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Guest Post: The U.S. Economy Is About To Grow Explosively, Or Whatever

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

The U.S. Economy Is About to Grow Explosively, Or Whatever  

Managing perception is the game plan, not fixing what ails the real economy. Why? Cui bono: it's all about rescuing a politically sacrosanct and highly insolvent financial sector

According to some analysts, the "recovering" U.S. economy is poised to enter a phase of explosive growth. Other analysts see evidence that the bogus "recovery" (all Fed stimulus "hat" and no organic growth "cattle") is teetering on the edge of implosion from any number of causes: high inflation, declining home values, high oil prices, etc.

My view? Whatever. The real economy is so detached from the one presented by official data and the stock market that "growth", explosive or modest, is a matter of managed perception, not reality.

As for the implosion, Central State intervention and massive spending/credit creation has already limited it to a decline heavily smoothed by extended unemployment, food stamps, zero interest rates, Federal Reserve purchases of Treasuries and mortgage instruments, and massive Federal spending on everything from fighter jets to Medicare.

The relentlessly managed perception is that the "spot of bother" circa 2008-09 is history, and the situation has been restored to normalcy, i.e. a rising stock market, super-low interest rates and unlimited Central State borrowing.

The key tools for managing perceptions are: 1) statistical evidence for rising profits, GDP, etc. and declining unemployment, and 2) the rising stock market, which supposedly triggers a "wealth effect" in the 10% of the population with enough financial assets to actually experience an increase in wealth.

We can see how the stock market has returned to "the good old days" after that "spot of bother:"


The reality is the "official account" of the real economy has near-zero credibility. Officially, there is no inflation in the Consumer Price Index. Officially, unemployment has plummeted to 9%--painfully high, perhaps, but an "improvement" that "augurs well for future growth"--blah, blah, blah.

As if a lack of "growth" is what ails the U.S. economy.

Meanwhile, on that distant island once known as reality, the factors at play include:

1. A potentially unlimited number of credit-created dollars is chasing a limited supply of tangible goods. How long that dynamic will endure nobody knows, but we do know the real world has limits, and credit creation does not.

2. The total number of employed people has barely increased in the past year, while the working-age population has risen. If official numbers actually reflected reality, then the unemployment number would be rising, not falling. The employment statistics are all a shell-game of switcheroo numbers, black-box guesstimates of robust job growth in phantom small businesses, and so on.

3. The economy is now totally dependent on Federal deficit spending to the tune of 10% of the entire GDP--a cool $1.5 trillion a year, borrowed and blown--and on the Federal Reserve's creation of money to buy U.S. Treasury bonds.

Without the former, the tattered state of the real economy would be starkly revealed, and without the latter, the stupendous supply of new Federal debt might overwhelm demand, pushing rates higher.

Put very simply: the U.S. economy is now totally dependent on unlimited expansion of debt and credit creation by the Central State and its proxies. Withdraw those and the gap between the managed-perception economy (the propaganda facade) and the real economy vanishes: reality trumps perception.

As I have outlined here earlier, the Fed's basic game plan is obviously to replay the successful recapitalization of the crippled financial sector circa the mid-to-late 1980s. Here is an FDIC paper on that previous debt crisis: The LDC Debt Crisis.

The game plan then was to enable the debt-crippled banks to write down their impaired/uncollectable debts slowly, and "earn" their way out of a hole via low rates, flimsy accounting rules that hid the true scope of losses, and new markets for their "products."

The same plan is being followed today, only the losses are an order of magnitude higher. The Fed is two years into a multi-year plan to siphon off enough money from the productive economy to the financial sector so that its staggering losses in global real estate speculation can be written down slowly enough that profits will recapitalize the essentially insolvent banks.

But the Fed is playing with explosives that weren't present in 1985: demographics (a fast-retiring Baby Boom generation which is pushing Federal spending into exponential growth), shortages of grain and other real-world materials, and a financial sector which has purchased control of the mechanisms of governance.

Given the extraordinary levels of Central State intervention, and the global bond market's obedient acceptance of this intervention, then the game can continue for quite some time. As I have often noted, hyperinflation is fundamentally a political dynamic; political leaders can change the inputs.

Two things could upset the Fed/Treasury's game plan to "fix" what they perceive as "the real problem:" that is, recapitalizing an insolvent financial sector which controls the political machinery of the nation:

1. The bond market could suddenly refuse to buy into the "story" that the Fed can buy trillions of dollars in bonds and mortgages with no side-effects whatsoever, and that the Federal government can borrow 10% of GDP with no side-effects whatsoever. If the bond market chokes, then the Fed will have to buy most of the new and maturing Treasury debt until doomsday. Otherwise, rates will rise, destroying the game plan of funneling free money to the banks via the zero interest rate policy (ZIRP).

2. Politicos could decide the Fed and Treasury plan is pure folly and upset the political apple cart.

How likely are either of these events? I have no idea. To date, the Powers That Be's game plan is working smoothly: the stock market is rising, unemployment is falling (as per the managed perception campaign of statistical legerdemain), and the banks distributed $135 billion in profits--a hefty return on a paltry $3 billion invested in lobbying Washington D.C. politicos and players.

Thus my view toward any official pronouncement: whatever. The Status Quo is failing to address the real problems in the real economy, choosing a strategy I described in Survival+ as a simulacrum of "change."

But managing perception is not the same things as fixing what ails the real economy. The difference between the two is lost on the Status Quo, which is pursuing the equivalent of Cargo Cult voodoo economics: if the people believe everything is fixed, then it is fixed. This is magical thinking at its finest--or worst.

Reality will trump managed perception, but nobody knows when. The entire Status Quo is completely dependent on sustaining the perception of "growth" and "recovery," and we shouldn't underestimate the resources and hubris they are bringing to bear on propping up the facade.

 

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Mon, 02/07/2011 - 12:12 | 940616 SheepDog-One
SheepDog-One's picture

Yea, its all about convincing record high number of bankrupt unemployed people that all is well. Im sure that will work fine forever.

Mon, 02/07/2011 - 12:53 | 940730 Max Hunter
Max Hunter's picture

The sad part is it has worked as long as it has..

 

Mon, 02/07/2011 - 13:00 | 940749 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

My asshole boyfriend cut me off and said today:

 

I don't care about whats going on out there because there is nothing I can do about it.

 

This is the mentality out there--Complicity of boobus americanus out of silent desperation.

This is exactly why the only thing we can all do is stockpile food, buy a farm in bumfrak, and wash our hands of this nonsense.

 

 

Mon, 02/07/2011 - 13:05 | 940763 CPL
CPL's picture

He's no good for you darlin! 

You should dump him and hook up with one of the zero hedge boyz.

Mon, 02/07/2011 - 13:08 | 940765 Max Hunter
Max Hunter's picture

I don't care about whats going on out there because there is nothing I can do about it.

I often get that response.. Sadly, we will be put in a position where these people (close to us) will need help after ignoring our research and preparation for years..

You have to hand it to TPTB.. They have created a nation of zombies.  Wow.. pure fucking genius i'd say..

Mon, 02/07/2011 - 13:38 | 940852 Hephasteus
Hephasteus's picture

Deniability will continue to work until.

Nothing - It's what's for dinner.

Mon, 02/07/2011 - 14:40 | 941015 Unlawful Justice
Unlawful Justice's picture

“But that’s what he said” As if saying makes it so. You must be an active not a passive user of language. You are not a receptacle into which the words are poured. You are and active, critically functioning participant in the act of communication of the semantic environment. If you are not part of the semantic environment, communication does not take place, at least not for you. Language should never be an uncontrolled flood of words flowing into your head. You need to assert control over language directed at you. People need to become first rate crap detectors. Becoming a crap detector isn’t all that hard, but it does require you to change some of your language habits. The first thing you have to do is stop looking for the meaning of any message in the words of the message. You need to look for the meaning in the whole context in which the message occurs.
To figure out what’s really being said, you need to ask who is saying what to whom, under what conditions and circumstances, with what intent, and what results. You need to be aware of, and examine the semantic environment in which any language occurs. It is within the context of the situation, the semantic environments, that we must evaluate language. What are the results of their talking, that is what happens or doesn’t happen as a results of what they say? You then have placed yourself outside the context or semantic environment in which the message occurs. Now you are the observer of the message and it context and less of a participant. Sometimes we can easily see the context of the message and evaluate the message. Other times however we can’t even see the context of the message.

Mon, 02/07/2011 - 16:06 | 941222 SilverRhino
SilverRhino's picture

>>I don't care about whats going on out there because there is nothing I can do about it.

That's pathetic.

Tue, 02/08/2011 - 13:28 | 943272 Winston Smith 2009
Winston Smith 2009's picture

"My asshole boyfriend cut me off and said today:

I don't care about whats going on out there because there is nothing I can do about it.

This is the mentality out there--Complicity of boobus americanus out of silent desperation."

Hopefully, they'll change their tune when the bread and circuses end (see "Egyptian revolution").

Mon, 02/07/2011 - 13:25 | 940812 UGrev
UGrev's picture

It's only worked in masking it for those who are still employed...

Mon, 02/07/2011 - 12:13 | 940617 the not so migh...
the not so mighty maximiza's picture

"Put very simply: the U.S. economy is now totally dependent on unlimited expansion of debt and credit creation by the Central State and its proxies. Withdraw those and the gap between the managed-perception economy (the propaganda facade) and the real economy vanishes: reality trumps perception."

Thats it folks!

Mon, 02/07/2011 - 12:15 | 940621 SheepDog-One
SheepDog-One's picture

Hell just stop ZIRP and put in a 2% rate in its place and it would be complete total implosion. So 'all is well'...as long as any kind of reality at all can continue to be completely ignored each and every minute of every day from here on out.

Mon, 02/07/2011 - 12:25 | 940650 limcagoldspot
limcagoldspot's picture

perception, is reality..

Mon, 02/07/2011 - 12:39 | 940694 jus_lite_reading
jus_lite_reading's picture

Which makes this excellent site, moot.

Mon, 02/07/2011 - 12:15 | 940620 apberusdisvet
apberusdisvet's picture

Goebbels is laughing.

Mon, 02/07/2011 - 12:16 | 940624 RobotTrader
RobotTrader's picture

Huge breadth surge today on the NYSE.

And virtually every U.S. and European stock index is positioned to break out to new highs today, no divergences anywhere.

79% up volume on NYSE, 82% on Nasdaq.

That means a huge gap up in both Summation Indexes.

Mon, 02/07/2011 - 12:45 | 940711 HarryWanger
HarryWanger's picture

Yes a huge breakout day indeed. AAPL running at a new all time high as well. Also, you have Obama talking about lowering the corporate tax rate. All of this combined will continue to push this market higher. And the kicker, oil is not along for the ride. That may be the best part of it all.

Mon, 02/07/2011 - 13:01 | 940753 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Are Robo and Harry the SAME person.

 

hmmm.

 

just playin' guys!

Mon, 02/07/2011 - 13:12 | 940758 lieutenantjohnchard
lieutenantjohnchard's picture

harry is actually danger barch from million dollar baby. robo is really a girl impersonating a man wearing yoga tights.

Mon, 02/07/2011 - 13:05 | 940762 aheady
aheady's picture

might as well be

Mon, 02/07/2011 - 14:05 | 940928 redpill
redpill's picture

Robot just wants to take advantage of the Ponzi.  Wanger celebrates it.

Mon, 02/07/2011 - 14:14 | 940949 Hephasteus
Hephasteus's picture

Robo want's to believe the fed is invincible despite the fact it's dying. He want's it to be extremely painful as he pours every drop of his belief into it.

It's a wet dream to think a corporation can tax people.

Hey sony fuck your taxes.

Mon, 02/07/2011 - 12:47 | 940714 alien-IQ
alien-IQ's picture

are you actually using the word "volume" with a straight face or are you smirking as you write that? Because from what I can see, SPY is heading towards another sub 100mil trading day...and a gap up and run strategy that the kool-aid crowd loves so much.

Mon, 02/07/2011 - 13:31 | 940829 UGrev
UGrev's picture

If you consider that roundish, brown colored encrusted orifice in which he sits upon, his mouth, then yes.. it's a straight face. 

Mon, 02/07/2011 - 12:55 | 940736 Id fight Gandhi
Id fight Gandhi's picture

And who cares? Most of us are either on the sidelines or holding metals (even though they went nowhere in two months). But whatever. Meh.

Mon, 02/07/2011 - 13:10 | 940770 lieutenantjohnchard
lieutenantjohnchard's picture

too bad you're only 30% invested and are missing the rally. but no difference. you made the call of the century at the bottom of the 2009 trough, and made a fortune, unlike rosie. why not give old rosie a call and school him on how he needs to do it like you since you're independently wealthy after having foreseen the bottom, and loaded up on common stock.

Mon, 02/07/2011 - 13:22 | 940790 ShankyS
ShankyS's picture

No divergences? That is cause it blew thew them all out. Fucking shit 'em out like a bad post fajita turd. Classic blow off top IMO. Not "the" top till they pull liquidity or their hand is forced to feed something other than the markets. I may be losing patience, but I can't ignore the TA much longer esp on the daily charts. Breakout? I should not doubt the Fed and it's mandate, but this is even a bit extreme for my taste. 1240 first target. If I am premature, there is a big ass wedge that is winding down and it will not be long. To qualify, at STB we're on the Fed mandate train lifting all markets and have been for some time. Even the crooked dealer has to throw the table a bone to keep them in the game. they can't win to many hands in a row or the table will clear out. Might be time for the bears to get a couple of 21's to keep them at the table a while longer.

Mon, 02/07/2011 - 14:08 | 940934 disabledvet
disabledvet's picture

And they call him The Suleman.  He is not a dictator but he does play one on TV.  And of course we rally--Oil Shieks are selling their gold.  Talk about blood on the streets.  In the holy lands no less.  Clearly this calls for a record.  Let us not be extravagent however.  Just the drip, drip, drip of institutional wealth moving higher and higher.  Caviar Emptor.

Mon, 02/07/2011 - 12:20 | 940634 The Axe
The Axe's picture

I can't find a seller in a stock that has a heartbeat of longer then 15min, the market just wants to run, cotton and copper again...AAPL back at it...and MA activity again..crazy stron 

Mon, 02/07/2011 - 12:26 | 940642 hedgeless_horseman
hedgeless_horseman's picture

We can't have an economy without the con.

A confidence trick or confidence game (also known as a bunko, con, flim flam, gaffle, grift, hustle, scam, scheme, swindle or bamboozle) is an attempt to defraud a person or group by gaining their confidence. The victim is known as the mark, the trickster is called a confidence man, con man, confidence trickster, grifter, or con artist, and any accomplices are known as plants. Confidence men or women exploit characteristics of the human psyche such as greed, both dishonesty and honesty, vanity, compassion, credulity, irresponsibility, naïveté, and the thought of trying to get something of value for nothing or for something far less valuable. Confidence men or women have victimized individuals from all walks of life.

 

http://en.wikipedia.org/wiki/Confidence_trick

Mon, 02/07/2011 - 12:23 | 940643 cougar_w
cougar_w's picture

The Fed can continue what they are doing so long as other countries are in worse shape than the US.

Period.

Mon, 02/07/2011 - 12:30 | 940667 topcallingtroll
topcallingtroll's picture

Absolutely cougar babe! And since every country playing beggar thy neighbor is almost out of chips the usa is going to go all in and knock them out of the game. USA! USA! USA1

Mon, 02/07/2011 - 12:42 | 940698 jus_lite_reading
jus_lite_reading's picture

Correction: The Fed can continue what they are doing so long as other nations don't call the EU/US/UK's bluff. Also, think big guns...

Mon, 02/07/2011 - 12:55 | 940737 cougar_w
cougar_w's picture

I'm not sure they can call our bluff without nuking their own economies. Even China. The new globalization: One hangs all hang.

The "big guns" argument is troublesome. In some respects what is going down right now is just the other shoe dropping from the war-torn period from 1917 to 1945. Abundant oil and nuclear weapons bought us all some time since then. Time is up. The dogs of war may come out of slumber and decide the whole thing, once and for all. The world would really be a sucky place to live, after that.

Tue, 02/08/2011 - 13:37 | 943308 Winston Smith 2009
Winston Smith 2009's picture

"...what is going down right now is just the other shoe dropping from the war-torn period from 1917 to 1945"

Yep. All of the economic/industrial nations of Europe and Asia were nearly bankrupted and, especially during WWII, razed to the ground while the US was left unscathed. After WWII, the brain drain from Europe to the vastly more prosperous and intact US began.

The great "American Exceptionalism" was just an accident of history that's now in decline.

Mon, 02/07/2011 - 12:26 | 940651 topcallingtroll
topcallingtroll's picture

Something is going to grow, but if real gdp pulls ahead.of core for a while dont leave the stadium just yet. Once it looks like unicorns and rainbows and free skittles from robos ass for everyone, about that time core is going to pull up neck and neck with gdp. Oh this race is exciting!

Mon, 02/07/2011 - 12:29 | 940658 TradingJoe
TradingJoe's picture

I say FARMING IT IS! Only way to survive and come out on top after this "Soap Opera" is over! and now the teleprompter is "speaking"!

Mon, 02/07/2011 - 13:20 | 940793 the rookie cynic
the rookie cynic's picture

If only Monsanto wasn't the Federal Reserve of farming. If you're going big into farming, be ready to have Monsanto as your pimp. Alternative is to do it something like Joel Salatin at Polyface farms. http://therookiecynic.wordpress.com/

Mon, 02/07/2011 - 21:57 | 942055 Sheepneck
Sheepneck's picture

The key is to find seeds that are not GMO, and start saving them after each harvest.  Polyface farms is a great model to follow!

Tue, 02/08/2011 - 01:51 | 942317 Captain Planet
Captain Planet's picture

+1 for you

+10 million healthy calories for Joel Salatin

 

Inflation, deflation....it don't matter.

Agricultural Land bitchezz!

Tue, 02/08/2011 - 08:09 | 942455 creviceCaress
creviceCaress's picture

fuck joel salatin, he's a typical capitalist sell-out , bible-thumping faggot.

 

he started his twoface farm on the grounds of being uber-local/communtiy-oriented "greenwash" model and now ships chicken across the country....and he's trying to do the same thing with pork.  that may seem like the thing to do, but when you start a farm/company and tout about how unsustainable big-ag is....then you end up acting like big-ag a few years later.....you become a sell-out faggot.

Mon, 02/07/2011 - 12:30 | 940661 Hephasteus
Hephasteus's picture

So we are going to avoid a liquidity trap by going directly from a solid to a gas.

Dry Ice shoots?

 

Mon, 02/07/2011 - 12:57 | 940742 cougar_w
cougar_w's picture

Phase change physics FTW. Though I think as a practical matter we'll probably go from a solid to a ghost.

Mon, 02/07/2011 - 12:30 | 940662 Lazane
Lazane's picture

"Put very simply: the U.S. economy is now totally dependent on unlimited expansion of debt and credit creation by the Central State and its proxies. Withdraw those and the gap between the managed-perception economy (the propaganda facade) and the real economy vanishes: reality

QE3-4-5-6 onto infinity? 

"the capacity of the human mind to resist the intrusion of new information is Infinite"

Larry G. Megular

Mon, 02/07/2011 - 12:30 | 940663 system failure
system failure's picture

I want to know when things are going to get really crazy......

Mon, 02/07/2011 - 12:34 | 940681 hedgeless_horseman
hedgeless_horseman's picture

If you are listening to others, then you will be among the last to know...

http://www.youtube.com/watch?v=gUkbdjetlY8

Mon, 02/07/2011 - 12:45 | 940712 Sean7k
Sean7k's picture

When suppliers refuse to accept dollars for inputs. This is the point credit creation fails. The flow of resources will be purchased by those that have currencies with greater values and desirability. 

America will experience scarcity. The shelves will start to be emptier, longer to restock. Some items will disappear all together. This will happen with monetary sustitutes first, then spread to resources from foreign countries, then a collapse of the supply chain domestically. 

Plan accordingly.

Mon, 02/07/2011 - 13:01 | 940752 Max Hunter
Max Hunter's picture

At some point, a large number of players along for the ride will see the eventuality of things and realize they are not slated to be one of those standing atop the pyramid at some point.

This is when the point at which cutting out will minimize losses and be the lesser of 2 evils.

There are so many chairs left and the music isn't stopping often enough for people to be worried about their odds of survival. The direction is clear though.. Like you said.. Plan accordingly.

Mon, 02/07/2011 - 16:03 | 941216 Gordon Freeman
Gordon Freeman's picture

WTF else are they going to accept?  Yeah, yeah, I know, I know: PMs.

Well, we are a long way from that time, mainly because they are a long way from becoming currencies i.e. they are not in any sort of circulation.

In the meantime, dollars trump all other fiats.  Go make some while you still can.

Mon, 02/07/2011 - 12:58 | 940744 cougar_w
cougar_w's picture

Last week.

Mon, 02/07/2011 - 15:04 | 941066 newworldorder
newworldorder's picture

In the US that moment will be when Food Stamp payments are not made due to lack of funds.

In the Global economy the moment will be when China is no longer able to feed its pupulation even with subsidized food prices.

Mon, 02/07/2011 - 16:05 | 941221 Gordon Freeman
Gordon Freeman's picture

When will that time be?  I'll even spot you a whole year, plus or minus.

Mon, 02/07/2011 - 12:32 | 940673 Careless Whisper
Careless Whisper's picture

SEC to give accreditation to flash crash traders

you can't make this shit up

http://www.tradersmagazine.com/news/trader-exam-flash-crash-107090-1.html

 

Mon, 02/07/2011 - 12:59 | 940748 cougar_w
cougar_w's picture

They had to do that before they could face accrediting the Ponzi traders. Madoff will be out and back on the floor in a fortnight.

You take little steps on a long journey into Hell.

Mon, 02/07/2011 - 12:35 | 940686 ivars
ivars's picture

Here is a system reaction to shock created technical charted prediction when. Not so long to wait-Q3 2011.

http://saposjoint.net/Forum/viewtopic.php?f=14&t=2626

Mon, 02/07/2011 - 12:40 | 940695 Blindweb
Blindweb's picture

Charles Hugh Smith was interesting for like the first week ZH posted him.  He just seems to be rehashing old news these days.

Mon, 02/07/2011 - 16:06 | 941225 Gordon Freeman
Gordon Freeman's picture

I feel the same way.  He's now the guy on the corner, wearing the sackcloth, and carrying the sign saying "The End is Near!"...

Tue, 02/08/2011 - 13:47 | 943345 Winston Smith 2009
Winston Smith 2009's picture

No, he doesn't claim to know how long the game can be continued. Read the article. He, like anyone who actually realizes what's going on, simply understands that anything other than a catastrophic end to the current situation is mathematically impossible.

Mon, 02/07/2011 - 12:41 | 940696 vast-dom
vast-dom's picture

...illusion can be the path to understanding reality.......

Mon, 02/07/2011 - 12:42 | 940697 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

The U.S. is a bankrupt banana republic, with a puppet government.

The only reason the U.S. hasn't collapse yet is because it still has enough guns to keep it's creditors (ala China) at bay.

No wonder the U.S. spends more money on their military than the rest of the world combined.

The U.S. deserves everything it gets coming to it unforuntately, it's been the biggest parasite history has ever seen and it's citizens have been complicit in this monumental crime.

Mon, 02/07/2011 - 12:44 | 940706 jus_lite_reading
jus_lite_reading's picture

As an Amerikan, I agree 100%...

Mon, 02/07/2011 - 12:47 | 940719 TradingJoe
TradingJoe's picture

AMEN! But I still feel pity for those who were to small to do anything and will still get hit big!

Mon, 02/07/2011 - 12:53 | 940729 goldfish1
goldfish1's picture

it's citizens have been complicit in this monumental crime.

Can be complicit if you're left out of the equation.

Mon, 02/07/2011 - 14:19 | 940959 MightyZum
MightyZum's picture

Couldn't agree more . . . my unborn kids are complicit if that is the measuring stick. Tough titty that they didn't even know they were already sold to the Chinese . . .

Mon, 02/07/2011 - 15:11 | 941079 newworldorder
newworldorder's picture

Don't kid yourself. We have been in the equation every two years and each election cycle since it really mattered - which I would say has been since the Nixon administration. We however have been unable to focus on the big picture, instead we argue about guns, bibles and sexual orientation.

Mon, 02/07/2011 - 17:51 | 941544 Financial_Guard...
Financial_Guardian_Angel's picture

Average citizens have been misdirected like a good magician does. Watch my right hand while the real action is going on in the left. We have a two party system that pits on group of ideals against another, but the real problem is that politicians on both sides have only one real game-to stay in power and consolidate money and influence. It will take several elections cycles to even begin rooting out this pervasive problem. The system needs to be changed before real reform can be made.

Tue, 02/08/2011 - 13:52 | 943370 Winston Smith 2009
Winston Smith 2009's picture

"It will take several elections cycles to even begin rooting out this pervasive problem."

It will take many, many more than "several." The average voter is an idiot, either too stupid to understand what's going on or too lazy to find out. This will ONLY change once the bread and circuses end.

Mon, 02/07/2011 - 15:14 | 941088 Unlawful Justice
Unlawful Justice's picture

Knowledge is Power- It’s not just that Americans are scandalously ignorant. It’s that they seem to believe that they have a democratic right to their ignorance....People are forming and expressing passionate view.... on the basis of no information at all. Ignorance not only produces double speak, but it encourages others to use doublespeak because ignorance usually produces language that is at variance with reality. Without knowledge we don’t know what has been left unsaid, or what has been altered through words.

Mon, 02/07/2011 - 20:41 | 941950 instinctiveDrift
instinctiveDrift's picture

There is no denying that the capacity to think for ones self is sorely lacking in the general populous here in the US.  That's a given.  All one has to do is watch Jersey Shore or the Real Housewives of X to see raw evidence.

But, the commentary here seems to suggest that Americans are the *only* ignorant ones.  That the populous in America are the only ones playing the role of village idiot.  

I talk to people from all over the world on a daily basis.  Highly educated, financially savvy, smart articulate people that do not understand the forces at work in the world and the impacts they will have on their lives.  

To call Americans out as the *only* ignorant ones here is ignoring the obvious.  The world has been lulled and deceived.  And no wonder too.  The world we live in today is more complex than at any time in human history.  To understand the socio-political-economic interconnections, associations and dependencies takes some serious time and mental effort.  Even then many of us are still learning the full extent of the system and it's "flaws".  If we weren't currently engaged in this activity ZH wouldn't have readers. 

As someone who "gets it" we have two choices.  

1. We can worry about ourselves.  Leaving the rest to suffer thru the aftermath of what will likely be horrific.  In doing so we can continue to blame others, call them names ("ignorant").  But in doing so, we are no better than the "ignorant" we look to blame since we do as little as they do to stop any of this.

2. We can work to educate those around us and in doing so potentially save lives.  People come to ZH to discuss financial topics and many think that's all this site represents.  But how many of you have actually read the manifesto for the site.  It sure seems to me that ZH was founded to help educate the wider populace.  To shake them from their slumber...to break the programming they've been trained to accept.  

Even if it's too late to keep the seemingly inevitable from happening at least there might be some enlightened souls who make it to the other side capable of rebuilding the world.

 

Tue, 02/08/2011 - 13:57 | 943389 Winston Smith 2009
Winston Smith 2009's picture

"Even if it's too late to keep the seemingly inevitable from happening at least there might be some enlightened souls who make it to the other side capable of rebuilding the world."

Suggested reading:

Lord of the Flies
Animal Farm
1984
Brave New World

All perfect studies of the most dominant human nature.

Mon, 02/07/2011 - 13:18 | 940776 Boxed Merlot
Boxed Merlot's picture

Perception is not reality. Truth does not cease to be truth just because it's chosen not to be believed.

 

The US has spent enormous amounts of capital, (monetary, good will, moral, etc.), around the globe. I know many of our exploits have resulted in the alleviation of countless amounts of pain, suffering, misery, death and unmeasurable hopelessness. There was a time NY harbor truly represented a beacon of hope.

 

Our guns initial purpose have been to protect the world's trading routes and along the way our personal fortunes have risen. So much so that now our success is percieved as exploitive.

 

If your view is honest to goodness unadulterated truth, I as an "ugly american" hang my head in shame. I give up. Let it be proclaimed now, across the globe, the US is now closed. Let's call it a day, lick our wounds, kick the global financiers and their debt paper off shore and secure the building.

 

Like Ferris says at the end of the movie, "What, you're still here? It's over, go home."

Mon, 02/07/2011 - 12:47 | 940720 Alexmai
Alexmai's picture

Today is so 1930, we can't find sellers in the market!!!

Mon, 02/07/2011 - 12:49 | 940724 economists_do_i...
economists_do_it_with_models's picture

Another insane day. SPY, UUP, TLT *all* up at the moment.

Mon, 02/07/2011 - 12:50 | 940726 Bluntly Put
Bluntly Put's picture

If you are "old school" the system is irreparably broken. That is the percentage of credit extended far exceeds wealth or money. That credit requires exponentially more credit to just keep financial institutions solvent.

If you are "new school" then you might think traditional methods of accounting and the monetary unit of account can be modified on the fly to keep TPTB in complete control. That means the richer get far richer and poorer get far poorer. That means the billions of wage slaves in the developing countries will never evolve a real middle class and the existing middle classes in the developed world will diminish until they are non existent.

It's a brave new monetary world, where solvency does not apply thanks to dynamic accounting standards and regulations and a dynamic unit of account, currency, that has detached itself from historical accounting methods/science.

This will lead to world wide armegeddon at some point, when who knows, but armeggedon it will be.

Mon, 02/07/2011 - 12:55 | 940733 Rainman
Rainman's picture

The show at the Dallas Colliseum is over, the lions are slain and the gladiators honored. The masses return to their slave pits. The fiat markets celebrate growth and recovery. Ignorance and bliss rage on.

Mon, 02/07/2011 - 12:57 | 940743 ningrim
ningrim's picture

first post:

Would revoking/amending the 1977 Fed Reserve Act so that the Fed's only mandate is stable prices do anything to handcuff Bernanke?

 

Mon, 02/07/2011 - 13:02 | 940754 cougar_w
cougar_w's picture

Wihtout even reading the Act I can say without equivocation or hesitation No it cannot. Because there is no force on the moving face of the Earth that can stop The Bernank now. Nothing. Nobody. No thing.

Mon, 02/07/2011 - 13:05 | 940759 hedgeless_horseman
hedgeless_horseman's picture

Handcuff Bernanke?  Why on God's green Earth would anyone want to do that?

Mon, 02/07/2011 - 14:06 | 940929 Bluntly Put
Bluntly Put's picture

LOL that is a good one, a puppet with handcuffs, makes one think the puppeteer has handcuffs.

 

Mon, 02/07/2011 - 14:23 | 940967 MightyZum
MightyZum's picture

"It's only after we've lost everything that we're free to do anything." Let the Bernank print until the value is zero. Hopefully it will happen sooner than later so we can get this charade over with.

Mon, 02/07/2011 - 13:10 | 940769 plocequ1
plocequ1's picture

i'll take the "or whatever" option

Mon, 02/07/2011 - 14:40 | 941014 cougar_w
cougar_w's picture

Very good sir. Would you like that with any "wtf"? We also have a special today on "just kill me now" and if you buy two, we'll kill your whole family for the same low price.

It's the end of the world. Good time to start laughing.

Mon, 02/07/2011 - 13:11 | 940772 topshelfstuff
topshelfstuff's picture

I should make a note of this, as I'm listening to Obama speaking. He just said, "Its time to Invest in America"

If you don't recall it, you can google these words [ March 3 2009, Obama says Buy Stocks ].

You'll notice the Headlines, and articles ... there was some amazement, since this was the first time a president ever sounded like an analyst...and you all know what followed. Now I'm wondering, is this his second signal?

 

 

 

 

Mon, 02/07/2011 - 13:17 | 940788 proLiberty
proLiberty's picture

 

"Put very simply: the U.S. economy is now totally dependent on unlimited expansion of debt and credit creation by the Central State and its proxies."

 

Put it very simply: the is specious, for the simple fact that the economy runs on wealth, not debt. von Mises was right: the expansion of credit creates only the appearance of prosperity, and triggers what he called "mal-investment".

 

Socialists love to scold the rest of us on the topic of "sustainability", yet they advocate unlimited expansion of credit, which is always and everywhere truly unsustainable. What they don't tell us is that unlimited expansion of debt and credit by government in the end is also unlimited expansion of government power into a parasitic Leviathan state that seeks to enslave its host victims (citizens) in a form of debt slavery. We must put government on a starvation diet before it snaps the lock on the chains shut. 

 

That process must start be revoking government's power to create an unlimited amount of debt and debt-money.

 

 

 

 

 

 

 

Mon, 02/07/2011 - 13:35 | 940844 Boxed Merlot
Boxed Merlot's picture

That process must start be revoking government's power to create an unlimited amount of debt and debt-money...

Yes and no. It must exercise its proper financial authority. to "Just say No" is not an adequate solution.

The US treasury should be required to return to its original constitutionally structured purpose. The saying no needs to be applied to the fed's private sector script, 2/3 of which is currently held off shore. Our nation's mints need to issue intrinsically valuable precious metal coinage that treasury issued US notes can redeem on demand.

BIS puppets, their script, show and theater need to be exorcised from our governments financial institutions and our Declaration of Independence from their tyrannical hold on the sovereign citizens needs to be upheld by every elected official.

imho.

Mon, 02/07/2011 - 16:40 | 941318 Bitch Tits
Bitch Tits's picture

This article states: " . . . and the banks distributed $135 billion in profits--a hefty return on a paltry $3 billion invested in lobbying Washington D.C. politicos and players."

 

Read that again, then do the math. $3 billion spread out to 535 decision-makers. Then tell me we have to put the government on a starvation diet. Who is feeding them?

Tue, 02/08/2011 - 14:09 | 943427 Winston Smith 2009
Winston Smith 2009's picture

"Put it very simply: the is specious, for the simple fact that the economy runs on wealth, not debt. von Mises was right: the expansion of credit creates only the appearance of prosperity, and triggers what he called 'mal-investment'"

Correct. A _properly functioning_ economy runs on _productive_ wealth creation and the related creation of debt in concert.  But that's not even _remotely_ close to what we have.  See:

Money as Debt - starts out with standard fractional reserve history, but gets MUCH deeper later on.  The system we have is fatally and _mathematically_ flawed because it _requires_ an exponential growth in _debt_; easy early on, but impossible in the steepening part of the curve... where we're at now; recessions are the only thing that can reset the curve, but those are no longer allowed by central banks:

http://video.google.com/videoplay?docid=-2550156453790090544#

Money as Debt II

http://vimeo.com/6822294

Mon, 02/07/2011 - 13:35 | 940842 blindman
blindman's picture

@ "..grow explosively.." , the virtuous cycle of printing private fiat notes

and digitally funneling them back into lobbying and reelection campaigns to

enable further free money distribution, stealing, extortion and systemic

usury and debt servitude as a means of destroying the earth and its

occupants.  ...ie ..the economy. the media needs its cut too. 

.

Campaign Contribution Limits Increase for 2012 Election Cycle

http://www.opensecrets.org/news/2011/02/campaign-contribution-limits-increa.html

.

and...

THE LITTLE RASCALS-LITTLE SPANKY WITH THE WILD MAN

http://www.youtube.com/watch?v=kSEY9WBDErI&NR=1

Mon, 02/07/2011 - 13:58 | 940910 redpill
redpill's picture

Bothering to put Bollinger Bands on the DJIA history is laughable in and of itself

Mon, 02/07/2011 - 14:24 | 940966 plocequ1
plocequ1's picture

Bollinger bands? I thought they were called the Bernankinger bands

Mon, 02/07/2011 - 14:42 | 941020 cougar_w
cougar_w's picture

No no. The Bernank calls them "goal posts" and tries daily to kick the average over them.

Mon, 02/07/2011 - 13:59 | 940913 disabledvet
disabledvet's picture

It's called a "Growth Recession."  It's motto is simple:  "I grow while you recess."  Now...go...and...recess.  Think of it as my gift to you courtesy of your Representative Democracy.  Indeed they are representative.  Of an object apparently.

Mon, 02/07/2011 - 14:07 | 940932 redpill
redpill's picture

I used to love recess when I was a kid, I guess that's why adults now have funemployment?

Mon, 02/07/2011 - 14:18 | 940955 amanfromMars
amanfromMars's picture

Nowhere in that report do I see any mention of the Internet and a fast growing, highly educated population who are being advised of the scams and the Ponzis which are enslaving them, just to keep a rotten to the core system and its head in the sands controllers in the lap of fiat currency luxury.  If you aint smart nowadays, and in control of the virtual space environment, you aint in control of nothing, and if you delude yourself and think that you are and tell all of your buddies that you are, will you lose everything and your shirt too.

Things and times have changed. Money doesn't rule anymore, Intelligence is King.

 

 

Mon, 02/07/2011 - 15:26 | 941114 newworldorder
newworldorder's picture

You are kidding - right?

Have you watched any "Tonite Show" street segments. Have you engaged in any meaningull conversations with your co-workers concerning, politics, money, ecomony, what it means to be an American in today's world?

The level of cluelesness out there is breathtaking. How does a coutnry recover from this? Please tell me how we recover from this.

 

Mon, 02/07/2011 - 14:35 | 941003 Glasgow Gary
Glasgow Gary's picture

This is the same Charles Smith who told us that the Powers That Be (PTB) benefit most from deflation. Thus ensuring that deflation would eventually win the day. But like many of the now discredited deflationists, they never considered that the PTB had actually more to lose through deflation, than inflation.

Better luck next time..er...next big call.

GG

Mon, 02/07/2011 - 17:23 | 941454 sellstop
sellstop's picture

If you look back to the 80's you remember the cost of oil peaked. The US economy took off. (yes, on increased debt)

Numerous currency crises in emerging markets in the 90's, kept oil costs low, the US boomed.

Now, China is slowing. Hard to just slow an economy. Usually ends with a crash. Or at least a hard financial correction. They slow, we get cheap energy. Relatively cheap energy. All currencies have been debased, but they all function relative to each other. Therefore oil will be RELATIVELY cheap.

The banks are recapitalized. They lend when the prospects of getting paid back improve.

There is a wave of money breaking loose. The dollar may go down, but will come flowing back to this country. This will increase the velocity of money. Inflation, yes, but the big crash is way down the road. The big crash will happen for us after China starts to come back next time...

Lots of "ifs", I know. But everybody expects a big crash. I suspect that, at least, their timing is wrong.

 

gh

Mon, 02/07/2011 - 17:45 | 941524 honestann
honestann's picture

Classic consequences shifting.  The predators-that-be and their wordsmiths play the classic shyster game.  Through blatant lying and misrepresentation of the shiny objects that dangle before everyone (namely "fake CPI", "fake unemployment measures", "fake stock market levels", etc) they mislead almost everyone in ways that consumes and will ultimately destroy the productive part of the economy.

But predators do not care about this.  Their core assumption is some new producer will appear by the time they totally destroy and consume their current victim.  By destroying the minds of the populace via public education and other farces, they render the population too confused or stupid to see through their endless game of "smoke and mirrors".

The end result is obvious.  Destruction.  Coming rather soon to the country you live in, suckers!

Mon, 02/07/2011 - 20:18 | 941910 vast-dom
vast-dom's picture

.......everything is permitted, nothing is true........

Mon, 02/07/2011 - 23:12 | 942153 Buck Johnson
Buck Johnson's picture

Another thing that wasn't present in 1985 was the insolvency of the states that are coming real soon.  The states need a bailout but the fed don't want to give it to them because of three reasons.  One, as soon as one state asks for money the rest of the 49 will want it to and that could costs us easily 1 trillion if not more.  Two, all that hot money from a bailout would instantly hit the streets in the US instead of overseas.  It would fuel inflation faster that what is happening now, and on top of that all this does is to help out for this year what about next and the next.  Three, the Republican party want to make it possible for the states to file bankruptcy in order to renegotiate with state Unions and their retires.  They believe that it would break the unions enough to weaken the democrats.  

This is what happens when you delay and delay and delay the inevitable of a problem because a nation and/or their leaders don't want to make the hard choices.  What happens is that a tsunami of so many different problems come at you at once that solving one can make another worse and vice versa.  We are at that point, we have limited options and the leadership is scared.  Because they know how Americans are and have been trained essentially, to be honest with you almost child like in a self centered way and intolerant.  So when they can't get their checks and/or their savings can't buy even a gallon of milk, they will go crazy. 

Mon, 02/07/2011 - 23:33 | 942181 sellstop
sellstop's picture

I know. This economy is in ruins. All I see when I drive to work is new cars zooming down the freeways and parking lots at the big box stores jammed full of new cars. When I go out to a restaraunt all of the seats are full and the waiter is bustling around trying to keep up. The local casino parking lot is full every weekend as well. It truly is depressing, all of this poverty and destitution......

gh

Tue, 02/08/2011 - 01:47 | 942314 cosmictrainwreck
cosmictrainwreck's picture

you're in Suburbia, dude...they only let the "beautiful people" in there. go visit some neighborhoods you don't frequent or live in

Tue, 02/08/2011 - 14:15 | 943457 Winston Smith 2009
Winston Smith 2009's picture

For an overall view, local economies are no more relevant than local weather.  And any continuing false prosperity is owed to the fedgov borrowing 40% of its budget to replace the 10-14% drop in consumer spending and the associated drop in GDP that that would cause.  This path is unsustainable and counterproductive.  Something major will eventually give.

Tue, 02/08/2011 - 14:33 | 943521 LooseLee
LooseLee's picture

That is what you have been programmed to see and TPTB have you righ where they want you. Good luck with the long-term success of that perception!

Tue, 02/08/2011 - 09:14 | 942530 oh_bama
oh_bama's picture

This guy is too pessimistic and unamerican

Remember: Recession has been over for more than a year! Now US is in normal time and is growing at 4% a year.

More americans retired early due to increased wealth and confidence, and low inflation expectations

More Americans pursuing graduate degrees including MBAs due to increased future outlook and higher pay!!

 

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