From bad to worse: The economy today, and tomorrow
by Giordano Bruno
Posted originally in Neithercorp Press
Dec 7, 2010
AT FIRST WE WERE TOLD THE AMERICAN ECONOMY WAS A FREIGHT TRAIN: INVINCIBLE. After the derivatives and mortgage crisis began in 2007-2008, we were told the problem was a mere blip in our financial timeline; nothing to be concerned about. In 2009, we were told that the recession was over, and that “green shoots” were on the way. Later, they said we were “turning the corner”, whatever that means.
In 2010, we were told it was time to get used to the “new normal”, which of course has yet to be clearly defined. Now, at the cusp of 2011, the year which many establishment economists originally claimed would bring a bright new era in U.S. employment and finance, it has become clear to much of the public that we are being deliberately herded with empty words and false promises towards a very dangerous and uncertain future.
We have discovered that there is no “new normal”. The word “normal” denotes a certain consistency, a set of rules to the system which are generally understood, yet we have seen nothing consistent except the continued downward freefall of our fiscal infrastructure and the end of anything remotely resembling stability.
I feel quite a bit of empathy and maybe even a little remorse for those who blindly believed the mainstream nonsense of the past few years. I can’t imagine being so lost and so utterly disappointed on such a regular basis. The only good to come out of this dashing of false hopes is that it has caused many to begin questioning what the hell is really happening. Why have things only become worse? What about all the government legislation and stimulus? When is it finally going to produce the effects that were once guaranteed? In fact, what are the benefits of ANY action the government or the private Federal Reserve has taken so far?
Let’s look at financial conditions across the globe and here at home, and perhaps we can gain a true understanding of the situation before us, and find answers for some of these questions…
Europe: American instability with an accent?
How many times over this summer did we hear about the bailout that “saved” the EU? About as much as we heard about the bailouts that supposedly saved America.
In spring, the MSM was warning of complete disintegration of the European Union. After the Greek bailout, all was suddenly well. The turnaround in rhetoric was enough to give me whiplash. I’m curious now as to where all that candy-coated bubbly adoration for European bonds and the Euro went. When I warned during the “summer of bailout love” that nothing had changed in the EU accept the media’s coverage of the problem, this is what I was talking about…
As we have been pointing out for the past two years, the debt default problems in the EU are not going away, nor are they likely to go away for quite some time. Greece, for instance, is now under review for yet another ratings downgrade by the S&P:
All the exuberance over the IMF/EU bailout of Greece this spring was for naught, as the country continues to falter with no end to their debt woes in sight. The bailout changed nothing (because bailouts never do). This lesson in Greece has apparently made no impression on mainstream media analysts and international investors, who now applaud a similar bailout of Ireland, and who will probably applaud the bailouts of Portugal, Spain, and Italy, once it finally becomes evident to the public that those countries are in equally terrible financial conditions.
Credit-default swaps for Portugal and Spain have risen to record levels as their debt exposure, which has been ignored by the MSM until this past month, is slowly revealed:
This means that the cost of insuring Portuguese or Spanish debt securities is becoming untenable. Like a couple of convicted drunk drivers, the risk of insuring them is tremendous. The likelihood of a crash is simply too high.
Italian bank refinancing costs are also exploding due to the unsustainable debt of the government, meaning an expanded credit crisis is looming for Italians (could this signal a coming bank holiday?):
Ireland and every other EU nation’s response to this disaster will, obviously, be the implementation of austerity measures in order to pay off their IMF creditors. Ireland has already announced a possible 20% cut in overall spending and the simultaneous raising of taxes; a double whammy for Irish citizens who will now lose many government aid programs while at the same time losing valuable income out of their pocket:
Countries that find themselves this indebted to the IMF rarely if ever actually improve conditions enough to pay off their liabilities, and that is not an accident. Global bankers have no intention of ever releasing EU nations from their clutches. The debt cycle must go on forever…
The debt crisis across the Atlantic is culminating in a massive destabilization of jobs markets, which is something we rarely hear about in terms of Europe. Eurozone nations have hit an overall record high “official” unemployment rate of 10.1% (double that for the REAL unemployment rate):
The point? Just under the surface Europe is in a shambles, the Euro is in almost as much danger as the Dollar, and this development will come to a head very soon. Already, the EU is moving to enact a “European Stability Mechanism”, which will effectively divide core EU nations like Germany and France from ‘peripheral’ countries like Greece or Portugal:
More fiscally stable nations such as Germany will no longer be required to foot the bill for those members of the EU that show signs of default. Even now, Germany is refusing to boost aid to EU bailout funds:
This is something we talked about with great concern at the beginning of this year, as richer European countries tie their economies to China and let the rest of the West rot. On one hand, it seems practical for sovereign countries to protect themselves and refuse to pay for the mistakes of others. However, the primary point of all of this has been ignored by the MSM, which is the fact that the EU should never have been formed in the first place. So far it has resulted in nothing but calamity for most participating countries. Surely, the IMF will drop by to pick up the pieces and “save” the union that was never wanted or needed, after the people are sufficiently desperate.
What this shows is that nearly all of the crises we are confronted with daily here in the U.S. are also striking Europe; there’s just much less talk about the EU disaster from local economic analysts. Regardless of what the MSM claims, Europe as we know it is about to change dramatically. In the U.S., the metamorphosis could be even more shocking…
The Recession that ate America!
The jobs report from the Labor Department last week underlined the breadth of the collapse in America. Establishment economists were heralding the Christmas season as a turning point (yet again) in the U.S. economy, for jobs, and for sales. Predictions for job creation ranged from around 150,000 to 400,000 openings. Traditionally, they would be correct in expecting such a spike in employment, but we are not living in typical times. The jobs report revealed only 39,000 newly employed, and being that Labor Department numbers are generally manipulated, we could safely suggest that almost no jobs were added. All in the midst of the Holidays, when temporary hiring is supposed to boom:
Now, some analysts are beginning to suggest that the U.S. is heading “back” into a recession. The problem is that in order to go into a second recession, we would have to actually exit the first recession before hand:
Whether or not you believe that we are facing a double dip, or that we are caught in one long economic death spiral, one must ask the question: where did all that bailout money go that was supposed to stop this? Recently, we received a pittance of a glimpse at the Federal Reserve balance sheet for part of the stimulus program. What little data was made public was not comforting…
If you thought that stimulus packages from the Fed would actually go into the U.S. economy, you were greatly mistaken. The largest recipients of bailout dollars from the Federal Reserve (paid for with your tax dollars) were FOREIGN BANKS. That’s right, the liquidity injections that have put the very health of the dollar at risk and stoked a growing trade and currency war across the planet did not even go towards the economy in which you live! Overseas banks such as UBS and Barclays received the largest portion of the $3.3 trillion in emergency stimulus that was outlined in documentation the Fed was forced to release due to lawsuit:
Remember, this $3.3 trillion is just what the central bankers openly admit to. We haven’t even scratched the surface of Fed accounts or Fed secrecy yet. One factor in stimulus injections that often goes under the radar is overnight lending. It has been revealed that the Fed has created at least $9 trillion which was then pumped into major banks over the course of the past two years. Merrill Lynch alone snapped up $2.1 trillion:
This brings up another important question: if the major banks have been privy to so much capital, why aren’t they lending to the public? Maybe because they are still broke, even after all that Fed liquidity! Currently, top U.S. banks still face a $100 billion to $150 billion shortfall according to Basel III rules (again, this is just the amount that has been admitted):
This amount of capital retention would suggest a ‘deflationary’ crisis, but instead, we have so far witnessed a falling dollar and rising prices on most goods and commodities. Gold is hovering near $1420 an ounce as I write this. Silver has broken the $30 an ounce mark. Oil is flirting with $90 a barrel, and is firmly entrenched above $3 a gallon, very close to where we predicted during the summer (we still have three weeks to hit $100 a barrel). Other base goods are spiking much faster…
The most recent and disingenuous talking point used by the MSM to explain away rising prices is that it is a result of “demand” by growing developing nations like China. Below are a couple examples, including an article which blames rising cotton prices on demand from China, and rising oil prices on “economic recovery”, which is an unbearable load of media manure:
Anything to avoid the word “inflation”, and most especially the word “hyperinflation”. The problem with the demand argument is that while there is growing need for materials in places like China, this is certainly not at all the driving force behind the explosion in prices. A good way to gauge this is by examining the BDI (Baltic Dry Index).
The BDI measures the cost of shipping raw materials across the ocean as well as the amount of goods being shipped. It is one of the few economic indicators that cannot be manipulated by international banks or governments. A dramatic drop in the BDI shows a sharp decrease in demand for global shipping and thus reveals a slowdown in the overall economy. This is exactly what occurred at the beginning of the credit crisis in 2007-2008. However, the BDI can also be measured in comparison with the values of stocks and commodities. Under normal conditions of supply and demand, if the BDI were to drop (or deflate), then the value of most stocks and goods should also drop. This has not been the case, as the below graphs illustrate:
BDI vs. S&P 500
BDI vs. CRB Index
BDI vs. Crude Oil
BDI vs. Gold
BDI vs. Copper
BDI vs. Soy
Now, there have been small deviations in the past between stocks and commodities versus the BDI, but usually it is the BDI which leads the deviation, and not the commodities. As the final year of every graph shows, there has been a significant decoupling of the price of stocks and goods when compared with the amount of shipping of those goods. To put it simply; demand is low, all over the world, yet prices continue to climb skyward at an incredible pace. This suggests to me that we are seeing the beginning of hyperinflation, mostly in the U.S., and in no way a recovery.
The main culprit in creating the inflation millstone is, as you probably guessed, the Federal Reserve. Being that much of the fiat the Fed throws out is going into foreign entities, we have not seen effects as pronounced as they would be if all that cash was flowing into our local markets. This has not, though, stopped devaluation of the dollar itself, which is the true cause of inflation beyond money supply.
Foreign central banks are all too aware that the Greenback will soon be history. Treasury auctions are producing dismal results for anything other than very short term T-bonds, and the Fed is quickly becoming the ONLY buyer of U.S. government debt:
And, the biggest news of the year, the news that almost no mainstream outlet in America covered: China and Russia have announced that they will stop using the dollar for trade between the two countries:
“Wen said Beijing is willing to boost cooperation with Moscow in Northeast Asia, Central Asia and the Asia-Pacific region, as well as in major international organizations and on mechanisms in pursuit of a “fair and reasonable new order” in international politics and the economy.”
“Sun Zhuangzhi, a senior researcher in Central Asian studies at the Chinese Academy of Social Sciences, said the new mode of trade settlement between China and Russia follows a global trend after the financial crisis exposed the faults of a dollar-dominated world financial system.”
Skeptics and disinformation campaigns will likely argue that Russia is barely in the top ten trading partners of China, and the announcement is not a threat to the dollar’s world reserve status. What they will neglect to mention is that China and Russia’s political influence internationally goes far beyond trade decisions. How long before the other BRIC nations, India and Brazil, follow suit and drop the dollar when trading with China? How long before European countries, or even OPEC nations, join this trend? What you are witnessing today is the median step before the final collapse of our currency, and when the history books are written, it will probably be this period that is singled out as the trigger point for the event.
Get ready for weapons of mass distraction
As we have written about many times and qualified in great detail with page after page of supported evidence, the shell shocked state of the economy is no accident. The financial implosion is itself a distraction from the centralization policies of corporate cartels through organizations like the IMF or the Federal Reserve. But as the breakdown progresses (and I think we have shown succinctly that it will), the masses will eventually look for the antagonist of this story. The elites will have no other choice but to conjure villains from the ether to divert attention away from themselves and their detrimental policies. Not to mention, the number of us who understand the criminal nature of central banks is becoming precariously threatening to the continuance of those policies.
The Liberty Movement has hit a point of critical mass. The alternative media is dominating over mainstream corporate news sources. Our fight for transparency in information is reaching every corner of the world. Our membership is growing beyond what many of us had ever imagined possible. Projects such as the ‘Buy Silver: Crash JP Morgan’ campaign have gone effectively viral. Ideas like the popular purchasing of physical precious metals to counter the COMEX manipulations and short positions of big banks have been around for a long time, but in the past couple of years, we finally have the support base and cultural clout to make them a reality with the fantastic media reach of men like Max Keiser, Alex Jones, websites like Zero Hedge, and many others.
The more prominent our movement becomes, the more dangerous we are to global banks, and the more likely we are to see the enactment of engineered events designed to fog the battlefield and confuse the public. The goal of globalists will be to fabricate threats which appear to be more immediate or more frightening than the power grabbing schemes of the elites themselves. Imagine you have cancer, but are then suddenly confronted with a live grenade in your lap. Which problem is going to receive your full attention at that moment; the grenade, or the cancer? The dilemma is that both eventually end the same way. This is how elitists operate; deny people the chance to deal with the long term threat by diverting them with short term catastrophes.
A new ‘Gulf of Tonkin’ off the shores of North Korea, the release of a weaponized computer virus into Wall Street trading networks, yet another attempted or successful terrorist attack with highly questionable players and suspicious results, or maybe a Treasury dump by China resulting in a trade or even shooting war. I can’t say where the punches will come from, but I do know that the hits are on their way.
The state of our economy and of public opinion is reaching a crescendo and something has to give. The global banks will do anything to ensure that they are not set in the crosshairs of those people who are forced to suffer, even if it means throwing numerous innocents into the path of the oncoming bullets (figurative or otherwise).
At bottom, to fully comprehend the events that are taking place, and that are about to take place in our economic and cultural environment, we have to focus on the ignition source. If your house is set on fire, do you blame the house for burning? Do you blame the fire? Or do you blame the people that started the fire? I have a feeling the coming months will be crucial in this regard, and how tomorrow unfolds will depend greatly on our ability to lock hold of the influential financial arsonists of today, and never let them go.
You can contact Giordano Bruno at: email@example.com
Written by aurick
18/12/2010 at 3:43 pm
Tagged with Baltic Dry Index, China, COMEX manipulation, Crash JP Morgan, debt crisis, economic crisis, European financial crisis, Federal Reserve, financial destruction, global crisis, Greek bailout, Gulf of Tonkin, IMF, Liberty Movement, monetary crisis, Russia, sovereign debt crisis