-- Published: Friday, 1 August 2014 | Print | Disqus
Week Ending (08/01/2014)
“Booming Initial Estimate for Second-Quarter GDP Largely Was Fluff….
“With the government’s estimates of GDP activity so far removed from reality, the issue here is not whether the U.S. economy is booming along or not. It is not; it never recovered from the collapse into 2008 and 2009. The issue with today’s numbers is in the timing of a more-formal financial-market and political recognition of the issues and ongoing severe difficulties involved here for consumers….
“The GDP remains the most-worthless and the most-heavily modeled, massaged and politically-manipulated of government economic series. It does not reflect properly or accurately the changes to the underlying fundamentals that drive the economy. Underlying real-world economic activity suggests that the broad economy began to turn down in 2006 and 2007, plunged into 2009, entered a protracted period of stagnation thereafter—never recovering—and then began to turn down anew in second- and third-quarter 2012…
“…the full economic recovery indicated by the official, real GDP numbers remains an illusion. It is a statistical illusion created by using too-low a rate of inflation in deflating (removing inflation effects) from the GDP series….”
“Second-Quarter 2014 GDP, GDP Benchmark Revisions, Household Income,” Commentary Number 646, John Williams, Shadowstats.com, 07/30/2014
Main Stream Media Distortions and News Blackouts coupled with Bogus Economic Numbers and “Communications Policy” Distortions from the U.S., European and Chinese Central Banks, and others Misleads Investors and puts their Investments at Risk.
Deepcaster aims to continue to inform investors of these Disinformation Risks before the fact. For example, we have reiterated the Dangers of the Massive and Intensifying Worldwide Credit/Debt Bubble which reared its head with Greece and Cyprus and now in Argentina’s Default.
The most Recent Official Statistics’ Distortion is reflected in the 2nd Quarter U.S. GDP Numbers which shadowsstats.com correctly labels “‘Fluff’, massaged and Politically Motivated.”
So here we Identify Major Distortions and News Blackouts to inform Investors and to facilitate Wealth Protection and Profit.
Yet another Major Threat arises from Central Bank Monetary Hyperinflation.
“Monetary Malfeasance by the Federal Reserve is seen in its process of seeking to provide liquidity to a troubled banking system, and also to the U.S. Treasury, with a current pace of monetization at 94.1% of effective net issuance of the Federal Debt to be held by the public so far in calendar year 2014 (through July 16th), 75.3% since the January, 2013 expansion of QE3.”
John Williams, Shadowstats.com, 07/23/2014
Extraordinary it is that the pace of Fed Monetization of U.S. Treasury Debt issuance continues to accelerate and has now reached 94.1% of Net Issuance.
This means that there is a dramatically decreasing Real (i.e., from other sovereign or Institutional Investors) Demand for U.S. Treasuries, and, by implication, for the U.S. Dollar.
But regarding Net New Issuance, the Monetization “Music” must stop at 100%.
But consider that, regarding Timing, we are nearly there Now.
This Ominous Trend spells Trouble, Serious Trouble for the U.S. Dollar as World Reserve Currency, and indeed as a Reservoir of Purchasing Power and Wealth.
The Tipping Point for the $US is very Near, so Deepcaster increasingly reiterates his Timing Forecasts.
Thus, the Consequences of a dramatically weakening $US for $US-denominated Assets (and, since the $US is still the World’s Reserve Currency, for Most Major Assets) will be Profound.
And these Consequences will begin to become evident very soon.
Former OMB Director, David Stockman, Counters the Main Stream Media Spin and Blackouts, and lays out the Essential Fundamentals.
“The 2008 Wall Street meltdown is long forgotten, having been washed away by a tsunami of central bank liquidity. Indeed, the S&P is up nearly 200% from its March 2009 low. Yet four cardinal measures of Main Street economic health convey nothing like a 2X pick-up from the post-crisis bottom.
“To wit, in June the count of breadwinner jobs was 68.5 million or 5% below where it stood as the crisis got underway. Likewise, business investment in real plant and equipment is still 5% below its late 2007 peak. So too with the real median family income at about $53k—it’s still down by 6%. And unlike past cycles where safety net programs like food stamps shed recipients as the recovery gained momentum, there are still nearly 47 million Americans in the program compared to 30 million in March 2009.
“This juxtaposition has been explained away by Wall Street stock touts under the heading that “this time is different”. … owing to record corporate profits and an upward re-rating of PE multiples reflecting lower than historical interest rates. And, indeed, the raw facts can be marshaled to this end. (For example) … profits are at 60-year highs.
“This is just the trouble, however. The robust rate of profit growth during recent years reflects a one-time gain in the profit share of factor income. This gain in all probability cannot be replicated again … (and) is extremely vulnerable …
“The same can be said of low interest rates. … No amount of money printing and financial repression by the central banks can keep yields on the massive trove of $12 trillion of publicly-held treasury debt at a negative after-tax and after-inflation rate indefinitely.
“… PE multiples are at the top of their historic range and at a point of extreme vulnerability where market crashes have invariably occurred in the past. …
“Given these adversities, there is no reason to assume that US real growth will sharply accelerate from the tepid trends of the recent past….
“And that points to the real evil of monetary central planning and the serial financial bubbles that it inexorably produces. Bubbles are only recognized after the burst into a flaming crash….”
"This Time is Not Different: Why the Market is headed for a Fall,"
David Stockman, 07/24/2014
Indeed, the BIS, the Central Bankers Bank, warned at the beginning of July 2014, that there are “dangerous new asset bubbles.” Yes, indeed!
And as a further Impending Threat to $US Dominance, a whole variety of Major Countries (including several of those in the Western Alliance) are entering into Bilateral Currency-Swap Agreements with China, thus excluding the $US. And when the $US Falls, the U.S. Economy and Markets Crash along with it.
As well, it is clear the BRICS Nations (Brazil, Russia, India, China, and South Africa) are rapidly moving toward a non-$US based World Reserve Currency, and indeed, an Alternative Central Banking System, thus bypassing the IMF. This BRICS recently met to create the $100 Billion BRICS Development Bank and a Reserve Currency Pool of Similar Size!
Compounding the problem is the compelling evidence that The Fed is increasing QE not “tapering” it. Were this Evidence to become widely accepted as Reality, it would be very $US Destructive and very Bullish for Gold, by the way.
Consider the Evidence for former Asst. Secretary of the Treasury, Paul Craig Roberts.
“Is the Fed ‘tapering’? Did the Fed really cut its bond purchases during the three month period November 2013 through January 2014? Apparently not if foreign holders of Treasuries are unloading them.
“From November 2013 through January 2014 Belgium with a GDP of $480 billion purchased $141.2 billion of US Treasury bonds. Somehow Belgium came up with enough money to allocate during a 3-month period 29 percent of its annual GDP to the purchase of US Treasury bonds.
“Certainly Belgium did not have a budget surplus of $141.2 billion. Was Belgium running a trade surplus during a 3-month period equal to 29 percent of Belgium GDP?
“No, Belgium’s trade and current accounts are in deficit.
“Did Belgium’s central bank print $141.2 billion worth of euros in order to make the purchase?
“No, Belgium is a member of the euro system, and its central bank cannot increase the money supply.
“So where did the $141.2 billion come from?
“There is only one source. The money came from the US Federal Reserve, and the purchase was laundered through Belgium in order to hide the fact that actual Federal Reserve bond purchases during November 2013 through January 2014 were $112 billion per month….
“Why did the Federal Reserve have to purchase so many bonds above the announced amounts and why did the Fed have to launder and hide the purchase?
“Some country or countries, unknown at this time, for reasons we do not know dumped $104 billion in Treasuries in one week….
“The Fed realized that its policy of Quantitative Easing initiated in order to support the balance sheets of ‘banks too big to fail’ and to lower the Treasury’s borrowing cost was putting pressure on the US dollar’s value. Tapering was a way of reassuring holders of dollars and dollar-denominated financial instruments that the Fed was going to reduce and eventually end the printing of new dollars with which to support financial markets. The image of foreign governments bailing out of Treasuries could unsettle the markets that the Fed was attempting to sooth by tapering….
“Washington’s power ultimately rests on the dollar as world reserve currency. …
“If the world loses confidence in the dollar, the cost of living in the US would rise sharply as the dollar drops in value. Economic hardship and poverty would worsen. Political instability would rise.
“If the dollar lost substantial value, the dollar would lose its reserve currency status. Washington would not be able to issue new debt or new dollars in order to pay its bills….”
“Fed Disguising QE by laundering it through Belgium,” Paul Craig Roberts, paulcraigroberts.org, 05/12/2014
And if we look at The Real Numbers and not the Bogus Official Ones, the U. S. Economy is not nearly as Robust as the Main Stream Media would have us believe.
“Seriously-Flawed Headline Jobs Growth and Unemployment Reporting Miss Underlying Reality by a Wide Margin. May 2014 headline jobs growth of 217,000 and headline unemployment at 6.3% both were close to market expectations, but they were far removed from common experience and underlying reality….
“With broad unemployment topping 23% and with monthly payroll-employment reporting currently overstating jobs growth by a couple of hundred thousand jobs, the economy never recovered from its plunge into 2009. It also is not about to recover, but instead it is turning down anew, as other discussed in 2014 Hyperinflation Report-Great Economic Tumble – Second Installment….
“…Headline employment reporting currently overstates monthly jobs growth by at least 200,000…”
“Monthly Payroll Gains Overstated by 200,000-Plus Jobs,” Commentary Number 633, John Williams, Shadowstats.com, 06/06/2014
And even the most recent Headline numbers reflected weakening Job Growth!
Yet Fed and other Major Central Bank Policy is not helping, and indeed is hurting Retirees, Savers and the Middle Class, the Bulwark of Consumer Spending, 70% of the U.S. Economy.
And we note another Ominous Trend: in June 2014, 523,000 full-time jobs were lost, but 800,000 part-time jobs were created for a net gain of 288,000 “jobs.” Progress? Hardly!
For a Chart comparing other “Bogus versus Real” Statistics, see Note 2 below.
As well, confirming the foregoing
“…We learned this week that the net worth of the median household in the U.S. was 43 percent lower in 2013 than it was in 2008. This is remarkable but not surprising. Think about that. Net worth has declined by almost half. Yet if you listen to pundits and the Central Planner economic reports, including those from the Fed, they would have you believe everything is chugging along nicely. Bullbleep. 1st quarter U.S. GDP was negative. It could be revised lower soon. If we see the second quarter also negative, then by the Central Planners’ own admission, the U.S. would officially be in a recession. Weather related? That dog don’t hunt.”
“Housing is at a freeze, construction is at a standstill. Down payment requirements are ridiculously high…. This is a bad situation. It will act like a black hole, eventually sucking/contracting our economy so fast and deep that the Fed can print all the cash it wants to and hand it to Wall Street and it will not have a meaningful effect on reversing the economy. Five trillion was just printed since 2008 and handed to Wall Street and most of it didn’t get into the hands of the general public. Only a few benefited. It caused a ton of inflation which is not reported in the CPI numbers. Food, medical and housing inflation. Automobile price inflation.
“About every mistake that can be made by the Central Planners is now underway….”
Robert McHugh, Ph. D, 06/27/2014
The Consequences of the foregoing Realities and Trends for the Economy, Key Equities Sectors and $US are Grim. But to comprehend the likely extent of those consequences and for Indications about how to surmount them and to Profit and Protect Wealth, consider the following overview of the International Fiat Currency System through an analysis of the prospects for Gold, Silver and the U.S. Dollar;
Mark Thornton: “…I have been studying this issue ever since. The only thing that has really surprised me about this is that it has taken so long to get to this place in time and by this place, I mean a world in which fiat money is the sole circulating means of exchange and where central banks are engaged in a world currency war, trying to manipulate the value of their currencies downward in a simultaneous battle across the globe. But in particular the United States, the European Central Bank, Japan, and China and then of course many other countries engaged in the war in a defensive status where countries like Switzerland and Norway are pumping up their money supplies and engaged in quantitative easing in order to stabilize the exchange value of their currency.
“So here in the United States, the ramifications of that are fairly easy to see that the Federal Reserve has manipulated markets to an extreme and to a level that I never thought they were going to be willing to go to. But they’ve manipulated stock markets and bond markets have created bubbles throughout the economy in the US in terms of, of course, the stock market reaching all-time high levels, bond markets reaching all-time high levels, junk bond yields down to historically low levels, rising real estate prices, rising art prices.
“It’s truly remarkable to the extent that they’ve been able to engineer this. They’ve taken so many unprecedented measures. I really never thought that central bankers would go to this extreme but they’ve done it. So right now, what we’re looking at is a worldwide currency war. We’re looking at real estate housing bubbles all around the planet, whether it’s Canada, in Asia, in Manhattan, in Washington DC….
“…eerie correlation of the building of record setting skyscrapers and world economic crises.
David Morgan: “The way I see it, all debts are either paid, defaulted upon, or partially paid off. But at some point in time, there is a reconciliation of the monetary system.
“You’re either going to default outright saying that we cannot pay back the debt or you’re going to default on a currency, which means that you’re going to continue to print money until the currency becomes worth less, worth less, and then it’s worthless.
“Can we default outright? Can we default via currency default, or do we have a combination? What are your thoughts?
MT: “Well, David, it’s a very good question and it’s a very, very important question. As you say, all debts are ultimately paid. The question is, “By whom?” Is it going to be the borrower or is it going to be some other party that ends up footing the bill for those debts?
“The governments of the world have built up huge national debts and obligations going forward that are unsustainable and that in my view cannot be paid off in a rational way which is using part of your revenues to pay off or pay down those debts….
“So the more likely, the most likely alternative and one that looks increasingly obvious to me is that they will continue to use the printing press. They can pull back at any time but the pain, the political pain and the economic pain in the short run is so difficult for them to accept, that it’s likely that they’re going to go down the path of printing up ever-increasing quantities of money, engaging in quantitative easing and so forth….
“In my estimation, it’s a very dangerous situation. I don’t think the world has ever been in a more dangerous economic situation than it is today….”
“Gold, Silver, and the Future of the Dollar,” Interview with Mark Thornton by David Morgan at The Morgan Report, 07/26/2014.
One Intensifying Consequence, which Deepcaster has repeatedly Documented, is Monetary Hyperinflation which is now transmogrifying into Price Hyperinflation. The U.S.A. is already Threshold Hyperinflationary with Real U.S. CPI at 9.8%, per Shadowstats.com.
Regarding moving into Full Blown Price Hyperinflation, the Salient Issue is Timing. Therefore our Major Focus is keeping our Subscribers updated re Forecasts for Timing in light of the foregoing Realities, Forces and Trends. Monitoring a Variety of Interventional, Fundamental and Technical Signals has already facilitated Significant Profitable Positions (See Note 1).
Regarding Potential Triggers for $US and Equities Takedowns consider the latest Distorted U.S. GDP Report.
We along with the Honest and Brilliant Economist, John Williams, (Shadowstats.com) expected the July 30 GDP Report to show weaker-than-expected, but nonetheless positive, GDP Growth. Instead, courtesy of the Bogus Numbers Manufacturers, it showed a stronger than expected Number. Equities and the $US should have taken a hit but they did not, until the day after. Perhaps the Release of the September 26 2nd Quarter GDP Report Revisions – which should, if honest, show an outright U.S. GDP contraction – will at least approach honest reporting.
If Honesty, rather than Political Numbers, prevail that would be an acknowledgement that the USA has been and is still in a Recession (defined as 2 successive Quarters of GDP Contraction).
Other Numbers, for example, the recent drop in Durable Goods orders, and weakening Employment Picture actually reflect the Recessionary Reality.
Couple that will the recent EIA Report showing that Stockpiles of WTI Crude at the Delivery Point in Cushing, Oklahoma are at the lowest level since 2008! (See below.)
This means the Economy (and Equities Market) is likely to get little or no relief from high Crude Prices for the foreseeable future!
Yet the U.S. Market is still Trending up (but just barely after the late July Takedown) while Major Eurozone Markets are trending down.
But the Global Dow has thus far this year maintained its uptrend. Yet these Uptrends are unconfirmed by several indicators, including the Transports, down significantly in the last week of July.
In some week soon, the Realities of the Real Economy will overcome the Spin and Blackouts, and the Significant Consequences will be felt in many Key Sectors, as we have and will continue to forecast.
In sum, To Surmount Distortions and News Blackouts Threatening Investments, look to Independent Information Sources such as Deepcaster and those mentioned here.
August 1, 2014
Note 1: Our attention to Key Timing Signals and accurate statistics has facilitated Recommendations which have performed well lately. Consider our profits taken in the last six months in our Speculative and Fortress Assets Portfolios*:
• 65% Profit on Energy Storage & Management Company on July 15, 2014 after just 342 days (i.e., about 70% Annualized)
• 95% Profit on Crude Oil Call on June 11, 2014 after just 73 days (i.e., about 470% Annualized)
• 75% Profit on Equity Index Call on May 27, 2014 after 21 days (i.e., about 1305% Annualized.)
• 30% Profit on Equity Index Call on May 13, 2014 after 34 days (i.e., about 320% Annualized)
• 75% Profit on Crude Oil Call on April 14, 2014 after 13 days (i.e., about 2000% Annualized)
• 60% Profit on Water Management Company on March 3, 2014 after 454 days (i.e., about 50% Annualized)
• 100% Profit on Crude Oil Call on February 10, 2014 after 27 days (i.e., about 1400% Annualized)
• 30% Profit on Equity Index Put on February 5, 2014 after 8 days (i.e., about 1440% Annualized)
• 55% Profit on Water Management Company on January 15, 2014 after 406 days (i.e., about 50% Annualized)
*Past Profitable Performance is no assurance of future Profitable Performance.
Note 2: *Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported July 22, 2014
2.07% / 9.81%
U.S. Unemployment reported July 3, 2014
6.1% / 23.1%
U.S. GDP Annual Growth/Decline reported July 30, 2014
2.43% / -1.66%
U.S. M3 reported July 21, 2014 (Month of June, Y.O.Y.)
No Official Report / 4.49% (i.e., total M3 Now at $15.910 Trillion!)
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-- Published: Friday, 1 August 2014 | E-Mail | Print | Source: GoldSeek.com