Alan Greenspan

Americans have an illogical love affair with their vehicles. There are 209 million licensed drivers in the U.S. and 260 million vehicles. The U.S. has a higher number of motor vehicles per capita than every country in the world at 845 per 1,000 people. Germany has 540; Japan has 593; Britain has 525; and China has 37. The population of the United States has risen from 203 million in 1970 to 311 million today, an increase of 108 million in 42 years. Over this same time frame, the number of motor vehicles on our crumbling highways has grown by 150 million. This might explain why a country that has 4.5% of the world’s population consumes 22% of the world’s daily oil supply. This might also further explain the Iraq War, the Afghanistan occupation, the Libyan “intervention”, and the coming war with Iran. Automobiles have been a vital component in the financial Ponzi scheme that has passed for our economic system over the last thirty years. For most of the past thirty years annual vehicle sales have ranged between 15 million and 20 million, with only occasional drops below that level during recessions. They actually surged during the 2001-2002 recession as Americans dutifully obeyed their moron President and bought millions of monster SUVs, Hummers, and Silverado pickups with 0% financing from GM to defeat terrorism. Alan Greenspan provided the fuel, with ridiculously low interest rates. The Madison Avenue media maggots provided the transmission fluid by convincing millions of willfully ignorant Americans to buy or lease vehicles they couldn’t afford. And the financially clueless dupes pushed the pedal to the metal, until everyone went off the cliff in 2008.

This cannot be the right course for us to take in the wake of such a widely recognized crisis. The lack of purposeful outrage is deafening. We cannot restore lasting stability to our economy and society unless we are willing to face up to what we did wrong, right it, and throw out the bums who put us there. Without that, the pattern of ever escalating crisis and interventionist, market-distorting solutions will surely lead to a bigger crisis still ahead... Perhaps the most important symbol of our failure to address reform are the pictures accompanying much of the coverage of Greg Smith’s letter, those of a power-posing Blankfein and Cohn, who without the Government’s accommodation might be striking a very different pose, indeed. You want to sign on to Mr. Smith’s army in joint distaste for Goldman’s lost culture? Please, be my guest. But more deserving of your enmity is the insidious co-option of the core premise of capitalism by a handful of people to ensure the banks’ undeserved survival, and their managers’ really nice lifestyle.

It was 42 months ago today...

While it is difficult to properly attribute blame for the collapse of the US economy, which commenced in the early 1980s, on either the Fed's policy of easy money starting with Alan Greenspan (and terminating with today's statement by Goldman that merely a suggestion of "not easing" may be equivalent to "tightening" - a symptom of a terminal junkie), or the resultant self-indulgent lifestyle of the maturing baby boomers, one thing is certain: the paradigm downturn of the United States began in the early 1980s. And here we are willing to break the cardinal rule of statistics and assume that correlation does imply causation. Because the 4 simple charts below don't lie: the US economy, as represented by its Balance of Payments, the profligacy of the US consumer, the massive expansion of consumer leverage, and the collapse in US manufacturing jobs, and specifically its current near-terminal state, is as much as legacy of the baby boom generation's actions (and lack thereof), as of everything else that has already been mulled over and scapegoated an infinite number of times in both the mainstream and fringe media.

The most profitable business of the future will be producing Space Available and For Lease signs. Betting on the intelligence of the American consumer has been a losing bet for decades. They will continue to swipe that credit card at the local 7-11 to buy those Funions, jalapeno cheese stuffed pretzels with a side of cheese dipping sauce, cartons of smokes, and 32 ounce Big Gulps of Mountain Dew until the message on the credit card machine comes back DENIED.  There will be crescendo of consequences as these stores are closed down. The rotting hulks of thousands of Sears and Kmarts will slowly decay; blighting the suburban landscape and beckoning criminals and the homeless. Retailers will be forced to lay-off hundreds of thousands of workers. Property taxes paid to local governments will dry up, resulting in worsening budget deficits. Sales taxes paid to state governments will plummet, forcing more government cutbacks and higher taxes. Mall owners and real estate developers will see their rental income dissipate. They will then proceed to default on their loans. Bankers will be stuck with billions in loan losses, at least until they are able to shift them to the American taxpayer – again.

All this money sloshing around is nothing but kindling. This is enough to start one hell of a large inflationary fire, but probably not until we have a deflationary panic first – which will add even more kindling to the pile. The progression from the $1.5 billion Chrysler rescue to the current multi-trillion dollar worldwide financial support operations seems to parallel the march from the first US forestry service attempts to limit forest fires about a century ago to the far more sophisticated efforts possible today... Studies have shown that the onset of that catastrophe is almost totally unpredictable. By suppressing small fires, the forests approach an unstable state where the dead wood, resulting from the natural cycle of birth and death in the wild, is piled high, ready to explode into flames if the conditions are right. The central banks and other governmental authorities have piled the money so high that bubbles are popping up everywhere. With so many bubbles and so much kindling, volatility in price is a sure thing. As research has shown that the timing of these dramatic breakdowns, whether a forest fire, an earthquake, or a market crash cannot predicted, or mitigated as it runs its course, the time to control these crises is way before they start. The US Forestry Service knows that, please tell Bernanke!

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

Currency debasement of all major currencies is happening today on a scale never before seen in history. Yet there continues to be a complete lack of awareness amongst the majority in the western world as to the risks posed by our currency monetary and financial system. There continues to be a lack of knowledge and indeed often wilful ignorance regarding gold. Indeed, some comments on gold are so ignorant of the historical and academic record that they have all the hallmarks of crude anti-gold propaganda – and will be seen as such in time. Gold is a proven safe haven asset and currency. Despite much recent academic evidence and the historical record showing this and despite voluminous articles, research and evidence, (evidence succinctly summarised in the video 'Gold Bullion or Cash'), there continue to be frequent anti gold outbursts by some of the most respected and trusted people in the western financial and economic world. Such attacks on gold have come from men such as Paul Krugman, Nouriel Roubini and more recently Warren Buffett. Alan Greenspan correctly wrote in 1966 that "an almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions”. Today, an almost hysterical antagonism towards gold bullion as a diversification and as a store of wealth alternative to fiat currencies unites beneficiaries of the current status quo – both intellectual beneficiaries and material beneficiaries. That status quo is a massively leveraged and insolvent monetary, financial and economic system. 

And like that, this year's Davos World Economic Forum has come and gone, having achieved nothing except allowing a bunch of representatives of the status quo to feel even more self-righteous and important in the world's biggest annual circle jerk, in which fawning journalists ask the questions their cue cards demand, knowing too well their jobs are on the line if they ask anything even remotely provocative (and with the price of admission in the tens of thousands of dollars, one wonders just how many Excel classes these "journalists" could have taken as an alternative, in order to actually do some original math-based research, yes, shocking concept, to present to their readers instead of merely regurgitating others' talking points). Bloomberg TV has compiled the best video summary of the highly irrelevant soundbites by economists, CEOs and other people of transitory power, who provide absolutely no original insight into anything, and in which ironically it is Mexico's Felipe Calderon who summarizes it best: "we have a timebomb the bomb is in Europe and we are working together to deactivate it before it explodes over all of us." Lastly, we provide a quick glimpse into current and previous guests of Davos to show just how utterly worthless is the "braintrust" of those present.

Because live is better than dead. And just in case he lets one slip just what his price target for the Russell 2000 (aka the US GDP) is and how much gold the Fed will secretly lease. As a reminder, from Alan Greenspan testimony to Congress in July 1998: "Central banks stand ready to lease gold in increasing quantities should the price rise."

So, who're you gonna believe, your NYC broker or your lyin' eyes???? Another Reggie Middleton "I told 'ya so" exclusive...

The last time intermodal traffic dipped to this level, we were in denial about a Recession and the Dow continued to march from 11,500 in January of 2008 all the way to just above 13,000 in May.

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

Is gold money?

You read that right. After such establishment "luminaries" as World Bank president Robert Zoellick, Warren Buffett's father Howard, Jim Grant, and, most recently, Kansas Fed president Thomas Hoenig, all voiced their support for a return to a gold standard, the most recent addition to the motley group of contrite voodoo shamans is none othe than the man who is singlehandedly responsible for America's addiction to cheap toxic credit, who spawned such destroyers of the middle class as the current Chaircreature, and who currently is the chief advisor in John Paulson's crusade to gobble up every ounce of deliverable physical in the world: former Fed Chairman - Alan Greenspan! In an interview with Fox Business, the man who refuses to go away into that good night: "We have at this particular stage a fiat money which is essentially money printed by a government and it's usually a central bank which is authorized to do so. Some mechanism has got to be in place that restricts the amount of money which is produced, either a gold standard or a currency board, because unless you do that all of history suggest that inflation will take hold with very deleterious effects on economic activity... There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard." And a further stunner: Greenspan himself wonders if we really need a central bank. Now our only question: why couldn't the maestro speak as clearly and coherently during his tenure which resulted in our current near-terminal financial state. And as a reminder, courtesy of Dylan Grice, if and when we do get a return to a gold standard there would be a need to reindex the monetary base to a real time equivalent price of gold, putting the price of the precious metal at about $6,300: "The US owns nearly 263m troy ounces of gold (the world's biggest holder) while the Fed's monetary base is $1.7 trillion. So the price of gold at which the US dollars would be fully gold-backed is currently around $6,300." And here you have people worried about day trading volatility...