ePAROL - Economic News and Views

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2011-12-18T18:10:00.001-05:00

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Another Bank Failure

2008-08-30T06:36:00.000-04:00

Integrity Bank of Alpharetta, Georgia, was closed by U.S. regulators today, the 10th bank to collapse this year amid a surge in soured real-estate loans stemming from the worst housing slump since the Great Depression.

Integrity Bank, with $1.1 billion in assets and $974 million in deposits, was shuttered by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp.

US Standard Of Living is Collapsing

2008-01-06T10:40:00.000-05:00

The standard of living in the UK has now surpassed the United States. So much for our GREAT economy, eh? Click HERE for the full story.

Saudi's Buy Major US Military Supplier...

2007-08-01T12:02:00.000-04:00

Great, just ducky! Click HERE.

So, let's see. We refuse to drill our own oil, we instead invest in Arabia, a Muslim country, and we send all of our money there for oil to use here. They take our money and buy our businesses. We then no longer own our own businesses and subsequently, our nation is held hostage (from a military supplier as well as an energy point of view). Who do I have to thank for this idiotic strategy of selling ourselves out to nothingness??

It's not the Pound, it's the Dollar...

2007-07-11T12:03:00.000-04:00

Headlines blare: The pound leapt to yet another 26-year pinnacle against the dollar on Wednesday. Click HERE.

Hey... it's not the Pound rising. It's the Dollar FALLING.

Currencies UP Against the Dollar

2007-07-11T11:57:00.000-04:00

The dollar continues to descent into record low territories amid fears about the health of the U.S. economy. The Pound is up against the Dollar and the Euro is at record peaks versus the Dollar. Translated: the value of the US Dollar continues to fall.

Click HERE.

No accounting for outright stupidity

2007-07-10T12:20:00.000-04:00

I recently engaged in a running dialog with a person from another forum site. I won't mention the name of the site but will tell you that it is well run, well organized, and populated with mostly first class folks. But a discussion was started along the lines of the economy and 1-2 people began to exhibited interesting characteristics. Actually, odd characteristics.

Allow me to use this anecdotal experience as evidence that we're in trouble. We don't need terrorists, we don't need corporations gouging us, we don't need lying politicians... we collectively have ourselves. And we're doing ourselves in with stupidity.

The theme of the thread was that most Americans do not know basic economics. The outcry and objections to that comment in the forum actually came from those that either don't know anything about economics at all, or those with some vested investment interest. In one case, one individual was heavily involved in trading currencies and simply would not allow anyone to say that the dollar was weak and falling in value. Heresy. To him, anyone even mentioning that the US economy is in trouble and the dollar was losing value was grounds for name calling, swearing, and arrogant belittlement. Yet... here we are. The dollar is plummeting, being unpegged from global currencies, and now faces being dumped by countries. Obviously an attitude of kill the messenger and resentment of the facts. In a second situation, a woman demands that anyone with any economic education has no clue what they are talking about and claims that the sole indicator of economic health is the number of banks that closed last year. Arrogant and stupid and unwilling to accept that someone might actually know more that her, she sticks to her guns about her own self made economic indicator... oblivious to a much larger and complicated world outside of her little soccer-mom housewife mentality.

I use these people as indicators of what is wrong in the country and why we are in trouble. These days, as the internet connects everyone to the far corners of the world, everyone has become an expert in everything and no one is wrong. How sad. How dangerous. You see... with this attitude, anything can be done, and will be done without these people having a clue. This is the prime example of "sheeple". This is the American Idol watching, Dallas Cowboys cheering, beer guzzling party down attitude that is killing us. When people pretend they know everything and are "above" learning, then the end is near for a culture. And so it is. Look around. the economy is booming? Sure - but on mounting debt. The unemplyment figures are good? Yeah - people that say that do not know about how people are dropped from the rolls and never counted again. Inflation is at 2%... yeah, sure, believe what the man on TV says but do not believe your checkbook.

Yes, a huge portion of our society has their fingers in their ears and they're humming loudly so they don;t have to hear. When they do, they do not want to believe, and when they are faced with facts, they accuse the messenger of not knowing anything. The same woman actually said to me (I have an MBA and studied global business systems): "I don't need any education in economics to know you are wrong". And of course, she had no education in economics or business. Yet she clings to her personal belief system - violently so. I call it stupidity and dumb arrogance. Ignorance can be very very costly.

The slow sink

2007-07-10T12:17:00.000-04:00

Euro Soars to New High Above $1.37 Amid Worries About U.S. Economy...
Or, if you wish, Dollar sinks to new lows.

http://biz.yahoo.com/ap/070710/dollar.html?.v=3t

INFLATE or DIE

2007-06-20T09:03:00.001-04:00

On June 7 the national debt of the US was $8.85 trillion. The annual interest on this debt is $406 billion or over one billion dollars each and every day of the year. The debt is increasing at the rate of $1.38 billion a day. Thus, we see the magic of compounding, but unfortunately what we're seeing is compounding in reverse.

With the above in mind, you have to ask yourself, "How in the world is the US going to finance its rising and compounding debt?" And the answer rings loud and clear -- it will be financed through inflation. I've said it for years, and I'll say it again -- it's a case of "inflate or die," and the US has no intention of dying. So we'll inflate, it's simply a matter of how rapidly we inflate and how successful the government and the Fed are in keeping the American people in the dark about what's happening to their money.

UGH!!!!

2007-05-21T11:42:00.000-04:00

UGH!!!

2007-04-02T16:34:00.000-04:00

April 2 (Bloomberg) -- New Century Financial Corp., overwhelmed by rising defaults from borrowers with poor credit records, became the largest subprime mortgage lender ever to fail as it filed for bankruptcy today.

New Century plans to sell most of its assets within 45 days, said the Chapter 11 filing in federal court in Wilmington, Delaware. About 3,200 people, more than half the workforce at the Irvine, California-based company, will be fired. New Century said it already agreed to sell its mortgage billing and collections unit to Carrington Capital Management LLC for $139 million.

Mr. Ghostship - Wrong!

2007-03-17T16:13:00.000-04:00

Mr. Ghostship... not that I want to be, but now that some time has elapsed, I was right after all, wasn't I? The current account is where I was worried it would be. The decline of the US dollar is where I thought it would be. The position of the M3 is where I was concerned it would be and tried to draw attention to. The housing bubble has ended up where I was worried it would be. The derivatives issues are the concern I said they would be. The unraveling of the Yen carry trade has started as I was worried it would be. Even Mr. Greenspan reluctantly states the same to some degree. And yet... all of this you angrily proclaimed as bunk over a year ago.

You are a smart person and mostly right on the target with the things you write about - but in this instance I think you were acting as the 'necessary cheerleader', and of course, 100% wrong. I will accept an apology any time.

Thanks.

Depression?

2007-03-15T12:52:00.000-04:00

Yes, I believe there will be a U.S. economic recession, but the elements are now in place for the first time in 80 years for America to sink into a depression. Should a depression unfold, there will be big name financial houses that will fail.

Click HERE

Gonna Get Ugly

2007-03-15T12:46:00.001-04:00

Commodities investment guru Jim Rogers stepped into the U.S. subprime fray on Wednesday, predicting a real estate crash that would trigger defaults and spread contagion to emerging markets.

"You can't believe how bad it's going to get before it gets any better," the prominent U.S. fund manager told Reuters by telephone from New York.

"It's going to be a disaster for many people who don't have a clue about what happens when a real estate bubble pops.

Click HERE

Nation's 2nd-biggest Subprime Mortgage Lender - BROKE

2007-03-13T10:56:00.000-04:00

March 12. Bloomberg is reporting that New Century Financial Corp., the nation's second-biggest subprime mortgage lender, said it doesn't have the cash to pay creditors who are demanding their money, increasing speculation that the company will go bankrupt.

The NYSE halted trading of New Century this morning until it decides whether to keep listing the company's securities. Shares of the Irvine, California-based company, already down 90 percent in 2007, lost half their remaining value in pre-market trading, and rivals fell as much as 25 percent today.

``They're one step closer to bankruptcy,'' said Bose George, an analyst at Keefe Bruyette & Woods in New York.

Click HERE for the original story

Recession?

2007-02-26T13:25:00.000-05:00

Greenspam finally admits... with a subdued voice... that we have an issue...

Click HERE for the FULL ORIGINAL Story

Fire Sale - USA

2007-02-16T10:24:00.000-05:00

The Main Stream Media (MSM) and Wall Street have both missed the importance of the attempted sale of Alcoa to concerns outside the United States. Chalk this up in the same category as the sale of our ports, the sale of our turnpikes, and the sale of our land to concerns outside this country. We're literally selling everything we have... to buy our groceries and pay our bills.

We've been selling our innovation, or manufacturing capabilities and plants, our property, our money, our jobs, our resources, and even our infrastructure to offshore concerns. Bottom line: we need the money. We're worse than a heroin-addict trying to scrounge up the money for our next fix. We've over extended ourselves, we're deep in debt (personally, federally, and in our corporations), and we're selling everything we have for that next fix of money so that we can continue to spend spend spend.

To compound the problem, we're doing NOTHING, NADA, ZIP, to prepare our future (our children and young adults) to compete with the rest of the world. "American Idol" is THE important media event. Science and Engineering is school is just too hard... selling drugs brings in money much faster. Well folks... we're toast. TOAST.

Click HERE for NEWS

Masco Corporation suffers rare losses

2007-02-15T10:54:00.000-05:00

Noteworthy news from Masco Corporation (they are the parent company of Delta faucets and Behr paints)! They are reporting "rare" 4th quarter losses. Their response is to trim their workforce by 16% by the end of March 2007. This amounts to over 8000 jobs.
Click HERE for the ORIGINAL Story

Personal Savings Drop to 74-Yr. Low

2007-02-01T14:51:00.000-05:00

People once again spent everything they made and then some last year, pushing the personal savings rate to the lowest level since the Great Depression more than seven decades ago.

The Commerce Department reported Thursday that the savings rate for all of 2006 was a negative 1 percent, meaning that not only did people spend all the money they earned but they also dipped into savings or increased borrowing to finance purchases. The 2006 figure was lower than a negative 0.4 percent in 2005 and was the poorest showing since a negative 1.5 percent savings rate in 1933 during the Great Depression.

Click HERE for the FULL Story

Delphi Automotive Moves Production 100% Offshore

2007-01-30T09:29:00.001-05:00

As you now know from even more recent news... Delphi Automotive is intending to move ALL production offshore while maintaining about 9000 management people here in the US - and very shortly. My opinion: Ford and GM will (HAVE TO) follow shortly since they want their assembly plants near Delphi's parts making. This then also puts the crimp on any sub assembly companies that service Delphi, Ford, GM, etc... The ripple effects will be enormous over time.

When we have 1) Management that gives itself million dollar raises, 2) Laborers that demand $90,000 a year plus the most outrageous health care and retirement packages in the universe... while foreign labor is paid 2 dollars an hour? You tell me there's no war on the Middle-Class!

Corporate greed is killing America. Union greed is killing America. And did you think there could be any other outcome?

Watch this video from CNN: Click HERE

Housing Bust Getting Worse...

2007-01-18T15:26:00.001-05:00

The US Federal Reserve will need to slash interest rates three times this year as the housing slump goes from bad to worse and the American consumer begins to buckle, Goldman Sachs has warned.

Click HERE for the FULL story

Bernanke Concern About Nations Fiscal Health

2007-01-18T11:01:00.000-05:00

"Unfortunately, economic growth alone is unlikely to solve the nation's impending fiscal problems," Bernanke told the Senate Budget Committee.

Bernanke acknowledged that official projections suggest the U.S. budget deficit could stabilize or shrink in the next few years, but cautioned: "We are experiencing what seems likely to be the calm before the storm."

Please, read the entire story by clicking HERE.

Citris to skyrocket in price

2007-01-16T12:51:00.000-05:00

Three nights of freezing temperatures have destroyed up to three-quarters of California's $1 billion citrus crop, according to an estimate issued Monday as forecasters warned the weather could continue.

Do you sense higher prices coming? I do...

Click HERE for the FULL Story

For Sale - not selling

2006-12-28T14:04:00.001-05:00

Developers have pulled the plug on some of Miami's most anticipated condominium developments, a sign the city's sizzling, speculator-driven condo market -- where prices of many apartments doubled or tripled in a few brief years -- has finally chilled. Click HERE for the FULL Story

U.A.E. is Dumping U.S. Currency

2006-12-28T14:01:00.000-05:00

Another country dumps the US dollar... The dollar dropped the most in a week against the euro as the United Arab Emirates said it will convert some of its reserves of U.S. assets into the European currency. Click HERE for the FULL Story.

Euro notes cash in to overtake dollar

2006-12-28T14:00:00.001-05:00

Click HERE for the FULL Article

The US dollar bill’s standing as the world’s favourite form of cash is being usurped by the five-year-old euro.

Foreclosures UP record levels

2006-12-20T09:44:00.001-05:00

A new Center for Responsible Lending (CRL) study reveals that 2.2 million American households will lose their homes and as much as $164 billion due to foreclosures in the subprime mortgage market. Titled, "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," the CRL study is the first comprehensive, nationwide review of millions of subprime mortgages originated from 1998 through the third quarter of 2006.

Click HERE for the FULL Story

Business Week Article - Coins being melted

2006-12-14T15:48:00.001-05:00

Given rising metal prices, the pennies and nickels in your pocket are worth more melted down than their face value -- and that has the government worried.

Click HERE for the FULL Story

True deficit:: 3.5 Trillion!!

2006-12-14T10:15:00.000-05:00

A report scheduled to be released by the Treasury Department tomorrow is expected to show the true deficit in the Bush administration's 2006 federal budget to be an astounding $3.5 trillion in the red, not $248.2 billion as previously reported.

Click HERE for the FULL Story

M3 Money Supply

2006-12-13T10:34:00.000-05:00

Reconstructed M3 is available here: CLICK HERE

Georgia foreclosures jump 99%

2006-12-06T16:38:00.001-05:00

Click HERE for the STORY

Dollar slides as US business slows

2006-11-30T18:55:00.000-05:00

Financial Times article at: Click Here

Dollar dropping - Potential Panic

2006-11-27T00:22:00.001-05:00

The dollar plunged with startling ferocity late last week, driven by heavy selling. This was very bearish action that signals panic, and the probable onset of a severe downtrend.

Click HERE to read this Article, with Graphs and Explanations

Forbes Article Concern

2006-11-25T16:07:00.000-05:00

Chinese central banker expressed fears about depreciation of the U.S. currency.

Click HERE for the FULL Story

Market's Rocked by Sliding Dollar

2006-11-25T15:46:00.000-05:00

A sharpening slide in the US dollar unnerved global markets on Friday as investors sought to protect themselves from the possibility of sustained dollar weakness.

Click HERE for the FULL Story

Walmart Sales Slump despite Holiday

2006-11-25T15:44:00.000-05:00

Walmart's sales not that good...

Click HERE for the FULL Story

The biggest bubble of all - derivatives Trading Soars to $370 Trillion – it will be the root cause for global depression

2006-11-20T19:35:00.001-05:00

Interesting data came out from the Bank for International Settlements. The global market for derivatives soared to a record $370 trillion in the first half of 2006. It is the highest ever and the bubble is bigger than any one can imagine.

Click HERE for the FULL Story

The Cookie Jar is Empty

2006-11-11T13:38:00.001-05:00

Every day we are bombarded with advertisements and ads speaking to our inner child. We, as consumers, are so conditioned to buy that fancier car or bigger house because the auto dealerships and bankers are offering financing terms that have made it so easy. The loans being offered today are so flexible and, at first glance, appear affordable because they're interest-free, 40-year, no money down/no payment due, piggyback, adjustable-rate, etc. The former Federal Reserve Chairman even encouraged "really sophisticated" consumers to take out ARM mortgages and extract equity from their homes. As a result, consumers have been lured into debt big time with these loans.

Click HERE for the FULL Story

Dollar Drops on China Report

2006-11-11T13:35:00.000-05:00

The dollar tumbled against the euro after Reuters reported the People's Bank of China may switch some of its currency reserves.

Click HERE for the FULL Story

Investors regroup as swaps panic hits

2006-11-07T14:37:00.000-05:00

Paul J Davies, Gillian Tett, London
November 07, 2006

INVESTMENT banks and hedge funds are being forced to rapidly adjust their trading strategies amid a wave of "panic selling" reported in the US and European credit derivatives market last week.

This heavy selling has driven the cost of insuring debt against default in the market for credit default swaps to record low levels - signalling either that investors are extraordinarily optimistic about the outlook for corporate debt, or that prices are so distorted that they are no longer being paid for the risks they are taking on.

Click HERE for the FULL Story

GAO Chief Warns of Economic Collapse

2006-11-03T12:42:00.001-05:00

What they don't talk about is a dirty little secret everyone in Washington knows, or at least should. The vast majority of economists and budget analysts agree: The ship of state is on a disastrous course, and will founder on the reefs of economic disaster if nothing is done to correct it.

Click HERE for FULL Story

Economy Sagging

2006-11-03T11:38:00.000-05:00

Weakness in the U.S. housing market could be turning the hoped-for soft landing for the economy into something a bit harder to deal with. Data released on Wednesday showed conditions in the housing market deteriorated in September, extending a slide that began early this year.

Click HERE for the FULL Story

Keep the Pom Poms going Mr. Ghostship...

Gore Vidal Predicts Collapse of America

2006-10-26T11:33:00.000-04:00

Controversial and prolific author, political commentator and essayist Gore Vidal is assured that the military's growing revulsion at the Bush junta's policies would ensure they would try and prevent any false flag staged terror attack, while slamming the end of Habeas Corpus and the administration's coup de 'tat of America on a nationally syndicated radio broadcast.

Speaking with the Alex Jones Show, Vidal decried the end of the foundational bedrock of "due process of law," and expressed his astonishment at the recent loss of Habeas Corpus with the passage of the Military Commissions Act , the most egregious assault on the Constitution since the USA Patriot Act of 2001.

"Wow - I didn't think I'd live as long to see that one go, that's Magna Carta - the spirit of Runnymede runs no longer in our republic," said Vidal.

Vidal stressed that the framework for the USA Patriot Act was erected with Bill Clinton's Omnibus Crime Bill, a massive expansion of offenses that would mandate the death penalty, passed in the immediate aftermath of the Oklahoma City Bombing.

Vidal predicted within the next two years, "the bankruptcy of the United States of America," citing vast unchecked payments to corporations like Halliburton and spiraling inflation.

Click HERE for the FULL article

Greenspan Warns Russia about the US Dollar

2006-10-24T13:46:00.001-04:00

Russia should be wary about the inflationary impact of buying U.S. dollars to insulate its economy from an influx of foreign earnings from oil exports, former Federal Reserve Chairman Alan Greenspan said on Thursday, Oct. 19.

Click HERE for the FULL Story

Slammed by China

2006-10-18T11:45:00.000-04:00

If I owned UPS and Fedex stock, I would be upset to read in the Adrian Van Eck newsletter that "Chinese Party bosses have just shoved through shocking new rules that will strip away 90% of the Chinese international small-package market FROM UPS and Fedex and reserve it for Red China's state-owned carriers". And this is just after the American firms had invested Millions of Dollars in China and developed techniques that showed Beijing how to organize this activity.

Who's stupid here?

Sold OUT Part 2

2006-10-05T20:03:00.000-04:00

13,546 Companies sold to other countries
$1,674,883,000,000 in value

Source: http://www.economyincrisis.org/acqtracker.asp

We have SOLD Out

2006-10-05T20:01:00.000-04:00

We are selling out and no longer own or control our own country and must now live on imports while incurring massive debts that can only be repaid through the sale of our wealth producing companies and assets. Very soon we will not even be able to protect or support ourselves as we have sold over 8000 of our best wealth producing companies in the last 10 years to foreigners.

RCA is now a French Company, Zenith is a Korean company, Frigidaire is a Swedish Company, IBM Personal Computer Division with its 500 patents is a Chinese Company, Chrysler is a German Company (they also produced our tanks in WWII), Westinghouse Nuclear Energy is presently being sold to a Japanese Company. Lucent Technology, a former research division of AT&T, along with all the patents acquired from the beginning of the phone system, is now a French company. With the sale of these manufacturing companies the future profit and technologies all belong to foreigners.

Now whole industries are controlled by foreigners.

Savings rate moves into NEGATIVE territory

2006-10-04T15:51:00.000-04:00

A report named "USA Personal Income and Its Disposition" from the "USA Department of Commerce Bureau of Economic Analysis since 1953" (bea.gov) says that the personal savings rate had never dipped below 7% in 1953 (and was usually comfortably higher than that). People used to save money.

By 1993, the dollar was so devalued, in comparison, that people were only able to save 5.8% of income. And since then, thirteen years later, it has gotten so progressively bad that not only are people now saving nothing, zero, zip, zilch, squat, but they have to constantly go deeper and deeper into debt! Every month!

The actual number was that savings have hit a new low; a minus 0.9% of income!

Does THIS sound like the behavior of a rational, educated people who should be trusted with nuclear weapons? Of course not! No wonder the world hates and fears us!

Click HERE for the FULL Story

GDP Cut in HALF!!!

2006-09-28T11:35:00.000-04:00

GDP was about halved in the second quarter of 2006 by figures out this morning from the Bureau of Economic Analysis: http://www.bea.gov/bea/newsrelarchive/2006/gdp206f.pdf

India

2006-09-28T08:57:00.000-04:00

The country’s economy has expanded at an average rate of 8% over the last three years. Just in the quarter ended June 30, it charged ahead by 8.4%.

Naturally, personal incomes are also quickly rising in India. Salaries are expected to increase 7.3% this year, the biggest jump of any of the 70 countries that the International Monetary Fund monitors.

Europe, Japan Wean Themselves From Dependence on U.S. Consumers

2006-09-27T12:48:00.000-04:00

Sept. 25 (Bloomberg) -- Europe, Japan and emerging economies around the world are weaning themselves from dependence on the American consumer, and economists say it's just in time.

Demand in the world's largest economy is slowing as the U.S. housing market falters, a development that the International Monetary Fund on Sept. 14 called a key risk to global expansion. If so, it's a risk that the biggest exporting nations are better prepared to weather now than five years ago.

Click HERE for the FULL Story

Trouble Predicted, BIG Trouble

2006-09-26T19:56:00.000-04:00

Fred Hickey is used to going against the crowd.

Everyone scoffed in 1999 when the veteran Nashua, N.H., stock market guru, who publishes the influential High-Tech Strategist investment newsletter, warned that the tech bubble was going to pop. And they dismissed him as a wild alarmist early last year when he said house prices were going to slump.

What’s his view now? "I think we’re going to have a crash, across the stock market,” he told me Friday.

Click HERE for the FULL Story

OMG

2006-09-20T10:05:00.000-04:00

From: The Mogambo Guru, 20 SEPT 2006

-- If you like theater of the absurd, then you will love "Everyone Loves A Parade!" by Rob Kirby of Kirby Analytics. He writes "J.P. Morgan Chase's derivatives book grew from 48.26 Trillion notional at Q4/05 to 53.76 Trillion at Q1/06. That's RECORD new growth of 5.5 TRILLION notional, folks!"

Note the clever use of capitalization to indicate emphasis, which makes the ending exclamation point seem almost, umm, understated. Seizing my red "Editor's pencil", I change it to read... "$5.5 TRILLION notional, folks!!" with the more powerful double exclamation point, which seems better suited to convey the significance of it all.

But, if you are like me, then your eyes immediately glazed over at the shock of learning that this is somehow vitally important but we have no idea what or why, made more mysterious and scary by the sheer incomprehensibility of the creation of $5.5 trillion in new derivatives in one quarter.

Mr. Kirby, wise to the ways of The Mogambo, sees that first little bit of Stunned-Mogambo Drool (SMD) coming out of the corner of my mouth, and instantly realizing his mistake, quickly backtracks by saying "Let's first try to quantify just how much a $5.5 trillion build in a derivatives trading book over a three month period really is, shall we?"

My mind is charmed by his use of the word "we", as we both know he means "him", as I am far, far, far too stupid to participate in building anything (unless you define "making of mess of everything I touch" as "building", except maybe in a Schumpeterian "creative destruction" kind of way), and sure enough he goes on without me, saying "The first quarter of 2006 contained 65 business days [64 excluding Presidents Day]. $5.5 Trillion divided by 65 equals $84.6 Billion per day in NEW BUSINESS - forgetting rollover of existing business which, in itself, must be massive."

Someone is creating $84 billion, per day, in new derivatives contracts? I leap to my feet and shout "One day? In one day? In one freaking day?" I am stunned. I am scared.

Using the GDP to measure inflation

2006-09-20T09:50:00.000-04:00

From "The Mogambo" Sept 20, 2006

"Raw GDP is the way the US measures GDP, which is the total of money made from final sales. Some of that is, of course, the result of higher prices."

"The reason that this is so important to figure in is that, by example, if last year the raw GDP number came from selling one widget for a buck (a $1 GDP), and this year raw GDP was one widget sold for two bucks (a $2 GDP), the economy looks like it doubled! GDP went from $1 to $2!" Everyone then says how wonderful the economy is doing.

But in reality, it did not actually grow; only one widget was made and sold still! The only thing that changed was the price of the widget. That is a result of inflation itself.

So if you want to know how the REAL economy is going in the exciting world of GDP and widget-making, you have to reduce the raw GDP figure by the rate of inflation.

Uh-oh!! Those of you familiar with the Mogambo Theory Of Soundtracks (MTOS) recognize the sense of foreboding doom as, suddenly, the soundtrack is filled with low, rumbling horns making screechy, horrible, dis-chords, and the penetrating sound of doomed souls wailing in economic and financial despair. Obviously, this is where it gets very interesting!

See, if the rate of inflation that you use to deflate the raw GDP number is too low (like it is now!), then the estimate of real, inflation-adjusted GDP is too high! The economy looks like it is going great, but it is, obviously, not. It's just that prices are rising!

So, if GDP is predicted to grow only 2.9%, with the assumption that inflation is only 3%, then the error is huuuUUUuuge when you use the 3% inflation to go back to get the raw GDP number, and then deflate by the actual rate of inflation (probably somewhere between 4.1% and 10%).

When you do that, you get a result that is so horrible, so terrifying to see that, like looking at a Gorgon, my brain is literally turning to stone, and all I can do is claw at my own head and cry out in anguish, "Not only are we in recession, as real GDP growth is actually negative, but we have been in one for years and years! Gaaahhh!"

To repeat: We are, and have been, in a recession, according to the new inflation number!

How to measure inflation

2006-09-20T09:44:00.000-04:00

The idea is to convert back to the old way of calculating inflation, as measured by the Consumer Price Index (CPI), which is a theoretical market basket of goods, supposedly representing what people routinely buy, and used to calculate inflation by noting the changes in the prices of each item from month to month. Seems simple enough.

For the last quarter of a century, however, the CPI has "conveniently" left out the costs of energy and food. But now, thanks to public outrage, things may soon change, and the much-abused-and-viciously-contorted CPI may be replaced by the "trimmed mean PCE", as explained by Dallas Fed's top dog Harvey Rosenblum, who said "The Federal Reserve should move away from using inflation measures that exclude food and energy since they make the central bank seem aloof from the reality of rising costs faced by Americans. Excluding food and energy angers many people. It makes the Fed seem out of touch."

And why are food and energy excluded from modern calculations of inflation in the first place? To lie, my naïve little darling! Why else does the government change anything? Hahahaha! They don't see it that way, of course, and instead rationalize it as "Food and energy costs were originally excluded from the inflationary equation in the late 1970s," he says, "when prices in those sectors were particularly volatile." He admits that "the measure is now outdated and does not capture the full scope of underlying price shifts."

-- The Mogambo. Sept 20, 2006

Dollar vs Gold

2006-09-06T11:04:00.001-04:00

As Bill Bonner of DailyReckoning.com writes, "Let me put it to you straight. How many times have paper currencies - unbacked by gold - become worthless? Answer: every time. And how many times has a gold currency lost its value? Never."

The Coming Consumer Crunch

2006-09-01T09:16:00.000-04:00

by Nilus Mattive

Weiss Research, Inc.

When I moved to New York City to start my career on Wall Street, I quickly learned that the most popular sport in town wasn’t baseball, basketball, or football … it was full-contact shopping. My friends and co-workers whiled away their non-working hours hitting every boutique from Soho to Midtown, eating at fancy restaurants, and frequenting expensive bars. And their habits were dangerously contagious. Since I’ve moved down here to Florida, I realize that the New York lifestyle is a bit hyperbolic – most folks don’t happily fork over $10 for a beer.

Still, I think the behavior pattern holds true all across our fair land: A walk in the park is no longer as fun as a walk through the mall. Spending is now beyond the national pastime. It’s a nationwide pandemic. What makes this so worrisome is the fact that our economy relies on "Spend-Happy" consumers. Some people say consumer spending accounts for two-thirds of U.S. gross domestic product. But it’s actually getting closer to three-fourths of the economy.

Wall Street loves touting this statistic when Americans are borrowing, spending, and generally feeling good about the future. And indeed, just yesterday, the July consumer spending numbers came in – the strongest in nine months. Everyone cheered the news, proclaiming that the back-to-school season got off to a stellar start. But the real question is: How long can this last? Already, even though people keep on shopping, their faith in the future is dropping:

• The University of Michigan’s overall consumer sentiment index has plunged to 78.7 in the preliminary August reading vs. 84.7 in the final July result. That’s the lowest since last October, when Americans were still reeling from Hurricanes Katrina and Rita.

• The index reflecting current economic conditions also fell – to 100.8 from 103.5 in July. In other words, the survey respondents aren’t happy about things right now.

• Consumers don’t have much hope for the future, either – the economic outlook index dropped to 64.5 from 72.5.

Another major consumer survey, from the Conference Board, just came out three days ago. It painted a similar picture – Americans’ faith in the economy plunged to a nine-month low.

It’s easy to see what’s got everybody down: Conflicts and terrorism, rising gas prices, higher interest rates, signs that inflation is ramping up, as well as job-related worries. Plus, the latest home sales data has been downright awful.

Despite all this, people are still spending (for now). That begs the question: Where are they getting the money? The last time American consumers spent more than they earned was during the Great Depression. Now, they ’re doing it again!! The U.S. Commerce Department's Bureau of Economic Analysis (BEA) reports that our country had a negative savings rate of -0.5% in 2005. And so far this year, this unfortunate trend seems to be holding.

In a growing economy, when times are supposedly good, this is absolutely unprecedented.

By contrast, Americans were fairly strong savers in almost every single year from the end of World War II through the middle of the 1980s. In 1985, the average U.S. citizen saved a respectable 11.1% of disposable income. No more! So why are people continuing to spend? Probably because of the gains they have in their homes, stocks, and bonds. Of course, those gains are unpredictable. Anyone counting on them is failing to see the impact that losses can have. Meanwhile, people feel wealthier simply because their assets have risen in value. This powerful force is known as the wealth effect. The general sentiment is, “Never mind that it might not last, I’m worth a million bucks right now.” With the wealth effect, comes a propensity to save less in other places. This is why, even if you look at other measures of savings, you’ll see a negative trend. For example, a study conducted by the Spectrem Group, a research firm, found that participation in company 401(k) retirement plans fell from 80% in 1999 to 70% in 2005. In addition, the average contribution rate fell from 8.9% in 1999 to 6.9% last year. And there’s another, even more dangerous aspect to the wealth effect: It compels people to borrow more. And therein lies my biggest worry … According to the Federal Reserve, consumer borrowing rose at an annual rate of 5.7% in June, after a 3.3% increase in May. In dollar terms, consumers borrowed $10.27 billion more than they did last year. That’s a heck of a lot more than the $3.7 billion economists were expecting.

More troublesome – the faster-than-expected jump was mainly the result of more credit card debt. In June alone, borrowing on credit cards and other “revolving” debt rose at an annual rate of 9.8% … on the heels of an 11% gain in May. That’s over twice as fast as the entire economy’s growth! All this borrowing pushed total consumer credit to a record annual rate of $2.19 trillion. And this doesn’t even include mortgages or other real estate loans. Americans who refinance their mortgages will cash out $257 billion from their homes this year, according to mortgage lender Freddie Mac. That’s a whopping FIFTEEN times more than the refinancing cash-outs of just ten years ago! Even Freddie Mac’s chief economist, Frank Nothaft, was surprised: ”I would have thought the home equity extractions would have been much weaker now. " I would have thought so too, Frank. But you can never underestimate the allure of gourmet meals and designer handbags.

Personal Savings Rate - in the dumper

2006-08-31T10:47:00.000-04:00

"Personal saving -- DPI less personal outlays -- was a negative $83.5 billion in July, compared with a negative $67.6 billion in June. Personal saving as a percentage of disposable personal income was a negative 0.9 percent in July, compared with a negative 0.7 percent in June." -- Urban Survival

Click HERE for the FULL Story

The great recession of 2007

2006-08-30T16:45:00.000-04:00

MarketWatch.com reports that "The United States is headed for a recession that will be 'much nastier, deeper and more protracted' than the 2001 recession, says Nouriel Roubini, president of Roubini Global Economics and professor of economics at New York University."

He says that "Every housing indictor is in free fall. As the housing sector slumps, the job and income and wage losses in housing will percolate throughout the economy."

Beyond that ugly volcanic eruption of bad news, he notes that it gets worse, as "Consumers also face high energy prices, higher interest rates, stagnant wages, negative savings and high debt levels."

This housing bust is, in effect, the "straw that broke the camel's back", and he says that "This is the tipping point for the U.S. consumer and the effects will be ugly. Expect the great recession of 2007 to be much nastier, deeper and more protracted than the 2001 recession."

Click HERE for the FULL Story

America's Sick E-Con: A Picture Worth Thousand Cries For the Optimists

2006-08-30T16:37:00.000-04:00

"Recession to Begin Within Six Months and Depression Prior to 2008Q2"

-- Jas Jain, Ph. D.

Americans have been led by a corrupt economic elite that has misled them into a self-destructive behavior for their own short-term gain.

Click HERE for the FULL Story

The Mother of all Economic Problems

2006-08-29T23:41:00.000-04:00

All of the economic problems we face do have the same root cause (a “mother”). "This mother either caused the problem directly or took a relatively manageable or minor issue and turned it into a major economic problem. The mother of all economic problems is government."

Click HERE for the FULL Story

Russians Dump Dollar

2006-08-28T12:33:00.001-04:00

MOSCOW -(Dow Jones)- Russians abandoned the dollar at an unprecedented rate in the first half of this year, the news agency RIA Novosti reported Central Bank deputy chairman Alexei Ulyukayev as saying Friday.

Ulyukayev told a press conference - to which foreign press weren't invited - that dollar assets held by the population had fallen by $5.1 billion in the first half of this year - three times the rate seen in the corresponding period in 2005.

Click HERE for the FULL Story

US housing slump fuels crash fears

2006-08-28T12:30:00.000-04:00

'Things do seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here,' said Paul Ashworth, chief US economist at Capital Economics.

Click HERE for the FULL Story

Three IT Warning Signs

2006-08-24T08:44:00.000-04:00

From "Money and Markets":

"First, Phoenix Technology, the largest BIOS (Basic Integrated Operating System) software maker in the world has coughed up a huge hairball, warning that it would miss its quarterly expectations by a country mile. That sure got my attention because BIOS software is used to start up every computer in the world. When Phoenix, which has a 70% share of the BIOS software market, is having problems, it’s a giant red flag that something is very, very wrong in the PC world. Phoenix Technologies warned that its second-quarter sales would only hit $10 to $12 million, a far, far cry below its prior guidance of $24.5 million to $26.5 million. According to the company, “We have seen slower-than-expected Core System Software or BIOS sales ... as well as a change in the supply chain buying patterns of ODMs [original design manufacturers] due to a general inventory build-up in the PC market.” In other words, Phoenix’s business really stinks.

Bottom line: If PC makers are buying fewer BIOS systems, it means they’re making few computers. And that spells trouble for Intel.

Second, Hewlett-Packard, the second-largest computer maker in the world, announced on Thursday that it was going to close “several hundred properties.” Wow, that’s a lot of closures! And believe me, they’re definitely not doing this because business is booming.

Third, Dell’s business is still a wreck. The company is now going to simplify its pricing structure by reducing its promotions and rebates by 80%. The goal: Raising prices to boost its slumping profit margins.

Click HERE for the FULL story

The Warning Flags Are Everywhere

2006-08-23T09:35:00.000-04:00

"The above recklessness has put the US economy in a precarious situation. Interest-rates are now rising all over the world and after a multi-month pause, I expect interest-rates to continue their upward trend. So far, the Federal Reserve has raised rates 17-times to 5.25% and the impact is already being felt on American real-estate. I'm afraid, the property industry in the US is falling into a serious recession. In June, new home sales fell to 1.49 million units, the lowest since November 2004 and down 18.1% from the record-high of 1.81 million units during January 2006. Furthermore, the supply of US-homes for sale has recently jumped to a multi-decade high. In summary, rising-interest rates are starting to bite into the real-estate boom and trouble may be on the horizon."

Click HERE for the FULL Story

Housing Crash is HERE

2006-08-21T15:32:00.000-04:00

Housing crash puts sellers in debt crisis
A THREE-BEDROOM brick-veneer house in St Clair sold for just $260,000 at the weekend - down about 42 per cent from its last sale at $450,000 in 2003 in a further sign of the depressed state of the Sydney property market.

Only one person bid on the house in the city's west. The mortgagee sale was forced after the owners could not meet the interest payments on the $405,000 they borrowed to buy the house at the peak of the market.

Auction clearance rates are hovering around 48 per cent since the recent interest rate rise, but plummeting property prices have meant many vendors are confronting negative equity, where they owe more on the property than it is worth.

Click HERE for the FULL Story

We're TOAST

2006-08-15T12:10:00.000-04:00

Consumer bankruptcy filings continue to increase, with Chapter 7 liquidation filings rising 54% in the second quarter compared to the previous three months.

Consumer bankruptcies had plunged following the passage of a tough new bankruptcy law last year. By the second quarter, however, the pace of filings had picked up to 2,200 to 2,300 new filings per business day, more than four times the level in November 2005 after the bankruptcy law went into effect, according to Chris Lundquist, founder of Lundquist Consulting, which tracks bankruptcy trends.

Individuals filed 85,449 Chapter 7 cases in the three months ended June 30 and 142,815 bankruptcy cases overall, a 39% increase from the previous quarter. (Most consumer bankruptcies are either Chapter 7s, which allow people to erase most of their unsecured debts, or Chapter 13s, which require that at least some of the debt be repaid over time.)

Click HERE for the FULL story

Dollar is Collapsing

2006-08-14T20:19:00.000-04:00

This is not a healthy dollar!

Builder: Oversupply slump worst in 40 years

2006-08-11T11:59:00.000-04:00

NEW YORK (CNNMoney.com) -- Homebuilder Toll Brothers said the current slump in residential construction is unlike any it has seen in 40 years as it became the latest to warn of a glut in new homes for sale and a slowdown in the closely watched real estate market.

The housing and homebuilding markets have helped drive the national economy during the past few years. Any downturns in these critical sectors could add to the problems of an already unsteady situation.

In a statement, company chairman Robert Toll warned there is a glut of supply of homes for sale in the market, as the building boom of recent years seems to be turning into a bust.
Click HERE for the FULL Story

Economic Madness

2006-08-10T10:37:00.000-04:00

Here are some hard-core facts that you need to consider. Starting in 2000, the U.S. has created $1.5 trillion new dollars (M2), and has a cumulative trade deficit of $1.6 trillion. This totals $3.1 trillion on the negative side of the dollar equation. To say the least, this is bad monetary karma and will lead toward a very strong gold price.

From 1973 to 1981 the inflation rate in the U.S. averaged 9.2% per year ! The Fed raising interest rates during this time, on balance did nothing ! Why ? Because the money increases from prior years were already in the system…the horses were out of the barn. For most of this time gold went up, interest rates went up and inflation went up. Prior to this time the money supply (M2) from 1965 to 1974 increased 101%. This caused the inflation from 1973 to 1981. The Fed could not stop it. Gold went from $100 to $850.

Here is a reality check on the above mentioned $1.5 trillion created from the year 2000. First, I will refer to the U.S. money supply (M2) in 1980. It was $1.5 trillion. All the tangible wealth in the United States, every bridge, office building, home, car, television, plane, everything was created over 200 years with a money supply that ended up at $1.5 trillion. 200 years of blood, sweat and tears to create all the tangible wealth in the U.S. Our country in a bit more than four years has created the same amount of money! $1.5 trillion! This new money has not created anything near the tangible wealth of the first 200 year’s $1.5 trillion. This is currency depreciation on a grand scale.

This is economic madness.

Click HERE for the FULL article

Oil Production versus Price

2006-08-09T08:43:00.000-04:00

In a nutshell... When prices go up dramatically, oil producers typically ramp up production to take advantage of it. This time however, despite huge price (not cost) increases, the oil producers are not growing production.

This is a concern!

Astounding Economic Fallout

2006-08-08T11:07:00.000-04:00

At the ASPO conference a riveting presentation was delivered by Terence Ward, a writer (Searching for Hassan) who grew up in Iran and is currently a cross-cultural consultant for businesses, foundations, and governments in the Islamic World and the West. Ward believes that a US bombing attack on Tehran is nearly inevitable and that it will have devastating consequences for the region and for the world.

He began by reminding the audience that there is no clear proof of an Iranian nuclear weapons program, and that what the US and Israel have pointed to as evidence falls short of what would be needed to publicly justify pre-emptive military action. The central question hanging over the proposals and counter-proposals involving the US, Iran, the UN Security Council, and other interested parties including Russia and China, is this: What if both the US and Iranian presidents seek confrontation and war?

Click HERE for the Full Article

Gold, the M3, and Manipulations

2006-08-08T11:03:00.000-04:00

"Why does the Fed no longer want to report the total quantity of dollars in circulation? They know what's coming - massive amounts of dollar creation to fund the worsening trade and federal government budget deficits."

Dennis Gartman, of the Institutionally- favored Gartman Letter, generally rubbishes these kinds of concerns. But nevertheless this past week, Gartman increased his portfolio exposure to gold to about half, depending on how you calculate it. He also bought back a position in Suncor Energy Inc. (SU), about as pure a bearish Middle East bet other than gold that I can see.

Click HERE for the FULL Story

Inflation Rates are Climbing

2006-07-19T11:23:00.000-04:00

"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

2006-07-17T17:19:00.000-04:00

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?

2006-07-13T11:36:00.000-04:00

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

2006-07-12T11:25:00.000-04:00

"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...

2006-07-12T11:13:00.000-04:00

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

2006-07-12T11:09:00.000-04:00

"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

2006-07-12T10:45:00.000-04:00

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

2006-07-12T10:38:00.000-04:00

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

2006-07-06T11:59:00.000-04:00

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

2006-07-05T16:26:00.000-04:00

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

2006-07-05T15:32:00.000-04:00

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...

2006-07-05T15:11:00.000-04:00

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

2006-07-03T12:40:00.000-04:00

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