America Just Declared The Recovery Over So You’d Better Get Ready For The Double Dip

February 23, 2010

Business Insider

By John Carney

Today’s bleak consumer confidence number is undoubtedly bad news for the economy. The bigger than expected drop suggests that consumers have lost confidence in the recovery, which will drive down home prices and consumer spending.

Consumer confidence is typically our “first look” at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels–today’s were the worst in 27 years–then it is a flashing red-light about the economy.

There wasn’t anything good about today’s numbers. Every part of the survey was awful. On jobs, the optimistic folks who say jobs are plentiful fell to 3.6 percent from 4.4 percent. The pessimistic people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. The gauge of expectations for the next six-months fell to 63.8, from 77.3 the prior month. The share of people who believe their incomes will increase over the next six months fell to 9.5 from 11 percent. The share of those expecting more jobs fell to 12.4 percent from 15.8 percent.

The message: the economy sucks.
The recovery we were supposed to have.
You’ll read a lot about how the consumer confidence numbers are a lagging indicator. Indeed, they are a lagging indicator when measured against the stock market. The real time data conveyed by the stock market is often a better indicator than any survey or government data. But that doesn’t mean you shouldn’t pay attention to the consumer confidence number, especially since stocks have declined for most of this year.

Let’s be clear here. The story-book recovery was dependent on a recovery of the consumer and a decline in the saving rate. If consumers lost some of their apprehension about future income prospects and future employment, they might begin to spend more on both retail goods and to purchase homes again. Anticipating this return of the consumer, businesses would increase capital spending and inventory. 

We got half of that equation. Business spending on new equipment and software reversed course from the sharp drop recorded during the recession. Exports began to grow, as well. The inventory swing–from liquidation of early 2009 to inventory accumulation at the end of the year–automatically boosted GDP.

The idea was that this would create positive feedback loop, with more production necessitating the hiring of new workers, adding to household income. Consumers would respond to increased household income with higher spending. That’s pretty much the textbook end of a recession.

The expectation that we would have a textbook end to the recession informed many of the expectations that were blown away by today’s drop in consumer confidence. We’ve have a historical record of 31 previous recessions in the United States, most of which indicate that the end of the inventory cycle boosts production and therefore employment and incomes. More importantly, the workers who kept their jobs become more confident about their future job and income prospects and begin to spend a larger fraction of their incomes. Deferred spending during a recession usually creates pent-up demand by consumers and businesses that then boosts spending once the recession ends.

The recovery we actually got.
But this cycle seems to be different. Workers who have kept their jobs are not gaining confidence. Boosted production seems to be being built on the backs of the current workers, driving up worker productivity, instead of increasing incomes or employment. The apprehension about future income prospects and employment is growing, not diminishing.

This could have some dire consequences. The inventory build was premised on the idea of the recovering consumer. Since that premise is wrong, businesses will find they have made a mistake. Inventory will have to be discounted and or scrapped. New equipment will remain under-utilized, and some of the new hires will have to be let go. In other words, the half of the recovery equation we got will simply have to be liquidated or put in cold-storage because of the half we didn’t get.

How did we screw up the recovery? Why did businesses get this so wrong that we’re headed back for the double dip instead of slowly climbing out of the recession?

What went wrong?
The answer will sound familiar to anyone acquainted with the work of Ludwig Von Mises or Friedrich Hayek. Cheap money created an illusion of wealth that businessmen interpreted as pent up demand. They invest money in inventory and equipment on the assumption that the consumer would recovery. And there assumption was based on very good evidence from past recoveries and the notion that loose monetary policy inevitably spurs a recovery.

Why was it different this time? The problem this time is that we’re in what the Keynesians would call a “liquidity trap.” Consumers, having been savaged by the housing bubble and its consequences, continue to be fearful of the future. Government regulation is making consumer spending more difficult by increasing capitalization requirement for banks and squeezing consumer access to credit. Huge debt overhangs from the boom still have many people trying to pay down debts instead of engaging in new spending. To put it briefly, the supply of funds to fuel economic growth is still very low because cautious Americans do not have faith in the recovery.

Economic planners will describe the situation as an “excess liquidity preference” and recommend more government spending to push the economy toward higher employment. Unfortunately, unless we’re really lucky, much of this government spending will likely be long-term destructive because it will direct funds in the wrong directions because it isn’t subject to market discipline. In any case, the current political atmosphere seems particularly unwelcoming to additional deficit spending. So we’d better hunker down and get ourselves adjusted to an economy with a higher than historical liquidity preference.

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We Are In A Depression, Not A Recovery

February3, 2010

The International Forecaster

Accept that we are now in a depression, Stock Markets still grossly overvalued, poverty rates increase across midwest, a lots opportunity to regulate the banks,Goldman Sachs reports record profits and still bonusing employees richly, mainstream America goes on a financial diet, suburbs now home to American poor.

Few professionals are yet willing to admit we have been in a depression for the last year. You have to understand the position that economists and analysts are in. They work for corporations, insurance, Wall Street, banking and government and if they thought we were in a depression and they publicly announced that all chances for advancement would be lost or they would be squeezed out of the firm or simply fired. Under such circumstances can you ever expect that you get the truth? We don’t think so. Furthermore the depression we are enveloped in is far from over. The recession encompassed a drop in real GDP in the midst of a credit crisis. The crisis was the result of over-extended credit, prohibitively low interest rates, massive speculation by banks, brokerage houses, insurance companies, and corporations worldwide. It just didn’t happen it was planned that way. We saw that recently in testimony before Congress when CEOs of these financial firms admitted they made a mistake in the process of enriching themselves. The worst sin was the criminal securitization of mortgages and the deliberately criminal mislabeling of their ratings. Then making matters worse those who sold this toxic garbage to their clients such as Goldman Sachs, JP Morgan Chase and Citigroup were shorting the product that they had just sold to their best clients. What kind of monsters are these people? Unethical doesn’t go far enough. It was criminal. These are the same characters, along with the Fed, and others, who gave us the dotcom boom and collapse and then foisted the real estate boom on our economy. The result has been deflating assets and contracting credit offset by massive lending, money and credit creation by the Fed and monetization, all temporary expedient measures, which in the context of history has led to failure. This has been in process for seven years. This second major abuse of our system in 14 years has presented a terrible dilemma and that is where we are today. Our monetary policy hasn’t worked and won’t work and there has been and presently is little fiscal control in Washington. This is no normal recession; it is a depression.

We have zero funds rates and up until six months ago M3 expansion of more than 17%. The Fed has monetized trillions of dollars of Treasuries, Agencies and toxic waste and now we are told we are in recovery – the worst is over. We wish we could agree, but we can’t. We are reenacting the same mistakes of the past all over again. Unemployment is close to the depression levels of the “Great Depression” and is still expanding albeit more slowly. Money velocity has fallen even after the massive infusion of aggregates. Liquidity is not flowing into the economy it is pouring into Wall Street to aid and abet more speculation, which has sent the Dow from 6600 to 10,700. This game cannot be played indefinitely. Wall Street cannot continue to prosper as the economy remains stagnant, and unemployment climbs higher.

The market is grossly overpriced and the effect of favorable news will begin to wane. It should be noted that insiders are selling into the never-ending rally, and mutual funds have very little money flow coming into the funds. That, of course, is our government at work manipulating the market. Just last week insiders bought $18 million worth of shares and sold $419 million.

This to us is more proof that the stock market is the most overvalued since September 1987, which brought about the market collapse of 10/19/87 and resulted in August 1988 in the Executive Order, “The President’s Working Group on Financial Markets,” which has led to market manipulation and the end of free markets.

That and the bailout of banks, brokerage firms and insurance companies too big to fail, those same entities carrying two sets of books as authorized by the BIS, FASD and the SEC, government purchase of stock in selective Illuminist controlled companies, and government control of the mortgage and real estate markets. This give you corporate fascism at its finest. We see intervention everywhere and that is not free markets.

How can there be a recovery with 22.5% unemployment, and with the additional threat of further unemployment? Who will buy the new housing and the tremendous inventory overhand? What will happen to the commercial inventory building up? Who has money in America to buy cars and trucks? Credits to buy housing for subprime and ALT-A buyers will end up with a 50% failure rate. Cash for clunkers was a colossal failure. Such exercises in futility only buy time, just as stimulus packages, and monetization do the same thing. The elitists behind the scenes know this just as we know this. That means the colossal deficit increase of $1.4 trillion a year will add 10% yearly to the federal debt to GDP ratio that will be over 100% by 2011. The tax liability to service this debt will be overwhelming. Government debt is rising exponentially and if further stimulus is not added the credit crisis will be renewed. This is why the Fed cannot remove further liquidity from the financial system, especially after having taken M3 from 17 to 18% to 6%. Incidentally, England and the ECB have done the same thing, and they still see rising inflation. If further stimulation is not forthcoming, or war, or default comes, we will see inflation reverse and deflation take over and that could last for ten years or more. This deflation, if allowed to take its course, will cause losses of $12 to $15 trillion from the economy and cause unemployment to rise to 40% to 50%. That would also entail cutting extended benefits. That would give us the scenes we saw in the 1930s. The debt we are facing knows no precedent in modern times, and there is no possible way it can be paid.

Bad debt is piling up again in residential and commercial real estate as well as in personal and business debt. This in part is why lenders are not talking about it if they can help it, but they are not lending. Without further lending increases the economy cannot function efficiently because it is so dependent on credit. That means higher unemployment, fewer buyers and a slower economy. If you think foreclosed inventory is bad now wait until the second wave hits and it is going to hit. If you are under water on your mortgage you do not care anymore. You stop paying your mortgage and you live rent-free for a year or more. There is no longer any stigma to walking away or going bankrupt. All the Mickey Mouse games being played by government to keep people in their homes are not going to work. Subprime and ALT-A loans are not the answer. They start going into default in a big way next year as the taxpayer again foots the bill.

Where does the accumulation of debt end? For the two fiscal years ended 9/30/99, the public increased Treasury debt $5 trillion to $7.5 trillion or by 50%. The Fed has purchased 80% of Treasury debt yoy, increasing the monetary base from $850 billion to $2 trillion, which includes Agencies and MBS. Seeking cover on their announcement, they said on Christmas they would supply unlimited funds for three years to Fannie Mae and Freddie Mac. Government liabilities made in behalf of the American taxpayer since the third quarter of 2007 have jumped 61% to $3.62 trillion. It is our opinion that the inflation caused by funding and monetization over the next decade will be very disruptive and expensive to US dollar users as purchasing power falls. That translates into an additional loss in buying power of some 50%.

If liquidity stays at current levels the stock market will fall as it flourishes on increasing liquidity. In addition, higher inflation rates tend to push stocks lower. If we are correct and there is a second credit crisis ahead of us, M3 will rise again and monetization will be pushed into high gear again.

The banks make their money trading for their own accounts. They won’t have much in the way of earnings if legislation passes, the largest manipulations in history would come to an end.

The President has called for limiting the size and trading activities of financial institutions to prevent risk taking and another financial crisis. He also said there should be no proprietary trading. We are told Goldman Sachs will benefit from the President’s proposal to limit Wall Street risk by forcing deposit-taking banks to unwind trading operations.

Again the commercial paper market fell by $10 billion to $1.092 trillion. Asset-backed commercial paper rose by $3.5 billion to $430.0 billion.

Unsecured issuance fell by $9.9 billion versus rising $12.7 billion in the prior week.

Democrats have completely lost their moorings. They want to allow government to borrow an additional $1.9 trillion to put the national debt at $14.3 trillion. It would need 60 votes to pass.oqHo

Food prices are roaring upward again as the PPI rose 0.2%. That is a 4.4% gain month-on-month.

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Top Scientists Predict Widespread Sterilization

December  27, 2009

The Times Online

By Bryan Appleyard

Nothing much is going to happen in the next 10 years. Of course, that’s not counting the diesel-excreting bacteria, the sequencing of your entire genome for $1,000, massive banks of frozen human eggs, space tourism, the identification of dark matter, widespread sterilisation of young adults, telepathy, supercomputer models of our brains, the discovery of life’s origins, maybe the disappearance of Bangladesh and certainly the loss of 247m acres of tropical forest.

As I said, just another decade really.

These days, “just another decade” always means 10 years of future shock. Science, technology and the contemporary mania for change combine to stun the imagination. It is the way we live now, in a condition of permanent technological revolution.

In 2000 — remember? — the internet all but died when the dotcom stock market bubble burst. You could stand on top of the World Trade Center. And mobile phones were just, er, phones. Today, you still get up and eat breakfast, but, outside, it’s a different world.

Next? Well, as Woody Allen said, if you want to make God laugh, tell him your plans for the future. But, taking a punt, I reckon the brain is the one to watch. Science has been zeroing in on the 2lb 14oz of grey and white custard-like stuff between your ears for some time now. It’s not been easy. In spite of the evidence of The X Factor, the human brain is very complex custard indeed. But some people are getting very excited.

“By 2020, genetics and brain simulation will be giving us personalised prescriptions for marriage, lifestyle and healthcare.” This is Henry Markram, director of the Blue Brain project in Switzerland, an attempt to reverse engineer the brain by building one from the ground up inside a supercomputer.

“We won’t need a psychologist to tell us why we feel unhappy. All we’ll need to do is log into a simulation of our own brain, navigate around in this virtual copy and find out the origins of our quirks … Computers will look at a virtual copy of our brains and work out exactly what we need to stop our headaches, quiet the voices talking in our heads and climb out of the valley of depression to a world of colour and beauty.”

Gosh. But isn’t there still that pesky problem of other people and their brains? It’s their quirks that tend to get in the way of my happiness. No problem, we can climb inside each other’s brains.

“The big thing for me is being able to link two brains together for communication.” This is Kevin Warwick, a cybernetics scientist at Reading University. “This could have great implications for teaching. Sometimes, no matter how you explain something, it takes forever for the penny to drop.

It would also help to avoid misunderstandings.”

But, eek, what would it be like?

“Well, just like The Matrix with a plug in the back of the head into the brain, or yes, like a Bluetooth earpiece. It would have to be bidirectional, though, so thoughts could travel from you to someone else and back,” says Warwick, who has already implanted a microchip in his own arm so that he can open doors without needing to use a doorknob.

James Watson, co-discoverer of the structure of the DNA molecule, thinks gene sequencing will be the key to unlock the custard and even stir it. “Disorders like Alzheimer’s disease, epilepsy, Parkinson’s disease, schizophrenia, bipolar disease, unipolar depression, obsessive-compulsive disease, attention deficit disorder and autism will finally have their genetic guts open for all to see.”

Some of the most impenetrable and harrowing mental illnesses known to man will, Watson believes, be understandable and maybe even curable.

“The exact location and biological function of the DNA variants causing many depressive disease and related disorders cannot be revealed too soon,” he says.

Colin Blakemore, professor of neuroscience at Warwick and Oxford, agrees that brain diseases are the really big nasties. “Some leave sufferers horribly aware as they lose the ability to walk, to talk, to swallow. Others corrupt and destroy the mind, leaving an empty body. Some, such as CJD, are very rare, others frighteningly common. About 700,000 people in the UK have dementia.”

We are seeing more of these diseases because death rates from cancer and heart disease are falling so people are living long enough to develop them. Hope for cures is coming from stem-cell research, genetic and molecular analysis.

“There will be a breakthrough. My hunch is that research on motor neurone disease will provide crucial clues and by 2020 we will know why cells die in some, perhaps many, of these diseases. It could be another decade before we see the impact on health, but by 2020, we must be on the way to this ultimate goal of modern medical science,” says Blakemore.

Meanwhile, sex — you knew it was coming — will be even more recreational than it is now. The pill will continue to be the primary contraceptive device, says its inventor, Carl Djerassi, but sterilisation will be catching up.

“At present, people tend to have children and then are sterilised later on in life. In the future, sterilisation will happen earlier on in a person’s life, with gametes, male and female, extracted and stored in a reproductive bank account… Already we know that male sperm can be frozen for decades, but it is far more difficult to freeze women’s eggs. The problem is not yet solved — this is where research should be directed.”

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Recent World Events Indicate Impending Market Chaos

December 1, 2009

Neithercorp

by Giordano Bruno

For the past couple years we have been covering every nuance of the economic collapse and in almost every instance we have come to the conclusion that 2010 would be the year that the U.S. would see an incredible downturn, possibly resulting in the inflationary disintegration of the Dollar, and a major stock market revolt which would destroy any remaining illusion Americans still have that a recovery is in progress.

We are now on the edge of winter 2009, and recent events across the globe indicate more and more that our predictions for 2010 were correct. Let’s examine some of those events and their implications now…

Dubai: Why Should We Care?

Only a year ago, Dubai was the jewel of the Middle East. A financial Mecca centered in the midst of the United Arab Emirates, Dubai has been nicknamed the “Global City,” not necessarily because its population is “globally conscious,” but because without investment from numerous foreign nations, Dubai would not exist.

Dubai is often mistaken as an oil rich nation, but the fact is, only 6% of Dubai’s GDP is supported by oil revenue. The vast remaining portion of Dubai’s economy operates completely on money from the U.S., China, Europe, and other foreign interests.

Since the “Great Recession” began in 2007, rumors of a systematic financial collapse in Dubai have circulated, along with reports of frozen investment, and even abandoned Real Estate projects that have left the country looking like a ghost town. In the past week, those rumors have been officially confirmed.

Essentially, Dubai is bankrupt, and this news has sent a shockwave through markets around the world. But why? Why would Dubai’s bankruptcy affect U.S. markets?

The first thing that we must understand is that this is the result of living in a “globalized” economy. Instead of having sovereign and self sufficient financial systems that act as checks to total world collapse, we now have “interdependent” economies connected like a chain of dominoes. All it takes is for one to tip over, and the others follow suit.

If a once explosive economy like that of Dubai’s is now on the edge of insolvency, this means Western companies are incredibly weak and unable to invest any longer. Dubai’s collapse indicates that the capital that once flowed from rich nations like the U.S. has dried up. The world is reeling, and perhaps even broke. Dubai is the canary in the coal mine, and the canary has just dropped dead. The signal is clear; the astounding resurgence of world markets is an illusion built on nothing but fantasy and fiat money printed out of thin air and used to prop up the Dow. Dubai has kicked off the coming avalanche, but there is more…

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Trends Forecaster, Gerald Celente

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Gerald Celente 11/11/09

The Kevin Trudeau Show: 11-11-09

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When Will Jobs Return

October 30, 2009

CNN Money

By Chris Isidore 

The economy is growing again. So when are the jobs that go with growth going to get here?

Not anytime soon, unfortunately.

The consensus forecast is that job losses will continue through the end of this year, with many economists not expecting unemployment to peak until next summer. That will add to the 7.2 million jobs already lost in this downturn.

Even with Thursday’s report that showed the economy grew at a 3.5% annual rate in the third quarter, the continued job losses are not a shock.

Jobs are what are known as a trailing or lagging indicator, meaning that they change in response to other economic events, rather than predicting changes the way a leading indicator, such as the stock market, does. That’s because even after a recession has ended, employers are slow to add staff until they’re sure that demand has returned.

The real worry is that the deepest and longest recession since the Great Depression will be followed by a jobless recovery, just like what happened after the recessions in 1990-1991 and 2001.

50 Best Jobs in America
It took almost two years after the end of the 2001 recession before the economy started adding jobs on a consistent basis. And it wasn’t until February 2005 until the job market got back to the employment levels of four years earlier.

Some economists argue that the job losses in this downturn will prompt employers to start hiring at a rapid clip soon after the economy starts to improve.

“People cut so quickly that they cut things they shouldn’t have, not just fat but also muscle and bone,” said Robert Brusca of FAO Economics.

Many other economists were already looking for a tough labor market for at least the next year.

According to a survey by the National Association of Business Economics, the consensus forecast of 44 top economists is for an addition of only 12,000 jobs a month in the first quarter of next year.

The economists surveyed also indicated they don’t expect monthly job gains to top the 150,000 level — which is generally thought of as what is needed to keep pace with population growth — until the end of 2010.

And in the most troubling sign, more than a half of the economists surveyed said they didn’t expect a recovery to pre-recession levels in the job market until 2012 while a third said they didn’t believe a full job recovery would occur until 2013 or beyond. There are number of reasons for this pessimism.

Money to hire is tight
Small businesses are typically the engine of job growth, but their access to credit is still severely limited. That means that even if they’re confident about their future prospects, many small employers won’t be able to afford to add staff.

“Recessions that involve a financial crisis take a much longer time for there to be a jobs recovery,” said Heidi Shierholz, labor economist for the Economic Policy Institute, a liberal think tank. “The credit crunch isn’t getting worse, but it’s still very tight.”

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Dollar is Dying a Slow Death

October 21, 2009

Yahoo Finance

By Peter Gorenstein

The weakening dollar is dying a slow death.

“It’s clear where we’re headed,” says Niall Ferguson, author of The Ascent of Money. “Ten years from now there will be more than one international reserve currency,” he tells Tech Ticker.

Ferguson dismisses the dollar loyalists, citing the British pound – the last international reserve currency – as his example. “These things don’t last forever” but don’t expect it to happen overnight. “It’s a long multi-decade process,” he states. Even with the dollar near a 14-month low against the Euro, he claims it’s not without historical precedence for the greenback to lose “another 20%” this year.

For international investors the loss is enough to offset this year’s stock market gains. Not exactly great motivation for foreigners to keep buying the almighty dollar.

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The Kevin Trudeau Show: 10-20-09

Today, on a very special edition of The Kevin Trudeau Show, Kevin gets interview by Dr. Leonard Coldwell on The Dr. Coldwell Report and then by Ronnie McMullen on The Prophetic Watch!

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