-- Posted Monday, 12 September 2011 | | Disqus
The following are some snippets from the most recent issue of the International Forecaster. For the full 27 page issue, please see subscription information below.
US MARKETS
Many people believe the Jackson Hole was a non-event, a failure and it was. QE 3 was not announced, as we predicted. We believe that was being saved for mid-September when the $300 billion rollover in Treasury securities is completed. Mr. Bernanke has failed in a number of respects, the most glaring being zero interest rates for 2-years and no housing recovery. Even purchasing $1.3 trillion in toxic mortgages has only helped the banks. We still do not know what the Fed paid and what these bonds are worth. No matter what happens the Fed has to again purchase about $900 billion more Treasuries this new upcoming fiscal year. There is no way to avoid that and if they have to buy Agencies and more toxic bonds the figures will be higher. Auction failures cannot be tolerated. This will, of course, increase inflation in 2013 and 2014. Sales to consumers and profits will fall as a result.
Not so fast, the Fed still has more monetary ammunition most people haven’t thought about and it lying on its books. It is the funds that belong to member banks, some $2 trillion that banks have been refusing to put to work. We mentioned the beginning of the movement of these funds from the Fed to the banks just recently. Will this persist? We do not know, but we think it will. It is a natural answer to the funding problem, they perhaps had been deliberately held in abeyance. We believe this could in part solve the liquidity problem over the next year or more. The Fed has sent the word out to the banks. It is time to employ our secret weapon. As a result in July and August we saw what is tantamount to monetary stimulus, and do not forget this is monetization, money that has not as yet flowed into the system. That means its usage will be inflationary.
Heretofore, these funds were deliberately withheld from the system to be used at the perfect time. There were plenty of borrowers, but the banks did not lend, because they were told to wait for the right moment. The unleashing of these funds leveraged into the fractional banking system will cause damage and inflation, but they will provide temporary assistance to a failing economy. The Fed also needed some relief as their balance sheet grew close to 25%. The combination of Fed spending for treasuries, bank lending and perhaps some government spending, should reinvigorate the economy temporarily over the next year. Unemployment should decline slightly and consumption and personal debt should grow. We think Mr. Bernanke’s plan will fall far short, because like in the 1930s too much structural damage has taken place. Demand for goods and services will grow, but not as much as anticipated and as long as desired. This unfortunately leads to disruption within the system for no other reason than the previous systemic damage visited upon the economy. We are about to see a respite but not a permanent solution. America is headed for 2nd or 3rd world status and the Fed is trying to get us there as soon as possible.
If you really want to understand how desperate the elitists are you have to take notice of their control of the US media. Every time they can a big deal is made out of every happening, such as the recent tropical storm, Irene, or the BP disaster, or anything to shift attention away from the dreadful state of the economy, unemployment, CPI or anything financially negative. In NYC, Irene, gave Mayor Bloomberg the excuse to make NYC look like a nuclear attack was underway. He ordered the evacuation of NYC, closes off transportation when he knows few New Yorkers have cars. This is how desperate the elitists are. Any distraction is used to take people’s eyes off the real problem. The Bloomberg theatrics were beyond the stage. He threatened to jail anyone who did not heed his dictates. What a meathead. He should have stayed in Medford, MA, where my mother lived near his family in the Lawrence Estates. This shows you how far the elitists will go and how ridiculous they appear, just to use their power. At the end of the farce, the coast had rain and high winds. The interior suffered more. Irene was essentially a phony scare – on a par with their phony financial and economic remedies.
As the corporatist fascist model comes more into play and becomes more obvious Americans are going to take orders from a more progressively authoritarian government that will eventually become dictatorial. These bubbleheads will overact all the way, because their power base is rooted in Wall Street and banking. They use the same concept with these events as they do with the idiotic terrorist threat. The people in political authority in America are control freaks. They are all dummies and they know it, and they’ll be the first ones thrown by the elitist to the wolves. They are a ridiculous tragedy.
The elitists do not care who gets elected the next president. They own them all except Dr. Ron Paul. We are told that to win the presidency one needs $1 billion. This is incredible and it proves why we need a change in campaign laws to harness the power of all those behind the scenes that buy our elected members. No member of Congress votes the way they want too. As soon as elected they are raising funds for reelection and in that process sell their souls.
One of the interesting factoids we have come across is the accounting for the US dollars loss of purchasing power due to inflation over the period of the last 2 years; half of the men aged 30 to 50 years saw wages fall 27%. Today only 63.5% of men actually have a job of any kind. This is the second lowest figure since 1948. The members of that era now shortly are going to be asked to have their retirement cut, which they paid for, to supply the military industrial complex with more money for more wars. As it turns out the Illuminists and their purchased politicians have sold Americans out for the past 100 years.
Mr. Bernanke at the Fed has indicated that the culprit in this financial mess is none other than the US government. He is right in part, but the Fed has caused 90% of these problems. The Fed should have long ago been reabsorbed into the Treasury, especially after observing its performance over the past few years. The lying about what they had been doing in lending something close to $20 trillion and keeping it a secret. Not to be outdone, both the US dollar and the Euro are in serious trouble and both have to find new lower levels. Versus gold and silver, they are both off annually more than 20% versus gold and silver. We expect those performances over time will worsen. In the case of the euro we have to see what is accomplished with Germany and the loans to failing countries. No matter what the outcome both the Fed and the ECB will continue to create money and credit one way or another and in that process achieve little except a temporary solution and substantially more inflation. In Europe, interest rates are 1.5%; in the US they are zero. What does one do for an encore? Very simply, both the dollar and the euro are in a box and cannot get out. If it’s not QE 3 and stimulus 3 at least for the time being it is the banks lending money that was lent to them two years ago by the Fed. All of the Fed’s and ECB’ policies do not work. We know that already. Those who believe that the Fed and the EB don’t know what they are doing are wrong. Both central banks know exactly what they are doing. That is creating a framework for the financial and economic destruction of economies of the US, UK and Europe in order to bring about a New World Order. In order to not allow the system to fail can never heal itself. Insolvent banks were legally allowed to carry two sets of books with the approval of the US government, the Bank for International Settlements, the BIS, and the accounting rules group FASB. What is very important to realize here is that some of these banks that are insolvent own the Fed. As a result they tell the Fed how much money and credit they need, and as a result they flow to the banks in unlimited amounts. This has to end. Banks are holding assets that have little or no value. They hold 3.5 million foreclosed homes in inventory and over the next five years that number will be 8 to 10 million homes worth 20% to 30% less than they are worth today. Yes, the FDIC would cease to insure and government will do what it did in the 1930s, allow you to withdraw only 5% of your balance at a time. Your deposits would essentially be lost perhaps temporarily or maybe permanently. Now you can better realize how really dire the situation is.
Supposedly everyone dislikes the debt extension bill and this is the reason Congress went along with the concept of a “Super Congress.” They do not want to be responsible for its passage. The debt limit will go to $16.7 trillion and there are to be almost $1 trillion in budget cuts. The second stage of cuts would be $1.4 trillion. The cuts over 10 years are only $240 billion a year. These cuts are a drop in the bucket compared to a $1.7 billion annual budget deficit. It will be interesting to see if the second stage includes tax increases. Both parties are failing to understand the country is bankrupt. These small changes are not going to change anything. The endless debate will eventually lead to default and the method of doing so. For two years we have witnessed a fall in purchasing due to the unofficial inflation of 11.2%, and as a result of QE and stimulus 1. We projected 14% by the end of the year last November. Of course, Americans will be interested to see what the Super Congress decides by November. Watchful observes know the debt extension debate could have been solved in 15 minutes. The real goal was to gut Social Security and Medicare and to set up the 2011 Enabling Act patterned on the 1933 Enabling Act in Germany that made Adolph Hitler dictator.
As unemployment unofficially stands at 22.6% American corporate profits account for a larger share of GDP than at any time in the past 60 years. Over the past three years of financial and economic crisis personal incomes fell $270 billion. Record corporate profits have generally happened due to massive layoffs. Employees make up about 70% of costs, so they are the first thing cut. As a result the profits account for the largest share of GDP since 1950, or 12.5%. Wages and salaries are the smallest since 1955, or 55%. Unfortunately, Americans do not read publications such as the International Forecaster, so they do not understand what has been done to them.
No matter how you look at it quantitative easing is a bailout of the financial sector. That even applies to the Fed’s purchase of Treasury, Agency bonds and other toxic waste, because it relieves the financial sector of the responsibility of purchasing these bonds. Those funds are then freed up for speculation in markets. This approach to financial crisis assures the survival and profit of the vested interests.
One of the striking things about the Fed is that it pays no heed to what politicians, foreign countries and other detractors say. Their only real mission is to keep the financial sectors in NYC, London and Europe solvent and operating. There are no other considerations, except printing trillions of dollars to keep the stock market up. During QE and Stimulus 2 MZM went ballistic sending the Dow close to 11,800. As you can see the Dow and major financial players, including the government, are helped by little falls through the cracks to the taxpayers. Higher inflation ensued higher gold, silver and commodity prices, as the dollar again came under downward pressure. That effect is still in process and it will extend through next year, because just through the end of the year real inflation will be 14% and official inflation 5.5%. These are about the same numbers we saw three years ago just prior to the credit crisis. During the intervening years 2-1/2 interest rates from the Fed to the banks remained at zero and we are told by the Fed that they will remain there for 2 more years. As a result of this myopia approach wages have hardly grown, unemployment has continued to rise and consumer purchasing power has fallen about 10% year-on-year. Overall second quarter growth was 1% and first half GDP growth was 0.7%. A year earlier we predicted 1% to 1-1/2%, so we were close. 98% of forecasters were way off target, but that often happens to lemmings. None in Wall Street, banking or government has a care about the American worker, who is earning much less than 11 years ago, or retirees who have to find a way to exist on 1% or 2% yields on their meager savings. Those rates are costing them almost $400 billion a year in lost income, and now Congress is in the process of cutting Social Security and Medicare after they looted those trusts. Speculators, banks and hedge funds get richer and the old and poor starve, or cut back on prescriptions, which help keep them alive, so we can fund more off balance sheet wars for profit.
The economy cannot stay profitable and the financials can’t stay profitable and write off their lead debt with more than $2 billion in assistance annually. Nothing has been fundamentally done to solve the underlying economic, financial and economic problems. The rich get richer and the crime syndicate that runs America screws the public.
These are the same people who rig every statistic released by government and even some issued privately. Those who own the Fed know long ahead of time what statistical releases will be and we believe often they craft the results. A blatant example is the July release of a 0.8% increase in consumer spending. A month or so from now the figure will probably be revised lower, as usual. It is a game they play to goose the stock market and make illegitimate profits. They never go to jail for what they do. You cannot prosecute a wink and a nod. Statistics are crafted for the market and result in large gains in the market and a hive of profit for traders. The stock market is an integral part of financial and economic policy. For the insiders only the stock and bond markets mean anything. This must stay up or the public loses confidence and once that happens the economy comes unglued. The binding of statistics no matter how observed is an important part of manipulation. These people can justify anything as sociopaths. 86% of those polled said the economy is in poor shape, yet consumer spending is up 0.8%. Give us a break. Even the Conference Board says consumer confidence fell from 59.2 in July to 44.5 in August and government expects us to believe consumption rose 0.8%.
Many layoffs lie ahead as corporations continue to cut back. Their earning gains mainly come from layoffs and productivity gains are terrible. The future is again clouded and full of pitfalls.
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THE INTERNATIONAL FORECASTER
SATURDAY, SEPTEMBER 10, 2011
09/10/11 (3) IF
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