Here’s a quick crash course in how the intelligence business works these days. Despite the Hollywood mystique of suave, womanizing, pun-dropping men of mystery flitting around the world, it’s much more mundane. In reality, government operatives from a host of three-letter agencies are working to develop large networks of informants. These are mostly folks who deal with other people and are in the know– the bartender in Beirut, the luxury car dealer in Bogota, the money changer in Riyadh, the hotel manager in Shanghai, etc. These assets are constantly being pumped for information– who did you see, what were they buying, where did they go next, who were they with, what were they discussing, etc. And in exchange, informants typically get paid. In the United States, there are a number of laws on the books which are theoretically supposed to prevent the three letter agencies from spying on US citizens. Naturally, the government dispenses with such inconvenient formalities in its sole discretion, and Congress frequently passes legislative exceptions (USA PATRIOT Act, NDAA, etc.) There’s a little known division of the Treasury Department called the Financial Crimes Enforcement Network (FinCEN) whose mission is to “to enhance U.S. national security, deter and detect criminal activity, and safeguard financial systems from abuse by promoting transparency in the U.S. and international financial systems.”
The numbers tell us America is in decline... if not outright collapse. I say "the numbers tell us" because I've become very sensitive to the impact this kind of statement has on people. When I warned about the impending bankruptcy of General Motors in 2006 and 2007, readers actually blamed me for the company's problems – as if my warnings to the public were the real problem, rather than GM's $400 billion in debt. The claim was absurd. But the resentment my work engendered was real. So please... before you read this issue, which makes several arresting claims about the future of our country... understand I am only writing about the facts as I find them today. I am only drawing conclusions based on the situation as it stands. I am not saying that these conditions can't improve. Or that they won't improve. The truth is, I am optimistic. I believe our country is heading into a crisis. But I also believe that... sooner or later... Americans will make the right choices and put our country back on sound footing.
The death throes of the debt-based consumerist lifestyle are already visible beneath the glossy propaganda of "rising revenues this Christmas season." Those revenues were obtained by selling goods at below cost, in the absurd hope that income-strapped, over-indebted consumers would make profitable "impulse buys." As Mish has documented, the "impulse buys" are being returned even before Christmas to the tune of hundreds of millions of dollars. The Fed is desperately attempting to re-inflate the debt bubble by lowering interest and mortgage rates and buying up all sorts of semi-toxic/impaired debt. What the Fed dreads is the reality we all feel and see: fear of the future due to diminished wealth and insecure incomes. If your assets have fallen in value, you feel poorer because you are poorer. Borrowing more at any interest rate will not make anyone feel wealthier. People who fear their income may plummet due to layoffs or their hours being cut are not in the euphoric mood to borrow more, and banks which cannot dare to lose more money loaning to people who will default have cut off credit to millions of previously rabid consumers of debt. Ask yourself this simple question: how much stuff could people buy if they could only spend surplus cash, after all their expenses and debt servicing payments were paid in full?
To answer the question, do high energy prices cause recessions, I would say with full respect to uncertainty and causality, yes. Eventually, however, the energy transition away from fossil fuels will gather enough momentum that we will interpret high energy prices differently: we will say they forced (helpfully) a necessary transition. But as we are so early in any global transition to alternatives, it would be better for economists, policy makers, and business to consider the Douglas Adams quote that’s in the header of this essay. Trying to prove that black is white may be a noble effort -- in the fullness of epistemology and causality -- but in the short term it could get you run over in a crosswalk. We face a more immediate question: is the global economy headed back into recession in 2012? Almost certainly, I think.
It’s clear that the BRICS cannot be the engine room of global economic growth. Meanwhile, Europe is a complete basket case, and the euro is looking increasingly as though it will be consigned to the dustbin of history. Across the pond, the US is trying to put a brave face on its jobless recovery whilst kicking a $15 trillion debt bomb down the road. Anyone who steps back and looks at the big picture has -got- to recognize the absurdity of this situation. Now… here’s the good news: you and I have a huge advantage. Citi, Deutsche Bank, Unicredit, etc. are sitting on incalculable losses, unrealistic obligations, and worthless paper that will destroy their organizations. They’ve been accumulating these for years and have no way of avoiding the endgame. We do. We, on the other hand, are little guys. If you and I want to cut our exposure to these silly pieces of paper that governments pass off as currency, we can do that easily. We can easily do that by buying gold or productive land overseas. Bank of America, on the other hand, has to hold Tim Geithner’s dirty laundry.
In April 2007, former New Jersey governor, 'honorable', Jon Corzine had an altercation with a Garden State Parkway guardrail. A year later, he addressed a bevy of reporters at the swanky Drumthwacket mansion and expressed appreciation for “family, friends, and the fragility of life.” During his recovery period, he advocated seatbelt safety, before returning to New Jersey's budget, extracting $500 million in austerity measures from farmers, educators, and environmentalists, and hiking tolls on New Jersey roadways. On the one-year anniversary of his accident, his chief-of-staff, Bradley I. Abelow declared, “Corzine has returned to his former self as a thorough and exacting boss.” (Italics mine.) Fast forward to the current MF Global flameout. Abelow shifted to Corzine’s Chief Operating Officer. And not only did Corzine ratchet up the ante on ways to really piss off farmers, but after several days of engaging in verbal dodge ball with Congress, this ‘thorough and exacting boss’ maintained his Forest Gump type cloak of secrecy regarding the stolen $1.2 billion of his customers’ segregated money. After days of political-reality TV, we knew nothing more about its evaporation. Corzine and his stewards, Abelow and Chief Financial Officer, Henri Steenkamp, executed a perfect chorus of ‘I don’t recalls’, ‘I didn’t intends’ and ‘the butler did its’.
A good way to generate hate mail is to question 1) Santa's "guaranteed year-end rally" and 2) the notion that market rallies always resume soon enough because of the Federal Reserve's backstop/intervention. If we step back from the latest shuck-and-jive data from the Ministry of Propaganda, a.k.a. the Status Quo managing perceptions, and take a longer view of the economy, money, credit and the stock market, we get an extremely troubling set of insights. Courtesy of this site's Chartist Friend from Pittsburgh, here are three charts that completely undermine the fantasy that central planning/intervention can "save the market" once again in 2012 and beyond.
Julius Caesar undoubtedly was showing off with his Veni-Vidi-Vici (I came, I saw, I conquered) when referencing to his short war outside Zela (Zile) in Turkey over two millennia ago. Similarly, if we were to use a short catchy-comment for the almost nine years America has invested in its “Iraq Mission,” we would be on target by condensing the US experience in also three Latin words, although not as melodic this time: Invasi-Eradicavi-Turbavi which sadly stand for, I invaded, I destroyed and I threw-into-chaos. No matter what the Pentagon and White House tell us, the fiasco in Iraq likely stands as the most costly mistake in America’s history, a true Keystone Kops type of political dark comedy. And it wasn’t a bad or flawed decision by a singular moron or group of morons – Bush the Younger, Sadist Cheney and Loquacious Rumsfeld composing the original warpath triumvirate, together with two dozen equally deranged staff of their inner circles. Unfortunately, this time Congress, together with a brainwashed public, closed rank with an evil and criminal White House. So, whether the American citizenry likes it or not… the Iraq conflict wasn’t just Bush’s war, but “the peoples’ war,” a war with a dangerous aftermath yet to come, one we’ll likely be paying for in the future with additional blood and treasure.
This goes for MFG's gold & silver customers too, who otherwise would have been put ahead of creditors.
The gloves are off! As the French prepare for the loss of their AAA status, the governor of the Bank of France, Christian Noyer, suggests that the UK should be first in the firing line as the data for inflation, real GDP growth and government deficit to GDP are worse across la Manche from where he sits. A month ago French 10 year yields were 3.8%. Today they are just above 3%, so maybe the markets are giving him the benefit of the doubt, but let us not forget that the maturity timeline of French bonds is considerably shorter than the UK. They are about to have a funding problem and that is one of the many issues that the much maligned ratings agencies are concerned about.
Why the abrupt Canadian volte-face? Canada has the world's third-largest oil reserves, more than 170 billion barrels and is the largest supplier of oil and natural gas to the U.S. The answer may lie in Canada’s far north, in Alberta’s massive bitumen tar sands deposits, a resource that Ottawa has been desperate to develop. Since 1997 some of the world’s biggest energy producers have spent $120 billion in developing Canada’s oil tar sands, which would be at risk if Ottawa went green in sporting the Kyoto accords. According to the Canadian Association of Petroleum Producers, more than 170 billion barrels of oil sands reserves now are considered economically viable for recovery using current technology. Current Canadian daily oil sands production is 1.5 million barrels per day (bpd), but Canadian boosters are optimistic that production can be ramped up to 3.7 million bpd by 2025. So, what’s the problem? Extracting oil from tar sands is an environmentally dirty process and the resultant fuel has a larger carbon footprint than petroleum derived from traditional fossil fuels, producing from 8 to 14 percent more CO2 emissions, depending on which scientific study you read.
Everybody wants a Santa rally in stocks: Wall Street, the financial media cheerleaders, mutal fund managers, politicos, pump-and-dumpers, retail investors, gamblers, grifters and even Mrs. Santa all want a year-end stock market rally. Santa's willing, but he's going to have to get past Mr. VIX. The VIX volatility index is a remarkably accurate indicator of market highs and lows. You can see how well extremes in the VIX line up with highs and lows in the S&P 500 in the charts below. I've marked the "Highs/Sells" in red lines and the "Lows/Buys" in black lines. As you can see, Mr. VIX isn't signaling a big fat buy here--he's signaling a big fat sell. The general idea with Mr. VIX is that when investors are panicky and bearish, then they buy hedges against further declines, and this spikes the VIX up. If the VIX breaches the upper Bollinger Band, that aligns rather closely with the stock market lows. If complacency is high and few investors feel much need to hedge against declines, then the VIX drops to the lower Bollinger Band. That generally aligns with market tops. The VIX just plummeted below 25. The last time it fell below 25, the market reversed and sold off hard. Bulls expecting Santa to deliver a rally come heck or high water have to explain why the VIX is no longer relevant, and what looks like a strong VIX sell signal is actually a monster-buy signal.
We have reported on changes in global gold demand, from booming investment demand in Asia to European and US debt concerns that have re-solidified gold's long tenure as the ultimate safe-haven asset for turbulent times. In fact, with investment demand from private and institutional buyers continuing to grow and central banks increasing their gold reserves, total demand reached a record US$57.7 billion in the third quarter of 2011. Quite astounding. But what's happening on the supply side of the equation? The most important source of gold supply is mine production – which is responsible for about two-thirds of the total – followed by recycled gold. While recycled gold is the reason supply is inelastic, new production has more predictive power since it can reflect shifts in industry conditions and investor sentiment. Starting with a bird's-eye view, take a look at global gold production since 1900.
The truth has a unique sting, and an equally unique ability to heal the destruction wrought by dishonesty, fraud and lies. The truth hurts, because the daylight of truth demands changes that the self-serving and those in denial desperately wish to avoid. But there can be no healing or reconciliation without the truth, baldly stated and plainly spoken without artifice or spin. If we can finally be truthful with ourselves as a nation, then we must admit that our financial system is fundamentally based on lies, fraud, embezzlement, misinformation, perverse filters and incentives, shadow systems that mock transparency and regulation, class privilege and the systemic flouting of the rule of law. This is the truth that hurts because it reveals the financial system as one stupendous exploitative fraud; but it also reveals the complicity and irrelevance of our judicial system and the complete capture of the legislative and Executive processes of governance. There is a system of government in which rule of law is merely a propaganda screen, where financial and political Elites run the show and escape the consequences of their actions: it's called tyranny. The truth is that we live in a financial tyranny. There is no other truthful way to describe the U.S.
A friend of mine took note recently that a large portion of activists involved in the Liberty Movement had hit extremely hard times, or had been struggling financially even before the general economic collapse began to take hold. He asked me my theory on why it was that so many of us are always so broke. I could only relate that it is almost always the working class poor in any society that first sees the effects of a corrupt government and a faulty economic system. Those who legitimately hold to the principles of self sustainment, and fair play, are usually the first to be stabbed in the back by the establishment, and so, they are the first to become politically active against it. That is to say, sometimes we have to lose almost everything before we are able to see the bigger picture. While I consider this fact a source of solace in these extraordinarily hard times, it still does little to put food on the table, or survival gear in the bug-out-bag. The overall consensus within the prepper community is that survival planning is expensive, and yes, it certainly can be. Another consensus is that you “get what you pay for”; also true...to a point. My belief is that while no prepping model is free of expense or of quality concerns, perhaps there is a middle road that activists with thin wallets can take which will provide solid gear for less money, and that will serve most of the functions of high-end gear that is ten times as expensive. Let’s examine a foundation list of those items that can help get you started now….