Guest Post

Through most of the 20th century, America led something of a charmed life, at least when compared with the disasters endured by almost every other major country. We became the richest and most powerful nation on earth, partly due to our own achievements and partly due to the mistakes of others. The public interpreted these decades of American power and prosperity as validation of our system of government and national leadership, and the technological effectiveness of our domestic propaganda machinery - our own American Pravda - has heightened this effect. Author James Bovard has described our society as an “attention deficit democracy,” and the speed with which important events are forgotten once the media loses interest might surprise George Orwell.

The biggest fear of the Federal Reserve has been the deflationary pressures that have continued to depress the domestic economy.  Despite the trillions of dollars of interventions by the Federal Reserve the only real accomplishment has been keeping the economy from slipping back into an outright recession.  However, when looking at many of the economic and confidence indicators, there are many that are still at levels normally associated with previous recessionary lows.  Despite many claims to the contrary the global economy is far from healed which explains the need for ongoing global central bank interventions.  However, even these interventions seem to be having a diminished rate of return in spurring real economic activity despite the inflation of asset prices. The risk, as discussed recently with relation to Japan, is that the Fed is now caught within a "liquidity trap."  The Fed cannot effectively withdraw from monetary interventions and raise interest rates to more productive levels without pushing the economy back into a recession.  The overriding deflationary drag on the economy is forcing the Federal Reserve to remain ultra-accommodative to support the current level of economic activity.  What is interesting is that mainstream economists and analysts keep predicting stronger levels of economic growth while all economic indications are indicating just the opposite.

Exxon Mobil hasn't asked federal regulatory authorities to restart the Pegasus oil pipeline, which burst open in a neighborhood in Mayflower, Ark.  In March, a 22-foot rupture in the pipeline spilled about 5,000 barrels of diluted Canadian crude oil into an area of marshland, though the company said it's been effectively cleaning the area with long-term remediation in mind. Talking points over pipelines are focused on economic and energy security interests on one side of the argument versus emissions and cleanup on the other. Given the legacy of pipeline spills since the Keystone XL debate began more than four years ago, the "real" issue may be the lack of debate over just why so many of these pipelines have burst open in the first place.

...It seemed like every week we would hear about some terrorist with a suitcase-sized bomb, and the bureaucrats would dive into a lively debate about whether or not to evacuate the Americans. One day, I remember, my friend who was the senior ranking non-commissioned officer interrupted and said, “What about the Swedes? Do we evacuate the Swedes too?” The embassy staff looked at each other, shrugged a bit, “Oh sure, sure, we’ll coordinate with Washington on that.” And the discussion continued. “What about the Saudis?” Silence again. And then he really made his point. “It’s not just about Americans, you know. [others] blood is worth something too.”

A data-based look at the financial context of the past 30 years from the perspective of Gen X.

Concentrated power and wealth are intrinsically sociopathological by their very nature. We have long spoken of the dangers inherent to centralization of power and the extreme concentrations of wealth centralization inevitably creates. There is another danger of centralization: sociopaths/psychopaths excel in organizations that centralize power, and their ability to flatter, browbeat and manipulate others greases their climb to the top. In effect, centralization is tailor-made for sociopaths gaining power. Nothing infuriates a sociopath or a sociopathological organization more than the exposure of their sociopathology, and so those in power will stop at nothing to silence, discredit, criminalize or eliminate the heroic whistleblower.

The theory of Petrodollar Warfare can be attributed to US analyst and author William R Clarke, and his 2005 book of that title which interpreted the US-UK decision to invade Iraq in 2003. He called this an "oil currency war", but the concept of the petrodollar system and petrodollar recyling dates back to the eve of the first Oil Shock in 1973-1974. The role of the petrodollar system as a driving force of US foreign policy is explained by analysts and historians as basic to maintaining the dollar's status as the world's dominant reserve currency - and the currency in which oil is priced. Today however, with the major and massive changes of oil resource availability revealed by the shale energy revolution, rising global oil production capabilities, stagnating oil demand, and rising renewable energy supplies in all major developed countries, and the constantly declining role of oil in the economy, the Petrodollar System's days are surely numbered

In August of 2011, Argentina’s government slowly began to implement a series of actions destined to curtail the right of citizens to access US dollars (foreign exchange in general). The goal was and is to force savings into pesos, as pesos are after the taxable asset in a country that cannot access capital markets and fully monetizes its deficits. From that moment onward  physical US dollars started to trade at a premium. First-hand experience on the ground in Patagonia confirm the irreversible damage caused by interventionist policies: Widespread poverty, abandoned infrastructure, scarcity of consumer goods, unseen unemployment and criminality, and the madness of hedging against inflation with the purchase of new cars. The streets of any forgotten small town in Patagonia are filled with brand new 4×4 vehicles that would be the envy of many in North America. We can now see that the sustainability of the manipulation in a segmented/broken foreign exchange market causes a negative carry, which would create a quasi-fiscal deficit in Argentina (i.e. the deficit of the Banco Central), fully opening the gates to hyperinflation.

The collective state of mind in the USA these days may be even more peculiar than what went on in Germany in the early 1930s, when the Nazis were freely elected to lead the country and reconstructed the battered national psyche into a superman cult that soon beat a path to mass death and ruin. America has its own way of going crazy. We don't goose-step to tragedy; we coalesce into an insane clown posse and stumble into it by pratfall -- juggaloes dancing backwards off the cliff edge. A subset of our master wish has been on vivid display in recent months, namely the idea that God has blessed the USA with a limitless supply of new oil that will allow us to keep driving to WalMart forever. Most of the current "endless oil" fantasy revolves around shale oil. Apart from the issue of sheer economic suffering and all the damage that will ensue from the realization of the falsehoods and propaganda, consider that it will be generations before anyone believes the "authorities" again.

Is a $400,000 house with NINJA loan normal? How about a $200,000 REO with missing appliances, a dead yard, a long list of maintenance and no financing? Maybe normal is a $300,000 flip after the flipper fixed everything and colored up the yard, and did some upgrades to the interior. Some may suggest that normal is more like a $300,000 sale with a 5.5% fixed rate and 20% down. Then again, it may be more normal if this $300,000 sale is financed with a 3.5% down FHA loan at 4%. Of course, all of the above is actually referring to the same house. So what is normal? At the moment, we know prices are going up in certain markets, and so are sales. Mortgage rates are higher now than when QE3 started in September 2012. Investors are gobbling up everything in sight in their favored target markets. As an example, they are buying 30% of the houses in Southern California, 38% in Phoenix and 53% in Vegas. First time buyers do not stand a chance. The percentage of home ownership is declining. Are policy makers happy with these results? Are these intended or unintended consequences of public policies?

There have been quite a few bold predictions, since the beginning of the year, that the dollar was set to soar and that the great "bond bull market" was dead.  The primary thesis behind these views was that the economy was set to strengthen and inflation would begin to seep its way back into the system.  Furthermore, the "Great Rotation" of bonds into stocks, on the back of said economic strength, would push interest rates substantially higher.  While we have no doubt that at some point down the road that inflation will become an issue, interest rates will rise and the dollar will strengthen - it just won't be anytime soon.  A wave of "disinflation" is currently engulfing the globe. The deflationary pressures that weigh on the consumer and the economy are likely going to keep downward pressure on rates for some time to come as the Fed comes to realize that they have been caught in the same "liquidity trap" that has plagued Japan for a generation. The real concern for investors, and individuals, is the actual economy.

We have often spoken of the disconnect between Wall Street and Main Street.   While asset prices are inflated by continued interventions of monetary policy from the Federal Reserve, boosting Wall Street profits and widening the wealth gap between the top 20% of Americans and the rest, "Main Street" continues to suffer a from a rising cost of living and falling wage growth. "How long can the disconnect last between Wall Street and Main Street?" There is no clear answer for that as consumers have shown a willingness to draw down savings rates to historically low levels while quickly returning to cheap credit forgetting the disaster that it caused them not so long ago.  However, in reality, when you have a family to feed, clothe and house - it really doesn't matter what is logical, but what is necessary, regardless of the consequences down the road.  Of course, for many American's today, the only real difference between now and the "bread lines" of the 30's is that the "bread" is delivered in the mail rather than at the "soup kitchen" on the corner.

What happens to everyone in the ruling Elites and those desperately trying to join the ruling Elites when the debt-serfs stop paying and the tax donkeys drift away to lower-cost, lower-income lifestyles? If you think Tune In, Turn On, Opt Out sounds ludicrous, check back in four years (2017) and eight years (2021) and see how many of your fellow debt-serfs and tax donkeys have quietly abandoned the bloated cost-structure, debt and derangement of the Neofeudal Debtocracy's twisted consumerist dream.

Parasites must balance their drive to maximize what they extract from their host with the risk of losing everything by killing their host. This is the dilemma of the parasitic partnership of the central state and financial Elites everywhere: to extract the maximum possible in debt payments and taxes without sparking rebellion and revolution. The 30 million whose labor funds the parasitic status quo don't have to rebel; they simply have to stop going to work, stop starting enterprises, stop being productive. They just have to tire of being the host, tire of being debt-serfs, tire of being tax donkeys. The trick to suppressing revolution is to keep debt-tax serfdom bearable. The parasitic Elites are keeping the host going, but at a high cost in resiliency. Let's see how long the host lasts once a crisis hits.

Since before the tech bust, we’ve been suggesting that while Americans “think” they’re getting richer... they’re actually heading in the other direction. They’re getting poorer. This proposition has been easier for folks to entertain since housing busted and the financial crisis reversed the “wealth effect” in 2008. With that in mind, let’s take a look at the logic of the American Empire and what you can expect in the year(s) ahead.