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July 24, 2011
Issue 157  -  Unfixable?
 
 
 
As the clowns in DC run around and chest thump and finger point, it's becoming more and more obvious to the careful observer, that things just might not be fixable.  The current system may have to be scrapped.  In essence, we may need to "reboot" the system.  The powers that be have thrown the kitchen sink at this thing to keep things afloat but the traction is fleeting:
 

Jobless Claims Rise as Companies Step Up Layoffs

Erik Hayden 8:41 AM ET 153 Views Comments (2)

Thursday's Labor Department report on unemployment benefit filings finds that claims rose to 418,000, which is 10,000 higher than last week's figure. Reuters initial report finds it "rose more than expected." From the Department's release:

In the week ending July 16, the advance figure for seasonally adjusted initial claims was 418,000, an increase of 10,000 from the previous week's revised figure of 408,000. The 4-week moving average was 421,250, a decrease of 2,750 from the previous week's revised average of 424,000.

Ahead of the jobs report bell, Bloomberg had estimated that "initial jobless claims increased by 5,000 to 410,000 last week," which would indicate that the labor market was "struggling to gain momentum." A FactSet economist survey cited by the Associated Press had forecast that there would be fewer unemployment benefits filings this week, which "would be the third straight decline and a sign that the job market is improving." The AP, however, still notes: "applications have topped 400,000 for 14 straight weeks, evidence that layoffs are high and hiring is weak."

The gloomy layoff news was seconded by The Wall Street Journal this morning with its own report: "Companies are laying off employees at a level not seen in nearly a year, hobbling the job market and intensifying fears about the pace of the economic recovery." Specifically, 1.78 million workers were laid off from public and private employers in May. The Journal cites the usual suspects for the layoff frenzy: slack consumer spending and employers with little faith in an upcoming economic recovery.

 
If things are getting "better" as CNBC will claim ad nauseum, how in the world can you have 400,000 unemployment claims for 14 straight weeks if things are improving?  Keep in mind that in a strong economy this number is under 300,000.  What this means is there are 400,000 more people getting laid off each month that impact that unemployment rate.  (calculated by subtracting 300,000 from 400,000 and multiplying by 4 weeks in a month)  The main issue here is that this is also affecting the juggernauts, and not just small companies:
 

Cisco Bracing for Massive Layoff

POSTED BY: Prachi Patel  /  Wed, July 20, 2011
 
 
Cisco Systems announced on Monday that it will axe 11 500 jobs in what could be the biggest layoff ever for the company.

Cisco had over 73 000 employees at the end of the last quarter, Reuters reports. The company says that this drastic reduction of 15 percent of its workforce is part of a move to streamline operations and cut annual expenses by US $1 billion. 

About 6500 employees across the globe will directly lose their jobs, including about 15 percent of all executives at the level of vice president and higher. Another 5000 workers will be shed through the sale of a set-top box manufacturing facility in Juarez, Mexico to China-based Foxconn Technology Group.

 
This is a fairly large percentage of their work force.  What are they seeing ahead that would lead them to this action?  Certainly not a recovery.   As the layoffs mount this number is certain to rise, causing more issues for the country:

47% will pay no federal income tax

An increasing number of households end up owing nothing in major federal taxes, but the situation may not be sustainable over the long run.

By Jeanne Sahadi, CNNMoney.com senior writer

NEW YORK (CNNMoney.com) -- Most people think they pay too much to Uncle Sam, but for some people it simply is not true.

In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.

Some in that group will even get additional money from the government because they qualify for refundable tax breaks.

The ranks of those whose major federal tax burdens net out at zero -- or less -- is on the rise. The center's original 2009 estimate was 38%. That was before enactment in February of the $787 billion economic recovery package, which included a host of new or expanded tax breaks.

The issue doesn't get a lot of attention even as lawmakers debate how to pay for policy initiatives like health reform, whether to extend the Bush tax cuts and how to reduce the deficit.

 
That is an amazing number.  Of course these people do pay other taxes, but this is a ploy to buy votes.  Make a whole class of people dependent and re-election is certain.  I believe everyone should pay SOMETHING into the system.  It makes them a stake holder.  Otherwise they are just serfs waiting for their checks.  This makes them infinitely controllable.  Here is Ron Paul telling it like it is, but with so many serfs, this message doesn't get enough attention:
 
 
 
The country is in default and it looks like more and more Americans are joining this club: 
 

U.S. Consumers Relying on Credit

 
By Anna-Louise Jackson and Anthony Feld - Jul 21, 2011 12:00 AM ET Thu Jul 21 04:00:00 GMT 2011

Americans Rely on Credit as Inflation Erodes Incomes

Consumers in the U.S. are increasingly using credit cards to pay for basic necessities as income gains fail to keep pace with rising food and fuel prices.

The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent, according to First Data Corp.’s SpendTrend report issued this month. The difference probably represents the increasing cost of gasoline, said Silvio Tavares, senior vice president at First Data, the largest credit card processor.

“Consumers, particularly in the lower-income end, are being forced to use their credit cards for everyday spending like gas and food,” said Tavares, who’s based in Atlanta. “That’s because there’s been no other positive catalyst, like an increase in wages, to offset higher prices. It’s a cash-flow problem.”

Rising costs of food and gasoline are leaving Americans less money to spend discretionary items, slowing the pace of the recovery, Tavares said. Household spending accounts for about 70 percent of the world’s largest economy.

After-tax income adjusted for inflation fell 0.1 percent from January through May, according to figures from the Commerce Department. The drop came as Labor Department data showed energy prices rose 8.2 percent and food climbed 2 percent during the same period.

‘Dramatic’ Swings

The swings in purchases of fuel and food have been “dramatic,” Tavares said. The volume of gasoline purchases placed on credit cards jumped 39 percent last month from a year earlier, compared with a 21 percent increase in June 2010, he said. Food shopping increased 5 percent after falling 7 percent last year.

The value of an average transaction on credit cards outpaced the gain for debit cards, showing consumers are increasingly relying on borrowing to pay for gasoline and other necessities, Tavares said.

The figures are in synch with data from the Federal Reserve. Revolving credit, primarily credit card balances, increased by $3.37 billion to $793.1 billion in May from an almost seven-year low of $789.8 billion in April, figures from the central bank showed. The gain was equivalent to a 5.1 percent increase at an annual rate.

The use of credit cards is a “smoking gun” that indicates some consumers, including the long-term unemployed who have lost jobless benefits, are resorting to other sources of cash flow just to “get by,” said David Rosenberg, chief economist at Gluskin Sheff & Associates Inc. in Toronto.

“People on the margin are putting necessities on their credit cards and this is a trend that’s very consistent with what lower-end retailers have been saying about their paycheck cycles,” Rosenberg said.

‘Cash-Strapped’

Core customers of Bentonville, Arkansas-based Wal-Mart Stores Inc. (WMT) are “cash strapped,” William Simon, U.S. stores chief, said at a June 15 conference hosted by William Blair & Co. “The paycheck cycle is severe.”

Similarly, customers of Matthews, North Carolina-based Family Dollar Stores Inc. (FDO) are living “paycheck-to-paycheck,” so when gas or food prices go up, “they don’t have the cushion that many others might have,” Chairman and Chief Executive Howard Levine said on a June 29 conference call.

Changes within the industry may account for some of the recent stabilization in outstanding revolving credit as several banks have ended incentive programs for debit cards, while increasing credit-card solicitations this year, Tavares said.

A possible bright spot is that inflation may moderate as prices of commodities stabilize, Fed Chairman Ben S. Bernanke said July 13 in his semi-annual testimony to Congress. As of July 19, the average price of a gallon of unleaded gas had dropped 7.6 percent from May 4, when it reached an almost three- year high.

Bernanke’s View

“The anticipated pickups in economic activity and job creation, together with the expected easing of price pressures, should bolster real household income, confidence, and spending,” Bernanke said.

Confidence has a long way to climb for those in the lower- income brackets. The sentiment gauge for those making less than $15,000 a year was minus 66 in the week ended July 10 and was minus 69.6 for those earning $15,000 to $24,999, according to the Bloomberg Consumer Comfort Index. The comparable reading for households making more than $100,000 was minus 1.4.

“For people to think that this rebound in credit-card usage is actually a sign of resurging consumer confidence, I think they’re looking at the situation backwards,” Rosenberg said.

With so many living "on the edge," it becomes easier to dupe them.  They are so worried about survival that stories like this doesn't even raise an eyebrow.
 

by Press Release | July 21, 2011

Michael Briggs
(202) 224-5141

WASHINGTON, July 21 –The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression.

An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study.

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,” said Sanders (I-Vt.). “This is a clear case of socialism for the rich and rugged, you’re-on-your-own individualism for everyone else.”

Among the investigation’s key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. Said Sanders: “No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president.”

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed’s board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed’s emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. “No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed’s board of directors or be employed by the Fed,” he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. “The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street.”

 
   
This story is illustrative in a number of ways.  First, it was IGNORED by almost every news outlet. You'd think that using the good name of the U.S. to back stop foreign countries might make someone sit up and take notice.  Secondly, how is this allowed to happen and congress does nothing?  This proves once and for all that the government is NOT set up to help you.  It is in place to protect the money interests.  16 trillion dollars?  To foreign banks?  That's beyond nuts.  What does that tell you about congress as they "haggle" over 10 billion dollar differences?  You are insignificant to them.  Pay your taxes and shut up.  That's all they want you to do.  That's why I'm pounding the table to get you to buy gold and silver.  That's your life raft.  This week brought more evidence of the manipulation going on in these markets.  Here's one showing the SLV (ETF for physical silver) (there is some crude language here too)
 
 
 
As the manipulators put up huge "asks" to keep a lid on the price, you can see no such action on the "bids".  That is as clear as day that someone wants to keep silver down.  I believe that the opening of the Hong Kong metals exchange is going to have a HUGE impact on the prices of the metals.  China has no interest in helping the FED control these prices.  In addition, if the price on the Hong Kong market is higher than on the COMEX, that will be a huge indicator of manipulation.  This should be short lived as the arbitragers play one market off the other.  This will lead to higher prices in the long term.  Here is another video showing a clear take down:
 
 
250,000 ounces of silver sold in 1 minute?  Does that make sense to you?  Does that seem feasible?  Who would do that?  For what purpose?  I hope this gives those of you on the fence about buying metals a little kick in the tail.  The time to act is now.  Please don't delay.
 
 
Positions
 
GORO  (closed $27.51, up  $2.41, average price paid $6)
 
Jim Puplava on Financial Sense interviewed John Doody, who has recommended GORO.  The talk about GORO for about five minutes, specifically about the Barron's article.  The GORO part starts at about 14:14 and goes to 19:12.  They both agreed that the stock could someday see triple digits and that the shorts don't really understand the stock.  Worth a listen.
 
Second interview down at 
http://www.financialsense.com/financial-sense-newshour
 
Mexus Gold  (closed $.19, down .005, average price paid, $.22) 
 
Alexco Resource Corporation -  AXU  (closed $8.58, up 0.14, recommended at $7.90)  
 
Stocks    (Current status, out, sold on March 18)
 
Didn't add this week, still waiting for a larger drop.
 
Physical Gold  (Closed $1,594,  up $50,  average price paid $395)
 
Physical Silver  (Closed $39.27,  up $2.56,  average price paid $5.31)
 
This week's video features three teenagers who can sing well beyond their appearance, have a great week!