Archive - Sep 2012

Submitted by cpowell on 02:09PM ET Saturday, September 8,
2012. Section: Daily Dispatches

5p ET Saturday, September 8, 2012

Dear Friend of GATA and Gold:

The Russia Today television network reports very high viewership for GATA hairman Bill Murphy's interview Tuesday on its "Capital Account" program with Lauren Lister, and so Murphy urges GATA supporters to send the interview's YouTube link --

With "unlimited" bond purchases confirmed by Super Mario and the ECB and the Fed essentially doing the same thing without calling it so, it is nothing short of integral to juxtapose the current western world central banking revolution with that of the Bank of Japan in the 80s. Japan faced an asset bubble that forced the nationalization decapitation of many Japanese banks whose lending practices and balance sheets depended upon the appreciation of said frothy assets (mainly real-estate, sound familiar?), which threw the country into recession in 1990...four years after the crisis was considered to have begun.

By now much has been written about the joke that was the collapse in the labor force participation rate. Perhaps too much, especially for a topic which as we predicted back in early 2011, would be the primary fudge factor allowing mainstream media headlines to blast America's economic renaissance. Remember: it is all about "confidence." Little, however, has been said about the constituents of this dramatic plunge to a 31 year low, namely the simplest distinction: that between genders. As the chart below shows, when one spreads the labor force by sex, the Friday data is particularly sad for one class of workers: Men. Because as the seasonally adjusted data shows, the labor force participation rate for men just printed at 69.8%. It has never been lower.

Back in May, we decided to conduct a thought experiment of the absurd as these are usually the best demonstration of modern-day economic insanity, when we extrapolated, based on trailing 12 month average data in the key labor market indicators, namely the number of total employees, the number of unemployed, the size of the labor force, and most importantly, the number of people not in the labor force, just when the US unemployment rate would hit not only zero, but go negative. As a reminder, we found then "that at the current surge of those leaving the labor force, the US unemployment rate will hit 0.0% in December of 2021 and finally go negative, or -0.1% in January 2022." Today, in the aftermath of Friday's farcical jobs data, we decided to update his absurdist thought experiment, because sadly what we thought was absurdity four months ago has proven to be reality. Should the number of people not in the labor force continue to surge at the August rate of 581,000/month, America will be "unemployment free" in October 2016, before the end of the next president's term, which judging by the most recent opinion polls looks to be Obama. The fine print: the labor force participation rate in November 2016 will be a record low 48.1%, and which, if extrapolated further into the future, would see less than a third of eligible US workers have a job by May 2022, as two thirds of the US population live on perpetual government handouts.

Lock Up Your Sacred Cows Before We Find and Slaughter Them!

It's time for the FACEBOOK FIASCO MSM blame game...

As of Friday, total US debt subject to the limit was $16.006 trillion, or $387 billion below the latest and greatest official debt ceiling. In the past 3 months the US has been raising debt at a slower pace than usual precisely for this reason. Debt issuance will now pick up at far faster pace as the trendline mean reversion reasserts itself. It means that sometime over the next few months, and certainly before the end of the year, the US debt ceiling will be breached (with all the usual tactics employed to delay this event from happening as much as possible, including resuming the pillaging of various government retirement funds) as the Treasury itself warned. It also means that either just before or just after the presidential election, the topic of the debt ceiling will be once again upon us. As a reminder, the reason why the market plunged back in August of 2011 is because as the GOP proved unwilling to compromise, suddenly everyone, led by Tim Geithner, realized just how close to a failed auction, read endgame, the US was, and the dire need for a wake up call became paramount. Furthermore as is well-known, the only stimulus Pavlovian politicians react to is a market collapse, which not only instills the fear of the "401(k)" god falling to earth, but lights up the switchboards as concerned "voters" suddenly realize that all their mark-to-Bernanke's market "wealth" may disappear in a puff of smoke. It is now, courtesy of Bob Woodward, that we learn just how close we came. And since the polarity and discord in Congress after the election, already at record levels, will soar to new all time highs after November, it is safe to say that the debt ceiling debacle deja vu is coming, and this time it will make the first one seem like child's play.

Who in their right mind would buy any government bonds today?

One of the populist buzzwords of the past 5 years, particularly in Europe, has been "austerity", which as we have said for the roughly the same past 5 years, is simply a synonym for "deleveraging" but one which carries just the right amount of negative connotations, and is used by crafty politicians to shift blame from their own failure to enact proper policy (which over the past 30 years has merely meant to borrow growth from future political cycles, aka, issue debt) onto a "technical" word conceived by Ph.D.-clad economists, who too, are looking for a passive victim on which to project their failure of enacting a voodoo economic theory. There is one problem with all of the above. As we have also been saying for the past five years, the austerity deleveraging myth is one big lie. We are setting the record straight below with facts and figures. We would be delighted if some politician, somewhere, could disprove these facts, which essentially imply that the world is now in a global recession, having experienced no growth as the recent 100% contractionary PMI print of all major economies confirms, yet without any country actually having implemented austerity, pardon deleveraging to have at least a modest justification for this failure of growth.

Earlier this week, former U.S. president Bill Clinton gave the keynote address to the Democractic National Convention in an effort to lend some of his popularity to Barack Obama.  With the unemployment rate still stubbornly high at 8.1%, Obama has lost many of the enthused voters who put him into the Oval Office in 2008.  Clinton was tapped to deliver the speech not only because of his image of a wonkish pragmatist but because of his presiding over the booming economy of the late 1990s.  Like a prized mule, Clinton was dragged out to give Democrats someone to point to and say that his policies were the hallmark of smart governance.  Today, Clinton still takes credit for Greenspan’s manipulated boom.  His supporters on the left love nothing more than to point at his presidency as vindication of the backwards theory that higher taxes equal more growth.  Clinton wasn’t a policy wonk; he was a politician who dipped into the Social Security trust fund to give an appearance of balancing the budget while the national debt still climbed higher. Through all of his financial scandals, womanizing, aggressive foreign policy approaches, and possible cover ups, it is actually fitting that Clinton is still looked to by the political establishment as someone worthy of respect.  He is representative of F.A. Hayek’s timeless lesson: in government the worst rise to the top and state power corrupts.

There was a time when the NSA would not know the content of this sentence minutes (or depending on the speed of typing, hours) ahead of our general readership. Those days are now gone, primarily thanks to the Patriot Act, which however merely accelerated the inevitable Orwellian destination to which American society was otherwise headed and which made constant "supervision" and "vigilance" of every US citizen a necessity (for some eyewatering details read “We Are This Far From A Turnkey Totalitarian State" - Big Brother Goes Live September 2013). There was, however, one aspect of society over which the US government did not have Chinese-type "firewall" supreme authority: the Internet. Now, as a result of an Executive Order being quietly drafted, the president of this once great country, together with the Department of Homeland Security formed in response to the events of September 11, is about to grasp supreme control over this last bastion of New Normal expression and content dissemination, naturally under the guise of protecting the people. Because as Bloomberg reports, President Obama’s administration is drafting an executive order that would create a program protecting vital computer networks from cyber attacks.

Quantitative easing hasn’t been about jobs. If this was about jobs or stimulating demand, Bernanke would have aimed the helicopter drops at the wider public, as many economists have suggested. This policy of dropping cash directly to the banks is bailing out a dangerous and morally-hazardous financial sector and too-big-to-fail megabanks that remain dangerously overleveraged and under-capitalised, needing endless new liquidity just to keep past debts serviceable. There has been plenty of cash helicopter-dropped onto Wall Street, but nobody on Wall Street has gone to jail for causing the 2008 crisis. Criminal banksters get the huge liquidity injections they want, and the rest get less than crumbs.

As President Obama doubles down on federal spending, he tells us these aren't the droids we're looking for

99 years ago the Fed was born. Then there was a world war. Two decades later, Keynesian economics (in a somewhat mutated form than that envisioned by the author, much like the Taylor rule) became the gold standard (pardon the pun) of the status quo, as it gave the political establishment a "scientific" justification to spend and accumulate gargantuan debt loads without fear of backlash by the public. Then there was another world war. Then the gold standard was obliterated, allowing the same establishment to dilute the instrument used as money and to cross the "gargantuan" barrier in spending and debt issuance. Then the world came to the verge of complete socio-economic and systemic collapse after a ponzi pyramid of $1 quadrillion in credit money nearly imploded in on itself. Then the final chapter of the corporate takeover of the sovereign model established by the Treaty of Westphalia arrived, as private deleveraging at the terminal expense of public debt took place at a record pace. This is a nutshell is the world history of the past century. And to summarize where we currently stand, we present the chart below. In the entire "developed" world, there is only one country that runs a budget surplus, even as the entire "developed" world is now, according to the Reinhart and Rogoff definition of sustainable public leverage, insolvent.

The Little Investor Is About to Get Hosed Again by Ben and the Boyz ...