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“U.S. Federal Budget Deficit Reality. On November 23rd… the
Congressional Super Committee is due to announce a mandatory plan for cutting
the federal budget deficit. Ostensibly,
the package to be produced will provide at least a 1.2-trillion dollar
deficit reduction over ten years.
Even if the Committee can reach an agreement… the deal will not
be meaningful… consider the following:
· Deficit reduction of
1.2-trillion dollars over ten years is little more than statistical noise,
given the overly optimistic assumptions underlying the deficit projections.
· The actual annual
deficit… likely will be reported in the range of five -to
seven-trillion dollars for 2011…”
“Commentary Number
400: Budget Deficit Reality, October CPI, Industrial Production”
John Williams,
shadowstats.com, 11/16/11
In all the legitimate concerns over the Eurozone
Debt and Solvency Crises, many commentators have failed to adequately focus
on The “Elephant” – the Debt, Spending and Solvency Crises
of the USA.
Those Crises are our focus here, and we proffer Key
Antidotes for Investors.
A $5 to $7 Trillion U.S. Deficit for 2011
does indeed qualify the USA as a distressed Financial Elephant in the
International Economy.
Consider the following:
“The White House
Office of Management and Budget (OMB) assumes
positive economic growth into the future, underlying its budget
projections… a more realistic outlook would show a contracting GDP for
at least the next several years.
The OMB also assumes
average CPI-U inflation of 2.0% or less for 2012 through 2015… A more
realistic outlook would show higher consumer inflation for at least the next
several years.
To the extent that
reported GDP growth is weaker than assumed, and that CPI-U inflation is
stronger than assumed, the resulting federal budget deficit and borrowing
needs of the U.S. Treasury will be worse than projected…
My best estimate for
fiscal 2010 remains that the GAAP-deficit… including the net present
value of unfunded liabilities in Social Security, etc.—was roughly
5.3-trillion dollars… the GAAP-based federal deficit for fiscal 2011
likely was in the range of five- to seven-trillion dollars.
That would put the ratio
of gross U.S. government debt and obligations to GDP closing in on
six-to-one, the worst of any major Western power…
It is the GAAP-based
deficit that shows the ultimate insolvency of the U.S. government. With an annual deficit in excess of
five-trillion dollars, the government could tax salaries and wages at 100%
and an annual deficit would remain.
The government could eliminate every penny of government spending,
except for Social Security and Medicare, and the annual deficit would remain.
A cut of $1.2 trillion
dollars over ten years is not too meaningful in such a
circumstance…” (emphasis added)
Ibid.
Indeed, that the debt to GDP ratio is “the
worst of any Western Power” and… reflecting “the ultimate
insolvency of the U.S. Government”, are Realistic Appraisals.
So The Essential Issue is what happens when the
Markets are forced to acknowledge and act on this Reality.
Honest John Williams (Shadowstats.com) and Astute
Trader Dan Norcini give us clues. First, consider
Williams further.
“Without
consistent and very strong political will—which I see largely as
lacking in Washington—and without concurrent extraordinary actions, the
U.S. economy remains at high risk of devolving quickly into a
hyperinflationary great depression…
The global markets have
been in turmoil since the debt-ceiling negotiations ended with the Super
Committee solution. It would not
take much intensification of U.S. political turmoil to refocus global
financial-market attention on the long-range U.S. insolvency—as things
stand—and to trigger renewed heavy selling of the U.S. dollar and
dollar-denominated assets.” (emphasis added)
Ibid.
Yes, there is a high risk that the U.S. economy will
devolve into hyperinflation. Indeed, in our view such a
devolution would be to Hyperstagflation
as price increases Stifle investment and Economic growth. Moreover, at some
point in the Hyperstagflation process
increasingly less valuable U.S. Dollars and other Fiat Currencies will be
traded for increasingly expensive Tangible Assets.
Indeed, the U.S. Economy is already at the Threshold
of Hyperstagflation.
Consider Real U.S. CPI of 11.12%, Real U.S.
Unemployment of 22.9% and Real GDP “Growth” of a Negative
2.89%.
Thus a $1.2 Trillion Cut over 10 years is
well-nigh insignificant.
Shadowstats.com calculates Key Statistics the way
they were calculated in the 1980s and 1990s before Official Data Manipulation
began in earnest. Consider
Bogus Official Numbers vs. Real
Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported November 16, 2011
3.53% 11.12%
(annualized October, 2011 Rate)
U.S. Unemployment reported November 4, 2011
9.0% 22.9%
U.S. GDP Annual Growth/Decline reported October 27, 2011
1.62% -2.89%
U.S. M3 reported November 10, 2011 (Month of October, Y.O.Y.)
No Official Report 2.62%
Lest one believe the foregoing commentary is merely
a theoretical projection consider Trader Dan’s
comment below on what is already happening to Commodities
Prices…
“Funny that on a
day when we have to sit and read commentators telling us gold is under
pressure because "inflation is benign"…
If WTI Crude continues
to show strength, it is going to be a difficult trick for the gold bears to
keep up any chatter on ebbing inflationary pressures.
On a different note,
take a look at the composite price of wholesale beef. It scored an EIGHT YEAR
HIGH yesterday! Don't worry however, this is just a
figment of your imagination. The government tells you so…
That is what is
particularly galling about the government's numbers. They give the impression
that inflation is benign but the truth is that while the CCI has fallen from
its peak, it remains at an extremely lofty level nearly 90% above the bottom
made back in 2008… commodity prices have nearly doubled since the fall
of 2008.”
Dan Norcini,
traderdannorcini.blogspot.com, 11/16/11
Crude over $100 and wholesale beef at an EIGHT YEAR
HIGHS!
And Commodities in general are 90% above the 2008
Bottom.
And consider that Major U.S. Banks still have
considerable exposure to the Eurozone. Fitch has it right.
“Fitch… said
U.S. banks could be "greatly affected" if Europe's debt crisis
continues to spread beyond financially troubled countries such as Greece,
Ireland and Portugal…
The benchmark rate on
France's 10-year bonds was just 2.54 percent on Oct. 5. It has climbed
steadily since then, reaching 3.69 percent Wednesday. That's a reflection of
deepening worries that France, the second-largest country in the euro bloc
after Germany, could be in danger of losing its triple-A credit rating.
… Fitch said the
top five U.S. banks have a total of $114 billion in loans, deposits and other
assets tied to French banks. French banks also have large holdings of bonds
issued by Greece and Italy.”
“Stocks sink after
Fitch warns on US bank exposure”
David k. Randall,
finance.yahoo.com, 11/16/11
And note that in France (2nd largest
Eurozone economy) the Major Banks have great exposure to Greece and Italy.
Elephant Antidotes
- Focus
on Acquisition of Tangible Assets in Relatively Inelastic Demand.
Agricultural Products and Producers are one Central Focus here (see
Recommendations in our Portfolios at www.deepcaster.com)
- Real
Estate in Prime (Recession Resistant) locations with High Yield is
another excellent choice for Profit and Protection
- By
contrast, Energy Prices and Values tend to be Sensitive to overall
economic condition. They tend to be dampened in periods of Economic
Weakness.
- Another
Essential Component for Portfolios is a High-Yield Portfolio*. This
should aim for a total Return (Gain plus Yield) well in excess of Real
Inflation which in the USA is 11.12% per Shadowstats.com.
- Move
Assets from banks with large Derivatives and/or Eurozone Exposure to
those with little or no such exposure. In the U.S. this could mean for
example, moving assets to credit unions in order to be somewhat removed
from exposure to Mega-Bank vulnerabilities.
- And,
of course, buy and take personal possession of Physical Gold and Silver
on the Dips, and Gold and Silver Shares at the right time. But stay
alert for The Cartel Price Takedowns***.
In this regard, the Gold Council just reported:
“Central Bank Buying hits 40 Year High in 3rd
Quarter” - Gold Council, 11/17/11
So we emphasize our Primary Recommendation
- Buy
and Take Possession of Physical Gold and Silver, but be mindful of the
Caveats in Notes 1 and 2 below.
Is it not most significant that the Masters of the Paper Game, The
Central Bankers, are Now Buying Record Amounts of Physical Gold?!!
Best regards,
Deepcaster
November 18, 2011
**Note 1: Shadowstats.com calculates Key Statistics the way
they were calculated in the 1980s and 1990s before Official Data Manipulation
began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per
Shadowstats.com)
Annual U.S. Consumer Price Inflation reported August 18, 2011
3.63% 11.21%
(annualized July, 2011 Rate)
U.S. Unemployment reported September 2, 2011
9.1% 22.8%
U.S. GDP Annual Growth/Decline reported August 26, 2011
1.55% -2.83%
U.S. M3 reported August 14, 2011 (Month of July, Y.O.Y.)
No Official Report 2.44%
***Note 2: Using the above Guidelines allowed Deepcaster to make buy and sell recommendations resulting
in remarkable profits recently if acquired and liquidated when we recommended*,
approximately:
35% Profit on Double Long Gold ETN on August 23, 2011 after just 41
days (i.e. about 280% annualized!)
26% Profit on Double Long Gold ETN on August 17, 2011 after just 35
days (i.e. about 260% annualized!)
25% Profit on Gold Stock on August 8, 2011 after just 201 days (i.e.
about 45% annualized!)
38% Profit on Silver on July 18, 2011 after just 201 days (i.e. about
68% annualized!)
150% Profit on Gold Stock Calls on July 13, 2011 after just 56 days
(i.e. about 975% annualized!)
40% Profit on leveraged Short Treasuries ETF Puts on April 15, 2011
after just 3 days (i.e. about 4800% annualized!)
30% Profit on Silver on April 6, 2011 after just 98 days (i.e. about
111% annualized!)
To read our recent article -- “Essentials for Wealth Acquisition
Acceleration”, go to www.deepcaster.com and click on the
‘Articles by Deepcaster’ Cache.
Past Profitable Performance is no assurance of future Profitable
Performance.
Wealth
Preservation - Wealth Enhancement
Financial
and Geopolitical Intelligence
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