Monday, May 18, 2009

Recovery? You're Joking Right?

There Will Be No Recovery
by James West,
According to the definition at, equity is:

“Definition 1
Ownership interest in a corporation in the form of common stock or preferred stock. It also refers to total assets minus total liabilities, in which case it is also referred to as shareholder's equity or net worth or book value. In real estate, it is the difference between what a property is worth and what the owner owes against that property (i.e. the difference between the house value and the remaining mortgage or loan payments on a house). In the context of a futures trading account, it is the value of the securities in the account, assuming that the account is liquidated at the going price. In the context of a brokerage account, it is the net value of the account, i.e. the value of securities in the account less any margin requirements.

Definition 2
Ownership interest in a corporation in the form of common stock or preferred stock.

Definition 3
Total assets minus total liabilities; here also called shareholder's equity or net worth or book value.

Definition 4
The value of a property minus the owner's outstanding mortgage balance.

Definition 5
Fairness in law.”

The idea of revolution keeps popping up, albeit intermittently, in the fringe blogosphere. I wonder just how far the disconnect goes between what the government-banking-media mafia thinks the public will swallow without complaint, versus the grave and solemn outrage dangerously smoldering in the hearts and minds of its victims that is the reality that brings that idea closer to an explosive existence?

This is the real and stark potential future for the United States. With crime on the rise in virtually all sectors, and the population already armed to the teeth, there is a fine line on the horizon that this organized crime gang seems intent on crossing.

The basic requirement of all humanity is food, shelter, and gainful employment. Historically, armed revolutions are ignited when those basic elements disappear from the daily lives of a majority of the population, such that most have nothing better to do than steal, beg, or roll over and die. When enough of that despair permeates any portion of humanity, there is an organic, deeply-rooted fury that, expressed collectively, has never failed to topple governments and rewrite the world order.

Proponents of globalization point to the fact that there has never been a longer period in the history of the planet where more people have enjoyed a peaceful and prosperous existence. That may be true, but one must question if that is because we have been living under a system that is for the most part fair and equitable, or have we just so thoroughly mastered the arts of manipulation and delusion through the offices of mass media that there has also never been a time where such astonishingly massive concentrations of personal wealth have accrued to such a proportionate few in the same time span?

The larger question in terms of a recovery is exactly what must we recover? The mafia most clearly wants us to believe that a return to over-leveraged and exuberant economic growth is the priority underlying the idea of recovery. I opine that there is something far more valuable that needs to be recovered, and issues economic are puny in comparison. For without the recovery of equity, there can be no recovery.

Bob Chapman, The International Forecaster
We have come a long way from Dow 14,168 and we have just completed a strong bear market rally based on little but hopes, dreams and the assistance of the “Working Group on Financial Markets” under the guidance of the Treasury and the Fed. We believe the bear market has a substantial distance to fall as the debt sector is purged. A 50% retraction of debt, which is far above GDP has to be completed, excess capacity has to be rung out of markets, consumer spending, which is now 70% of GDP, has to return to the long-term average of 64.5% of GDP. Once real estate bottoms in 2011 and 2012, we will probably be half way to the overall bottom. We have 2/3’s of the way to go before credit card debt is purged. We are just beginning to see failure of commercial and industrial loans and that could last another 3 to 4 years. Presently we are about 40% to the bottom. Then the question arises how long do we bump along the bottom – probably 5 years or longer – dependent on how bad the structural damage is, whether we still have a Federal Reserve; how many banks are left; whether we have WWIII or whether we have revolution. America and the world are in for a difficult time.

There are still massive imbalances in the US and world economy. Fiscal and monetary policies in almost all countries have gone over the edge. In a panic to subdue deflation governments and central banks have way overused fiscal and monetary policies, which is sure to end in hyperinflation. Any natural pause or mini recovery is doomed by the massive amount of monetary aggregates racing through the system. Over the next year and one-quarter negative GDP of 6.3% from the last quarter of 2008 should rise to even. That is no negative growth in the fall of 2010.

In spite of massive injections of money and credit worldwide the consumer price index fell to its lowest level since 1955. Those of course are US Labor Department figures. Inflation is still persistent at 9% and M3 is back to 18% annualized. Capacity utilization is 69.3%, the lowest since 1967, which means few businesses have profits. A reflection of that is that state and local taxes have fallen more than 7%. Personal income taxes are off over 1% and corporate taxes more than 15%. 80% of states have had a more than 13% decline in tax receipts year on year. Credit card balances are down more than 10%. It would be very helpful if our federal government would stop lying about our statistics.

Digging a Deeper Budgetary Hole
by Mike Larson, Money and Markets
Most Americans dread April 15. That’s when we all have to pay the fiddler — or more specifically, Uncle Sam. If you don’t get your tax check in on time, you may get a knock on your door someday from the IRS.

In Washington, though, April is a time to break out the champagne. It’s usually a windfall month for the Federal Treasury, with big budget surpluses the norm as money floods in.

But a strange thing happened this year. For the first time since 1983, the Treasury ran a DEFICIT in April. It racked up $20.9 billion in red ink. That was worse than economists were expecting … worse than the Congressional Budget Office had forecast … and a huge, huge shift from a year earlier, when Treasury recorded a SURPLUS of $159.3 billion.

What happened? Simple. Uncle Sam spent money he didn’t have!

Government spending surged 17.5 percent year-over-year, while revenue plunged 34.1 percent. You don’t need a Ph.D. in economics to know that’s a recipe for disaster.

The budget deficit for the current fiscal year is now running at $802.3 billion. That compares to $153.5 billion this time last year. In other words, we’ve ALREADY dug a budget hole that’s more than five times as deep as the one in 2008!

The Obama administration and many economists say we have no other choice. They say the $184 billion in TARP money we’ve already shoveled into the banking system this year was money well spent. And they say that the $787 billion economic stimulus package was absolutely essential to keep the recession from getting even worse.

But let me ask you two simple questions:

Do you really think we can keep this up forever?

Does it really make sense that foreign lenders will continue to underwrite this borrowing and spending bonanza?

What’s more, does Washington really expect us to keep buying the story that budget conditions will get better soon? I sure hope not, because the latest numbers show the exact OPPOSITE is happening.

The administration was just forced to raise its 2009 budget deficit estimate to $1.84trillion, up 5 percent from the outlook it shared just two months earlier. And the 2010 deficit estimate jumped 7.4 percent to $1.26 trillion. This means we’re running a deficit equal to a whopping 12.9 percent of the U.S. economy … the highest in 64 years!

Five Economic Storms Raging NOW!
by Martin D. Weiss, Ph.D., Money and Markets
Any economist fixated on so-called “signs of a recovery” needs to have his head examined.

Storm #1.
Plunging Jobs

On Friday, the Bureau of Labor Statistics announced that job losses were running at a slightly slower pace than in the first quarter. So Wall Street cheered.

But it’s a joke, and the 539,000 additional Americans out of work aren’t laughing.

Nor are the 23 million people — 15.8 percent of the work force — who are officially unemployed … are struggling with lower paying part-time jobs … or have given up looking for work entirely.

Storm #2
U.S. Housing Starts Down 77.6 Percent!

Housing is the nation’s largest industry. With it, the entire global economy boomed in the mid-2000s. Without it, a recovery is next to impossible.

The big picture: Housing starts, the best measure of the industry’s health, peaked at an annual pace of 2.3 million units in early 2006.

Now, they’re running at barely more than a 0.5 million units.

That’s a decline of 77.6 percent — three-quarters of America’s largest single industry wiped out.

Storm #3
Auto Sales Down 44 Percent!

At their peak in February 2007, U.S. and foreign-owned companies sold automobiles in America at an annual pace of 16.6 million units.

Last month, their sales pace plunged to 9.3 million, a decline of
44 percent (including the best performers like Toyota and Honda).

Storm #4
Biggest Decline in Consumer
Credit Ever Recorded!

Any economist counting on the consumer to get things going again had better go back for some more Rorschach tests …

… because you don’t need a therapist to interpret the image depicted in my chart below. It shows very clearly how the nation’s lenders are dumping consumers and making a mad dash for the exits:

In the third quarter of 2007, banks dished out $44 billion in net new loans on credit cards, autos, and other consumer credit (excluding mortgages).

Then, just 12 months later, in the third quarter of 2008, that giant credit machine collapsed to a meager $8.7 billion, a decline of 80 percent!

But the collapse didn’t end there. In last year’s fourth quarter, not only did new credit disappear, but lenders actually pulled out of the consumer credit market to the tune of $19.5 billion.

And they did it AGAIN in the first quarter of this year, pulling out another $12.2 billion.

It is the biggest collapse in consumer credit ever recorded.

Storm #5
Big Banks!

Whether the government lets big banks fail or not, the impact on the economy is similar: A massive contraction of bank loans and credit, sabotaging attempts to revive credit flows and stimulate the economy.

Reason: These banks must build capital quickly, and the only realistic way to do so is by cutting back on their lending.

The official stress test results released Thursday on 19 U.S. bank holding companies were supposed to help determine exactly how much capital they’ll need, and the total came to $75 billion.

That’s no small amount. But the stress tests will go down in history as the world’s most elaborate effort to paint lipstick on a pig.

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