Tag Archives: US debt

Who’s winning the China vs. USA economic competition? China is. Here’s why.

China owns nearly one-third of US debt.  Owning US treasury notes helps China’s economy grow by keeping its currency, the yuan, weaker than the dollar.

This practice keeps Chinese exports cheaper than US products, which is an ideal situation for China, since the top priority for China is creating jobs for its 1.4 billion people.

Why does China want the yuan to be weaker than the dollar?  A weaker currency makes China more attractive to traders in global markets.  This is part of the Chinese economic strategy, because it keeps Chinese export prices competitive.  The nation does this by holding the yuan at a fixed rate compared to a currency “basket” in which most currencies are pegged to the US dollar.  This is nothing less than deliberate currency manipulation.

China’s position as one of America’s main lenders also gives the country huge leverage.  If China called in all of its debt at once, demand for the dollar would plummet.  This would severely disrupt international markets along with the entire American economy.

China’s debt-holder strategy is working wonderfully for China’s benefit.  This low-cost competitive approach has enabled the Chinese economy to grow 10% annually for the past three decades.

Is there a risk in allowing China to be such an important “banker” to the USA?  Of course there is a risk, and it could easily be a huge risk.  But at this point the USA has no way to reduce that risk. None.

 

[From an article published by AMAC.COM]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

 

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The government’s official lies and false reality

Official government lies...

The false reality constructed for Americans parallels perfectly the false reality constructed by Big Brother in George Orwells’ dystopian novel 1984.

Consider the constant morphing of “the Muslim threat” from al-Qaeda to the Taliban, to al-Nusra, to ISIS to ISIL, to Daesh with a jump to Russia. All of a sudden 16 years of Middle East wars against “terrorists” and “dictators” have become a matter of standing up to Russia, the country most threatened by Muslim terrorism, and the country most capable of wiping the United States and its vassal empire off of the face of the earth.

Domestically, Americans are assured that, thanks to the Federal Reserve’s policy of quantitative easing, that is, flooding the financial markets with newly printed money that has driven up the prices of stocks and bonds, America has enjoyed an economic recovery since June of 2009, which must be one of the longest recoveries in history despite the absence of growth in median real family incomes, despite the lack of growth in real retail sales, despite the falling labor force participation rate, despite the lack of high value-added, high productivity, high wage jobs.

The “recovery” is more than a mystery. It is a miracle. It exists only on paper. Fake paper.

According to CNN, an unreliable source for sure, Jennifer Tescher, president and CEO of the Center for Financial Services Innovation, reports that about half of Americans report that their living expenses are equal to or exceed their incomes. Among those aged 18 to 25 burdened by student loans, 54 percent say their debts are equal to or exceed their incomes. This means that half of the U.S. population has ZERO discretionary income. So what is driving the recovery?

Nothing. For half or more of the U.S. population there is no discretionary income with which to drive the economy.

The older part of the population has no discretionary income either. For a decade there has been essentially zero interest on the savings of the elderly, and if you believe John Williams of shadowstats.com, which I do, the real interest rates have been zero and even negative as inflation is measured in a way designed to prevent Social Security cost of living adjustments.

In other words, the American economy has been skating by on the shrinkage of the savings and living standards of its population.

Last Friday’s employment report is just another lie from the government. The report says that the unemployment rate is 4.4 percent and that June employment increased by 222,000 jobs. A rosy picture. But as I have just demonstrated, there are no fundamentals to support it. It is just another U.S. government fabrication.

The rosy unemployment picture is totally contrived. The unemployment rate is 4.4 percent because discouraged workers who have not searched for a job in the past four weeks are not counted as unemployed.

The BLS has a second measure of unemployment, known as U6, which is seldom reported by the presstitute financial media. According to this official measure the US unemployment rate is about double the reported rate.

Why? the U6 rate counts discouraged workers who have been discouraged for less than one year.

John Williams counts the long term discouraged workers (discouraged for more than one year) who formerly (before “reforms”) were counted officially. When the long term discouraged are counted, the U.S. unemployment rate is in the 22-23 percent range. This is borne out by the clear fact that the labor force participation rate has been falling throughout the alleged “recovery.” Normally, labor force participation rates rise during economic recoveries.

It is very easy for the government to report a low jobless rate when the government studiously avoids counting the unemployed.

It is an extraordinary thing that although the U.S. government itself reports that if even a small part of discouraged workers are counted as unemployed the unemployment rate is 8.6 percent, the presstitute financial media, a collection of professional liars, still reports, in the face of the government’s admission, that the unemployment rate as 4.4 percent.

Now, let’s do what I have done month after month, year after year. Let’s look at the jobs that the BLS alleges are being created. Remember, most of these alleged jobs are the product of the birth/death model that adds by assumption alone about 100,000 jobs per month. In other words, these jobs come out of a model, not from reality.

Where are these reported jobs? They are where they always are, in lowly paid domestic services. Health care and social assistance, about half of which is “ambulatory health care services,” provided 59,000 jobs. Leisure and hospitality provided 36,000 jobs of which 29,300 consist of waitresses and bartenders. Local government rose by 35,000. Manufacturing, once the backbone of the U.S. economy, provided a measly 1,000 jobs.

As I have emphasized for a decade or two, the U.S. is devolving into a third world workforce where the only employment available is in lowly paid domestic service jobs that cannot be offshored and that do not pay enough to provide an independent existence. This is why 50 percent of 25-year-olds live at home with their parents and why there are more Americans aged 24-34 living with parents than living independently.

This is not the economic profile of a “superpower.”  The American economy that offshoring corporations and financialization have created is incapable of supporting the enormous U.S. debt burden. It is only a matter of time and circumstance until the US debt burden becomes completely unmanageable.

 

[From an article by Paul Craig Roberts, published by PERSONAL LIBERTY]

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

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Americans seem to agree on at least one thing: They REALLY dislike the US government!

If there is one thing that Americans can agree on these days, it is the fact that most of us don’t like the government.

 

CBS News has just released an article entitled “Americans hate the U.S. government more than ever“, and an average of recent surveys calculated by Real Clear Politics found that 63 percent of all Americans believe the country is heading in the wrong direction and only 28 percent of all Americans believe that the country is heading in the right direction.  In just a few days the first real ballots of the 2016 election will be cast in Iowa, and up to this point the big story of this cycle has been the rise of “outsider” candidates that many of the pundits had assumed would never have a legitimate chance.  Donald Trump, Ted Cruz and Bernie Sanders have all been beneficiaries of the overwhelming disgust that the American people feel regarding what has been going on in Washington.

And it isn’t just Barack Obama or members of Congress that Americans are disgusted with.  According to the CBS News article that I referenced above, our satisfaction with various federal agencies has fallen to an eight year low…

A handful of industries are those “love to hate” types of businesses, such as cable-television companies and Internet service providers.

The federal government has joined the ranks of the bottom-of-the-barrel industries, according to a new survey from the American Customer Satisfaction Index. Americans’ satisfaction level in dealing with federal agencies –everything from Treasury to Homeland Security — has fallen for a third consecutive year, reaching an eight-year low.

So if we are all so fed up with the way that things are running, it should be easy to fix right?

Unfortunately, things are not so simple.

In America today, we are more divided as a nation than ever.  If you ask 100 different people how we should fix this country, you are going to get 100 very different answers.  We no longer have a single shared set of values or principles that unites us, and therefore it is going to be nearly impossible for us to come together on specific solutions.

You would think that the principles enshrined in the U.S. Constitution should be able to unite us, but sadly those days are long gone.  In fact, the word “constitutionalist” has become almost synonymous with “terrorist” in our nation.  If you go around calling yourself a “constitutionalist” in America today, there is a good chance that you will be dismissed as a radical right-wing wacko who probably needs to be locked up.

The increasing division in our nation can be seen very clearly during this election season.  On the left, an admitted socialist is generating the most enthusiasm of any of the candidates.  Among many Democrats today, Hillary Clinton is simply “not liberal enough” and no longer represents their values.

On the other end of the spectrum, a lot of Republican voters are gravitating toward either Donald Trump or Ted Cruz.  Both of those candidates represent a complete break from how establishment Republicans have been doing things in recent years.

Now don’t get me wrong – I am certainly not suggesting that we need to meet in the middle.  My point is that there is absolutely no national consensus about what we should do.  On the far left, they want to take us into full-blown socialism.  Those that support Donald Trump or Ted Cruz want to take us in a more conservative direction.  But even among Republicans there are vast disagreements about how to fix this country.  Establishment Republicans greatly dislike both Trump and Cruz, and they are quite determined to do whatever it takes to keep either of them from getting the nomination.  The elite have grown very accustomed to anointing the nominee from each party every four years, and so the popularity of Trump and Cruz is making them quite uneasy this time around.  The following comes from the New York Times

The members of the party establishment are growing impatient as they watch Mr. Trump and Mr. Cruz dominate the field heading into the Iowa caucuses next Monday and the New Hampshire primary about a week later.

The party elders had hoped that one of their preferred candidates, such as Senator Marco Rubio of Florida, would be rising above the others by now and becoming a contender to rally around.

The global elite gathered in Davos, Switzerland are also greatly displeased with Trump.  Just check out some of the words that they are using to describe him

Unbelievable“, “embarrassing” even “dangerous” are some of the words the financial elite gathered at the World Economic Forum conference in the Swiss resort of Davos have been using to describe U.S. Republican presidential frontrunner Donald Trump.

Although some said they still expected his campaign to founder before his party picks its nominee for the November election many said it was no longer unthinkable that he could be the Republican candidate.

The truth is that the Republican Party represents somewhere less than half the population in the United States, and today it is at war with itself.  Supporters of Trump have a significantly different vision of the future than supporters of Cruz, and the establishment wing wants nothing to do with either candidate.

A lot of people seem to assume that since Trump is leading in the polls that he will almost certainly get the nomination.

That is not exactly a safe bet.

It is my contention that the establishment will pull out every trick in the book to keep either him or Cruz from getting the nomination.  And in order to lock up the nomination before the Republican convention, a candidate will need to have secured slightly more than 60 percent of all of the delegates during the caucuses and the primaries.

The following is an excerpt from one of my previous articles in which I discussed the difficult delegate math that the Republican candidates are facing this time around…

It is going to be much more difficult for Donald Trump to win the Republican nomination than most people think.  In order to win the nomination, a candidate must secure at least 1,237 of the 2,472 delegates that are up for grabs.  But not all of them will be won during the state-by-state series of caucuses and primaries that will take place during the first half of 2016.  Of the total of 2,472 Republican delegates, 437 of them are unpledged delegates – and 168 of those are members of the Republican National Committee.  And unless you have been hiding under a rock somewhere, you already know that the Republican National Committee is not a fan of Donald Trump.  In order to win the Republican nomination without any of the unpledged delegates, Trump would need to win 60.78 percent of the delegates that are up for grabs during the caucuses and primaries.  And considering that his poll support is hovering around 30 percent right now, that is a very tall order.

In the past, it was easier for a front-runner to pile up delegates in “winner take all” states, but for this election cycle the Republicans have changed quite a few things.  In 2016, all states that hold caucuses or primaries before March 15th must award their delegates proportionally.  So when Trump wins any of those early states, he won’t receive all of the delegates.  Instead, he will just get a portion of them based on the percentage of the vote that he received.

In 2016, more delegates will be allocated on a proportional basis by the Republicans than ever before, and with such a crowded field that makes it quite likely that no candidate will have secured enough delegates for the nomination by the time the Republican convention rolls around.

If no candidate has more than 60 percent of the delegates by the end of the process, then it is quite likely that we will see the first true “brokered convention” in decades.

If we do see a “brokered convention”, that would almost surely result in an establishment candidate coming away with the nomination.  That list of names would include Bush, Rubio, Christie and Kasich.

And if by some incredible miracle either Trump or Cruz does get the nomination, the elite will move heaven and earth to make sure that Hillary Clinton ends up in the White House.

For decades, it has seemed like nothing ever really changes no matter which political party is in power, and that is exactly how the elite like it.  Our two major political parties are really just two sides of the same coin, and they are both leading this nation right down the drain.

 

[by Michael Snyder, writing for The Economic Collapse Blog]

 

NORM ‘n’ AL Note:  If it seems like the good ol’ USA is foundering like a ship in a storm, that’s because the USA very definitely IS foundering. Just like the Titanic, which although proclaimed unsinkable, hit an iceberg and took thousands of its passengers to a cold and watery grave, the USA, once the brightest light among countries anywhere on the planet, is very close to taking many millions of its own citizens to their graves. The demise of the Titanic was preventable by those at the helm. The demise of the USA is also preventable, but those at the helm are too busy re-arranging deck chairs while the ship they are supposed to be steering is heading straight for the rocks.

Americans used to have respect for life, liberty, and the pursuit of happiness. Now we have no respect for life: We murder little human beings with hardly a thought, and since Roe v. Wade became law, we have murdered nearly 60 million of them. We obviously have no respect for liberty, because we continue to do our best to enslave those in coming generations who have not a prayer of being able to repay the monstrous level of debt we continue to heap upon them. As for happiness, just ask yourself this very simple question: Am I happy? Do I like the fact that the US government is more restrictive than ever before? Does it make me happy to see our economy prevent millions of us from getting a job? Does it make me happy to see our Oval Office Occupant favor Muslims over Christians? Am I happy with a government that is now so big and clumsy and oppressive that it simply cannot get out of its own way and protect its citizens, which is its most basic obligation? If you want to experience first-hand just how big and clumsy and inept the US government really is, just get sick and try to get good, effective, first-rate health care. You stand a better chance of getting well in 36 other countries, because the US is now ranked 37th in quality of healthcare. (That ranking comes from the World Health Organization, WHO, which has been ranking the world’s quality of healthcare for decades. WHO knows what good healthcare is.)

Are you not yet sick and tired of politicians who seek office for their OWN benefit, and not that of the USA? You SHOULD be fighting mad by now, unless it makes you happy to live like a doormat. Do you think God is going to look with favor on a country that continues to kill its unborn by the millions? That has removed prayer from its schools in an all-out effort to remove God from its children? That has spared no expense to remove all references to the Creator from the everyday lives of its citizens? That has absolutely no respect for the truth of the Bible? Think again. You are now living in a country which is showing you very clearly what ONE NATION UNDER NO GOD looks like, feels like, and will be like, next week and next year.

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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Perfect illustration of just how far from reality the White House — and many in Congress — are operating…

Star members of the government's Reality Team...

Harry Reid says “Obama – Reid team is the greatest in US history.”

Senate Minority Leader Harry Reid said Friday his partnership with President Obama will go down in history.

“The record book that records will be written about the eight years of Obama and Reid, never in the history of the country — never in the history of the country — have we produced more for a president and somebody that’s led his party than we’ve done together,” Mr. Reid said Friday on KNPR radio.

Mr. Reid, who announced he will not be running for re-election in 2016, was greeted with what was apparently a surprise call from Mr. Obama during the appearance.

Harry, this is Barack,” the president said.

“Well, I’ll be damned,” Mr. Reid said. “I’ll be damned.”

Mr. Obama then asked if he was allowed to say that on live radio, to which Mr. Reid replied: “Well, I’ll be damned. What a guy.”

“I think that when the story is written and when all is told, you’re gonna have somebody who has done more for Nevada and for this country as anybody who’s ever been in the Senate, and I could not be prouder of him — he did an unbelievable job on a whole bunch of really tough issues,” Mr. Obama said. “Saving this country from a depression, making sure millions of people had health care, makin’ sure that young people were able to go to college and he’s been one of my best partners and best friends and I’m really honored to have served him.”

Mr. Reid assured the president the feeling was mutual.

“We’ve done it as friends, we’ve done it as people who love our country. We love it as a couple of people who have backgrounds that are so unusual,” Mr. Reid said. “How in the world did Obama and Reid get to where they are? We talked last night — I have so much affection and admiration for Barack Obama, that we’ve proven that to each other, our mutual affection, and we have 22 more months to continue doing the best we can for our country.”

“That’s what we’re gonna do,” Mr. Obama said.

 

[by David Sherfinski, writing for The Washington Times]

 

NORM ‘n’ AL Note:  We’ve heard everything now, folks. The last 6+ years with Obama at the helm have been some of the best years in the history of the country. Do you believe it? Do you believe they have the gall to even THINK that? Over six years of deadlock in Congress, with Reid stacking bills on his desk rather than bringing them to a vote. (Don’t want to actually pass something the Republicans might be able to take some credit for, do we?) Adding not billions, but trillions, of dollars to the US debt. (No matter. It’s only paper, you know.)  Spending more than forty million (40 MILLION) dollars on Obama and family vacations. (How much did the average American get to spend on vacations? Nothing. Nothing at all. We didn’t take vacations. We were too busy trying to find jobs and keep a roof over our heads.)  Opening our southern border to illegal aliens by the thousands, so they could stay here, get steady jobs, and hopefully vote Democratic in upcoming elections. (The 2014 election showed just how well that theory worked, with Republicans taking over the Senate, the House, and a majority of governorships.) Pulling all our troops out of Iraq on a pre-announced schedule so the radical Islamists could move in right behind us. (The Islamic State now controls huge swaths of the entire Middle East, thanks to the opening we gave them in Iraq.)  Shoving Obamacare down our throats whether we wanted it or not, so that a small minority of Americans could finally get some healthcare by paying too much for it.  Spending US taxpayer money in Israel to defeat the Prime Minister, who was running for re-election.  (Another really good idea from Obonehead in the Oval Office.  Mr. Netanyahu won by a substantial margin, and the White House appeared dumber than ever.)  So…brace yourselves, folks. That wonderful White House team, led by you-know-who, wants to bring you another “twenty-two months of the best we can do for our country.”  May God help us…because He is our only chance.

 

As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

 

 

 

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Obama legacy likely to be huge US financial collapse…

Just before Obama began his first term, and before the Financial Crisis of 2008, the national debt represented 62 cents of every dollar of this nation’s Gross Domestic Product, or GDP.

Simply put, GDP is the total amount of goods and services produced by a country. If you looked at a country like a business, their GDP would be their gross sales.

Last year – for the first time ever – the national debt exceeded the U.S. GDP.

This means that we, as a nation, owe more than we produce.

We are now part of a very “unique” group of countries in the world that have a debt-to-GDP ratio greater than 1. We now rank number 6, right behind Ireland, Portugal, Italy, Greece and Japan.

This is NOT a list the most prosperous nation on earth should be on.

US heading to third-world financial status

What is even more troubling is not only the size of the debt but how fast it’s been growing compared to the economy, and that is what’s keeping lots of us up at night.

If the economy grew faster than the rate the government borrowed money… the debt wouldn’t be as much of a problem.

But we are now on an unsustainable path. Under the ‘leadership’ of Barack Obama, our deficit is growing at eight to ten percent per year while the economy is growing at only two to three percent per year.  How is this economically sustainable?

We are now at the tipping point… when government debt is greater than its ability to repay that debt.

The next step in this debt disaster is even more terrifying.

That’s because the cost of paying the interest on this debt has become astronomical. In order to keep current on our interest payments right now…the cost is more than $415 billion!

This amount — $415 billion — is almost as much as the government spends on Medicare…and it’s the same percentage of the U.S. budget that is spent on education.

So we’re spending just as much to educate the nation’s children as we are simply to maintain our debt at its current level.

But here’s the dangerous part:

For the past few years, the Fed has maintained a near-zero interest rate policy…and for good reason: The U.S. currently pays an interest rate of just 2.4% on its $17.6 trillion in debt.

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

In other words, a simple 1% increase in the interest rate we have to pay on our debt would mean the total cost would climb to more than $600 billion – almost as much as the entire U.S. defense budget!

So far, the Fed has been able to “manage” the cost of this debt by keeping interest rates low.

But the Fed could have to raise interest rates – and soon – in order to help the U.S. economy avoid a crippling inflation that would resemble the 1970s or early ‘80s.

Or – even worse – the decision could be out of the Fed’s hands entirely…

Here’s where the situation goes from disappointing… to dire. Why? Because the United States is no longer in control of the interest rate it pays on its debt.

That’s because foreign investors now own a whopping 48% of U.S. debt…up from just 19% back in 1990.

US Debt Held by Foreigners

In other words – we’re now at the mercy of China and Japan – the two largest holders of U.S. debt.

If either of those nations demand higher interest rates…the U.S. will be forced to comply. And – as I just showed you…the impact on the U.S. budget will be devastating.

If rates go up by 1% — where will we get the more than $170 billion needed to finance a 1% rise in rates… the $255 billion needed to finance a 1.5% rise… or the $340 billion needed to finance a 2% increase?

Every 1% rise in interest rates would increase the debt payment by more than $170 billion!

We don’t have the money – that’s the point. So government spending will have to be cut…in a big way.

American citizens got a small taste of spending cuts when Obama shut down government services during the first two weeks of October 2013:

800,000 federal employees were furloughed 1.3 million were required to work without pay Government contractors such as United Technologies were preparing to lay off 2,000 workers, Lockheed Martin, 3,000.

Shelters for domestic abuse victims across America had trouble paying their bills and closed down.

More than 19,000 low income school children lost access to programs that provides nutritious meals and medical screening.

Even our nation’s brave heroes — individuals who fought for our freedom in Vietnam, Korea… even World War II — were denied access to the national memorials erected in honor of their fallen comrades.

Simply put — it was sickening to watch.

But it also shows you that if Obama and our government are willing to stoop so low as to treat the men and women who have protected our freedom so poorly during a short-term squabble over money…

They’ll do anything when a real crisis strikes.

The barricades put up around the World War II Memorial in Washington have become a symbol held up by both Democrats and Republicans as an example of what’s wrong with Washington.

If millions of Americans were impacted by the last, brief government shutdown…

How long would it take before there would be chaos and riots in our cities in the event of more drastic – and more prolonged – spending cuts?

Before looting and gangs roam the streets of our major cities?

The bottom line, folks, is this: Our beloved USA is no longer in control of its own destiny. Our future can easily be controlled by Russia and China…and these countries are already well on their way toward dictating that future.

[from a report prepared by Stealth Stocks Online]
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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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“The people at the Fed do not know what they’re doing…don’t ever think they know what they’re doing.”

I was at a recent conclave in the Rocky Mountains with a couple central bankers, one from the Federal Reserve and one from the Bank of England. They’ll say things privately that they won’t say publicly.

And I was handed a copy of Janet Yellen’s playbook.

The Fed is trying to kind of use propaganda…lie to us about economic prospects, talk about green shoots, use happy talk to try to get us to spend our money.

The Fed doesn’t know what they’re doing. Don’t ever think that they know what they’re doing.

You can print all the money you want, but if people are not borrowing it, if they’re not spending it, then your economy is collapsing, even with money printing.

So you can understand it this way…

Let’s say I go out to dinner and I tip the waiter. And the waiter takes my tip and he takes a taxicab home. And the taxi driver takes the fare and puts some gas in her taxicab.

Well, in that example, my dollar had the velocity of three. $1 supported $3 of goods and services: the tip, the taxi ride, and the gasoline.

But, what if I don’t feel great? I stay home, and watch television. I don’t spend any money. Well, that money now has a velocity of zero.  I leave my money in the bank, but I don’t spend it.

Let’s look at what’s actually happening with the velocity of money.

It’s plunging… It’s going down very rapidly.

But compare this decline of velocity today to what we saw leading up the Great Depression.

Now, in the depths of the Great Depression velocity was even lower…

But…

If you compare what’s going on today to what happened in the late 1920s just prior to the Great Depression, there’s a very striking resemblance.

So, it doesn’t matter how much money the Fed prints.

Think of it as an airplane that’s coming in for a nosedive. It’s crashing… crashing… getting closer to the ground. The Fed is trying to grab the joystick and pull the plane up out of the nosedive and get it back in the air…

But, unfortunately, it’s not working, we’re heading for a crash.

There are a lot of signals out there and they’re very, very troubling.

One of the ones I’m watching closely, and I know people in the Intelligence Community focus on also, because it covers so much ground, is called the Misery Index.

The Misery Index = Real Inflation Rate + Real Unemployment Rate

If you look at the Misery Index today compared to the period of stagflation in the late 1970s and early ’80s that Americans remember so well…

It’s actually worse.

This can lead to social instability…

Take this back to the Great Depression… The Misery Index in the Great Depression was 27.

Today it’s 32.89.

Believe it or not, it’s worse today than it was during the Great Depression. What happens as a depression worsens? Businesses can’t pay their debts. The bad losses fall on the banks. The banks ultimately fail.

That’s happened before. The Fed has had to bail out the banks.

But what happens when the Fed, itself, is in jeopardy?

You have to compare the capital to the balance sheet. How much in the way of assets and liabilities is the Fed’s capital supporting?

When you look at that it’s a much scarier picture, because the actual liabilities, or debt, if you will, on the Fed’s books is $4.3 trillion.

So you’ve got $4.3 trillion sitting on comparatively skinny little capital base of $56 billion…

That’s very unstable.

Prior to 2008, the Fed’s leverage was about 22 to 1.  Meaning they had $22 in debt on their books for every $1 of capital.  Today, that leverage is 77 to 1.

But, the problem is not limited to the Fed.  It’s infecting the private banking system as well.

There’s about $60 trillion of debt on the balance sheets of our banking system.

For a long time, debt and the banks grew at about two times the rate of growth in the economy.  But lately, this has exploded.  Today it’s up to 30 to 1.

In other words, for every dollar of economic growth, there’s $30 of credit being created by the banking system.

I can give you a very good example of this and this actually comes from physics.

If you had, let’s say, a 35-pound block of uranium shaped like a cube, it would actually be fairly harmless.  It’s what we call sub-critical.  It’s radioactive, but it’s kind of tame.  But now imagine you engineer it.  You take that 35-pound block.  You take one piece and shape it into something about the size of a grapefruit.  Take another piece, shape it into something like a bat.  Put the ball and the bat in a tube and fire them together with high explosives.

That sets off a nuclear detonation.  That destroys a city.

The way it’s been shaped and configured is what takes it from what we call sub-critical to super-critical.

Even our stock market has reached a super-critical state.

One of the signs that’s really fundamental, and really important, is the ratio of stock market capitalization to GDP.

Because, remember, the value of all the stocks in the stock market, that’s supposed to represent the fundamental economy.  It’s not supposed to be off in a world of its own.  But if you look at what’s been happening to that ratio recently, it’s going sky-high.

It’s 203%.

Just prior to the recession…

That number was 183%.

Go back to the famous tech bubble, the dot com implosion of 2000.

At that time, it was 204%.

And if you want the scariest news of all…just prior to the Great Depression that number was 87%.

In other words…

The stock market capitalization, as a percentage of GDP, is twice as high as it was just prior to the Great Depression.

So, that’s a really good metric for saying, “Hey, is the stock market heading for a crash?”

All the data says, “Yes, we are.”

[from an interview with Jim Rickards, Financial Threat Advisor to the CIA]

 

NORM ‘n’ AL Note:  More tomorrow from this same interview.

 

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As always, posted for your edification and enlightenment by

NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

 

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Very simple post today: You decide, and then take action…

Every single hour, of every single day, the U.S. government spends about $200 million that it doesn’t have.

Yes, that’s every hour of every single day… 24 hours a day, seven days a week, including Sundays, Christmas, Thanksgiving, Easter, and every other holiday.

For a point of reference, consider that in just two months, the government borrows more money than the combined annual profits of the 100 biggest publicly traded companies in America.

That’s absolutely incredible, isn’t it?

Again, every hour of every single day, we are spending $200 million we don’t have.

Does that sound sustainable to you?

Take a look at just one simple chart…

This will tell you all you need to know about the likelihood of massive changes in the very near future. This will tell you whether or not things are really “normal” in America today.

This chart shows that what has taken place is something straight out of Weimar Germany… or the last 20 years in Zimbabwe. This kind of gross, out-of-control experiment with our money has never happened before. No one can predict the exact outcome. No one. It sure isn’t “normal,” and it’s sure to be a disaster.

Here’s the chart:
We began the year 2014 with a net public debt that has more than doubled since the year BEFORE Barack Obama took office. These overwhelming public financial obligations are completely unprecedented in the history of our country, outside of the two major global wars we fought in the 20th century.

But even these incredible figures don’t tell the real story. Or even half of it.

Various other government agencies and private companies taken over by the government also have obligations of nearly another $5 trillion. We’ve already booked complete losses on $140 billion worth of these obligations. Yet they remain completely off the federal balance sheet.

When you add these other, genuine, federal obligations that exist right now, today, you come up with a total debt figure that’s much more than $20 trillion. Far more than half of these debts were assumed under President Obama.

We don’t know what the full burden of these new and existing debts will be in total, over time.

That’s because the Federal Reserves power to manipulate interest rates is unlimited—at least for now that’s the case.

We don’t know how much of Fannie’s and Freddie’s bad debts will eventually be covered by the U.S. Treasury. (We do know they have an unlimited line of credit… so it’s a safe bet that we haven’t seen the last of these charges.) Finally, we have no idea what the eventual costs of the Federal Reserve’s ongoing expansion of the monetary base will be over the long term.

There is one thing that’s certain, however: these debts will not be free. They will carry a burden.

Today, we have more government debt than any country in the history of the world. We have more debt than every country in the European Union… combined.

With each additional commitment we sink further and further into debt… closing in upon the moment that we can simply no longer afford even the interest payments on our obligations.

And here is the part that really matters… the costs of maintaining our debts are about to skyrocket.

Right now the Federal Reserve is manipulating interest rates down to almost zero. As a result, the interest rate at which our government can borrow money is at a record low level. In fact, the Federal Reserve has lowered its benchmark interest rate ten times since August 2007, from 5.25% to a zone between zero and 0.25%. Obviously, the current rate won’t last forever.

But what will happen if the average real interest rate ends up being just 4% annually, and we pay it off over 30 years like a mortgage?

Incredibly, we’ll spend $34.3 trillion to simply repay what we owe right now. If the rate ends up being 6%, we’ll spend $43.1 trillion.

Now, of course, our politicians believe that through policy and currency manipulation, they can simply avoid paying any of these costs. They can order the Federal Reserve to prevent interest rates from ever rising to a level that would cost the American people anything. They believe they can manage the economy, so the debts of Fannie and Freddie won’t go bad. They believe (without any proof whatsoever) that they can stimulate the economy by even more deficit spending, so that it grows faster, allowing tax revenues to produce a surplus. Repaying these debts, they say, will be easy and painless.

But you know better, my friend. You must know better. The wages of sin must be paid. And they will be paid.

Paul Krugman, one of the most widely read and respected “economists” in the country wrote about this incredibly naïve and ridiculous solution in a January 7th, 2013 New York Times column. He said:

“There’s a legal loophole allowing the Treasury to mint platinum coins in any denomination the secretary chooses. Yes, it was intended to allow commemorative collector’s items – but that’s not what the letter of the law says. And by minting a $1 trillion coin, then depositing it at the Fed, the Treasury could acquire enough cash to sidestep the debt ceiling – while doing no economic harm at all.”

Very few people, even our most influential economists, seem to remember that the utility of money and credit are based upon their soundness.

Money allows people to exchange goods and services widely, greatly increasing the specialization of labor and facilitating the economic magic of competitive advantage. Money also plays the critical function of facilitating communications between and among many disparate actors. Price changes guide producers and consumers.

But… when the money can’t be trusted… this entire system breaks down. The price signals can’t be relied upon. And it becomes harder and harder for people to exchange labor and capital.

Likewise, credit enables an economy to grow by facilitating the growth of savings and capital investment through real interest rates. But very few people are willing to delay consumption and trust their savings in an economy that refuses to pay savers any return above inflation for their savings.

And that’s exactly where we are today.

Although to most Americans everything seems calm… and that we are enjoying an economic recovery, here is the real and uncomfortable truth:

We are trapped. There is no way out.

And nobody in Washington – not Republicans, not Democrats, and not even Tea Partiers – want you to realize how precarious our government’s finances really are. They can’t afford for you to understand this dilemma… or what it means.

Because here’s the thing…

And this is the big secret the government hopes you never understand…

According to even the most conservative calculations (again, using numbers provided by the Congressional Budget Office) a debt default by the U.S. government would be inevitable – were it not for one simple anomaly…the one thing that has saved the United States so far: Our country’s unique ability to simply print more money.

You see, the U.S. government has one very important weapon to use in this crisis so far: We are the only debtor in the world that can legally print U.S. dollars. And the U.S. dollar is what’s known as “the world’s reserve currency.”

The dollar forms the basis of the world’s financial system. It is what banks around the world hold in reserve against their loans.

Again, that’s a secret most politicians don’t understand:

As things stand now, the U.S. government can’t go broke in any ordinary sense of the word because it can simply print dollars to pay for its bad debts. (It’s been doing so since March of 2009.)

That might sound pretty good at first. Since we can always just print more money, what is there to worry about…?

Take a look at this chart…
Even as late as the 1970s, America was the world’s largest creditor. But by the mid-1980s we’d become a debtor to the world. And since the late 1990s we’ve been the world’s LARGEST debtor.

Today, our government owes more money to more people than anyone else in the world.

With all of these bad debts piling up, we’ve had to begin repaying our debts by printing trillions of new dollars.

With QE3, the latest round of “quantitative easing,” the Fed is printing $65 billion a month. That’s nearly a trillion dollars a year.

And now, finally, the impact of this is being felt in a big way.

As our creditors figure out what’s happening, we are beginning to have very, very big problems.

Our creditors (which include foreign countries and other investors here and abroad) can either completely stop accepting dollars in repayment… or greatly discount the value of these new dollars. This is already happening.

In fact, Zha Xiaogang, a researcher at the Shanghai Institutes for International Studies, recently said:

The shortcomings of the current international monetary system pose a big threat to China’s economy.”

That’s why China is now actively taking steps to phase out the U.S. dollar because of its frustration with the U.S. government’s mismanagement of our currency. And how does our government respond? We have the audacity to label China a “currency manipulator!”

The U.S. dollar has been the world’s reserve currency for decades now… so most Americans don’t have a clue about what the repercussions are of losing this status.

And maybe you think it could never happen… but the truth is, this is exactly what happens when countries get too far in debt or when they consume too much or produce too little.

In fact, the same thing happened to Great Britain in the 1970s.

Most people don’t know this, but Britain’s sterling was the reserve currency for most of the world for nearly 200 years… for most of the 18th and 19th centuries.

It continued to play this role until after World War II, when America was forced to prop up Britain’s economy with foreign aid –remember the famous Marshall Plan, when we gave billions to help European countries rebuild?

Unfortunately though, Britain pursued a socialist national agenda. The government took over all of the major industries. Like Barack Obama, Britain’s leaders wanted to “spread the wealth around.” Pretty soon the country was flat broke.

The final straw for Britain came in 1967, when things got so bad the Labour Party (the socialists) decided to “devalue” the British currency by 14%, overnight. They believed this would make it easier for people to afford their debts.

In reality, what it did was make anyone holding British sterling 14% poorer, overnight, and it made everything in Britain, much, much more expensive in the coming years.

And for the country as a whole, it ushered in one of the worst decades in modern British history.

Most Americans don’t know about Britain’s “Winter of Discontent” in the late 1970s, when the government put a freeze on wages. There were continuous strikes in nearly every sector… grave diggers, trash collectors… even hospital workers. Things got so bad at one point that many hospitals were reduced to accepting only emergency patients. And mothers giving birth had to bring their own linens.

In 1975, inflation in Britain skyrocketed 26.9%… in a single year!

The government also imposed what was known as the “Three Day Week” in 1974. In short, businesses were limited to using electricity for only three specified consecutive days’ each week and they were prohibited from working longer hours on those days.

Television companies were required to cease broadcasting at 10:30pm… to save electricity.

Just how bad were things, exactly?

Well, here’s a photo of the garbage that piled up because they didn’t have enough money to pay trash collectors a fair wage…

Imagine… Britain was a global superpower for 150 years. But when they started intentionally devaluing their currency, things went straight downhill.

It’s now obviously clear that the same thing that happened to Britain’s sterling when it was the world’s reserve currency, is now happening to the U.S. dollar. In fact, the exchange value of the U.S. dollar has fallen nearly 20% since mid-2003, according to data from the Federal Reserve itself.

As the U.S. dollar continues to lose its position as the world’s currency, gas, oil, and other commodities will continue to skyrocket. Almost EVERYTHING we consume will get dramatically more expensive. All the clothing, furniture, and household goods we import from China. All the food we get from Central and South America… all the electronics, televisions, computers, and cars we get from Asia and Europe.

As we print more money, the price of the world’s most essential commodities have soared. This is NOT a coincidence.

Around the world, as we print, prices soar… citizens protest… governments get overthrown. And it’s only going to get worse…

Because here’s the important fact you simply must understand about the United States right now:

Our government can NOT stop printing money because there is no possible way for us to actually afford our existing debts. No one wants you to know this. No one.

That’s why, despite the obvious inflation going on all around the world, the Fed continues to say there’s no inflation at all.

Just like in a Third World country, the government is radically devaluing the dollar and simply lying to everyone about what is really happening.
[from a letter published by Stansberry Research]
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As always, posted for your edification and enlightenment by
NORM ‘n’ AL, Minneapolis
normal@usa1usa.com
612.239.0970

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