For greater insight into the philosophy behind
Tedbits, have a look at the Tedbits Overview. To help understand our mission in serving you, the
Tedbits Overview gives a broad description of what's unfolding globally and
what you can expect from Tedbits as a regular reader.
I wish to send you my very best wishes for a Happy
New Year.
What is YOUR PORTION of the National Debt?
Find out what it is up to today - click here.
TEDBITS PODCAST NEWS
I have been appearing with Jim Willie in a podcast on the unfolding economic
scene at www.ContraryInvestorsCafe.com, it is a gas and I will be appearing monthly in a
podcast on Jim Willie & Friends, discussing recent Tedbits commentary and
unfolding events and how to get into the markets in an orderly manner. Access it by clicking here.
It's going to be fun, thought provoking and VERY informative. Don't miss it.
WE WILL BEGIN THIS MULTI-PART OUTLOOK WITH A GENERAL
OVERVIEW, THEN OVER THE FOLLOWING WEEKS TOUCH ON A VARIETY OF CONVENTIONAL
AND UNCONVENTIONAL ANALYSES, SPANNING THE MARKETS IN GENERAL, SUCH AS STOCKS,
COMMODITIES, CURRENCIES, INTEREST RATES, BOMB....ER, BOND MARKETS AND TAKE
FUNDAMENTAL LOOKS AT THE DIFFERENT REGIONS, BANKING SYSTEMS ETC. IF YOU HAVE
NOT READ THE LAST TWO TEDBITS YOU NEED TO AS THEY COVER THE UNFOLDING HUMAN
BEHAVIOR AND SOCIAL TRENDS DRIVING THE DEVELOPED AND EMERGING WORLDS IN
OPPOSITE DIRECTIONS AND WILL BE REFERRED TO MANY TIMES OVER THE NEXT SEVERAL
WEEKS, THEY ARE CRITICAL COMPONENTS OF UNDERSTANDING THE UNFOLDING CRISIS
(find them in our archives: www.traderview.com/tedbits_newsletter.cfm
Hope is not an investment strategy and it certainly
is not a good guide to selecting LEADERS.
To the something-for-nothing personality, hope is
like the high from dope, fed by main stream media to the functionally
literate (those who can read and write) and the practically illiterate (those
who are told what to think rather than taught how to think.)
The world is falling into what ultimately will be an
inflationary depression. This will cause the death or near death of the
world's principle reserve currencies: US Dollar, UK Pounds, Euros, Swiss
Francs and Yen, and it is unfolding. Insolvency, both moral and fiscal is
unfolding: debt spirals on many levels of the developed world will be
resolved ultimately with the printing press, this year, next year and until
the rest of the world abandons the current FIAT paper and the ultimate
Crack-Up Booms unfold. Opportunities abound for the prepared investor, and in
fact they are BIGGER than EVER.
When the broad masses who have bought the hope
realize it is a lie, and their hope turns to fear, this QE-induced high will
turn into a blind panic as the G7's safety nets FAIL; many markets will crash
and others will soar and the most helpless will turn into angry mobs as they
have no skills and their economies no longer produce blue collar jobs that
create the middle classes - those jobs have been driven offshore by public
serpents, crony capitalists, trade unions and banksters.
There are three quotes from some of the greatest
economists in history which summarize the G7 global economy, currency and
financial systems and the societies in which they reside. Two by Ludwig Von
Mises and one by John Maynard Keynes and they are:
1. There is no means of avoiding the final collapse
of a boom brought about by credit expansion. The alternative is only whether
the crisis should come sooner as a result of a voluntary abandonment of
further credit expansion, or later as a final and total catastrophe of the
currency system involved. --Ludwig von Mises
Author's comment: G7 Central banks and governments
are fully committed to restoring the expansion!!! Debt is exploding higher in
government as income and revenue are in FREEFALL. It's no coincidence that
the fed and UK central bank asset purchases are larger than the budget
deficits. The Fed is purchasing toxic assets, MBS and agency debt and central
banks are recycling the money back into another TOXIC asset: US treasuries.
Why you ask? Its because the dollar as the
world's reserve currency is the FOUNDATION of the world monetary systems
and is the one currency in the world where both the shorts and longs don't
want it to change in value: the people storing wealth in it don't want it to
go down and those printing it like toilet paper want to exchange it -
basically, exchange nothing (fiat currency backed by nothing) for something
(goods, services, etc.).
2. Ludwig von Mises describes the "Crack-up
Boom" that marks the denouement of all great monetary inflations:
"This first stage of the inflationary process
may last for many years. While it lasts, the prices of many goods and
services are not yet adjusted to the altered money relation. There are still
people in the country who have not yet become aware of the fact that they are
confronted with a price revolution which will finally result in a
considerable rise of all prices, although the extent of this rise will not be
the same in the various commodities and services. These people still believe
that prices one day will drop. Waiting for this day, they restrict their
purchases and concomitantly increase their cash holdings. As long as such
ideas are still held by public opinion, it is not yet too late for the
government to abandon its inflationary policy.
"But then, finally, the masses wake up. They
become suddenly aware of the fact that inflation is a deliberate policy and
will go on endlessly. A breakdown occurs. The Crack Up Boom appears.
Everybody is anxious to swap their money against "real" goods,
whether he needs them or not, no matter how much money he has to pay for
them. Within a few weeks or even days, the things which were used as money
are no longer used as media of exchange. They become scrap paper. Nobody
wants to give away anything against them.... If a thing has to be used as a
medium of exchange, public opinion must not believe that the quantity of this
thing will increase beyond all bounds. Inflation is a policy that cannot
last."
This is a perfect description of what is unfolding
today, people are building up their cash and new mini-bubbles are appearing
globally as people exchange fire hoses of hot money for tangibles and assets;
and a CRACK-UP BOOM looms, as we can see in asset prices around the world --
other than the fatally-inflated MALINVESTMENTS such as real estate.
3. "By a continuous process of inflation,
governments can confiscate, secretly and unobserved, an important part of the
wealth of their citizens. The process engages all of the hidden forces of
economic law on the side of destruction, and does it in a manner that not one
man in a million can diagnose." - John Maynard Keynes, 1920
Look no further than this illustration of the loss
of purchasing power by misstated inflation courtesy of John Williams of www.shadowstats.com:
Wow, the dollar has lost 80% of its purchasing power
since the printing press was unharnessed at Bretton Woods II in 1971. This is
the government and banksters stealing the value out of people's money, as
well as deficit spending and OUT-OF-CONTROL fractional banking without
SAVINGS to back them. Counterfeiting/printing money out of THIN AIR! This is
the cause of the "something-for-nothing" personality.
The FINAL move from sound money to fiat currency in
1971, when Nixon closed the gold window, set the G7 on the path to where we
find ourselves today: On a one-way elevator DOWN since 1971. The middle
classes have been CONSUMED by the Banksters and by public serpent debasement
of their incomes and that in which they store their wealth - their cash. The
middle class in America is just about gone, robbed of their pay and savings
by the people in whom they have placed their trust: The government.
Investors will be crushed if not properly prepared;
however, If properly prepared this is the greatest opportunity in history.
VOLATILITY is set to soar "Up and down" as people scramble to price
in and discover the REAL PURCHASING POWER of the Oceans of FAKE money which
has been created in the last year. You must learn to fix your paper
currencies and then find alternative investments which have the potential to
thrive in UP and DOWN markets. This is what I do, contact me if
you wish (www.traderview.com/portfolio_analysis_analysis.cfm).
Economies and markets afloat on a sea of trillions
of Dollars, Euros, Swiss Francs, Yen and British Pounds in which price
discovery is occurring right now! But one thing we do know it is, and that is
LESS:
"Currencies don't float, they just SINK at
different rates" - Clyde Harrison
At no time in my career have so many asset classes
been this mispriced. Stocks and bonds are in the ether of overvaluations, and
gold and silver are massively undervalued, to name but a few. As bubbles can
be seen forming around the globe in selected asset classes. We are in a
period which, when completed, will have seen the greatest transfer of
wealth from those who hold their wealth in paper to those that don't.
An oscillation of inflation and deflation between
asset classes is to be expected. Deflation in mal-investments created over
the last five decades (stocks, bonds, real estate, ethanol and now green
energy, paper investments etc.) and mispriced because of always cheaper
credit (easy money forever), and inflation in asset classes (production of
commodities, natural resources, oil and natural gas exploration and
production, nuclear power and electrical generation, infrastructure, etc.)
which were neglected during this period when capital should have been
directed at them and wasn't.
The fingerprints of a Crack-up Boom can be seen
GLOBALLY across many asset classes. As hot buckets of money RACE around the
world seeking shelter from both the powerful central bank printing presses
and the poor policies of the G7 public serpents, elites, crony capitalists and
trade unions as they search for a place where capital can be preserved and
thrive. All the while, these same predators use the unfolding crisis to take
bigger slices of the shrinking G7 economic pies.
The wealth of the world has rotated (G7 are now major
debtors and the emerging world economies are their creditors), and political
power is doing so, as well, as can be seen by the G7 losing leadership and
the G20 taking power. The welfare states of the developed world cannot avoid
the final debacle (there is only a small constituency supporting the hard
choices required to POSTPONE the unfolding debacle, they are also known as
the people that work for a living rather than vote for one), and the emerging
world is rising on the wings of Austrian Economics -- the same formula the US
used to rise to prominence.
Nominally, after adjusting for consumer price
inflation, there has been NO REAL GROWTH in stocks, income, bonds, employment
or household net worth in over a decade (this GOVERNMENT measure understates
true inflation by 1 to 4 % annually, sometimes more, see www.shadowstats.com.) In fact, it has been a DECADE-LONG debacle of inflation and theft
of purchasing power by government and the banksters:
All the rallies in stocks and gains in bonds
DISSAPPEAR! If you are in BUY
and HOLD stocks and bonds you have LOST ¾ of your net worth since
2000, measured in purchasing power. BUY AND HOLD is dead until the printing
press and RUNAWAY debt issuance is brought under control, so don't hold your
breath. Look at this recent chart of household net worth and employment going
back a decade (from the Washington Post):
Now think about it adjusted for purchasing power in
gold as I did above for stocks and bonds. Ouch, it's another debacle from the
banksters and Capitol Hill. That loss of purchasing power was a result of
central bank printing presses and deficit spending, which are spiraling out
of control in a manner NEVER SEEN BEFORE! The exception would be those
previous to a currency extinction event, of which this is one!
The G7 economies, stock and bond markets are in
WEAK, statistically-driven, cyclical bull markets and counter-trend rallies
in an unfolding secular bear market. Most of the growth is government
MISSTATEMENT of economic statistics, inventory adjustments and nominal, as
opposed to real, growth. The 2009 rally in the S&P 500 is an illusion;
the index was up about 23% and the loss in purchasing power as measured in
gold was? 23% So, in real terms YOU MADE NOTHING. The rally in the S&P
was actually reflecting a 23% loss in purchasing power of the currency in
which the index was priced: US DOLLARS. It was repricing higher to reflect
the lower purchasing power of the currency. OUCH....
The G7 economies will peak sometime in the next year
and resume their descent ultimately into a hyperinflationary depression. Afloat on a sea of almost 12 trillion Dollars,
Euros, Pounds, Yen, Swiss Francs, etc. which have been printed out of thin
air -- also known as Quantitative Easing (to fool the public who don't
understand that this term means money printing and whose money is being
stolen while it sits in the bank,) or borrowed from unsuspecting future
victims (foreign central banks, institutions, private investors, etc.) of the
coming money printing debacle as "political correctness" defines
most G7 government borrowing as risk free.
"When a well-packaged web of lies has been sold
gradually to the masses over generations, the truth will seem utterly
preposterous and its speaker a raving lunatic." - Donald James
Words of wisdom.
"The danger to America is not Barack
Obama but a citizenry capable of entrusting a man like him with the
presidency. It will be easier to limit and undo the follies of an Obama
presidency than to restore the necessary common sense and good judgment to a
depraved electorate willing to have such a man for their president. The
problem is much deeper and far more serious than Mr. Obama, who is a mere
symptom of what ails us. Blaming the prince of the fools should not blind
anyone to the vast confederacy of fools that made him their prince. The
republic can survive a Barack Obama, who is, after all, merely a fool. It is
less likely to survive a multitude of fools such as those who made him their
president." -- Author Unknown
I call this fool the something-for-nothing
personality (see Tedbits Archives www.traderview.com/tedbits_newsletter.cfm). That is precisely where we are now: Total
absurdity regarded as common sense. Our leaders are a reflection of the
general public, trapped in a matrix of illusions and lies and unable to see
reality. The G7 economic demise IS NOT a failure of CAPITALISM, it is a
failure of 50 plus years of creeping SOCIALISM masquerading as capitalism
and of the G7 schools who fail to teach the differences between them; to do
so would bring about the demise of those in power at the hands of the public.
"Capitalism should not be condemned, since we
haven't had capitalism." - Ron Paul
Capitalism is where a entrepreneur or small
businessman identifies something that a broad group of people want to BUY,
and delivers more of the desired goods or services for less money,
thus gathering market share and killing the previous provider who failed to
do so. This is called creative destruction and is the enemy of crony
capitalists, big unions and the public serpents who SELL legislation to the
dinosaurs and then legislate and mandate their success. It is a natural disinflation
which is great unless it is short-circuited by public-sector predators and
their special-interest supporters.
Capitalism has nothing to do with ponzi finance;
ponzi finance is a function of fiat currency and credit financial systems
where the government creates, prints and lends funds out of thin air, where
the INSIDERS get the printed money/credit first, and then inflate asset
values to create the illusion of growth. Look at today's 0% interest rates;
banksters and connected organizations get the money virtually free (from the
FED and their DEPOSITORS) and lend it to the public at 5 to 30% rates, or to
the government. Capitalism was in effect before fiat currencies and will
function after this version of them fall to their EXTINCTION.
G7 economies are now
defined as CENTRALLY planned, socialist corporatism, where central banks,
elites, crony capitalists, public serpents and banksters conspire and
legislate their way to riches and success at the expense of the publics they
claim to serve. The public and small/medium size businesses are the prey
to be bought and sold, their interests ignored by the PUBLIC SERPENTS who
sell them to the aforementioned group of PREDATORS. Europe has suffered from
this for decades, and it has crept into the US, but now it is unbridled as
Chicago-trained politicians sell EVERYTHING in exchange for government
FAVORS, now and in the future.
It is no different in healthcare, the military
industrial complex, green energy or what have you. Isn't it interesting to
see Bill Clinton and Al Gore now each worth over $100 million dollars since
the end of their terms, when before being elected they were worth just a few
million? Can you say "quid pro quo?"
"We haven't had true capitalism since 1913. We
live in a corporate fascist state dominated by the military industrial
complex, the financial banking complex and now the healthcare industry
complex. It is fascinating that the health industry has spent $396 million in
2009 on lobbying and the financial industry $334 million while Congressmen
debate the future of both industries. These industries surprisingly have
received a windfall in the legislation that has been put forth by Congress.
The system is so corrupt and rotting from within that elections will never
result in necessary reform. Corporations are spending $3 billion per year to
bribe (lobby) your elected officials. Whose interest do you think Congress is
looking out for?"-- Richard Lamm, www.theburningplatform.com
Not yours, that's for sure. Just look at recent bank
bailouts and stimulus packages. They have not one single line that is
targeted at the private sector. According to www.recovery.gov (the official tracking site), the federal
government has SPENT over $400,000 for every job created and sponsored, and
many will have created NO LONG TERM employment. Take a look at this list of
projects assembled by Senator Tom Colburn (www.traderview.com/tedbits/StimulusCheckup-Dec09.pdf ); this is really obscene reading for anyone who
has respect for the value of the dollar. Now look at the recent comments of
Michael Barone on the contrasts between PUBLIC and PRIVATE sectors:
"Recent Rasmussen poll that shows that 46 percent of government employees
say the economy is getting better, while just 31 percent say it's getting
worse. In contrast, 32 percent of those with private-sector jobs say the
economy is getting better, while 49 percent say it is getting worse.
Nearly half, 44 percent, of government employees
rate their personal finances as good or excellent. Only 33 percent of
private-sector employees do.
It sounds like public- and private-sector employees
are looking at different Americas. And they are.
Private-sector employment peaked at 115.8 million in
December 2007, when the recession officially began. It was down to 108.5
million last November. That's a 6 percent decline.
Public-sector employment peaked at 22.6 million in
August 2008. It fell a bit in 2009, then rebounded back to 22.5 million in
November. That's less than a 1 percent decline.
This is not an accident -- it is the result of
deliberate public policy. About one-third of the $787 million stimulus
package passed in February 2009 was directed at state and local governments,
which have been facing declining revenues and are, mostly, required to
balance their budgets.
The policy aim, say Democrats, was to maintain
public services and aid. The political aim, although Democrats don't say so,
was to maintain public-sector jobs -- and the flow of union dues to the
public-employee unions that represent almost 40 percent of public-sector
workers.
Those unions in turn have contributed generously to
Democrats. Service Employees International Union head Andy Stern, the most
frequent non-government visitor to the Obama White House, has boasted that
his union steered $60 million to Democrats in the 2008 cycle. The total union
contribution to Democrats has been estimated at $400 million. In effect, some
significant portion of the stimulus package can be regarded as taxpayer funding
of the Democratic Party. Needless to say, no Republicans need apply.
One must concede that there is something to the
argument that maintaining government spending levels helps people in need and
provides essential public services. Something, but not everything."
And from The Privateer (www.the-privateer.com):
"After the "health care plan" comes
what is now being called the "Jobs for Main Street" act, a bill
which through the house in a 217-212 vote (Tedbits note: party line vote )in
December. The republicans have lost no time in dubbing the bill "Stimulus
Two". It is a $US 154 Billion dollar package, half of which is
aimed at extending "lifeline programs" for the poor and unemployed
until the end of June this year. The other half of the bill is pure job
creation, most being aimed at retaining "public employees" on the
job. "Jobs on Main Street?"
NO. Just as the original stimulus bill was a
government support and expansion act, as reported by yours truly, so is this
one! Main Street be damned, as anyone knows this is the ultimate result of
SOCIALISM, and it equals MISERY SPREAD WIDELY. Stimulus is only for their
cronies!
Public and UNION employees are paid an estimated
150% of the private sector, and their pensions equally generous. Of course
public employees don't have a requirement that they produce more then they
consume, and you can say the same for unions whose employers are dropping
like flies under the uncompetitive labor rates that are MANDATED and
protected by government laws and regulations. Cost benefit analysis has gone
the way of the extinct DO DO bird, the assumption being that government and
its solutions are worth any price and never to be questioned; so the MAIN
STREAM media and the something-for-nothing personality don't.
The construction projects are MANDATED to overpaid
union companies, job support for state and municipal employees (UNION),
credit guarantees for the biggest banks and crony capitalists such as GE,
AIG, Fannie Mae and Freddie Mac, General Motors, Chrysler (transferred from
public ownership and secured bondholders) to the Government and Unions, GMAC
(nationalized last week: government owns 50% plus). The 19 banks which are
now TOO BIG TO FAIL (now GSE's, or government sponsored enterprises) enjoy
record profits. Once inside the government safety net, the risks are sent to
the public at large and the profits to the elites who DONATED (couldn't use
the real word: BR**ED) to the public serpents. MORAL HAZARD WRIT LARGE.
"It is well enough that the people of the
nation do not understand our banking and monetary system for, if they did, I
believe there would be a revolution before tomorrow morning." - Henry Ford
NO ONE knows what money is, but before this crisis
is over they WILL.MONEY is a mystery
to those even at the top of society, finance and business. Most are never
taught this, and if the broad public was to understand what has been done to
them it would cause RIOTING in the streets. CREDIT IS NOT MONEY!
Money has five functions and if what you
store your wealth in does not function in this manner you AREN'T holding
money. Those functions are:
- Medium of exchange
- Store of value
- Standard of value
- Measure of value
- Moves purchasing power through time and space
An example of real versus fake money is a one dollar
bill versus a silver dollar:
In 1960, dollars were backed and redeemable in
silver (US CITIZENS) or gold (Foreign central banks which used them as
reserves). In 1960 you could exchange the paper dollar or silver dollar for 5
gallons of gas. Today the silver dollar STILL buys 5 gallons of gas and the
paper dollar buys less the ½ gallon. One is real money and the other
is an illusion and only as good as the promises of the issuing government.
In today's world what masquerades as money is only a
medium of exchange and an IOU. Whoever holds them has FAITH that it will be
repaid; in other words, faith that the government which issues them will not
print them to INFINITY. The only thing backing a fiat currency is the PRIVATE
property of the citizens of the country which issued them, as it can be
exchanged for either goods and services in the issuing country or, in the
case of the DOLLAR, global finance and trade which have been conducted in
dollars since Bretton woods mandated it as the world RESERVE currency in the
mid 1940's. Tens of trillions of these IOU's, aka G7 currencies, are held by
people around the world. If they ever decide to REPATRIATE them or think they
will be printed infinitely, and someday they will, the CRACK-UP BOOM will
commence.
This unfolding depression is the failure of FAKE,
unsound IOU's (credit is not money) masquerading as sound money and of PONZI
finance imploding upon itself as much of the debt has been used for
CONSUMPTION, rather than used for investments which pay for themselves
because they produce more than they consume. Consequently, more and more
productive capacity goes to pay previous borrowing rather than investment in
the future. The G7 has eaten its seed corn and spent future seed corn for
generations and now the future is BLEAK.
The G7 has entered the final stages of their empires
and their financial and monetary systems face their demise as all
credit-based fiat currency systems have done before them. They always
collapse into insolvency, without exception.
It is the battle of TITANS. The most powerful
central bankers, public servants, banksters, elites and crony capitalists in
the world versus Mother Nature and DARWIN in a battle to see what truth and
fiction are.
Unfortunately for the former, Mother Nature is
extremely hard to find and impossible to KILL, and Darwin identified Nature's
order in the world. Compete or die, produce more than you consume; these are
ideas which the something-for-nothing, G7 welfare states have forgotten and
lost the ability to do. Like King Canute they CANNOT stop the tides from rolling
over them and washing them into moral and fiscal bankruptcy throughout the
developed world (see Tedbits: Something for Nothing special edition
released December 23, 2009 at
www.traderview.com/tedbits/tedbits-SomethingForNothing.pdf).
Incomes in the G7 are collapsing because they no
longer produce more than they consume, and so wealth is manufactured through
MISTATED inflation, credit creation and the printing press. This is the
definition of redistribution of wealth, and misery spread widely. In
the G7 they don't create middle classes, they consume them by FAILING to
provide the policies necessary for the creation of wealth and rising middle
classes.
Take a look at this essay from the BOND KING Bill
Gross of PIMCO:
(www.pimco.com/LeftNav/Featured+Market+Commentary..) as he outlines the fork in the road that was taken
shortly after Breton Woods II in 1971. When public servants and BANKSTERS
morally and fiscally tore the final underpinnings of sound money and
redeemability in GOLD, from the world's RESERVE currency; thus, allowing them
to STEAL the purchasing power of people's money while it NOMINALLY sits in
the bank. If you read between the lines you see that he is talking about
his own demise, as the assets he talks about are the same as those he
manages.
In the emerging world they are doing the opposite,
providing the conditions necessary for huge emerging middle classes which
will dwarf their competitors in the west in short order.
Just as trillions have been printed or borrowed to
this point, trillions will be printed and borrowed in the future. Anything
you hear from ANY G7 central bank or public serpent is HOT AIR; the
quantitative easing can never end, because they have RUN OUT of lenders,
except for "Indirect Bidders," aka central banks, defending their
reserves and reinvesting currency sterilization from intervention to stop
their currencies from rising against the dollar (competitive currency
devaluation raceway.)
The G7 governments are in DEBT spirals, which are
when new deficits exceed GDP growth by considerable amounts and government
spending and payments on previous borrowings can only be met by printing
money out of thin air, because revenues are unable to meet current and future
obligations.
Of course, these are government projections so the
reality will be MUCH WORSE. The IMF estimates OECD budget deficits to average
over 8.5% of GDP. Just this week it was disclosed that US public sector
pension funds are $2 Trillion underfunded. You can just add that to the $70 +
trillion of obligations ALREADY held off the books. As I outlined in the
last Tedbits (Dec 31, 2009,) the treasury uncapped the losses that Fannie Mae
and Freddie Mac can incur, in a fabulous article By Dr. John Hussman of
the Hussman Funds entitled "Tim Geithner meets Vladimir Lenin" of
how criminality and the people working without regard to the constitution
loose in the beltway is fully explored (http://www.hussmanfunds.com/wmc/wmc100104.htm.)
A lot of words have been spoken about the budget
deficits and the debt-to-GDP ratios of the PIIG's: Portugal, Italy, Ireland
and Greece, but If you take off the rose-colored glasses, the core of the G7:
the US, the UK and Japan, are FAR WORSE.
Take a look at this chart showing revenues versus
expenditures going back to 2000:
The gap we see between income and expenditures is
echoed THROUGHOUT the G7, and if you include the states and municipalities
the budget deficits are over $2 trillion in the US. If you did the accounting
according to GAAP (generally accepted account principles), rather than
POLITICALLY correct methods, the US budget deficit BALLOONS to almost $9
TRILLION, as this illustration from John Williams of www.shadowstats.com illustrates:
If you think this is isolated to the US think again,
Nadeem Walayat of www.Marketoracle.co.uk has done fabulous work on the similar situation in
the UK and you can reference it here: http://www.marketoracle.co.uk/Article7526.html. It plainly illustrates the catastrophic drop in
the real value of sterling, and the current 500% debt-to-GDP ratio, while
illustrating the straight line of inflation that has been BARELY interrupted
by the global financial crisis.
As Bill Buckner of www.the-privateer.com said in his November missive (I urge you to subscribe, its fabulous
global macro):
"For 50 years, not one Dollar of new debt
created by the US government to fund activities it does not wish to tax for
has been repaid. The debt has been "re-financed" with new debt
being sold to retire the existing debt."
Recall the words of Treasury Secretary Timothy
Geithn@r in September when he said the debt ceiling must be raised so
America's bondholders can rest assured that they will be repaid. This was a
public acknowledgement that America must borrow more to repay previous
obligations as income and revenue are unable to. I was shocked when he said
this aloud, publically, as it underscored the complete MORAL and FISCAL
bankruptcy of the US. In December when a short term increase in the debt
ceiling was passed, the US was within THREE days of default, when they passed
it on New Years Eve they had to RUSH a treasury auction into the last week of
2009.
The G7 financial and banking systems, as well as
governments on all levels (national, state and municipal) are mostly
INSOLVENT, also known as BANKRUPT, and the only thing preventing the crash is
the widespread belief that the respective G7 governments will not allow them
to fail. That is a grand illusion.
Think of the United States, in the beginning of 2009
there were only a few GSE's (government sponsored enterprises) such as Fannie
Mae, Freddie Mac, Ginny mae, Federal Housing administration and AIG
Insurance. Now there are dozens of them as all the 19 big banks now
operate under quasi-government guarantees, and those banks are now making
most of their money from trading activities rather than traditional banking.
Not to mention Government.....er, General Motors, Chrysler, GMAC (just
recently the government's stake rose to over 50%) which are ALL POLITICALLY
CONNECTED or OWNED and SINKING INTO DEEPER INSOLVENCY daily AND GUARANTEED BY
THE FEDERAL GOVERNMENT (the public). The one saving grace for these people
is, as Helicopter Ben says:
"The U.S. government has a technology called a
printing press, which allows it to produce as many U.S. dollars as it wishes
at essentially no cost." - Benjamin S. Bernanke Chairman, U.S. Federal
Reserve
The toxic assets that were to be taken care of with
tarp (Troubled Asset Relief Program) still reside on their balance sheets due
to REGULATORY forbearance. In other words, they leaned on the accounting
boards to let them carry the assets at full value rather than marked to
market, and trillions of dollars in losses are yet to be realized. The
Federal Reserve has lowered interest rates to almost ZERO to allow them to
rebuild their balance sheets and absorb the losses, but rather than doing so
they are paying themselves big bonuses. The biggest banks in the world have
to roll over $7 trillion of borrowing in the next two years.
Ben Bernanke made a trip to the mountaintop, aka the
WHITEHOUSE, just as Greenspan did when he sought reappointment as head of the
Federal Reserve under Clinton. I promise you he made the commitments
necessary (MONEY PRINTING) to extend his term, if he didn't, Larry Summers
would now be in line for the job. Hi ho, hi ho, off to the printing press we will
go....
In conclusion: ONE QUESTION, what is the only thing
standing between sovereign bankruptcy and solvency in 2010? The
printing press.Why do we know they will print the money? BERNANKE'S
reappointment, and the simple fact that if someone points a gun at your head
you are going to duck rather than take the bullet. Public serpents, central
bankers, banksters, elites and crony capitalists have a printing press at
their disposal and they will duck, just as you would, and they will use it
and let YOU, the public and main street, take the bullets just as they have
since 1971. Quantitative Easing (money printing) in one form or another can
NEVER end! The G7 economies will collapse if they do.
They WILL TRY to DEBASE the G7 currencies, economies
and outstanding liabilities until their debts have been inflated away. They
will be able to do so until the public, bondholders and creditors WAKE UP and
TRY to EXIT by exchanging their holdings for real things. at which point the
Crack-up Booms appear. Once this rally in RISKY assets ends the next leg down
will commence.
State's revenues are off, on average 11-12%, sales
taxes are off 9% (that is hard to understand as retail sales are supposedly
climbing!) and income taxes are off 12%. How can the economy be growing with
these numbers? When government borrowing and spending are counted in the
Gross Domestic Product, that is how.
They can never allow interest rates to climb to
neutral; negative interest rates are here to stay. But this has been the case
for DECADES, and has been why every time the fed raised rates over the last
three decades. The level at which the economy faltered was always lower than
the previous peak in interest rates, and every low was lower than the
previous lows. Malinvestments are failing at ever-lower levels of interest
rates because, in order to right the economy, easy money and leverage are
always increased during every slowdown.
Unadjusted for seasonality and labor force
participation, unemployment is still RISING at up to 600,000 a month.
Take a look at this chart of comparisons of
unemployment in past recessions and where we are now:
Until employment and REAL incomes rise the
depression will not even begin to end. The government statisticians and main
stream media are MANUFACTURING GOOD NEWS to fool their something-for-nothing
constituents and MAIN STREET and provide COVER for their ONGOING FAILURES in
restoring the economy. Subtract government borrowing and spending and GDP
fell last year at least 10%. This year will be NO BETTER. Eight out of
ten dollars of government spending is wasted (it's a rat hole and you know
who the rats are); don't you think that that the money being borrowed or printed
would be safer and better invested in the PRIVATE sector?
At no point in my career has the future held so many
potholes or opportunities depending on how you approach this unfolding
depression. You must learn how to fix your paper currencies to preserve the
purchasing power and find investments that have the potential to thrive in up
and down markets, because they will be doing plenty of BOTH. This is what I
do. Contact me if you wish (www.traderview.com/portfolio_analysis_analysis.cfm)
In Part II of this 2010 Outlook we will be covering
BANKS, currencies, interest rates and bonds in the as they are the epicenter
of the unfolding maelstrom. PAPER is poison, as you will learn. When they
fall the final debacle will be at hand for the powers that be and their
something-for-nothing constituents. Don't miss it. I will be appearing at
the Freedom Fest World Economic Summit on January 31 - Feb. 2, 2010 at
Atlantis Paradise Island Resort, Bahamas (www.freedomfest.com/wes/).
I urge you to attend as I will be doing two
break-out sessions on the unfolding economics of the global financial crisis
and how to assemble investments to meet its challenges. Thank you for reading
Tedbits. If you enjoyed it...
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Theodore
“Ty” Andros
www.traderview.com
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Tedbits is authored
by Theodore "Ty" Andros, and is registered with TraderView, a
registered CTA (Commodity Trading Advisor) and Global Asset Advisors
(Introducing Broker). TraderView is a managed futures and alternative
investment boutique. Mr. Andros began his commodity career in the early
1980's and became a managed futures and forex specialist beginning in 1985.
Mr. Andros duties include marketing, sales, and portfolio selection and
monitoring, customer relations and all aspects required in building a
successful managed futures and alternative investment brokerage service. Mr.
Andros attended the University of San Diego, and the University of Miami,
majoring in Marketing, Economics and Business Administration. He began his
career as a broker in 1983, and has worked his way to the creation of
TraderView. Mr. Andros is active in Economic analysis and brings this
information and analysis to his clients on a regular basis, creating
investment portfolios designed to capture these unfolding opportunities as
the emerge. Ty prides himself on his personal preparation for the markets as
they unfold and his ability to take this information and build innovative
professionally managed portfolios. Developing a loyal clientele.
This report may include
information obtained from sources believed to be reliable and accurate as of
the date of this publication, but no independent verification has been made
to ensure its accuracy or completeness. Opinions expressed are subject to
change without notice. This report is not a request to engage in any
transaction involving the purchase or sale of futures contracts or options on
futures. There is a substantial risk of loss associated with trading futures
and options on futures.
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