Guest Post: From Bad To Worse: The Economy Today, And Tomorrow

Tyler Durden's picture

Submitted by Giordano Bruno of Neithercorp Press

From Bad To Worse: The Economy Today, And Tomorrow

At first, we were told the American economy was a freight train;
invincible. After the derivatives and mortgage crisis began in
2007-2008, we were told the problem was a mere blip in our financial
timeline; nothing to be concerned about. In 2009, we were told that the
recession was over, and that “green shoots” were on the way. Later,
they said we were “turning the corner”, whatever that means. In 2010,
we were told it was time to get used to the “new normal”, which of
course has yet to be clearly defined. Now, at the cusp of 2011, the
year which many establishment economists originally claimed would bring a
bright new era in U.S. employment and finance, it has become clear to
much of the public that we are being deliberately herded with empty
words and false promises towards a very dangerous and uncertain future.

We have discovered that there is no “new normal”. The word “normal”
denotes a certain consistency, a set of rules to the system which are
generally understood, yet we have seen nothing consistent except the
continued downward freefall of our fiscal infrastructure and the end of
anything remotely resembling stability.

I feel quite a bit of empathy and maybe even a little remorse for
those who blindly believed the mainstream nonsense of the past few
years. I can’t imagine being so lost and so utterly disappointed on
such a regular basis. The only good to come out of this dashing of
false hopes is that it has caused many to begin questioning what the
hell is really happening. Why have things only become worse? What
about all the government legislation and stimulus? When is it finally
going to produce the effects that were once guaranteed? In fact, what
are the benefits of ANY action the government or the private Federal
Reserve has taken so far?

Let’s look at financial conditions across the globe and here at home,
and perhaps we can gain a true understanding of the situation before
us, and find answers for some of these questions…

Europe: American Instability With An Accent?

How many times over this summer did we hear about the bailout that
“saved” the EU? About as much as we heard about the bailouts that
supposedly saved America.

In spring, the MSM was warning of complete disintegration of the
European Union. After the Greek bailout, all was suddenly well. The
turnaround in rhetoric was enough to give me whiplash. I’m curious now
as to where all that candy-coated bubbly adoration for European bonds
and the Euro went. When I warned during the “summer of bailout love”
that nothing had changed in the EU accept the media’s coverage of the
problem, this is what I was talking about…

As we have been pointing out for the past two years, the debt default
problems in the EU are not going away, nor are they likely to go away
for quite some time. Greece, for instance, is now under review for yet
another ratings downgrade by the S&P:

http://www.bloomberg.com/news/2010-12-03/greece-s-credit-rating-may-be-cut-by-s-p-as-eu-rules-threaten-bondholders.html

All the exuberance over the IMF/EU bailout of Greece this spring was for
naught, as the country continues to falter with no end to their debt
woes in sight. The bailout changed nothing (because bailouts never do).
This lesson in Greece has apparently made no impression on mainstream
media analysts and international investors, who now applaud a similar
bailout of Ireland, and who will probably applaud the bailouts of
Portugal, Spain, and Italy, once it finally becomes evident to the
public that those countries are in equally terrible financial
conditions.

Credit-default swaps for Portugal and Spain have risen to record
levels as their debt exposure, which has been ignored by the MSM until
this past month, is slowly revealed:

http://www.bloomberg.com/news/2010-11-29/corporate-bond-risk-falls-in-europe-credit-default-swaps-show.html

This means that the cost of insuring Portuguese or Spanish debt
securities is becoming untenable. Like a couple of convicted drunk
drivers, the risk of insuring them is tremendous. The likelihood of a
crash is simply too high.

Italian bank refinancing costs are also exploding due to the
unsustainable debt of the government, meaning an expanded credit crisis
is looming for Italians (could this signal a coming bank holiday?):

http://www.bloomberg.com/news/2010-12-02/italian-banks-refinancing-costs-soar-on-contagion-concern-nation-s-debts.html

Ireland and every other EU nation’s response to this disaster will,
obviously, be the implementation of austerity measures in order to pay
off their IMF creditors. Ireland has already announced a possible 20%
cut in overall spending and the simultaneous raising of taxes; a double
whammy for Irish citizens who will now lose many government aid programs
while at the same time losing valuable income out of their pocket:

http://www.bloomberg.com/news/2010-11-24/ireland-plans-to-reduce-spending-20-raise-taxes-as-rescue-talks-climax.html

Countries that find themselves this indebted to the IMF rarely if
ever actually improve conditions enough to pay off their liabilities,
and that is not an accident. Global bankers have no intention of ever
releasing EU nations from their clutches. The debt cycle must go on
forever…

The debt crisis across the Atlantic is culminating in a massive
destabilization of jobs markets, which is something we rarely hear about
in terms of Europe. Eurozone nations have hit an overall record high
“official” unemployment rate of 10.1% (double that for the REAL
unemployment rate):

http://english.peopledaily.com.cn/90001/90777/90853/7216710.html

The point? Just under the surface Europe is in a shambles, the Euro
is in almost as much danger as the Dollar, and this development will
come to a head very soon. Already, the EU is moving to enact a
“European Stability Mechanism”, which will effectively divide core EU
nations like Germany and France from ‘peripheral’ countries like Greece
or Portugal:

http://news.yahoo.com/s/ap/20101203/ap_on_bi_ge/eu_europe_debt_rules

More fiscally stable nations such as Germany will no longer be
required to foot the bill for those members of the EU that show signs of
default. Even now, Germany is refusing to boost aid to EU bailout
funds:

http://www.bloomberg.com/news/2010-12-06/eu-officials-debate-larger-bailout-fund-to-stem-sovereign-crisis-contagion.html

This is something we talked about with great concern at the beginning
of this year, as richer European countries tie their economies to China
and let the rest of the West rot. On one hand, it seems practical for
sovereign countries to protect themselves and refuse to pay for the
mistakes of others. However, the primary point of all of this has been
ignored by the MSM, which is the fact that the EU should never have been
formed in the first place. So far it has resulted in nothing but
calamity for most participating countries. Surely, the IMF will drop
by to pick up the pieces and “save” the union that was never wanted or
needed, after the people are sufficiently desperate.

What this shows is that nearly all of the crises we are confronted
with daily here in the U.S. are also striking Europe; there’s just much
less talk about the EU disaster from local economic analysts.
Regardless of what the MSM claims, Europe as we know it is about to
change dramatically. In the U.S., the metamorphosis could be even more
shocking…

The Recession That Ate America!

The jobs report from the Labor Department last week underlined the
breadth of the collapse in America. Establishment economists were
heralding the Christmas season as a turning point (yet again) in the
U.S. economy, for jobs, and for sales. Predictions for job creation
ranged from around 150,000 to 400,000 openings. Traditionally, they
would be correct in expecting such a spike in employment, but we are not
living in typical times. The jobs report revealed only 39,000 newly
employed, and being that Labor Department numbers are generally
manipulated, we could safely suggest that almost no jobs were added.
All in the midst of the Holidays, when temporary hiring is supposed to
boom:

http://money.cnn.com/2010/12/03/news/economy/november_jobs_report/index.htm

Now, some analysts are beginning to suggest that the U.S. is heading
“back” into a recession. The problem is that in order to go into a
second recession, we would have to actually exit the first recession
before hand:

http://www.reuters.com/article/idUSTRE6B52NK20101206

Whether or not you believe that we are facing a double dip, or that
we are caught in one long economic death spiral, one must ask the
question: where did all that bailout money go that was supposed to stop
this? Recently, we received a pittance of a glimpse at the Federal
Reserve balance sheet for part of the stimulus program. What little
data was made public was not comforting…

If you thought that stimulus packages from the Fed would actually go
into the U.S. economy, you were greatly mistaken. The largest
recipients of bailout dollars from the Federal Reserve (paid for with
your tax dollars) were FOREIGN BANKS. That’s right, the liquidity
injections that have put the very health of the dollar at risk and
stoked a growing trade and currency war across the planet did not even
go towards the economy in which you live! Overseas banks such as UBS
and Barclays received the largest portion of the $3.3 trillion in
emergency stimulus that was outlined in documentation the Fed was forced
to release due to lawsuit:

http://www.bloomberg.com/news/2010-12-02/federal-reserve-may-be-central-bank-of-the-world-after-ubs-barclays-aid.html

Remember, this $3.3 trillion is just what the central bankers openly
admit to. We haven’t even scratched the surface of Fed accounts or Fed
secrecy yet. One factor in stimulus injections that often goes under
the radar is overnight lending. It has been revealed that the Fed has
created at least $9 trillion which was then pumped into major banks over
the course of the past two years. Merrill Lynch alone snapped up $2.1
trillion:

http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm?source=ft

This brings up another important question: if the major banks have been
privy to so much capital, why aren’t they lending to the public? Maybe
because they are still broke, even after all that Fed liquidity!
Currently, top U.S. banks still face a $100 billion to $150 billion
shortfall according to Basel III rules (again, this is just the amount
that has been admitted):

http://www.reuters.com/article/idUSTRE6AL0A220101122

This amount of capital retention would suggest a ‘deflationary’
crisis, but instead, we have so far witnessed a falling dollar and
rising prices on most goods and commodities. Gold is hovering near
$1420 an ounce as I write this. Silver has broken the $30 an ounce
mark. Oil is flirting with $90 a barrel, and is firmly entrenched above
$3 a gallon, very close to where we predicted during the summer (we
still have three weeks to hit $100 a barrel). Other base goods are
spiking much faster…

The most recent and disingenuous talking point used by the MSM to
explain away rising prices is that it is a result of “demand” by growing
developing nations like China. Below are a couple examples, including
an article which blames rising cotton prices on demand from China, and
rising oil prices on “economic recovery”, which is an unbearable load of
media manure:

http://www.bloomberg.com/news/2010-12-02/cotton-soars-as-growers-can-t-ship-fast-enough-to-meet-chinese-demand.html

http://www.reuters.com/article/idUSLDE6AA0XV20101206

Anything to avoid the word “inflation”, and most especially the word
“hyperinflation”. The problem with the demand argument is that while
there is growing need for materials in places like China, this is
certainly not at all the driving force behind the explosion in prices. A
good way to gage this is by examining the BDI (Baltic Dry Index).

The BDI measures the cost of shipping raw materials across the ocean
as well as the amount of goods being shipped. It is one of the few
economic indicators that cannot be manipulated by international banks or
governments. A dramatic drop in the BDI shows a sharp decrease in
demand for global shipping and thus reveals a slowdown in the overall
economy. This is exactly what occurred at the beginning of the credit
crisis in 2007-2008. However, the BDI can also be measured in
comparison with the values of stocks and commodities. Under normal
conditions of supply and demand, if the BDI were to drop (or deflate),
then the value of most stocks and goods should also drop. This has not
been the case, as the below graphs illustrate:

BDI vs. S&P 500

BDI vs. CRB Index

BDI vs. Crude Oil

BDI vs. Gold

BDI vs. Copper

BDI vs. Soy

Now, there have been small deviations in the past between stocks and
commodities versus the BDI, but usually it is the BDI which leads the
deviation, and not the commodities. As the final year of every graph
shows, there has been a significant decoupling of the price of stocks
and goods when compared with the amount of shipping of those goods. To
put it simply; demand is low, all over the world, yet prices continue to
climb skyward at an incredible pace. This suggests to me that we are
seeing the beginning of hyperinflation, mostly in the U.S., and in no
way a recovery.

The main culprit in creating the inflation millstone is, as you
probably guessed, the Federal Reserve. Being that much of the fiat the
Fed throws out is going into foreign entities, we have not seen effects
as pronounced as they would be if all that cash was flowing into our
local markets. This has not, though, stopped devaluation of the dollar
itself, which is the true cause of inflation beyond money supply.

Foreign central banks are all too aware that the Greenback will soon
be history. Treasury auctions are producing dismal results for anything
other than very short term T-bonds, and the Fed is quickly becoming the
ONLY buyer of U.S. government debt:

http://www.zerohedge.com/article/weak-29-billion-7-year-auction-prices-225-bid-cover-drops

And, the biggest news of the year, the news that almost no mainstream
outlet in America covered: China and Russia have announced that they
will stop using the dollar for trade between the two countries:

http://english.peopledaily.com.cn/90001/90778/90859/7208907.html

“Wen said Beijing is willing to boost cooperation with Moscow in
Northeast Asia, Central Asia and the Asia-Pacific region, as well as in
major international organizations and on mechanisms in pursuit of a
“fair and reasonable new order” in international politics and the
economy.”

“Sun Zhuangzhi, a senior researcher in Central Asian studies at
the Chinese Academy of Social Sciences, said the new mode of trade
settlement between China and Russia follows a global trend after the
financial crisis exposed the faults of a dollar-dominated world
financial system.”

Skeptics and disinformation campaigns will likely argue that Russia
is barely in the top ten trading partners of China, and the announcement
is not a threat to the dollar’s world reserve status. What they will
neglect to mention is that China and Russia’s political influence
internationally goes far beyond trade decisions. How long before the
other BRIC nations, India and Brazil, follow suit and drop the dollar
when trading with China? How long before European countries, or even
OPEC nations, join this trend? What you are witnessing today is the
median step before the final collapse of our currency, and when the
history books are written, it will probably be this period that is
singled out as the trigger point for the event.

Get Ready For Weapons Of Mass Distraction

As we have written about many times and qualified in great detail
with page after page of supported evidence, the shell shocked state of
the economy is no accident. The financial implosion is itself a
distraction from the centralization policies of corporate cartels
through organizations like the IMF or the Federal Reserve. But as the
breakdown progresses (and I think we have shown succinctly that it
will), the masses will eventually look for the antagonist of this story.
The elites will have no other choice but to conjure villains from the
ether to divert attention away from themselves and their detrimental
policies. Not to mention, the number of us who understand the criminal
nature of central banks is becoming precariously threatening to the
continuance of those policies.

The Liberty Movement has hit a point of critical mass. The
alternative media is dominating over mainstream corporate news sources.
Our fight for transparency in information is reaching every corner of
the world. Our membership is growing beyond what many of us had ever
imagined possible. Projects such as the ‘Buy Silver: Crash JP Morgan’
campaign have gone effectively viral. Ideas like the popular
purchasing of physical precious metals to counter the COMEX
manipulations and short positions of big banks have been around for a
long time, but in the past couple of years, we finally have the support
base and cultural clout to make them a reality with the fantastic media
reach of men like Max Keiser, Alex Jones, websites like Zero Hedge, and
many others.

The more prominent our movement becomes, the more dangerous we are to
global banks, and the more likely we are to see the enactment of
engineered events designed to fog the battlefield and confuse the
public. The goal of globalists will be to fabricate threats which
appear to be more immediate or more frightening than the power grabbing
schemes of the elites themselves. Imagine you have cancer, but are then
suddenly confronted with a live grenade in your lap. Which problem is
going to receive your full attention at that moment; the grenade, or the
cancer? The dilemma is that both eventually end the same way. This is
how elitists operate; deny people the chance to deal with the long term
threat by diverting them with short term catastrophes.

A new ‘Gulf of Tonkin’ off the shores of North Korea, the release of a
weaponized computer virus into Wall Street trading networks, yet
another attempted or successful terrorist attack with highly
questionable players and suspicious results, or maybe a Treasury dump by
China resulting in a trade or even shooting war. I can’t say where the
punches will come from, but I do know that the hits are on their way.
The state of our economy and of public opinion is reaching a crescendo
and something has to give. The global banks will do anything to ensure
that they are not set in the crosshairs of those people who are forced
to suffer, even if it means throwing numerous innocents into the path of
the oncoming bullets (figurative or otherwise).

At bottom, to fully comprehend the events that are taking place, and
that are about to take place in our economic and cultural environment,
we have to focus on the ignition source. If your house is set on fire,
do you blame the house for burning? Do you blame the fire? Or do you
blame the people that started the fire? I have a feeling the coming
months will be crucial in this regard, and how tomorrow unfolds will
depend greatly on our ability to lock hold of the influential financial
arsonists of today, and never let them go.