Retirement: Surely You Jest

A 90% cogent article in The New York Times discusses the utter absence of any contact with reality in most Americans' retirement plans. The numbers do not come close to adding up. The article is here.

Seventy-five percent of Americans nearing retirement age in 2010 had less than $30,000 in their retirement accounts. The specter of downward mobility in retirement is a looming reality for both middle- and higher-income workers. Almost half of middle-class workers, 49 percent, will be poor or near poor in retirement, living on a food budget of about $5 a day.

This means that a majority of Americans have not taken seriously the economics of retirement. They have not saved. They have been faithful Keynesians. They have spent. They have borrowed to finance this spending. They have been grasshoppers, not ants.

To maintain living standards into old age we need roughly 20 times our annual income in financial wealth. If you earn $100,000 at retirement, you need about $2 million beyond what you will receive from Social Security. .....This number is startling in light of the stone-cold fact that most people aged 50 to 64 have nothing or next to nothing in retirement accounts and thus will rely solely on Social Security.

If we manage to accept that our investments will likely not be enough, we usually enter another fantasy world – that of working longer. After all, people hear that 70 is the new 50, and a recent report from Boston College says that if people work until age 70, they will most likely have enough to retire on.

 I was warned in 1959 that the government would default on its Social Security promises. My high school civics teacher ran the numbers for us. The program would go bankrupt. It did: in 2010. The general fund is now bailing it out....The confidence that people have in the future is based on ignorance, procrastination, and naivete. The voters do not understand how close the U.S. government is to bankruptcy. I define "bankruptcy" as follows: "the inability of the Treasury to borrow money at rates low enough to keep from producing Great Depression II, but without relying on the Federal Reserve System to lend at these low rates."

By Gary North

Turning Into PIIGS: Why France’s Debt Crisis Could Doom the EU

From one ragged country to another. We are on a tour of Europe’s unraveling economies. Ireland…Spain…and now France.

France seems to be hanging by a thread too…

The Telegraph:

Public debt in France is at 86.1pc of GDP (146pc if ECB liabilities and bank guarantees are included). The projected budget deficit this year is 4.5pc, with France having exempted itself from the EU’s instruction to bring deficits down to 3pct by the end of the year.

France’s numbers are not so different from those of the US. But America has a very big bazooka….one that France does not have…at least not yet. The US can give out the word to its central banks to buy its own bonds. It can ‘monetize the debt’ in other words.

This is always a disastrous policy…but that doesn’t make it unpopular. And in a period of debt destruction, the disaster may be far in the future…and it may not be suffered by the people who cause it. But France doesn’t have that option. It has to operate in a more honest system…like the individual US states. Which means, it has to cut spending.

By Bill Bonner

The Illusion of Choice

.............The State’s self-serving version: Too Big to Fail? Where might the economy be if the weak hands had been eliminated from the market, ceding what remaining value they had on the books to institutions that had exercised prudence and good judgment while future bailout recipients busily indulged in excessive risk-taking and reckless profligacy?

We’ll never know, of course…because Bernanke, Paulson, Pelosi & Co.’s false dilemma scared enough people into thinking there was “no other option”........ it attacks the creative process by which new ideas come to “market” by slamming the door closed on alternative possibilities.

Nowhere is a free market alternative presented. And it’s little wonder why. At the precise point the free market ends, the tyranny of The State begins. Nowhere do the two overlap. (Crony capitalism, mixed market economies and the rest are NOT free markets.) Clearly, therefore, it is in The State’s best interest to see that free market activity is marginalized as far as possible in order that The State itself might occupy ever more space in people’s minds and, by extension, in the economies they are “allowed” to build....some confused people even contend that, were we to ignore the iron-fisted directives of The State, we would promptly descend into a Mad Max-style dystopia, in which a collection of unchecked territorial monopolies would roam the planet, stealing and damaging property at whim and torturing, imprisoning and killing whomever they so wished.....

By Joel Bowman

Jim’s Mailbox....

In 1974 I placed an advertisement in Barrons saying gold would go to $900. That made for good laughs amongst the establishment then at Domonicos Steak House in the financial district. When in early 2000 I suggested gold would go to $1650 there were great laughs amongst the newbies. Now we are going to and through $3500.

If we go back to the late 1960′s, the gold price was suppressed to try and keep it at the $35 dollar price level where it had been for years, some three and a half decades. If anyone had suggested the gold price would rise from $35 to $887.50 at the high in 1980, they would have been considered nuts. A 25 fold increase. Yes, it settled down at 400 dollars for the next 30 something years, but that was still 11.4 times what it had been for the several decades before that.

We now have moved up to roughly 1600 dollars, a 4 fold move. The folks that did the repression in the 1960′s, I believe it was called the London Gold Pool, lost the battle, and the same folks doing the same thing will lose this one too....

....a 25 fold move for gold would put us at $10,000 gold, something most reading this will simply not believe.

The powers that be continue to print more paper money with abandon, while denying to the grave they are doing it. They either print, or the system comes down tomorrow..... 

Nations are no different than people. At some point you cannot pay the interest. When that happens, currencies implode. When currencies implode, you better make sure you own gold. If you have the means to buy in the current weakness in the gold price, do so. If you don’t have the means, don’t do anything – make sure you have ample cash in hand so as not to have to sell out any of your position while it has been manipulated lower. There are powers that want you out of gold, holding only paper for when the currencies are devalued. Do not throw away your insurance policy. When gold lights up, many will be shocked, not understanding why it is doing so. The price control mechanism for gold and silver is beginning to break down, as it did in the 60′s.

The Aftershock Survival Summit Transcription

Given the pullback in income growth as well as other economic factors like inflation and a weakened dollar, the retirement age would now have to be raised to 73 for average Americans just to maintain the same standard of living as in the 1940s.

Since the average life expectancy is currently about 78, millions will now have to work until they drop dead, instead of enjoying their golden years.... jobs will be tight, especially for people over 55. So for those seeking job security during the coming crisis, the necessities sector is the place to be.This is composed primarily of healthcare, education, utilities, basic food, basic clothing, and government services.

I'm not a "Gold Bug" by any means. But I know what investments are right for different conditions.
Gold will continue to be a favorite safe haven for countries across the globe.
Right now, only 10 percent of the world's total gold is purchased by the United States.
Which puts us right in line with Turkey.

India currently buys more than 20 percent of the world's gold, China 18 percent, and other countries will increase their stakes in this precious metal as confidence in the U.S. wanes.

But gold is just like any other bubble. It will burst eventually...

After inflation really sets in, you will need to keep cash in short-term investments such as money markets, TIPS, and Treasuries. Their low returns don't exactly make them very attractive, but they will protect you against inflation much better than longer-term debt.
I highly advise our viewers to stay away from long-term bonds.
Let me stress that again. Avoid long-term, government bonds.

.....Bob Wiedemer (author of Aftershock)
The Aftershock Survival Summit Transcription

About Those Excess Reserves At the Fed

If reserves do not matter, if they are a meaningless accounting entity, then it would not matter what the Fed pays on them, except for the purposes of a risk free handout to their banking buddies. And there may be a valuable insight in that after all.

Regardless, I would just like the Fed to make up its collective mind what their position on this really is, and not trot out whatever argument they feel suits the moment, although that does seem to be à la modeamongst economists these days. They have become as bad as attorneys and accountants. The truth is whatever we say it is, whatever the guy with the most money wants it to be.

The next time some economist says that paying interest on Excess Reserves does not matter, show them this newswire copied below, and let them argue it with Alan Blinder. San Francisco Fed President John C. Williams made a similar argument about four weeks ago. And Bernanke concurs that this is a powerful weapon in his mad scientist's toolkit. ....some economists argue that Fed interest payments on reserve do not matter because they do not want to deal with the political issue of paying what is essentially a subsidy to the banks for the reserves that the Fed creates for them...

jessescrossroadscafe

David Einhorn Throws France Under The Bond Vigilante Bus

.... France is now cozying up to its new anti-austerity, pro-money-printing allies, Italy and Spain. This makes sense when one considers that France's economy is more akin to that of its southern neighbors than it is to the German economy. Strangely, the French bond market hasn’t figured this out just yet."

In April, the LTRO “fix” began to wear off as bank customers in Europe’s periphery started contemplating what would happen to their savings if their nation left the Euro. Visions of bank statements not in Euros, but in ‘newly re-issued for the purpose of devaluation’ local currency, offered no twinges of nostalgia. National pride gave way to pragmatism as depositors in Spain, Italy and Greece began transferring money in droves from their respective local banks to less risky banks of other countries – particularly those with German names. The market took note of these incipient bank runs as peripheral sovereign bond spreads raced to new highs.

By early June the market had given back all of its first quarter gains ....a simple analysis of Germany shows that its own fiscal situation isn’t so rosy, particularly if it is also headed toward recession. Were it to try to bail out its neighbors, there is the risk that they would all sink together. Germany already has its own fiscal commitments, and its economy is simply not big enough to bail out the rest of Europe.

The whole thing is such a mess – who can blame them for heading for vacation? ....

By Tyler Durden

Austerity Is Not Discretionary

...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....

..you can't live beyond your means because it's pleasant. It's not sustainable. Clearly the level of debt that we have is not sustainable. We have a whole generation – the Baby Boom – that's about ready to retire, and they have no retirement savings. We have a federal government that is bankrupt, literally. Its [debt is] $16 trillion and growing by a trillion a year. Something's going to give. We can't pay for all these entitlements. There won't be the revenue generation in the economy to do it.... Austerity hasn't been forced upon us yet. The dollar is up, people are continuing to buy Treasuries – both nations and banks are buying Treasuries. To all extents and purposes, people are continuing to show massive confidence in the US government, lend it money at extremely cheap interest rates, and letting it build up its debt.

This market isn't real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they're doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank.

The Fed has destroyed the money market. It has destroyed the capital markets. They have something that you can see on the screen called an "interest rate." That isn't a market price of money or a market price of five-year debt capital. That is an administered price that the Fed has set and that every trader watches by the minute to make sure that he's still in a positive spread. And you can't have capitalism if the capital markets are dead, if the capital markets are simply a branch office – branch casino – of the central bank. That's essentially what we have today.

monetary central planners who are attempting to use the crude instrument of interest-rate pegging and yield-curve manipulation and essentially buying debt that no one else would buy, in order to keep this whole system afloat. It's Ponzi economics. Anybody who had financial training before 1970 would instantly recognize this as Ponzi economics

The greatest period of growth in American history was 1870-1914 – the Fed didn't exist. Right after 1870, when we recovered from the Civil War we went back on the gold standard. It worked pretty well...Where we should have been by the Lehman crisis event. In the next seven weeks, this crazy lunatic who's running the Fed increased the balance sheet of the Fed by $900 billion, in seven weeks. In other words, they expanded the balance sheet of the Fed as rapidly in seven weeks as it had occurred during the first 93 years of its existence. And that's not all, as they say on late night TV: in the next six weeks they added another $900 billion. So in thirteen weeks they tripled the balance sheet of the Fed.....

David Stockman

The Cons and Cons of Debt Monetisation

A critical point to understand is that monetary inflation carried out by the central bank is a problem for the same reason that private counterfeiting is a problem. It results in an exchange of nothing for something and is therefore a form of theft. Nobody would argue that a private counterfeiter was providing a valuable service to the economy if he printed-up money to buy the bonds of financially-stressed governments, so why do many people believe that the central bank can do some good when it buys bonds with money conjured out of nothing?

Adding to the supply of money cannot possibly add to the total wealth in the economy, and yet some people get richer as a result of the monetary injection. If some people get richer while the total wealth is not increased, then other people must be made poorer and what we are dealing with is a forced transfer of wealth. 

In effect, the costs of making a bad investment in bonds would be shifted from those who made the ill-conceived investment decision to those who had nothing to do with the decision. Furthermore, the shifting of costs would be done surreptitiously. If all euro savers were sent a bill for their share of the wealth transfer there would be an uprising, but when the transfer is done via monetary inflation not even one person in one hundred will be able to figure out why he/she has become poorer.

The costs to euro savers are hidden from view because rather than there being an immediate transfer of money there is a gradual transfer of purchasing power....

By Steve Saville, 321Gold

Why The Government Is Destroying The U.S. Dollar

1. Creating money out of thin air on a massive basis is all that stands between the current state of hidden depression, and overt depression with unemployment levels in excess of those seen in the US Great Depression of the 1930s...almost 9% of the US economy is currently funded by deficit spending. From a political perspective, this $1.3 trillion a year is "free money" that politicians get to disburse on a political district and favored special interest group basis...

2. It is the most effective way to meet not just current crushing debt levels, but to deal with the rapidly approaching massive generational crisis of paying for Boomer retirement promises... To hide a depression.

3. It creates a lucratively profitable $500 billion a year hidden tax for the benefit of the US government which is not understood by voters or debated in elections.The US government has been waging currency war since September of 2010. One solution is that when a nation slashes the value of its currency, its workers become relatively cheaper. There is no free lunch, however. Older citizens will be bearing most of the pain can be found in my article linked below, "Bullets In The Back: How Boomers & Retirees Will Become Stimulus, Bailout & Currency War Casualties".http://danielamerman.com/articles/Bullets.htm

4. It is the weapon of choice being used to wage currency war and reboot US economic growth;
The graph below is from my article, "Six Layers Of Deficit Impossibilities Mean Retirement Catastrophe".

If taxes can’t pay (and it’s ludicrous to think they can), and the US doesn’t declare bankruptcy, then just how do we cover the gap?
Short answer: pay in full, but make the dollar worth five cents. This drops the per household cost for everything from almost $800,000 down to about $40,000. Painful, but manageable over a period of 20-30 years. Merely make a dollar worth five cents, and impossible government promises become quite payable. The problem with this "solution" is that it also requires making most people's life savings worth five cents on the dollar.

5. It is an essential component of political survival and enhanced power for incumbent politicians.
The Federal Reserve effectively controls short, medium and long-term interest rates in the United States, and this means that it controls the borrowing costs of the United States government. As developed my article linked below, "Hiding A $500 Billion Tax On Savings: How The Government Deceives Millions", by forcing interest rates below the rate of inflation, the Federal Reserve creates about a half trillion dollar per year "windfall" gain for the Federal government.

This is not "free money", far from it. Every dollar of benefit for the government from interest rate manipulations comes directly out of the pockets of savers.
From a politician's perspective this massive tax - almost three times the size of federal corporate taxation - is a "dream tax". Half a trillion dollars a year is available to spend without raising taxes or increasing deficits. Sure, there is a cost, which is the entirely deliberate destruction of retirement dreams and promises for tens of millions of US workers and retirees - particularly Boomers - as well as pushing forward the insolvency of state and local government pension funds around the country. But the deliberate bankrupting of a generation is a long term problem with no clear accountability and almost no voter understanding, which means it is more or less irrelevant for how political decisions are made today.

By Dan Amerman

Focus on the 20% Because You Can Replace Lost Money But Not Lost Time

I define puttering as follows: "Unsystematic work that fills time without accomplishing much output." I define frittering as follows: "The refusal to take advantage of opportunities that have been placed in your hand."

Vilfredo Pareto in 1897 reported on land ownership in several European nations. About 20% of the inhabitants owned 80% of the land. Over the last century, investigators in many fields have noticed a similar distribution. About 20% of the officers in a police force make 80% of the arrests. About 20% of the clients of a company produce about 80% of the profits.

It turns out that the best way for a businessman to spend his time is the 20% of his hours in a day that produce 80% of his net income. It may not be easy to identify these activities, but for a successful career, a person must do this

What we find is that even when people do this, they do not have the self-discipline to ruthlessly abandon the 80%. They keep doing these low-return tasks. This may be pure habit. It may be a commitment to the ideal of perfectionism: to be sure that everything gets done right. The person refuses to decentralize and delegate. He cannot bring himself to let go. The result is that the person does not attain his maximum output/income.

Puttering is the same as perfectionism in this sense: the putterer does not prioritize his work. Neither does the perfectionist. The putterer works on lots of projects. He does a little here, a little there. He is not focused on the one project that needs to have the key 20% operating at 96% efficiency, and the key 1% operating at 99% efficiency. He does not have a time schedule. He does not have a schedule of priorities. He works a little on a major project, but then gets sidetracked on a minor project. The idea that some things can safely be delayed does not amaze him. He delays lots of things. But he has no sense of "first things first."

The putterer is busy. He is not lazy. He never stops working. But his output is unreliable. He is never sure how long it will take him to complete the most important projects. ...The putterer's great enemy is time. It gets away from him.

The fritterer cannot distinguish a unique opportunity from a poor one. He does not see that life brings some opportunities that are uniquely valuable. They will not come again. The fritterer thinks that life is a stream of opportunities. One is as good as another. There is no need to prioritize. There is no need to select one and concentrate on it to the exclusion of all others.The fritterer has a problem related to puttering. He lacks a sense of priorities.He misses opportunities. We say this: "He let the opportunity slip through his fingers." This is especially true of money. He cannot handle money. More important, he cannot handle time. Both "get away from him."n this life, entropy rules by default. Things get chaotic unless we actively intervene. It takes capital to reverse this regression to the mean: chaos. The fritterer does not perceive the power of entropy. He needs to pay attention. The friterrer's great enemy is money. It gets away from him. But time is also an enemy. It is easy to fritter away opportunities.

If it's puttering, then you must pay close attention to these issues: (1) your long-term goals, (2) your ability to prioritize them, (3) your ability to budget time, (4) your ability to review the output of your efforts in relation to your goals. You know that you must get a lot of things done. You don't know which have chronological priority.

If your problem is frittering, you must pay close attention to these issues: (1) your long-term goals, (2) your ability to prioritize them, (3) your ability to budget money, (4) your ability to review the output of your efforts in relation to your goals. You know that you must get a lot of things done. You don't know which have monetary priority.

Time and money are always in tension. There is a time cost of money and a money cost of time. The faster you want to accomplish something, the more you will have to pay. If you are short of money, you had better be long on time. This is the situation faced by youths. Old people face the reverse.

Time can get away from you. Money can get away from you. You can replace lost money. You cannot replace lost time.People forget how little time they have. When it comes to time, there's not more of that. When the account says "insufficient time," the process ends. It's not like "insufficient funds."

By Gary North

A Reliable Contrary Indicator for Gold
"A government big enough to give you everything you need is a government strong enough to take everything you have." ~ Thomas Jefferson

Today, I urge you to read the excellent article contributed to Mountain Vision courtesy of our friend Ronald Stoeferle of Erste Group Research in Austria, "Gold Analysts Remain Bearish: A Reliable Contrary Indicator." Many of you have asked us whether we are still positive about gold. The short answer to your question is "yes." We continue to be very positive on gold, and certainly in the medium- to long-term. In this regard, Roland´s article reflects our position very well.

"Financial crises are becoming a common feature of the economic landscape. Despite this new reality, many companies continue to conduct business as usual, with devastating effects when trouble strikes. Executives who do prepare companies when times are good can increase their odds of weathering a financial crisis when it hits - and even position them to prosper in its wake.

By Frank Suess

The Quantum of Quantitative Easing Inflation is Coming!

First we saw the US dig out and focus on 4 year old LIBOR manipulation stories centred around the cesspit that goes by the name of Barclays Bank that looks set to devastate all of UK's biggest banks, with the UK tax payer ultimately footing the bailout bill. I have covered this story at length that illustrate that everyone knew about LIBOR manipulation but now pretend that they only found out relatively recently - more here - RBS Chaos and Barclays Libor Cesspit Prompts Slow Motion Run on British Banks

...we have seen more convenient revelations out of the US dating back to 2007 that HSBC, Britain's biggest bank that forces ordinary citizens to jump through hoops to transfer small amounts of currency abroad has been engaged in systematic money laundering for the Mexican drug cartels to the tune $7 billion with potentially far worse across the world as HSBC affiliates apparently did business with rogue nations and terror organisations.The truth is that BOTH stories could equally apply to major U.S. Banks but U.S. politicians are choosing not to investigate / hold them to account.... One possible answer may be found in the records of campaign donations??

So now in the UK, HSBC takes the lead from Barclays as Britains most criminal banking institution, the question is will Barclays fight back for the lead with something even worse? Off course Britain's banks are just a few amongst many that is the global banking mafia crime family. The truth will belatedly come out though the price paid will probably wholly be by tax payers.

Now whilst you should by now be agreeing fully with me that the global banking system is fraudulent and possibly even start to see that the central banks are party to this fraud by evidence of their actions as illustrated by money printing, the whole of which has been effectively funneled into the back pockets of the Bankster elite where in the UK this stands to the tune of £375 billion over 3 years, all aided by pure propaganda that central banks are pumping money into the economy which I have repeatedly illustrated as being a PURE LIE because it has NOT been pumped into the the economy as politicians continually state but into the banks.

The Only Solution Governments have is Inflationary Debt and Money Printing
If the Government / Bank of England wanted to boost the economy then they would have handed over at least some of the money that has been stuffed into the bankster banks to the people of Britain by means of tax refunds. The only reason why they have not done so is because it will be highly inflationary, after all Britain being an economy in depression for the past 4 years has still suffered Inflation of 15% as illustrated by the Inflation Mega-trend graph below -



The inflation mega-trend is something that the mainstream press never mentions ...

The QQE Secret of How to Print Money Without Increasing Debt

This is taking place right now, completely out of the focus of the public and the mainstream press....

QQE is taking place by means of the interest earned on government debt bought by the Bank of England

I am sure this is one secret that the Bank of England wants to keep hidden away for as long as possible for it implies that the ramping up of the Inflation Mega-trend is already underway with approx 1/3rd of Government debt having been effectively cancelled to date! As effectively 1/3rd of the interest the government pays on it's debts is going back to itself! And meamtime about 12% of the value of the debt has been wiped out by inflation (£132 billion) over the past 3.5 years)

This is the magic of the electronic money printing presses and inflation, as one minute the government had £1.1 trillion of debt and then the next minute POOF, it is all gone! A bit like Verbal Kint turning into Kaiser Sozer!

By Nadeem Walayat

Central Banks Are Doomed, Thanks to the Fed's Criminality

Untouchable status means that the organization gets a free ride in society. Its mistakes are overlooked. Its deviations from established standards are overlooked. It is immune from the usual criticisms that all other institutions are subjected to.


These organizations are at the center of the social order. They are immune from politics, because they are the basis of power.... It is considered unthinkable that society could function without an untouchable institution. The organization is so deeply ingrained in the thinking of the intelligentsia that leaders are literally unable to imagine how society could exist without it.... Yet at some point in a nation's history, society and politics did without every presently untouchable organization. It was not only not untouchable, it did not exist.

There are two such organizations in the West today: the public school system and the central bank.

THE PUBLIC SCHOOLS
The Powers That Be do not send their children into compulsory tax-funded schools. So, those at the top buy their children's way out. The power elite maintains control through the compulsory school systems which their wealth allows them to escape.

CENTRAL BANKING
The twentieth century was the century of central banking. Almost every nation had a central bank in 1999. Central banking is untouchable. Except for Austrian School economists and fiat money Greenbackers, no one calls for the abolition of central banks. To get involved in opposition to central banking is like applying for membership in the Black Helicopters Society.

Congress legally is in charge of the FED. Yet it has yet to audit the FED, with a comprehensive audit of the gold holdings. It does not set policy for the FED. "Where is the government's gold?" "In our vaults." "How do we know?" "Trust, but don't verify."The Board of Governors of the FED is the only governmental agency that is legally independent of the government, and is praised by the nation's opinion leaders for this independence. That is to say, the FED is the most anti-democratic agency in the country. It is not just that politics has no control over it.

Here is an institution whose publicly appointed agents are paid by the government, yet whose 12 regional banks are privately owned, and no one in Congress knows by whom. These 12 regional banks have the power of civil governments, yet they are immune from civil government. No Congressman or local politician dares call for public representation on their boards. There is no other institution like this in the nation.

The Greenback movement began in the 1870s. These people have always been on the fringes of American politics. They are advocates of pure fiat money issued by the federal government. They got their name from the green paper bills issued by the Union in the Civil War. They oppose the gold standard. They oppose banks. They oppose the FED.Voorhis was a Greenbacker who wrote a book on this: Out of Debt, Out of Danger.

WHEN QE3 TURNS INTO MASS INFLATION

A recession looms, despite Bernanke's assurances to the contrary. The fiscal cliff looms on January 1: the expiration of Bush's tax cuts. The prospect of an annual deficit approaching $2 trillion looms. Social Security is running a deficit. Asia may stop buying Treasury debt. Then what?

Inflate or die.

The FED will try to play the boom/bust game one more time. This has worked for 60 years. But the annual deficit was not $1.2 trillion. Social Security was not in deficit mode. The Baby Boomers were not retiring. Foreign central banks were not holding 40% of the public debt.

By Gary North

All The World's A Stage

The bank and regional debt problem is one the size of $350-400 billion in the fourth largest economy in Europe while their 12% contribution to the EU, the ECB and the stabilization funds will soon no longer be made I surmise. It is a squared problem then you see and a vindication of the notion that firewalls and fences do nothing to improve the health of the horses that are inside the corral. The animals are sick, infected by their own exacerbated standards of living which they can no longer fund internally given declining revenue bases as virtually every country in Europe, besides Germany for the moment, falters in recession. Hence you hear the cries and screams and the gnashing of teeth demanding that Germany picks up the bill but the size of the German wallet is not up to the task with a $3.2 trillion dollar economy that can only withstand so much.

By Tyler Durden

David Rosenberg On A Modern Day Depression Vs Dow 20,000

This is looking more and more like a modem-day depression. After all, last month alone, 85,000 Americans signed on for Social Security disability cheques, which exceeded the 80,000 net new jobs that were created: and a record 46 million Americans or 14.8% of the population (also a record) are in the Food Stamp program (participation averaged 7.9% from 1970 to 2000, by way of contrast) — enrollment has risen an average of over 400,000 per month over the past four years. A record share of 41% pay zero national incomes tax as well (58 million), a share that has doubled over the past two decades. Increasingly, the U.S. is following in the footsteps of Europe of becoming a nation of dependants.

From David Rosenberg of Gluskin Sheff

The Unacceptable Behavior of the Market

At this point the only thing that can save the euro is a combination of moves in which the European banks are guaranteed by a credible institution and in which Germany takes steps to stimulate its economy quickly and dramatically. Until Germany is willing to boost domestic spending enough to run a deficit that allows Spain to run a surplus, it is impossible for Spain to repay its debt. This is just basic balance-of-payments arithmetic.
.... Given all the excitement over the speed of the deterioration in European markets, I suppose we are going to see urgent new measures announced and a temporary respite in the crisis, but ultimately I think this will be little more than a blip on the way to sovereign debt restructuring and the break-up of the euro. Nothing has changed fundamentally in Europe in the past few weeks and there is no reason to assume that the crisis is on its way to being resolved.

..... The massive credit expansion in China, with its associated problems of overinvestment and asset price bubbles, is no different than any other credit bubble.
..... In my opinion the next few years are not going to see soaring commodity prices but rather collapsing commodity prices, in large part because it has been China’s unsustainable investment boom that has both driven demand up ferociously (accounting for only 10% of global GDP China nonetheless absorbs roughly 40% of global copper production and nearly 60% of global iron ore and cement production) and driven up investment in extractive industries.
Once China brings down its infrastructure investment rate, the combination of declining demand (in fact China has stockpiled so much that it will soon turn from importing copper, iron ore, and other commodities to exporting them) and expanding supply is likely to have a very deleterious effect on prices. In my opinion China is paying overly high prices in a market in which prices are likely to drop sharply.

BY MICHAEL PETTIS

JAPAN

I’m amazed that Japan has not yet hit an economic reef. At over 230+%, the country’s debt to GDP is so far out of whack that I keep thinking that something has to give. I’ve been wrong for years.

The trend lines for Japan are awful. A decline in total population coupled with a rapidly aging society is a recipe for slow or no growth. Japan is the world leader in these critical statistics. I don’t think there is anything that Japan can do to reverse its social/economic future. Projections on the critical variables for at least the next ten-years continue to head south.

There is no chance in hell that Japan will achieve the triggers. The folks who passed the laws know that. I think Japan deserves the annual award for the most heinous “kick the can down” tactic. The following chart shows how Japan has limped along for the past 20 years. Note the GDP performance over the past decade. What are the odds that it breaks 2% anytime soon based on the prior track record?



How’s Japan doing today? Is it on it way to achieving the all important 2% GDP target for 2013 (the trigger for the 2014 tax increase)? Not a chance. From the FT this morning:



................ Bruce Krasting

Can Gold's Luster be Restored This Summer?

The summer has been a dizzying one for commodities. The last four weeks have witnessed the price of corn soaring toward an all-time high due to withering heat in the Corn Belt states. At the same time, this weather-driven bull market in the grain market, as well as the recent oil price rally, has left investors wondering if this summer might finally be gold’s time to shine.

In the same period that the CRB Commodity Index has rallied off a 52-week low, the price of gold hasn’t made much headway at all. Gold remains stuck in neutral as both professional and retail traders have shown little inclination to bid up prices.

Indeed, gold is already technically “oversold” on a longer-term basis as we’ve discussed in recent commentaries. The 10-month price oscillator for gold has registered its most sold out reading for gold in 10 years (see chart below). While this is an important consideration for serious longer-term investors, it hasn’t done anything to attract the “hot money” crowd.



There are two major components of the gold price. The first one is monetary, the second is emotional. Both have served as powerful catalysts to a gold rally in the recent past. The monetary component is obvious to most observers in that a sizable increase in monetary liquidity tends to increase the gold price. The emotional component is mainly driven by fear – whether fear of a dollar collapse or some other market-related or political fear. Right now the fear element is muted since investors are too busy chasing high-yielding stocks to worry about impending economic collapse. The dollar has actually strengthened in the past year (see chart below), which gives investors even less reason to pile into gold. Until investors are given a serious reason for concern, they are likely to continue ignoring gold.

.......... Cliff Droke

The Potential for Gold Stocks in 2013-2014

Valuations are currently at levels commensurate with those of late 2008 and late 2000. By the way, those were the two best times to buy in the last 12 years. Also, we want you to notice how valuations increased substantially (about 100%) from those levels within six months.....

There are two drivers of stock prices: valuation and earnings. Valuations are very much driven by investor sentiment while earnings are driven by revenue and margins. In recent months we’ve devoted some time to the three phases of a bull market. These are the stealth phase, wall of worry phase and participation or bubble phase. Earnings rise in each stage while valuations only increase in the first and last phase. The average gold producer has made no net progress in five or six years because the average valuation has declined considerably. Going forward, this means opportunity.

Valuations are currently at levels commensurate with those of late 2008 and late 2000. By the way, those were the two best times to buy in the last 12 years. Also, we want you to notice how valuations increased substantially (about 100%) from those levels within six months.

If Gold is able to break above $1625 and confirm its bottom then it would be on an eventual track for a rebound back to $1900. If a cup and handle type of pattern develops, it would project to $2250/oz. In the past we’ve noted $2,300 as a strong Fibonacci target.


...By Jordan Roy-Byrne

GOLD Analysis

There is actually a "solution", albeit a very painful one. All that needs to be admitted is that the problem is grave and insoluble because the debts which are ALREADY on the books cannot ever be repaid. After that, it is a simple matter of letting the liquidation take its full toll as some of the debt is written off at pennies on the Dollar while most of it is simply eradicated as being totally unrepayable. Having done that, there is the further matter of exposing the malinvestments whose prices have been propped up for decades by the issuance of this unrepayable debt. All of this would certainly cause an instant and global economic and financial implosion. That having been said, there is no such thing as an economic good which does not have a market price. Leave the market free to find it and the wreckage can be cleared away in an astonishingly short period of time...

The global paper currency system is very young. It depends for its continued functioning on the belief that the debt upon which it is based will, someday, be repaid. The one thing, above all others, that could shake that faith, and therefore the foundations of the modern financial system itself, is a rise (especially a sharp rise) in the U.S. Dollar price of Gold.
Daily Spot Future $US Gold

With 25, 50, and 200 day Moving Averages


.....
Gold and silver ARE money. Interest rates merely reflect the fact that people prefer present goods to future goods. In a money economy, there is no economic good that people want more than money because they know that they can exchange the money for anything they want at any time. A VERY low interest rate on the reserve behind the money - which today is sovereign debt - gives the impression that the money is "sound" and will hold its purchasing power. That is why the interest rates on US Treasuries are routinely manipulated. The case for Gold (and silver) is even more obvious. Gold and silver are money that is nobody's liability and which cannot be created by a keystroke on a computer. They are the alternative to modern fiat and backed by government debt money. Any rise in their purchasing power as compared to what is used as money casts what is used as money into increasing disrepute. Obviously, those in charge of that money don't want to see Gold and silver rising in "price". Therefore, the price of Gold and silver is manipulated. It has ALWAYS been manipulated and will be until the day comes when it regains its function as money.

..............theprivateer

Ending the Monetary Fiasco – Returning to Sound Money 

Ludwig von Mises is one of the most important economist of the 20th century and one of the greatest social philosophers. Mises knew that capitalism, for a number of reasons, has politically powerful enemies. The most powerful, most destructive, and most vicious and subversive of these would be false monetary theory and, as a result, a misguided monetary system, as it inevitably will destroy the free societal order. In The Theory of Money and Credit, published in 1912, Mises noted. It would be a mistake to assume that the modern organization of exchange is bound to continue to exist. It carries within itself the germ of its own destruction; the development of the fiduciary medium must necessarily lead to its breakdown.[2]

By fiduciary medium Mises meant fraudulent money: money that systematically violates the principle of private property — money that isn't backed by freely chosen money proper (such as gold and silver). Government controlled fiat money is and will always be, by construction, fraudulent money. We already find ourselves facing the destructive consequences that the worldwide fiat-money regime has engendered: impoverishment, caused by malinvestment, and rising despair among the people — which, it must be feared, will set into motion disintegrating forces for capitalism, the productive, peaceful, and sustainable societal cooperation.

Interventionism is," as Mises wrote,
not an economic system, that is, it is not a method which enables people to achieve their aims. It is merely a system of procedures which disturb and eventually destroy the market economy. It hampers production and impairs satisfaction of needs. It does not make people richer; it makes people poorer.[3]

Today's money is supplied by government-controlled central banks, which hold the money-supply monopoly. Today's money is fiat money; it no longer has any link to a commodity such as gold. Central banks can, and do, issue new money "out of thin air." The stock of money is increased without invoking any wealth-producing activities as required in the free market. Fiat-money creation — which is typically done via the credit markets — can therefore — from the viewpoint of the best legal tradition — be called counterfeiting money. The increase in the fiat-money supply via circulation credit is inflationary, and its consequence is prices for consumer or asset prices going up.

What is more, it leads to a false sense of real savings. The artificially lowered market interest rate induces investment projects that would not have been undertaken under an unchanged credit and money supply.
The increase in the fiat-money supply via circulation credit is inflationary, and its consequence is prices for consumer or asset prices going up.What is more, it leads to a false sense of real savings. The artificially lowered market interest rate induces investment projects that would not have been undertaken under an unchanged credit and money supply.

...The disintegrating of fiat-money systems the world over...If commercial banks default on their debt, bank liabilities — in the form of unsecured and secured debentures — and finally also demand, time, and savings deposits would be destroyed.

The collapse of stock-market valuations has been accompanied by skyrocketing price volatility. In the US stock market, volatility has reached levels last seen in the Great Depression period.

The price volatility of gold has also been going up dramatically, having returned to levels last seen when paper money devalued sharply against gold, that is in 1933–34, the early 1970s and 1980s.

What is more, governments around the world have underwritten domestic banks' balance sheets with tax payers' money. This, in turn, has increased investor concern about possible government defaults, as reflected in strongly rising premiums for insuring government bond portfolios, or so-called "credit default swap spreads."

....establishing free banking, based on 100% reserve banking that complies with traditional legal rules of property rights. The corollary would be ending any government inference in monetary affairs, abolishing the central bank....Central banks loose their monopoly over the money supply, and they could no longer manipulate the market interest rates.

Mises lays bare, and unmistakably so, the decivilization process caused by government-controlled fiat money. Fiat money destroys, sooner or later, the free society, through the economic and political catastrophes it provokes.

By Thorsten Polleit

Our Money Is Dying: Don’t Let Your Wealth Die With It 

...what this boils down to is that you want to trade out of the dying currency and hold assets that will not lose value as the currency collapses – physical goods. Once hyperinflation takes hold it becomes unstoppable, even though there are moments of hope (as evidenced by the timeline of Weimar hyperinflation chart provided in the article below.) The key is to own goods and assets that will preserve wealth or can be traded for the currency as it becomes necessary (to pay bills or transact locally). The article below not only provides historic precedent for why hyperinflation could occur in the United States and to the world’s reserve currency, but how to identify it when it takes hold.A question on the minds of many people today (increasingly those who manage or invest money professionally) is this: How do I preserve wealth during a period of intense official intervention in and manipulation of money supply, price, and asset markets? 

...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 the result of a voluntary abandonment of further credit expansion, or later, as a final and total catastrophe of the currency system involved.

(Source)

When Money Dies - In the book When Money Dies by Adam Fergusson, which details Weimar Germany’s inflation over the period from 1918 to 1923, the most riveting parts for me were the first-hand accounts from the people caught in the storm.The simple observation is that many people had a blind belief in the money system. They lost their wealth because they were unable or unwilling to allow reality to challenge their beliefs.

When Money Dies is the classic history of what happens when a nation’s currency depreciates beyond recovery. In 1923, with its currency effectively worthless (the exchange rate in December of that year was one dollar to 4,200,000,000,000 marks), the German republic was all but reduced to a barter economy.

Those without the gift of foresight to identify what is coming, coupled with an inability to take decisive action that cuts against the social grain (at least early on), will simply lose their wealth and not be in a position to buy or exchange anything but their own time and labor in the future. This leads to the assessment that owning or producing things that people need or want is a good strategy.

The cruelest part of a currency destruction is that it will sneak up on most people....

............. By Chris Martenson

A Message to the Deflationistas

Whatever is needed to paper over the excesses of the banking industry will be provided. 

.... the U.S. is running Japan’s playbook straight down the line, except that they are doing so at a point in time where they have consumed their pool of savings and will have to rebuild it while simultaneously bailing out a banking system infinitely more over-levered through the magic of rehypothecation and risk-price fixing, as in JPMorgan finally admitting that they have been mis-reporting CDS quotes. So, while the U.S. is in year four of the Japanese recipe for losing a generation, Japan is likely exiting theirs, albeit it at a glacial pace.

.... In the end we have exactly what we inflationistas have been saying for four years: commodity inflation and credit deflation. Hyperinflation will only arrive as a mistake or a blunder by the central banks, but not out of stupidity but rather out of faith in models which are wrong and when those models fail, they fail spectacularly causing massive interventions. The more likely scenario now that we have lived through four years of it is a grinding stagflation a la the 1970’s with rising energy, food and precious metals prices and a sideways stock market



The Federal Reserve is still fully in control of the situation, at least for now, and at this point if they get the timing wrong will result in hyperinflation because they are so woefully behind the curve that they will have to over-print to the point of confidence collapse or we will muddle through with a grinding 8-15% inflation for the next 10-15 years which will wipe out an entire generation of value investors just like in Japan after their bust in the 1990’s until now.

Central to the deflationist argument is that because we live in an age of fiduciary media, or credit money, and credit is trying to contract as loans are defaulted on wiping out creditors’ claims to money that this is the same as all forms of credit are contracting and will create something akin to the liquidity trap of Keynes’ nightmares. But to make this argument one has to believe that the central banks will not perform the one function they were created for in the first place: to provide the banks with all the credit they needed to keep functioning if they over lent to people who couldn’t pay. Yes, the system is structured similarly to a Ponzi scheme but the difference is that Ponzi didn’t have a printing press.

For this reason being long gold in a mix of physical metal and claims for it is an excellent long term hedge against the self-preservation instincts of the banking class.

....................... Peter Pham

13 States Now Considering Gold and Silver as Money



The Utah Sound Money Act outright flies in the face of the fiat money system, which is the printed money used today; backed by nothing but the promises of politicians. While U.S. states cannot create their own currency under the Constitution, they are allowed to use gold bullion and silver bullion as legal tender.More and more states are now exercising that right.Lawmakers in Utah, when they studied history, found that every single instance of money printing and massive increases in a country’s debt always led to the destruction of the currency and a depression among the citizens that lived through it.

Other states considering legislation to make gold bullion and silver bullion legal tender are Montana, Colorado, Idaho, Indiana, New Hampshire, Georgia, Washington, Minnesota, Tennessee, and Virginia.
This may seem strange, but cultures in Asia would not be surprised, considering that gold bullion and silver bullion have been considered money for 5,000 years there. Also, people forget that, until 1971, the U.S. dollar was backed by gold bullion. The distrust of the money printing being enacted by the Federal Reserve and the unprecedented debts being accumulated by the U.S. government, which are increasing by at least $1.0 trillion per year, are being questioned....

The stock market, as measured by the Dow Jones Industrial Average, has been stuck in a narrow trading range between 12,500 and 13,000 for the past month.....

.......... By Michael Lombardi (http://www.profitconfidential.com/)

Ray Dalio's Bridgewater On The "Self Re-Inforcing Global Decline"

The developed world remains mired in the deleveraging phase of the long-term debt cycle. The European deleveraging has been badly managed and is escalating, bringing Europe closer to either a debt implosion or a monetization and currency collapse. In the US, the deleveraging is progressing in a more orderly fashion but continues to weigh on the economy's ability to grow without the monetary support of the Fed.

The breadth of this slowdown creates a dangerous dynamic because, given the inter-connectedness of economies and capital flows, one country's decline tends to reinforce another's, making a self-reinforcing global decline more likely and a reversal more difficult to produce.

Given the lack of global private sector credit creation, the world's economies remain highly reliant on government support through monetary and fiscal stimulation. Our studies of deleveragings have proven to be invaluable through this period. Because the dynamics of deleveragings are understandable and observable throughout history, one can reasonably assess the nature of their outcomes over time. But because highly-indebted systems that are in deleveragings are also inherently unstable.

....The unresolved European imbalances and the differences in their impacts on each country have produced widening differences in the self-interests of these countries, which have led to political divergences that have magnified the risks.

........ By Bridgewater

Full Spanish Bailout Will Cost €650bn …………..It’s Impossible !

It’s always absolutely terrific when economic realities start to slaughter political fantasies.
Personally these days I’m placing all my bets on economic realities eventually destroying first the euro monetary union and then second the European Union (EU) itself. The EU will probably have to be destroyed by the direct action of citizens rather than by economics per se (normal democratic arrangements in Europe have been all but snuffed out by the Lisbon Treaty).

 
Incidentally, where the hell is anyone going to find €650 billion just like that? Let’s be honest, by any measure you care to choose, the euro/EU is unmitigated madness. 

The European Union will almost certainly turn out to have been one of the greatest deceits in history. The citizens of Europe and the UK were never supposed to understand the true intentions of their political elites. But, “oh what a tangled web we weave, when first we practise to deceive …”.
       ..............
By Moraymint

Why Gold Will Erupt? 

Intervention, manipulation and suppression
We have gold intervention, manipulation and suppression by governments, banks and hedge funds. We have a paper market in gold which is around 100 bigger than the physical market, facilitating this market intervention. Governments dislike gold since it reveals their deceitful actions in destroying the value of paper money by printing unlimited amounts of it. The media don’t understand gold. Financial TV ridicules gold and even the most respected newspapers, like the FT, don’t appreciate that gold is money.

And even with the major investment demand that we have seen in the last few years, only 1% of world financial assets are in gold.

So why is gold likely to erupt in the next few weeks? After a strong move into late August 2011 we have had a correction/consolidation for almost 11 months. Debts are increasing at an exponential rate and there is no attempt by government to stop the spending of money the country doesn’t have. Total debts and exposure in the US is approaching $500 trillion. This includes unfunded liabilities and derivatives.

Bonanza
A concerted (ECB, FED, IMF etc) money printing bonanza is likely to start in 2012. This will lead to all currencies collapsing in real terms. Collapsing currencies will lead to a hyperinflationary depression.

Distrust in governments
Gold will also appreciate because there is a total distrust in governments’ ability to govern. The more governments fail, the more they will want to control the system and the citizens and the more regulation they introduce. There is also distrust in the financial system.

Consequences
The financial system is rotten in its core and bankrupt governments have no chance of saving it.
Unemployment is already 25% in many countries (USA 23%) with youth unemployment in many areas at 50%. This will get a lot worse. But this time around there will be no government handouts. The social security system will collapse under its own weight and so will the pension system. Most pension plans worldwide are non-existent, unfunded or massively underfunded. Very few people will be able to rely on a pension and whatever is paid out will be worthless due to hyperinflation. The social and human effects of this will be horrendous and very long lasting.

Gold
...remember that gold must be held in physical form and stored outside the banking system.

 The next move could be explosive and take gold to $3,500 to $5,000 in the next 12-18 months. My long term target, set several years ago, that gold is likely to exceed $10,000 could be reached within the next 3-4 years.
                             
............. By Egon von Greyerz

Spain Goes From Bad To Worse

Despite the world and their lemur believing that, with a self-referential EUR100 billion bailout (loan) for its banks and a ponzi guarantee scheme for its insolvent regions, all will be well and more debt fixes too much debt, Spanish 10Y yields are back near 7% and spreads over 575bps. The reason - simple - the backbone of their credit-fueled economic growth has crumbled and is now crumbling faster.

"This government can't decide between a good and a bad choice," Mr. Rajoy said. "This government has to choose between the bad and the even worse." 

Since the EU Summit, and basically month-to-date, Spanish 10Y spreads are 100bps wider back near record wides... 

and Spanish bad loans are rising at an extremely high pace and for 14 months in a row...

........................ Tyler Durden

FT's Gillian Tett provides the rationale for gold price suppression

Explaining "financial repression" as the coercion of investors to purchase government bonds that pay negative real interest rates, Gillian Tett of the Financial Times this week provided the perfect rationale for the Western central bank gold price suppression scheme -- all without mentioning gold at all.

In an essay published in The Wall Street Journal last December, recently resigned Federal Reserve Board member Kevin M. Warsh was among the first to complain about "financial repression," which he described as a matter of policy makers' "suppressing market prices that they don't like":

http://www.gata.org/node/10839

Almost exactly a year ago, the economists Carmen Reinhart and Belén Sbrancia wrote a path-breaking International Monetary Fund paper about "financial repression." It initially caused many Western investors to blink. For while such "repression" has been extensively discussed in emerging markets in recent years, not many people in America knew what this dark-sounding phrase meant.

(Answer: "Financial repression" occurs when governments engineer a situation in which investors feel compelled to buy bonds at unfavourable rates, ie below the prevailing level of inflation, thus helping to reduce national debt.)

How times change. A year later, the word "repression" is being bandied about at investor conferences across the Western world. No wonder. In the eurozone, there are growing signs that governments in places such as Spain and Ireland are "encouraging" -- if not forcing -- banks and state pension funds to buy public sector bonds, at potentially unfavourable prices.

Anybody buying Treasuries.... is essentially agreeing to subsidise the US government in coming years -- unless you believe that deep deflation looms. Call it, if you like, a form of "voluntary" repression; either way, it will almost certainly end up helping the US state, to the detriment of investors.

Another Way Washington Just Robbed Retirees …
Whenever Washington is given an opportunity to stand up for savers and retirees, they almost always do the opposite. As usual, the name sounds innocent enough. In this case, it’s called “The Surface Transportation Bill.”Yet what this law actually does is allow employers to contribute less money into their pension plans.

All told, it should mean an estimated $35 billion LESS going into those plans in 2012 vs. original expectations of $80 billion. Yes, that means almost half as much money going into employee retirement plans this year. Then, next year, it will likely amount to another $73 billion less in private pension plan contributions! .....Pension plan contributions are tax deductible, so instead of going into retirement plans this money will now go into Federal coffers.

What’s going to happen right now, however, IS certain. The money that should be going into corporate pension plans will now go to Washington, who will be using the proceeds to:
Renew transportation programs (essentially meaning more highway and bridge construction projects to “save or create” jobs)
Keep student loan interest rates at low levels (because they know that this is likely to be the next major bubble to pop)

We have corporate plans that are underfunded. We have new laws that amount to less money going into those plans. And we have the government-sponsored insurance for those plans without enough money to even pay the pensioners it’s already covering. 

................ Nilus Mattive

Equities of Mega Banks - Avoid Forever
Too Big to Fail—Then Who Needs their Stock
..... large banks will not be allowed to go bankrupt.

The Lehman and J.P. Morgan Fiascos
....The American officials....realized in horror that the entire global financial sector was lined up to go down next. One hundred years of coddling and risk backstopping – starting with the creation of the Federal Reserve in 1914—had created a financial industry that wasn’t ready to be released in the wild.... the financial sector is the nervous center of capitalism. No modern elected government anywhere can allow its financial sector to have a nervous breakdown.... government’s implied guarantee to these banks creates a major case of moral hazard. If the government is going to pick up the losses, why, mega bank managements may ask, not take more risks on less capital? Of course that is what happened over the years...Over the years, large commercial banks gave the public an illusion that they were safe and protected by their governments. The banking crisis in 2008 shattered this illusion.

The LIBOR Issue—Another Reason to Go to Law School
The banks apparently gamed the system. The London Interbank Offered Rate or LIBOR is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. It turns out weaker banks reported rates to LIBOR that were below that which they were actually paying. The idea was to conceal weakness. Apparently the professionals and the regulators knew what was going on. So from an economic point of view (as opposed to a legal), the wholesale market adjusted and no big deal.

But LIBOR has been used for pricing many loans around the world by borrowers that didn’t know the system was not what it appeared. For example mortgage loans in East Los Angeles or Fresno made to overleveraged minority borrowers who had no business borrowing in the first place. That was not a good idea. LIBOR wound up being used for purposes it was not intended.


........... Peter T Treadway

19 Warnings About A Coming Global Financial Catastrophe

Global leaders have tried just about everything that they can think of, but the coming global financial catastrophe continues to march steadily toward us. We have seen "stimulus packages", quantitative easing, bond buying, interest rate cuts, emergency economic summits, bailout packages for banks, bailout packages for entire nations, "Operation Twist", unprecedented government intervention in business and massive amounts of new government debt and yet nothing seems to revive the global economy. In fact, it looks like we are rapidly heading into the second dip of a "double dip recession". Unfortunately, many believe that this next dip will be more like a full-blown depression. All over the world, top economic experts are warning that we are facing an unprecedented crisis of debt and insolvency that will result in a global financial catastrophe. The eurozone is drowning in debt, the U.S. government is drowning in debt and major banks all over the globe are drowning in debt. Global authorities have been trying to patch the system together and keep it going, but the incredible damage that all of this debt has done is now becoming apparent to everyone. The global debt bubble that has fueled prosperity in the western world for the last several decades is getting ready to burst, and when that happens the chaos that will result will be absolutely horrifying.

The following are 19 warnings about a coming global financial catastrophe....

1. "Dr. Doom" Nouriel Roubini says that the rapidly approaching financial crisis will be even worse than 2008.... The problem is that we are running out of policy rabbits to pull out of the hat!"

2. John Embry....

3. Jim Rogers....

4. Prominent Spanish politician Felipe Gonzalez....

5. Leader of the UK Independence Party Nigel Farage....

6. Peter Praet, chief economist at the European Central Bank....

7. Graham Summers....

8. Peter Schiff....

9. New York Times columnist Paul Krugman....

10. IMF Managing Director Christine Lagarde....

11. Andrew Kenningham, senior global economist at Capital Economics....

12. Zero Hedge....

13. Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute....

14. Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch..

15. Chris Williamson, the chief economist at Markit....

16. Howard Archer, chief European economist at IHS Global Insight....

17. Karl Denninger....

18. LEAP/E2020...

19. Steve Quayle's anonymous international banking source..

Scenes of Despair

Sometimes it can be easy to forget that behind all of the horrible economic numbers that we hear about are millions of real people that have had their lives absolutely devastated by this economy. Elderly couples are being brutally evicted from their homes, young families are living in their cars, terminally ill people are dying because they cannot afford medication that they need and millions of parents can't sleep at night as they wrestle with anxiety over not being able to provide for their children. Often those that lose their jobs or their homes discover that people start looking at them very differently and that there is very little compassion out there these days. As you will read about below, one major U.S. bank is even kicking an elderly woman with stage 4 breast cancer out of her home because she cannot make her full mortgage payment each month. When the next majorglobal financial catastrophe happens, we are going to see a whole lot more economic despair. Will society respond to that crisis by becoming warmer and more compassionate, or will the world around us become even more cold and even more cruel? As bad as things are right now, it truly is frightening to think about what the world is going to look like after the next major economic downturn.....

Crushing Poverty In Greece

As I have written about before, Greece is essentially experiencing a full-blown economic depression at this point.......There is a severe shortage of medicine in Greece right now, and many doctors are essentially volunteers at this point because so few people can actually afford to pay their bills. The following description of the chaos in the Greek healthcare system comes from a recent Natural News article....The economic situation in Greece is only continuing to worsen, as reports indicate that hospitals and care centers throughout the nation are running completely out of medicines, and many healthcare workers are now voluntarily providing care services without pay. Strapped with spiraling debt, the Greek healthcare, which is government-run, has had to receive gobs of international financial aid just to keep operating with some semblance of normalcy. There has also been plenty of IOUs issued, and desperate patients quietly forking over cash "gifts" to doctors to receive treatments. All in all, the healthcare situation is in utter chaos, save for those that have sacrificed their own time, often free of charge, just to help those in need. Economic conditions have gotten so bad in Greece that some parents are actually abandoning their children in the streets according to the Daily Mail....Children are being abandoned on Greece's streets by their poverty-stricken families who cannot afford to look after them any more.Youngsters are being dumped by their parents who are struggling to make ends meet in what is fast becoming the most tragic human consequence of the Euro crisis.

American Families Living In Their Cars

In some areas of the United States you would never even know that an economic crisis is happening, but in other areas things are clearly falling apart very rapidly. There is a very serious shortage of decent jobs in most parts of the country, and we are seeing clear signs of societal breakdownin many of our major cities.
During the last recession, millions of Americans lost their jobs. Because a lot of them did not have much money saved up, many of those unemployed Americans also quickly lost their homes.In the end, some of them ended up living in their vehicles.....And living in a car can be absolute hell. The following is from an ABC News report....Three children -- one suffering second-degree burns -- were taken into protective custody Monday after they were discovered living with their parents in a "filthy" car in a Walmart parking lot.
Police were called to the parking lot Monday morning in Mount Dora, Fla., where they found the family of five living in a 1987 Cadillac Coupe de Ville full of clothes and garbage. Police told the Orlando Sentinel that days-old chicken bones were strewn about the car, along with a spoiled carton of milk and a bottle of tequila.

                  ...............

Gold to Outshine Dollar?

As the price of gold has gone up fivefold over the past 10 years, why would one buy it at today’s prices? For the same reason an investor would buy any other asset: if one believed it would be a good investment now, that is if one believed it may appreciate in value and add portfolio diversification benefits. A key reason to hold gold today might be to prepare for the crisis tomorrow.

By now it is no secret anymore that the finances of the U.S. government are heading towards a fiscal train wreck – a positive step, as at least the discussion on how to tackle the deficit has started to broaden. Each year, the Congressional Budget Office (CBO) is warning in ever-clearer terms that the current path is unsustainable. In its 2012 long-term budget outlook, the CBO is warning of a 199% debt-to-GDP ratio by 2037 under its “extended alternative fiscal scenario” that considers “what might be deemed current policies, as opposed to current laws, implying that lawmakers will extend most tax cuts and other forms of tax relief currently in place, but set to expire and that they will prevent automatic spending reductions and certain spending restraints from occurring.” With regard to the forecast, the CBO cautions “the projections… understate the severity of the long-term budget problem… because they do not incorporate the negative effects that additional federal debt would have on the economy.”

.... Different from the Eurozone, however, the U.S. has a substantial current account deficit. In our analysis, currencies of countries with a current account deficit are more vulnerable, because such countries are dependent on inflows from foreigners to finance the current account. While the debt crisis weighs heavily on the borrowing costs in the Eurozone, the euro itself has held on remarkably well; we have our doubts that the U.S. dollar would has benign a ride should investors shun U.S. bonds.....

               ..............Axel Merk

There is no Exit Plan

Europe is on the verge of collapse. The US is still regarded as the safe haven but despite years of zero interest rate policy and a massively expanded Federal Reserve balance sheet the economy is again on the verge of disaster. Yet the only solutions being discussed are more easing and stimulus.

Regardless of the results, monetary expansion remains the only tool in the central-bank tool kit. Global markets have not revisited the type of chaos experienced after the Lehman Brothers failure, but that’s simply because the problems have been avoided and pushed into the future. In America the federal debt is expanding as rapidly as the Fed balance sheet. And while government and central bank officials constantly remind the public about the disaster that was avoided, they rarely mention how these short-term solutions will eventually be unwound.

These are mainly Treasury and mortgage securities. These are both interest rate sensitive assets. Their value moves inversely to interest rates, meaning that as rates go down they become more valuable. Of course the problem is that as interest rates rise they lose value. The Fed claims that as conditions improve it will begin unwinding this book of securities. But in this environment, interest rates will be rising, which means that the Fed is going to be selling assets that are losing value.

           ................... Chris Marcus

Richard Russell - Gold, Stocks  

With continued uncertainty in global markets, the Godfather of newsletter writers, Richard Russell, wrote, “...we see the stock market up on Fed-created stilts ... I'm stating that deflationary and deleveraging forces are still in command, and all the Fed's manipulations are, and will, fail to turn the bear market into a new bull market.”

“Most of my subscribers are interested in gold. All I'm going to say about gold is wrapped up in the chart below. Here we see gold in a large rectangle formation. The 1550 level has been tested numerous times and it has shown to be solid support.”


“Now gold has its choice of breaking out on the upside of the rectangle or on the downside ... It's obvious that there are buyers at 1550 or below, and that there are sellers near the 1800 area. All of which has given us a trading range of almost one year.

It's always educational to view the stock market as a ‘big picture.’ For that I'll include the Wilshire 5,000, below. The Wilshire includes almost all stocks traded on the NASDAQ, the Amex and the NYSE. I ran a horizontal line on the chart starting from the May 2011 Peak. Note that the Wilshire is below the 2011 peak now. Thus, since May, 2011, the mass of US stocks are actually down. And so are most portfolios.

Right now, US stocks are at a standstill -- caught between two opposing forces. The positive force is the hope of additional Fed stimulative action. The negative force is the primary trend of deflation and over-production.
..........................  Richard  Russell