Tag Archives: GDP

The Big Money Grab Is “On” As Middle America Collapses

The stock market rejoices the House passage of the tax “reform” Bill as the Dow shot up 187 points and the S&P 500 spiked up 21. The Nasdaq soared 1.3%, retracing its 3-day decline in one day. The tax bill is nothing more than a massive redirect of money flow from the Treasury Department to Corporate America and billionaires. The middle class will not receive any tax relief from the Bill but it will shoulder the burden of the several trillion dollars extra in Treasury debt that will be required to finance the tax cuts for the wealthy. The tax “reform” will have, at best, no effect on GDP.   It will likely be detrimental to real economic output.

The Big Money Grab is “on” at the highest levels of of Wall St., DC, Corporate America, the Judiciary and State/local Govt. These people are grabbing from a dying carcass as fast and greedily as possible.  The elitists are operating free from any fear of the Rule of Law.  That particular nuisance does not apply to “them” – only to “us.” They don’t even try to hide their grand scale theft anymore because the protocol in place to prevent them from doing this is now on their side. This is the section in Atlas Shrugged leading up to the big implosion.

“When you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed.” – Atlas Shrugged

Speaking of the economy, as with inflation the GDP report does not reflect the true level of real economic activity in the U.S. because the Government report is not designed to measure real economic output. Instead, the GDP is yet another Government economic report constructed with blatant statistical manipulation and outright fraudulent data sampling. How am I so certain of this? The “tell” on the true condition of the economy lies with the fact that Fed is “normalizing” neither interest rates nor its balance sheet. In fact, if the Fed were to “normalize” monetary policy, it would quickly hike the Fed funds rate up closer to 6% and it would be reducing its balance sheet and removing at least the $2.1 trillion in printed cash sitting in the banks’ excess reserve account.  The problem is that this “normalization” would pop the enormous asset bubble created from money printing.  It would also interrupt the ongoing wealth confiscation.

Elijah Johnson at Silver Doctors invited to discuss the above issues as well as the stock, bond and housing bubbles. And of course gold and mining stocks:

I’ll be releasing the latest issue of my Mining Stock Journal this evening. It will have an emerging junior gold exploration company that has been described at “Gold Standard Ventures 2.0.” You can find out more information here:   Mining Stock Journal info.

The Public Is Getting Pissed – Ignoring Rule Of Law

“If liberty means anything at all, it means the right to tell people what they do not want to hear.”   – George Orwell

There’s a narrative here that the Government, the Fed, the Trump Administration, etc conveniently ignored.  Here’s the headline list this morning:

  • GM Extends Plant Shutdowns
  • 2nd Quarter GDP Hit As Inventories Tumble In April
  • Retail Sales Tumble Most Since January 2016
  • Pension Crisis Escalates
  • House Majority Whip Shot At Congressional Baseball Practice

Real Clear News reported that Representative De Santis stated to police that the shooter asked “whether Republicans or Dems were on the field before shooting.”  Fox News has confirmed  the report.

The public is getting pissed.  It is told daily, on no uncertain terms, by the White House that the economy is rapidly improving.  The Fed confirms that the economy is improving.  Wall Street chimes in confirming that “narrative.”

The public is told that the unemployment rate is under 5% and the labor market is tight.  But 95 million people in the working age population don’t have jobs.  They are not considered part of the “Labor Force” and have been removed from the statistics altogether by some BLS bureaucrat’s pencil eraser. To be sure, maybe 1/3 or even 1/2 of those people don’t want to work or need to work for some reason (wealthy, wealthy and lazy, inherited income, public assistance of some form, etc).  But 1/2 to 2/3’s of those people would like to find a job that doesn’t entail delivering pizza or washing dishes – in other words, jobs that pay to support a family.

A growing portion of the population understands the underlying truth about the economy that exists behind the propaganda and lies. And they are getting pissed. It’s become clear to anyone desperate enough in their fight to get by that the politicians, corporate elitists and Wall Street crooks are no longer beholden to Rule of Law.   The conclusion for the growing legion of desperate is obvious:  “why should we adhere to Rule of Law?”

At least this time the Deep State can’t shove the “it was ISIS” narrative down our collective gullets.

Retailing Is Bad And About To Get Worse

Americans are filing for bankruptcy at the fastest rate in several years. In January 2017, 55,421 individuals filed bankruptcy. That’s a 5.4% increase over January 2016. In December 2016, 4.5% more individual bankruptcies were filed than in December 2015. It’s the first time in 7 years that personal bankruptcies have risen in successive months on a year over year basis.

Also notable, in 2016 the number of U.S. Corporate bankruptcies jumped by 26% over 2015. U.S. Corporations have issued $9.5 trillion in bonds. That’s 61% more than they borrowed in the eight years leading up to the 2008 de facto financial system collapse (aka “the great financial crisis”).

The Financial Times reported that over 1 million U.S. consumers – prime and subprime – were behind on their car loans and that the overall delinquency rate had reached its highest level since 2009. The FT also stated that “lending to consumers with weak credit scores has been one of the fastest growing parts of the [banking] industry.” It’s starting to smell like early 2008 out there.

This is information and data that you will not hear on any of the “Bubblevision” financial “news” programs or read in the mainstream financial media. It’s also information that is not being factored at all by stock prices.

Americans are bulging from the eyeballs with mortgage, auto, credit card and student loan debt. The amount of outstanding auto debt hits a new record every month. Of the $1.2 trillion in auto loans outstanding, over 30% is considered subprime. In fact, I would bet good money that the number is closer to 40%, as the same type of non-documentation loans that infected the mortgage market in mid-2000’s has invaded the auto loan market. It was recently disclosed that the 61+ day delinquency rate on General Motors’ securitized subprime loans has soared to levels not seen since 2009.

To put the amount of subprime auto debt in context, assume 35% of total auto debt outstanding is now below prime (subprime and “not rated”). This equates to $420 billion of below prime debt. The total amount of below prime mortgage debt during the mid-2000’s housing bubble was about $600 billion. In other words, the subprime auto debt problem could easily precipitate another financial markets catastrophe.

Although the retail sales report for January earlier this month purported to show a 4.9% year/year increase in retail for January, the majority of the “gain” came from the rising price of gasoline during the month (the gasoline sales category showed a 13.9% gain over January 2016, most of which can be explained by higher prices). In fact, the .4% “gain” from December 2016 to January 2017 reported for the overall retail sales number lagged the Government’s measure of inflation. Real, inflation-adjusted sales from December to January declined by 0.20%. (Note also that the retail sales report is derived largely from Census Bureau “guesstimates” due to the supposed unavailability of real-time data. This explains why typically previous reports are revised lower – I detail this in my weekly Short Seller’s Journal).

Debt-squeezed Americans are spending less on discretionary items, especially clothing. This is why Walmart has launched a new price-war agenda aimed at the grocery industry, big-box retailers and Amazon.com.    The retail spending “pie” is shrinking and Walmart intends to do fight hard to maintain the size of its piece.  For all the attention focused on Amazon, Walmart’s annual revenues are nearly 4-times larger than Amazon’s.   And make no mistake, Walmart has plenty of room to fight, as its operating margin is nearly double AMZN’s – and that’s before we adjust AMZN’s highly misleading accounting, which would reduce AMZN’s margins.

Despite the Dow hitting new all-time highs for a record number of days in a row, The S&P retail ETF, XRT, is currently 10.4% below its 52-week high.   It’s 15% below its all-time high, which it hit in mid-July 2015:

Target (TGT) is today’s poster-child for the retail sector, as its Q4 earnings missed expectations badly and it warned for 2017.  Its quarterly revenues dropped 4.3% year over year and its full-year 2016 earnings fell nearly 6% vs. 2015.   Operating earnings were crushed, down 42.2% in Q4 2016 vs. Q4 2015.  The stock is down over 11% right now (mid-morning trading on Tuesday).

I would also suggest that the revised GDP  for Q4, reported to be 1.9%, is derived from Government statisticians’ manipulation because most of the gain is attributed to consumer spending.  Tell that to holders of XRT and RTH.

The economy is sinking further into a recession despite the propaganda coming from Wall Street, financial bubblevision “meat with mouths” and the mainstream media.  Real median household income continues to decline and the Fed/Government intervention in the stock market is helpless to prevent this fact from being reflected in many sub-sectors of the stock market “hiding” beneath the headline-grabbing Dow and S&P 500.

My Short Seller’s Journal presents analysis like this to subscribers every week.  There’s a big difference between what gets reported and what is really going on.  My journal looks “under the hood” of the headline economic reports in order detail what’s really going in in the economy.  Most of the analysis and assertions are backed up with actual data.  I also “de-construct” the game of “beat the earnings” which makes headlines and stocks pop, but also creates short-sell opportunities.  Each issue presents at least two short ideas, along with suggestions for using options and managing positions.  The retail sector has been fertile shorting ground and the housing market is next.  You can subscribe by clicking on this link:  Short Seller’s Journal – plus receive a discount link to my Mining Stock Journal.

China Is Headed For The Exits

A few years ago, we opined that Bernanke and his ilk created a stock market Frankenstein with their desire to generate ‘the wealth effect.’ We also regularly stated that eventually, markets stage violent revolts against central planning and command control. The revolt has only just begun.  – The King Report, Thursday, August 27

I have maintained that part of China’s “hidden” agenda in devaluing its currency is to let the air out of its bubbles ahead of every other asset bubble-infested system – the U.S. assets bubbles being the biggest (ignore the western propaganda slamming China).

It was revealed yesterday that China is now unloading its massive U.S. Treasury bond holdings.  The entire astute segment of the financial has been wondering for years when and how this would occur.  China has even given the U.S. Government a “courtesy call:”  China Selling Treasuries.

Rather than re-invent the wheel on my analysis, here’s some comments I made in an email exchange with Jay Taylor, who asked me if yesterday’s and today’s stock market action was a sign that the criminals running our system had “won:”

I’m trying to figure out why everyone is pegging Sept 23 as a key date.  If you go to Google maps and type in 09/23/2015, the map zeroes in on CERN – the European nuclear research facility.  I didn’t even know you could type dates in to Google maps. I’m wondering if that’s Google screwing around with the conspiracy crowd.

No, history tells us that the bad guys eventually always lose.  It’s just that they keep reappearing over time – it’s the human condition.  I personally think that China is letting the air out of its bubbles ahead of the crowd.  Now we see they are starting to really unload their Treasuries. I believe part of the reason that China is devaluing is to use this as “cover” for its desire to unload as much of their massive Treasury holdings as possible without trashing the market or losing the Fed’s “bid” for Treasury paper.

You won’t see this analysis in any of the mainstream media, or even a lot of the alternative media, because most of these “information purveyors” just regurgitate the script Wall Street puts in front of them or drool out the obvious explanations.  But we know that China never puts a plan into motion without a lot of planning and forethought.  There’s a lot more going on than the obvious.  Most “analysts” and commentators either have a very rudimentary understanding of economics and how markets really operate or they knowingly prefer to spoon-feed the public their snake-oil propaganda.

China was the first to “jump out of its seat in the crowded theatre” and head for exits, before the crowd see the inferno that’s been ignited.  It’s classic “prisoner’s dilemma” behavior.  Their doing this will likely mean that they suffer the least when the real brown stuff hits the fan blades.  The U.S. keeps trying to inflate its bubbles.  Look at yesterday/today.  Look at that absurd GDP “revision.”  The U.S. is interminably pumping money into the asset bubbles and churning out Orwellian propaganda.  It will end a lot worse for the United States than for China.

I think the market action starting last Friday is the beginning of the end for this era.  Just a question of how long the U.S. criminals can keep kicking that can.

Gold, Silver Smashed On Gold-Friendly News Report

Move along regulators and financial media “journalists” – there’s nothing to see here…other than the obvious.  As the open interest, naked short position in silver climbs to an new all-time record and approaches 1 billion ounces of paper silver – most of which is a naked short position – the physical buying markets of the world continue to accumulate massive hoards of gold and silver and the fraudulent paper manipulating world continues to keep the price down for the buyers.

Same story today (click to enlarge):

ComexGold

After yesterday’s take-down of the metals by the Comex criminals, the eastern hemisphere physical gold buyers decided to do more “feeding at the trough.” Gold rose steadily during Mumbai, Hong Kong and Shanghai trading hours.

As soon as Shanghai closes, London opens up and the paper gold bombs start flying.  Gold is immediately hit nearly straight down for the first 30 minutes.  The market rebounds as the naked shorts contemplate the a.m. LBMA pirce “fix.”   Clearly there was an excess of bidders looking for the delivery of physical bars, as the price rose into the 3 – 3:30 a.m. fixing period in order to balance out buyers and sellers (of actual bars).   After the fix it was hit again with more paper.

Of course, gold was banged as soon as the Comex floor opened at 8:20 a.m. NY time.  This is about a 90% occurrence.  Then, about 5 minutes after the GDP 2nd revision report came in as expected, gold was taken off a cliff for another $6.

Any who can’t see the blatant manipulation here is either an idiot or is involved in the corruption.  Clearly, the GDP report should be gold “friendly,” as a negative GDP means th economy is contracting and it reduces or eliminates the probability of any interest rate bumps (which we already know to be the case anyway) and it heightens the possibility of QE4.

I don’t know when this corruption will end, but market intervention and systemic corruption always ends with catastrophic consequences.  Anyone who is not at least moving all of their paper “wealth” out of system – this includes retirements assets – will live to regret it.

COMPLACENY

“The World Is Drowning In Debt” – Goldman Sachs

The media propagandists, Wall Street snake-oil pimps and U.S. policymakers collectively like to point the finger at the rest of the world when addressing the issue of debt.  But when you total up all Government + private sector debt, the U.S. is the most debt-laden country in the history of the universe.

As of October 2014, the latest period for which the data is available, total credit market instruments – meaning all outstanding debt – in the U.S. economy was $58 trillion LINK. With the perverse increase in student loan, auto, mortgage and Treasury debt since then, the number is probably pushing $59 trillion.  The latest “measurement” of GDP by the Government was $17.7 trillion.  This puts total systemic debt at 333% of GDP.

So when Goldman makes a comment like “global debt is too much, man,” the title of a specific Hemingway novel rings in my ears (sorry, I was an English major in college).

But at least Goldman acknowledges the obvious in this article published by the Telegraph UK – and it’s an article that we’ll never see published by a U.S. newspaper:

The world is sinking under too much debt and an ageing global population means countries’ debt piles are in danger of growing out of control, the European chief executive of Goldman Sachs Asset Management has warned.

I wanted to post this article because it has an excellent graph in it (see below) and because you’ll note that the dweeb from Goldman singles out the debt problem in Japan.  How convenient it is for him to overlook the United States.  However the graphic below shows the U.S. to be among the worst offenders.  You’ll note that the graphic measures Government debt to GDP.  But now we know that only legitimate metric uses total debt to GDP to measure the problem.  And in this light of truth, the United States is the worst offender.

GlobalDebt

And therefore never send to know for whom the bell tolls; It tolls for thee. – John Donne

March Was The Worst Month For U.S. Economy Since The 2008 Recession

The broadest gauge of U.S. economic output, from the Commerce Department, tracks the economy on a quarterly basis. The private forecasting firm Macroeconomic Advisers provides a measure to track gross domestic product on a monthly basis…Macroeconomic Advisers on Thursday said its monthly estimate showed GDP fell an inflation-adjusted 1% in March, the largest drop since December 2008. – Wall St Journal – LINK

(click to enlarge)
EconomicPotholeThe Kool-aid drinking Keynesian economists are attributing the poor GDP report for Q1 to a drop in exports.  That’s an absurd notion, of course.  Especially if we were to re-adjust the GDP estimate with a true GDP-price deflator (inflation measure).    These guys always have some excuse, whether its the weather or the port strike on the west coast.

How about just the simple fact that the overleveraged, underemployed American middle class has finally hit a wall in its ability to consume beyond everyday necessities?

Yes, exports were down in Q1, but I guess that has nothing to do with the fact that the entire global economy is in the throws of an economic collapse.  Real imports of goods and services were estimated to be up 1.8% in Q1 vs. 10.4% increase in Q4 2014.  In other words, exports declined but the rate of imports slowed considerably.

About those retail sales (click to enlarge, source:  Bloomberg):

Retail SalesThis graph shows the monthly % change (left axis) and year over year % change (right axis, red line) in total retail sales.  As you can see from the blue line, there’s been a decleration in year over year retail sales since May 2013.  So much for the “polar vortex” fairytale.  Retail sales have been slowing down starting six months before (July 2013) the polar vortex allegedly affected the ability of consumers to use their credit cards in a manner which pleases the Keynesian central planners.  The red line shows us that the deceleration in retail sales growth accelerated in October 2014.  This includes three months in a row (red box) of negative monthly retail sales.

This next graph shows retails sales year over year ex-automobile sales (click to enlarge):

RetailSalesApril

As everyone knows, auto sales have been fueled by the a bubble in subprime auto loans – auto loans which are starting to go delinquent and default at an alarming rate. If you strip out this artificially induced demand for new cars, retail sales have been declining on a year over year basis since mid-2011.  No wonder the Fed implemented “Operation Twist” in late 2011, followed by QE 2 shortly thereafter.  Furthermore, the year over year decline in retail sales ex-autos started to accelerate downward in late 2014.

One last data point.  Construction spending.  To the extent that there’s been any “strength” in the economy, it’s come from auto sales and the housing market.  Auto sales have been fueled primarily by an explosion in subprime auto lending, market by extraordinarily easy lending standards and extending payment periods out to 84 months, which is longer than has been typical. Delinquencies are already rising quickly.  The other source has been 0-3.5% down payment mortgages made available by the Government-owned mortgage entities.  BOTH sources of economic activity have been funded by the Fed’s QE program.

But the trend in construction spending has been declining since May 2012:

ConstructionSpending

The Census Bureau provides the data input for the economic series. As you can see, by the Census Bureau’s own calculations, the decline in construction spending runs completely contrary to the wildly absurd housing starts report the agency released earlier today.  One would think the Census Bureau and the Government could at least manage some consistency among its data-reporting fabrications.

The bottom line is that the primary sources of economic activity, retail sales, the housing market and auto sales are all beginning to slow down – retail sales rather quickly.  This assertion is reinforced by the steady stream of economic reports released over the last few months which show that nearly all economic measurement data series are dropping at the same rate at which they were falling in the 2008-2009 period.

Regardless of the flood of Orwellian propaganda coming from Wall Street, the financial media and the various Government and quasi-Government agencies, by all valid economic activity metrics the U.S. economy is entering into crash mode.  The problem faced by all of us is that the crash that is in front of us will be many multiples more severe than what occurred in 2008.

Shadow Of Truth: Our Deteriorating Economy

Both retail sales and new orders for durable goods showed slowing or contracting fourth-quarter 2014 growth, with indications of outright first-quarter 2015 contractions already in play, irrespective of the series being, or not being, adjusted for inflation. Those patterns should become increasingly obvious in headline reporting of the next month or so… The effects of the weakening underlying data, on both forthcoming and soon-to-be-revised historical GDP growth patterns, should be distressing to the consensus outlook of a fully-recovered and expanding U.S. economy.   – John Williams, Shadowstats.com

On Friday, after the big downside revision to the Q4 GDP, the Chicago PMI report literally crashed to 45.8 from January’s 59.4 reading –  a 23% plunge.  58.7 had been expected by Wall Street’s brain trust.  This was the biggest drop since the Financial Collapse of 2008 and the second biggest drop in 1980.   The new order sub-index had the biggest month to month drop on record.

My colleague Rory Hall of The Daily Coin and I discuss the rapidly deteriorating economy in our latest episode of “Shadow of Truth.”  I also relate some information about Alan Greenspan that most of you probably have never heard before:

The economy is in the early stages of a major recession.  We’re seeing this in all of the latest economic reports and in the fact that the Fed/Govt can’t stimulate homes sales even with near-record low interest rates and a substantial easing of credit standards.

The housing market is going to get crushed and you can take advantage of this by reading my homebuilder reports – two of the plays have already produced over 20% returns for anyone of acted on the information.   Both of those companies will hit the wall before this over.   The other three companies are now set up for huge drops in the next 3-6 months:  Homebuilder Research Reports.

Another great play is shorting Amazon.com.  This will require “legging” into a full position over time – and it will require some patience.  I have section in the report which discusses using options for speculation and to help manage risk:   AMAZON.CON

Here’s the latest reader testimonial:   “I bought your Amazon report and it was outstanding!  Thanks for sharing your work in this way!!   Best regards,  Jim”

Greenspan: The Weak Demand Feels Like A Depression

In fact, effective demand is extraordinarily weak…The way I measure it, it’s probably tantamount to what we saw in the later stages of the Great Depression.   – Alan Greenspan on CNBC (interview link)

I have been suggesting for quite some time now that the underlying demand in this country is far weaker than is represented by the “seasonally adjusted, annualized rate” statistical vomit that the Government and industry marketing associations throw in our face on a daily basis.

In fact, I suggested in late November that the crashing price of oil was likely the “black swan” that no one saw coming (link) – not one single Wall Street analyst was forecasting a decline in the price of oil.  I further surmised that the crashing price of oil was primarily a result of extraordinarily weak demand not just globally but specifically and especially here in the U.S.   Subsequent reports for December and January retail sales showing almost 1% declines in each month further validated my analysis.

Retail sales are rarely negative.  A negative nominal retail sales number means unit sales declined.  The even more negative inflation-adjusted “real” retail sales would indicate a serious decline in unit volume sales.  It means the average consumer is basically “dead.” In this article on Seeking Alpha I go into further detail which shows how and why I know that the U.S. economy is on the verge of a “cliff dive:”  U.S. economy/cliff’s edge link.

You know the saying, you can lead a horse to water…AMZN is going to be one of the more epic stock crashes when reality grips the market.   AMZN’s operating income margin has been declining toward zero since 2004.  I show why in my report.   AMZN’s operating income was almost zero in 2014.   I show why in my report.  As AMZN’s sales growth rate declines, AMZN will become increasingly squeezed for cash – I show why in my report.  If you play the short-side of this stock intelligently and with discipline, you can make a lot of money shorting AMZN.   My report also has ideas for trade position management and the use of options to short the stock and manage risk:    AMAZON.CON

The quality of your content is incredible.  Your work shows not only why AMZN will eventually hit the wall, but it shows that the fraudulence embedded in our financial system runs all the way up to the highest levels – in this case FASB (Financial Accounting Standards Board) and the SEC.   Your work shows in detail how the Amazon Ponzi scheme is constructed right in front our eyes and everyone who owns the stock is clueless.  It’s the best $25 I’ve ever spent on financial research…Scott in Arizona

 [post_ender]

The System Is Terminally Broken

This is a world where nothing is solved. Someone once told me, ‘Time is a flat circle.’ Everything we’ve ever done or will do, we’re gonna do over and over and over again.  – Nic Pizzalotto, “True Detective”

The Fed has formally “ended” QE, but it hasn’t really.  The Fed will continue reinvesting interest on its portfolio in more bonds and it will rollover maturities.  We saw what happens to the stock market a few weeks ago when Fed official James Bullard asserted that the Fed needs to start raising rates:   the S&P 500 quickly dropped 8%.  Right at the bottom of the drop, the very same Bullard issued a statement suggesting that QE should be extended.  This triggered an insanely abrupt “V” move back up to a new record high for the S&P 500.  Bullard either did this intentionally or is a complete idiot.

The stock market can’t function without Federal Reserve intervention.  The stock market lost 8% quickly on just the thought that the Fed might start raising rates.  Imagine what would happen if the Fed decided to “experiment” by shutting down its market intervention operations – both verbal and physical – for a month…

As for QE, if the Fed has achieved its objective of stimulating the economy, why doesn’t it start removing the $2.6 trillion of liquidity that it has injected into its member banks (LINK)?  This was money that was supposed to be directed at the economy.  How come it’s sitting on bank balance sheets earning .25% interest?  That’s $6.5 billion in free interest the Fed continues to inject into the Too Big To Fail banks.  But why?  What would happen if the Fed decided to “experiment” by removing this massive dead-pool of money from the banks?  The money isn’t really “dead,” it’s keeping the banks from collapsing.

I’m interested to watch the Government Treasury bond auctions now that the Fed is not there to soak up anywhere from 50-100% of each issue.  I wonder if the banks will be moving their $2.6 trillion in Excess Reserves into new Treasury issuance.  Obama is going around broadcasting the lie that the Government’s spending deficit in FY 2014 was something like $600 billion.  Yet, the amount of new Treasury bonds issued increased by $1  trillion over the same period.  Either Obama is lying or the accountants at the Treasury committed a big typo.  Either the Fed has found a way to continue opaquely monetizing new Government debt issuance, or the market is soon going to force U.S. interest rates up much higher.

By continuously intervening in all of the markets, the Fed has destroyed the information transmission system that is built into freely trading markets.  If the Fed left the gold market alone – instead of hammering away with the naked shorting of Comex paper gold – the price of gold would be significantly higher than where it is now.  This would be the market’s signal that our system is indeed terminally broken.

Instead, the Fed keeps interest rates artificially low in hopes of stimulating a recovery in consumption and housing. But if this is working, how come the country’s two largest retailers have begun Black Friday shopping discounts on November 3rd (LINK)?  And the Fed keeps pushing stocks higher to  new record highs in order to “stimulate” confidence and faith in the system.  The fact that the stock market craps its pants when the Fed steps away for a split-second tells us just how broken this transmission mechanism is.  That 8% drop 4 weeks ago is the real signal that our system is terminally broken.

And now it’s emerging that the Q3 GDP report was greatly inflated by a statistical error which erroneously boosted the Government spending component.  It was this component that juiced the GDP report because residential investment (housing) and personal expenditures (consumption) both tanked.    Imagine that – a statistical error artificially boosted the GDP report right before a national election…

A colleague of mine has concluded that the QE infinity policy implemented Friday in Japan is the market’s signal that the entire western fiat system is getting close to imploding.  I’m inclined to agree with him.  Wall Street, the financial media and politicians are pointing at Europe and Japan as the source of the problems.   But the heart and nerve center of the western fiat currency/debt Ponzi scheme is right under our nose in this country.   The U.S. financial system is in worse shape than both Japan and Europe.  The only difference is that the U.S. officials do a much better job hiding these problems.

Time is starting to run out for ability of the U.S. to keep kicking the can of collapse down the road.  I really believe that the full-on intensity of the recent intervention in the precious metals market is the most obvious signal of time expiring.  China has been accumulating physical gold at a stunning rate and now some research indicates that China’s Central Bank may have accumulated significantly more gold than anyone previously thought (LINK).   China has most likely maneuvered itself into owning the world’s largest stock of gold, which is where the U.S. had positioned itself after WW2.   China has done this to a large degree by buying massive quantities of western Central Bank gold.

We’ve come full circle, only with China in the Midas throne this time around.  Eventually the world is going to revert back to a gold-backed currency system.  When this happens, the U.S. will be required to demonstrate that it possesses the amount of gold that it reports to own. The only caveat here is that I believe that the U.S. will start WW3 before it’s forced to reveal the truth about its empty gold vault. That’s how broken our system really is…