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“Now, with the “fiscal
cliff” looming at year-end, at least partially as a result of
last-year’s failed deficit negotiations; and with the U.S. Treasury
indicating that the next increase in the U.S. debt ceiling will be needed
around year-end; deficit reduction issues (taxation and spending) will be
coming to a head quickly, along with questions of renewed economic stimulus.
There is no reason to expect that
renewed efforts at federal budget deficit reduction will result in anything
more than the usual smoke and mirrors, further increasing, not reducing,
long-term U.S. sovereign-solvency risk. In reality, the U.S. economy has not
recovered, and no recovery is pending. Consumer liquidity remains severely
impaired, and broad business activity continues to falter anew. As a result. the actual federal budget deficit going forward will be
much worse than the relatively rosy numbers being used as the basis for
government negotiations.
Accordingly, global market
reaction—to a severely deteriorating outlook for U.S. fiscal
conditions—increasingly should reflect massive flight from the U.S.
dollar and movement into gold and the stronger Western currencies.”
“September Trade Balance,
Presidential Election”
John Williams, Shadowstats.com, 11/08/2012
Insightful John Williams’ Key
Insight is that, going forward we are likely to see an intensification of
trends already developing, i.e. increasing stagflation. That is, we are
seeing an increasing economic contraction coupled with increasing inflation
(already at 9.6% in the U.S. e.g. per shadowstats).
This inflation is now hidden from us in Bogus Official figures.
But the Prices for Essential Assets,
such as Food, are harder to manipulate. Increasing Prices of Essential Food
Commodities are now close to those which ignited Food Price Riots in 2008,
which continued through the “Arab Spring” and are continuing today.
But key food stuff production is
expected to fall from 2011 levels, by 5% for wheat for example. Yet 870
Million are malnourished worldwide, according to the UN FAO and world
population is increasing by 80 Million per Year.
And Crude Oil Prices remain stubbornly
above $85/bbl for WTI and over $100 for Brent; with
the consequent Economic Dampening Effect.
No wonder that fewer than half the companies reporting earnings for Q3 beat
their revenue estimates. The economic
contraction is starting to bite. Yet understandably, the demands
of the sorely pressed citizenry, especially via the Eurozone and the U.S.,
for Safety Net Subsidies is growing and is a growing Tax on Budgets.
“Everybody’s
worried about the fiscal cliff. But there’s a much bigger cliff coming
up, and it’s the “Entitlement
Cliff.” In the four years since Obama took office, entitlement
participants have grown exponentially.
“Medicaid
has grown from 46 million to 56 million people.
“Disability
beneficiaries have grown from 7.5 million to 8.8 million people.
“Food
stamp recipients have grown from 32 million to 47 million.
“On
top of the above, about 40 million Americans aged 65 or older on Social
Security and Medicare are receiving benefits. Add the numerous smaller
entitlement programs to the total and the expenses are mind-boggling. All together, half of the nation now receives
entitlements. On top of the massive entitlements programs, we have the
interest on the Federal debt, which is currently $220 billion.
“One
danger will come from the “bond vigilantes.” As they survey the
nation’s entitlement situation, they are going to want higher interest
payments on Treasuries. This will skyrocket the interest cost on the Federal
debt, and push Uncle Sam into a compounding pressure cooker. This, in turn,
will put further pressure on the US’s credit rating.
“The
implications of these statistics are frightening. Expenses
of $2.2 trillion for 120 million entitlement receivers comes down to
$18,000 per recipient! Talk about mind-boggling problems.”
“Richard’s
Remarks”
Richard
Russell, dowtheoryletters.com, 11/16/2012
Russell is right. The Bond Vigilantes
will begin to ride again soon. And notwithstanding The Fed’s ongoing open-ended
commitment to be buying (now over 70% of) U.S. Debt, which has temporarily
suppressed rates, but cannot do so forever.
Central Banks have added $5 Trillion! to
the monetary base since 2007. This cannot
continue without dire consequences. And, as Bill Bonner notes, Consumer
Prices would have to double from
here (i.e. increase 10%/yr for 7 years) to keep up
with monetary base increases.
The Fed has increased the Monetary base
threefold in the last four years. But to dampen the increasing inflation it
would have to sell those trillions of bonds back into the Market. But who
wants to buy bonds in an inflating economy?
Daryl Robert Schoon’s
brilliant analysis describes why Capitalism is suffering a Paradigm Shift.
“The bankers bet that sufficient credit can
reverse an economic contract ion is no longer on the table. This does
not mean central bank credit will tighten. Just the opposite will happen.
Monetary easing will continue until the very end. Central bankers are
trapped. The end game is now underway….
“The world has entered a paradigm shift of immense proportions;
and the collapse of the bankers’ economic world is a part of that
shift. The bankers’ credit fueled a 300-year global expansion which
transformed the world. The bankers’ credit, however, has now become
debt which increasingly cannot be repaid….
“Prior to capitalism, the underlying economic dynamic was supply
and demand. However, in economies fueled by the bankers’ debt-based
bank notes, the relationship between credit and debt becomes equally, if not
more, important than supply and demand….
“After gold was removed from the global monetary system in 1971
and after initial inflationary concerns were addressed in 1980, embedded
constraints on monetary and credit growth no longer existed. The attendant
rise in debt is noteworthy – as will be the consequences.
“What central bankers did not anticipate from the explosive
growth of credit was the resultant levels of massive debt. Fixated on growth,
central bankers miscalculated the inevitable effects of the unrestrained
increase in monetary and credit aggregates on their heretofore successful ponzi-scheme of credit and debt.
Credit is the zygote of debt; and since debts constantly compound in capitalist
economies, unless controlled, credit will inevitably lead to fatal level of
debt. This is not rocket science. This is common sense.”
“2012: The Tipping Point: The Results Are In: THE BANKERS LOST”
Daryl Robert Schoon, via LeMetropoleCafé,
11/20/2012
Observing how Central Banks, the
Mega-Banks Cartel, and their Captive Government’s cope with
‘fatal levels of debt” is arguably the Key “Factor”
to consider in Markets Performance going into 2013.
Complicating and worsening the scenario are
the Manipulations of Key Mega-Banks, which seek ultra-profit maximization
regardless of the wider destructive consequences. Consider:
“In
the summer of 2011, I wrote a four-part series entitled “Economic Rape
of Europe Nearly Complete”. In that extended piece; I detailed how the
combination of three malevolent forces was decimating the economies of Europe
one-by-one.
“Through
the relentless fraud/manipulation in Euro debt markets, sadistic
“austerity”, and so-called “bail-outs” which just
bury these insolvent economies even deeper in debt; the Western banking cabal
is systematically looting these nations.
“The
manipulation of European debt markets was (is) accomplished through the
fraudulent rigging of the credit default swap markets; combined with the
complicity of the Big Three ratings agencies and the West’s media
Oligarchs.
“The
bankers manipulate credit default swap prices higher, simply by piling-on
massive bets that a particular Euro-zone nation will default. The propaganda
machine immediately shrieks that “risk” has now increased for
this debt market, and then the accomplices in the ratings agencies comply
with a ratings downgrade – immediately driving interest rates higher.
“With
the massive debts being carried by these economies, any increase in interest
rates automatically makes the economy significantly less solvent, turning
this tag-team of fraud into a self-fulfilling prophesy. With the banksters literally capable of manipulating Euro zone
interest rates to any number they desire, as a matter of simple arithmetic it
is impossible to “bail out” any of these nations – by
lending them more money.
“The
moment more bail-out dollars are released, the banksters
immediately drive interest rates even higher. Thus all the bail-out dollars
are siphoned-out of the economy in the form of higher interest payments to
the Bond Parasites, meaning all that each “bail out” accomplishes
is to pointlessly pile on more debt.
“Meanwhile,
as more and more of every revenue-dollar is sucked
out of these economies by the debt-market fraud, Austerity is literally
nothing less than economic suicide. In economies already starved for capital,
Austerity is the precise equivalent of a doctor putting a severely anorexic
patient on a diet.
“The
empirical evidence is overwhelming. In every European economy which has
inflicted Austerity on its population, the
rate of economic contraction has accelerated, and the size of the budget
deficits has grown larger instead of smaller. Since the entire raison d’etre of Austerity is to (supposedly) shrink these
deficits, it is nothing less than deliberate suicide to continue this policy,
and serves no purpose except to free-up more dollars to be paid out as
interest payments to the Bond Parasites.
“This
is the real impact of the new “unlimited bond-buying” announced
by the European Central Bank, since (as the dust settles) we now see there
are strings attached to yet more loans to these
economies. Specifically, the ECB wants to strip these nations of what little
economic sovereignty they still possess, and be able to mandate increasing
levels of Austerity with each new round of suicidal bond-buying.”
“ECB
Bond-Buying: The Rape of Europe Continues”
Jeff Nielson, via LeMetropoleCafe.com, 11/12/2012
Clearly, several Eurozone countries (and not just the PIIGS) have reached, or
will reach Debt Saturation. (Indeed, the USA and Great Britain have arguably
reached Debt Saturation as well.) That is, no reasonable level of economic
growth will allow the Debts to be repaid, ever.
Three alternatives remain for the Debt
Saturated Sovereigns – Partial or Total Debt Repudiation (a la
Iceland), Voluntary Creditors’ Debt “Haircuts,” or Currency
Debasement through Monetary Inflation, or some combination thereof.
Clearly the Central Banks have chosen the
third alternative, but as we have demonstrated here and elsewhere, that
inevitably leads to Price Inflation, which the Real Numbers (as opposed to
Bogus Official Ones in China, the USA, and elsewhere) show is already
occurring.
Rising Food, Energy, and Precious Metals
Prices in recent years demonstrate this effect. This is why Deepcaster continues to recommend Investments in these
Sectors – see Notes 1, 2, and 3 below – since these are Assets
which serve both as Wealth Shelters and Profit Sources.
In conclusion, the long-term uptrend in
these Sectors will continue. [But the Energy Sector will be especially
volatile with month-long downtrends and uptrends. Yet over the long-term the
Uptrends will dominate.] In sum, these three provide the best Wealth Protection
and Profit Potential given that Price Inflation will surely continue.
Continue, that is, if and until the
Central Banks’ Money Printing stops. Then … Massive Deflation.
And, by the way, one
closing observation regarding Wealth Protection. There is increasing
evidence that the Obama Administration will soon begin a push to de facto
confiscate 401K’s and IRA’s by forcing their owners to buy U.S.
Treasury Bonds and/or Government sponsored annuities. Whether or not this is
true, we do think it advisable to consider the pros and cons of shifting
assets from such “paper” stock accounts to physical Gold and
Silver, as well as agriculture investments.
Best regards,
Deepcaster
November 22, 2012
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 October 16, 2012
1.41% / 9.64%
U.S. Unemployment reported October
5, 2012
8.3% / 22.8%
U.S. GDP Annual Growth/Decline
reported September 27, 2012
2.21% / -2.15%
U.S. M3 reported October 16, 2012
(Month of September, Y.O.Y.)
No Official Report / 3.32%
Note 2: The $US dropped nearly 200 basis points at one
point in the last three weeks. No surprise since the Fed’s U.S.
Dollar-Destructive Q.E. to Infinity Action, coupled with the ECB’s
Similar Action the week before, boosted the Euro vis-à-vis the Dollar,
as we earlier Forecast. The very recent $US bounce does not change its
weakening Trend.
This Debauchery of the $US weakens its Purchasing
Power and thus increases Burdens on the agonized disappearing Middle Class.
The Bernanke claim that buying $40 billion per month
in Mortgage Backed Securities would Stimulate the Economy and help the
Housing Market is just a Fictitious Cover Story. In fact, it is just another
Gift to the Mega-Banks who hold Underwater Paper, and to Wall Street which
proceeded to rally on The Fed-sugared High.
Both the Continuous Commodities Index which show Average Annual Price Inflation of 15% and the Real
Inflation Number (9.3% per year from shadowstats.com) reveal Serious
Inflation is with us and it Intensifying.
And Especially Food Price Inflation.
To increase Yields, Farmers increasingly employ
Fertilizer.
And a recent Reco –
a Fertilizer Producer – was trading near its 52 week low at under
40¢ per share when we first recommended it. It has moved up nicely since
we recommended you buy in. But it has such great potential that we raise our
original “buy under” price to 45¢ per share.
To see our recent Buy Reco
aimed at Profiting from the Fed’s Inflation Rocket, read Deepcaster’s recent Alert, “Buy Reco (under 40¢/share) to Ride Inflation Rocket;
Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, & Interest Rates,
Gold, Silver, Crude Oil, & Equities,” recently posted in
‘Alerts Cache’, on deepcaster.com.
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