Main Street

In one sentence, during 2013, we expect imbalances to grow. These imbalances are the US fiscal and trade deficits, the fiscal deficits of the members of the European Monetary Union (EMU) and the unemployment rate of the EMU thanks to a stronger Euro. By now, it should be clear that the rally in equities is not the reflection of upcoming economic growth. Paraphrasing Shakespeare, economic growth "should be made of sterner stuff". Many analysts rightly focus on the political fragility of the framework. The uncertainty over the US debt ceiling negotiations and the fact that prices today do not reflect anything else but the probability of a bid or lack thereof by a central bank makes politics relevant. Should the European Central Bank finally engage in Open Monetary Transactions, the importance of politics would be fully visible. However, unemployment is 'the' fundamental underlying factor in this story and we do not think it will fall. In the long term, financial repression, including zero-interest rate policies, simply hurts investment demand and productivity.

Peer-to-Peer Lending and Crowd-Funding Have the Power to Change Finance

Not surprisingly when wages and salaries are growing at a slower rate there is a corresponding weakness in the level of retail sales.  The peak in wages and salaries occurred in early 2011 with the subsequent growth rate trending weaker.  This corresponds with the economy which has continued to muddle along at a very anemic pace.  While it may be likely that the damage from Hurricane Sandy may have soured some sales, particularly in the North East, it is unlikely to have had much of an effect on the retail sales nation wide.   For majority of America the "fiscal cliff" debate largely goes unnoticed as it remains a battle between the White House and the "rich" - for the rest the country it is more of a distraction from the things that matter like "Honey Boo Boo" and "Housewives Of Whereever".   What does matter though, as stated above, are incomes.  The decline in incomes, which can be seen in the roughly 1.2 million person increase in food stamp participation from June to September, is why retail "holiday" spending is weaker.  With credit limits reduced, incomes stagnant and real costs of living on the rise - it is not surprising that retail sales are far weaker than the NRF's holiday season predictions.

The Christmas Eve classic rinsed, lathered, washed and repeated...just like the real world.

Presenting Dave Collum's now ubiquitous and all-encompassing annual review of markets and much, much more. From Baptists, Bankers, and Bootleggers to Capitalism, Corporate Debt, Government Corruption, and the Constitution, Dave provides a one-stop-shop summary of everything relevant this year (and how it will affect next year and beyond).

We believe that because the Rockefellers and Rothschilds created our “modern” banking system with the express diabolical intent of transferring the wealth of nations to themselves with zero work and of preventing the people of these nations from revolting through the imposition of debt enslavement achieved through the administration of the fractional reserve banking system, it is impossible to be a moral person and work for a bank.

Merry QE to Goldman and to all squids a good night...

Bankers have engaged in a huge misinformation campaign against gold and silver to deliberately keep people out of buying gold and silver. If you’re a newbie thinking about buying gold and silver assets for the first time ever, here’s what you need to know.

Sweeping changes are taking place at the state level as pension trustees and legislatures push for higher monthly contributions to pension plans, a later retirement age and lower annual cost-of-living adjustments for current and retired workers. Unions (those that don't make Twinkles, in any event), are making the concessions because they can see the future absent shared sacrifice — the termination of defined benefit plans in favour of defined contribution plans. Be that as it may, employee contributions are going up — a de facto tax hike. And this will work directly against any upturn in consumer spending when you consider that the state and local government sector employ nearly 20 million people or 15% of the national job pie. So we will have less government, fewer entitlements and more whisperings that it isn't just the $250,000+ high-income households that are going to experience tax increases and diminished disposable income growth. This is shared sacrifice. To think that the nation could have ever gone to war in Iraq and in Afghanistan under the Bush regime, putting our troops at great risk not to mention the emotional scars on their families, while here at home civilians would be allowed to enjoy tax cuts and a debt-financed consumption binge.... One has to wonder what events could provide positive momentum to GDP growth, push corporate earnings to record highs as the consensus predicts as early as next year, or generate any lasting inflation, for that matter.  It's the people that make these pricing decisions. Businesses can only price up to what consumers are willing to pay. It is households that determine whether or not we have inflation, not some bureaucrat in Washington who believes he has control over some printing press.

We expect a return to a skittish environment in markets. We are confident in my prediction for the course of the economy by leveraging simple game theory in handling the upcoming crisis as Congress returns for its lame duck session. “Compromise” reflects a decision from either side that each find unpalatable. Both President Obama and Speaker Boehner would rather shove two sticks in their eyes than move from their hardened stance despite some of the recent rhetoric in favor of bargaining in good faith.  As long as the loss of utility from both sides’ digging in their heels is more favorable than conceding to the preferences from those across the aisle, then the game arrives at a Prisoner’s Dilemma. the above matrix concludes that the fiscal cliff virtually guarantees an aggressive selloff for equities until the stop loss for the Democrats and Republicans has been triggered.  For example, if the clock hits midnight on New Year’s Eve with the blue chip index at or near its September peak, each faction would feel comfortable standing up to the other well into January.

If the citizenry cannot dislodge a parasitic, predatory financial Aristocracy via elections, then "democracy" is merely a public-relations facade, a simulacra designed to create the illusion that the citizenry "have a voice" when in fact they are debt-serfs in a neofeudal State. When the Status Quo remains the same no matter who gets elected, democracy is a sham.  The U.S. Status Quo is also like an iceberg: the visible 10% is what we're reassured "we" control, but the 90% that is completely out of our control is what matters. There is another dynamic in a facsimile democracy: the Tyranny of the Majority. When the Central State issues enough promises to enough people, the majority concludes that supporting the Status Quo, no matter how corrupt, venal, parasitic, unsustainable and dysfunctional it might be, is in their personal interests. In this facsimile democracy, citizenship has devolved to advocacy for a larger share of Federal government swag. Is Democracy Possible in a Corrupt Society? No, it is not. Our democracy is a PR sham.

The 2008 elections were contested on the basis of rescuing the banks and financial markets while claiming that this was ESSENTIAL to save the economy. Four years later, the 2012 elections are being contested on the basis that the economy HAS been saved, but more needs to be done to ensure that it  STAYS saved. Wall Street, as one of the first recipients of the new “money” cascading from both the Fed and the Treasury, has been happy to buy this. Main Street does NOT buy it. The result is an election campaign in the context of a comparative calm on financial markets and a seething discontent in the electorate.

Before the campaign contributors lavished billions of dollars on their favorite candidate; and long after they toast their winner or drink to forget their loser, Wall Street was already primed to continue its reign over the economy. For, after three debates (well, four), when it comes to banking, finance, and the ongoing subsidization of Wall Street, both presidential candidates and their parties’ attitudes toward the banking sector is similar  – i.e. it must be preserved – as is – at all costs, rhetoric to the contrary, aside. Obama hasn’t brought ‘sweeping reform’ upon the Establishment Banks, nor does Romney need to exude deregulatory babble, because nothing structurally substantive has been done to harness the biggest banks of the financial sector, enabled, as they are, by entities from the SEC to the Fed to the Treasury Department to the White House.

Between today and the American elections; virtually nothing else will matter. Gone are the promises of social redemption from Mr. Obama’s speeches because, in my view, the promises were not delivered upon. There is no ground swell of younger voters campaigning and voting for some sort of Orwellian new world order and I wonder just how many in this sub-set will actually vote for anyone. Gone are the speeches promising new hope for the next generation because America has run up the debt to the point that something must be done and we have reached the limit of our social indulgence and so that hard choices, tough choices, are going to have to be made by whoever assumes the American presidency.

If your predictions are wildly out-of-whack with reality, you need to change your approach. Jared Bernstein and Christy Romer Administration predictions have been an unmitigated disaster. Not only did the real figures not match up to the advertised ones, but they are also much worse than the baseline expectations. Romer and Bernstein appear to have both severely under-estimated the depth of the crisis, and over-estimated the effectiveness of the stimulus package. Obama might talk about spreading the wealth around, but the aggregate effect of the policies pursued during his administration have squarely benefited large corporations and the financial sector, and not the middle class or small business. Is reinflating financial bubbles and pumping up corporate profits Obama’s idea of recovery? The money isn’t trickling down, and small businesses and the middle class are more in debt than they were before the crisis started.