Thursday, July 19, 2012

When "Fed Hopes" Are Dashed...What Then?

The denial that is being witnessed in the financial mainstream media, and without question in the US Equity markets, is quite disturbing.  

US economic data should have pulled the rug out from under the US Equity Markets weeks ago, and should have yet again today...

But no...  There are Fed Hopes behind EVERY negative US Economic Data release.  They are there to save the equity markets from collapse.


I suppose the Tooth Fairy and Santa Claus are real too?!

This "act of denial"will not end with people dancing in the streets:

U.S. Retail Collapse Accelerates
Written by Jeff Nielson Tuesday, 17 July 2012 13:17 

Less than two weeks ago I wrote “Crash Warning.” It outlined the current economic parameters of the global economy and explained that we were careening toward a particular form of economic Armageddon which I believe was first described by John Williams of, when he coined the phrase “hyperinflationary depression” nearly a decade ago.

The debt-laden, fraud-saturated paper Ponzi-schemes of Western bankers are now all about to implode in a deflationary (debt-default) collapse – most notably all their fraud-bonds. Simultaneously, the rabidly excessive money-printing of these reckless gamblers is causing (and will cause) the prices for hard assets (i.e. assets which actually have value) to spiral upward, with the most likely final destination being hyperinflation.

Because that previous commentary was describing a global economic paradigm, my analysis was necessarily abbreviated with respect to the apex of all economic ills: the United States. In particular, I spent less than a paragraph discussing the collapse of the retail sector in the world’s largest economy -- a consumer economy.

Before we examine this train-wreck directly, let’s take a moment to define the backbone of this consumer economy: the American consumer. The two charts below should be very familiar to regular readers, and describe the American consumer in stark but precise terms: poor and/or unemployed.

[chart above courtesy of]

We see two things in the chart above on average American wages. First we see how (in real dollars) wages for the average U.S. worker have been falling steadily for more than 40 years. Those wages have now fallen by more than 50%, all the way down to the same levels as during the Great Depression. And we see how the U.S. government’s lies about inflation have almost entirely concealed this relentless collapse in wages. How convenient.

Meanwhile, we see the percentage of Americans who are actually working also plummeting downward, to a 30-year low. The collapse in wages has been accompanied by a collapse in employment levels. Combined, it translates into a collapse in consumer purchasing power of well in excess of 50%.

The great Economic Myth (naturally perpetuated by the U.S. government) is that “the world can’t live without” the American Consumer. The truth is that the rest of the world has been gradually learning how to live without the American consumer for the past 40 years, as the American consumer is literally less than half what he used to be. The real-and-obvious question instead is how will the U.S.’s consumer economy be able to survive the Death of the U.S. Consumer?

The relentless campaign by the U.S. government to transform its own Middle Class into the Working Poor has been an unmitigated success. Using the numbers of the Corporate Media itself, only about 10% of the U.S. population presently qualify as “middle class”, now actually a smaller segment of the total population than the wealthy Americans who tower oppressively above them.

The purpose of destroying wage-levels for U.S. workers has been to drive those wages so low that American serfs will be able to “compete” with the wages of Asian serfs…while they manufacture toys and consumables for the wealthy. This is the “prosperity” which the Corporate Oligarchs promised us when they rammed “globalization” down our throats. They had the gall to call it “free trade”, when the only thing “free” about it was their ride – on our backs.

However, this transformation comes at a terrible cost. Deprived of income, the Working Poor have been forced to use ever-increasing amounts of debt in a foolish quest to sustain an unsustainable level of consumption: mimicking the policies and attitude of the U.S. government itself. The result is the ultimate retail “perfect storm”: consumers with small-and-falling incomes; loaded up with so much debt that they are incapable of borrowing any more; and with much/most of those incomes permanently going to pay interest to the Debt Parasites (i.e. banks). Perpetual debt-slavery.

Of course the “collapse” to which I’m referring didn’t just start last month, or even last year. It began in earnest with the Crash of ’08, and has continued unabated since then. The propaganda-concocted “recovery” of government and media has been nothing but a cruel hoax, designed to placate the growing suffering of the Working Poor, and goad them into more overspending with the malicious lies that “things are getting better”.

The truth is the exact opposite. During every month of this sham-recovery, the real rate of inflation (as provided by John Williams of has exceeded the percentage increase in retail sales (which are always unadjusted for inflation). Translation: every month of this “recovery” U.S. retailers have been selling less and less goods. This leads to another extremely obvious question: how can a consumer economy claim to be experiencing a “recovery” when it sells less and less goods each month, to consumers with ever-smaller incomes (and ever-larger debts)?

This scenario become still more absurd when we note that rising costs of raw materials have put extreme pressure on retail profit margins. Selling less and less goods for less and less incremental profit is not a formula for retail success. Rather it is a prescription for annihilation, and this is precisely what we see before us.

U.S. mall-vacancy rates have soared to all-time highs, and stubbornly refused to budge from those levels. Concurrently, margin-starved retailers are closing their storefronts and opting for more and more on-line commerce. In other words, they’re closing stores which generate significant numbers of jobs and tax revenues in favor of on-line operations which provide little of either. It is a self-reinforcing downward spiral which can only end in total economic disintegration. And we’re told that this collapse in sales, profit margins, employment, and tax revenues can all be taking place while the U.S. economy “recovers”.

This brings us (at last) to the actual numbers currently being peddled by this propaganda-machine. On Monday it was announced that U.S. retail sales had fallen by 0.5% in the month of June, and that this was the third month in a row that sales had (officially) fallen. For a consumer economy, this sounds bad enough even when we only contemplate the official propaganda. However, it’s only when we translate these numbers that we can truly appreciate the approaching U.S. economic holocaust.

As noted previously, retail sales numbers are never adjusted for inflation. Living in a permanent era of high inflation, this makes absolutely no sense at all if you’re attempting to distribute information with this statistic, but makes wonderful sense if you’re a propaganda-machine with the sole goal of deceiving people every day of their lives.

Instead of the runaway inflation produced by the psychopathic money-printing of Western bankers being their “enemy”, it is their best friend. The propagandists hide it completely with their absurd lies about “official” inflation. And eureka! High inflation is magically transformed into “high (and growing) retail sales”, and “high (and growing) GDP”.

I’ve dealt exclusively with the U.S.’s GDP sham in a previous commentary, so those readers still not familiar with this clumsy ruse can refer to that older piece. Here’s how the game of pretending that inflation doesn’t exist is used to lie about retail sales.

Real inflation is currently bouncing somewhere around the 10% level. John Williams will tell us that it has briefly dipped below that level, however his calculation is somewhat skewed by the effect of (temporarily) falling gasoline prices. As less and less of the Working Poor can afford to drive, the correct weighting of gasoline in an any inflation calculation must steadily fall – while (high) double-digit increases in food prices must be given more and more weight, as is the case in other poor nations.

I will steadfastly stick with a 10% figure for real inflation, with the qualification that this is an understatement for the American majority. Note also that in order to hide its deceptions involving retail sales, the U.S. government reports it as a monthly figure, with monthly rates of change. Conversely, almost every other major economic statistic is expressed as an annual rate of change, because we have been programmed to understand all statistics expressed in this manner. Thus by reporting retail sales in purely monthly terms, this dramatically shrinks the perceived size of these incremental changes in the eyes of the average reader. This serves two purposes.

When these numbers are bad (as they are presently), it dramatically understates this severity in the minds of those being fed these numbers. Conversely when the numbers were (supposedly) “good”; when U.S. retail sales were increasing (nominally) by a 20%+ annual rate while wages were increasing by only a (nominal) 3% annual rate, it stopped the dim bulbs in the media from forming the word “bubble” in their minds.

The argument for expressing these numbers in monthly terms is that they are “highly volatile”, and so reporting them as annual figures would be “misleading”. Obviously such an argument is nothing less than Machiavellian when coming from the most-accomplished propaganda machine which the world has ever seen.

Translated into an annual number, and adjusted for inflation; the 0.5% number reported for June is transformed into a collapse in U.S. retail sales at an annual rate of 16%. The 0.2% decline reported in May becomes a plunge of well in excess of 12% (annually). Which of these numbers “misleads” people, and which informs them?

With consumption directly or indirectly accounting for well over 80% of the U.S. economy; by the time that the “multiplier effect” is factored in (in reverse) this collapse in retail sales transforms almost point-for-point into a collapse in (real) U.S. GDP. Thus the consequences of this double-digit freefall in U.S. retail sales are plain for all to see.

The worsening economic collapse engineered by several successive U.S. regimes (at the guidance of their Bankster Overlords) is about to produce an economic cataclysm for Americans which will make the Great Depression seem like a day at Disneyland. Indeed, in the don’t-worry-be-happy world of the U.S. propaganda machine and its beloved “recovery” every day is like a day in Disneyland.

Who is Obama gonna blame this on?

US Ag Sec:Likely To See Food Price Increase Late ’12, Early ’13
By   || July 19, 2012 at 12:20 GMT

WASHINGTON (MNI) – The following are excerpts from the transcript
of the press briefing by U.S. Agriculture Secretary Tom Vilsack
Wednesday at the White House:
“I did have an opportunity to visit with the President. He is very
well informed on the circumstances surrounding a very serious drought —
the most serious situation we’ve had probably in 25 years — across the
country. Sixty-one percent of the land mass of the United States is
currently being characterized as being impacted by this drought.
“There’s no question that this drought is having an impact on our
crops: 78 percent of the corn crop is now in an area designated as
drought impacted; 77 percent of the soybeans that are being grown in
this country also impacted. It also obviously involves other
commodities as well — 38 percent of our corn crop as of today is rated
poor to very poor; 30 percent of our soybeans poor to very poor.
“And this obviously will have an impact on the yields. Right now we
have indicated yields will be down about 20 bushels to the acre for corn
and about 3 bushels to the acre for beans. That may be adjusted upward
or downward as weather conditions dictate.
“This will result in significant increases in prices. For corn,
we’ve seen a 38 percent increase since June 1st, and the price of a
bushel of corn is now at $7.88. A bushel of beans have risen 24
“The question that a lot of folks are asking is what will the
impact be on food prices. Because livestock producers will begin the
process of potentially reducing their herds in light of higher feed
costs, we would anticipate in the short term actually food prices for
beef, poultry, pork may go down a bit, but over time they will rise. We
will probably see those higher prices later this year, first part of
next year. Processed foods obviously impacted by crop yields, and we
will likely see the increase of that also in 2013.
“It’s important to note that farmers only receive 14 cents of every
food dollar that goes through the grocery store, so even though prices
on commodities increase significantly, it doesn’t necessarily translate
into large increases for food prices. And if, in fact, people are
beginning to see food price increases now, it is not in any way, shape,
or form, related to the drought. And we should be very careful to keep
an eye on that to make sure that people do not take advantage of a very
difficult and painful situation.
“There is some degree of uncertainty about all of this. Technology
has allowed us to have more drought-resistant crops. The spotty nature
of drought, the spotty nature of rains can sometimes result in better
yields than anticipated. We’re just going to have to see. As of today,
1,297 counties have been designated as Secretarial Disaster Areas.
That’s approximately a third of the counties in the United States.
We’re adding 39 counties today in eight states — those states are New
Mexico, Tennessee, Utah, Wyoming, Arkansas, Indiana, Georgia, and

And the US Equity Market levitates higher...there is only so much hot air even in a blowhard like Bernanke.
Tyler Durden's picture

What Housing Recovery? Existing Home Sales Miss By Most In 2 Years

Reality recovery Renaissance While it seems like everyone 'wants' the housing recovery to be real and organic (and not simply a reflection of limited supply and P.E. investor interest in scraping up the lowest fruit - they have to earn their commish after all), even the NAR couldn't put lipstick on this morning's pig of an existing home sales number. The biggest drop MoM in 16 months and the largest miss to expectations in 24 months is hardly the stuff of a solid foundation for the renaissance of the American Dream. CNBC's Diana Olick speaks the truth on the distressed supply drying up (despite Liesman's efforts to ignore it).

Tyler Durden's picture

Another Double Digit Negative Philly Fed Print Means Fourth Miss In A Row

Market Conditions Philly Fed
Every single economic data point keeps coming worse than expected, and the S&P is just shy of 2012 and probably all time (for those who still care about such things) highs. The Philly Fed just posted its July index print which was as usual abysmal, posting its third negative month in a row, coming in at -12.9, and missing expectations of -8.0 for the fourth month in a row. And while the bulk of index subcomponents were more or less in line, the biggest and most notable change by far was the Number of Employees which tumbled from 1.8 to -8.4. Sadly, which the economic contraction accelerates and print after print is horrible, once again they are not nearly bad enough to usher in New QE any second, even as the market has priced in not only QE 4, but 5, 6, and so on.

The Six Psychological Stages of Denial
From the book Aftershock written by David Wiedemer, PhD
[see Chapter 4, page 126]

First Stage: Denial

This is the stage in which the United States has been firmly planted for quite some time. This is the “Don’t worry, just go shopping” phase of dealing with (or more correctly, not dealing with) the reality of our vulnerable multibubble economy. Regardless of the facts, in the Denial stage people firmly believethat home prices cannot drop any further, the stock market hasalready hit bottom, and the mighty U.S. dollar will always be king.

The big advantage of the Denial stage is that people do not haveto take any unpleasant actions at all. We don’t have a problem and therefore we don’t have to change. But this stage involves more thansimply ignoring the problem. In the Denial stage, we actively keepour multibubble economy pumped up and expanding. Governments, businesses, and individuals continue to borrow their way to prosper-ity, regardless of the future price tag. And even when things start going bad, the Denial stage just won’t let the party quit. We continueto buy homes we can’t afford until we can no longer get mortgages,and run up more and more debts we can’t easily repay until we canget no more loans. And we continue to entrust our retirements andother investments to Wall Street even when stock prices have far out-stripped an economic basis because we want to believe in Tinker Bell.

It can be very comfortable to live in denial—in a big, multi-bubble economy that has only begun to fall. In the Land of Denial,there’s no need to recognize economic bubbles before they growtoo large. After all, this is the United States of America, the biggest,most powerful economy in history. Everything is fine. And besides, if things really start to look bad, we can always turn to our next stageof dealing with our economic problems, which is to rely on ourabiding faith in repeating market cycles.

Got Gold You Can Hold?

Got Silver You Can Squeeze?

It's NOT TOO LATE To Accumulate!!!

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