Friday, August 19, 2011

Morning Update/ Market Thread 8/19 - Philadelphia Debt Saturation Cliff Edition…

Good Morning,

Equity futures are down once again this morning despite a rapidly falling dollar. Bonds are higher again, now into record territory on a closing basis. Oil is flat, but gold is running wild, already hitting more than $1,882 an ounce! Silver is also up substantially, and food commodities are back into the range they have been the last couple of weeks.

That rise in gold is definitely on another level. It has now risen 55% in the past year, the one year chart is below:

Note the parabola on the 10 year monthly gold chart… they start out subtly, beginning here from a $250 base and growing at a moderate rate until 2005 when the growth rate began to build. Then, in late 2008, early 2009, when quantitative easing was announced, gold began rising on a much steeper path:

Sure Bernanke, you can create inflation… and you can wreak havoc on the world too, which is exactly what you have done.

The bond market is now in record territory, with rates even lower than at the height of the 2008 crisis. That level of debt is not sustainable, the math that took it there is quite impossible – it is therefore a bubble of giant proportions and that will burst just as surely as the sun will rise again tomorrow. It is the toppling of the bond bubble that will mark the end of the current power structure, for it is the bond market that gives them power – it is the base of their Ponzi.

Once macroeconomic debt saturation has set in, forcing more debt backed money into the system only works to burden the economy further with impossible math – it becomes a drag that real production must support. The more drag, the less real production there is, and the FEWER jobs there will be!

“Stimulating” the economy with debt backed money works until the debt saturation point, but after that point it is exactly the opposite – that’s where we are, the backside of the debt curve.

Propping up the stock and bond markets at this point destroys the real economy, and it destroys jobs. Realize that it doesn’t have to be like this at all! There is zero need for any national debt whatsoever – it is a construct of private individuals, and it flies in the face of what’s natural and what’s sustainable. It is a system based upon individual greed – great if you’re one of the benefactors, sucks if you’re not. The power to produce money rightly belongs to everyone equally, therefore it is our government’s responsibility. In fact it’s the most important thing our government should be in control of, and it’s the one thing they are not!

There are no economic reports today, however the Philly “Fed” Survey yesterday was a shocker, falling from the prior index value of 3.0 all the way to -30.7. The consensus of the clowns was +4.0. This report was for the month of August as the survey was accomplished this month and is our first look at August manufacturing data. This is a cliff dive compared to data from July, the Industrial Production number released just this Tuesday was positive, but it was based on July data. Here’s Econorattled:
An eye popping minus 30.7 headlines a troubling manufacturing report from the Philly Fed. The reading indicates very significant month-to-month contraction in general business conditions for August, one consistent with a shock and one compared against a small gain of 3.2 in July. But the report cites no particular factors behind the contraction, contraction that's evident throughout the details of the report.

New orders fell to minus 26.8 from plus 0.1, shipments minus 13.9 from plus 4.3, number of employees minus 5.2 vs plus 8.9, unfilled orders minus 20.9 vs an already dismal minus 16.3. Price data show a contraction for output prices and a much slower rate of inflation for input prices. Delivery times improved significantly which is another sign of weakness.

The six-month outlook also crumbled, coming in above zero but just barely at 1.4 vs July's 23.7. The Empire State report, released Monday and covering the New York manufacturing economy, also showed contraction but at a much less severe rate. Next week and the week following eyes will be on a run of other regional indicators to see if the outlook for the national manufacturing economy has suddenly taken a turn for the worse.

Zerohedge ran a chart yesterday comparing Nonfarm Payrolls to the Philly Fed Survey. The correlation is obvious, as is what we can expect for near term employment prospects:

Meanwhile the evening news carries footage of President Obama vacationing in Martha’s Vineyard, while juxtaposing images of the unemployed masses lined up in Philadelphia for a job fair – the line circled entire city blocks. Sad. Those people stand no chance with the current criminal class running the show, and they know it. The youth know their future. They see two separate and distinct rules of law – one where the upper criminal class gets away Scott-free robbing trillions, while the lower classes suffer the fate of no meaningful employment and an oppressive rule of law foisted unfairly upon them from the criminals in suits.

Yes, they are going to lash out, this is all a part of the one and only rule of law that matters, that is the natural rule of law which is self-righting and is a part of the evolution of our species – it is a part of the condition of humanity. That natural condition demands equal economic opportunity for everyone. When it gets too far out of balance, then the pressure builds until “other events” release the pressure and restore the balance.

Humanity is slowly working towards the tenants of Freedom’s Vision. That is that the power of money creation belongs to the PEOPLE equally. Any rule of law that gives that power to a few individuals is an UNNATURAL RULE OF LAW. When unnatural rules of law are present in society then pressures of inequality build until, again, those “other events” occur to rewrite the rule of law.

A major rewrite is coming, those “other events” are in full swing. I won’t be surprised if the rewrite begins on the streets of Philadelphia…