I used to have a Google AdSense "ad" here but the AdSense people at Google kept sending out homosexual oriented garbage so I deleted it. The jerks."
Inflation Rates are Climbing
"The
JOC-ECRI Industrial Price Index jumped in July, rising to 130.17 from 128.18! That one-month gain of 1.6% in prices is a lot of inflation in one month! What is even more interesting, if you think that being eaten alive by inflation is 'interesting', is that the index is up from 108.95 a year ago at this time, which is an inflation rate of 19.5%!"
- The Mogambo Guru.
Click HERE for the FULL Article The rate of inflation is climbing... and has been. This is noted even in 2005 by the Economic Cycle research Institute (http://www.businesscycle.com).
The United States is heading for bankruptcy
The United States is heading for bankruptcy, according to an extraordinary paper published by one of the key members of the country's central bank. A ballooning budget deficit and a pensions and welfare timebomb could send the economic superpower into insolvency, according to research by Professor Laurence Kotlikoff for the Federal Reserve Bank of St Louis, a leading constituent of the US Federal Reserve.
Prof Kotlikoff said that, by some measures, the US is already bankrupt. "To paraphrase the Oxford English Dictionary, is the United States at the end of its resources, exhausted, stripped bare, destitute, bereft, wanting in property, or wrecked in consequence of failure to pay its creditors," he asked.
According to his central analysis, "the US government is, indeed, bankrupt, insofar as it will be unable to pay its creditors, who, in this context, are current and future generations to whom it has explicitly or implicitly promised future net payments of various kinds''.
The budget deficit in the US is not massive. The Bush administration this week cut its forecasts for the fiscal shortfall this year by almost a third, saying it will come in at 2.3pc of gross domestic product. This is smaller than most European countries - including the UK - which have deficits north of 3pc of GDP.
Prof Kotlikoff, who teaches at Boston University, says: "The proper way to consider a country's solvency is to examine the lifetime fiscal burdens facing current and future generations. If these burdens exceed the resources of those generations, get close to doing so, or simply get so high as to preclude their full collection, the country's policy will be unsustainable and can constitute or lead to national bankruptcy.
"Does the United States fit this bill? No one knows for sure, but there are strong reasons to believe the United States may be going broke."
Experts have calculated that the country's long-term "fiscal gap" between all future government spending and all future receipts will widen immensely as the Baby Boomer generation retires, and as the amount the state will have to spend on healthcare and pensions soars. The total fiscal gap could be an almost incomprehensible $65.9 trillion, according to a study by Professors Gokhale and Smetters.
The figure is massive because President George W Bush has made major tax cuts in recent years, and because the bill for Medicare, which provides health insurance for the elderly, and Medicaid, which does likewise for the poor, will increase greatly due to demographics.
The Full Story Here
Is the United States bankrupt?
Countries can and do go bankrupt. The United
States, with its $65.9 trillion fiscal gap, seems
clearly headed down that path. The country needs
to stop shooting itself in the foot.
Read the whole article from the Federal Reserve Bank of St. Louis..
Pain and Horror of Utter Ruination
"I was just working myself in to a fit of exasperation about the "pain and horror of utter ruination", when pleading reader asks "Please do a piece on the plight of the retired people in America. Most people I personally know realize this current scenario will not go on indefinitely. They just don't know what to do about it."
I think to myself "Perfect! Now I can illustrate the 'pain and horror of utter ruination' and act surly at the same time! And against people who are smaller and weaker than me!"
Emboldened, I enthusiastically start off by saying "Old people? What a bunch of whiners! It reminds me of my own kids. They know they are reaching the age when I can legally kick them out, and they know that their allowance will stop. Thus they, too, realize that the 'current scenario will not go on indefinitely.' So for both of these groups I am supposed to, I guess, get up off my fat, lazy butt and, oh, I dunno, wave my Magic Mogambo Wand (MMW) around in the air a few times, thus solving their problem of how to keep getting a free lunch? Hahaha! Thanks for the compliment that the stupid Mogambo could fashion a remedy that has evaded the greatest minds of economic history! Hahaha!"
Anyway, there is no need to wave magic wands, which is so old-fashioned. Let's, instead, rely on that infallible source of good advice, the Chinese fortune cookie. After making goo-goo eyes at the pretty waitress at the Chinese restaurant and flirting with her while ordering ("Everything with pork in it, my little Chinese won ton cutie!"), I finally get my food, which I notice she has spit on again, although I don't remember actually ordering "spit sauce." I figure it must be how ethnic Chinese girls flirt with men who are old enough to be their grandfathers.
Anyway, after eating, along with the bill and a lot of burping, we get the fortune cookie. With trembling fingers we crack it open to retrieve that little scrap of paper inside. It says "Get a job, scrimp along for a few years so that you can buy as much gold and silver as you can afford. Then you will take an ocean voyage and gain ten pounds eating like a pig." Sounds about right to me!
The real problem with these old people is that 1) they stupidly believe that Social Security is a retirement fund and they are supposed to be able to live on it, when it is not and never was, and 2) they stupidly believe that inflation nowadays actually measures all of the increases in prices that they pay, and 3) that they stupidly believe that their Social Security checks are going to go up as fast as inflation. (As a caveat to that last point, Social Security checks are actually going up as fast as the "official, government-declared" rate of inflation. It's just that the rate of inflation they use to administer the Cost Of Living Adjustment (COLA) to Social Security checks happens to be a lie which was cooked up by the horrid Alan Greenspan, former chairman of the Federal Reserve, and aided by the equally detestable Michael Boskin, economics professor at Stanford, who got his degrees at Berkeley, which probably explains a lot).
And old people (although they are supposed to be the ones with all the smarts and all, and who proudly call themselves "The Greatest Generation") stupidly believe that a central bank (the Federal Reserve) is not a horror that will destroy their money, a fiat currency is not a horror that will be destroyed, and that fractional-reserve banking is not a horror that combines them into economic Armageddon, contrary to the lessons learned during the entire history of all the countries in all the world ever since cavemen were selling mastodon steaks over the Internet.
In short, old people are the very ones who continuously voted into office the Congressional creeps who perpetuated this disaster (and who picked the members of the Supreme Court who let them get away with it, contrary as it was to the clear strictures of the Constitution), and then stood around with their hands out, joining the growing crowds of people gobbling up more and more cash and benefits. And now that the inevitable inflation in prices, caused by the monstrous increase in the amount of money created by the Federal Reserve to finance all of this largesse is wiping them out, they cry out, piteously, "Help us! We cannot live a comfortable life at public expense anymore!"
And the biggest mistake the old people made is thinking that the government they elected is looking out for them. Read the full article here
Feeling of unease grows...
The Lipper Mutual Fund Performance Index for the first half of the year came out, and gold lead the pack by a long shot. Their 10-fund index was up 27%, and the World Equity Funds Index showed that the 54 gold-oriented funds were up 25% for the last six months, too.
By contrast, when Lipper considers all 12,675 equity funds, the average return was less than 4%. Hahahaha! Official "trust me" government-reported inflation alone is running more than that! And real, old-school-way-of-measuring-inflation is running at least to 9%, being as conservative as I can.
So that means that the average mutual fund holder made 4%, on which a capital gains and income taxes are levied. But even assuming that the mutual fund holder pays no tax at all, he or she is still losing at least 5% a year in spending power! Losing! Losing 5% a year! Which is the optimistic scenario!
Link to the Full Article
US Dollar - downgrades and disorder
"Anyone who cannot detect rumblings with more magnitude than early volcanic tremors is brain dead, plain and simple. For a full year, the USDollar enjoyed a sizeable counter-trend bounce. It relieved the long-term oversold condition. In usual times, in typical markets, such a period of time would offer the fundamentals an opportunity to catch up, for the remedy to work its medicine, for the condition to heal itself. In the case of the USDollar, the trade deficit worsened. The Jan2005 trade deficit was a grandiose $58.3 billion, pretty doggone rotten. By Jan2006, a full twelve months for the "fix" to take hold, to work through the system, the trade deficit had ballooned to a shocking, yawning $68.6 billion, as nothing but more metastasis flowed their the body economic."
Link to the Article
STORMS LURKING ON THE HORIZON
by James Howard Kunstler
For those of you too young to remember, the Y2K scare was about an
esoteric little programming glitch that existed almost universally in
older "legacy" computer systems around the world. The glitch in
essence
would have prevented older systems from recognizing the date beyond
12/31/99, and this, it was widely believed, would have pranged the
interdependent complex institutions and public services that ran on these
computers.
There was fear that everything from municipal sewage treatment plants, to
international banks, to big electric grids, to government agencies would
stumble, that equipment for running these things would be badly damaged in
the process, and that financial records would be lost on a broad basis.
As it turned out, very little happened on New Years Day, 2000. Scoffers
exulted in their righteous rightness. The truth, though, was that immense
sums of money had been spent - hundreds of billions worldwide - and
countless work hours put in by programmers to avert the problem. It was a
problem with a very definite deadline, and they made the deadline.
The Y2K event would have been a harsh lesson in the diminishing returns of
technology and especially over-investments in complexity. Ironically, the
work done, and the new equipment purchased by companies, institutions, and
agencies may have played a major role in the tech boom of the late 1990s -
which, of course, eventuated in the tech bust that immediately followed.
My own involvement in Y2K in the early days of blogging derived from my
observation that a lot of knowledgeable tech people were taking the Y2K
problem seriously, and yakking about it on the Net, and so I concluded the
issue deserved attention. In retrospect, I also suppose that the one thing
nobody really knew was how the programmers working on their own individual
projects around the world were coming along, because a lot of that work
and expenditure was going on in secret - big government agencies, big
companies, and big utilities did not want to scare the public, queer their
stock values, or let on about the difficulties involved in fixing the
problem. And of course, the inter-connectivity of many of these complex
systems - banks especially - was precisely the scariest part of the
problem, meaning that it would not be okay for some of them to fix their
problems and some of them to fail. As it happened, enough of them fixed
their problems - at great cost - and there were no cascading failures.
Score one for advanced civilization.
Now that I have written a book titled The Long Emergency, there is a new
wave of disappointment gathering - that life, as we know it has not come
to an immediate end, and I am being reproached for suggesting that we have
some problems. Of course, that was never the point, as a reflection on the
book's title ought to suggest. One funny element of this is that the
reproach reached a crescendo the very week that crude oil prices reached
record levels above $75 a barrel.
So this might just be a good point to step back and ask where we are now
at mid-year, 2006. In January, I predicted that the U.S. economy would get
into a lot of trouble, specifically that the Dow would melt down to around
4000 and that we would see carnage on the real estate scene. When you
figure in inflation, the Dow has just gone sideways for six months. What
is propping it up?
Last week I referred to Doug Noland's theory that investments in
alternative fuels and technology are starting a new boom. I doubt this can
work as a prop to support the huge losses in previous misinvestments. For
instance, sooner or later General Motors will go up in a vapor for its
failure to sell cars, pure and simple.
In any case, we are faced with the essential problem of ever-increasing
prices for far less net energy. That is a recipe, perhaps, for an American
perestroika, but not for continuing to benefit from the old arrangements.
And so far, America at all levels, in leadership and the public, resists
the sort restructuring we require. For example, we are still
systematically starving and dismantling the railroad system instead of
rebuilding it. There is still plenty of time left in 2006 for the stock
market to start reflecting the true character of our phony-baloney economy
- namely that it is based on consuming goods and resources without
producing things of value.
It is my observation that the housing market is tanking broadly and
steeply around the nation. In my own town, a mini "hot market," there
have
never been so many "for sale" signs planted in so many yards (and
remaining there month after month). Some even have "price reduced"
shingles added to them. But there remains mutual reinforcement between the
sellers and their realtor agents to keep a happy face on the situation (to
avoid panic selling).
Since house prices here, in a tourist town, are falling when the tourist
season has hardly gotten underway, I have to surmise that the local market
is in deep trouble. A few months from now when the tourists depart, and
the last golden leaves flutter down from the maples, I expect we'll see
psychological capitulation among the sellers and their realtor
cheerleaders.
The energy picture, as alluded to above, is certainly cause for concern.
Oil prices are creeping up relentlessly into territory that will, at
least, stall the consumption orgy among the Wal-Mart shoppers. We are one
hurricane or one geopolitical incident away from an energy trauma. The
natural gas supply situation is another storm lurking on the far horizon.
So, here at high noon of 2006, I'll stand pat with what I have said more
than once: we have already entered the zone of The Long Emergency.
Regards,
James Howard Kunstler
for The Daily Reckoning
Strike Three
FOR THE THIRD month in a row, there was a huge miss in job gains versus expectations.
"The ADP National Employment Report was developed to help meet the need for additional timely and accurate estimates of short-term movements in the national labor market among economists, financial professionals, and government policymakers."
In April, ADP predicted 175,000 new jobs.
In April, the actual number was 131,000.
A miss of 25%.
In May, ADP predicted 122,000 new jobs.
In May, the actual number was 74,000 jobs.
A miss of 39%.
In June, ADP predicted 368,000 new jobs.
In June, the actual number was 121,000 jobs.
A miss of 67%.
"For the third month in a row, the nation's employers hired fewer workers than analysts expected, providing another month of evidence that the American job machine has downshifted.
Link to the article
ISM Nonmanufacturing Index Falls
The ISM nonmanufacturing index fell to 57.0% from 60.1% in May. This is the slowest pace since January. The drop was larger than expected. Economists were looking the index to inch lower to 59.6%. New orders fell to 56.6% from 59.6%.
MarketWatch Story
Debt Levels Rising to the Sky
Stephen Church of Piscatasquaresearch.com, in his essay at PrudentBear.com entitled: "Consumer Crunch Update", writes:
"The latest 2005 economic statistics show that consumers depended on new debt for more than 90% of their cash flow during 2005. Most new consumer cash flow now comes from new debt."
"Consumer liquidity has resumed its downward trend. Liquidity has fallen to 3 weeks of funds on our preferred measure. Consumer money supply now flows backward."
"Historically, household incomes were sufficient to generate a cash surplus after consumption and debt service. Now, households have a large cash deficit."
Required Reserves Down
In December 1996, Required Reserves were $48,935 million. Today, ten years later, and with twice as much loans and twice as much deposits in the banks, Required Reserves are only $44,139 million, down about five billion bucks!
This means that every dime of debt and money created by the banks for the last ten years was literally created out of thin air, as there is no fractional-reserve backing (in cash) as a rainy-day fund for one thin dime's worth of the doubling of loans created, or the liability created by doubling of deposits! Zero reserves! In fact, reserves are about 10% less than they were ten years ago!
-- Richard Daughty, Mogambo Guru
Source: http://www.321gold.com/editorials/daughty/daughty070506.html
Pennies...
From George Ure at Urban Survival:
"There are 252 stories about pennies/coins being ready to go extinct in the USA, appearing everywhere from Forbes to the LA Times, to the East Oregonian.. And why? Because it costs about 1.23
¢ to make a penny.
But whose fault is that? When the Banksters hijacked America with the Federal Reserve Act with the just-before Christmas slider on Dec. 23, 1913, it was an open secret the passage earlier in the year of the 16th Amendment was just too good an opportunity for Banksters to pass up. And my, haven't they done a fine job! The not-really Federal Reserve has overseen a decline in purchasing power from a full honest dollar in 1913 to a mere 4.8899¢ - that's right - cents today.
A big inflation lesson here: When you think of what $20 will buy today (a mid-range meal out), that's what a single dollar would buy in 1913 when this fiddling with our money got organized into the hands of the Banksters. Lend us our own money at interest, indeed!
Now, adding insult to injury, their solution? Stop producing pennies! Claim it's gotten too expensive - which it has, but through not fault of the penny: Through the fault of Banksters and treasonous members of CONgress who have overseen the debasement of the Republic.
By the Constitution, I don't recall reading anything about "hand over creations of money to the Banksters" - that'd be like hiring foxes to patrol hen houses. But that's where we are. It's a Testament that people were ill-advised in 1913 and they are at least similarly ill-advised today when it comes to something as simple as sound money. "
Ford, Chrysler see big drops
Ford sales fall 7 percent in June, DaimlerChrysler hit by 13 percent drop.July 3 2006: 12:19 PM EDT
DETROIT (Reuters) -- Ford and DaimlerChrysler Monday reported much slower U.S. sales in June.
Ford said that U.S. vehicle sales fell 7 percent last month, hurt by a decline in truck sales.
The second-largest U.S. automaker said it sold 269,404 vehicles in the United States last month, compared with 289,449 vehicles a year earlier.
Results for Ford include its import brands and some medium- and heavy-duty trucks.
DaimlerChrysler said U.S. vehicle sales fell 13 percent, led by a decline in its truck-heavy Dodge brand and its Jeep sport utility vehicles.
The German automaker said it sold 206,748 vehicles in the United States last month, compared with 238,274 vehicles a year earlier.
Source: http://money.cnn.com/2006/07/03/news/companies/auto_sales.reut/index.htm
