Saturday, March 19, 2011

Economic Disinformation

*Note: The following was written for Bill Still's new book, "No More National Debt," which can be purchased here: Bill Still - No More National Debt

Economic Disinformation
Do not put your faith in what statistics say until you have carefully considered what they do not say.
~William W. Watt

By now you are quite aware that the “Federal Reserve Bank” is not “Federal,” nor do they hold reserves, and not even are they a bank. The disinformation begins there and reaches out like tentacles from a metastasizing cancer to spread into most government statistics, our education system and business schools, our media, and even our history books.

The disinformation is pervasive, it causes massive misallocations of human and natural resources while working to congregate wealth into the hands of those who control the production of money – private banks. They need apparent growth (inflation) to keep their game going, without it the Ponzi of ever increasing sums (and profit) collapses into deflation.

On the national level all deficits add to the national debt that is financed through the Treasury and ultimately owned as an asset by the private banks in the form of U.S. Treasury Notes and Bonds. In this way the people are effectively charged interest payable to those banks via income taxes. This dynamic simply does not have to work in that manner, in effect it causes the people to pay for the use of their own money system – a system that belongs to them via Congress and not to the private banks.

Thus, the population is placed into a false box in which the solution to debt is either more debt, which is ridiculous of course, or into “austerity” – that is higher taxes and less spending. According to corporate sources who live and think inside of the current box, those are the only two alternatives. Reality and the right answers, of course, are only found well outside of that two-dimensional illusion.

But before any solution stands a chance of working over long periods of time, first we must be able to be honest with ourselves in understanding the current system and we must be able to accurately measure what’s really happening in the monetary system and then in our economy. I would posit that we are currently living a mass-experienced delusion within a fog of economic disinformation.

Math is not pliable to disinformation. Inflation will absolutely destroy any currency given enough time. What sounds mundane in the short term, say 3%, will literally make a currency worthless in just a few short decades. Why would any country implement a monetary system that depends on inflation, or said another way, why would one target inflation when that inflation will most certainly lead to the eventual demise of that currency?

That hardly seems sane… unless you are the one who produces the money and profits from it! Thus it is vital to look through the lens of those who control the quantity of money when trying to make sense of the economy.

As Bill Still has repeatedly stated, WHO controls the quantity of money is far more important than WHAT backs it! For it is the who that not only makes the quantity decisions (more is always good when you’re the one making it), but who it is that controls the production of money eventually also controls the production of a nation’s laws, aka “The Golden Rule.” This is why who produces the money within the economy is so vitally important to politics, and by extension world events.

Let me make that last point clear. There is a direct chain that leads from the production of money to world events! Follow the money and the production thereof. This is true because money is ultimately about control. He who produces the money is in control. Let the private bankers produce the money, they are in control, you just surrendered your sovereignty! Take loans from the IMF, surrender your sovereignty! Borrow money from China, surrender your sovereignty!

That money can be backed by seashells, gold, silver, paper, or whatever… ultimately the quantity of money can always be manipulated by those who produce it! Once the perception becomes pervasive that the quantity of money is out of control, then the end of the current money system is at hand.

Thus I would propose that any system that targets positive price inflation is not sane or rational in the sense that it serves the people over the long term. There is only one price inflation target that’s mathematically sustainable, and that is ZERO percent inflation.

Since there is smaller profit involved in producing a non-inflating currency, don’t look for private entities to back this rational inflation target any time soon. Thus the production of money can only be rational when it is in the hands of the people who rightly own it. And who are the people’s representatives? Congress – and they too must respect the math or the system will ultimately fail. Not accepting the reality of the math leads to disinformation, fuzzy thinking, and problems that never seem go away.

The Bad Math of Debt

Nearly all money produced today comes into existence as somebody’s debt. The myth is that the government currently “prints” money. They do not, and have not for quite some time. Private banks and other quasi-financial institutions are the ones who produce most of the money, and they do so from thin air without assets backing their credit money creation.

It didn’t used to be this way, but today it is a fact. Private institutions make the money. They hold the debt as an asset and they collect interest on it.

This is quite different than sovereign money which is created when a nation produces its own money without debt.

When a nation first transitions from a sovereign money system into a debt money system, adding more credit money works to stimulate the economy as the total supply of sovereign and credit money expand, creating new infrastructure and new industry. The “Keynesian” model is to add more credit money to the economic dips in order to spur the economy. This works in an immature economy where the ratio of credit dollars to sovereign dollars is low.

But then the math of debt begins to catch up with the economy as credit money begins to outstrip sovereign money. The problem with debt is that it requires continuous income to service it. Once a nation’s money becomes 100% credit, as is the case in the United States and throughout much of the globe now, then scarcity is assured as all that money carries interest. The interest works to consolidate the money into the hands of those producing the debt.

For everybody else, they eventually enter a condition that I term “Debt Saturation.” That is the point at which current income can no longer service more debt. If more debt is added to a debt saturated situation, then something must mathematically give way.

The United States as a whole reached the debt saturated condition quite some time ago. Once reached, adding more debt, as we are massively attempting to do, no longer results in real economic expansion. Instead it results in real economic contraction, the exact opposite of what worked before! Let me make that clear, attempting to stimulate a debt saturated economy with more debt will only lead to real economic contraction and higher levels of structural unemployment!

But remember WHO produces the money! In order for their profits to grow, they must produce ever increasing sums of debt, such that today the acknowledged Current Account Deficit of the United States exceeds $14 Trillion!

If only it were that good in reality! But sadly it’s not – there is much disinformation and fuzzy thinking here.

Even if we give this number the benefit of naively believing that’s the extent of it, it is still completely unworkable math. Even the mainstream media, who is complicit in creating and disseminating economic disinformation, is forced to concede that the numbers are completely unworkable. Just taken at face value, the current advertised account deficit of $14 trillion+ equals more than $45,000 of debt for every man, woman, and child in the United States (current population approximately 310 million). My family of four would thus be responsible for more than $180,000 just in our share of national debt!

Oh, but if only it were that promising! Not even close!

The never mentioned truth is that not only are our families responsible for the national debt, but they are also the same people responsible for our state’s debts, our county’s debts, our city’s debts, our personal debts, and ultimately because we’re end use consumers, we’re also responsible for corporate debts! Whew, it all adds up to sums so vast that there is absolutely no possible way the debt can ever be repaid. In fact, it really can’t even be seriously paid down without dramatically shrinking economic activity. Math is math… it cannot be fooled. It can be ignored for a while, and that’s exactly how we’ve been handling it so far.

Lies, Damn Lies, and Statistics

"There are three kinds of lies: lies, damned lies, and statistics."
~Mark Twain, autobiography, 1904
Another way that logic is turned on its head is when the bankers, politicians, and economists (who are trained in schools financed by bankers), compare GDP (Gross Domestic Product) to our nation’s debt! What do the two have to do with one another? Very little!

What’s far more important is our nation’s debt compared to our nation’s income. After all, it requires income to service debts, not some trumped up measurement of production. Even using our crooked $14 Trillion current debt number, it is 583% of our nation’s $2.4 trillion annual income:

Why do I say that number is crooked? For starters our government refuses to use GAAP accounting like they demand of companies within the United States. This means that we are failing to acknowledge accounts payables – future obligations and other promises that are not currently on the books, that’s why it’s called the “current” account deficit. Adding future obligations catapults the $14 Trillion total into the $60 Trillion (conservative figure) to $100 Trillion + range ($322,000+ per person, $1.3 million for a family of four).

Additionally, GDP is supposed to be the measurement of goods and services produced in this country. This figure is VASTLY overstated for two primary reasons – this makes our debt condition all the more ominous:

1. Credit money production and derivatives, aka financial engineering, should be subtracted from GDP as creating a debt dollar only pulls future demand forward into the here and now and thus creates a future obligation. This is like taking a cash advance on a credit card and counting it towards your personal income! It’s not income, it’s a loan! This single effect has masked the fact that the United State’s real output of goods and services has not actually increased in the past decade at all. This overestimates the value of our GDP by roughly 30% to 40%.

2. Our GDP is measured in dollars and not in actual goods or services. Thus if the value of the dollar falls, it will appear that more goods and services are being created than actually are (apparent growth). For example, if the value of the dollar falls 5% in real terms, but GDP supposedly increases 3%, then real growth is actually -2%. The BEA (Bureau of Economic Analysis) and BLS (Bureau of Labor Statistics) calculate supposed inflation and then use a “deflator” to adjust the GDP number, but due to errors in the way they calculate those numbers, the net effect is to understate inflation and that overstates GDP.

The net effect of these errors is that you are being fed disinformation about the state of our economy, and about our ability to service our debts. Our nation is functionally insolvent as are large private banks.

The lie in this regard is that we are a sovereign nation and can simply print money and thus make it easier to pay back our debts and future obligation. But once debt saturation is reached and interest rates are at zero, then the only way left to cause apparent growth is to either use fraudulent accounting, or to print money. We are doing both, and both will lead to the eventual loss of confidence that will end the charade that the quantity of money being produced is under control – it is not.

Imagine that you are the largest lender to a nation. You worked hard for the money that you lent them. But that nation continues to spend money they don’t have and begin to take the easy way out by printing up more money. This action devalues the money that they are paying you back with, and thus in effect they are stealing from you! Will you continue to lend your hard earned money to such a nation? Certainly not forever, and thus there are limits. History has proven these limits time and time again, yet the disinformation is overpowering.

Growth and inflation are two completely different things, but the terms are often confused for one another. This is a large part of the disinformation that is laced throughout economic statistics. Often inflation is used to sell the idea that growth is occurring when in fact it is not.

A bowling ball manufacturer, for example, may build and sell 10,000 balls in one year, selling each for $80, and thus creating $800,000 in revenue. The next year they do not report the number of balls produced, but claim that sales rose to $990,000. Congratulations! If this is the only data one has, a person may be forced to conclude that they are growing their business, and one would have to conclude that demand is strong! But when given the fact that they actually produced only 9,000 bowling balls, but sold them for $110 each, then it becomes apparent that they made and sold 10% fewer products! While the company can report sales grew by $190,000 or 23%, real production declined! The conclusion here is different, now it could be that demand is super strong and they were setting a higher price point, OR monetary inflation is quite high. Once you have this real quantity information then it’s easy to tell that what rose was the quantity of money, and not the quantity of product. The quantity of money in the transaction may have risen, but fewer workers will be needed with the real quantity of items being produced in decline.

The problem is even more severe when Retail Sales are reported. These are also overstated as they are measured and expressed in dollars which are being devalued. Additionally, Retail Sales are only reported for stores open one year or longer, thus capturing only sales of stores that are open. This instills substitution bias because sales at stores that have closed in the past year are not considered! This error gets larger the more stores that close.

The biggest and most pervasive errors are in the way our government reports inflation data. They use “hedonistic adjustments” and a myriad of other faulty methods to make inflation appear smaller than it actually is. These errors are now famous so I won’t describe them all except to say that they use these numbers to artificially hold down things like annual Social Security paycheck adjustments. And, because this inflation data is bad, almost all other data is bad too when corrections for inflation are attempted to make them “real.”

Many economic data sets use “real” data. They are actually not real. This inflation adjustment error ripples throughout the data sets and winds up painting a completely false picture. Producing good retail sales numbers would be very easy with today’s technology, yet we don’t do it because those financing it all can’t stand the truth. And everything today is marketing and perception driven. The fear is that if perceptions of weakness are evident then it will lead to more weakness. But eventually the math expresses itself, it cannot be hidden forever.

Are economic statistic errors intentional? You bet they are. They are getting worse and worse over time as one lie is placed upon the former. Some may be “adjusted” with the best of intentions by the people doing the adjusting, but this simply brings in another type of bias, that is the optimism bias. People simply don’t like to report or promote bad news.

But when money interests get involved, look out!

Organizations like the MBA (Mortgage Banker’s Association) report statistics for their own economic segments. In the case of the MBA, they report Pending Home Sales and Refinance activity on a weekly basis. They are now famous hypocrites for chastising home owners who walk away from their homes (thus returning the collateral to the bank) while they were simultaneously doing exactly that with their own corporate headquarters.

When the data starts looking bad, as it did for home sales, private organizations like the MBA begin to clam up and start obscuring the data, making it hard to examine and compare with past figures. This is disinformation step number one – a lack of transparency. The “Fed” has never been transparent and fights every attempt to force it, the latest being the “Audit the Fed” bill sponsored by Congressman Ron Paul. The “Fed” won’t allow itself to be audited because it would make the fraud absolutely apparent.

Our unemployment numbers are also another piece of gross disinformation. The BLS induces huge errors into these reports with massive seasonal adjustments and by using phony models such as their small business “Birth/Death” model. Additionally, they also use old and outdated technology to gather information (a phone survey) when technology exists to get a very timely and accurate view. Employers are required to provide payroll information directly and thus real information could be easily compiled and reported, yet it is not.

And since our money is created by so many private companies, and then it is further leveraged and confused with derivatives, we have completely lost touch of our ability to even know what the total quantity of money is! Don’t fall for the disinformation, “Fed” reported money aggregates are not even close to reality! What little they actually do track and report is dwarfed by what they fail to track and report, namely the derivates within the “shadow banking industry.” Truly, there is no agency that is privy to the actual total quantity of money within the system and throughout the globe. They want it that way, the more you are kept in the dark, the easier it is for them to do as they please.

An entire book filled with the specifics of bad economic data could be written, I observe and report on it every single day. The information is there for those with the willingness and courage to look.

So, you have to ask yourself why is the data slanted, and almost always the slanting is in the direction that makes the economy look more healthy than it actually is? The answer, I believe, is readily apparent when you simply follow the trail of money back to who profits from it, and who produces the money.

Misallocation and then Turmoil

This pervasive economic disinformation leads to tremendous misallocations of resources, both human and capital. The housing bubble is an excellent example of that, causing people and resources to simply produce far more than was needed. When we are producing things we don’t really need, we need to be asking ourselves what it is we’re not producing but should be – like energy infrastructure.

And to keep the illusion going interest rates were lowered to zero and kept there. Then comes the outright money printing disguised in the form of “Quantitative Easing” – which is simply more blatant disinformation by the same private organization who refers to themselves as the “Fed.” Their lie is that money printing in this manner is benign. It is not, as is readily apparent by the doubling of food commodity prices in just the past six months alone.

Real people throughout the world are starving due to these actions, yet our government fails to acknowledge this, much less take action to prevent it. People who live in poor regions are affected to a much greater degree than those who are wealthier as a much larger percentage of their income goes to pay for food. For example, approximately 40% of the average income is needed just to buy food for the average income earner in China. Imagine the effects on their lives if the cost of food doubles for them. In the United States a much smaller percentage of income goes to food, and thus we are affected to a much smaller degree. Still, those on the margins are greatly affected, a travesty of greed that has resulted in the breakdown of the rule of law.

The saying is that “desperate people do desperate things.” In this manner then, the undertow of economic misallocation leads to what I term “other events.” Hunger and discontent can lead to violence, revolution, and war. We are seeing these “other events” play out on the world stage now, yet few can see the chain of events leading from the “Fed’s” economic and money disinformation directly to these tragedies.

Transparency, Checks & Balances are Paramount

How to stop and to prevent the spread of economic disinformation? Unfortunately it probably won’t change until we change WHO produces and controls the quantity of money. However, if we look forward to the day that change does occur, then we need to be ready to create a system that is sustainable in the very long term.

Money absolutely corrupts. This makes it essential that those disseminating important economic data be neutral in regards to financial incentive. The Mortgage Banker’s Association, for example, should not be the ones reporting mortgage information to the public and to investors! The government agencies responsible for reporting statistics should not be under the influence of private corporations, nor should they be beholden to politicians whose careers are dependent on winning votes (often by showering money upon their constituents). Thus, agencies that report economic statistics should be separated as much as possible from those money driven influences.

This could be accomplished by replacing the current alphabet soup of agencies with one independent agency responsible solely for the collection and dissemination of economic data.

Such an agency would be tasked with the following:

  1. Compile and track all data necessary to monitor and to adjust the economy. This panel must be completely independent and without influence from all other agencies. Workers within this agency should not come from or leave to go to work within corporations who may benefit from this agency’s work for a specified time both before and after employment.
  2. Complete transparency is required, ALL data is made available to the public, free of charge.
  3. Raw data should be made available as soon as it’s available to them, no individual, firm, or politician should have access to the data before the public.
  4. Independent parties must compile and report statistics for any industry that has a measurable effect on the overall economy. In other words, a neutral party should be required to compile and report meaningful industry data so that insiders do not have the ability to manipulate overall industry data.
  5. Statistics should be separated and reported in three categories:
    a. Raw data.
    b. Timeless data – methods should be developed to report data in such a manner that the methods of calculation can be repeated and reported consistently over time, thus ensuring that future generations can compare apples to apples.
    c. Modern data – these are data that can be improved and changed over time. However, all such changes shall be completely transparent and shall always be presented with the raw data and with access to the way in which the statistic is compiled and calculated.

But this alone is not enough. The special interests who produce the money also control our education system and our media. They also actively work to prevent good and honest scientific research in the field of economics. Again, keeping people in the dark is profitable for them. This is why the field of economics seems more like voodoo than science.

We fail to track and monitor the economy properly, we fail to do meaningful research, and then we anoint a supposed “expert” to act as God at the head of the “Fed” who is supposedly “independent.” This is laughably archaic, intentionally so, and against the wishes of our nation’s founders who understood the importance for checks and balances.

We should be doing meaningful research within the economy and we should be attempting to model it and the associated human behavior. We should be striving to create controls to keep the quantity of money under control – this is not impossible. What is impossible is expecting gold backing or private individuals to keep the quantity of money under control on their own. There must be transparency coupled to checks and balances if we wish to be truly prosperous over the long haul.

Friday, March 18, 2011

Weekend Open Thread...

Morning Update/ Market Thread 3/18

Good Morning,

Equity futures are higher again this morning as the G7 steps in to intervene in the currency markets:
Officials of the United States, the United Kingdom, Canada and the European Central Bank said in a statement that they will join with Japan in "concerted intervention in exchange markets."

"As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the ministers said in the statement. "We will monitor exchange markets closely and will cooperate as appropriate."

This action has caused the Yen to drop, but the dollar is also dropping. Once again, the markets are anything but “free,” they are captured completely by the central banks.

And the result? Oil continues to spike higher, now well back above $100, gold & silver continue higher; Rice, Wheat, Corn, and all food commodities race skywards! Inflation rages, yet incomes in real terms are falling. The population is growing, but yet there are fewer people employed. Statistics are growing again, but mostly those that are measured in dollars.

My current journey into “the hot zone” has produced nothing but sticker shock. Rising prices are everywhere, from gas, to dog grooming, dog food, more expensive dinner, on and on. To add insult to injury, I received a $25 parking ticket because I failed to notice that the spots in front of the Tacoma Spaghetti Factory where I have parked free for years and years were now pay for parking with tiny signs that had small print indicating that you now walk half a block to the little pay station. None of the 6 of us noticed, and thus the ticket upon completion of the meal. Slowly but surely, the city is turning into a police state with ticket by mail cameras everywhere and simply more and more attempts to squeeze every last unit of revenue out of you they can. My reaction? After more than 40 years of going there with family, that will probably be my last time – and letters to the chain’s CEO and the Mayor will be in the mail by tomorrow letting them know how they are driving revenue away. Of course I already moved away, and am glad that I did.

While I have never been one living on the margins, I am now beginning to feel very unsecure with the relationship of rising costs and steady income. I am trying to imagine what it will be like if gas, food, and most other things rise by say another 50% in cost. That type of a move will put the vast majority of Americans on the margins if they weren’t already there, and right now, I can only see one central banker action after another to get us there. The one notable central banker exception is in China where more tightening occurred this morning, but they are so far gone off the deep end of money creation it’s not even funny.

Today is options expiration, no data releases until next week.

The markets did produce a short term Dow Theory sell signal when both the Industrials and the Transports made new closing lows. Now we are bouncing on intervention once again, and this has caused the VIX to close back inside the range of the Bollinger bands, and thus a new market buy signal has been generated:

Just-in-time has shown its vulnerability as GM has been forced to close a truck assembly line in Shreveport, LA due to a lack of parts coming from Japan. I think events there are dire for the world economy, the ripple has just begun.

And now the U.N. has authorized the creation of a “No-Fly Zone” in Libya. That’ll mean another war front for our military and yet another big question mark for the Middle-East. I’m not entirely sure how to read events there, I get the feeling that there’s a lot more to it than just the spreading of freedom – I believe “freedom” has become as manipulated as our “free” markets – and the manipulation is coming from the same exact few individuals WHO control the production of money around the globe.

Thursday, March 17, 2011

Morning Update/ Market Thread 3/17

Good Morning,

I'm out of town for the day, and will have a short update Friday morning. There is a busy economic calendar today, including CPI, Weekly Jobless Claims, Industrial Production, "Leading" Indicators, and the Philly "Fed" Index.

Wednesday, March 16, 2011

Morning Update/ Market Thread 3/16 – "It's Contained" Edition…

Good Morning,

Equity futures are moving sideways in a triangular formation overnight, indicating that some type of sideways wave is occurring, possibly wave 4 of 3… meaning that wave 5 of 3 may be next. The dollar is lower and very close to falling into new low territory as the Yen strengthens. Bonds are still rising overnight, oil is recovering some of yesterday’s loss, while gold and silver are higher as are most food commodities.

I keep hearing a lot of “it’s contained” type of rhetoric from the media, especially the financial media in regards to the radiation risk in Japan. Statements like, “30 times normal radiation is nothing – it’s not even a fraction of a chest x-ray,” are very misleading because constant exposure to radiation can build up over time versus a one-time instant exposure. Let me ask everyone a question… If you were informed that the town where you live has 30 times higher radiation, would you keep yourself and your family there? I sure as heck wouldn’t, I’d be long gone. Now imagine this happening to one of the largest cities in the world, and then imagine the economic fallout from that, knowing that this is exactly what’s occurring and that it could get much worse.

The captured news media is going way out of their way to calm the sheep. Just remember that GE, the company that built those plants also owns a large chunk of the media. Of course it’s always contained, just like subprime, remember that?

So when Black Swan events occur now, our trick is to talk smoothly (and unrealistically), ignore potential worse outcomes, and then paper it all over with freshly printed money to give the appearance that all’s okay within the totally captured markets – as if the markets have any real meaning to the average person who no longer can afford to participate in them even if they wanted to. Yen printing in response to this disaster now stands at 26.5 Trillion – that we know of.

And our “Fed” announced yesterday that all is improving in the economy and in this way the signal is being taken – by Bloomberg at least – that come June the “Fed” will end QE. Oh, and no mention of events in Japan, not even a warm “our hearts go out to those Japanese “consumers.” But if they do end QE, in my opinion it will be temporary, AND they will continue to add liquidity behind the scenes and in other ways, but it won’t be enough. Not with the math growing exponentially and the entire world saturated in debt. If they stop in earnest, markets will deflate, and thus expecting more QE or whatever their latest shell game is called will follow – just take a look at this nation’s deficits… impossible math is everywhere.

And just look at the results of all this printing. Energy and food to the moon, and even with trumped up numbers, this morning’s PPI is screaming hot at 1.6% just for the month of February – if you annualize that figure it equals 19.2% inflation! But not to worry, according to Bernanke it’s just a momentary blip – in other words, “it’s all contained.” Here’s Econoday:
Producer price inflation remains red hot at the headline level while the core eased from January's spike. Energy and food, of course, jacked up the headline number. The overall PPI inflation rate for February posted at a strong 1.6 percent increase, following the January jump of 0.8 percent. The February increase vastly topped analysts' estimate for a 0.7 percent gain. Both food and energy components were exceptionally strong. At the core level, the PPI slowed to a 0.2 percent rise after jumping 0.5 percent in January. The median market forecast was for a 0.2 percent rise.

By components, food prices surged 3.9 percent, after a 0.3 percent rise in January. The energy component remained under strong upward pressure, gaining 3.3 percent after jumping 1.8 percent in January. The core rate slowed on pharmaceuticals turning flat after a 1.4 percent spike in January and with computers dropping 1.1 percent.

For the overall PPI, the year-on-year rate jumped to 5.8 percent from 3.7 percent in January (seasonally adjusted). The core rate rose to 1.9 percent from 1.6 the month before. On a not seasonally adjusted basis for February, the year-ago the headline PPI was up 5.6 percent while the core was up 1.8 percent.

The headline number will likely raise expectations for tomorrow's headline CPI as both food and energy costs are red hot. The Fed sees these effects on long-term inflation as "likely transitory" based on yesterday's FOMC statement. But the numbers certainly raise the level of concern and may be nudging up the Fed's schedule for unwinding QE2.

This number is far above consensus, and don’t forget that the PPI leads. And food and energy also lead, and thus I do expect the “core” rate to follow in the coming months, despite the fact that incomes are not rising. Rising food and energy without the associated rise in incomes will prove to be costly to the lifestyle of Americans, especially those on the margins.

Meanwhile Housing Starts fell a record amount in February, down 22.5%, while permits, falling 8.2% are also at a record low annual rate. The 479,000 starts in February are far below both consensus and January’s 596,000 which was bad enough as it was:
Housing starts fell back in February after an unexpectedly strong showing in January. Mostly, it was a partial reversal of the earlier spike in the multifamily component but single-family starts weakened significantly. Housing starts in February dropped a monthly 22.5 percent after jumping 18.4 percent the prior month. The February annualized pace of 0.479 million units was sharply lower than the median forecast for 0.560 million units and is down 20.8 percent on a year-ago basis. The February reversal was led by a monthly 46.1 percent drop in multifamily starts, following an 87.4 percent surge in January. The single-family component fell 11.8 percent in February after edging up 1.4 percent the prior month.

January starts were revised up to a 0.618 million unit annualized pace from the initial estimate of 0.596 million.

By region, declines in starts in February were broad based. The Midwest was down 48.6 percent; the Northeast, down 37.5 percent; the West, down 28.0 percent; and the South, down 1.4 percent.

Housing permits declined 8.2 percent in February, following a 10.2 percent decrease in February. Overall permits printed at an annualized rate of 0.517 million units and are down 20.5 percent on a year-ago basis. The latest decline was led by the single-family component which was down 9.3 percent while multifamily permits fell 4.9 percent.

Several factors likely affected the latest starts number which is extremely low. First, January's jump was way above trend and some reversal should be expected. Second, winter months are notoriously volatile and starts may have been hampered by severe weather. Finally, housing demand is still soft and inventories of single-family houses are still high. The bottom line is that housing is still anemic but maybe not as bad as suggested by today's numbers.

Not that I trust these numbers, I do not. Note the wild swings in multi-family units (apartments) – swings like that are never real, they are an indication of a sick reporting system.

Just as a reminder, Option-ARM resets are beginning to ramp fast and furious from now through about October. Look for these resets to pressure upper-end home prices especially as many people will be forced to put their homes on the market this spring and through next year as their payments will simply become unaffordable for many:

Not only were Starts and Permits down, but even the corrupt, conflicted, and morally reprehensible Mortgage Banker’s Association reported that Purchase Applications took yet another header, falling another 4.0% in the prior week:
The purchase index was unable to add to a sharp jump in the prior week, slipping back a week-to-week 4.0 percent against the tough comparison. But the refinance index, due to low borrowing rates, was able to extend its gain, up 0.9 percent in the week. These are data for the March 11 week.

Mortgage rates are more and more favorable as safe-haven investment flows move into US Treasuries. The average 30-year mortgage fell more than 20 basis points in the week to 4.79 percent for a two-month low.

Just to reiterate, the bond market recently fell to major support while the stock market rose – this forced mortgage interest rates up nearly a full percent. Each percent rise in rates equals about 11% less house that a borrow can afford for the same payment. Now equities have put in a top, and money has begun to come back into bonds, temporarily lowering rates slightly. Again, the “Fed” is in a pickle as they have and are spending TRILLIONS in order to artificially buy down rates. If they stop, as some now think, then rates MUST eventually rise, OR stocks must fall – something is going to give.

So, there are still options – does the “Fed” keep up the pretense of THEIR markets? Or, do they sacrifice equities in order to save the debt markets? No, they are narcissists, they want it all, and thus printing will likely continue until all confidence in our money is gone – and thus we see even the trumped up PPI rising to the moon while they pretend that “it’s all contained.”

Just turn American Idol back on and don’t worry – whatever you do, don’t prepare (because if everyone does, the system collapses now instead of later).

The VIX closed well above the upper Bollinger Band yesterday and thus we are set up for a market buy signal once it returns within range on a closing basis:

And for the few who are paying attention to the historic humanitarian disaster in Japan, while you’re distracted with those events, atrocious events continue to occur in the Middle East, and our own politicians use this as cover to introduce new “copyright” laws that would make it okay to spy on anyone downloading copyright protected video on the internet. So, whatever you do, don’t turn off American Idol and take the time to actually read this White House white paper, and surely don’t think about the consequences and possible abuses therein. And absolutely whatever you do, don’t compare these tactics to actual history or tactics actually used by the NAZI administration, or you will certainly be labeled a flake:

White House White Paper

Not to worry, American Idol is on, and as far as I know the following copyrighted video is legal to download… or is it? No matter, it’s surely all contained.

Tuesday, March 15, 2011

Morning Update/ Market Thread 3/1 – Beware the Ides of March Edition…

Good Morning,

REMEMBER, IT IS ALWAYS THE TRIGGERING EVENT THAT TAKES THE BLAME, never the bubble the bankers created in the first place.

I’ll be out of town until later this afternoon, so I’m asking the usual folks to please keep one another up to date inside of the daily thread below this post.

Don't forget, the FOMC gives lip service to those who hang on their every meaningless word at 2:15 Eastern.

Did you see the impact Anonymous had on BAC shares? Fifteen whole cents! Oh boy, that is quite the display of total market capture by the banks. Not only did their blatantly illegal activities not affect share price, I couldn’t even find mention of it in the mainstream news. There’s a lot to be gleaned from this observation, like the fact that the rule of law obviously no longer applies to the banks (already known), and that the people who hold the shares know this. Of course it is the banks who own one another’s shares, that’s how they keep appearances up – well that and outright accounting fraud… and theft… and direct market manipulation, just to name a few of their well used tools. Hey, nothing to see here, move along my wayward son…

Monday, March 14, 2011

Morning Update/ Market Thread 3/14 – OMG Edition…

Good Morning,

Equity futures are lower this morning, but not anywhere near in proportion to the declines in Asia, nor for what you would expect with the rolling disasters we are experiencing. The dollar is lower, the Yen is lower after being higher, bonds have moved higher, oil is down but bouncing, gold is up, rice is up, while most other food commodities are down.

Which disaster should we talk about first, the earthquake, the tsunami, our markets, or our economy?

Let’s start with the obvious stuff. To me the reaction in our futures markets is simply too muted to match reality. It is quite obvious to me that our markets are complete nonsense, taken over by computers fueled by money that’s simply made on other computers. None of it is real, the market I see more closely resembles a marketing tool in the hands of the “Fed.”

From my perspective, “investing” in THEIR markets at this juncture is as riskless as a stroll through the Fukushima Reactor #3 parking lot... you know, the one with the plutonium fuel.

The U.S. Navy has detected radiation up to 100 miles away, and they are repositioning their ships to avoid the fallout. Seventeen sailors who participated in rescue operations have tested positive for nuclear contamination - Tests detect radioactivity on 17 U.S. Navy crew members in Japan.

The effects of the earthquake and tsunami are huge, both in terms of life and money. But the effects of the damage done to the nuclear energy industry will be felt for decades to come. America has not built a nuclear power plant since after the Three Mile Island accident – the last reactor was completed in 1974. And yet, the United States still gets nearly 20% of its electricity from nuclear plants. What will be the future with these events? I see this as further pressuring organic based fuels, although the initial reaction has the oil markets lower. Again, the markets are not real, so I would not pass judgment on any short term move.

And as I predicted, these events are equating to even more money printing as the Japanese central bankers jumped right in to provide 15 Trillion Yen stimulus and have said that they will DOUBLE the amount of debt they are buying up (which equals more printing). The numbers in Japan are momentous and getting larger by the day.

Our own “FED” meets today in their regular FOMC meeting and will make their indebt you further announcement tomorrow. I think these events in Japan equal even more market manipulation and more money printing here and around the rest of the debt saturated globe. They can’t stop, and the numbers will only get bigger. These disasters then, are a triggering/ accelerating event.

And what I’m seeing of the natural world is that we are not living in an era that’s as calm as the recent past for the human experience. We have to not be afraid to connect the dots: large increase in solar activity, large increase in volcanic activity, bigger and stronger storms in a more energized atmosphere, strange and unexplained animal deaths/behaviors, large increase in earthquake activity with stronger earthquakes and more damaging results.

Take the Japanese reactors for example, they were designed 40 years ago and benchmarked the largest earthquakes in recorded history up to then – and then they added a safety margin and built them to 7.9 earthquake standards. Boom, a 9.0 (revised up from 8.9) comes along. And this follows on the heals of TWO devastating earthquakes in New Zealand, one in Haiti, one in Puru, and not too long ago one of the largest ever recorded, a 9.2 that struck Indonesia.

My point being that our science is failing miserably to explain a trend that is becoming very in your face. I now regard mainstream science in the very same way that I view mainstream media – they have been co-opted by the central banks and their money. There is good thinking going on in the fringes by people who refuse to participate in special interest science. We discuss these people inside of the daily threads, please join us there for more information.

Where these natural events are leading, I do not know, but I hope the trend that is becoming obvious changes real soon. But one thing is for certain… these natural disasters are pressuring earth’s resources and are adding fuel to the inflationary fire sparked by the central bankers.

True, one would rationally think that disasters on the scale Japan is currently facing could create a large and sudden decrease in economic activity – and you would be correct. But it is the central banker reaction to that which will create the inflation. The central bankers have only one tool left in their toolbox – since they have already lowered rates to zero, all they can do is print – and when that fails to work, they reach for the same old tool and print some more. Thus “growth” will occur despite the deflationary effects of a decrease in real economic activity and output – the “growth” being solely in the supply of dollars, yen, euros, and any other currency that a central banker can get their little hoofs on.

Speaking of the little pigs, the group Anonymous this morning released information that Bank of America was involved in scamming both the people who had mortgages with their bank, and those “investors” who purchased the mortgages in the form of derivates. In a nutshell, this was an insurance scheme where BOA teamed with an insurance company (Balboa - a wholly owned BAC subsidiary no less) and then would intentionally not pay the homeowner’s insurance. And when the insurance would lapse, BOA would then hire said insurance company and pay exorbitant fees while taking kick-backs and passing these exorbitant fees then off on the investors.

Blatantly and totally illegal – yep, no doubt about it. But you know what? As I read this I’m think, yeah, that’s obviously a crime, and it has huge implications, but it’s not anywhere near as bad as the dozen other crimes that we already know the banks are responsible for. In fact, compared to the size of the scandals ignored already to date, this is a yawner. Oh sure, two decades ago heads would have rolled and people would have been in jail, but in light of current events, I can see how the banks simply ignore this… maybe pay a fine and move on. But WHO is there to enforce the rule of law? No one, that’s WHO, because these banks are the ones who produce the money and are “too big to be taken down” solely because they have subverted the political and judicial branches of government.

Sorry, Anonymous, but you’re going to have to do better than that. Here’s a suggestion – think in terms of their HFT machines and exchanges, and you’ll be on a more effective path – but you didn’t hear that from me.

Once the math becomes impossible, as it most surely has, then shocks to the economy become accelerating events that make the math all the more impossible. Thus the economies of the world are a disaster of monumental proportions and we are witnessing a most bizarre and strange series of “other events” unfold. We are living in very historic times, I haven’t even mentioned yet the debt crisis growing in Europe, the continued violence against protestors in Bahrain and how the United State’s reaction to these freedom seekers varies with how entangled our own special interests are in each region. We are obviously bedmates to Saudi Arabia and Bahrain, the people and their freedoms be damned. Of course our policies are molded by and for the pleasure of those WHO produce and control the money.

No economic data today. Again, the FOMC meeting announcement comes tomorrow, there’s quite a lot of data on Thursday, and then no data Friday as it is quadruple witching day/ options expiration.

For those who worry about nuclear fallout reaching the United States, here is a link to a PRIVATE network of radiation monitors – all quiet so far: Radiation Network

Please follow breaking news and market activity within our daily thread.

Sunday, March 13, 2011

Hacker Group Anonymous – “We demand that the Federal Reserve banking system be broken up immediately”

“We demand that the primary dealers within the Federal Reserve banking system be broken up and held accountable for rigging markets and destroying the global economy, effective immediately.”
Well now, there’s a group that has squarely landed on the root of the matter - the WHO in question. I do not know anything first hand about this group, but they are purported to be the best hackers in the world. If they do carry out acts against the “Federal Reserve,” then I am certain they will be branded “Domestic Terrorists” immediately.

Your “Domestic Terrorist” is someone else’s rebel leader fighting against the evil powers who seek to dominate the globe and control its people. Regardless of how this is spun by the government, it is an important development that will undoubtedly help to ignite those “other events” which I’ve been saying all along would come due to the impossible math created by the “Fed.”

Remember that this group has promised to leak information and emails about Bank of America tomorrow that purportedly prove FRAUD - not that fraud hasn't already been proven time and time again, it has. Gee, that must be the breakdown of the rule-of-law to which they refer?

  • We are a decentralized non-violent resistance movement, which seeks to restore the rule of law and fight back against the organized criminal class.

  • One-tenth of one percent of the population has consolidated wealth in unprecedented fashion and launched an all-out economic war against 99.9% of the population.

  • We are not affiliated with either wing of the two-party oligarchy. We seek an end to the corrupted two-party system by ending the campaign finance and lobbying racket.

  • Above all, we aim to break up the global banking cartel centered at the Federal Reserve, International Monetary Fund, Bank of International Settlement and World Bank.

  • We demand that the primary dealers within the Federal Reserve banking system be broken up and held accountable for rigging markets and destroying the global economy, effective immediately.

  • As a first sign of good faith we demand Ben Bernanke step down as Federal Reserve chairman.

  • Until our demands are met and a rule of law is restored, we will engage in a relentless campaign of non-violent, peaceful, civil disobedience.

  • In our next communication we will announce Operation Empire State Rebellion.

Personally, I would have waited for the Japanese situation to settle down. Still, this is a very interesting development, the first act of civil disobedience directed squarely at the "Fed."

I want to point out that unlike Wikileaks, Anonymous is a headless organization, and thus has better odds of survival. I’ve talked about this before with the Swarm – that headless organizations become movements and are impossible to stop. Compare that to what is currently happening to the head of Wikileaks, Julian Assange, and there you have an excellent example of what happens to individual leaders who are operating on their own and using their name in a leadership position… the head gets removed.

More on Anonymous:

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