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Posts Tagged ‘paradigm shift

Long shadows cast over U.S. Economy

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by Jim Willie
Originally posted Wed, 12 Jan 2011

Another important and superbly perceptive article from the Jackass himself.  –Aurick

NUMEROUS ARE THE THREATS TO THE US ECONOMY AND US FINANCIAL STRUCTURES. Many are hidden threats, subtle challenges to undermine increasingly fragile support systems, planks, and cables that hold the system together. The year 2011 will be when the system breaks in open visible fashion, when the explanations that justify it sound silly and baseless, when the entire bond world endures major crashes. All things financial are inter-related.

Recall that in summer 2007, the professor occupying the US Federal Reserve claimed the subprime mortgage crisis was isolated. The Jackass countered with a claim that the bond market was suffering a crisis in absolute terms, where all bond markets were on the verge of fracture, perhaps globally. In year 2008 the banking system in the Western world broke, fatally and irreparably in my view. In 2009, the solutions, the treatment, the official programs were all exaggerated for their effectiveness while banker welfare became a fixture. Neglect of the people on Main Street became policy. In 2010, the system revealed it is still broken. The global monetary system after all rests atop the sovereign bond market. This year, it must fight off a collapse. Many are the hidden points of vulnerability. Gold and Silver will continue to be the great beneficiaries.


Huge outflows have struck from US-based bond funds, while the outflows continue for stock funds since may 2010. Even the flagship Pimco bond fund saw net redemptions. The public is stepping aside as the US Fed does its destructive work. No end is in sight for the stock fund outflows. A public boycott seems firmly in place. The new event is the largest bond fund outflow in almost 30 months. The Investment Company Institute reported that in the week ended December 15th, another massive outflow took place from domestic stock funds. It was the 33rd week in a row, amounting to an exit of $2.4 billion. Worse, taxable and municipal bonds saw a nasty shocker of $8.62 billion in outflows, which included another record $4.9 billion in muni bond outflows.

Bond mutual funds had the biggest client withdrawals in more than two years, as a flight from fixed income investments has accelerated. The withdrawals were the largest since mid-October 2008, when investors pulled out $17.6 billion from bond funds. The US bond fund retreat showed acceleration signs, since the rise was from $1.66 billion the week before, according to the ICI report. So outflows are in progress for both US stocks and US bonds!! Year to date, investors have yanked $100 billion in funds from US-focused equity mutual funds, offset by a smaller $16 billion in comparable inflows into equity strategies via ETFunds. The $250 billion PIMCO Total Return Fund, managed by Bill Gross, had its first net withdrawals in two years in November as investors pulled $1.9 billion, according to Morningstar.

The public has grown jaded by stories of flash trading smears of the stock market, insider trading scandals, and incessant internal reports of stock support from the Working Group for Financial Markets. They sense stock prices are heavily manipulated and not a reflection of true value. They might on a wider basis believe that most US financial markets are either in ruins or corrupted. The vast record outflows accompany a rise in the S&P500 stock index, which is a clear signal of USGovt prop programs in a corrupt market.

Ridiculous illogical and ludicrous interpretations continue to be disseminated about the US Economy in recovery. The false story has become a billboard message of deception. We are told that investors are retreating from bond funds after signs of an economic recovery and a stock market rally, which have lifted interest rates broadly. The reality is something quite different. The selloff in USTreasurys happened exactly after the US Federal Reserve in November offered specific details on its pledge to purchase $600 billion in bond assets to revive the sluggish US Economy. The 10-year USTreasury yields lie in the 3.2% to 3.4% range, much higher than the 2.49% in the first week of November. The bond market contradiction to the USFed monetization plan is without precedent in US bond market history, a grandiose insult.

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Global Systemic Crisis: Breach of the critical threshold of global geopolitical dislocation

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Excerpt from GEAB N°49
Originally published November 16, 2010

This is a small excerpt from the longer public article posted here on Quantum Pranx. This is important information that anticipates unfolding events that will impact the lives of most, if not all, of us.

AS THE LEAP/E2020 TEAM ANTICIPATED IN ITS OPEN LETTER TO THE G20 LEADERS published in the international edition of the Financial Times of 24 March 2009, on the eve of the London Summit, the question of a fundamental reform of the international monetary system is central to any attempt to solve the current crisis. But sadly, as was demonstrated again at the failure of the G20 summit in Seoul, the window of opportunity for achieving such a reform peaceably closed at the end of summer 2009 and will not open again before 2012/2013.

The world is indeed in the throes of the global geopolitical dislocation that we had announced as beginning at the end of 2009 and which can be seen, less than a year later, in the proliferation of movements, the economic woes, the fiscal deficits, the monetary disagreements, all setting the scene for major geopolitical shocks.

With the G20 summit in Seoul, which signalled to the planet in its entirety the end of US domination of the international agenda and its replacement by a generalised mood of “every man for himself”, a new phase of the crisis has begun, prompting the LEAP/E2020 team to issue a new warning.

The world is about to breach a critical threshold in this phase of global geopolitical dislocation. And as with every breach of threshold in a complex system, this will generate, as from the first quarter of 2011, a suite of non-linear phenomena: developments that do not conform to the usual rules and the traditional projections, be they economic, monetary, financial, social or political.

In this GEAB N°49, in addition to the analysis of the six main steps marking the breach of this critical threshold of the global geopolitical, our team presents numerous recommendations to help cope with the consequences of this new phase of the crisis. They address, for example the currency/interest rates/gold and precious metals group; wealth preservation and the replacement of the US dollar by another measure of net worth; the bubbles in asset classes denominated in US dollars; and the stock markets and the most vulnerable corporate categories in this phase of the crisis.

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Predictions are beginning to surface

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by Roger Wiegand
Posted originally November 2, 2010

Our 2011 predictions are beginning to surface

BETWEEN NOVEMBER 1 AND DECEMBER 15 WE LIKE TO POST our next years’ predictions for those markets and social situations affecting our trading and investing ideas. I should probably wait until the USA election fallout is completed but news is coming in fast and furious. I suspect that because I’m offering these predictions so early that before year end I’ll have to do this over again, perhaps within the next six weeks.

We previously forecast that both the stock and bond markets would sell-off for numerous fundamental reasons. Of course the timing and the amount of selling is front and center on everyone’s mind.

Before we continue with our predictions it is important to review this email from our top advisor. He has been consistently correct in his forecasts and has me brought a great deal of insight regarding things I would have never considered. Consider this a fundamental back-drop covering the next several years. After this note, I will elaborate further on my forecasts and suggest some prospective dates for our trading and investing.

Our Best Advisor Says It’s All Over

I’m not a pessimist but our top and best advisor who seems to be always correct offers the following. If he is correct, and I suspect he is, we have a long slow Japan-style slog in the economic mud with a major system breakdown, like Russia’s bust-up some years ago. I suspect somewhere along the trail in this movie, the USA Sheeple go to pitchforks and torches. I sure hope not but it almost seems inevitable. What a shame that a few Marxists can do so much permanent damage to my beloved America, but all political parties are guilty.

“The midterm elections are anticlimactic and change nothing. In the short term, it makes no difference how many Congressional seats the GOP captures. The Dumb-O-Crats have already won. Since taking control of Congress in 2006, Hussein and his wrecking crew have jammed through more socialist legislation than all the past liberal agendas combined (had) ever hoped to accomplish. It’s a done deed.”

“If anyone thinks that changing the mix of Congress with more elected conservatives will fix things; (they are) dreaming. The new Congress will be just as clueless, incompetent, corrupt, and swayed by the lobbyists. The only priority will be to get re-elected, as usual. Any hopes and promises will be dashed by reality. The reality is any legislation that the new Congress passes to try to undo Hussein’s Marxist programs will be simply vetoed. The GOP will not have the votes to over-ride a Presidential veto. Dead-End.”

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The US$200-Trillion Debt which cannot be named

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from The Daily Bell
Posted originally October 28, 2010

The scary real U.S. government debt … Boston University economist Laurence Kotlikoff says U.S. government debt is not $13.5-trillion (U.S.), which is 60 percent of current gross domestic product, as global investors and American taxpayers think, but rather 14-fold higher: $200-trillion – 840 per cent of current GDP. “Let’s get real,” Prof. Kotlikoff says. “The U.S. is bankrupt.” Writing in the September issue of Finance and Development, a journal of the International Monetary Fund, Prof. Kotlikoff says the IMF itself has quietly confirmed that the U.S. is in terrible fiscal trouble – far worse than the Washington-based lender of last resort has previously acknowledged. “The U.S. fiscal gap is huge,” the IMF asserted in a June report. “Closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of U.S. GDP.” This sum is equal to all current U.S. federal taxes combined. The consequences of the IMF’s fiscal fix, a doubling of federal taxes in perpetuity, would be appalling – and possibly worse than appalling. – Globe and Mail (Canada)

Dominant Social Theme:
What? That can’t be. Let’s not talk about it.

Free-Market Analysis:
These numbers cited by Laurence Kotlikoff have been all over the Internet for a while now but have not been much reported by the mainstream press. No surprise there, but we are a bit shocked that the Globe and Mail chose to pick them up. Was it a slow news day? The story itself has been around since August.

Because the Globe and Mail has covered it, so shall we. Here is our question: Given these numbers, how can banks and institutions purchase US fixed income securities, let alone the dollar? What sense does it make? These large institutions, with fiduciary responsibility, are basically buying a bankrupt product. And it is not just the US. The entire Western world (maybe with the exception of Germany) is pretty much either flat broke or worse than broke.

For us, this shows as much as anything else how controlled the system really is. It’s just a fiction and has little resemblance to reality. Institutions are said to flee to the “safe-haven” of the US dollar when they are nervous. But as Kotlikoff shows, the safe-haven is nothing of the sort. When one adds up all of the various commitments that the US has made abroad and at home (to its own citizens) the debt begins to add up to the monstrous, impossible number Kotlikoff arrives at.

So we ask: Can’t bond buyers at large institutions add? How are they comfortable buying the bonds of a bankrupt entity? And why has it taken until 2010 for a mainstream economics professor to measure the “real debt” of the US and speak out about it? Heck we’ve known this for years now – and so have you! If the Western monetary system were a person, it would long ago have been declared clinically insane and shipped off to an asylum. What is worse is the conspiracy of silence about the “real” US debt, which we have to assume parallels at least partially the debt of other Western nations. The whole of the West is busted, pretty much – and the “austerity” plans being put in place are just more window-dressing, albeit of a very nasty sort.

Of course there are several ways out of this dilemma. Probably the easiest one is inflation verging on hyperinflation. If the US prints enough dollars-from-nothing (as Bernanke seems intent on doing) perhaps the dollar will lose so much value that the growing debt will be partially erased. Of course this basically debases the goods and services that people currently count on. The services will remain as a kind of legal fiction – funded but not worth anything.

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Austerity bites Ireland and Elite

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from The Daily Bell
posted Friday, October 01, 2010

Ireland’s love affair with masochism … The final bill for Anglo Irish Bank has ballooned to €34bn … A more shocking set of numbers is hard to imagine. The latest bailout package for Ireland’s insolvent banks will raise the nation’s budget deficit from an already alarmingly high 12 percent to a jaw dropping 32 percent, which will in turn send overall public debt spiralling upwards to just shy of 100 percent of GDP. Only a few years back, Ireland had one of the best public debt to GDP ratios in the eurozone at under 25 percent. The scale of the deterioration is truly astonishing, and vivid illustration of the degree to which Ireland’s “tiger economy” was built on the sand of misallocated credit. … The good news for Ireland is that these latest bailouts have the potential to draw a line in the sand, and provide a grounding from which the economy can rebuild. The other piece of good news to take from all this destruction is that Ireland has already fully funded itself until the middle of next year … [But] there must be some doubt over whether Ireland can grow its way back to health. – UK Telegraph

Dominant Social Theme:
We are shocked that Ireland has not improved. But we know it will!

Free-Market Analysis:
The EUs condition continues to deteriorate and austerity has fanned the flames of resentment as we predicted it would. Ireland is in fact a kind of poster child for the uselessness of what is occurring now. And here at the Bell, we would like to make sure that people do not misunderstand the ramifications. The EU is a core project for the power elite. It is a building block of world government. The elite in no way wants the EU to disintegrate or shrink. In fact, an additional dominant social theme might be: “Sure, we’ve made mistakes, but we will muddle through, all of us.”

The EU is still, for instance, trying to bring Iceland into the fold. And numerous other countries as well. There is debate about offering Turkey and even Russia the ability to join the EU. The EU is expansive because the elite likely had the idea that it could create three or four regional, global building blocks that could serve as a platform for some sort of one-world governance.

We don’t need any secret plans or startling admissions from insiders to tell us this. We have eyes and ears (2,000 of them!). The EU, the now-scuttled North American Union (for the moment anyway) and the planned regional enterprises in Asia, Africa and South America tell us what we need to know. This was the plan. Of course there are many, especially in the alternative news community, who will maintain that all is working just fine. That the idea all along was to introduce the EU, build it up and then destabilize it. We find this a stretch. We think the elite basically miscalculated.

Yes, as regards the EU (and many other promotions) it did not count on the truth-telling of the Internet when planning for further globalization. Order from chaos is certainly a utile strategy, but too much chaos, as we have pointed out before, can be counterproductive. And certainly there does seem to be a good amount of chaos in the EU at the present time. The Telegraph reports the following:

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The Strategic Outlook – Fear and Uncertainty have paths of their own

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by James Stafford

FEAR AND UNCERTAINTY CREATE PATTERNS, PATHS OF THEIR OWN. And societies are again in a mosaic of uncertainty — and resultant fear — over the fate and durability of the social and security frameworks once taken for granted. Mass reaction to these fears will trigger transformative change. But there will be opportunities to seize and command change.

Almost all societies in the world have gone beyond the stage where they expect stability and linear progressions of the past to long endure. Some societies — almost en bloc — anticipate the end of their security; others anticipate the end of their suffering. Few expect insulation from change. That change, however, need not be entirely inscrutable if we look at global patterns and at historical human behaviour.

Economic Patterns: What we now call “economics” determines power and conflict patterns because wealth, or the deprivation of it, determines survival, and, for those who survive, “economics” determines the relative control they may have over individual and societal destiny. Thus social behavior determines economic viability, and the failure or success of economic patterns determines social corrective or compounding action.

We are about to see an acceleration of social reaction to economic failure – a reaction to the inflexibility of policies which have failed to adjust to changing circumstances.

Many finance ministers are speaking, still, as though their national economies can perform well with just minor adjustment to old patterns. This may not be so, particularly in the West, where the rapid growth in state revenues since the end of the Cold War pushed governments down the path of highly capital-intensive programs in areas which absolutely do not contribute to national productivity in essential manufactures or primary industry, and in many cases actually constrain productivity rises. As wealth grew, and tax revenues rose commensurately, the logical approaches of governments in market economies should have been to reduce taxation and further stimulate investment.

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The Bernanke Defense – Fail!

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from The Daily Bell
Posted originally June 14, 2010

BERNANKE BUILDS UP A CUSHION AS WE DANCE ON PINS… WE ARE ALL OF US BALLOONS DANCING in a world of pins, noted Sir Anthony Montague Browne, one of Winston Churchill’s private secretaries. That seems to describe our economic condition. Share prices drop like stones in response to action by Greek civil servants, or an oil spill in the Gulf of Mexico, or an Israeli attempt to enforce its blockade against Hamas, or rumours that the Chinese regime is attempting to slow its economy. And then soar when Spain manages to borrow a few billion from unwary investors. Uncertainty is the order of the day. Which makes life difficult for economic forecasters, who are more comfortable basing their effusions on non-random, hard data that point in one direction. That happy circumstance is denied them. Just when the housing market seemed to be stabilising and the manufacturing sector to be recovering, along comes a report that only very few private-sector jobs were created last month. Retailers, seeing sales drop 1.2% in May, wonder just how much stuff they should order in anticipation of the Christmas season. And just when the financial sector is preparing to hire large numbers of laid-off workers, a 2,000-page financial regulation bill introduces an unnerving degree of uncertainty. Equally important, just when the American economy seems to be regaining its footing, news from Europe turns gloomy. Retrenchment is the order of the day; Germany refuses to stimulate domestic demand; the European Central Bank declines to loosen monetary policy to offset the new austerity programmes; and a shrivelled euro threatens the export market for American goods. – Times OnLine

Dominant Social Theme:
The problems with Western economies are grave but not insurmountable if central bankers do the right thing.

Free-Market Analysis:
It is so interesting to see the ways that people construct the various realities of modern day life – and their evolution. In our opinion, the London Times has gotten a lot more aggressive and honest in terms of covering the current economic crisis. This fits into our understanding of how elite messaging operates. As we tend to see it, the Anglo-American power elite uses the London Times as a mouthpiece (along with The Economist newspaper and some others) to present theses that it wishes to promote. These have lately tacked hard toward libertarianism and frank acknowledgement of the West’s financial mess.

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