Guest Post: Dangerous Economic Misconceptions

Tyler Durden's picture

Submitted by Giordano Bruno of Neithercorp Press

Dangerous Economic Misconceptions

By Giordano Bruno

Neithercorp Press – 09/07/2010

For many years, economics in the U.S. has been approached with a
‘game show’ mentality. Wild and backwards speculations on financial
growth have become the norm. The daily ‘Wall Street Journal’ and
‘Washington Post’ musings of international bankers and their servile
lackeys are treated as divination, rather than the bamboozle they
actually signify. If you play along and contribute to the mechanics of
the great casino, then you are treated as a “serious” economist or
analyst, regardless of how many times your advice has been completely
off the mark, or how many middle-class nest eggs you destroyed in the
process. If you question the conclusions of the pundits and talking
heads, or, God forbid, question the validity of the system itself, you
are immediately marginalized as a “kook” or “conspiracy theorist”. The
workings of the mainstream financial world are more inbred than
Hollywood and Washington D.C. combined.

Cable news providers like MSNBC and CNN have set the American people
up for fall after fall; sometimes because they were blinded by their own
bells and whistles, sometimes because they deliberately and blatantly
lied in order to create engineered market sentiment. In the wake of the
initial credit market collapse of 2008, these people, who didn’t see it
coming and denied it was happening, still have their jobs, still have
their TV shows and news columns, and, are still generally blowing smoke
up our posteriors.

It’s not that the inhabitants of this country continue to trust the
MSM (some do; seniors on prescription medication, yuppies on
prescription medication, ignorant day traders who are often
self-medicated, etc.), it’s just that the well established opposing
views and arguments we in the Liberty Movement are exposed to by honest
alternative news sources have not been properly presented in a forum
that is widely visible to the average citizen. When was the last time
you saw a Ron Paul, a Peter Schiff, a Gerald Celente, or a Max Keiser,
etc. on a MSM financial program for any longer than ten minutes? When
have we ever seen the opposing view given respectful consideration in a
fairly moderated debate? Would any high level ghoul from Goldman Sachs,
JP Morgan, or the private Federal Reserve, submit to an unbiased hour
long televised discussion with any analyst from our side of the line?

On the few occasions in which Ben Bernanke was cornered in the highly
controlled environment of Congressional hearings, he was either
completely unable or unwilling to give a coherent response of any
substance to the questions of Ron Paul. Anytime these men are taken out
of the protective element of the worshipful MSM shell and actually
challenged, their arguments fall apart.

In some fields of research, dishonesty and misconceptions can cost
lives. In economics, dishonesty and misconceptions can cost MILLIONS of
lives. Mainstream financial analysts (and the MSM in general) have
lost all sense of responsibility for what they do, and thus, continue to
put our society at risk and continue to lose vaster portions of their
audience year after year. The problem is that the vacuum left behind by
this mass exodus from the MSM has not yet been correctly filled with
principled alternative news providers. We are growing everyday, but the
information void is still ever present, and the memory hole continues
to be exploited by global bankers. Some people don’t know where to
turn, and have instead given up on looking for the truth altogether.

My only option has been to continue drilling away at the root points
of disinformation, along with many other uncompromised researchers, and
hope that consistency and perseverance win the day by accumulation and

With that strategy in mind, we will now examine the instabilities
behind our current recession/depression. We will then follow by
deconstructing the most prominent economic misconceptions surrounding
them (often perpetuated by the MSM), along with those misconceptions you
will probably hear in the near future…

Did Someone Say “Recovery”?

There are a handful of exceptions in history, but those aside, one of
the safest generalizations one can make, is that governments lie. Why
do they lie? Simple; because they are afraid of how the public might
react if they knew the truth. Governments are often composed of men
with a strong sense of self-interest, and an even stronger sense of self
preservation. This drives them to put their own agendas over the
wellbeing of the people they are supposed to serve. And, if it’s safe
to bet that governments lie, it’s an even safer bet that international
bankers, who have no principled ties to any country, lie more!

During the Great Depression, government officials, mainstream
financial analysts, and global bankers, released press notices and
interviews every year for over a decade, all claiming that “recovery”
was just around the corner, that good times were back again. Then, we
witnessed a world war. A third of the planet was leveled, but America
(unlike most countries) came out with its industrial base still intact,
and so, we called it a recovery (actually just a reallocation of world
assets into one of the few un-scorched nations left) and happily skipped
on our way towards the comparably decadent 1950’s.

Today, we face a far more dangerous scenario than the Great
Depression ever was, but the strategy of skewed statistics and denial by
the elites has remained pretty much unchanged. Unsupported talk of
recovery fumes from every word and every pore of the establishment
media, and the investment community to some extent has even been
convinced that if they “wish” for recovery hard enough, if they think
happy thoughts, it will materialize, all without any effort, any
sacrifice, any suffering, like magic. Unfortunately, fairy dust and
fiat alone are not going to undo the slowly accumulated damage that our
economy has sustained for the past several decades. Below, are the
reasons why…

Employment Near Great Depression Levels

In the past week, the Obama Administration has preemptively claimed
victory on two fronts; a military pullout in Iraq, and the American
economy (and conveniently right in time for Labor Day I might add). Of
course, he “exaggerated” the pullout in Iraq. There are still 50,000
troops on the ground, and the troops he did pull out are merely being
replaced with private mercenary contractors like those from Blackwater.
So, in Iraq, nothing has changed. The administration’s proclamation
that they have “stopped the bleeding” in terms of the economy is a
similar misrepresentation of the facts. Its not that they have stopped
the bleeding, America has almost bled out!

Counting U-6 measurements of those not considered by the Labor
Department as unemployed because they are either off jobless benefits or
are working part time, the jobless rate of the U.S. has hovered near
20% for over a year at least. During the Great Depression at its peak,
unemployment reached 25%, but even this comparison is misleading. The
population of the U.S. during the 1930’s was around 122 million, meaning
far less working age adults than there are today in our population of
310 million people. In fact, the actual number, not percentage, of
unemployed and underemployed today far exceeds that of the Great
Depression. The number of desperate people, the critical mass of poor
in a country, can have a far more insidious effect on its social
environment than the abstract historical “percentage”, at least in my

Given the real state of unemployment, why has there been such
euphoria over the economy in the past few days? Well, August private
employment numbers from the Labor Department of 67,000 jobs created
“beat Wall Street estimates”, that’s why. Set aside the fact that
121,000 temporary government jobs were cut equaling an actual net loss
of 54,000 jobs. At least the privet sector is alive, right? Wrong.
Here’s the rub…

Mainstream analyst estimates have become an incredibly pervasive
delusion among investors and the public lately, a delusion that now has
the financial sector dancing to whatever tune the government and the
central banks wish to play.

Analysts forecast monthly unemployment reductions or increases based
on….? Certainly weekly unemployment benefits filings are a part of the
prediction process, and perhaps a few other statistics which are
questionable themselves, but at bottom, these estimates are a blind
guess involving very little concrete math. A guess completely subject
to the whims of the analysts themselves. This “guess” is then for some
reason treated as a legitimate reference point by the entire market for
determining the health of the economy. It becomes a purely fabricated
psychological indicator with no basis in reality. Want to pump up the
stock market for a couple weeks? Why not guess lower job creation than
is liable to occur. Or, if you are the Labor Department, tweak the
numbers up a little above estimates and then “revise” them down in
another month or two after everyone has forgotten. Bankers and
economists projected 40,000 new private sector jobs created in August.
Labor Department numbers were 27,000 above that. Result: stock market
jubilee and a declaration that the recovery is in full swing.

The market has become so addicted to the use of arbitrary monthly
analyst estimates that they have forgotten to look at the bigger
picture, the real and fundamental reference points compiled over decades
and used for gauging the actual state of the economy. Below is a graph
from Clusterstock which very clearly and concisely illustrates EXACTLY
how our jobs market is doing by comparing the percent of job losses to
peak employment today, along side the same statistics from every
recession after WWII:

When one looks at the broader comparisons of our financial situation, he
discovers that a 67,000 job boost isn’t even a drop in the bucket. In
our current state, 300,000 to 400,000 jobs a month would have to be
generated for at least three years straight in order to reach employment
levels similar to those of 2006-2007, before the collapse was fully

Even if significant job loss has stopped (which is unlikely), no
economy can recover without first reducing its static 20% unemployment
rate. The longer this portion of the populace remains out of work, the
harder it will be for the government to continue welfare and
unemployment programs (modern day soup kitchens). Once these programs
falter, the rampant poverty they obscured will become highly visible.

Housing Market Is Never Coming Back

Some might consider this statement to be rather brash. I disagree.
According to the data, it is highly unlikely that we will see the
housing market return to even a semblance of its former glory in our
lifetimes. I often hear MSM analysts claim on a monthly basis that
housing has bottomed, only to have home prices fall yet again, or
mortgage rates hit record low after record low:

The establishment often tries to turn these numbers on their ear, as
if they are a good thing. Record low mortgage rates are touted as
investment candy. “Surely”, they say, ”such low rates will lure
homebuyers out in droves.” However, as of the closing of August 2010,
and the end of the homebuyer tax credit, there has been no real estate
frenzy, and sales have fallen to the slowest pace on record, all during
summer months when home buying is traditionally supposed to increase:

This long last gasp of the real estate sector is not just limited to
residential property. Commercial property is also plunging in value and
retail spaces are emptying at a substantial rate. The overall property
value of American malls and shopping centers fell 11% in the second
quarter of this year alone:

This has caused some to suggest even more government capitalization of banks to protect them from further property declines:

So, no recovery in employment, and no recovery in real estate; the
two most important factors necessary for a legitimate revitalization of
the U.S economy. Is there some golden bit of good financial news Obama
knows that we don’t. I doubt it. But let’s continue…

FDIC Blackhole Bailout

Anyone who says the stimulus measures ever stopped doesn’t know what
they are talking about. We actually have several “blackhole bailouts”;
bailouts with undefined limits or no limits at all, draining money from
the American taxpayer continuously. One would be the endless bailout of
Fannie Mae and Freddie Mac, which will require more and more stimulus
every quarter as the housing market continues to disintegrate. Another,
would be the rarely spoken of bailout of the FDIC, which has been in
the red for quite some time now. Just as Fannie and Freddie’s bailout
is dependent on the constant default of mortgage loans, the FDIC’s
bailout is predicated on the constant default of banks.

Last year, analysts estimated that we would see approximately 140
bank closures in 2010. It is now the beginning of September and already
118 banks have been shuttered, well on our way to surpassing the 140
bank estimate:

Keep in mind that all of these banks are closing while the FDIC is
broke! Meaning, every penny the FDIC pays out to insured account
holders is supplied by the Treasury, which is also broke! Where do they
get the money? Where else? The Federal Reserve issues the money out
of thin air. Where is this leading? One of two scenarios: either the
Fed ends its printing and the FDIC goes bankrupt, causing a run on the
banks, or, the Fed continues to print more fiat until the dollar is
rendered absolutely worthless on the world market.

For those who think healthier banking is just around the corner, the
FDIC expanded its “secret” list of troubled banks this year to over 800!

This has some of the smarter investors questioning if the bailouts
will EVER end. The answer is ‘no’. At least, not until the government
defaults, or our currency implodes, which we will discuss in a moment.

Stock Market Hanging By A Thread

The stock market is perhaps the worst possible indicator of the true
health of the economy. No system is more prone to manipulation and
engineered equity floods. Some Americans rarely if ever question why or
how stocks increase or decrease in overall strength, all they know is,
green means “good”, and red means “bad”. As long as they see green once
or twice a week, they are content.

In a market not under duress by central banks, the Dow is supposed to
reflect the profit health and viability of the companies that make up
its index. However, in our current market, this is rarely the case. In
fact, stock values for the past several months are far above what they
should be when considering the low profits and massive debts of our
corporate infrastructure. Some estimate using the P/E Ratio (price to
earnings ratio), that stocks are at least 30% overvalued. I think that
if we take into account the fact that most banks and funds hold toxic
equities worth nothing and count them as AAA rated assets, it is more
likely that stocks are 50% to 60% overvalued, and the Dow could easily
lose this much in the near future.

The number of investors actively trading in the Dow also affects its
“moods”. The lower the market volume, the more wild stocks tend to
swing. This is because more and more market value is being determined
by fewer and fewer people. The volume of this August was approximately
30% lower than the volume of August, 2009:

What this means is, many average investors are pulling out of stocks
completely, leaving the big boys even greater dominance of the playing
field, and greater ability to drive values up or down at will.

Larger corporations also use subversive tactics to drive up their
short term stock value at the expense of long term stability. One such
tactic is to forcefully expand through acquisitions of smaller companies
in other fields that they cannot really afford. A good example is HP
and Dell’s crazed bidding war for 3Par, or BHP’s bid for Potash:

These companies could easily develop along the same guidelines as the
companies they are spending incredible sums to purchase, IF they had the
long term capital to do so. They don’t. And so, we will see top
corporations drive harder and harder to devour smaller companies in
order to drive up their own share values all while knowing they cannot
continue to sustain themselves in the long run. Google alone has
already announced 18 acquisitions so far this year:

As for average investors, where is all their money going if not into
stocks? Investors are snapping up bonds of all types (except municipals
which are a death trap), and of course, gold, which is holding near
record highs despite all the predictions made against it by the MSM:

This trend has been developing for many months now, and it should
come as no surprise that stocks have lost investor trust. It should
also come as no surprise that due to this trend the dreaded “Hindenburg
Omen” recently reared its ugly head not once, but twice within the span
of 30 days!

The indicator has a 92% success rate in predicting a considerable
stock market decline, and the probability of a major stock market crash
after a single Omen is around 24%. Establishment analysts have
attempted to shrug off the indicator, or apply a “modern take” to the
definition of an actual Hindenburg Omen, so as to dilute its meaning and
the warning. But this is what they have always done from the Great
Depression to today; plant the seeds of false hope in an economy clearly
on the verge of failure.

Asia Will Not Pick Up U.S. Slack

The prevailing argument in the MSM is the globalist one; that the
fall of the U.S. consumer is a natural part of global “harmonization”,
and that devaluation of the U.S. dollar is a “good thing” because it
will “force” the east to begin purchasing more U.S. goods, driving up
our exports and manufacturing leading to an “industrial rebirth” in
America. There is absolutely no logical basis for this argument.

Essentially, establishment economists want us to believe that Asia is
going to pick up where the American citizen left off as the new
super-consumers, and we will jump right back into our post WWII role as
manufacturing giants, all in time to head off any major crisis in the
world economy. This is a fantasy.

While it is true that America must eventually return to its
industrial roots if we are to survive, our manufacturing capability is
almost non-existent compared to what is required to make such a
transition in the short term. MSM talking heads argue that the U.S. has
the greatest manufacturing capability on Earth, but what they fail to
mention is that the vast majority of our factories are on foreign soil,
not here in the U.S.! After outsourcing all our manufacturing
capability to the third world, it could take a couple decades to rebuild
our home industry to effective levels, and this is a conservative
estimate considering our country has no savings and is drowning in debt.

China has shown it has no intention of turning to the U.S. for goods
they could easily make themselves or import through the new ASEAN
trading bloc, which is really just the foundation for an Asian Union,
eventually relying on the Yuan as its reserve currency. Chinese trade
has increased almost 50% this year with ASEAN, not the U.S.

While China’s non-bond investments in the U.S. have dropped 47%:

If the Obama Administration is so interesting in building a better
trade relationship with China and convincing them to purchase our
exports, as they have claimed in the past, you would think they would
try to involve themselves further in the activities of ASEAN. Instead,
Obama failed to name any ambassadors to the major ASEAN trade conference
last month in Vietnam. This only caused China and other Eastern
nations to feel slighted and ignored by the U.S; always a good idea to
thumb your nose at someone before asking them to buy your stuff:

The financial and political moves by China show not a reversal of
roles as exporter nation and importer nation, but a complete separation
of the two economies, an ending of substantial economic interaction or
reliance. The developments in Treasury bonds and the Chinese currency
only reinforce this fact.

Japan, China, ASEAN, And The Dollar

The U.S. Dollar continues to exist for one reason and one reason
only; habit. As the World Reserve Currency, the dollar has been
entrenched across the globe as the primary trade mechanism. It holds
psychological significance among investors not because it is stable but
simply because it has played this role for so long. The common
assumption is that this role will not change anytime soon. What most
Americans don’t know though, and what the MSM rarely talks about, is
that the dollar’s role has already changed. In light of endless
quantitative easing measures, mushrooming U.S. debt, and Obama’s
harebrained new plan for FDR-like public works programs which we cannot
afford, the time has come to pay the piper.

Investors are abandoning the dollar as a safe haven and are now
treating it as a “funding currency”, a middle-man investment for the
purchase of higher yield assets, much like the Japanese Yen or the Swiss
Franc. It was only a matter of time:

The Chinese Government has now publicly warned that they will be
diversifying out of U.S. Treasuries (they already have been for months)
and that this will result in “some” devaluation in the dollar:

China has ramped up cross-border Yuan transactions with other
countries making their currency more viable as a trade mechanism, and
making the dollar less necessary:

Both the U.S. and EU governments are practically begging China to
allow a fast appreciation in the Yuan, which could only be precipitated
by a dump of their Treasury reserves and a considerable devaluation of
the dollar:

And most startling (but not all that unexpected), is the incredible
amount of PR the Yuan is getting as a reserve currency from
international banks and corporations. Global banks, including Citigroup
and JP Morgan, are launching “roadshows” promoting trade using the Yuan
or “Renminbi” instead of the U.S. dollar! That’s right! Global
bankers are now openly pushing for the dollar to be replaced by the Yuan
in international trade:

(Special Note: The article above was also published on in full, but has since been removed)

Even McDonalds is now selling Yuan denominated bonds:

There is absolutely no doubt, China is spreading the Yuan everywhere.
Inflationary effects are already occurring because of this move:

The only way to avoid severe negative effects on the average Chinese
citizen is to allow an unprecedented surge in the Yuan’s value in order
to increase consumer buying power in line with inflation. Again, the
best and most efficient way for China to make this happen is to dump
their U.S. Treasury Bond holdings.

It seems that Japan, the second largest holder of U.S. debt, may not
be far behind China in this respect. The Yen has recently risen to a 15
year high against the dollar, causing the Japanese Government to
discuss the possibility of a currency intervention. However, Japan is
well aware that if the U.S. is so adamant about Chinese currency
manipulation, it will be just as disruptive over Japanese currency

Without help from the U.S. and the EU, a currency intervention in Japan
would surely fail. Japan, unlike China, has not re-engineered its
economy for greater consumption and has maintained its traditional
export relationship with the U.S. This has resulted in dismal revenues
and a continuous deflationary spiral in the Japanese economy. So what
is Japan to do? Every move by international banks to pump up China,
along with the U.S. Government’s demand that China allow a quick
appreciation in the Yuan despite the obvious negative effect it will
have on the dollar suggests to me that there is a deliberate strategy by
global bankers to end our currency’s world reserve status and debase
our financial system, but, it also looks as though the Japanese people
are being prepared at the same time to accept full membership in ASEAN.

This has been discussed by the Japanese for some time, but the
cultural divide between China and Japan is still very strong. Making
the Japanese populace highly dependent on China for economic stability
may not go over well without prompting:

It appears that Japan, just like the U.S., is being positioned
between the proverbial “rock and a hard place”. If they continue to
rely on poor U.S. consumption, if investors continue to pour into the
Yen as a safer hedge than the dollar, Japan will face dire deflationary
consequences, especially if the EU and the U.S. do not support a Yen
intervention. The only option left to them (rather conveniently) is to
conform to the ASEAN trading bloc. Why is this bad for the U.S.? The
side effect of this move would probably entail the Japanese dumping of
U.S. Treasuries, right on top of China’s. This means the end of the

The World Hurts More Without The Truth

My favorite propaganda trend in the mainstream media today is one
directed at researchers like myself who expose the darker side of our
economic and political environment. The term “Apocalypse Porn”, or
“Doomer Porn”, is rising as the preferred Ad hominem attack on Liberty
Movement writers, in place of “conspiracy theorist” which doesn’t seem
to be working for them anymore. The MSM apparently spends more time
trying to develop ‘memes’ like this than they do actually researching
the so called news they propagate. The insinuation is that we either
embellish data to make it seem more frightening than it actually is, or,
that by reporting on valid but terrible news, we are a “danger” to
society, because we perpetuate fear. Basically, it is the beginnings of
an argument for suppression of 1st Amendment rights.

The reason the information we report on is disturbing is not because
it is “bad”, but because it is TRUE. There are children who could make
the distinction, but some full grown men and women seem to have
difficulty with the concept. When the establishment says that we as
researchers and alternative media do not have a right to spread facts
that might upset you, what they are also saying is that you as an
American cannot be trusted to act responsibly and constructively with
the facts you are given. They are saying that they need to protect you
from yourself. Who ever gave them permission to take on that job?

The Doomer Porn argument rings hollow because what I state here in
these articles is entirely subject to your verification. If I
embellish, or lie, I will be caught, and thus, my writing becomes
meaningless. If I tell the truth, the hard truth, it is not up to me or
the MSM or anyone else accept yourself to decide what you will do with

Perhaps the greatest misconception of all, especially in economics,
is that bad news encourages bad events. That the truth is hazardous,
and for the economy to remain healthy, the establishment must continue
to lie. The presumption that our financial system is so dependent on
our mass psychology is complete nonsense. The dollar is being
fundamentally debased whether or not we blindly “believe” the dollar is
fine. Our country is facing unserviceable national debts whether or not
we force ourselves to think positive thoughts. The stock market is
exceedingly overpriced and primed for collapse even if you and I ignore
all the warning signs and drink margaritas on white sandy beaches all
day with big dumb smiles on our faces. Two plus two equals four no
matter what the psychological state of our society is. The facts are
not subject to my “good vibes” or “bad vibes”, and if this is the best
argument MSM pundits can make against legitimate alternative financial
analysts, then I think they need to pack it up and leave the thinking to
more adequate men.

Without confronting the stark reality of our situation, be it
economic, political, or social, we will never be able change things for
the better. Ignorance is not bliss. The ignorant always end up paying a
steep price. The U.S. economy is going to experience some rather
horrifying repercussions, for the actions of the elites who seek to
derail our culture and replace it with another, and for the publics’
continued lack of vigilance to those actions. In my next article, I
will be discussing possible solutions to all of the dilemmas I describe
above, but first and foremost on the list is developing the ability to
accept the nature of the situation as it stands, and not as we would
like it to be. Life has never worked that way, and finance is no

You can contact Giordano Bruno at: