Monday, September 12, 2011

Government Spending: Just Like Magic, Everything Gets Paid For

Dow Falls 1% on Euro Zone Concerns- Reuters
U.S. stocks fell at the open Monday as fears of a credit rating downgrade of French banks and the lack of a solution to Greece's debt problem heightened concerns about the euro zone's debt crisis.

Why is it lately, that every down tick in US equities is blamed on "Euro Zone Concerns"?  It's as if America's astounding $14.6 TRILLION debt is irrelevant.  Did anybody stop to consider that the latest increase in the US debt ceiling may have something to do with the weak equity markets?  After all, the last debt ceiling increase in early August was hardly met with huge rally in US stocks.

What do you mean the latest increase in the US debt ceiling?  The US Congress raised the debt ceiling again?  Raised the debt ceiling again, without a media driven fiasco regarding debt default?

YES, the US Senate, following President Obama's Thursday night $477 BILLION call to arms to fight unemployment in America, approved a $500 BILLION increase in the US Government Debt Limit.  And you thought these guys were serious about cutting spending and controlling the growth of America's WORLD LEADING DEBT...

"How in the hell did that happen?" you might ask.  Well like a magician working his magic, political sleight of hand makes things happen "over here" while you may be prompted to "look over there". 

Government Spending: Just Like Magic, Everything Gets Paid For.

Follow the time line:

On Wednesday September 7 the White House tells us that a package of job-creation and economic growth proposals that President Barack Obama will put before Congress will be paid for and will not breach the legal U.S. borrowing limit.

"We're not going to bust the debt ceiling," White House press secretary Jay Carney told a news briefing.

Obama "will put forward, both in his speech and supporting material, a very detailed set of proposals to grow the economy and create jobs," Carney said. "They will be specific, they will be measurable, they will be paid for," he said.

On Thursday evening, September 8, and much to the dismay of NFL Football fans from coast to coast, Houdini [I'm sorry, I meant to say "President Obama"] steps in front of a joint session of Congress to make a campaign speech [I'm sorry, I meant to say "present a jobs proposal"] that not only will create much needed jobs for Americans, but put more money into the pockets of even Americans that still have jobs...and it won't cost the taxpayers a penny!

Please take note here, that on September 2, 2011, the US government went over the new debt ceiling limit it had been granted by the Congress on August 2, 2011. Yes, even before the President gave his jobs speech, AND the White House promised his jobs program would not "bust the debt ceiling", the US Government, having borrowed and spent $400 BILLION in JUST ONE MONTH, was already over the new debt ceiling and had no more "credits" available to pay for the President's jobs plan.

Now watch how the magic works.  While the President buffaloes Americans with his Jobs Recovery Act, the Senate sneaks off, and uses a little rule that was included in the August debt ceiling agreement, to raise the US Government's credit line by $500 BILLION, merely agreeing to do so by a simple majority vote.  Conveniently, the US Senate is controlled by the President's Democratic Party.

Senate Approves $500 Billion Increase in Borrowing Authority
By Corey Boles
The U.S. Senate, in an unusual procedure, cleared the way Thursday for the U.S. to lift its borrowing authority by $500 billion to $15.19 trillion, enough to keep the support federal government borrowing through late January or early February.

The action came under an unusual legislative procedure spelled out under the August agreement to raise the U.S. debt ceiling and avoid a U.S. credit default. In a 52-45 vote, the Senate blocked an attempt by Republicans to slow down the process that will result in the $500 billion debt-ceiling increase.

The increase stems from a deal between Congress and the White House, finalized last month, that spells out how the borrowing limit would be increased by $500 billion. Under the process, lawmakers in both the House and Senate must vote on a resolution of disapproval against the increase in the borrowing limit. President Barack Obama would then have to veto the resolution of disapproval, and Congress would then vote to try and override that veto.

The complicated procedure, designed by Senate Minority Leader Mitch McConnell (R., Ky.), would allow an increase of the borrowing limit while allowing most Republicans to vote against such an increase.

There was a twist in this scenario Thursday evening, however. Democrats held firm, rejecting the resolution of disapproval, thereby speeding the process and increasing the borrowing limit immediately.

Just like Magic.

Was this latest debt ceiling increase mentioned by anybody on the "nightly news"?

And these politicians are now supposed to be "concerned" about government spending?  They are concerned alright.  They are concerned ONLY about their chances for re-election. They are determined to spend as much borrowed money as they can, to give the public the "perception" that they are doing something to fix things, and hopefully buy enough votes to get them re-elected in the next election.

The Euro Zone debt crisis is certainly a global problem, and it warrants the weak equity market's reaction, but it pales in comparison the the US Debt addiction.  The global debt bubble is about to burst because nothing is being done by global governments to address the cause of the debt crisis.  All efforts are an attempt to kick the can down the road in the hopes of buying time to "fix the problem" later.  Sadly, the future is NOW.

Are US stocks down because of the Euro Zone debt crisis, or are they down as a vote of "no confidence" in the President's Jobs Recovery Act, OR are they down because the US Government is simply spending MORE borrowed money in the hopes of getting re-elected to do even MORE damage to the US Financial system?

According to Ron Hera, government efforts to buy the "confidence" of their citizens are nothing more than campaign promises by the politicians charged to their tax paying citizens:

The financial news media and the statements of monetary authorities and government officials inevitably and grossly oversimplify the scope and magnitude of the still unfolding global crisis that began in 2008. The overall global economic situation is rife with conflicts and is dynamically unstable. A new global financial crisis, for example, is entirely possible. Political and social tensions are additional wildcards. The eventual breakup of the Euro is by no means off the table.

The American Jobs Act, proposed yesterday by U.S. President Barrack Obama, is similar to the 2009 American Recovery and Reinvestment Act, which generated artificial GDP growth staving off further declines. Obviously, temporary measures are intended to buy time so that root causes can be addressed. Unfortunately, that has not been the case. The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010, for example, failed to address regulation of OTC derivatives and the restoration of key Glass–Steagall Act provisions put in place during the Great Depression.

As a result, the American Jobs Act is pure politics and little more than a new government economic stimulus, the intentions of which are as follows:

1.Delay public servant layoffs, e.g., teachers, police, etc.

2.Fund or continue to fund infrastructure projects, i.e., Recovery and Reinvestment Act and similar projects

3.Extend unemployment insurance and fund or continue to fund job training programs and the
Innovation Fund for Training

4.Increase welfare spending, e.g., Temporary Assistance for Needy Families (TANF)

5.Establish a government infrastructure bank to fund public or private (stimulus) projects

All of the above stem from a single, temporary goal: support key economic indicators (employment, consumer spending, consumer confidence and GDP) until after the 2012 U.S. presidential elections. The price tag to buy that time is $447 billion. What is important is that supporting the inputs of headline economic measures is unrelated to the root causes—the structural causes—of the current U.S. economic decline.

Once again, instead of a legitimate effort to address the "root causes" of the ongoing financial crisis, the government opts instead to throw more money at the problem in the hopes that it will go away until "after the election".  It should be pretty clear why equity markets are going down, simply blaming the Euro Zone is a petty cop out.  In short order, that which is dragging the Euro into the abyss of failed funny money will soon enough be dragging the US Dollar down as well...and then who is the US financial media going to blame?  What goes around comes around. 

The US banks are at the root of the collapse of the global financial system.  It may be convenient to blame Europe for the problem today, but the TRUTH will only hurt more tomorrow by continually spending borrowed money to cover it up.

Surprisingly, Gold prices are weak as threats of a Greek debt default reach deafening levels.  Surprising?  No, not really.  Every effort is presently being made by the western central banks to prevent the price of Gold from exposing the TRUTH about the demise of their fiat money system now staring them squarely in the face.

Financial news headlines this morning are being written to persuade the financial markets that Gold is being sold to cover "equity losses", or because the Dollar is up.  Yeah, right.  There is NO GOLD BEING SOLD.  There may be "gold derivatives" being sold, but no REAL Gold is being sold.  The price of Gold can not be allowed to rise in such a potentially explosive global banking crisis environment.  Gold's TRUTH could crush these banks in a flash.

Gold futures lower as dollar strengthens


Gold eases as investors sell to plug other losses

Gold Retreats as Some Investors Sell to Cover Losses in Equity Markets

Gold may be down today in terms of US Dollars, but is anybody paying attention to the price of Gold in the other fiat currencies?

Gold New Record High In Euros (€1,375/oz) On Greek Default And Eurozone Contagion Risk

Funny how Gold hits a new All-time high in Euros at the same time US equity market weakness is blamed on Euro Zone debt risks.  This is all I need to see to know that Gold's weakness "due to strength in the US Dollar" is pure illusion.  The US Dollar Index is up ONLY because the Euro makes up 57% of the Index.  The US Dollar is not any "stronger" today than it was yesterday, except on paper.  And "paper gold" is the only thing being sold today.

Dan Norcini discusses the "global price" of Gold in a recent commentary posted on his blog:

“US based analysts continue to approach the gold market with blinders on as they focus exclusively on the US Dollar price of Gold and draw all their views of the market from that perspective. An apt comparison would be looking at the Dollar price of RICE and extrapolating future price action for the global price of this international food without even considering its price in Japan or Malaysia for example. This is shortsighted at least and foolish at worst as it betrays a flawed understanding of the role of gold in the international arena and its function as the currency of last resort.

With the vast majority of Central Banks around the world embarking on policies and practices designed to deliberately debase their respective currencies, those investors around the globe seeking to protect their wealth from such depredations are buying gold. That is why it continues to make one new high after another across a variety of global currencies.

Consider the price of Gold in Swiss Francs or "Swissie Gold". Ever since the SNB decided to debauch their currency and kill its historic safe haven status, gold has been soaring in terms of the Franc. Do you think that those Swiss who are financially savvy were going to sit idly by while their Central Bank plundered and looted their wealth?

Or consider the chart of Euro Gold, Gold priced in terms of the Euro. It too is making one new all time high after another. It is responding to the circus in Europe as the monetary authorities and political leaders there provide living testimony why one should not "put their trust in princes". The resignation of the ECB's Stark is yet another straw on that camel's back.

Think citizens in Britain have any more confidence in their leaders than the rest of the Euro Zone? Guess again!

Judging from the price action of the US equity markets this morning, the investing community has as much confidence in the Obama Administration's efforts to create jobs and turn the economy around as the passengers and crew of the Titanic had in their captain to save them from their collision with that enormous iceberg. This is the reason that while the Central Bank attack on gold continues, they have not been successful in derailing it. No one trusts the hapless clods to fix anything.

Do you get the distinct impression that there seems to be a rising lack of confidence across most of the globe in their respective governments? Personally I shudder to think where the S&P 500 would be without the surreptitious buying of the Exchange Stabilization Fund.

Considering the debacle unfolding in the equity markets today, the HUI or mining shares index, is once again holding remarkably firm as this sector continues to outperform the rest of the broad market.

Not surprisingly, the US Dollar has become the safe haven currency for the time being not based on any merits of its own, but only because the alternatives are even worse. It is attempting an upside breakout above a key chart level in today's session would which confirm a bottom is in for the intermediate term as it flirts with the 25% Fibonacci retracement level from the decline that began last May. It still looks like a rally in an ongoing bear market however. It could push as high as 79 - 80 on this leg if it sees some follow through gains next week but I frankly would dismiss any long term sustained strength unless it could convincingly clear the 81 level.

In the meantime this Dollar strength is engendering selling in the commodity complex by the hedgie algorithms once again. This is where some of the pressure in SILVER is coming from today. For the time being, the slowing global economic growth theme is currently outweighing the fears of currency debauchment when it comes to commodity pricing.”

Again I ask, Do the Western Central Banks Really Believe A Lower Gold Price Will Cut Demand For The Precious Metal?

If the price of Gold is dropping for any reason, it is because the banks want to buy at the lowest price possible ahead of the inevitable global failure of fiat money now staring them down.  NOBODY is selling any REAL GOLD today to cover their losses in stocks...that is pure mainstream financial news media bullshit. 

The banks are in deep do-do in their Gold suppression scheme.  The Gold they borrowed, and sold, from the central banks in a coordinated effort to suppress the price of Gold globally is now being called in by those same central banks.  Venezuela is the first to go public with this demand, more are soon to follow.

Gold is on the cusp of a global explosion in price, physical Gold is disappearing at an alarming rate.  And loathe to admit it, the western central banks are scared they may never see their Gold again.

By Andy Hoffman
Quantitative Easing has accelerated GLOBALLY for the past THREE YEARS, yet somehow we are led to believe an OFFICIAL commencement of QE3 in America will somehow matter. Two weeks ago, the Pollyana media espoused the market was ‘waiting with baited breath’ for Bernanke’s Jackson Hole speech, as if he could somehow reverse decades of decay by announcing QE3, but he disappointed by essentially saying he’ll announced it on September 21st, a whopping three weeks hence. Yesterday, we were told the G-7 would SAVE THE DAY by announcing “GLOBAL QUANTITATIVE EASING” at their tax-payer funded boondoggle in Marseilles this weekend, but all they wound up stating were these UNBACKED platitudes:

Central Banks stand ready to provide liquidity to banks as required. We will take all necessary actions to ensure the resilience of banking systems and financial markets.

We reaffirm our shared interest in a strong and stable international financial system, and our support for market- determined exchange rates.

Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability, and we will consult closely in regard to actions in exchange markets and cooperate as appropriate.

Ah, what a beaut! They agreed on absolutely NOTHING, other than to put out a CHEERLEADING STATEMENT! Moreover, if you want to see just how STUPID these “leading bankers” are, look at the blatant contradiction of the last two sentences, first stating the G7 supports market-determined exchange rates, and directly afterwards stating that market-determined exchange rates can be dangerous, and thus they will blatantly, in a coordinated manner, MANIPULATE them further. As if the Japanese and Swiss Central Bank devaluations of the past two weeks weren’t enough!

Even better, after reading this article about the G7 proceedings (, it appears it was nothing more than a giant arguing session. The ministers admitted the problems were much broader than 2008, that the individual nations’ had dramatically different aims, and that further meetings were required due to deep concerns regarding the economic viability of the Eurozone.

Furthermore, according to ZeroHedge, LATE FRIDAY NIGHT the IMF activated a $580 billion bailout fund (all PRINTED MONEY, by the way) which, via their own bylaws, is only to be activated to "forestall or cope with a threat to the international monetary system."

So you tell me readers, what ammo is left to the bankers except PRAYER?

The answer, of course, is NOTHING, and that is exactly what the GLOBAL FINANCIAL MARKETS are about to realize, perhaps as early as this week. Regarding my aforementioned “Eureka moment”, I believe global markets will start to reflect, in VERY SHORT ORDER, the HOPELESSNESS of the Eurozone’s financial situation, particularly in its weakest link Greece, the invetible all-out collapse of the U.S. economy, the insolvent nature of essentially ALL the Western money-center banks, and the utter WORTHLESSNESS of the fiat currencies behind them.

Conversely, they will realize, perhaps simultaneously, what I and other “goldbugs” have been stating for the past decade, that ONLY GOLD AND SILVER ARE MONEY. When this happens, the parabolic stage will officially commence (to the chagrin of top callers everywhere), and don’t be surprised if gold and silver coins and bars go “no offer” a lot sooner than you think.

Gold Technical Outlook: Looks Set for Upside Break
by Chris Capre of 2ndSkiesForex
Three weeks of selling and three weeks of strong rejections off the lows clearly communicating to us anytime the shiny metal is sold off, buyers are eager to come back in. And each time, they are doing so with more confidence because every time, they are buying at a higher price suggesting they are happy to take any dips as an opportunity to buy (or invest/hold) more gold.

This clearly communicates the underlying buyers are not afraid of the short term effects CME margin hikes may have on it or their futile (and puerile for that matter) attempts to manipulate something the market clearly wants to have and to hold. If they were afraid, they'd simply wait for a longer or deeper correction but the elevated buying rejections/levels suggests traders and holders appetite has not been satiated and continues to be part of their desired palette.

As a trader and quantitative technician, this all communicates continued upside pressure and a likely breakout (and close) above the $1900 barrier is coming soon to a market near you. We feel whoever is attempting to depress the prices (albeit sovereigns or manipulators alike) will soon have to yield the $1900 barrier and a close above it.

It is still NOT TO LATE to accumulate the Precious Metals.

1 comment:

  1. eToro is the ultimate forex broker for new and pro traders.