," said Alexandria Verykokaki, 55, whose family has owned a jewelry shop in downtown Athens since 1923.

"These are not poor folks. They are ordinary, middle-class Greeks: a woman with three kids who needs to sell her wedding jewelry just to send her kids to school."


That is one side of the coin. On the other, many wealthy Greeks, worried by the political paralysis gripping their country, are pulling money out of the bank and buying gold, regarded as the ultimate safe haven in times of uncertainty.

Fed's Massive Stimulus Had Little Impact: Greenspan

Now that Greenspan is no longer Fed Chairman, he speaks the truth.
The Federal Reserve's massive stimulus program had little impact on the U.S. economy besides weakening the dollar and helping U.S. exports, Federal Reserve Governor Alan Greenspan told CNBC Thursday.

In a blunt critique of his successor, Fed Chairman Ben Bernanke, Greenspan said the $2 trillion in quantative easing [cnbc explains] over the past two years had done little to loosen credit and boost the economy.

"There is no evidence that huge inflow of money into the system basically worked," Greenspan said in a live interview.

"It obviously had some effect on the exchange rate and the exchange rate was a critical issue in export expansion," he said. "Aside from that, I am ill-aware of anything that really worked. Not only QE2 but QE1."

Dominique Strauss-Kahn case 'on verge of collapse' amid doubts over maid

I told you DSK was set up.  The sad part is that legitimate sexual assault charges against powerful men will in the future be diluted and tainted by this fraudulent case.

IEA Replaces One Crude Supply-Limiting Cartel, OPEC, With Another: The TBTF Banks

This is another example of why government "strategies" never work as planned.