Jim Sinclair…Gold Is Locked And Loaded For $1,650 And Higher

Posted By on April 24, 2011

We’ll say it again….Jim Sinclair is probably the best Gold trader ever!

Jim Sinclair’s Commentary

Consider for a moment what things would have looked like if QE did not exist in the US as well as other major Western financial systems. What would this so called recovery look like?

Now think how things will look if the Fed, pressured politically, ceases QE. Then think how fast and big the next program (with a new name for QE) will be to manufacture money before all legislators, Democrats and Republicans, get sent home along with the Administration in 2012.

Be realistic. Before our beloved politicians give up their power forever the master of the financial universe will burn down the dollar barn.

Gold is locked and loaded for $1650 and higher…… Jim Sinclair

Stimulus by Fed Is Disappointing, Economists Say
By BINYAMIN APPELBAUM
Published: April 24, 2011

WASHINGTON — The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.

But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs.

As the Fed’s policy-making board prepares to meet Tuesday and Wednesday — after which the Fed chairman, Ben S. Bernanke, will hold a news conference for the first time to explain its decisions to the public — a broad range of economists say that the disappointing results show the limits of the central bank’s ability to lift the nation from its economic malaise.

“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” said Mark Thoma, a professor of economics at the University of Oregon, referring specifically to the bond-buying program.

Mr. Bernanke and his supporters say that the purchases have improved economic conditions, all but erasing fears of deflation, a pattern of falling prices that can delay purchases and stall growth. Inflation, which is beneficial in moderation, has climbed closer to healthy levels since the Fed started buying bonds.

www.jsmineset.com

Cumberland Advisors…. FDIC & Fed: More Questions Than Answers

Posted By on April 24, 2011

David Kotak out with his latest opinion of how things are….normally David has more answers then questions!  Hmm…..

Cumberland Advisors

FDIC & Fed: more questions than answers
April 23, 2011

We thank readers for their kind words about Scylla and Charybdis (www.cumber.com).  We also thank friends Dennis Gartman, John Mauldin and Barry Ritholtz for sharing the piece with their readers.  There have been many questions and comments forwarded to us.  They were specific to our articulated views about the FDIC and the Fed.  Some answers are below.

Q.  How do you estimate that the FDIC action is going to neutralize all of QE2? 

A.  When QE2 was announced, there were a number of estimates of impact.  Ours and others centered on about 2 to 3 basis points for each $100 billion.  QE2 is about $600 billion in size.  At 2.5 basis points per each $100 bn, the total value of QE2 is about 15 basis points reduction in interest rates, contrasted with where the rates might otherwise be.  The new FDIC fee action on April 1 creates a “wedge” by imposing a cost on the entire banking system.  We estimate (as does Barclays) that the wedge is about 15 basis points.  Thus, FDIC fees will offset QE2 in full.

Q.  Will Bernanke address this in his press conference? 

A.  We do not know, but we hope that a reporter will ask him about it.

Q.  Why did the FDIC do this? 

A.  They had no choice.  This is one of the consequences of the Dodd-Frank legislation. 

Q.  Didn’t the Fed see this coming?  Did they know about it when they announced and developed the QE2 policy?

A.  We do not know if the Fed saw it coming, but we do know that the Fed was silent on this issue.  In the comments on the proposed Dodd-Frank legislation, there is not a single word about the impact of the FDIC fee.  It is hard to imagine, but it is true.  We surmise that the comment period was directed to the Fed’s legal staff and that the impact of this issue was not thought about by the monetary economists.  Furthermore, the monetary policy folks tend to think in macro terms, so this may have escaped their radar screen.  Alternatively, they may have considered it and then dismissed it.  There is no way to know.  Perhaps Bernanke will clarify this, or some of the other members of the FOMC may do so in their speeches and comments.

Q.  Doesn’t this hurt the smaller banks?

A.  Absolutely.  The regs are extensive and complex.  From what we can see upon reading them, there is a bias toward a smaller fee rate based upon size.  The range of fees is 2.5 basis points low to 45 basis points high.  We are correcting a technical error in our original piece, in which we quoted the lowest fee at ten.  There are numerous adjustments needed in order to get to the final fee base for each particular bank.  Clearly, banks paying a large fee rate are competitively disadvantaged.

Q.  Is the banking community reacting?  

A.  Yes.  There are reorganizations taking place in larger banks in order to achieve a lower fee rate.  Smaller banks are adjusting their business models where they are able to do it.

Q.  Does this affect Munis?

A.  We think the answer is yes.  Many small Muni issuers are sole-sourced in banks for their capital.  They issue bonds under the small-issuer, bank-qualified exemption. They deposit in the local bank and the local bank buys their notes and bonds.  This FDIC fee does not exempt them.  Thus, the cost of finance for the smaller Muni issuers has been increased by the fee rate assessed by the FDIC on the particular bank.  The result is to raise the cost of finance for smaller Muni issuers at the very time they are retrenching in their budgets. 

Q.  What happens next?

A.  It takes Congress to change the law.  The unintended consequences are now starting to be revealed.  The Muni case is an example.  The impact on Fed policy is another.  There will be many more.  We expect a massive debate on how much damage Dodd-Frank is actually doing and how poorly it was conceived.  This is typical of a Congress that rushes to pass a major piece of legislation without full vetting and comments.  As the public learns more, they will protest to their representatives and the finger pointing will begin in Washington.  With enough furor, the law will be amended. 

David R. Kotok, Chairman and Chief Investment Officer

*********

Copyright 2011, Cumberland Advisors. All rights reserved.

The preceding was provided by Cumberland Advisors, Home Office: One Sarasota Tower, 2 N. Tamiami Trail, Suite 303, Sarasota, FL 34236; New Jersey Office: 614 Landis Ave, Vineland, NJ 08360. 1-800-257-7013. This report has been derived from information considered reliable, but it cannot be guaranteed as to accuracy or completeness.

Cumberland Advisors supervises about $1.5 billion in separate account assets for individuals, institutions, retirement plans, government entities, and cash-management portfolios. Cumberland manages portfolios for clients in 47 states, the District of Columbia and in countries outside the U.S. Cumberland Advisors is an SEC registered investment adviser. For further information about Cumberland Advisors, please visit our website at www.cumber.com.

Please feel free to forward this Commentary (with proper attribution) to others who may be interested.

Archived Commentaries: http://www.cumber.com/comments/archiveindex.htm

Jim Grant Explains Why QE3 Is Coming

Posted By on April 21, 2011

Jim Grant ranks in the top tear of analysts covering interest rates…..right at the top of the list with Bill Gross, the founder of PIMCO (the worlds largest bond manager).

From his latest Grant’s Interest Rate Observer: “Almost 30% of the respondents to a poll conducted by UBS a few weeks back said they anticipate a third round of so-called quantitative easing… We count ourselves among the expectant 30%. To its congressional directed dual mandate the Bernanke Fed has unilaterally added a third. It has undertaken to make the markets rise. The chairman himself has more than once taken credit for the post-2008 bull market (on one such occasion in January, he reminded the CNBC audience how far the Russell 2000 had come under Fed ministrations). Could he therefore stand idly by in the face of a new bear market. Byron Wien, vice chairman of Blackstone Advisory Services, went on record the other day predicting a summer swoon in stocks following the scheduled winding down of QE2 in June. Let us say that Wien is right, and that, furthermore, drooping stocks are accompanied by sagging house prices and a weakening labor market. Bernanke was hard put to explain why he chose to let Lehman go while acting to save Bear Stearns. He would be harder put to explain why he chose to implement QE1 and QE2 but, in another hour of need, refused to launch QE3.” And “Sooner or later, gravity turns speculative markets into investment markets. When this transformation occurs, the Fed will confront the need to bail out the innocents it had previously bailed in. Hence, QE3.” And therein lies the rub. Simple, sweet, and, for the US dollar, suicidal.

www.zerohedge.com

Six Dollar Gasoline Could Be Just Around The Corner

Posted By on April 21, 2011

$6 Gas? Could happen sooner then you think if the dollar gets weaker and we have one large storm in the Gulf of Mexico!  2012 to 2014 will be hard years.  Batten down the hatches, you’ve been warned.

April 20, 2011
By Jeff Cox, Staff Writer

A dollar plumbing three-year lows is hitting Americans squarely in the gas tank, and one economist thinks it could drive prices as high as $6 a gallon or more by summertime under the right conditions.

With the greenback coming under increased pressure from Federal Reserve policies and investor appetite for more risk, there seems little direction but up for commodity prices, in particular energy and metals.

Weakness in the U.S. currency feeds upward pressure on commodities, which are priced in dollars and thus come at a discount on the foreign markets.

One result has been a surge higher in gasoline prices to nearly $4 a gallon before the summer driving season even starts, a trend that economists say will be aggravated as demand increases and the summer storm season threatens to disrupt oil supplies.

“All we have to have is a couple badly placed hurricanes which could constrain some of the refinery output capacity in some key locations,” says Richard Hastings, strategist at Global Hunter Securities in Charlotte, N.C. “If you get weakness in the dollar concurrent with the strong driving season concurrent with the impact of one or two hurricanes in the wrong place, prices could go up in a quasi-exponential manner.”

More at: http://www.csmonitor.com/Business/Latest-News-Wires/2011/0420/6-gas-Could-happen-if-dollar-keeps-getting-weaker

Business Current And Future General Activity Indexes Surprise Eonomists…Head South

Posted By on April 21, 2011

Trouble dead ahead….remember, we’re (supposedly) in an economic recovery?

www.ingerletter.com

S&P Cuts Ratings To Negative For Fannie Mae, Freddie Mac, The Federal Home Loan And Farm Credit

Posted By on April 20, 2011

This just in from S&P, which does a follow up to its earlier U.S. outlook warning, and revises its GSE and FHLB outlook to negative.  Let’s remember that this is happening in an economic (supposed) recovery.

NEW YORK (Standard & Poor’s) April 20, 2011–Standard & Poor’s Ratings  Services said today that it revised its outlooks on the debt issues of Fannie Mae, Freddie Mac, the Federal Home Loan Bank System, and the Farm Credit System Banks to negative from stable while affirming our respective debt issue ratings.

Jim Sinclair Interview Covering The World Economy And Gold

Posted By on April 20, 2011

An excellent review of the world economic picture and the future of Gold

By Ron Hera

April 15, 2011

©2011 Hera Research, LLC

The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.

Jim Sinclair is primarily a precious metals specialist and a commodities and foreign currency trader.  He founded the Sinclair Group of Companies in 1977, which offered full brokerage services in stocks, bonds, and other investment vehicles.  The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.

From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.

He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation (a commodity clearing firm) and Global Arbitrage (a derivative dealer in metals and currencies).

In April 2002, shareholders of Tanzanian Royalty Exploration (formerly Tan Range Exploration) approved the acquisition of a Sinclair managed private company, Tanzania American International, and its exploration assets in Tanzania. Subsequently, Mr. Sinclair became Chairman of Tanzanian Royalty and now leads its efforts to become a gold royalty and development company.

He has authored three books and numerous magazine articles dealing with a variety of investment subjects, including precious metals, trading strategies and geopolitical events and their relationship to world economics and the markets.  He is a frequent and popular commentator on financial and market related issues in various news publications and has been profiled in the New York Times.

In January 2003 Mr. Sinclair launched, Jim Sinclair’s MineSet, which now hosts his gold commentary and is intended as a free service to the gold community.

Hera Research Newsletter (HRN): Thank you for speaking with us today.  You are one of very few people who have tried to warn investors about OTC derivatives.  Why are OTC derivatives a problem in your opinion?

Jim Sinclair:Over the counter (OTC) derivatives are the reason we are going through what we are going through now.  An OTC derivative is a kind of wager on what something will do.  Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses.  There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.

HRN: Did OTC derivatives destabilize the financial system in 2008?

Jim Sinclair: Absolutely.

HRN: Don’t financial institutions use risk cancellation models to hedge risks using OTC derivatives?

Jim Sinclair:Before the failure of Lehman Brothers, OTC derivatives losses would have almost netted out to zero.  You can consider derivatives like a string in a circle with various knots representing all the derivatives transactions.  When Lehman went broke, the string broke.  When Lehman couldn’t meet its obligations on derivatives, they could no longer be netted out to zero.  That’s why the banks went down, and that’s why you had the government bailouts and quantitative easing (QE).

HRN: OTC derivatives are the real reason for the bank bailouts?

Jim Sinclair: That is a fact which can in no way be argued away.

HRN:Hasn’t the problem been cleaned up by the Dodd–Frank Wall Street Reform and Consumer Protection Act?

Jim Sinclair:The pile of OTC derivatives is over $1 quadrillion.  After 2008, the International Monetary Fund (IMF) adopted a new method of valuing them called value to maturity.  Value to maturity assumes all of them will function, which is a cartoon.  The derivatives pile hasn’t contracted.  Basically, it has expanded, but value to maturity reduced the notional value from over $1 quadrillion to under $700 trillion.  The amount outstanding is the same as it was in the first place.

The flavor of the present moment is credit default swaps against the solvency, or lack thereof, of sovereign nations.  New derivatives have some margin behind them, but they only work if they are not called upon.  If a nation’s debt was in fact to default, it would happen very quickly without a great deal of run up before.  Most people would expect a rescue to be coming.  Let’s say a rescue didn’t come, those credit default swaps would simply not be able to function and down again would come the banking system.

HRN: Are you saying that the financial system is less stable today than it was in 2008?

Jim Sinclair: It appears more stable but that’s only an appearance.  The entire equity rally took place almost to the day from when the Financial Accounting Standards Board (FASB) relaxed the mark to market rule.  It allowed financial institutions to make up whatever value they wanted for their worthless pieces of paper.  If they used the real values, the banks would have come down.

HRN:Wasn’t the FASB change a temporary measure to halt the decline in mortgage-backed securities?

Jim Sinclair:It wasn’t just mortgage-backed securities.  It was all the paper on bank balance sheets.  The balance sheets of banks appear to be in good shape but they’re not.  In fact, they will need a lot more funds.

HRN: Then the financial system is still vulnerable?

Jim Sinclair:They’ve kicked the can down the road.  The purpose of QE, in other words the printing of money, is to maintain some degree of integrity in the financial system.  Bear in mind that the grease for the wheels of equity markets is liquidity, meaning that if you create a lot of money, it goes into the hands of banking institutions and international investment houses.  So, the equity out of thin air market has been sustained by QE.

HRN: What can the government do to prevent another crisis?

Jim Sinclair: You can assume that what’s been done already will be done again.  There are no other tools in a practical sense.  The idea that there won’t be a continuation of QE is nonsense.

HRN: Can the government bail out the banks again?

Jim Sinclair: The central banks will buy the government debt.  That’s called quantitative easing.

HRN:Doesn’t QE undermine the dollar?

Jim Sinclair: The dollar is an exercise in psychology.  It’s a piece of paper with a promise to pay but there’s nothing in which it can be paid.  It’s legal settlement for debt but there’s nothing that it’s convertible into.  To maintain confidence, it’s necessary to maintain the stature of a currency.  In an arithmetic sense, if you go into a market to sell a supply of apples, and if you’re the only seller, you can get a nice price.  If more sellers, meaning more apples, come into the market, there goes the price of apples.  QE creates more dollars, which increases the supply.

HRN: If the dollar is loosing value because of QE, what about the Euro?

Jim Sinclair: If you look at the dollar or the Euro or the Yen, or even the Swiss franc, it’s a race to the bottom amongst all currencies.  All countries everywhere are creating more paper every day.  It’s a relative valuation, rather than a valuation based on an objective reference.  What happens in the European Union immediately affects the dollar.

HRN: You mean the sovereign debt crisis?

Jim Sinclair: There’s too much focus on the Euro countries.  There’s no difference between the economic union of Europe and the union of the states in the United States.  The states of Europe have been revealed to be insolvent.  How about the states of the United States?  Out of New York, Illinois, California, etc., how many are solvent?  The focus of the media has been on the Euro.  The U.S. should stand in front of a mirror.  The states of the economic union of America are in no better shape.

HRN: The news media is ignoring the U.S. sovereign debt crisis?

Jim Sinclair: In George Orwell’s Nineteen Eighty-Four, there were loud speakers constantly teaching the people what Big Brother wanted.  The loudspeakers today are financial television.  How much attention has financial TV put on the insolvency of U.S. states?  It’s been mentioned, but not like the solvency problems of Portugal, Greece, Spain and Ireland, which have gotten hours, days, weeks and months of constant coverage.  The solvency of New York, Illinois and California has been brought up but fleetingly at best.

HRN: So, the solvency problems of U.S. states are like an elephant in the room that no one is talking about?

Jim Sinclair: How can you say that the Euro is a disaster based on the financial condition of the states of the economic union of Europe, when the states of the economic union of the United States are in equally bad shape and in some cases worse?  There’s no difference.  If you want to analyze the Euro based on the weakness of its member states, how can the dollar be strong when the states of the United States are as weak or weaker?

HRN: So, the Euro could rise against the U.S. dollar, despite the European sovereign debt crisis?

Jim Sinclair: Sure it can.  The question is, can the dollar go lower?  The Euro could go to $1.50 or higher.

HRN:But the U.S. dollar is the world reserve currency.  Doesn’t that guarantee its value?

Jim Sinclair: Only by default.  It remains so because central banks own dollars.  If central banks could exchange them for gold or other currencies without a major dislocation, they would.

HRN: Then, as a practical matter, central banks can’t get out of the dollar?

Jim Sinclair:The only one that’s gotten out of it is China.  They’ve made deals all around the world for metals, materials, energy and manufacturing.  If you add it all up, China is no more stuck in the dollar than the man in the moon.

HRN:Doesn’t the U.S. maintain a strong dollar policy?

Jim Sinclair: The strong dollar policy has only been a moderate, long-term downtrend that continues lower.

HRN: Don’t central banks manage currency exchange rates to prevent disruptive changes, like the recent Japanese Yen intervention?

Jim Sinclair: In the Japanese yen intervention, the central banks intervened but how long can they intervene?  They have to create money to intervene, which comes back to QE.

HRN: Do you mean the overall affect of currency interventions is to create new money?

Jim Sinclair: Anything that happens around the world, for instance, the Bank of Japan’s response to the horrible disaster in Japan, was to go straight to QE.  Money is being created everywhere without any discipline but the problems of financial institutions remain because they have make-believe balance sheets with improper values for their OTC derivatives.

HRN:Doesn’t the suspension of the FASB mark to market rule buy time for banks to repair their balance sheets?

Jim Sinclair: There are five million homes for sale in the United States if you include the off-market shadow inventory, which is a real inventory.  There’s no repair coming in the real estate market, therefore, there’s no repair coming in the OTC derivatives based on that.  That means there’s no repair coming in the underlying paper that the banks now value at much higher levels than they could possibly sell them for, if they could sell them at all.

HRN: Will bank balance sheets eventually get better?

Jim Sinclair: As long as confidence remains in place, which depends on the equity market and that comes back to QE.

HRN: Are you saying that the U.S. stock market rally is driven by QE?

Jim Sinclair: There’s an inability to stop QE without the whole house of cards coming down on itself.  There’s no other choice.  It’s the only tool left.  The Federal Reserve can’t take a hawkish position on monetary policy and interest rates without this whole thing rolling over.  They can talk about it constantly and might have more back door QE than front door QE.

HRN:If QE doesn’t stop soon, what will happen?

Jim Sinclair:The end game is a virtual reserve currency linked to gold.  It will be based on an average of major currencies, which will slow down the movement in the index.  The International Monetary Fund (IMF) is moving in that direction with Special Drawing Rights (SDRs).  The dollar will be just another currency.  The dollar’s not going to zero.  It could loose a significant part of its buying power, which it already has and could again.

HRN: How would a virtual currency work?

Jim Sinclair: There would have to be a broad measure of the money supply, such as M3 used to be for the U.S. dollar, but on an international basis.  The price of gold would be related to that measure.  Central banks would have to value their gold according to their contribution to or extraction of international liquidity, so the price of gold would rise or fall on its own.

HRN:Wouldn’t that be a gold standard?

Jim Sinclair:There’ll never be a return to a gold standard in my opinion.  The end of all hyperinflations has been a commodity currency.  That’s exactly what happened in Germany, for example.  Gold has the capacity to give confidence to people if there’s some relationship between the currency and gold.  The virtual currency will be linked to gold but not convertible into gold.

HRN: So, a gold component will restore confidence?

Jim Sinclair:The answer is a commodity currency.  That’s what happened every time there was this type of situation in monetary history.  The rentenmark, which ended the German hyperinflation in 1923, was supposedly backed by all the real estate in Germany, but the government didn’t own that real estate.  The point is that it wasn’t true.  There was no great commodity backing for the rentenmark, but it was enough.  It was a period when people were searching for anything to restore confidence in the currency.

HRN: Do you expect high inflation in U.S. dollar terms?

Jim Sinclair:The deed is done.  Inflation is a pregnancy.  The conception has already taken place.  There’s a delayed effect but if you do the crime, you do the time.  The Federal Reserve could stop QE tomorrow and it wouldn’t stop what’s going to happen because of what they’ve already done.

HRN: Won’t inflation reduce the real value of debt and help to repair bank balance sheets?

Jim Sinclair: Inflation is the way debt will be taken care of.  The value of the currency will be so reduced as to reduce the debt load.  It will also change the political scene.  Whoever has power going into this will not have power coming out of it.

HRN: In other words, inflation is politically destabilizing?

Jim Sinclair: People really haven’t seen the big picture.  Currency induced cost push inflation is already here.  Look at what’s going on right now in the Middle East.  We are moving from order to lack of order.

HRN: Would you say that inflation in food prices is indirectly driving oil prices higher?

Jim Sinclair: Oil goes right through from fertilizers to farm equipment to transportation and to food prices.  The price of food is going to go even higher than we are seeing this year.  The price of oil is headed decidedly higher.  Peak Oil was a concept of the future.  Now it’s a concept of now.  A car getting 25 miles per gallon will probably be too expensive for the average person to drive.

HRN: How will high oil prices affect the prices of other things?

Jim Sinclair: There will be dislocation in the means of delivery of products.  There may be shortages of goods, not because there are no available goods but because the means of distribution breaks down.  It’s not that there won’t be corn or wheat, but the fuel needed to deliver it will be too expensive and people who work in transportation will demand higher pay so they can live.  That’s where hyperinflation comes in.

HRN: And money to maintain the distribution of goods will be printed out of thin air?

Jim Sinclair:Every nation that has ever done this has turned into a banana republic.  People can live in banana republics but there will be few wealthy people.  There will be a few super wealthy people and an enormous amount of poverty.  You can see it across the border in Nogales, Mexico, where people continue to live in extreme poverty.

HRN: America is becoming like Mexico?

Jim Sinclair: The standard of living is going much lower.  People have to realize that the damage is already done.  It’s not a question of whether the U.S. can be pushed over the edge.  We are over the edge.  We are watching the consequences play out now.

HRN: What can people do to protect their wealth from inflation?

Jim Sinclair: People have to try to maintain their buying power.  Each person can become their own central bank and, to the best of their abilities, focus on the assets that benefit from the disorder that’s taking place and that will continue to take place.

HRN: Do you mean buying precious metals or commodities?

Jim Sinclair:I’ve spoken to people who, over the last ten years, have had this perspective.  They have done very well.  Even doing it now could protect your wealth.

HRN: What about gold?  Do you see gold as a currency that can’t be debased?

Jim Sinclair: What is real money?  Gold is a currency that has no liability attached to it.  It’s a measure of value and a store of wealth that’s universally acceptable. 

HRN: So, gold is an alternative to dollars or Euros?

Jim Sinclair: Physical gold is the answer.  An individual who holds gold will have more time and ability to function.

HRN: How much higher do you think the price of gold could go?

Jim Sinclair: What’s the exchange rate of a currency with no liability attached to it?  Gold is going much higher.  We could see shocking gold prices, maybe Alf Fields’ target of $10,000 per ounce or Martin Armstrong’s target of $12,000 per ounce.  I think that my price target of $1,650 per ounce gold is going to be so low it will be considered silly.

HRN: Thank you for your time today.

Jim Sinclair: It was my pleasure.

www.jsmineset.com

Let’s Be Honest, State Revenue Models Are In Ruins

Posted By on April 19, 2011

States see biggest revenue drop in 60 years…In a sign of the sluggish economy’s devastating impact, state government revenue across the country dropped by nearly one third in 2009 – the sharpest decline in 60 years, the Census Bureau said in a new report.  Expectations are for 2010 show improvement, but 2011 isn’t going to be good and 2012 is expected to be the worst in history due to the federal government slashing state stimulus programs.


By JENNIFER EPSTEIN

In a sign of the sluggish economy’s devastating impact, state government revenue across the country dropped by nearly one third in 2009 – the sharpest decline in 60 years, the Census Bureau said in a new report.

States saw record-breaking losses to their pension funds and in their tax revenues, as the recession wreaked havoc on payrolls and investments,.

Revenues plummeted by 30.8 percent, from $1.6 trillion in 2008 to $1.1 trillion in 2009, according to the report.

It was the most dramatic drop the Census Bureau has seen since it began collecting state revenue data in 1951.

States reported a total $477 billion drop in “insurance trust revenue” – mostly money from pension funds, while tax collections fell by $66 billion.

And the worst may still be to come.

Fiscal 2012 “will actually be the most difficult budget year for states ever,” said Nicholas Johnson, director of the state fiscal project at the Center on Budget and Policy Priorities, in an interview with The Washington Post.

The center reported last month that states will see budget shortfalls totaling more than $140 billion next year as they continue to wrestle with depressed revenue levels while federal stimulus dollars and reserves run out.

NYSE Margin Debt Surges, Net Speculator Leverage Second Highest Ever

Posted By on April 19, 2011

This is the second highest net leverage ever seen on on the NYSE,  and only a freckle away from a new record….Words to the wise, be prepared is not just a boy scout motto.

The NYSE has released its monthly margin debt update for March. Not surprisingly, with EVERYONE chasing nothing but levered beta, margin debt surged to a fresh 3 year high at $315.7 billion, the highest since February 2008. But far more troubling is that when netting out positive margin balances such as Free Credit Cash Accounts and Credit Balances in Margin Accounts, the investor net worth, or alternatively net leverage, as it is defined, plunged by $18.2 billion to ($75.2) billion. This is the second highest net leverage ever seen on on the NYSE, only lower compared to the $79 billion hit at the absolute peak of the credit bubble in June 2007.

www.zerohedge.com

Stratfor: China And The End Of The Deng Dynasty

Posted By on April 19, 2011

 

China and the End of the Deng Dynasty

By Jennifer Richmond and Matthew Gertken | April 19, 2011

Beijing has become noticeably more anxious than usual in recent months, launching one of the more high-profile security campaigns to suppress political dissent since the aftermath of Tiananmen Square crackdown in 1989. Journalists, bloggers, artists, Christians and others have been arrested or have disappeared in a crackdown prompted by fears that foreign forces and domestic dissidents have hatched any number of “Jasmine” gatherings inspired by recent events in the Middle East. More remarkable than the small, foreign-coordinated protests, however, has been the state’s aggressive and erratic reaction to them.

Meanwhile, the Chinese economy has maintained a furious pace of credit-fueled growth despite authorities’ repeated claims of working to slow growth down to prevent excessive inflation and systemic financial risks. The government’s cautious approach to fighting inflation has emboldened local governments and state companies, which benefit from rapid growth. Yet the risk to socio-political stability posed by inflation, expected to peak in springtime, has provoked a gradually tougher stance. The government thus faces twin perils of economic overheating on one side and overcorrection on the other, either of which could trigger an outburst of social unrest — and both of which have led to increasingly erratic policymaking.

More at: www.stratfor.com

S&P Cuts U.S. Ratings Outlook to Negative

Posted By on April 18, 2011

History shows it’s all forgotten by the next day……maybe this time will be different!

A stark warning from S&P about the U.S. government’s fiscal problems stoked concern on Wall Street and in Washington on Monday,  intensifying political divisions concerning the growing deficits.

House of Representatives Republican leader Eric Cantor on Monday called the Standard & Poor’s downgrade of U.S. credit outlook “a wake-up call” against those seeking to “blindly increase” the U.S. debt limit.

Cantor said the S&P action makes clear that any increase in the debt limit must be accompanied by “meaningful fiscal reforms that immediately reduce federal spending and stop our nation from digging itself further into debt.”

WikiLeaks Reports Secret U.S. Funding For Syrian Opposition

Posted By on April 18, 2011

No surprise here….The U.S. seems to have its fingers in every pie!
 
From the Associated Press
April 17, 2011
 
WASHINGTON—The State Department has been secretly financing opponents of Syrian President Bashar Assad, the Washington Post reported, citing previously undisclosed diplomatic documents provided to the newspaper by the WikiLeaks website.

One of the outfits funded by the U.S. is Barada TV, a London-based satellite channel that broadcasts anti-government news into Syria, the Post reported Sunday. Barada’s chief editor, Malik al-Abdeh, is a cofounder of the Syrian exile group Movement for Justice and Development.

The leaked documents show that the U.S. has provided at least $6 million to Barada TV and other opposition groups inside Syria, the newspaper said.

A Gold Tipping Point….We’ll Know Soon Enough! Gold Is An Under Owned Investment….

Posted By on April 17, 2011

Hmm….The University of  Texas whose $19.9 billion in assets ranked it second only behind Harvard University’s endowment as of August, added about $500 million in gold investments to an existing stake last year, and took delivery of almost $1 billion in gold bullion….”storing the bars in a New York vault, according to the fund’s board.” said Bruce Zimmerman, the endowment’s chief executive officer.

For years, decades, even centuries, the conditions for an event to occur may be ripe yet nothing happens. Then, in an instant, a shift occurs, whether its is due a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment. This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs.  and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg: “The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.”

From Bloomberg:

The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.

Years from now, when historians attempt to define who may have started it all, one name may emerge…

The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.

“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”

To Big To Fail, And To Big To Regulate

Posted By on April 17, 2011

Goldman makes their own rules!  Goldman broke the law and lied.   Eliot Spitzer: ” If they don’t prosecute, shame on them. If they don’t, the Attorney General should resign if he can’t bring this case.”

Goldman is back in the spotlight following Carl Levin’s concluding report, referring Goldman Sachs to the same law enforcement authorities that are overeager to get a job at none other than Goldman (the most recent example of which came yesterday when Bank of America which hired Gary Lynch, a former director of enforcement at the SEC, to head its legal, compliance, and regulatory relations efforts) for misleading investors and perjury, the wave of indignation at the glaringly obvious is once again back in vogue. To wit: on Friday’s Andreson Cooper, Matt Taibbi and Eliot Spitzer presented their views on the fact that several years into the biggest ponzi collapse in Wall Street history, stabilized only by the Fed’s pledging of trillions in taxpayer capital and the Treasury issuing like amount in debt to prevent the insolvency of Wall Street’s corner offices, nobody has still gone to jail. It was actually an oddly open and forthright show. Some of the notable soundbites from the transcript: “Eliot, do you believe Goldman broke the law and lied? – Yes, I do. And I know people are going to say how can you say that as a lawyer? I have read this report. It confirms our worst fears about double dealing, lying. Goldman Sachs has zero, none, nada credibility in my book”…..”Tim Geithner, treasury secretary, apparently reported in today’s “New York Times” was calling people saying don’t bring cases, it will unsettle the markets, so they let these guys go free. Meanwhile, he signed off on $12.9 billion to Goldman to cover a bad bet they made.”…..”Goldman Sachs was the number one private campaign contributor to Barack Obama’s presidential election campaign. It’s one of the single biggest campaign contributors to both parties in Congress”…”Anderson, before I sued, went after Merrill Lynch, which was the first case we filed many years back, I was told by their lawyer — this is a direct quote — “Be careful, we have powerful friends“…and the kicker: “Do you think the Justice Department will prosecute? Spitzer: If they don’t, shame on them. If they don’t, the Attorney General should resign if he can’t bring this case.

www.zerohedge.com

E*Trade Baby…..I Want My Mommy, I Just Blew My Wadd!

Posted By on April 15, 2011

Yep, Let this be a lesson to you….cry baby!

www.zerohedge.com

Harsh Words Out Of The White House

Posted By on April 15, 2011

President Obama has interesting but harsh words out of the White House…..Let’s look at his record,  looks like the old saying, do as I say, not as I do!

“Failure by Congress to raise the U.S. debt limit “could plunge the world economy back into recession,” President Barack Obama declared Friday, and he acknowledged that he must compromise on spending with Republicans who control the House to avoid such a crisis. Obama urged swift action, saying he doesn’t want the United States to get close to a deadline that would destabilize financial markets. He said he was confident Congress ultimately would raise the limit. “We always have. We will do it again,” said Obama, who voted against raising the debt limit as a freshman senator from Illinois.”

Banks Face $3.6 Trillion ‘Wall’ of Debt According To The IMF

Posted By on April 14, 2011

Say what, how much did the IMF say….yep, pushing 4 trillion dollars, looks like another piece of dynamite looking for a match!!    For 2011, Japan and the United States face the largest public debt rollovers of any advanced economy at 56 percent and 29 percent of gross domestic product, respectively. It repeated its warning that the United States and Japan faced particularly dangerous debt dynamics.

The world’s banks face a $3.6 trillion “wall of maturing debt” in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday.

Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report.

European banks still need to raise a “significant amount of capital” to regain access to funding markets, the fund said.

“It is … imperative that weak banks raise capital to avoid a pernicious cycle of deleveraging, weak credit growth, and falling asset prices,” it warned.

The IMF said banks’ exposure to troubled sovereign debt is “uncertain,” which adds to the funding strains.

It said government debt was generally high and on a worrying upward path in many advanced economies.

It repeated its warning that the United States and Japan faced particularly dangerous debt dynamics.

For 2011, Japan and the United States face the largest public debt rollovers of any advanced economy at 56 percent and 29 percent of gross domestic product, respectively.

“While the United States and Japan continue to benefit from low current (borrowing) rates, both are very sensitive to a potential rise in funding costs,” it said.

Interesting Tid Bits….Why We’re A Broke Society

Posted By on April 12, 2011

There are now 6.4 million fewer jobs in America than there were when the recession began, but the government says the recession is long gone……..

Total home mortgage debt in the United States is now 5 times larger than it was 20 years ago…..so we’re talking 5 times larger than 1991 folks! Wow, and people wonder why we’re a debt ridden broke society?

Further more….According to the Economic Policy Institute, 25 percent of U.S. households now have zero total net worth or negative total net worth.  Back in 2007, that number was just 18.6 percent.

And Americans now owe almost one trillion, yes….one trillion dollars in student loans…..

Even more interesting…..Back in the 1950s, corporate taxes accounted for about 30 percent of all federal revenue.  Today they account for less than 7 percent of all federal revenue.

According to the New York Times, the wealthiest 5 percent of all Americans had 63.5 percent of all the wealth in America.  Meanwhile, the bottom 80 percent had just 12.8 percent of all the wealth.

The median pay for CEOs increased by 27 percent during 2010.  

The price of corn has more than doubled over the past year.  

According to a recent report from the National Employment Law Project, higher wage industries accounted for 40 percent of the job losses over the past 12 months but only 14 percent of the job growth.  Lower wage industries accounted for just 23 percent of the job losses over the past 12 months and a whopping 49 percent of the job growth.

Inflation Component Breakdown Since 2000

Posted By on April 12, 2011

Ah, This is easy to understand, energy and college expenses are top inflation runners since 2000.

Courtesy of the excellent dshort.com, here is a chart of inflation from 2000 to Q1 2011. In a low-inflation decade, tuition has more than doubled. This is the acme of unsustainability. Students loans are the only sector of credit which is expanding, and they are now almost one trillion dollars!

A Bum Deal………

Posted By on April 12, 2011

We’re not surprised!

Commentary Magazine reports that the “Budget Deal”, won after so much theatrics, soap opera, and Razzie nominations, may in fact collapse shortly. “The big news today is that the $38.5 billion in budget cuts announced with such fanfare on Friday night mostly aren’t real. A good deal of it involves money from previous years and previous budgets that hasn’t actually been spent.” Commentary refers to an AP article in which it is made clear that the proposed legislation is one ‘financed with a lot of one-time savings and cuts that officially “score” as savings to pay for spending elsewhere, but that often have little to no actual impact on the deficit…cuts to earmarks, unspent census money, leftover federal construction funding, and $2.5 billion from the most recent renewal of highway programs that can’t be spent because of restrictions set by other legislation. Another $3.5 billion comes from unused spending authority from a program providing health care to children of lower-income families.” And once the more vocal fringers realize they have been cheated once again by both parties, the whole thing could just as easily turn to dust and go blowing in the wind.

www.zerohedge.com

Joke(s) Of The Day

Posted By on April 12, 2011

Here are some Smart Blonde jokes……enjoy!

DISNEYLAND

Two blonds were going to Disneyland . They were driving on the Interstate when they saw the sign that said Disneyland LEFT. They started crying and turned around and went home.

FLORIDA Or MOON

Two blonds living in Oklahoma were sitting on a bench talking, and one blond says to the other, ‘Which do you think is farther away… Florida or the moon?’ The other blond turns and says ‘Helloooooooooo, can you see Florida ?????’

CAR TROUBLE

A blonde pushes her BMW into a gas station. She tells the
Mechanic it died. After he works on it for a few minutes, it is idling smoothly.
She says, ‘What’s the story?’
He replies, ‘Just crap in the carburetor’
She asks, ‘How often do I have to do that?’

SPEEDING TICKET

A police officer stops a blonde for speeding and asks her very nicely if he could see her license.
She replied in a huff, ‘I wish you guys would get your act together.
Just yesterday you take away my license and then today you want to see it again”.’

RIVER WALK

There’s this blonde out for a walk. She comes to a river and sees another blonde on the opposite bank ‘Yoo-hoo!’ she shouts, ‘How can I get to the other side?’
The second blonde looks up the river then down the river and shouts back, ‘You ARE on the other side.’

AT THE DOCTOR’S OFFICE

A gorgeous young redhead goes into the doctor’s office and said that her body hurt wherever she touched it.
‘Impossible!’ says the doctor.. ‘Show me.’
The redhead took her finger, pushed on her left shoulder and screamed, then she pushed her elbow and screamed even more. She pushed her knee and screamed; likewise she pushed her ankle and screamed. Everywhere she touched made her scream.
The doctor said, ‘You’re not really a redhead, are you?
‘Well, no’ she said, ‘I’m actually a blonde.’
‘I thought so,’ the doctor said, ‘Your finger is broken.’

BLONDE ON THE SUN

A Russian, an American, and a Blonde were talking one day.
The Russian said, ‘We were the first in space!’
The American said, ‘We were the first on the moon!’
The Blonde said, ‘So what? We’re going to be the first on the sun!’ The Russian and the American looked at each other and shook their heads.
‘You can’t land on the sun, you idiot! You’ll burn up!’ said the Russian.
To which the Blonde replied, ‘We’re not stupid, you know. We’re going at night!’

IN A VACUUM

A blonde was playing Trivial Pursuit one night… It was her turn. She rolled the dice and she landed on Science & Nature.. Her question was, ‘If you are in a vacuum and someone calls your name, can you hear it?’ She thought for a time and then asked, ‘Is it on or off?’

 
Finally,  What’s In The Name!

A girl was visiting her blonde friend, who had acquired two new dogs, and asked her what their names were. The blonde responded by saying that one was named Rolex and one was named Timex. Her friend said, ‘Whoever heard of someone naming dogs like that?’ ‘HELLLOOOOOOO…….,’ answered the blonde. ‘They’re watch dogs’!

“Spent Fuel Pools In U.S. Are A Potential Timebomb”

Posted By on April 11, 2011

Nuclear Whistleblower: “Spent Fuel Pools in U.S. are a potential timebomb, situation can get worse than Chernobyl”….So here in is the problem, will any government in the world be honest about nuclear power plant problems until it’s to late!  This is just one of the many reasons to say no to nuclear power solutions!

Interview by Tuur Demeester

George Galatis became world famous in 1996, when Time Magazine featured him in its cover article “Nuclear Warriors”. Today, he warns that that the situation in the USA may soon become much graver than that in Japan.

Working as a Senior Engineer at Northeast Utilities company (NU) in Connecticut, Galatis noticed that across the country, high-level radioactive waste was being stored in overfull spent-fuel pools, creating the kinds of risk that could lead to a nuclear disaster with radiological consequences greater than those in Japan today, graver than even the Chernobyl disaster. Indeed, along with a host of other safety related issues, his 1992 memo specifically mentioned that some of the pool’s cooling pipes weren’t designed to withstand an earthquake as they were required to.

After a lengthy legal battle, and dealing with an uncooperative Nuclear Regulatory Commission (NRC), the Northeast Utilities Company was eventually convicted of 25 federal felonies, was forced to sell all of its nuclear plants, and lost over $3 billion in what company CEO Bruce Kenyon called “the largest management turnaround in the history of the nuclear industry”. Eventually, NU grudgingly made the fuel pool cooling system changes that Galatis had suggested. Though treated as a hero by the public, collegues continued intimidation and threats, according to Galatis, which eventually killed his career in the nuclear industry.

In light of the Fukushima nuclear disaster, where spent fuel rods are in effect melting down in the aftermath of an earth quake and subsequent tsunami, these sentences of the 1996 Time article have a prophetic ring to them:

“Because the Federal Government has never created a storage site for high-level radioactive waste, fuel pools in nuclear plants across the country have become de facto nuclear dumps—with many filled nearly to capacity. The pools weren’t designed for this purpose, and risk is involved: the rods must be submerged at all times. A cooling system must dissipate the intense heat they give off. If the system failed, the pool could boil, turning the plant into a lethal sauna with clouds of reactive steam. And if earthquake, human error or mechanical failure drained the pool, the result could be catastrophic: a meltdown of multiple cores taking place outside of the reactor containment, releasing massive amounts of radiation and rendering hundreds of square miles uninhabitable.” (Emphasis added.)

So what does whistleblower George Galatis make of the global nuclear crisis that developed since the earthquake and tsunami of March 11?

George Galatis: “Since the start of the Japanese nuclear crisis, I have been very concerned about its consequences to the Japanese people, to the general public, and about the lack of attention to what I perceive as being the real issue.”

Tuur Demeester: What is the real issue at stake, in your opinion?

GG: “The real issue is that of nuclear safety. Right now the true risk to public health and safety associated with the generation of nuclear power is intentionally kept from the public. Because of misplaced trust, these enormous risks are in effect being enforced on the public without their knowledge or consent. People need to know about and agree to accept the real risks involved so that when a scenario like Fukushima—or worse—arises here, there is already a degree of acceptance. Without this formal public acceptance, nuclear power will never be cost effective nor will it survive.”

“And despite many years of hard work of the Union of Concerned Scientists (UCS) and others such as Robert Alvarez of the Institute for Policy Studies, the risks associated with nuclear power and in particular, the storage of spent fuel in the spent fuel pools, have not been properly addressed by the nuclear industry and its Federal regulator. Without appropriate action, the nuclear tragedy in Japan may very well be reproduced on American soil at some point in the near future.”

TD: Why were these risks kept hidden from the public?

GG: “The reason for this, in my opinion, is that the radiation dose limits of a spent fuel pool accident would now exceed the limits set by Congress and originally agreed to by the public when the license to operate or build a nuclear plant was approved. Had the radiological consequences or risks associated with a spent fuel pool accident been communicated to the public prior to the NRC and the nuclear industry opting to perform full core off loads and store vast amounts of spent fuel in the pool, the public would not have accepted them. So, the NRC opted instead to ignore this change “from original operation” and its radiological impact by offering this as their official position: “the agency [NRC] analyzes dose rates at the time a plant opens—when its pool is empty. The law does not contain a provision for rereview.” Unfortunately, the industry also went along with this line of reasoning, even though it blatently contradicts reality.”

TD: Could you name some specific risks the public is facing today?

GG: “For example, one of the big surprises the public has become aware of is that the spent fuel pools in the Japanese nuclear power plants do not have a containment structure over them to prevent the escape of radioactive contaminants. People today can not believe how the design of a plant could so grossly compromise the health and safety of the general public. Yet this is one of the key safety issues we have right here in the USA as well: 23 American reactors are based on the same ‘Mark I’ blueprint as the Fukushima plant, and all 33 US Boiling Water Reactors share the same spent fuel pool design.”

TD: What are the safety issues with the spent fuel pools?

GG: “These pools were originally designed to hold less than half of a reactor’s core of fuel as a normal mode of operation, and that on a temporary basis. They were never intended to serve as a long-term nuclear fuel storage facility. However, today most nuclear plants in the USA contain more than five cores, which is at least ten times their original design for normal operation, and at least 2-3 times more than the amount held at the Fukushima unit 4 spent fuel pool. This means the US power plants, especially those with elevated spent fuel pools, are potential ticking timebombs, waiting for earth quakes, human error, acts of malice, or terrorism to cause a radiological crisis.”

TD: Your success as a nuclear whistleblower did not turn the tide?

GG: “Only temporarily, but I knew that beforehand. Many warnings to the industry, the nuclear industry regulators, and Congress, have not been heeded at all. For example, after the 9/11 attacks here in the USA, a Congressional Commission was formed and one of the issues was how vulnerable the nuclear plants were to terrorist attacks, especially airplane attacks. In response, the Nuclear Regulatory Commission issued a public proclamation that the plants are safe because of the concrete dome protecting the ‘reactor’. Their initial answer was entirely beside the question, and the issue of the spent-fuel pools remained unanswered, in my opinion intentionally.”

TD: Worldwide, there are sixty reactors under construction in 15 countries, with most in Asia, the USA, and eastern Europe. According to the Council of Foreign Relations, the USA currently has 25 reactors in the planning stages, with $8.33 billion in loan guarantees for the construction of two nuclear reactors in Georgia. What are your thoughts about this expansion of nuclear power production?

GG: “In the USA, I would not consider any future expansion until the current nuclear safety, national security, and long-term storage issues have been addressed, approved by all stakeholders (public, industry, regulators, legislators), implemented fully, and are fully functional.  It would be premature and unwise to start building new plants when the issues of the present plants haven’t been addressed yet, especially the spent fuel and national security issues.  In addition, much can be learned from from the current Japanese crisis which may need to be incorporated into the new designs once that evaluation and analysis is completed. “

TD: Do you have any final words of advice to share?

GG: “In my experience, official sources of information are often confusing and of little transparency. Given the enormous risks involved, it is vitally important for everyone to do their own research and become more informed. Fortunately today, thanks to the Internet, there are sufficient resources available. As I mentioned before, I think the Union of Concerned Scientists is doing an excellent job in addressing the pressing issues at hand and educating the public. Hopefully, the industry, the NRC, and Congress will heed their advice and remember whose interests it is they are supposed to serve: those of the general public.”

www.zerohedge.com

Fukushima Accident Assessment Officially Raised To Maximum Level 7

Posted By on April 11, 2011

Just for the record…..level 7!  And now we are getting unconfirmed reports that radiation content in Hawaii milk is orders of magnitude greater than Federal Drinking water limits. While one can bicker over the exact number, it is certain that as long as Fukushima continues to billow radioactive smoke, steam and/or water, cumulative radiation levels, both domestically and globally, can only go in one direction.

What started as less serious than Three Mile Island has just become as serious as Chernobyl, with the Fukushima disaster assessment having been raised to the highest, Level 7. From NHK: “For a series of accidents happening at TEPCO’s Fukushima Daiichi Nuclear Power Station, Nuclear and Industrial Safety Agency of the Ministry of Economy, which released large amounts of radioactive substances that affect human health and the environment in a wide range As an assessment based on international standards of the accident, the worst “level seven” decided to raise. “Level 7″ is the same as the evaluation occurred in the Soviet Chernobyl disaster. Nuclear Safety Agency, 12, held a press conference with the Nuclear Safety Commission has decided to publish the contents of the evaluation.”

www.zerohedge.com

Demographics…My Dear Watson!

Posted By on April 10, 2011

Here is why things are broken for baby boomers, and unlikely to get a lot better any time soon!

The interesting thing about the post-war baby boom and our guns-and-butter generation isn’t what happened during or as a result of this population tidal wave, but what didn’t happen:  the birth rate in America abruptly fell during the mid-60s, and continued to fall even through to today.  Compounding the problem, on one hand you have increasing life expectancies and the expansion of benefits placing financial burdens on the retirement system.  On the other hand, increasingly competitive labor markets and trade liberalization placed further importance on education and technological adoption, which both increased the displacement of workers as the domestic value chain moved upstream and delayed the entry of individuals into the labor pool well into their 20s as they traded off starting a family for attaining college educations.  These lengthened dependant obligations (from both ends of the curve) have necessitated longer workforce tenures, and are simultaneously acting as an artificial floor to wages for those already at the peak of their earnings trajectory while creating a ceiling as the next generation is kept in an advancement holding pattern, denied the skills and experience needed to achieve their own maximum earnings potential.  The divide between rich and poor is as much a generational problem as it is access to education, technology, and capital resources.

 

The other interesting thing about the post-war baby boom was the impact on the savings rate.  The rising percentage of income coming from transfer payments (i.e. entitlement programs) as a result of displacement on one end of the economic spectrum coupled with multiple streams of household income and smaller family sizes on the other drove an insatiable consumer demand that depressed the household savings rate, increased demand for foreign goods, and lowered borrowing costs as a vicious cycle was created.  Attempts at intervening in the markets to protect trade and standards of living did little more than fuel government spending as the domestic value chain moved even higher, displacing more workers and shifting the demand for low-wage labor overseas.

www.zerohedge.com

Why Education Matters In The Job Market

Posted By on April 9, 2011

From Chapter 4 Of The Book Endgame:

What it shows is that employment is very skewed, as is income. This was as of the end of 2009, but the principle is the same.

The clear problem in the United States is this: If the highly skilled have 2.5 percent unemployment, how do you reduce that? You can’t. That is probably the natural frictional rate of unemployment, that is, people naturally moving between jobs or geographies. Faster economic growth or more money supply won’t bring down a 2.5 percent unemployment rate.

There are clear trends developing. Those who have attained a higher level of education are not suffering to nearly the same extent as those at the lower end of the educational scale. Indeed, conditions for certain highly skilled workers could be described as tight.

Furthermore, those who find themselves out of work are on average out of work longer now. The average time of unemployment has sharply increased from less than 20 weeks only two years ago to more than 30 weeks now—a 50 percent increase. Those unemployed for shorter lengths of time now make up much less of the total than they used to.

The majority of unemployed workers are instead primarily those in a chronic state of joblessness. Such people find it ever harder to get back into employment as their skills become rusty. This phenomenon is not confined to the United States. A similar pattern is developing in the United Kingdom and throughout the developed world. The stories of chronic unemployment in Portugal, where fewer than 30% have high school degrees, have been everywhere of late, as Portugal becomes the latest of the euro-area countries to need funding help.

John Mauldin

Another Stock Market Warning

Posted By on April 9, 2011

More warning signals for the stock market………just the opposite of the bottom!

The The Devolution Of The Consumer Economy…Rising Costs, Declining Wages

Posted By on April 8, 2011

It’s here and now folks, the widening gap between declining incomes and higher costs has been filled with borrowed money. Now that borrowing has reached its limit,  the consumer economy is devolving.  Here is what it means.

The cost structure of the entire U.S. economy has bloated to unsustainable levels.

Here’s the basic mechanism: when money is “free,” costs rise. If you had to explain why sickcare in the U.S. consumes 17% of our nation’s GDP while other developed nations provide universal care for half that cost per capita (7-9% of their GDP), the answer boils down to “there’s an unlimited amount of free money here for sickcare.” There are no real limits on Medicaid or Medicare spending, and none on insurance cartels (it’s a free market for health insurance, except there’s only two providers in your area and their prices are the same–welcome to a “free market,” hahahahaha).

In other words, thanks to lack of competition via Central State-granted quasi-monopolies to cartels, and virtually unlimited sums of money for Federal programs, then the sky’s the limit on cost.

If Medicare limits the cost of an MRI, just triple the number of MRIs you give. Don’t laugh–that’s exactly what happens. Then there’s the hundreds of billions of dollars in outright fraud the system routinely pays.

You provide endless free money, costs go up. Look at the education cartel, another parasitic system latched onto the Central State. Once you enable students to borrow $36,000 a year, then magically the costs of a year in college (or for-profit school offering  “skills” that do no more for the hapless student than a high school diploma) rise to $36,000.

The same dynamic results when oceans of credit are available: assets inflate into bubbles, and costs rise concurrently. The commercial space that once was valued at $1 million magically rises to $3 million when cheap, abundant credit sparks a real estate bubble. As hot money chases higher returns, the costs of servicing that debt rise with every flip and purchase. And it’s not just debt servicing which costs more as a result–property taxes jump, too.

After a few lucrative flips, the new owner is staggering under a huge mortgage and crushing property taxes. So the space which only a few years ago rented for $1 a square foot now costs $3.50 a foot, just for the owner to break even.

That pushes the higher costs down on the small business tenant, who sees their profits vanish. When business sours in the inevitable credit-bubble bust downturn, then the tenant bails, and the landlord is underwater.

Bureaucracies and institutions may suffer from Baumol’s Disease, but they also suffer from the Ratchet Effect: they only know how to add expenses and scale up. Productivity, Baumol’s Disease and the Cliff Just Ahead (December 8, 2010) Baumol’s Disease describes the rising costs of sectors whose productivity gains lag behind more productive sectors. Thus education costs more even as manufactured goods fall in price, as labor-intensive education doesn’t lend itself to leaps in productivity.

But Baumol’s Disease doesn’t explain why fighter aircraft now cost $300 million each when the “best of the best” five years ago cost $56 million, or how Medicare has leaped from $52 billion a year to $600 billion a year in a decade. Nor does it explain why property taxes have risen 60% above inflation in the past 10 years.

What does explain these gigantic increases is monopoly powers granted to cartels by unaccountable State fiefdoms. With the Federal government able to borrow and spend without any visible limits, then the sky’s the limit on everything from MRI tests to Medicaid to foreign wars. With the public unable to opt out of local government, then local government expands and passes the costs onto the private-sector tax donkeys.

Real wages have been stagnant for decades–but in the last decade, they actually fell by 8%. Median household income of the U.S. fell from over $52,000 in 1999 to $49,777 in 2010: The Lost Decade.

As costs for medical care, education, property taxes, etc. skyrocketed far above inflation, credit-driven asset bubbles drove up the cost of housing. Tax policies provided ample incentives to borrowers while super-low interest rates punished savers.

The key feature of financialization is that the outsized profits and opportunities come not from producing goods and services but from leveraging, borrowing, obscuring risk and gaming widely ignored regulations. Banks made money not from prudent loans but from taking $1 in deposits and originating $50 of risk-laden loans from that paltry capital. Wall Street reaped billions by packaging high-risk mortgages as “low-risk” investments.

The housing bubble offered the ambitious debt serf a rare opportunity to lie and leverage just like Wall Street. Anyone with sufficient chutzpah could buy a number of houses with no-document “liar loans” with option-adjustable rate loans at super-low rates of interest, hold the homes for a few months and then flip them for profits.

A few thousand dollars in closing and carrying costs could be leveraged into tens of thousands of dollars in profits which could then be pyramided into more leverage.

Debt serfs soon discovered a key difference between their own reckless speculation and Wall Street’s reckless speculation: the over-leveraged debt serf was chided as irresponsible when his mini-empire of debt collapsed in a heap, while Wall Street was “saved” by trillions of dollars in Federal cash, credit, backstops and guarantees.

With incomes declining, assets imploding and reckless banks suddenly risk-averse, consumers can no longer borrow to fill the widening gap between their income and their consumption. Not to worry–the Federal government has stepped in and borrowed and blown the $5 trillion that the consumer would have borrowed in the past four years if he’d been able to. (Make that $6.5 trillion by October 2012.)

So now one unsustainable course of debt expansion has been replaced by another unsustainable course of debt expansion. The apologists and apparatchiks of the Status Quo keep claiming that the State is borrowing 11% of GDP only until private demand roars back to life.

This conveniently overlooks the fact that the private sector has been squeezed by declining incomes and rising costs to the point that it no longer has any discretionary spending money nor does it have the leverage to borrow more. It also no longer has enough assets to support reckless bubble borrowing.

Debt has this funny characteristic: interest must be paid. Even at low interest rates, this interest becomes an ever-larger drag on income. At some point the interest costs take every last dollar of disposable income, and carefree consumption disappears from the economy.

That point was reached in 2008. The Federal debt orgy has simply created an illusory stability and normalcy via “extend and pretend” manipulation and intervention. But the debt serf and his bubble-era mini-empire of expanding debt has been insolvent for three years. The two-decade game of backfilling the widening gap between stagnant income and carefree consumption can no longer be filled with borrowed money.

www.zerohedge.com

Mall Vacancies Are At The Highest Rate In 11 Years; Strip Mall Vacancy Rates Are Highest Since 1990

Posted By on April 8, 2011

Nobody seems to be paying attention to this…..

From the WSJ:

Mall vacancies hit their highest level in at least 11 years in the first quarter, new figures from real-estate research company Reis Inc. showed. In the top 80 U.S. markets, the average vacancy rate was 9.1%, up from 8.7%.

The outlook is especially bad for strip malls and other neighborhood shopping centers. Their vacancy rate is expected to top 11.1% later this year, up from 10.9%, Reis predicts. That would be the highest level since 1990.

In 2005, the mall-vacancy rate hit a low of 5.1%. For strip centers the boom-time low vacancy rate was 6.7% that same year.

Not all retail properties have suffered as much, especially on the high end. Large, publicly traded mall owners like Simon Property Group Inc. and Taubman Centers Inc., which tend to own top-tier properties, have trimmed their vacancy rates to 7% or lower and lifted their lease rates in the past year, buoying their stock.

But a broader glut has struck some of the exurbs that saw heavy housing development during the boom, where malls and strip centers built for growth that never came. More than one billion square feet of retail space was added in the 54 largest U.S. markets since the start of 2000, according to CoStar Group’s Property & Portfolio Research Inc. of Boston.

Protests Erupt In Syria

Posted By on April 8, 2011

The Middle East is a fuse looking for a match….

Syrian security forces opened fire on tens of thousands of protesters across several cities Friday, killing at least 20 people, wounding hundreds and forcing residents to turn mosques into makeshift hospitals.

U.S. Consumer Credit Rises 3.8% Annualized In February

Posted By on April 7, 2011

Here is the secret sauce…..revolving credit, or credit cards, actually fell during this period, down 4%.  But non- revolving credit, which includes student, auto, and other loans, increased by 7.7%. Interesting to note that January’s numbers were revised down which had the effect of making these February numbers look even better.
 
U.S. consumer credit surged 3.8% annualized in February, ahead of expectations. Expectations were for a smaller $5 billion rise. What we got was a $7.6 billion rise, beyond market expectations.

Surprisingly, revolving credit, or credit cards, actually fell during this period, down 4%.

Non-revolving credit, which includes student, auto, and other loans, increased by 7.7%

The Top 1%

Posted By on April 7, 2011

The top 1 percent have over 40 percent of all financial wealth in this country.

And…The top 1 percent has never done so well in relative terms.  In fact we would have to go back to the years prior to the Great Depression to find such a glaring divide with income inequality:

wealth inequality

Source:  Center on Budget and Policy Priorities

www.mybudget360.com

Portugal Lights Out…. Pleads For EU Bailout, Joining Greece And Ireland…Spain On Deck

Posted By on April 6, 2011

Portugal has been saying we are good, we don’t need help…they have been saying it over and over…Now, Portugal says we need help fast!  The dominoes are falling in Europe, and we haven’t seen anything yet!

Running out of money and paralyzed by a political crisis, Portugal said it would ask the European Union for a financial bailout—setting up a crucial test of the bloc’s emboldened efforts to contain its sovereign-debt crisis.

Portugal will seek a bailout from the European Union after the nation’s political crisis pushed borrowing costs to record levels and forced it to become the third euro-region country needing a rescue.

“I tried everything but we came to a moment that not taking this decision would bring risks we can’t afford,” Prime Minister Jose Socrates said in a televised statement from Lisbon late yesterday. “The government decided to make a request for financial aid to the European Commission.”

The ECB is forecast to raise its benchmark rate by a quarter point to 1.25 percent, according to the median forecast in a Bloomberg News survey, to counter inflationary pressures in the aftermath of a jump in oil and other commodity costs. The step risks deepening Europe’s sovereign-debt woes, said David Blanchflower, a former Bank of England policy maker.

“This could be another big mistake because then the cross hairs move to Spain,” which has an unemployment rate in excess of 20 percent and a housing market dominated by variable-rate mortgages, Blanchflower, a professor of economics at Dartmouth College in New Hampshire, said in an interview with Bloomberg Television. The probability of Spain needing a rescue “took a big jump upwards” after Portugal’s decision, he said.

Some Food For Thought…..Amazing Government Statistics

Posted By on April 5, 2011

Did You Know…..More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined.  Even more interesting are some of the state ratios.

Consider this statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees.

Every state in America today except for two—Indiana and Wisconsin—has more government workers on the payroll than people manufacturing industrial goods. Consider California, which has the highest budget deficit in the history of the states. The not-so Golden State now has an incredible 2.4 million government employees—twice as many as people at work in manufacturing. New Jersey has just under two-and-a-half as many government employees as manufacturers. Florida’s ratio is more than 3 to 1. So is New York’s.

Don’t expect a reversal of this trend anytime soon. Surveys of college graduates are finding that more and more of our top minds want to work for the government. Why? Because in recent years only government agencies have been hiring, and because the offer of near lifetime security is highly valued in these times of economic turbulence. When 23-year-olds aren’t willing to take career risks, we have a real problem on our hands. Sadly, we could end up with a generation of Americans who want to work at the Department of Motor Vehicles.

So where are the productivity gains in government? Lets first consider a core function of state and local governments: schools. Over the period 1970-2005, school spending per pupil, adjusted for inflation, doubled, while standardized achievement test scores were flat. Over roughly that same time period, public-school employment doubled per student, according to a study by researchers at the University of Washington. That is what economists call negative productivity.

But education is an industry where we measure performance backwards: We gauge school performance not by outputs, but by inputs. If quality falls, we say we didn’t pay teachers enough or we need smaller class sizes or newer schools. If education had undergone the same productivity revolution that manufacturing has, we would have half as many educators, smaller school budgets, and higher graduation rates and test scores.

The same is true of almost all other government services.  One way that private companies spur productivity is by firing underperforming employees and rewarding excellence. In government employment, tenure for teachers and near lifetime employment for other civil servants shields workers from this basic system of reward and punishment. It is a system that breeds mediocrity, which is what we’ve gotten.

Most reasonable steps to restrain public-sector employment costs are smothered by the unions. Study after study has shown that states and cities could shave 20% to 40% off the cost of many services—fire fighting, public transportation, garbage collection, administrative functions, even prison operations—through competitive contracting to private providers. But unions have blocked many of those efforts and public employees maintain that they are underpaid relative to equally qualified private-sector workers.

Food for thought!

Obama Healthcare Bill Known As The “1099 Repeal” Has Passed Congress

Posted By on April 5, 2011

At least it’s a start…..Congress passes a measure known as the “1099 repeal” because it would relieve businesses of having to file 1099 tax forms for any person or company to which they pay at least $600 in a year.

Congress on Tuesday passed the first major changes to last year’s health care law, undoing both a burdensome paperwork requirement for small businesses and rewriting part of the way the health exchange subsidies are paid for.

The changes are complex and don’t affect the fundamental operations of the health law, but Republicans said they are symbolic nonetheless because they mark the first repeals of significant provisions from Democrats’ signature legislative achievement under President Obama.

The bill passed the Senate on Tuesday with strong bipartisan support, 87-12, and goes to Mr. Obama, who will face a big test over whether to sign it. He has said he wants to repeal the paperwork requirement, but the administration has objected to rewriting the way subsidies in the exchange are funded, arguing it may make people less enthusiastic about joining.

After the bill passed, White House press secretary Jay Carney said Mr. Obama is “open to working with Republicans and Democrats to improve the health reform law, and we are pleased Congress has acted to correct a flaw that placed an unnecessary bookkeeping burden on small businesses.”

Sen. Orrin G. Hatch, Utah Republican, called the bill “a down payment on total repeal of the onerous health care law.”

The measure has become known as the “1099 repeal” because it would relieve businesses of having to file 1099 tax forms for any person or company to which they pay at least $600 in a year.

“Passing the 1099 repeal exemplifies why I came to the United States Senate,” said Sen. Mike Johanns, Nebraska Republican, who has led the fight for repeal in the upper chamber.

The bill marks a major victory for House Republicans, who wrote the bill the Senate passed.

The 1099 filing requirement was included in last year’s health law to try to raise money to pay for some of the new benefits. The goal was to try to force companies to accurately report their finances, which would make it easier to check whether they are complying on their taxes.

But small businesses immediately complained the new paperwork could cost them tens of thousands of dollars a year to hire staff to comply.

More at:http://www.washingtontimes.com/news/2011/apr/5/congress-makes-first-major-dent-health-care-law/

Stock Market Tid Bits, And The Long Term Kress Cycles

Posted By on April 3, 2011

The Fed Q Ratio (chart below) is signaling a warning for stocks……it is saying that we are currently at a level seen only 6 times since 1900!  So lets look at this in terms of the Kress Cycles between now and Sept-October (the approximate date of the Kress 6 Year Cycle high  This is where we could see a market top setup. From that possible top,(if) the Kress Cycle is right, then we will rapidly head down into the Kress 120 year Grand Super Cycle  low. When analyzing the impact of the yearly cycles it’s important to keep in mind that the final 12% of the duration of any cycle is the “hard down” phase.  The 120-year cycle’s hard down phase began 14 years prior from 2014, which was 2000.  This says Kress, “was the peak of the nation’s economic expansion, the beginning of economic winter, and the terminal high.” 

The 120-year cycle includes two 60-year cycles, which also answers to the economic long wave (also known as the Kondratieff Wave, or K Wave).  The K Wave tracks the four economic phases of the credit cycle from boom to bust.  Applying the 12% “hard down” rule of thumb, 7 ¼ years retroactive from the scheduled 2014 Grand Super Cycle bottom is mid-2007.  “This period began the ‘hard down’ phase of economic winter prior to the ‘credit crash’ and the beginning of deflation,” writes Kress.  “Of greater significance,” he adds, “the current 60-year [cycle] is the fourth which completes the series which began with the first 120-year which transformed America into an independent country as we know it today.”  The inference here is that when the current 120-year/60-year cycles bottom in 2014, the United States will experience a dynamic revolutionary transformation.  We’ll leave you with this ending tid bit……

Kress observes, “With all of SineScope’s cycles being in the down phase for the first time since 1890, the potential for the worst of anything to occur exists.  This elicits some very disarming implications for the U.S.A. and our lifestyles for the next three years.” 

This is of course is if we survive the Dec 21, 2012 end of the Mayan calendar! (half kidding aside)…..

Definition of the Q-Ratio:  The Q Ratio is a method of estimating the fair value of the stock market developed by Nobel Laureate James Tobin. It’s a fairly simple concept. The Q Ratio is the total price of the market divided by the replacement cost of all its companies. The data for making the calculation comes from the Federal Reserve Z.1 Flow of Funds Accounts of the United States, which is released quarterly for data that is already over two months old.

GOP To Propose $4 Trillion In Spending Cuts…Here’s The Rub, It’s Over The Next Decade!

Posted By on April 3, 2011

Over the next decade, a million things could happen, the least of them we think is $4 trillion in spending cuts.

From The Wall Street Journal:

House Republicans will propose slashing federal spending by more than $4 trillion over the next decade, by capping spending, overhauling entitlement programs and revamping the tax system, the chairman of the Budget Committee said.

Food Stamps Hit New All Time Record

Posted By on April 1, 2011

The total foodstamp participation in January hit an all time record 44,187,831 according to the USDA.  The average amount recieved per participent is $132.81 per month.  We might add that we are in an economic recovrey….but the GDP growth looks to be about the rate of inflation, which means if we buy the same things as we did last year, it’s costing us about 2.5-3% more, so for every $100 spent last year it’s costing us $102.50 to $103.00 this year.  That works out to about the rate of GDP growth.

Real Estate Sales Of Tomorrow, Happened Yesterday (Or 2002-2006 As May Be The Case)

Posted By on April 1, 2011

Governments are STUPID……Last week we found out that fewer new houses were sold in February than in any month since they started keeping records in 1963….yep, the more you give somebody, the more they become reliant on it, then when it stops, they don’t know what to do.  We’re seeing this same thing happen over and over.  Still the morons in government can’t get a wrap on it.  It’s really just basic economics 101.  Definitely not rocket science!     

 Tomorrow Happened Yesterday
     by Bill Bonner
 
A shocking figure came out last week. In the US, fewer new houses were sold last month than in any month since they started keeping records in 1963.How is it possible? Simple. The houses that would have been sold to today’s able buyers were built and sold years ago. That’s what excess credit does. It doesn’t really enlarge or enrich an economy…it stretches it, bringing things that would have happened tomorrow forward, to yesterday. Only a certain number of people every year can afford a new house. If in 2005, you give credit to buyers who won’t be ready for many years, or perhaps never – who will buy a new house in 2011?By the time the bubble popped in ’07, there were few able buyers still looking. And then, a US federal tax credit program in the fall of ’09 and the first part of ’10 finished them off. That program expired a year ago. Housing has been an empty husk ever since.

The latest data show more remarkable developments in time travel. You have to see it to believe it. And even then, you rub your eyes and wonder. In the US, the financial sector is riding high. Again. After bringing the whole world economy to its knees three years ago, profits for the industry are back where they were before the crisis began 4 years ago. For every dollar of corporate profit made in the United States of America in 2011, nearly 30% comes from shuffling money.

A good bartender will stop serving a customer who is in danger of falling on his face. No such decency exists in finance. Even with the crisis of ’07-’09 fresh in their memories, the debt mongers keep the taps open. At the low end, borrowers increased their credit card debt over the last 2 years. The word “usury” must have been invented to describe the interest rate charged subprime borrowers – an average over 18%. Meanwhile, total debt in the US is now above where it was when the correction began. At the end of 2008, debt crested at $56.4 trillion. In the last quarter of 2010, thanks to the tsunami of cash and credit coming form the feds, the total had risen to $56.6 trillion.

And it’s going higher. Clive Crook gave us a peek into the vanities that make it possible. Writing in The Financial Times, he says the Fed made “the decisive interventions that stopped the recent recession from turning into something much worse…” Yes, the Fed probably did overstep its boundaries. But “thank heaven” it did, he says. “By every commonsense measure, what the Fed did was right.”

This year marks the beginning of the 5th decade of the world’s latest experiment with a free floating, paper-based monetary system. The authorities are taking no chances. Lest member governments slip into integrity, the IMF bans them from backing their currencies with gold. And now, under pressure from insolvent banks, natural catastrophes, and a Great Correction, the authorities are introducing huge new amounts of this paper money – trillions of it.

For example, the Irish needed cash to bail out their banks. Wiser providence had the solution already in hand – bankruptcy – when the government committed 46 billion euros to save them, an amount equal to more than a quarter of GDP. They may need 35 billion more.

In Japan and America, as in Ireland, the feds try to shift the finance industry’s losses onto taxpayers. Unlike the Irish, they use absurdly low interest rates to push the cost into the fog of the future; at zero interest rates it costs less to carry bad debt than to bury it.

Most beguiling of all, they can print an almost unlimited supply of non-interest bearing securities – cash – with which to keep the ponziplan going a bit longer. In Japan, for example, the authorities responded to the recent disasters with money-printing on a Godzilla scale. The Bank of Japan announced that it would create 39 trillion yen – about $481 billion. In proportion to the economy, it is as if the Bernanke Fed said it would run off $1.5 trillion in stacks of 20s and 50s. In America, the central bank covers more than 100% of the government’s IOUs – equal to more than $5 billion in new currency every business day. Money-printing used to be what central bankers hoped no one would notice. Now, they call press conferences to announce it. And no one cares.

Mr. Crook even wants more of it: “When QE2 ends in June, QE3 should start.” He should watch out. For the gods of money are as mischievous as they are unrelenting. They use short-term success like the mortgage industry uses teaser rates.

The record from yesterday is clear: Once they get a taste for it, few economies can resist spending money they didn’t earn. First, they borrow from the future. Then, they steal from it, by simply printing up new money. Finally, you get déjà vu tomorrow, as yesterday’s greatest financial disasters happen, once again.

Regards,

Bill Bonner,
for The Daily Reckoning

The Seeds Of Discontent

Posted By on March 31, 2011

To see the real story, just look at the charts…..

The top 1 percent  control 42 percent of all financial wealth.

Growing Inequality…the middle class vs. the rich

Growing Inequality…in income

Source:  Social Security

Does this look like a recovery to you?  

More and More Food Stamps……and no end in sight

And Real Estate values are falling fast while mortgage debt is only slightly lower….

We have now created the seeds of discontent…..a nightmare on elm street in an economic sense!

http://www.mybudget360.com/financial-scam-of-the-century-2010-added-600000-millionaire-wealthy-derive-profits-from-stocks/

We May Be ‘Facing 50-100-year Battle’ At Fukushima

Posted By on March 31, 2011

So you want your power to come from a nuclear reactor do you……A nuclear expert has warned that it might be 50-100 years before melting fuel rods can be safely removed from Japan’s Fukushima nuclear plant.  Two new experts say capping the damaged reactors with concrete is not an option.  They had better get together with the japanese government which just yesterday seemed to have a different idea on the matter of capping the reactor in cement.

Water is still being poured into the damaged reactors to cool melting fuel rods.

But one expert says the radiation leaks will be ongoing and it could take 50 to 100 years before the nuclear fuel rods have completely cooled and been removed.

“The final thing is that the reactors will have to be closed and the fuel removed, and that is 50 to 100 years away.

“It means that the workers and the site will have to be intensely controlled for a very long period of time.”

Two new experts agree capping the damaged reactors with concrete is not an option.

Meanwhile the Wall Street Journal says it has obtained disaster-readiness plans which show the facility only had one satellite phone and a single stretcher in case of an accident.

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