Busted: Bankers and The Global Economy

November 16, 2011

Financial Nonsense of GDP & Jobless Figures

Third quarter GDP numbers have no relation to reality  says John Williams of Shadow Stats. He believes that unemployment hasn’t really recovered from the 2001 recession. GDP has become a nonsense number, worthless in terms of having any meaning in terms of the real economy.

July 31, 2011

Realities Behind the U.S. Debt Crisis

While incompetent and corrupt politics continues to announce a huge divide between sides, the real truth is that Americans have been deceived. The last election proved how little difference exists between moderates on either side, and that is what politics in the United States plays to. Despite the rhetoric in debt crisis debate, there are few meaningful differences in the plans that are being voted on.

Both bills have been estimated to reduce the national budget deficit by around $900 billion over the next 10 years, which is small change in a nation that is overspending by 50%. $750 billion is linked to actual decisions to cut spending. The remaining savings are another accounting gimmick, a projected reduction in interest payments on the national debt because of the proposed budget cuts. $70 billion of the “huge savings” will be applied to 2012 and 2013. As usual, deciding to do anything meaningful always points off somewhere in the distant future. $70 billion is small potatoes for a large economy that continually overspends by increasing margins.

The real issue resides in the fact that the nation has an unstable fiat currency that has been losing its purchasing power for decades. Today, the well is virtually dry, which could easily result in the collapse of the dollar as international currency. This makes the reality of planning ahead a mere mental exercise instead of meaningful in any way. What is worse is that all this fancy accounting is dependent on an unrealistic gross national product of 4.86%. As a result, this budgeting is an exercise in smoke and mirrors.

If you live in the United States, you’ve probably heard the grim news. National GDP growth for the first quarter of 2011 was just revised down yesterday by 81% from 1.91% to 0.36%. Never mind that 1.91% is paltry growth anyway. Second quarter estimates for the nation look even worse as the Federal Reserve prints more fiat dollars than ever before. Printing greenbacks doesn’t create economic growth or employment.

As the Federal Government wriggles in credit agony, the Treasury had $51.6 billion available for discretionary spending. The U.S. Treasury expects to bring in $172.4 billion from August 3rd through August 31st in tax receipts, while being scheduled to pay out $306.7 billion. This means a projected deficit of $134.3 billion. The Federal Government is scheduled to make its interest payment of $30 billion on the national debt on August 15th. They are now on track to spend a record $514.5 billion this year on interest payments alone. The nation faces an increase of the interest rate because of a likelihood of a credit downgrade, which would destroy any deficit reductions proposed by national politicians.

The Treasury has been able to pay bills in recent weeks by using accounting gimmicks, but that has come to an end in a few days. The Federal Government is in a real pickle without more fiat money printed by the Federal Reserve. Prioritizing incoming tax receipts of an expected $174.2 billion is essential, which will include the $30 billion interest payment on August 15th to avoid default.

The immediate obligations to the populace in August are $49.2 billion in Social Security, $50 billion in Medicare and Medicaid, topped by $12.8 billion in unemployment benefits. $23 billion of $49.2 billion in Social Security payments are due to be paid on August 3rd. $59 billion in treasury bills are due on August 4th to pay back investors. This says nothing of $31.7 billion in defense payments to pay soldiers and the like.

As a U.S. debt default and credit shortage looms, investors continue (so far) to invest in Treasury Bonds as a safe haven, which would be worthless in the event of a national default. All of this assumes, of course, that they don’t rewrite all the rules because of the need to save the international economy. I’m surprised that they haven’t already taken over the ‘renegade’ credit agencies in the name of national security so that the world can continue to ride the dollar bubble.

After all the politics, interest rates are likely to be propelled rapidly upward, resulting in obvious hyperinflation that cannot be quietly manipulated or explained away. The world is flooded with American greenbacks, thanks in no small part to the uninspired management of Ben Bernanke and the Federal Reserve. As a result, the Federal Reserve is likely to be the only buyer for U.S. debt. How long will that last as it is?

July 1, 2011

Recession Warning

Filed under: banking, economy, recession — Tags: , , , , — digitaleconomy @ 11:21 am

economic tsunamiThe Dallas Fed’s latest manufacturing gauge has imploded! It fell to -17.5 from -7.4, the worst reading in 11 months. The New York and Philadelphia indices tanked, and the overall plunge in these up-to-date manufacturing surveys over the past couple of months is one of the worst on record!

The Wall Street Journal reported on Monday …

“The Federal Reserve is just days away from ending one of the major steps to aid the U.S. economy — but the effort has done little to solve the original problem: The government and individuals alike are still heavily in debt.”

The Journal goes on to make the same argument:

“The fundamental problem is that reversing the trend of piling on the debt requires some combination of cutting spending, growing income or the economy, and inflation. But wage growth is stagnant and home prices, which underpin much of the debt problem, are still falling.

“Meanwhile, in a vicious circle, businesses aren’t hiring or investing because they know consumers are tapped out. Banks, for their part, are hoarding cash, being stingy with new loans.

Ben Bernanke admitted in his most recent press conference:

“We don’t have a precise read on why this slower pace of growth is persisting … Some of the headwinds that have been concerning us, like the weakness in the financial sector, problems in the housing sector, balance sheet and deleveraging issues, may be stronger and more persistent than we thought.”

If you’re counting on the Fed to get things right, good luck! They got the dot-com bubble wrong. They got the housing bubble wrong. Their plan to underwrite an economic recovery has proven to be the wrong medicine for what ails the nation.

June 21, 2011

A Chronicle of the Euro Crisis

Filed under: banking, economy, government, money — Tags: , , , , , — digitaleconomy @ 5:43 am

euroWhen the euro crisis started in Greece in October 2009, nobody had any idea how quickly or broadly it would spread — or how difficult it would be to solve. Below, some key dates in this still-unfolding saga.

October 2009 Greece revised its 2009 budget deficit to 12.5 percent of GDP from 3.7 percent. The dramatic news sparked a raft of downgrades by credit-rating agencies. By November, Greece’s budget deficit had ballooned to 15.4 percent of GDP.

February 2010 Greece is forced to put its budget under EU monitoring. Dramatic austerity measures are implemented in a bid to clean up the country’s finances in the coming years.

March 2010 The first Greek austerity package is passed: Value-added tax is raised by 2 percentage points, and salaries for civil servants are frozen. The size of annual savings is estimated to be roughly €4.8 billion ($6.8 billion).

May 2010 Euro-zone finance ministers and the International Monetary Fund (IMF) agree on an aid package for Greece worth €110 billion over three years. Officials plan to monitor Greece’s efforts to trim costs every three months.

A second austerity package is passed by the Greek parliament. Emergency measures aim to save €30 billion by 2013. Value-added tax is once again lifted by two percentage points, bringing it to 23 percent. Spending on defense, health and pensions is slashed.

May 2010 In a bid to prop up other financially ailing member states, the EU finance ministers and the IMF agree on a provisional safety net worth €750 billion to be in effect until 2013.

November 2010 Ireland asks for EU assistance. Under the safety net, the EU finance ministers agree on a bailout package with the IMF worth more than €85 billion over three years.

January 2011 The Irish parliament agrees to a drastic austerity plan.

March 2011 The European Council gives the green light to a permanent stability mechanism (ESM). Designed to take effect as of mid-2013, the fund will be worth €700 billion.

April 2011 Portugal asks the EU for financial assistance.

May 2011 The EU and the IMF sign off a bailout package for Portugal worth €78 billion. In return, Portugal pledges to enforce a program of cost-cutting measures and economic reforms.

June 2011 Greece plans a further raft of austerity and privatization measures. Meanwhile, the euro-zone countries, the ECB and the IMF argue about the structure and amount of future financial aid.

June 20, 2011

Bernanke to Invent New Term for Printing Money

Filed under: banking, central bank, corporatism, economy, federal reserve, government, inflation, money — digitaleconomy @ 10:27 am

When the U.S. Bureau of Labor and Statistics (BLS) reported their latest consumer price index (CPI) inflation data last week, everybody in the mainstream media worked tirelessly to spin the data in order to proclaim that U.S. price inflation is not a problem. It’s been that way for some time now. Most articles in the media reported that inflation slowed in May due to falling gas prices. The truth is, gas prices rose last month and U.S. price inflation is spiraling out of control.

Price inflation based on the CPI on a year-over-year basis rose during the month of May to 3.57%, up from 3.16% in April, 2.68% in March, 2.11% in February, 1.63% in January, 1.5% in December, and 1.1% in November. The official rate of price inflation has more than tripled over the past 6 months. Yes, maybe the rate of year-over-year price inflation rose by slightly less in May over April, than it did in April over March, but this isn’t good news at all. This U.S. dollar is still rapidly losing its purchasing power and the rate at which it is declining in purchasing power is accelerating.

On an unadjusted basis, gas prices rose 3.6% in the month of May. The media is reporting gas prices based on the BLS’s seasonal adjustments. Only with the BLS’s deceptive seasonal adjustments did gas prices decline by 2% in the month of May. The BLS’s seasonal adjustments will actually reverse starting in the month of July and add to reported gasoline prices. NIA predicts that come August when the BLS releases its July CPI report, the media will begin focusing on unadjusted gasoline prices because the unadjusted gain will be less than the adjusted one. The media always reports the data that supports their agenda and ignores the data that works against it.

The media is obviously just saying what the U.S. government wants them to say. Larry Summers, a Keynesian economist who served for 5 years last decade as President of Harvard and was up until late-2010 director of President Obama’s White House National Economic Council, just said last week that, “the underlying rate of inflation is still trending downwards”. The media’s favorite economist Paul Krugman, a Keynesian who has an op-ed column in the New York Times, said last week that, “There’s really nothing here to shake my view that deflation, not inflation, is the threat.”

Krugman, who has been calling for massive price deflation the whole entire time that NIA has been predicting massive price inflation, is refusing to admit he has been wrong and is telling all Americans to ignore rapidly rising food and energy prices because he claims they are too volatile. He is telling the world to focus solely on the core CPI, which ignores food and energy, the two items that Americans need most to live and survive. Core CPI is weighed heavily by rents and America’s Real Estate bubble still isn’t finished deflating. The only purpose of having a core CPI  is to use it to mislead Americans and deceive them into believing that inflation is not a problem.

nixon greenspanCore CPI was an invention of the Nixon administration, which right there should tell you all you need to know about it. President Nixon’s idea for creating core CPI, was to deceive Americans about price inflation by excluding the items that were rising the most, which he would justify by calling these items “too volatile”. NIA has predicted from the very beginning that inflation will not effect all goods and services equally and that as inflation begins to spiral out of control, inflation would gravitate most towards the prices of the items that Americans need the most, and there is nothing that Americans need more than food and agricultural products, and to a lesser extent energy.

Whenever the mainstream media reports about global inflation and they show a map of the world, the map always shows massive inflation in Middle Eastern and Asian countries, with the U.S. having the least price inflation. The truth is, inflation in Middle Eastern and Asian countries isn’t many times worse than the U.S., it is just that their governments are many times more honest and aren’t as advanced in manipulating economic statistics as our government is. While all of the headlines from major American news organizations about U.S. inflation said last week that inflation is slowing and not a problem, those same news organizations wrote articles about Chinese inflation being at a new 34-month high of 5.5%. The fact is, official U.S. price inflation is also at its highest level in nearly three years and our real price inflation rate is actually higher than China’s reported rate of price inflation.

Based on the BLS’s CPI, year-over-year U.S. price inflation in the month of May of 3.57% was the highest year-over-year price inflation rate since October of 2008, right before the global financial crisis. If it wasn’t for the global financial crisis of late-2008/early-2009 and the world’s mistake of liquidating real assets and hoarding fiat U.S. dollars as a safe haven, it is likely that the official rate of U.S. price inflation would already be in the double-digits today. NIA estimates the real rate of U.S. price inflation, minus geometric weighting and hedonics, to currently be approximately 7.5% on a year-over-year basis. It is possible that the real U.S. price inflation rate will reach double digits in the second half of 2011. That will be devastating to the U.S. economy because at that point it will just about guarantee that the Federal Reserve will have to raise the federal funds rate to north of 10% by the middle of this decade.

The Federal Reserve’s balance sheet just reached a brand new record of $2.832 trillion, up from $2.815 trillion in the prior week, as we approach the end of QE2 at the end of June. The stock market is already anticipating the end of QE2 with the Dow Jones currently down over 900 points from its high at the end of April. The declining stock market is pretty much sowing the seeds for a QE3. After all, Federal Reserve Chairman Ben Bernanke doesn’t want to see the phony U.S. economic recovery blow up in smoke.

Bernanke will do everything possible to disguise QE3 and will never admit to there being a QE3. Remember, this is the same Federal Reserve Chairman who lied to every single American on ’60 Minutes’ when he said, “We’re not printing money.” That is exactly what QE2 is, printing money, but just like how Bernanke won’t admit to printing money, Bernanke is now going to retire the term “quantitative easing” and come up with a new term for the Fed’s latest destructive policy of creating massive monetary inflation.

June 15, 2011

US economist predicts economic storm in 2013

devalued dollarA “perfect storm” of fiscal woes in the United States, a slowdown in China, the debt crisis in Europe and stagnation in Japan has a decent chance of damaging the global economy by 2013, Roubini told reporters late last week. Even so, he is being quite conservative about it. A 33% chance doesn’t seem like news to me. All this by New York University professor Nouriel Roubini, who correctly predicted the global economic crisis in 2008.

According to Mr. Roubini, the world economy expansion may slow in the second half of this year as “the deleveraging process continues, fiscal stimulus is withdrawn and confidence ebbs.”  To me, this seems obvious. This process is really part of what is already happening. It’s not news. The job market stinks in the U.S. and other modern nations. Money isn’t being made abundantly in the real economy. It’s all on Wall Street and in the investment world, based on heavy borrowing and debt restructuring of nations based on fiat money. Washington has been unwilling to deal with a one-trillion-plus budget deficit and a distinct bond market revolt is in the wings. Investors are waking up to the danger to their investment as US bonds are in danger of becoming junk. This will create higher interest rates and possible hyperinflation, which will remove any possibility of a recovery, even resulting the destruction of the dollar for an international medium of exchange. The bankers aren’t truly bothered by this. Based on inside information, the bankers already have a plan in the wings that I have touched on previously. It’s all about marketing, presentation to them.

Already, we have riots in Greece, as they face the music regarding the bad debt that the nation and bankers have created. They claim that officials need to restructure the debt of Greece, Ireland and Portugal. Waiting too long will ultimately result in the disintegration of the euro zone stability, experts say. Roubini agrees. The ridiculous aspect to the entire scenario is that all banking debt in the current system that is created will never be paid back. Further, much of this debt has been cleverly folded into Wall Street investments with the idea of making money, either through long or short selling. But this does not solve the problem of any debt unless the nations involved have the ability to make money by having control. They don’t. Only the bankers make money on any debt. In the meantime, these nations are paying on interest, not on principal. It’s stupid. The spiral never ends. Roubini and most economists remain silent on this aspect of the system.

Many other analysts, like myself,  have repeatedly warned of a “possible” repeat of the 2008 global economic meltdown in the immediate future. Others, like Moscow financial expert Alexander Osin expresses hope that the international community will be able to find the way out. Russian economist Konstantin Sonin  warns against overdramatizing the situation since people like Roubini are full of it, false prophets, in essence. The solution?

“The world economy faced such a problem in the 1930s,” Osin says, adding that Adolf Hitler’s ascent to power and the beginning of World War Two helped to resolve the problem. “At present, it should be solved by peaceful means, which the global community is almost certain to find.” Certainly, the Russians and Arabs are doing quite well since they are sitting on oil profits. That will only last as long as the current monetary gaming system does. That is the problem behind the whole matter. An eternal debt-based banking system destroys the nations that depend on it unless they are sitting on huge cash cow. Rest assured, that is temporary. If they are doing business with the bankers, the banking system will drain that wealth too. That is the nature of the system in place, as well as the nature of the future system.

So, to solve the problem we need a global war and preferably another Hitler. In the meantime, resolving the monetary system crisis is all about “hope,” and now we are listening to Russians for economic advice. The global economy really is in trouble. There won’t be any gain without plenty of pain. Never mind the pain that so many are in now.

E. Manning

May 28, 2011

Goldman Sachs Continues to Take Down Nations

Filed under: banking, corporatism, economy, government, recession, video — Tags: , , , , , , , , , , — digitaleconomy @ 9:39 am

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