Department Of Commerce

Eric Sprott's findings support the growing meme that there is a massive bullion transfer from West to East. This should particularly concern those in the U.S., EU and Canada as his suspicion is that, increasingly, it's monetary gold that is being sold. "We are well into the financial crisis. Everyone’s trying to keep it together, even though it would appear from the reading of the economy things are not going well at all here. And everyone's ignoring things. But I think, in their hearts, the Central Bankers must know what they’re doing is totally irresponsible. And the tell of that irresponsibility – which is the debasing of the currencies – is the fact that real things will go up in value. This should be reflected in the price of gold and silver." For precious metals holders licking their wounds from the carnage of the past several months , this note offers both new insights and sound reminders of the long-term reasons for owning gold and silver.

The purpose of asset purchases by the Fed might no longer be improvements in the real economy, but rather a more subtle financing of U.S. government deficits. However, in the long run, expanding the money supply inevitably leads to inflationary pressures. Luckily for the Fed and the U.S. government, there is so much slack in the labour market that inflation might be years away. And, if we are right about the long run unemployment rate being structurally higher, then the Fed has all the room it needs to continue Quantitative Easing (QE) to infinity. This might allow them to continue to hide the true financial position of the government for many years to come. Nonetheless, the rising GAAP deficit and the sheer size of the U.S. Federal Government’s liabilities to its citizens makes it clear that one day or another, services (health care, social security) will have to be cut. Financial alchemy can hide reality, but it does not provide any tangible services. Europe’s (unresolved) experience with its debt crisis provides an insightful window into the future. Austerity measures in Ireland, Portugal, Spain and Greece have caused tremendous pain to their citizens (25% unemployment rates) and wreaked havoc in their economies (double digit retail sales declines). Are we going to ignore the obvious?

Other than some obligatory arrests for disorderly conduct, the Occupy Wall Street movement celebrated its one year anniversary this past September with little fanfare. While the movement seems to have lost momentum, at least temporarily, it did succeed in showcasing the growing sense of unease felt among a large segment of the US population – a group the Occupy movement shrewdly referred to as “the 99%”. The 99% means different things to different people, but to us, the 99% represents the US consumer. It represents the majority of Americans who are neither wealthy nor impoverished and whose spending power makes up approximately 71% of the US economy. It is the purchasing power of this massive, amorphous group that drives the US economy forward. The problem, however, is that four years into a so-called recovery, this group is still being financially squeezed from every possible angle, making it very difficult for them to maintain their standard of living, let alone increase their levels of consumption.

America's July trade deficit came in slightly better than expected, printing at $42 billion, compared to expectations of $44.4 billion, on exports of $183.3 billion and imports of $225.3 billion, which was to be expected in light of the ongoing drop in Chinese net trade surplus. After all global trade is a zero sum game. The better than expected number was an increase from the revised July deficit of -$41.9 billion, revised lower from $42.9 billion in June. And while GDP beancounter calculations will generate slightly higher Q3 GDP forecasts as a result of the number and revision, the reason for the "improvement" is an ongoing contraction in global trade, which is anything but favorable for the world's economies for which any diversion from a status quo M.O. means longer-term pain.

A courageous act in face of the punishment the Fed inflicts on them. But it doesn't bode well for the economy.

• *COMMERCE DEPARTMENT ISSUES DECISION ON WASHERS IN STATEMENT
• U.S. FINDS DUMPING OF SOME LARGE WASHERS FROM MEXICO, S. KOREA
• *U.S. SETS DUTIES OF AS MUCH AS 82% KOREA-PRODUCED WASHERS
• *U.S. SETS DUTIES OF 72% ON MEXICO-PRODUCED WASHING MACHINES

All you need to read.

Four months before the election. And yet, a horrendous migration across the Pacific

Last Saturday, it is being reported that U.S. Department of Commerce Secretary John Bryson was involved in two auto accidents that may have been related to a seizure he suffered during the incidents.  According to CNN, Bryson is currently under investigation for a felony hit and run.  It is unclear at this point if his health played a part in either accident.  Police currently don’t believe drugs or alcohol were involved.  Whatever the case, Bryson’s insider status will likely help him escape any significant legal trouble that could arise from the episode.  That’s just how plutocracies roll. Perhaps now is a good time to analyze the oxymoronic reasoning behind a government bureaucrat in charge of regulating commerce. Those who had their vehicle plowed into by his Lexus are not the only ones who have suffered at the hands of Secretary Bryson.  It is the businesses and innovations that will never see the light of day due to the endless amounts of regulatory red tape which permeate from Washington into the economy like a deadly plague.

Last night it was uber-dove Janet Yellen, today it is uberer-dove, former Goldmanite (what is it about Goldman central bankers and easing: Dudley unleashing QE2 in 2010, Draghi unleashing QE LTRO in Europe?) Bill Dudley joining the fray and saying QE is pretty much on the table. Of course, the only one that matters is Benny, and he will complete the doves on parade tomorrow, when he shows that all the hawkish rhetoric recently has been for naught. Cutting straight to the chase from just released Dudley comments:"we cannot lose sight of the fact that the economy still faces significant headwinds and that there are some meaningful downside risks... To sum up, the incoming data on the U.S. economy has been a bit more upbeat of late, suggesting that the recovery may be getting better established.  But, while these developments are certainly encouraging, it is far too soon to conclude that we are out of the woods in terms of generating a strong, sustainable recovery.  On the inflation front, the year-over-year rate of consumer price inflation has slowed in recent months, and despite the recent rise of gasoline prices, we expect inflation to moderate further in 2012." Translate: NEW QE is but a CTRL-P keystroke away now that all the inflation the Fed usually ignores continues to be ignored.

Seasonal adjustments are not forever. 

Anyone Who Thinks that War Is Good For the Economy Has One Eye Covered ... And Is Only Looking At Half the Picture ...

As markets replay the same identical reaction to the same identical Greek news that we saw back on July 21, 2011 (and we all know where that went), something else entirely and more troubling is going on behind the scenes. Because as the world was transfixed on regurgitated news out of Greece, which will without a shadow of a doubt end up with a far worse 2020 debt/GDP scenario than the IMF's downside case per the sustainability report (first posted in its entirety here on Zero Hedge last night, and which assumes just a 1% decline in Greek 2013 GDP), China just escalated currency wars into outright trade wars. Because as China Daily reports, "Chinese exports are set to get a tax boost." Translated: even as China pushes the CNY higher in infinitesimal and irrelevant increments to appease US Congress, it has just taken out the trade stimulus bazooka. Why? "Export tax rebates will be increased this year in response to an export decline triggered by the European debt crisis. The move, which Commerce Ministry officials said will be implemented when the time is appropriate, will be the first increase since 2009." Still think Europe is fixed? China's answer: nope.

While this will hardly come as a surprise to any of our regular readers, occasional visitors may be confused to learn that according to a discovery by the Carolina Journal, North Carolina "Gov. Bev Perdue’s press office has received access to confidential employment data from the U.S. Bureau of Labor Statistics hours if not days before its scheduled release, quite likely in violation of federal law." Once again the rabbit hole, which these days is pretty much everywhere, emerges: "Documents and correspondence obtained by Carolina Journal show that the Division of Employment Security, formerly known as the Employment Security Commission, sent a draft of the press release each month to Perdue’s press office. The governor’s spokesmen typically rewrote the text and added a positive spin, even if the data did not support Perdue’s talking points." And while one may say this is a perfectly innocuous leak of otherwise embargoed data, others may highlight the following facts: "While the operation may sound like a harmless effort to add political spin to the release of jobs data, sharing confidential BLS estimates while they are protected by an embargo violates a federal law barring the early release of employment data. This is no small matter: A conviction for breaching the Confidential Information Protection and Statistical Efficiency Act of 2002 carries a fine of up to $250,000, up to five years in prison, or both." Of course, when it comes to breaking the law, both members of the US banking class, as well as America's politicians, are perfectly immune from any repercussions. But at least the next time the market does its usual pre-NFP acrobats, the only question will be: which particular US politicians i) traded in advance of the embargo lift, and ii) leaked the information to ten of their closest friends, who did the same, who did the same, etc.

All you need to read.