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Tough Day For Our Calamity Economy
By Wolf Richter www.testosteronepit.com
The ugly numbers speak volumes on how the policies of the Federal Reserve hurt the real economy. But those very policies enable Congress and the White House to run up ruinous budget deficits.
Inflation is getting worse. CPI is up 3.9% over the past 12 months (BLS report). For "Urban Wage Earners and Clerical Workers," it spiked 4.4%. Price pressures in the supply chain indicate that this trend isn't going to abate anytime soon. Producer prices jumped 6.9% over September last year, and import prices shot up a red-hot 13.4%. There is absolutely nothing "subdued" about this kind of inflation though the New York Times inexplicably used that term.
But that's inflation in goods and services. Not wages!
Wages dropped 1.9% from September a year ago and .1% for the month on an inflation-adjusted basis. For production and non-supervisory employees, the drop was even steeper, down 2.4% for the year—those at the lower levels of the wage scale are getting whacked the most (BLS report). It's a continuation of a 12-year trajectory during which real wages dropped 9%.
Could we have a little deflation in goods and services please, to keep up with wage deflation? Yes. During a few months in 2009, consumer prices actually declined a bit while wages rose a smidgen. Result: a jump in purchasing power and an improvement in consumer spending.
But the Fed abhors declining prices and rising wages. Or even stable prices and stable wages. Instead, it has chosen the insidious combination of inflation in goods and services and deflation in real wages. And it has been vocal about its policies. The result is a creeping impoverishment of the middle class: 46.2 million Americans live in poverty, more than ever, the Census Bureau reported in September. No wonder that the Michigan Consumer confidence index dropped to 57.5 and that the expectations sub-index to 47, the lowest in 31 years. So, don't expect the middle class to rev up the economy.
Finally a good number ... on the surface: Housing starts shot up 15% from August to a seasonally adjusted annual rate of 658,000 "±13.7%"—for a sense of proportion, this is down from a peak of 2.3 million starts in January 2006. But every unit built only prolongs the housing nightmare. Its cause: 19 million vacant units, according to the Census Bureau. While reasonable minds might quibble with that number, everyone agrees that the inventory of vacant units is huge. And the healing process—household creation, which has nearly ground to a halt—will take along time. For more: US Housing Hangover or 20-Year Japanese Nightmare.
In other parts of the economy, early warning signs are also flashing. Capital One, one of the largest credit card issuers in the US, reported that 30-day delinquencies were rising—consumers are getting strung out again. Two days ago, the Empire State Manufacturing index came in at -8.5, in negative territory for the fifth straight month. On a very dark note, its future general business conditions sub-index, which measures expectations, fell to its lowest level since February 2009, the depth of the financial crisis. International business travel has fallen off a cliff at the end of August. And ominously, inbound port traffic is down, probably due to declining expectations for holiday sales.
Government deficit spending, an economic stimulus, filled the holes for the last ten years, but now, the economy is addicted to it, and even a $1.3 trillion deficit—8.7% of GDP, in line with Greece's deficit!—isn't enough anymore to keep it growing. Despite all the posturing by Congress and by the White House about cutting the budget, and despite the silly theatrics around the debt ceiling, spending in fiscal 2011 actually rose 4.2% to $3.6 trillion. With receipts of only $2.3 trillion, 36% of the entire budget was borrowed money. It makes the Eurozone debt crisis look benign.
The "advantage" the U.S. has over the Eurozone is a central bank that is willing and able to print whatever it takes to monetize the deficit, and to do so at negative real yields. It's financial repression that will demolish fixed-income investors and workers alike, but it enables Congress and the White House to continue their fiscal policies to the detriment of the real economy.
$46 billion in August, a hair-raising $376 billion year to date, half a trillion by year end—economic activity gone overseas. When everyone follows an ancient and valid business principle.... The Brutal Trade Deficit.
Wolf Richter www.testosteronepit.com
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From independent political analyst: "Any lowering of inflation isn't going to have much effect. People are just focused like a laser on unemployment"
This is part of problem. There are 2 USDs: the ones in our wallet, and the ones in big banks. Big banks love to see lower wages/high inflation because it allow their investors to speculate more, increasing volume (which they get a cut of).
All while we fight for scraps. This shit ain't gonna end well, and was part of the reason back in Roman times (a their empire was declining due to over expansion) Jesus stormed the Temple to root out the Pharisees and the money changers.
http://en.wikipedia.org/wiki/Cleansing_of_the_Temple
NASDAQ megaphone pattern on daily chart indicates big move ahead.
USD weekly chart remains bullish and as predicted for some time further dollar upside expected.
http://stockmarket618.wordpress.com
"Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago."
http://www.cnbc.com/id/44962589
As a Christian or believer in Jesus Christ, I am both a citizen of the country I abide in (US) and a citizen of Heaven, wherever that is, whether "up there" or in the New Jerusalem, the City of God, down here. The church today teaches falsely that we merely go to Heaven or hell, when neither are eternal. For the unbeliever hell is temporary, followed by the lake of fire or Gehenna, which is eternal. For the believer, heaven is followed by a return to the earth in a glorified body to rule and reign with Christ in the Millenial reign of Messiah Jesus. This is not western thinking.
Not being desirous of being with Christ, of dying even a martyr's death, that is western thinking. To want to run to a easier place, toprotect one's wealth no matter what, well even the founding fathers gave that up. We live in exciting times, truly.
Just call it what it is, a Calamitonomy...
I think you can get a shot for that, no?
Are we talking absinthe or antibiotics? Pernod or penicillin?
Blue I was a buyer of building supplies at one time and traditionally we get screwed with building supplies. When interest rates drop commodities go up and when interest rates rise they drop. Maybe someone here can explain this. Having done it for 10 years that was how it worked. I got out of that business and moved on. Talk about a racket building homes is one of them.
I could go on and on about how builders and supply stores selling them, screw the homeowners with discounts to the builders. If you want to open a contract account you do not get the same discounts.
Prices in the local home improvement store are up 20-25% in the last 6 months. Pretty soon the cost of building a new house will be triple the cost of buying one already built.
I dumped both Lowe's and Home Despot last year. Both were dogs for years. Have been seeing lumber prices dropping for ages though. Would have thought builder costs would be dropping but I guess all the Chinese-made 'accessories' are rising in prices?
Yep....& Lowe's is closing stores. All the big boxes are looking to build units going forward with smaller footprints.
Nothing new- Lincoln's greenbacks-
By April 1862, $449,338,902 worth of Lincoln’s debt free money had been printed and distributed. He states of this, “We gave the people of this republic the greatest blessing they ever had, their own paper money to pay their own debts.”
So the Times of London publishes a story containing the following statement,
“If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce. It will become prosperous beyond precedent in the history of civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe.”
In 1865, Abe was shot in the head.
After the Whig Party died, the Big Money in the Northern states needed a new political home. Combine merchant and industrial interests with the useful idiots of the idealistic Abolitionists to get the new Republican Party. (BTW, the Abolitionists parents and grandparents got rich in building the slave trade.) The victors wrote the history and cast the North as the heroes with the cause of the abolition of slavery, forgetting to mention the mercantile interests that enjoyed both houses of Congress, the White House, a neutered Supreme Court, and a press intimidated by the jailing of numerous editors, particularly in the Midwest. See the "Copperhead" anti-war movement elsewhere.
The Northern factories produced inferior goods to those from Europe, but taxes were imposed to force the South to "Buy American". The South loved hard money, the Republicans printed specie-free "greenbacks" to pay for the war. Spanish pieces of eight and British sterling freely circulated in the South until the Republicans banned their use in favor of greenbacks. See the National Banking Act of 1863. The Republicans passed the Morrill Land Grant Act of 1862 establishing Agricultural and Mechanical colleges to teach scientific agriculture, engineering, and to train military officers. The Republican government became deeply enmeshed with Big Business helping it expand the railroads throughout the West via land grabs. Graft and corruption were everywhere with Northern troops sometimes loading cannons with blackpowder that turned out to be mostly dirt from government contractors. Charles Dickens declared the war to be entirely a fiscal matter; what many described as "a rich man's war and a poor man's fight". Perhaps candidate Lincoln could have proposed an economic settlement to end slavery and eroded opposition to his election in the South. Or maybe some of his supporters wanted to provoke the war for their own purposes?
Personally, I still don't understand the concept of enshrining freedom as the highest ideal of the USA and then forcing "free states" to return to the "Union" at the point of a bayonet. Toss in the hypocrisy of accepting the secession of numerous counties from Virginia to form the Northern state of West Virginia during a war against secession and the whole Northern position becomes ridiculous. The American Civil War destroyed the 10th Amendment and with it the concept of a limited Federal government. The Interstate Commerce Clause finding of the Supreme Court in the 20th Century completed the destruction of the Constitution.
I also find it curious that Northern armies destroyed the iron and steel foundries around Birmingham in the final few days before Lee's surrender. I wonder if they had orders from Pittsburgh steel barons to eliminate competition for the lucrative rebuilding contracts sure to follow.
Lincoln was no saint and slavery is horrible.
He should have been shot in 1860, before he and Davis killed off/mauled 2 million men and ruined 2million families to force the Southern States to stay in the union.
How much better off would we be today if we had least two or three nations on this part of the North American Continent.
And don't hand me the standard crap about his emancipation of the slaves which certainly under different leadership could have been accomplished without the carnage, blood and guts strewn all over the country, even during reconstruction.
Given the fact that Lincoln's Emancipation Proclamation didn't free a single slave, it was nothing but a miliatry ploy seeking to cause an uprising, when that didn't happen, when the Radical Republicans realized that the vast majority of the slave population cared about their country, that is the Confederate States of American, they were shocked.
Few realize that one of Lincoln's friends, and later government appointee, Hinton Helper wrote a book, very popular at the time with Lincoln and the Radical Republicans, entitled The Negro in Negroland. In that volume, Helper advocated plans for the genocide, the complete extermination of the "inferior race". That being said, Lincoln, who settled on a policy of deportation of all people of color, was neither a hero of America nor of the African Americans held in slavery.
Slavery was a dying institution and based on the South's policy of manumission, it would have ended with a far better outcome for all concerned, black and white...not to mention this country..
Few realize that one of Lincoln's friends, and later government appointee,
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No. Many know that the US has hijacked freedom, forcing an angle on anything done by the US.
The US civil war could only be reported as being about emancipation, as it was what is expected from a nation promoting freedom.
The reality is other though: the US civil war was conform to US citizens nature. It was about different conceptions of slavery. It was about slavery, not about freedom.
As expected from the US.
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when the Radical Republicans realized that the vast majority of the slave population cared about their country, that is the Confederate States of American, they were shocked.
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They were probably much aware of the US citizen nature as they had to live with US citizens for one century. An opportunity Iraqis did not have when they rose up against the mad man from the desert after the war against Iraq numberone.
Interestingly enough, even inthose times, negroes were smart enough to see through US propaganda,which mightindicate the propagandawas already cheap.
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Slavery was a dying institution and based on the South's policy of manumission, it would have ended with a far better outcome for all concerned, black and white...not to mention this country..
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Funny how US citizens advocate for activism when they are on the wrong side and let it flow when they are on the right side.
So here is a modern version
The Fed is a dying institution and based on the US' policy of debt forgiveness, it will end with a far better outcome for all concerned, US citizens or not...not to mention this world...
Indeed, slavery ended gradually and peacefully everywhere but here. BTW, blacks captured fighting for the South were summarily executed, and slaves on plantations were required to fight for the North. The emancipation proclamation was only applicable to the rebel states.
Out of curiosity, what year did slavery end everywhere else?
Slavery is a vile institution, but unfortunately, it is still alive and well....actually increasing, and it will continue to increase worldwide as economic stress increases.
Considering that US civil war was about slavery,not about emancipation, one cannottell the end of slavery happened in the US violently.
Ending slavery was not an objective of the US civil war. On the contrary, southern states wanted to crush states rights as they wanted to expand slavery on non slaver states, one of their big beef being that those non slaver states did notrecognize slave ownershipwhensouthernersmoved there.
Actually, it was the Northern members of Congress that wanted to keep the lucrative slave trade going and expand it, all of the slave trade shippers were Northern. The South simply wanted the people of the territories to decide for themselves. In fact, there had been several pieces of legislation presented by Southern Congress members that would have placed restrictions on slavery in the territories, but guess who prevented that legislation from passing? Northern Congress members beholding to Northern Industrialists who were also heavily into the slave trade.Southerns wanted to know that the Constitution would be upheld, as as slaves were considered property at the time, they were concerned that if they moved to one of the territories their property rights would be denied.
Talk about completely missing the point. I was merely pointing out that like Kennedy, he had angered the money changers then came up shot. He destroyed our republic with his War of Northern Aggression, and I am no fan.
Thomas J. DiLorenzo has written many articles, all of which I have archived. I was only referring to the European reaction to his 'greenbacks'.
Sorry. I didn't read it as you intended.
were those lincoln dollar competing with jeff davis dollars in any way? he may have felt that he had too, just as one central bank today cannot keep their money supply steady when the US is printing
I don't think either side allowed the circulation of enemy fiat. Silver and gold however, was a different story.
Both sides had trouble financing the war effort. Especially the North.. Lincoln approached the banks for the money, they quoted an interest rate above 30%! So he invented his own fiat. Southern elites put up their own money since they were personally involved in the war. The North had very few face-to-face meetups with Southern troops, and the war seemed distant to them. Nobody burned Philadelphia to the ground, for instance. General Lee did not advocate or tolerate killing civilians like the northern gov't did.
The South had a problem with the manufacturing of weapons and so forth. The factories were mostly northern. Imports were stymied by various blockades. If the South had focused on manufacturing a bit more, the outcome might have been different, ya'll. But we ain't here to refight the 'civil' war..
Good God!
At least you imply the slaves would have been emancipated...Thanks!
We all know the southerners were just itching to free them.
You have been reading from one book.
Better expand your scope, you are getting brainwashed.
Lincoln and Stanton were tyrants, murderers, as bad or worse than the King that the founders of this country escaped from.
Lincoln was the primary despot of his time. Not many have arisen to beat that record here since.
I agree. History has Lincoln all wrong.
I'd probably have to agree. Having been exposed to more history here, and reading from links posted here, than I ever even considered before, I'd have to say my 'public education' was pretty much bullshit. Interesting how the past's 'heroes' are often villainous in many respects.
Lenin was certainly right, there is no more positive, or subtle or surer means of destroying the existing basis of society than to debauch the currency.
By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of the citizens.
The process engages all of the hidden forces of economics on the side of destruction, and does it in a manner that not one man in a million can diagnose. - Keynes
But that's how this extend-and-pretend paradigm actually comes to an end, and the TBTFs do finally actually 'F'.
i.e. when enough people can't pay for milk and bread only three days after getting paid the entire system simply grinds slowly to a halt.
It will of course go non-linear, at some point.
That's the mechanism that will end it.
I've been waiting for the real-world crunch since mark-to-market was 'suspended' (i.e. abolished in reality).
This was always what was going occur, from that point, because the money 'industry' would NEVER be able to be weened off mark-to-make-believe, without systemic collapse and unbridled reset and a political wildfire that consumes all the current deadwood - the completely failed political old-normal, all over the world, that has refused to go away, peaceably.
So will soon be forced to go away, war-ably.
The damage was done long ago so each day just brings the fruits of it all closer to an intersection with our NOW. The spineless and destructive bankster-run White House choices of early 2009 still have to play out.
I love economic calamity porn.
And will you be so smug when it comes your way?
"Smugness" has nothing to do with it. Unless one has played it so that he is set for life with any gains whether it be gold, shorting, or some other mechanism, the masses will endure much and trudge on regardless.
Nothing lasts forever, not even a depression. The Trial by Fire will come whether it is now, soon, or later. It would be be best that it happens now when the baby boomers aren't all retired yet, When the country becomes inundated with old people would be the worst timing.
I'm off-topic, but it appears to me that Chinese and others could be working in collusion with US monetary interests in suppressiong the price of gold. It would behoove them, and other nations, to do "whatever is necessary" in order to maintain the status quo at any and all cost. It is in the entire planet's interest to keep the ponzi alive -- and they will do so for as long as they can. It will take another major shocking development for gold to top $2K/oz. Which could happen at any moment. And no one will have seen it coming :)
Wolfman,
I am waiting for it to go lower, and I am loading the van.
Push it down $500.00-600.00-, see if you can find any,it won't be available .
I finally met one of my blog readers today. One of my best "Virtual Friends" if you will. One of my "real" friends and I went to drive to meet up.
He is VERY worried, even short-term about the state of the world economy. The three of us had lunch, and talked for over two hours...
Great article, Wolf. Perfect for a day like today.
Scrolled Petie! You actually think increased inventory is going to grow the R/E debacle out of oblivion?
Hell< I'm investing in Steam Shovels! Strip malls and recycling come to mind ass wipe!
Most people don't understand the long term, overall agenda that has destroyed the USA and ultimately the hope of mankind for a good life. The initial success of individualism in the USA made the elitist predator thugs who controlled the rest of the world very angry. They understood very clearly that they were overt predators, and their entire modus-operandi was control of that portion of humanity that were producers. As is obvious, predators need to consume producers, but producers have no need or use for predators.
The predators-that-be established a long term plan to destroy all that was good in the USA and anywhere else that went down a similar path, and they have been diligently implimenting their plan ever since. They are purposely destroying everything good, honest, ethical and productive to assure they remain at the top of the food chain... the predators that feed upon everyone else.
Everything else we see, including this and most articles in ZeroHedge and elsewhere, is simply implementation of the plans of the predators-that-be and predator-class.
The only way to deal with predators is... extermination or cages. There never have been, and never will be, any other alternatives. Predators cannot be reasoned with. It's either them or us. Period.
Funny.
US citizens really need their fabled past.
And as usual, something alien has corrupted their good ole republic.
On the plan:
If today, there is no merit to tell what theUS is, it is just observations, back in the 1780s, a few writers rather envisioned what the US would become. And no, they are not taught in US public or private schools, a good thing as US citizens are propagandists.
But, their works show that the US was on a predetermined course. Nothingalien in its development, only the natural path.
On predation:
Actually, the US has been a beacon for all the extorters of the weak and farmers of the poor around theworld. Many like Imperial Japan, Nazi Germany wantedto mimick the US. Thugs have learnedfromthe US andtheUS has idolized theircriminals.
From a class of extorters and farmers who were still entangled into values like honour, keeping up one's word, to a class of extorters and farmers cleaned from these bounds.
This is what the US has offered to the world.
On individuality:
Individuality does not exist in the US. On the contrary, the US has suppressed individuality.
Individuality, namely, refers to something undivided. Yet, in the US, what is called individual is actually the recollection of group markers, patched up to form a semblance of whole.
What is undivided in the US, the groups. The groups are undivided.
From the basic observations that a group is the sum of the individuals forming it,theUS has constructed the reverse through social constraints:
an 'individual' is a sum of all groups he is supposed to belong to.
In the US, a group can not be divided. An 'individual' has to.
This is manipulated in asking people to choose one of their group memberships, tearing individuals apart.
You have to choose yourself over yourself.
If you are a man and a father, US philosophy creates two groups: man and father that compose you. Man as a group is supposed to be undivided (the famous US rattling on human nature), father as a group is the same.
And thanks to US philosophy, you might be forced to choose whether you are a man or a father, that is divide yourself into two entities that are insane in theirconstruction, undivided groups.
No, no. The US has never been the temple of individuality.
The US has been the graveyard of individuality.
There are indeed many problems with america today, including far too much acceptance of authoritarianism and loss of individualism. That was in fact explicit in my message.
You simply IGNORE what I described... the change from a rather high degree of individualism in america hundreds of years ago to the current sad state of affairs. What I/we are bitching about IS the sad state of affairs today. By ignoring my message, you make yourself look stupid, and avoid any useful understanding or exchange.
What you call "US philosophy" is simply "authoritarian philosophy", which without any doubt whatsoever pre-dated america. This "philosophy" (actually, it was just "propaganda") dominated everywhere except in a few extremely rural areas before america was settled by westerners. And america did not invent individualism, it simply recognized its value and legitimacy against the overwhelmingly dominant institutions of "authority". You can be quite certain that people who migrated to the americas in the 1500s, 1600s, 1700s and into the 1800s were largely individualists. Those who migrated to the americas tens of thousands of years before them were of course amazing individualists. People should consider the wilderness those humans faced alone 20,000 ~ 50,000 years ago before they start claiming that "individualism" is impossible or "a bogus concept". People should also consider that individualism is still a valid concept and practice in the 21st century, even when surrounded by masses of other human beings.
AnAnonymous,
You sir, and I use the term loosely are giagantic Sphincter.
Since you hat the "idea" of America, why do you even bother speaking at Americans?.
I am sure where you abide is Nirvana...................
Since you hat the "idea" of America, why do you even bother speaking at Americans?.
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Another funny comment.
Since you love the 'idea' of 'America' why do you even bother speaking at people you claim hate on 'America'?
So cheap propaganda.
US citizens love to depict themselves as innovative. Innovation in their propaganda would be welcomed.
Facts do not care about love and hate. Facts exist.
Reporting about the absence of individuality in the US hangs alone. Done or not done, individuality will not be more present.
Contrary to lies, facts are not bound to their reports.
Who's the equivalent of Henry Ford, Thomas Edison, Mark Twain, Timothy Leary or Kurt Cobain in your country? What is your country anyway?
Who's the equivalent of Henry Ford, Thomas Edison, Mark Twain, Timothy Leary or Kurt Cobain in your country?
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Huh, yes? Topical indeed.
Made me laugh. Group at work. What have these people's achievements to do with the topic at hand?
Wishing for making their achievements yours?
Then how do you explain Chad Bono?
She/he might be able to explain himself/herself.
predators do serve a purpose. they cull the herd of the weak making the reamining producers fitter for purpose.
These predators just break the legs of the weak and throw them in a wagon that the rest of us have to pull.
Who are you going to believe, the New York Times or your own damn eyes. Rising prices - the effects of inflation - are visible everywhere. Inflation of the money supplies will continue to steal from every holder of USD assets to pay the gambling debts the Fed's owners owe to each other. Generational debt peonage is just the icing on the cake.