Guest Post: Disinformation Fog Intensifies As Economic Turmoil Develops

Tyler Durden's picture

Submitted by Giordano Bruno of Neithercorp Press

Disinformation Fog Intensifies As Economic Turmoil Develops

In the past few years, the concept of economic globalism has revealed
itself as quite the Trojan horse; once posing as the next step in the
evolution of “free market” capitalism and the savior of third world
nations striving for development status, now revealed as a fiscal plague
spreading delirium and destruction wherever it touches ground. There
is no denying that the economies of the world are irrevocably tied to
one another, but until recently, this was always thought of as a “good
thing” in mainstream financial circles. Today, the great failings of
engineered interdependency are painfully apparent. The EU’s many
peripheral nations are dropping one after another like flies in a fog of
DDT, rising economies in Asia are bloated with investment capital
escaping from debt default in the West, causing impressive levels of
inflation, and the U.S. is on the verge of a currency implosion as the
Federal Reserve opens the floodgates of fiat in a bid to hide our
system’s extreme destabilization and maintain what little international
faith is left in our ability to service our rampant liabilities.
Globalism has led us to disaster…

Of course, this disaster is not quite so obvious if you only follow
the MSM’s version of events, or the pithy, watered down observations of
mainstream economists, central bank officials, and puppet politicians.
In fact, it’s difficult for the average person only mildly versed in
economics to understand just what is going on! The closer we get to the
edge of the ravine, the deeper the deception becomes. Most Americans
feel the danger intuitively, and see the warning signs in their local
communities, but clear, concise information in the midst of this
‘Gordian Knot’ of lies is difficult to come by.

Treasury Secretary Timothy Geithner claims that the Fed’s
quantitative easing programs are no threat to the dollar and that our
country “will not engage in devaluation”, all while commodity and energy
prices skyrocket to record levels and numerous nations threaten to dump
the Greenback as the world reserve currency. China claims that their
inflation is manageable, releasing CPI data that is even more arbitrary
and skewed as our own, while the Chinese masses grow louder in their
anger over a lack of purchasing power to match exploding housing and
food prices. The U.S. blames the lack of global recovery on China’s
undervalued Yuan and its unfair trade imbalance. China blames the lack
of global recovery on the overprinting of the dollar. Europe sits
across the Atlantic hoping both China and the U.S. will keep printing
and sending currency care packages to keep the EU afloat, all while
claiming every three months or so that the “crisis has passed”.

So, what’s the truth in all of this?

In the following, I will attempt to dismantle the latest
disinformation campaigns, explaining the most important factors
surrounding the developing calamity between the world’s major economic
powers in the easiest terms possible; including how these factors will
directly and indirectly affect you…

Truth: Dollar Devaluation Is Occurring, Inflation Is Here

As we have covered in recent articles, widely visible inflation in
the U.S. has been steadily developing for at least one and a half years.
Food, energy, and metals prices across the board are soaring, and
commodities actually outperformed stocks, bonds, and the dollar in 2010:

http://www.bloomberg.com/news/2011-01-01/commodities-lead-gains-as-all-assets-climb-on-recovering-economy.html

Wholesale prices (according to “official” numbers) rose 1.1% in
December, following a 1.5% gain in November. These figures are diluted,
to be sure, but the fact that inflation is being reported at all
signals probable danger for the coming year:

http://www.marketwatch.com/story/us-wholesale-prices-up-11-in-december-2011-01-13

Grain prices surged in 2010. Corn gained nearly 60%, while soy and wheat gained around 40%. Cooking oil prices jumped 62%:

http://www.bloomberg.com/news/2011-01-12/corn-soybean-wheat-prices-surge-as-u-s-cuts-supply-outlook.html

Anyone today who denies inflation is evident in our economy is either
blind, dishonest, or mentally deranged. In any case, they are not to be
trusted. The question now is, is this inflation being caused by
devaluing world currencies like the dollar, or a myriad of random
chaotic “coincidences”…

Lie: Current Inflation Is Caused By “Global Recovery”, And “Rising Demand”

The great lie surrounding these inflationary warning signs is that
they are a product of “recovery”, and increasing demand in the U.S. and
developing countries. While the “demand” argument may be partly true
for gold and silver’s rise, it is certainly not true for oil and grains.
Global demand for goods overall is dropping off a cliff, as is evident
in the Baltic Dry Index, which measures shipping and freight rates
around the world. The BDI has suffered a 20% decline in the past three
weeks alone:

http://www.theindonesiatoday.com/transportation-headline/6577-baltic-dry-index-fell-20.html

If shipping demand is falling around the world, then demand for goods is
falling around the world. If demand for most base goods is falling,
then demand is not the cause of our current price spikes. Period.

More Americans filed for consumer bankruptcy in 2010 than in any year
since 2005. Keep in mind that the government’s new rules making
bankruptcy filing far more difficult took effect after 2005. This means
that even with harsher bankruptcy guidelines, we still saw a massive
wave of filings last year. If demand is actually a substantial factor,
then U.S. consumers are burying themselves in red ink in order to
support it:

http://www.marketwatch.com/story/consumer-bankruptcies-rose-9-in-2010-2011-01-03

Considering that over 8 million Americans have stopped using credit
cards just since Christmas 2009, I think it much more likely that
consumer demand in the U.S. is flat, or, still falling, despite the
claims of the MSM:

http://abcnews.go.com/Business/holiday-shopping-americans-cut-back-credit-card/story?id=12367547

Mainstream analysts are often quick to point out that annual retail
sales for 2010 were up over 6%, claiming this is a sure sign of
recovery. Unfortunately, in their effort to ignore inflationary factors
in 2010, they forgot to consider that perhaps rising retail sales were
not due to increased consumption, but INCREASING PRICES on goods we
already buy daily. Black Friday and Christmas season sales were
generally unimpressive compared to 2009. Black Friday sales were flat
and December sales were up only 0.6%. Are Americans really buying more,
or are they forced to spend more on goods they need due to inflation?

Lie: The BDI Is Falling Because Of An Expanding Shipping Fleet

A new disinfo tactic I’ve noticed in the past two weeks is the
suggestion that the BDI is not falling because of decreasing demand for
raw goods, but a growing fleet of idle freight vessels in an already
tight market. That is to say, some analysts are suggesting that it is
not demand that is falling, but the supply of ships that is growing.

While it is true that world freight fleets are to add 200 new ships, this is not to occur for another year and a half:

http://thestar.com.my/maritime/story.asp?file=/2011/1/10/maritime/7756404&sec=maritime

The BDI plummeted in 2008, and has not shown any signs of recovery
since. This was not due to a new supply of ships, but directly tied to
the global economic collapse. The “growing fleet” argument seems to be a
distraction designed specifically because of the public’s growing
awareness of the Baltic Dry Index and its implications.

Another poorly conceived argument is that the BDI is inaccurate
because it does not take into account that smaller fleet vessels are
seeing increased freight rates while larger ships are falling out of
favor. It’s true, that if you only count the shipping frequency of
smaller boats, demand appears to be rising (barely). However, I hardly
see how this is a good thing. Increased demand for smaller boats means
no one is shipping enough volume to make leasing a large vessel
worthwhile. Smaller volume still equals smaller demand.

Lie: Food Inflation Caused By “Bad Growing Season”

It would appear that the “mystery” of exploding food prices has been
solved, and according to a USDA report released this month, the culprit
is “weak agricultural output” causing a diminished supply of staple
grains in the U.S.:

http://www.usda.gov/oce/commodity/wasde/latest.pdf

This release was so shocking to markets because the report’s figures
were so far below the USDA’s original estimates for harvest at the
middle of this year, but why should we care about the USDA’s estimates?
Are they not arbitrary? Why not look at the actual output for previous
years compared to 2010 and get a real sense of what is happening?

If we are going to compare the crop outputs of 2010 to 2009, we
should also keep in mind that 2009 was a record year for agricultural
production. Did the USDA really assume that 2010 would meet or surpass
such a bumper crop?

http://www.businesspundit.com/usda-crop-report-reveals-record-harvests/

Corn harvests reportedly dropped 5% compared to last year, however,
2010 was still the third largest crop on record. Soybean production was
down only 1% from 2009. Cotton (not edible, but still important) was
up 50% from 2009. Wheat was down less than 1% from 2009. One of the
only grains affected in a substantial way in 2010 was Sorghum. The crop
yield for Sorghum dropped 10% compared to 2009, but the planting area
used in 2010 was 19% less than a year before, so this drop was to be
expected:

http://www.farms.com/FarmsPages/Commentary/DetailedCommentary/tabid/192/Default.aspx?NewsID=37813

What does this mean? The U.S. had a GOOD year for crop output, not a
bad one. And what about Russia’s summer disaster wheat crop? Are our
exports picking up the slack of bad harvests overseas, causing prices to
rise? Actually, warmer Russian weather in November spurred wheat
production, helping alleviate the weaker summer yields:

http://www.allbusiness.com/agriculture-forestry/agriculture-agricultural/15345042-1.html

Are there dangers in world grain output due to weather? Yes, but not
enough to warrant a doubling of commodity prices. The REAL concern of
agriculturalists, not just in Russia but in many nations, has not been
the weather, but the ever expanding costs of production itself! From
fuels to fertilizers, the process of growing food is becoming more and
more expensive. What is facilitating this surging cost of production?
How about the one factor that no one seems to want to discuss; the
devaluation of major currencies, most especially the dollar? I find it
interesting that so much disinformation on supply and demand in
commodities is hitting the news streams just as the Dollar and the Euro
begin to unhinge. In my view, this engineered hysteria is meant to
distract us from the collapse of our currency, and to create plausible
scapegoats for the inevitable ill effects that devaluation will bring.

Lie: Oil Inflation Caused By Rising Demand

Same argument, different commodity. Oil output has been more than
ample in light of the fact that oil consumption in almost every nation
has fallen substantially in the past three years:

http://politicalcalculations.blogspot.com/2010/06/us-per-capita-oil-consumption-plummets.html

http://blogs.worldbank.org/prospects/category/tags/world-oil-demand

What about the surprise shutdown of the Alaskan pipeline this month?
Is our supply in danger? No. According to the EIA (Energy Information
Administration), the U.S. exports (that’s right, exports!) over 2
million barrels (2009 figures) of petroleum and petroleum byproducts a
day, most of it from the Alaskan fields!

http://www.eia.doe.gov/dnav/pet/pet_move_exp_dc_NUS-Z00_mbblpd_a.htm

Apparently, Americans didn’t need that oil when the pipeline was
working, so shutting it down certainly wouldn’t diminish supply here at
home.

Oil is pegged to and traded in the world reserve currency; the
dollar. Any devaluation in the dollar will have immediate effects on
the value of oil. OPEC nations can and have been absorbing the
inflationary costs, but they can only succeed in this for a short time.
Eventually, the fundamental expenses will overwhelm them, and they will
be forced to allow the price per barrel to take flight. That time has
essentially come. Prices are likely to climb at breakneck speed in
2011, not because of demand, but because of the crumbling Greenback.

Truth: China Is Preparing To Dump The Dollar

Most economists should have seen the Chinese problem back in 2005,
when their central bank started issuing Yuan denominated treasury
securities called “Panda Bonds”:

http://www.emergingmarkets.org/Article/1016222/Panda-bonds-explained.html

Maybe the cute name threw mainstream pundits for a loop, or maybe they just couldn’t see the true purpose behind such a move.

China is the largest holder of U.S. debt and dollars. It is also the
largest holder of forex reserves in the world. China’s coffers are
bloated with savings. So then, why would the Chinese government
introduce a plan to sell their own debt securities? They don’t need
constant inflows of foreign cash to stay afloat like we do here. Their
currency was pegged to the dollar so issuing a Yuan denominated security
would have been pointless, at least in the eyes of the common investor.
What did the Chinese central bank know that we didn’t?

It took some connecting of dots, but in 2008, when the ASEAN trading
bloc took shape and they began to allow Yuan bonds for cross border
trades, the reason was clear; China was planning to de-peg from the
dollar. China was going to allow their currency to valuate. China was
going to move towards a consumer based economy. China was going to drop
the dollar as its reserve currency for international trade. And,
eventually, China was going to dump their U.S. Treasury holdings
altogether.

Why would China start preparations for this all the way back in 2005?
It seems like a serious gamble, unless they KNEW what was coming in
2008. Unless they knew that the credit crisis would strike hard, that
U.S. consumption would falter for years, not months, damaging Chinese
exports. Unless they knew that the Federal Reserve would recklessly
pour fiat into the system. Looking back at China’s actions, one can
only conclude that their central bank was made aware of coming events by
others, or, they are all Jedi, and deserve some kind of award for their
incredible powers of foresight.

So far, the Chinese have de-pegged from the dollar, Yuan bonds are
now being issued by the World Bank, and China has dropped the dollar in
bilateral trades with Russia. We are only a step or two away from a
global shunning of the dollar and a treasury dump by our biggest
creditor.

Truth: China Is Suffering From Inflation

Concise data on Chinese inflation is even more impossible to obtain
than it is here in the U.S. The “official” inflation rate in China
increased by 5.1% last year, however, some estimates double that figure:

http://www.businessinsider.com/marc-faber-real-chinese-inflation-10-percent-2010-11

Chinese property prices rose for the 19th month in a row last
December, while Chinese demand for housing remained low. Government
subsidization of residential construction has created modern day “ghost
towns”; entire complexes of apartments and retail spaces devoid of
inhabitants:

http://blogs.forbes.com/robertlenzner/2010/11/27/property-developers-chinas-worst-performers/

China has introduced its own stimulus measures in the face of the
global credit crunch. While our fiat dollars have all been stuffed into
the pockets of corporate banks and foreign entities, their fiat Yuan is
going directly into their real economy. This is why China’s inflation
is so immediate, while ours is still partly subdued.

Does this mean China is in the midst of its own bubble, ready to pop and rain down financial havoc? Not necessarily…

Lie: China Can Counter Inflation Without Boosting The Yuan

China has one option; extreme Yuan appreciation boosting the buying
power of their populace in order to counter rising prices. China denies
this possibility in public forums, but their central bank’s actions
tell a different story.

Reserve requirements (the amount of money Chinese banks must hold as a
safety net) have been upped several times, mushrooming to 19%. This is
meant to remove excess liquidity from the economy, but so far the move
has failed miserably. China has also raised interest rates to curb
lending several times to no avail. As noted above, inflation continues.

I believe Chinese as well as Western central bankers are well aware
that the Yuan will have to spike considerably if inflation is going to
be halted, but currency valuation is not something that can be enacted
without consequence. Generally, for one currency to rise quickly,
another currency tends to fall. In this case, that currency will be the
dollar.

Forget about all the empty rhetoric you hear in the MSM or are liable
to hear during Chinese President Hu Jintao’s visit this week in
Washington. Already, Hu has called for greater cooperation between the
U.S. and China while at the same time stating that the dollar based
system is a “product of the past”:

http://www.breitbart.com/article.php?id=CNG.9964072691a62252d0a98b0308fb8063.281&show_article=1

The U.S. government has called for greater cooperation with China
while the Senate has issued a statement demanding Congress institute a
bill that would label China as a “currency manipulator” on the eve of
Hu’s visit:

http://news.yahoo.com/s/nm/20110118/pl_nm/us_usa_china

The meeting between Hu and Obama will generate nothing, because
neither Hu nor Obama actually have any say in the financial decisions
they will discuss. Those decisions are made by the central bankers of
our respective nations, and the central banks want an end to the dollar.
When it comes down to it, the banking elites of China and the U.S. are
both working towards this goal, while the masses are led to believe
that they stand opposed.

Most revealing has been China’s support of the EU. Why are the
Chinese suddenly so interested in propping up European economies that
are destined to default? It’s definitely not out of the kindness of
their hearts. First, China gains greater proliferation of the Yuan by
tying itself closer to Europe, Africa, and the rest of Asia. Greater
Chinese investment in the EU makes a switch to the Yuan (or a basket of
currencies) and a move away from the dollar more acceptable to the
citizenry of Europe. (Notice that all the American taxpayer dollars
that were sent to tide over the EU were made secret, while all that
Chinese money sent to the EU is loudly paraded for all to see. China:
good guy. America: bad guy). Second, the greater the proliferation of
Yuan bonds, the faster the Chinese can begin to dump their U.S.
Treasuries. This is the key!

China must shrink its forex and T-bill reserves in order to drive an
appreciation of the Yuan able to cut off inflation concerns. Timothy
Geithner claims this will be good for the U.S. Hu claims it would be
bad for China. They are both liars. Ultimately, inflation will be used
by China as the excuse to drop the dollar completely, which is what
they have been planning to do since at least 2005. The private Federal
Reserve and our government will announce victory and a “managed”
devaluation of the dollar, only to have the treasury bubble snap and
bury us in hyperinflation, which is what they wanted all along, for many
reasons, but most importantly to allow for the birth of the IMF’s SDR
as the new global currency (amply supported by the new improved Yuan).

The Saga Of Disinformation Continues

I thought the economic situation was confusing two years ago. I
never dreamed the pretzel could become so twisted so fast. The reason
it is vital to stay on top of the fog and misdirection should be
evident; deception in the economy can be used to steer the public and
our country towards terrible ends. While many of us might become
exhausted with the constant reminders of the dark road ahead, we cannot
take for granted that the battle for the truth is far from over. We
have made great headway over the years, far more than I dared imagine
possible, but this is a beginning, one that must be cradled carefully,
like the embers of the first fire.

The nature of propaganda is to strut, to pound its chest and wail the
closer we get to reality. The more Americans stumble upon the facts
behind the false statistics and false smiles of establishment pundits,
the more we will be subjected to globalist think-tank fancies and
elaborate insanities. In this, we find our most reliable gauge of
impending jeopardy, and salvation. Bigger grifts signal precarious
times, but also desperation amongst the perpetrators and con men. There
does come a time when people become weary of being fooled, and they
turn their blunderings from a hindrance into an education. Ironically,
lies very often destroy themselves, by frustrating their intended
victims into action.