Busted: Bankers and The Global Economy

January 5, 2011

Hyperinflation: Top Economic Predictions

The National Inflation Association is pleased to announce its top 10 predictions for 2011:

1) The Dow/Gold and Gold/Silver ratios will continue to decline.

Major declines in the Dow/Gold and Gold/Silver ratios in the works. The Dow/Gold ratio was 9.3 at the time and finished 2010 down 15% to 8.1. The Gold/Silver ratio was 64 at the time and finished 2010 down 28% to 46. We expect to see the Dow/Gold ratio decline to 6.5 and the Gold/Silver ratio decline to 38 in 2011. Later this decade, we expect to see the Dow/Gold ratio bottom at 1 and the Gold/Silver ratio decline to below 16 and possibly as low as 10.

2) Colleges will begin to go bankrupt and close their doors.

The USA has a college education bubble in America that was made possible by the U.S. government’s willingness to give out cheap and easy student loans. With all of the technological advances that have been taking place worldwide, the cost for a college education in America should be getting cheaper. Instead, private four-year colleges have averaged 5.6% tuition inflation over the past six years.

College tuitions are the one thing in America that never declined in price during the panic of 2008. Despite collapsing stock market and Real Estate prices, college tuition costs surged to new highs as Americans instinctively sought to become better educated in order to better ride out and survive the economic crisis. Unfortunately, American students who overpaid for college educations are graduating and finding out that their degrees are worthless and no jobs are available for them. They would have been better off going straight into the work force and investing their money into gold and silver. That way, they would have real wealth today instead of debt and would already have valuable work place experience, which is much more important than any piece of paper.

Colleges and universities took on ambitious construction projects and built new libraries, gyms, and sporting venues, that added no value to the education of students. These projects were intended for the sole purpose of impressing students and their families. The administrators of these colleges knew that no matter how high tuitions rose, students would be able to simply borrow more from the government in order to pay them.

Americans today can purchase just about any type of good on Amazon.com, cheaper than they can find it in retail stores. This is because Amazon.com is a lot more efficient and doesn’t have the overhead costs of brick and mortar retailers. NIA expects to see a new trend of Americans seeking to become educated cheaply over the Internet. There will be a huge drop off in demand for traditional college degrees. NIA expects to see many colleges default on their debts in 2011. These colleges will be forced to either downsize and educate students more cost effectively or close their doors for good.

3) U.S. retailers will report declines in profit margins and their stocks will decline.

Although most analysts on Wall Street believe retailers will report a major increase in holiday season sales over a year ago, NIA believes any top line growth retailers report will come at the expense of dismal bottom line profits. NIA expects many retailers to report large declines in their profit margins for the 4Q of 2010 and first half of 2011. Retailers have been selling goods at bargain basement prices in order to generate demand. Americans, being flush with newly printed dollars from the Federal Reserve, have been eager to buy up supplies of goods at artificially low prices. However, shareholders will likely sell off their retail stocks on this news. As share prices of retail stocks decline, retailers will begin to rapidly increase their prices by mid-2011.

4) The mainstream public will begin to buy gold.

Although the mainstream media continues to proclaim we have a gold bubble, it is impossible to have a gold bubble when mainstream America isn’t buying gold. The average American is more likely to be a seller of gold through companies like Cash4Gold, in order to raise enough dollars to put food on their table. Most Americans today don’t even know the price of gold. During the next 12 months, we expect to see a huge ramping up in the public’s knowledge about gold. More Americans than ever will know the current price of gold and understand that it is real money. By the end of 2011, we expect the general public to begin looking at gold as an investment, just like they began looking at Real Estate as an investment in 2003. Sometime during the next six months, we believe you will overhear a stranger at a restaurant talking about investing into gold. We believe the price of gold could surge to as high as $2,000 per ounce in 2011.

5) We will see a huge surge in municipal debt defaults.

In the closing months of 2010, we saw yields on municipal bonds rise to their highest levels since early 2009. After 29 consecutive weeks of inflows into municipal bond funds, investors are now pulling money out of municipal bond funds by record amounts, with $9 billion exiting municipal bond funds in the five weeks leading up to Christmas. NIA believes there could be a small dip in municipal bond yields over the next couple of months as investors realize that municipal debt defaults might not be imminent, but we expect municipal bond yields to begin rising again by mid-2011 with a huge surge in municipal debt defaults coming in the second half of 2011. Although the Federal Government has a printing press that it uses in order to pay its debts, cities and municipalities do not.

6) We will see a large decline in the crude oil/natural gas ratio.

When we released our top 10 predictions for 2010, crude oil was $73 per barrel and we predicted that oil prices would rise to $100 per barrel in 2010. Crude oil ended up rising by 26% in 2010 to $92 per barrel, coming short of our outlook. However, it is possible our $100 per barrel oil forecast might be off by just a month or two. We wouldn’t be surprised to see $100 per barrel oil within the first two months of 2011 and if so, we expect to see a huge movement in America this year towards natural gas.

The crude oil/natural gas ratio currently stands at 20. Historically, the crude oil/natural gas ratio has averaged 10 and based on an energy equivalent basis, crude oil and natural gas prices should have a 6 to 1 ratio. Brand new fracking technology has caused natural gas supplies in the U.S. to rise to record levels. Although our country might be flooded with natural gas, the natural gas fracking boom that is taking place across the U.S. today is causing ground water in the U.S. to become contaminated. Americans living near natural gas wells that use fracking, are finding that they can now light the water coming out of their faucets on fire. New government regulations are likely to crack down on natural gas fracking and this will come at the same time as American individuals and businesses begin to convert their automobiles and machinery to run off of natural gas. A large decline in the crude oil/natural gas ratio in 2011 is likely, possibly down to as low as 15.

7) The median U.S. home will decline sharply priced in silver.

For the past couple of years, being able to make ones mortgage payment has been the primary concern for the average American. In an attempt to support housing prices and keep mortgage interest rates at artificially low levels, the Federal Reserve has been implementing massive quantitative easing and buying mortgage backed securities. NIA believes the Federal Reserve will be successful at putting a nominal floor under Real Estate prices. NIA also believes that the Federal Reserve’s actions will cause a massive decline in the value of the U.S. dollar, which will allow Americans to more easily pay back their mortgages with depreciated U.S. dollars.

However, the Federal Reserve will not be successful at reinflating the Real Estate bubble. In fact, in terms of real money (gold and silver), NIA believes Real Estate prices will decline to record lows. The median U.S. home is currently priced at $170,600 or 5,500 ounces of silver. Priced in silver, the median U.S. home price is down 16% from one month ago and 45% from one year ago. After the inflationary crisis of the 1970s, silver rose to a high in 1980 of $49.45 per ounce. The median U.S. home price in 1980 was $47,200, which means the median U.S. home/silver ratio declined to a low of 954.

With the Federal Reserve printing money at an unprecedented rate and record amounts of new homes built during the recent Real Estate bubble, NIA believes it is inevitable that the median U.S. home will decline to a price of 1,000 ounces of silver this decade and possibly as low as 500 ounces of silver. In 2011, we believe a decline in the median U.S. home price to 4,000 ounces of silver is possible.

8) Food inflation will become America’s top crisis.

Starting a few decades ago and accelerating in recent years, America has seen a boom in non-productive service jobs, mainly in the financial sector. Most of these jobs were made possible by inflation. Without inflation, which steals from the purchasing power of the incomes and savings of goods producing workers, the majority of the jobs on Wall Street would not exist today and our country would be in much better financial shape because of it.

With most Americans in recent decades seeking non-productive jobs in the financial services sector because that is where they could access the Fed’s cheap and easy money, very few Americans sought jobs in the farming and agriculture sector. In the 1930s, approximately 28% of the population was employed in the agriculture sector, but today this number is less than 2%. Agriculture currently makes up only 1.2% of U.S. GDP, compared to the services sector, which makes up 76.9% of U.S. GDP.

There is currently a major shortage of farmers in the U.S. and a lot of land that was previously used for farming has now been developed with Real Estate. To make matters worse, agricultural products now trade on the international market and Americans must now compete against citizens of emerging nations like China and India for the purchasing of food.

Prices of goods and services do not rise equally when governments create monetary inflation. Inflation gravitates most towards the items that Americans need the most and there is nothing that Americans need more to survive than food and agriculture. As the U.S. government prints money, the first thing Americans will spend it on is food. Americans can cut back on energy use by moving into a smaller home and carpooling to work. They can cut back on entertainment, travel, and other discretionary spending. However, Americans can never stop spending money on food.

The days of cheap food in America are coming to an end. The recent unprecedented rise that we have seen in agricultural commodity prices is showing no signs of letting up. In the past few days, sugar futures reached a new 30-year high, coffee futures reached a new 13-year high, orange juice futures reached a new 3-year high, corn futures reached a new 29-month high, soybean futures reached a new 27-month high, and palm oil futures reached a new 33-month high.

We estimate that it takes as long as six months for rising agricultural commodity prices to be felt by U.S. consumers in their local supermarket. Even if food producers and retailers accept substantially lower profit margins in 2011, we are still guaranteed to see double-digit across the board U.S. food inflation in the first half of the year. That is correct, let us repeat, NIA guarantees that Americans will see double-digit food inflation in the first half of 2011.

Shockingly, except for Glenn Beck (who was kind enough to feature our food inflation report), absolutely nobody in the mainstream media is doing anything to warn Americans about the food inflation crisis that is ahead. In fact, left-wing groups like Media Matters (funded by George Soros) have been working tirelessly to try and discredit NIA’s research while reassuring Americans that they need not worry about food inflation. The truth is, when Americans realize that they can no longer take food for granted, we will likely see the outbreak of an all out food price panic with everybody rushing to the supermarket to stock up on goods before prices rise even further. The end result will likely be government price controls and empty store shelves, but NIA doesn’t project this to occur until later this decade.

9) QE2 will disappoint and the Federal Reserve will prepare QE3.

The Dow Jones is now back up to 11,670, which is where it was in mid-2008 before the crash. NIA believes that most of QE2 has already been priced into the market, before the Federal Reserve even prints the $600 billion. At some point, we expect it to become apparent to all that the U.S. economic recovery is phony and stock prices are rising solely due to inflation. In our opinion, we will see some sort of catalyst that causes the stock market to sell off at some point and the consensus on Wall Street will be that QE2 will not be enough to save the U.S. economy. By the end of 2011, we expect the Federal Reserve to begin planning QE3. QE3 might be the final dose of inflation that causes the U.S. economy to overdose into hyperinflation.

10) Sarah Palin will announce she is running for President as a Republican.

NIA believes that Sarah Palin has been setup perfectly to run for President in 2012 and that she will announce her candidacy for the Republican nomination with great fanfare from tea party supporters in 2011. We give Sarah Palin credit for recently speaking out against the Federal Reserve’s QE2 and warning Americans about the food inflation crisis that is ahead. Unfortunately, we believe Sarah Palin is not a true independent and is being controlled by the Republican establishment, which is just as responsible as the Democrats are for the financial crisis we have today. As President, Palin would be unlikely to implement the measures that are necessary to prevent hyperinflation. In our opinion, we need to elect a true libertarian candidate as President who will cut government spending, balance the budget, and restore sound money. NIA intends to support Ron Paul, if he decides to run for President.

Thanks to the National Inflation Association for these really decent and down-to-earth predictions.

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September 24, 2010

U.N. Says World is at the Brink of Food Crisis through Speculation

Environmental disasters and speculative investors are to blame for volatile food commodities markets, says UN’s special adviser

The United Nations warned that the world is likely on the brink of a major new food crisis caused by environmental disasters and rampant market speculators today at an emergency meeting on food price inflation.

The U.N.’s Food and Agriculture Organization (FAO meeting in Rome, Italy, on September 24 was called last month after a heatwave and wildfires in Russia led to a draconian wheat export ban while food riots broke out in Mozambique, killing 13 people. U.N. experts heard that pension and hedge funds, sovereign wealth funds and large banks who speculate on commodity markets are likely to be responsible for inflation in food prices being seen across all continents.

In a new paper released this week, Olivier De Schutter, the U.N.’s special rapporteur on food, says that the increases in price and the volatility of food commodities can only be explained by the emergence of a “speculative bubble” which he traces back to early this decade.

“[Beginning in] 2001, food commodities derivatives markets, and commodities indexes began to see an influx of non-traditional investors,” De Schutter writes. “The reason for this was because other markets dried up one by one: the dotcoms vanished at the end of 2001, the stock market soon after, and the U.S. housing market in August 2007. As each bubble burst, these large institutional investors moved into other markets, each traditionally considered more stable than the last. Strong similarities can be seen between the price behavior of food commodities and other refuge values, such as gold.”

He continues: “A significant contributory cause of the price spike [has been] speculation by institutional investors who did not have any expertise or interest in agricultural commodities, and who invested in commodities index funds or in order to hedge speculative bets.”

A near doubling of many staple food prices in 2007 and 2008 led to riots in more than 30 countries and an estimated 150 million extra people going hungry. While some commodity prices have since reduced, the majority are well over 50% higher than pre-2007 figures – and are now rising quickly upwards again.

“Once again we find ourselves in a situation where basic food commodities are undergoing supply shocks. World wheat futures and spot prices climbed steadily until the beginning of August 2010, when Russia – faced with massive wildfires that destroyed its wheat harvest – imposed an export ban on that commodity. In addition, other markets such as sugar and oilseeds are witnessing significant price increases,” said De Schutter, who spoke today at The U.K. Food Group’s conference in London.

Gregory Barrow, of the U.N. World Food Program said: “What we have seen over the past few weeks is a period of volatility driven partly by the announcement from Russia of an export ban on grain food until next year, and this has driven prices up. They have fallen back again, but this has had an impact.”

Sergei Sukhov, from Russia’s agriculture ministry, told the Associated Press during a break in the meeting in Rome that the market for grains “should be stable and predictable for all participants.” He said no efforts should be spared “to the effect that the production of food be sufficient.”

“The emergency U.N. meeting in Rome is a clear warning sign that we could be on the brink of another food price crisis unless swift action is taken. Already, nearly a billion people go to bed hungry every night – another food crisis would be catastrophic for millions of poor people,” said Alex Wijeratna, ActionAid’s hunger campaigner.

An ActionAid report released last week revealed that hunger could be costing poor nations $450 billion a year – more than 10 times the amount needed to halve hunger by 2015 and meet Millennium Development Goal One.

Food prices are rising around 15% a year in India and Nepal, and similarly in Latin America and China. U.S.  maize prices this week broke through the $5-a-bushel level for the first time since September 2008, fueled by reports from U.S. farmers of disappointing yields in the early stages of their harvests. The surge in the corn price also pushed up European wheat prices to a two-year high of €238 a ton.

Elsewhere, the threat of civil unrest led Egypt this week to announce measures to increase food self-sufficiency to 70%. Partly as a result of food price rises, many middle eastern and other water-scarce countries have begun to invest heavily in farmland in Africa and elsewhere to guarantee supplies.

Although the FAO has rejected the notion of a food crisis on the scale of 2007-2008, it this week warned of greater volatility in food commodities markets in the years ahead.

At the meeting in London today, De Schutter said the only long term way to resolve the crisis would be to shift to “agro-ecological” ways of growing food. This farming, which does not depend on fossil fuels, pesticides or heavy machinery has been shown to protect soils and use less water.

“A growing number of experts are calling for a major shift in food security policies, and support the development of agroecology approaches, which have shown very promising results where implemented,” he said.

Green Party Parliament Member Caroline Lucas called for tighter regulation of the food trade. “Food has become a commodity to be traded. The only thing that matters under the current system is profit. Trading in food must not be treated as simply another form of business as usual: for many people it is a matter of life and death. We must insist on the complete removal of agriculture from the remit of the World Trade Organization,” she said.

You can read this article by Guardian environmental editor John Vidal, with reporting by various news agencies, in context here: http://www.guardian.co.uk/environment/2010/sep/24/food-crisis-un-emergency-meeting-rome

November 23, 2009

New World Authority: The Fed’s Automatic Bailout Bill

Congress intends to grant the Federal Reserve even more powers to control the economy of the United States with HR 3996. This gives the Fed complete power on top of  dollar creation worldwide, excess credit, and low interests rates to cause financial bubbles and control corporate financial power. This power allows for full-scale abuse and manipulation of the system while profiting from transactions and time spent a/k/a administrative expenses. This gives authority of global banking system to run the economy of the United States at their own comfort. The bill secures automatic bailouts for the banks and powerful corporations through the power of the Federal Reserve, which is part of a global consortium of bankers (what I call the International Society of Central Bankers).

“Upon the written approval of the Board of Governors of the Federal Reserve System… and the Board of Directors of the Corporation … and with the written consent of the Secretary of the Treasury, the Corporation may extend credit to or guarantee obligations of solvent insured depository institutions or other solvent companies that are predominantly engaged in activities that are financial in nature, if necessary to prevent financial instability during times of severe economic distress. There shall be available to the Corporation to carry out this section amounts in the Treasury not otherwise appropriated, including for the payment of reasonable administrative expenses.” (pages 43-44/253)

HR 3996 gives power to the Federal Reserve to force companies to obey financial orders from the Federal Reserve, making them an authority of power in their own right. (The nation has already been moving in this direction.) The Fed has the power to take over companies that Fed deems a threat to their own “safety and soundness” or to the “financial stability of the United States.”

Section 1105 gives the Federal Reserve the power to force financial holding companies into bankruptcy: “an involuntary case may be commenced by the Board of Governors of the Federal Reserve System against an identified financial holding company.” (page 38/253)

Section 1701 gives the Federal Reserve the power “in unusual and exigent circumstances” to authorize immediate bailouts and assistance to any “individual, partnership, or corporation.” (page 253/253) Section 1701 enables the Federal Reserve the authority to bypass Congress when the next fiscal crisis occurs.

You can now see the danger that the Federal Reserve and global bankers pose to the national security and the solvency of all Americans if HR 3996 passes.

July 30, 2009

Video: The World of Planet Finance

Filed under: banking, economy, inflation, money — Tags: , , , , , , , , — digitaleconomy @ 1:13 am

ascent of moneyEpisode Four of the Ascent of Money illustrates the spread of financial practices across the globe including the bad, the American real estate bubble and the consequences of the subprime mortgage fiasco. The series, hosted by Professor Niall Ferguson is not exactly perfect and leaves out some details along the way. However, the presentation is worth your while and contains some nuggets of understanding that you can take to heart. At the end, this episode clearly shows what happens during hyperinflation, using the plight of Argentina as an example. America faces a similar plight, but has been immune so far because the dollar is the prevalent world currency, bolstered by foreign investment. The dollar as the chief currency could change and when it does, so will the fortunes of the nation.  Right now we have a mighty wrestle going on between central bankers and many nations that could benefit mightily from a global currency change. A shift in that balance will mark the end to  the status that the nation enjoys.      video link

February 11, 2009

Kissing the Ring of the Banking Mafia

kiss-the-mafia-ringEven after years as a corporate economist, I could hardly comprehend the pride and arrogance that exists within the minds of the banking mafia were it not for one simple fact. You might think that beggars couldn’t be choosers unless you consider that the beggars have their own guys on the inside. From central bankers to commercial bankers to Wall Street mafioso, the banking mafia has moved into the political front of influence and power as the salvation of the new U.S. administration. What is the U.S. government doing? Involving themselves in a little ring kissing.

In private industry or in the world of everyday Americans, the borrower, especially a desperate borrower who is already bankrupt, doesn’t have the privilege of dictating the terms of his bailout. The one with the money is the one that sets the rules or at least those were the rules of the old capitalism.

treasury-secretariesThe last two Treasury Secretaries, intimate insiders, proclaim selflessly that banks and financial institutions will not take proffered bailout money if it hurts the personal and financial interest of their executives. That has politicians shaking in their boots instead of exercising their authority by strapping arrogant criminals off to jail. The nation clearly doesn’t operate by the innocent until proven guilty ideal in this current age, so what are we waiting for when it comes to the world of finance? Instead, the criminal and the incompetent are still running the show.

The only solution is not to make banks and their snooty executives thrive and prosper after ruining the national and global economy because they could. Bankers aren’t even cooperating or following the mandates of lawmakers. Even worse, bad business practices should not be encouraged or artificially prospered and that is what the nation is doing in the name of confidence.

The nation doesn’t have a need to kiss the ring of the banking mafia, yet that is what panicked politicians and insiders want to do. How gutless can America be in the face of criminal conduct and complete lack of accountability? Bankers proclaim that they are patriots first and bankers second. How laughable! Unfortunately, what Timothy Geithner indicated on his Tuesday night briefing was that business as usual on Wall Street and in the banking community must continue. Did America vote for more obscene profits, the complete lack of accountability and the justification of the Wall Street bubble? I think not.

This debacle isn’t just about crime or revenge of the American public. National security is at stake. Lives are at stake.  America has been and continues to be thoroughly violated by corporations from banking to the Federal Reserve to Swiss and Italian bankers for corporate and fraternal prosperity. What is worse, the civil rights of every American have been violated in the name of capitalism. As usual, the Feds are ignoring the violation. They just want to run the show. What goes on off stage is simply ignored. ~ E. Manning

January 8, 2009

How Will Obama Create a Wall Street Miracle?

obama-discusses-stimulus-2009Throughout America’s history, there have been some years that simply rolled into the next without much notice or fanfare. Then there are the years that come along once in a generation – the kind that mark a clean break from a troubled past, and set a new course for our nation. So started Barack Obama’s “stimulus speech” today. Perhaps Obama’s opening statement is somewhat understated, but certainly well placed in the realm of psychology.

The emphasis of his speech was largely inspirational in nature, but held a few small pearls where ideas are concerned. One area is of special concern:

“…it means reforming a weak and outdated regulatory system so that we can better withstand financial shocks and better protect consumers, investors, and businesses from the reckless greed and risk-taking that must never endanger our prosperity again. No longer can we allow Wall Street wrongdoers to slip through regulatory cracks. No longer can we allow special interests to put their thumbs on the economic scales. No longer can we allow the unscrupulous lending and borrowing that leads only to destructive cycles of bubble and bust.”

obama-big-brotherSafety in America is rarely a hard sell for a people obsessed with their own security. How is President Obama going to accomplish this miracle of financial national health that not a single man in existence has dared to attempt to act on? How will America create the miracle of coveted and elusive financial transparency without creating a “big brother” situation in the realm of business, privacy and the American Dream? How can a system be created that doesn’t limit freedom while making runaway theft and abuse a topic of the past on Wall Street and in financial circles. Much like Bush’s “war on terror” seemed like a good idea when the twin towers fell, a dramatic change in course including an invasion of privacy where Corporate America and Wall Street are concerned could be a slippery slope.

Unfortunately, the U.S. Federal Government is not a bastion of transparency in any regard, which leaves many Americans pausing to consider: “What will I have to give up to keep America safe from reckless greed and risk-taking that must never endanger prosperity again.” Is America preparing itself for another “war on terror” in the name of financial literacy? What new technology and control system will we use to create this mandated financial transparency or is this a resolution that will fall neatly into the hands of global finance ministers?

Nancy Pelosi and the elected lawmakers are about to make more bailout history in the hope of abating the tide of recession with the intention of avoiding economic depression. There will be no Congressional vacation without a legislative solution for bettering the economy. So far, throwing money and liquidity a la Milton Friedman has done little to help the situation. In desperation, the Feds are looking to avoid the specter of an 25% American unemployment rate and the resulting unpopularity, misery and perhaps rebellion against established authority as millions bite the economic dust in a nation ill equipped to deal with any blight. What America has now is nothing less than political panic.

March 25, 2008

Mortgage-Lovin’ Enron MLM Blues

Filed under: banking, investment, money — Tags: , , , , , , , , , , , , — digitaleconomy @ 12:00 am

securities2.jpgFederal regulators and government policies have clearly overcome any chance of market discipline or natural market correction in the mortgage market. A long-overdue correction in the United States mortgage sector began to rear its’ head last summer. If you’ve been listening, you know this well by now. What is happening with mortgage financing could be compared to Bush’s last financial crisis, the dot.com bust. America survived that financial bubble, although that bubble affected business and investors only. Like todays’ crisis, the production of income was secondary to complicated financial constructs which obfuscated the real mortgage business. The securities invented by the mortgage banking industry aren’t in reality a legitimate investment. Remember when Enron invented entire energy-investment markets that ultimately dealt in nothing but hype?

Turning mortgages into securities has been a great deal for early lenders, much like a wonderful multi-level marketing scheme. The directives market went gangbusters. The desire for non-stop heady profits has put the world where it is. The guys that joined the game later on (more…)

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