“As the miscreants in Washington negotiate solutions to the
[various –Ed.] crises, trial balloons have been floated that agreement
has been reached to use a new CPI measure—the C-CPI-U, which tends to
understate inflation even more than the CPI-U—as way of deceptively
reducing cost-of-living adjustments to Social Security, etc. Not too
surprisingly, public reaction appears to be turning increasingly negative, as
the concept gets broader exposure in the popular press.
Public Furor
Mounts Over Proposed Use of the C-CPI-U to Short-Change Social Security
Recipients on Their Cost of Living Adjustments. The chain-weighted CPI-U (C-CPI-U) is
the fully substitution-based inflation series that is under serious
consideration by those in Congress and the White House as a replacement for the
CPI, with the goal of cutting Social Security cost-of-living adjustments
(COLA) by stealth. A fully-substitution-based inflation index used in COLA
calculations would reflect lower inflation than would the CPI-U or CPI-W
(used for Social Security), resulting in fraudulently- and
artificially-reduced cost-of-living adjustments to social programs,
retirement funds, etc.
If the people controlling the U.S. government were honest, they simply
would tell the COLA recipients that payments were being cut as part of the
effort to balance the budget. Yet, no one in Washington has the political
courage to suggest such a thing, openly, hence the regular deception that so
often surfaces in the headline budget bargaining.
Reducing COLA
by artificially reducing CPI reporting is not new. Had the politicians not
pursued similar policies successfully in the 1980s and 1990s, Social Security
payments would be more than double current levels… annual SGS –
CPI Inflation… (using) the 1980-based measure came in at 9.4% in November …” (emphasis added)
November CPI, Industrial Production”, Shadowstats.com, 12/14/12
The proposed forced Investment of Present and Prospective Retirees 401(K)
Assets in U.S. Treasury Paper about which we earlier wrote, is now followed
by yet another prospective attack on Retirees’ Security, and indeed on
the Wealth Security of those who hold $US Denominated Assets.
The Prospective Rigging of the CPI
Calculation Protocol would , yet again, make the
“Official” CPI even further removed from The Inflation Reality.
The Reality is that the current U.S.
Inflation Rate, 9.82%, is already Threshold Hyperinflationary (see below).
And, of course, Official Numbers-Rigging
is not limited to the U.S. We note Chinese and Eurozone Numbers-Rigging as
well.
“A fake Libor rate, the scandal involving global benchmark
interest rates that has raised the level of distrust in major banks and
markets, is nothing compared to the damage that could be done if
China’s true economic growth figures were revealed, according to Larry
McDonald’s newsletter.
“Is Chinese GDP the new Libor? …More and more investors
are starting to question the Chinese math on GDP.
“Annual gross domestic product came in at 7.6 percent in the
second quarter, according to China’s government on July 13th. The
report was better than investors expected…
“But slowing imports and industrial production, as well as
harder-to-fudge electricity usage data, points to much slower growth,
according to McDonald and other investors. Barclays believes the number
should have been more like 7.15 percent.
“What worries McDonald… is that lying by governments and
banks — be it Libor rates or GDP statistics
— raises the systemic risk to the markets, which is much worse than
just economic risk.”
“Lying Libor Is Nothing Compared to China’s Fake GDP:
Report”
John Melloy, CNBC, 7/22/2012
Indeed, if one considers all the salient
Chinese data together, one concludes that the Barclays estimate of Chinese
GDP at 7.15% is still high.
In order to obtain a realistic view of
economic performance it is necessary to look beyond the Official Data to data
that are more difficult to manipulate. For China, for example, consider:
China’s shipbuilding industry has
suffered a 60% decline in gross tonnage of orders; some builders may go
bankrupt. China has vast stockpiles of as-of-yet-unused coal, iron ore, and
copper. In the first half of 2012, Shanghai land sales fell close to 60%. The
June 2012 Chinese electrical grid usage was flat. Prices in some Asian
sectors sank an incredible 25% in June because of collapsing demand.
China’s neighbor Singapore reported that its GDP growth fell 1.1%
during the second quarter of 2012 following a 9.4% gain during the first
quarter.
Australia has been losing jobs –
Australian employers surprised the market after reporting payrolls were
trimmed by 27,000 in June 2012; pushing the unemployment rate up to 5.2% from
5.1% in May, due primarily to redirection in growth of Chinese demand. And
the two major customers of China’s exports – the Eurozone and the
US continue to weaken.
Switching focus to the U.S. we recently
see that some Mainstream Media are claiming that the Housing Market has
bottomed and is recovering. It is not.
“With minimal levels of consumer confidence
and sentiment, and without positive real (inflation-adjusted) income growth
and available credit, consumers generally cannot support real growth in broad
consumption, let alone fuel a renewed housing boom. The financially-impaired
banking system still largely is sitting on the sidelines, despite four-plus
years of systemic-liquefaction efforts by the Federal Reserve.
Nonetheless, insurance payments on hurricane-damaged properties should
help provide at least some temporary boost to the home construction industry
in the next quarter or so.
November housing starts fell month-to-month by a
statistically-insignificant 3.0%, likely reflecting mixed pressures from
storm disruptions and rebuilding. The November loss, however, was in the
context of downside revisions to reported activity of the last several
months, in this highly volatile series.”
“November Durable Goods, Housing Starts, GDP Revision,
#490”
John Williams, shadowstats.com, 12/21/2012
And most important, consider Williams on
Real Current U.S. Inflation.
“Set by Uncontained
Fiscal Malfeasance, and Exacerbated by Still-Unfolding Effects of the 2008
Systemic Panic and Near-Collapse, U.S. Hyperinflation Looms by End of 2014.
After decades of U.S. government fiscal mismanagement, by 2004, the U.S.
budget deficit was so out of control that it had become both unsustainable
and uncontainable. Using generally accepted accounting principles
(GAAP-accounting), the deficit for just the fiscal-year 2004 exploded to
$11.0 trillion…
“Adjusted for distortions from one-time accounting changes, the
actual, or GAAP-based, federal deficit has run roughly $5 trillion per year
since 2004, and it likely topped $7 trillion in 2012, with total federal debt
and the net present value of federal-government obligations approaching $90
trillion. No amount of spending cuts, outside of the politically-untouchable
social programs, and no amount of tax increases, can bring the GAAP-based
annual U.S. budget deficit into balance.
“Faced with structural impairments to individual income growth,
the Federal Reserve (under Chairman Alan Greenspan) actively encouraged the
excessive growth of consumer debt as a way to support economic activity,
continuously borrowing economic growth from the future.
“With an inevitable day of reckoning, the U.S. financial and
banking systems came literally to the brink of collapse in September 2008. To
prevent the unthinkable, the Federal Reserve and the U.S. government created,
spent, loaned, guaranteed, and gave away whatever money was necessary, and
otherwise bailed out or acquired a number of failing large
corporations…
“Those actions forestalled a systemic collapse, but they did not
resolve the fundamental underlying difficulties. Contrary to official GDP
reporting, there has been no subsequent economic recovery.
“The ultimate costs for saving the system in 2008 and beyond,
comes down to inflation, which will be reflected eventually in the complete
debasement of the U.S. dollar. Accordingly, actions taken during the
crisis-containment of 2008, and later, brought the outside timing for the
hyperinflation forecast of 2018, into 2014.
“…the U.S. dollar, as we know it, is not likely to survive
until the next congressional election in 2014…”
“Special Commentary: Review of Economic, Systemic-Solvency,
Inflation, U.S. Dollar and Gold Circumstances, #485”
John Williams, shadowstats.com, 11/27/2012
Official Data Purveyors would have you
believe that U.S. inflation is “contained,” GDP is growing
healthily, and Sovereign Debt is sustainable. Not true! The U.S. for example
is already Threshold Hyperinflationary at 9.82% and GDP growth is a negative 2.10% and the net present
value of downstream Federal as-yet-unfunded government obligations is nearly
$90 trillion.
Bogus Official Statistics mask a wide
variety of Negative Effects of ongoing Q.E. to Infinity and related Actions.
Shadowstats.com calculates Key Statistics the way they were calculated in the
1980s and 1990s before Official Data Manipulation began in earnest. Consider:
Bogus
Official Numbers vs. Real Numbers (per Shadowstats.com)
|
|
Annual
U.S. Consumer Price Inflation reported November 15, 2012
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2.16%
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9.82%
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|
|
U.S.
Unemployment reported November 2, 2012
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7.9%
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22.9%
|
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U.S. GDP
Annual Growth/Decline reported November 29, 2012
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2.49%
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-2.10%
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U.S. M3 reported November 17, 2012 (Month of October, Y.O.Y.)
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No Official
Report
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3.56%
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Shadowstats Forecast of
Impending Hyperinflation beginning no later than the end of 2014, is quite
significant.
“I have been warning of a hyperinflation for at least seven
years, but those warnings have been about a hyperinflation that was sometime
in the future, generally in 2018 or 2014 timeframes mentioned above. Now,
however, along with the passage of time, circumstances have evolved and are
aligned for the hyperinflation to develop in the near future, specifically,
within the next two years or so, by the end of 2014. Key developments, such
as global loss of confidence in the U.S. dollar, and the dollar losing its
safe-haven status, fell into place during 2011.
“Why 2014? While
inflation is far from being out of control at the moment, the U.S. dollar is
relatively strong, due to the euro crisis, that can change rapidly as global
markets and domestic holders of the U.S. currency begin to flee the dollar,
along with dumping dollar-denominated assets. Fiscal, systemic-solvency and
economic conditions are deteriorating markedly, with a confluence of unstable
circumstances likely to come to a head within the next year or so, placing
extremely heavy selling pressure on the U.S. dollar and, before 2014, setting
the stage for hyperinflation.
“The damage to the U.S. financial system and to U.S. dollar
credibility have been so severe in recent
years…
“The U.S. economy is far weaker than commonly viewed—it
never recovered from the 2006/2007-to-2009 plunge in activity—and
has begun to show renewed deterioration in terms of already moribund consumer
income growth.
“Fundamental effects of the crises already have been seen in
deteriorating funding conditions for Social Security and the annual budget
deficit in general.
“Reflecting the impact of the recession, Social Security cash
flows began turning negative in 2010, seven or eight years ahead of schedule.
Also reflecting the effects of the recession and the crises responses of the
Fed and federal government, the annual cash-based federal deficit exploded,
hitting $1.3 trillion or above for each of the last three years, with annual
GAAP-based deficits running at $5 trillion or more.
“Pending the results of court challenges, the Affordable Care Act (ACA) healthcare legislation likely will add
more than $10 trillion in unfunded liabilities (net present value) to the
government’s 2012 GAAP-based accounting, due for release in
December 2012. That, plus consideration of accounting for Freddie Mac and Fannie Mae and otherwise normal annual
transactions, could push the reporting of total GAAP-Based U.S.
obligations—including gross federal debt and net present value of
unfunded liabilities—from $80
trillion in 2011, into the $120 trillion range for 2012, or roughly
eight-times the level of U.S. GDP.” (emphasis added)
“Review of Economic, Systemic-Solvency, Inflation, U.S. Dollar
and Gold Circumstances, #445”
John Williams, shadowstats.com, 7/17/2012
Of Great Significance is the fact that
Degradation of the U.S. Dollar’s status as World Reserve Currency is
already well under way.
China has already entered into bilateral
Currency Deals with several nations including Russia, Iran, Brazil, and (soon
to be former) financial allies Japan and Australia. Consequently, the
Purchasing Power of the $US will suffer a huge hit in the next very few
years. Given the Real Numbers (per Shadowstats and Deepcaster, et al.) it is no wonder Economist Nouriel Roubini characterizes
U.S. Recovery as a “Fairy Tale.”
“…the first-half growth rate looks set to come in closer
to 1.5 percent at best, even below 2011’s dismal 1.7 percent. And now,
after getting the first half of 2012 wrong, many are repeating the fairy tale
that a combination of lower oil prices, rising auto sales, recovering house
prices and a resurgence of U.S. manufacturing will boost growth in the second
half of the year and fuel above-potential growth by 2013.
“…the gravity of weaker growth will most likely overcome
the levitational effect on equity prices from more
quantitative easing, particularly given that equity valuations today are not
as depressed as they were in 2009 or 2010. Indeed, growth in earnings and
profits is now running out of steam…”
“We’re Not Even Close to a Robust Recovery”
Nouriel Roubini,
Project Syndicate, 7/22/2012
And it is not just Doctor Doom Roubini who sees beyond the Bogus Official Data. Former
Reagan Budget Director, David Stockman sees the Real Data, the Consequences,
and the Challenges clearly.
“I don't think we are at the beginning of the recovery. I think we
are at the end of a disastrous debt supercycle that
has gone on for the last thirty or forty years, really. It started when Nixon
defaulted on our obligations under Bretton Woods and closed the gold window.
Incrementally, year after year since then, we have been going in a direction
of extremely unsound money, of massive borrowing in both the private and the
public sector. We now have an economy that is saturated with debt: $54
trillion or $53 trillion – 3.5 times the GDP – way off the charts
from where it was for a hundred years prior to the beginning of this. The
idea that somehow all of that debt is irrelevant, as the Keynesians would
tell us, is fundamentally wrong – and the reason
why the economy can't get up off the mat.
“We're doing all the wrong things. We're adding to the problem,
not subtracting. We are not allowing the debt to be worked down and
liquidated. We're not asking people to save more and consume less, which is
what we really need to do. And so therefore I think policy is just making it
worse, and any day now we will have another recurrence of the kind of
economic crisis we had a few years ago.”
“Austerity Is Not Discretionary,” Interviewed by Alex
Daley, Casey Research
David Stockman, Congressman and former Reagan Budget Director, 7/20/2012
Official data sources have Powerful
Interests to protect and Truth is often sacrificed. Thus it is essential to
rely on other entities and persons such as Shadowstats,
Deepcaster, Stockman, Paul Craig Roberts, and Roubini for Genuine Data and Honest Analyses. Given the
aforementioned, to Protect and Profit from confiscatory polices and Bogus
Numbers it is essential to Invest in the Precious Monetary metals, Gold and
Silver, (but see Note 1) and Inflation-Resistant Assets such as Food
Commodities. For Deepcaster’s specific
recommendations aimed at Profit and Protection despite Bogus Official data
and Confiscating Policies see Notes 2, 3, and 4 below.
Necessary also, is having Courage to see
the Truth, because the Truth is not always Pretty.
Finally, important to note is the fact
that, absent manipulation, Gold and Silver would be the monetary
“Canaries” of the Financial World, whose prices would long ago
have warned of Excessive Monetary and Credit Creation. Well, in the past
decade their price appreciation certainly has “warned” of that,
but not in the past few months. Gold and Silver prices are subject of ongoing
Price Suppression by a Fed-led Cartel as described in Note 1 below. But Gold
and Silver Price Suppression, cannot last forever.
Best regards,
Deepcaster
December 29, 2012
Note 1: *Shadowstats.com
calculates Key Statistics the way they were calculated in the 1980s and 1990s
before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer
Price Inflation reported October 16,
2012
1.41% / 9.64%
U.S. Unemployment reported October
5, 2012
8.3% / 22.8%
U.S. GDP Annual Growth/Decline
reported September 27, 2012
2.21% / -2.15%
U.S. M3 reported October 16, 2012
(Month of September, Y.O.Y.)
No Official Report / 3.32%
Note 2: The $US dropped nearly
200 basis points at one point in the last three weeks. No surprise since the
Fed’s U.S. Dollar-Destructive Q.E. to Infinity Action, coupled with the
ECB’s Similar Action the week before, boosted the Euro vis-à-vis
the Dollar, as we earlier Forecast. The very recent $US bounce does not
change its weakening Trend.
This Debauchery of the
$US weakens its Purchasing Power and thus increases Burdens on the agonized
disappearing Middle Class.
The Bernanke claim that
buying $40 billion per month in Mortgage Backed Securities would Stimulate
the Economy and help the Housing Market is just a Fictitious Cover Story. In
fact, it is just another Gift to the Mega-Banks who hold Underwater Paper,
and to Wall Street which proceeded to rally on The Fed-sugared High.
Both the Continuous
Commodities Index which show Average Annual Price
Inflation of 15% and the Real Inflation Number (9.3% per year from
shadowstats.com) reveal Serious Inflation is with us and it Intensifying.
And Especially Food
Price Inflation.
To increase Yields,
Farmers increasingly employ Fertilizer.
And a recent Reco – a Fertilizer Producer – was trading
near its 52 week low at under 40¢ per share when we first recommended it.
It has moved up nicely since we recommended you buy in. But it has such great
potential that we raise our original “buy under” price to
45¢ per share.
To see our recent Buy Reco aimed at Profiting from the Fed’s Inflation
Rocket, read Deepcaster’s recent Alert,
“Buy Reco (under 40¢/share) to Ride
Inflation Rocket; Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, &
Interest Rates, Gold, Silver, Crude Oil, & Equities,” recently
posted in ‘Alerts Cache’, on deepcaster.com.
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