Economic collapse is a mathematical certainty: The top 5 places where not to be

by NewAmericaNow
Posted June 26, 2011

Bernanke’s Press Conference: Some Responses

“We Don’t Control Emerging Markets”

by John Rubino
April 27, 2011

THE FED CHAIRMAN’S FIRST PRESS CONFERENCE generated neither heat nor light, but did include some typically, um, questionable statements. Here are a few, followed by responses in bold:

“Keeping inflation low and boosting the economy are good for the dollar over the medium-term.”

Well, duh. But talking about controlling inflation while interest rates are at record low levels and commodities are soaring is pointless. Eventually energy and food prices will work their way through to restaurant menus and store shelves (see McDonalds and Huggies) and then inflation won’t be low — even by the government’s deceptive accounting. That won’t be good for the dollar.

“There’s not much the Fed can do about gas prices per se. After all the Fed can’t create more oil. We don’t control emerging markets. What we can do is try to keep higher gas prices from passing into other prices, creating a broader inflation. Our view is that gas prices will not continue to rise at the recent pace.”

The Fed might not control emerging markets but it does affect them. We’re exporting our inflation to them by supporting US consumer borrowing and keeping interest rates low, which creates a torrent of hot money flowing into Brazil, China and India. That’s why they’re overheating.

Put another way, they’re paying the price for our lack of self-control. China is raising rates and Brazil is at 12% already, which means they’re looking at a combination of slower growth and continued high prices. This is a huge problem for countries where many workers spend most of their paychecks on food and energy.

“The inflationary expectations we’re concerned about are long-term. Our anticipation is that oil prices will stabilize or come down. If firms aren’t passing on higher costs into broader prices, broader inflation, then we’ll feel more comfortable watching and waiting to see how it evolves… Long-term expectations are still stable. We’re confident they’ll stay down.”

Letting inflation run and hoping it doesn’t persist is extraordinarily dangerous, because by the time people figure out that it is going to persist you won’t be able to quickly change their minds. They’ll be dumping their bonds and buying real assets like gold and silver and farmland, sending the dollar down and interest rates up. Then you’ll have to spend years convincing them that they’re wrong by raising short-term rates and engineering a recession. And that’s the optimistic scenario. A recession with home prices already falling and systemic debt at record levels would risk a return to the mid-1930s, when a brief recovery turned into the Great Depression.

“We’re completing purchases by July. It probably won’t have significant impact on markets or the economy because the market already knows that. It’s not the pace of ongoing purchase that matters, but the size of the portfolio we hold. We’ll continue to reinvest, so our portfolio size will remain constant. Any changes to portfolio size would depend on pace of economic recovery.”

What he’s saying is that the Fed will continue to buy up Treasuries and other kinds of debt with the proceeds of its maturing bonds. This is a massive amount of money, hundreds of billions a year, so in effect QE 2 won’t really end.

“All I can say is, recovery is moderate, but I do think the pace will pick up over time. Over the long run, the US will return to being the most productive and dynamic economy in the world. It hasn’t lost any of its basic characteristics.”

Unfortunately the US has lost one of its most basic characteristics: a solid balance sheet. We’re effectively bankrupt, and the resulting loss of flexibility and access to capital will fundamentally change this country in the future. A few pockets of innovation won’t be able to bail out an insolvent majority.

“We’re using new tools, but nothing we’re doing is fundamentally different from what we normally do. We’re monitoring inflation as well as recovery. The problem is the same one central banks always face — which is tightening at the right time of a recovery. But we have a lot of experience with how to do this, and we’ll tighten as conditions warrant.”

Let’s consider that experience…the junk bond bubble of the 1980s, the tech bubble of the 1990s, the housing bubble, and now this, whatever it is. Not reassuring.

Why Bernanke’s next move doesn’t matter

from Phoenix Capital Research
April 27, 2011

THE FINANCIAL WORLD IS SITTING ON THE EDGE of its seat today to see just what Ben Bernanke has to say about inflation. It’s odd that a man with just a horrific track record, not to mention the fact his policies have resulted in tens of thousands of people starving or being killed in riots, should be the focus of the entire financial system.

After all, why should we listen to a pathological liar and idiot, not to mention a man void of morals or compassion? Regardless or Bernanke’s personal qualities, the fact is that it doesn’t matter what he does next. Whether or not he issues QE 3, raises interest rates, references inflation differently, or what have you is irrelevant. We will see some kind of Crisis in the near future because of his policies.

If he raises interest rates, the debt market and derivative implodes. If he launches QE 3, the Dollar collapses and trade wars erupt. If he doesn’t launch QE 3, the stock market collapses.

The idea of “success” is completely off the table at this point. It’s now simply a matter of which Crisis we will see. Even if Bernanke does become hawkish and defends the Dollar, the US’s debt load is beyond sustainable levels and will result in a debt default.

Again, there is no positive outcome from the current financial situation. The only good thing that will come out of the destruction will be the Fed being dismantled and Bernanke no longer in control (though this may take years before it’s complete). One thing that is now certain however, is that the US Dollar will be collapsing in the future. It might take two months (Bernanke indicates QE 3 is coming) or two years (Bernanke becomes more hawkish), but it will happen.

Into the Economic Abyss

by Brandon Smith
Monday, 25 April 2011

http://www.alt-market.com/articles/103-into-the-economic-abyss

OVER THE PAST FEW YEARS, MAINSTREAM ANALYSTS HAVE SHOWN A TENACIOUS BLIND FAITH in the U.S. economy and the dollar that goes far beyond religion to the point of mindless cultism, so, when even they begin to question the future of American finance (as has been occurring more and more everyday), you know its time to worry.

For those that have been following my work since 2007, the events of the past few months have not been a surprise at all, however, for those just waking up to the ongoing implosion of our fiscal infrastructure, the bubbling inflationary meltdown just over the horizon and the nightmare unfolding around our national debt is rather shocking. Living through a full spectrum catastrophe is, to say the least, confusing, especially when you have no idea where the whole thing began.

Until now, the mainstream media has provided nothing but economic fantasy for the masses. They have satiated the public with what amounts to financial toddler talk for helpless preschool minds averse to any research beyond their daily 15 minute sippy cup of New York Times, CNN, MSNBC or FOX cable news sound bites. I mean, have you ever actually stopped and read a Paul Krugman article more than once? Or listened carefully to an MSNBC economic piece? It’s like being violently accosted by a band of slobbering mental deficients with securitized ARM mortgages stuffed in their pants. Of course, fewer and fewer people are now buying what these hucksters are selling.

With gasoline nearing $5 a gallon, grain prices doubling, and shelf prices beginning to skyrocket, it’s hard for even the most ignorant suburban schlep to remain oblivious to the problem anymore. We are no longer on the edge of the abyss; we have fallen into it head first…

I make this statement not for effect, not to startle people out of their apathy, not even to illustrate what “may” be coming around the bend in the near future. I make this statement as directly and sincerely as I know how; we have indeed crossed the line between economic weakness and economic catastrophe. For those of you who have been asking when the final stage of the economic collapse will begin, that time has arrived. Here is why…

Energy Inflation Overdrive

Here’s how to tell when inflation is about to run out of control in your country; wait for the politicians and bankers to begin making excuses for its consequences instead of pretending it doesn’t exist! Remember after the initial 2008 spike in oil prices when we talked about the prospect of “speculation” as the culprit? Remember also that I have pointed out for the past three years at Neithercorp Press that when the dollar eventually began to crumble, and the price of crude began to spike again, the government would try to blame speculators as the scapegoat hoping that Americans would assume the situation today was the same as it was in 2008?

Well, guess what? The Obama Administration has just initiated the first volley of “speculation” propaganda talking points by tapping the Department Of Justice among others to “investigate” possible trader fraud and speculation in the price destabilization of oil.

Ah! So it’s those devious “traders” and “speculators” out there in the ether that are driving up the price of oil, and don’t worry folks, ole’ Barry is on the case! Little mention of OPEC’s general distaste for current U.S. activities in the Middle East. And certainly, no mention of the dollar’s continuous sharp decline over the past two months from the White House as being even remotely responsible for you being robbed at the gas pump. The dollar, despite intervention by G7 countries, continues to depreciate against the Japanese Yen, and has also slid to a 15 month low against the Euro.

At the publishing of this article, the Nymex crude index is at around $113 a barrel, while the Brent crude index stands at $124 a barrel. Gasoline prices across the country are averaging $3.50 to $4.00 a gallon. Now, some crazy individuals out there may question any overt concerns towards $120 or even $150-a-barrel crude. We survived it back in 2008, right? Why not today? However, this fuzzy logic depends greatly on a very unfortunate premise; that the economic atmosphere of today is the same as it was in 2008. Not even close…

The crude explosion in 2008 lasted for around six months, peaked at around $4 a gallon, and then ended with a deflationary-like plunge precisely because that price spike WAS (for the most part) caused by speculation. This time, expect no peak. Only an endless steady climb as the summer months progress. We have been calling for an increase in oil costs far exceeding the $150 a barrel achieved in 2008 and we stand by that prediction.

Negative aspects of energy inflation will take hold much faster than in 2008, primarily because our economic foundations are even weaker than they were three years ago. Today, we not only have a massive and unsustainable national debt, and a credit crisis still unresolved, but also a privately controlled Federal Reserve with no oversight running amok, printing non-stop since the derivatives bubble first popped. Not even the dollar’s fake reputation as a safe haven investment can stall the collapse now.

High energy costs hit every conceivable sector of the economy, from freight, to food, to vacations, to housing. People drive less when it costs them twice as much to do so, which means less shopping, fewer trips to Disney World, and second thoughts about moving to a new home in a new state. The cost of producing goods hits wholesale prices, which eventually hit retail prices when corporate chains are no longer able to absorb the increases. Your electric and heating bills take a bite right out of your tender behind. All of these factors will snap the thin thread our system is clinging to. America, as we know it, WILL NOT survive $5-$10 gas. Period.

The Middle East is lost as gold, silver, oil rocket higher

by Roger Wiegand
Editor, Trader Tracks Newsletter
Originally posted Mar 23 2011

Since origination of our Federal Reserve in 1913, banker-controlled dollar devaluation has been ruinous.

When a long list of really bad stuff piles-up over several years the ending is beyond ugly. We suspect the crack-up-boom ending is near as this fundamental list has grown way too long and those allegedly in charge are way beyond stupid as to potential outcome. Geopolitics was so mishandled it appears deliberate.

Since the Napoleonic Wars when the Rothchild’s lent cash to both sides, crooked bankers have been busy planning the final solution for a one world government power using one currency. While this nefarious plan has worked so far, we have to wonder how it ends in America with millions of guns, super angry citizens and global banks holding treasury paper as valuable as potty tissue. How lovely that their own toxic paper takes them down.

The bond-credit-currency-confidence-games end when confidence leaves town.
We think it went away earlier this year.

Where’s the Money? Money is the real stuff made from commodities, commodities themselves, and hard asset manufactured goods. Play money is all the fiat currencies and bonds produced from and backed by nothing. Even some stock markets are play money.

As we’ve written several times lately in Trader Tracks, the list of naughty stuff is a mile long and growing. Some of the more critical problems are:

Credit:

In our view government credit for nations, states, municipalities, and that of most private, commercial, and citizens, has been severely damaged and in many cases irreparably damaged. The QE2 continuation digs the hole deeper and we think the end is in sight when former buyers of USA paper quit buying. In many cases buying has already either slowed or stopped. Bond markets are damaged and being further damaged by the printing binge of Bernanke and Geithner. We are not alone. Other nations are doing the same thing in varying amounts. Budgets are shattered and in most cases there is little hope of full repayment. No bonds; no system. As we write today, Portugal is on the brink.

Food:

There has been no major improvement in food growing, crops or farm management in the past decade. Yet, over one billion new mouths were born and must be fed. Next, Asia that formerly existed on a modest diet, is demanding up-grades in most all food groups because they can afford it. This imbalance appears to hit the world food system this year as weather is not cooperating and grain supplies are way too low. One US grain analyst said we had better have a big corn crop this year along with wheat or, we are into major problems with prospects of rationing. With USA corn reserves at a 37 year low, I suspect rationing is inevitable with higher prices; either in 2011 or 2012.

Energy:

Energy production and demand has been fractured with nuclear problems in Japan, disruptions in the Middle East and lack of a coherent energy policy in America. Crude oil is now firmly supported at $104 per barrel and our forecast for 2011 is much higher on forthcoming shortages and new inflation. USA refineries are shrinking in number as it costs $6 Billion to build a new one, and operators can’t get permits to build them, and refinery profit margins are too small to match investments. Consequently, the US is purchasing about 35% of its refined unleaded gasoline demand from imports, with fuel arriving on ships daily. In our view, big global producers prefer to buy out wildcatters and not take drilling risks. Next, they also prefer to tap foreign oil sources, first leaving domestic reserves in the ground for later production. This creates a higher risk for America, being dependent on others; particularly geopolitically unstable others.