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October 30, 2011

Issue 171  -  It's Beginning
 
 
As the world economic misadventures and experiments come to a head, the problems facing the masters of the universe will continue to grow and fester.  As those without jobs or prospects come to the stark reality that their future is about as solid as a donkey on a unicycle, we will see more and more protests.  While the powers that be are doing their best to paint the occupy wall street groups as kooks, and there are many kooks in there, I think you will see that there are issues that are worth protesting.  (and why is it ok to criticize people for exercising their first amendment rights?)
 
One of the big issues of the protesters is the lack of prosecutions from the shenanigans that led to the 2008 crash.  I know of ZERO wall street officials or traders that have gone to prison.  When one considers that there were billions and billions of tax payer obligations (it can't be money, because we are in deficit)  that were GIVEN to perpetrators of the CRIMES to make good on their bad bets, it becomes clear who Washington works for.  The quick and dirty way of thinking about what happened is that these banks made a bunch of bets.  If the bets had paid off, they would have received 100% of the rewards.  They didn't hit, but instead of the banks going out of business, they were bailed out by tax payers.  Kind of a sweet deal if you can get it.
 
As these protests become more prevalent, you will see more belittling of the protesters.  Some on the right are so indoctrinated into believing whatever is spouted about those who would go against the system, that acts such as this are being defended or made light of in the mainstream conservative media:
 
 
There is no defense for this type of behavior in a free and open society based on the rule of law.  I can't comment on how this guy went down as the video is unclear, but it's crystal clear that the police lobbed this device into the crowd helping him.  This officer should be charged immediately.  There is no place for that in a TAX PAYER funded position.  The officers work FOR the protestors, regardless of whether they agree with their views.  I understand completely that there was probably some activity which was not very pleasant for the officers, but that is no excuse.  If they are being attacked or stoned than I shift to their side, but a flash bang beside a down man?  That's just too much.  This isn't the only case of this provocation caught on film.  Here is a video from Canada where three policemen where in the crowd trying to incite violence:
 
 
 
It was later confirmed by the police that these three men were indeed officers.  How is this type of action justified?  What is going on?
 
My uncle was a cop in my home town and I have all the respect in the world for what the job entails and the risks entered.  That being said, the training in the law enforcement academies has taken a dramatic turn over the last 10 years and an "us versus them" mentality is being taught.  This is in contrast to the old "protect and serve" mentality.  I believe this is being done on purpose to enable the use of police against the citizens in the coming turmoil.  Just what is causing the bubbling of anger and frustration?  Things like this:
 
Budget cuts claim hundreds of thousands of county, city jobs

By Paul Davidson, USA TODAY

Local governments, once a steady source of employment in tough economic times, are shedding jobs in unprecedented numbers, and heavy payroll losses are expected to persist into next year.

The job cuts by city and county governments are helping offset modest private-sector employment gains, restraining broader job growth.

"They'll continue to be a drag on the overall (employment) numbers and the economy," says Wells Fargo economist Mark Vitner.

Localities have chopped 535,000 positions since September 2008 to close massive budget deficits resulting largely from sharp declines in property tax receipts. That exceeds the 413,000 local government jobs cut from 1980 to 1983, the only other substantial downturn in local government employment, according to federal records that go back to 1955.

Christopher Hoene, research director for the National League of Cities, estimates an additional 265,000 or so jobs could be eliminated by the end of 2012…

 
With more and more losing their jobs, of course people will get frustrated.  There is just not enough growth in the economy to sustain any meaningful job growth.  This is adding to the misery, which is back to multi decade highs:
 

U.S. 'Misery Index' Rises To Highest Since 1983

 
Ballooning prices and painfully high unemployment have created a miserable economic situation for many Americans.

The misery index--the sum of the country's inflation and unemployment rates--rose last month to a 28-year high as Americans struggled with rising inflation and high unemployment.

The last time the misery index was at current levels was in 1983.

Consumer prices rose 3.9 percent in the 12 months through September, the fastest pace in three years.

FOX Business complied this chart which shows how the misery index has fluctuated since 1980.

 
This index was created during the Carter years and we have arrived back at those levels.  The reasons for this can all be laid at the foot of the Federal Reserve and their actions.  Our policies have never allowed a "reset" of the system to cleanse out the bad investments and kill the weak companies.  This means we are trying to build our future on a very shaky foundation.  Obviously a recipe for disaster.  And the evidence is clear:
 

America Has Experienced The Biggest Drop In Standard Of Living Since The Sixties

Ron Scherer, The Christian Science Monitor

Think life is not as good as it used to be, at least in terms of your wallet? You'd be right about that. The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.

Bottom line: The average individual now has $1,315 less in disposable income than he or she did three years ago at the onset of the Great Recession – even though the recession ended, technically speaking, in mid-2009. That means less money to spend at the spa or the movies, less for vacations, new carpeting for the house, or dinner at a restaurant.

In short, it means a less vibrant economy, with more Americans spending primarily on necessities. The diminished standard of living, moreover, is squeezing the middle class, whose restlessness and discontent are evident in grass-roots movements such as the tea party and "Occupy Wall Street" and who may take out their frustrations on incumbent politicians in next year's election.

What has led to the most dramatic drop in the US standard of living since at least 1960? One factor is stagnant incomes: Real median income is down 9.8 percent since the start of the recession through this June, according to Sentier Research in Annapolis, Md., citing census bureau data. Another is falling net worth – think about the value of your home and, if you have one, your retirement portfolio. A third is rising consumer prices, with inflation eroding people's buying power by 3.25 percent since mid-2008.

"In a dynamic economy, one would expect Americans' disposable income to be growing, but it has flattened out at a low level," says economist Bob Brusca of Fact & Opinion Economics in New York.

To be sure, the recession has hit unevenly, with lower-skilled and less-educated Americans feeling the pinch the most, says Mark Zandi, chief economist for Moody's Economy.com based in West Chester, Pa. Many found their jobs gone for good as companies moved production offshore or bought equipment that replaced manpower.

"The pace of change has been incredibly rapid and incredibly tough on the less educated," says Mr. Zandi, who calls this period the most difficult for American households since the 1930s. "If you don't have the education and you don't have the right skills, then you are getting creamed."…

 
The drop in standards of Americans lives will not only continue, but probably accelerate.  All due to the continuation of failed policies that only protect the money interests.   And the expected housing rebound?  Not so much...
  

Median US New Home Price Has Biggest 3 Month Drop Ever

 
 
There is only one notable data point in today's release of new home sales, which, and this should not come as a surprise to anyone, continue to crawl along the floor with just 313,000 houses sold. The datapoint is the median home price, which tumbled from 0,900 to 4,400. This is certainly the lowest number in 2011, and is just modestly off the decade low record in October 2010. And it gets worse: the 3 month drop in median home prices is the biggest ever. Regardless: we are confident this will force the Comcast-based, housing "bottom-callers" to call yet another bottom shortly.
 
As we work off the gigantic overbuild of houses in last decade, expect prices to drop even further.  This, with record low rates and government subsidies.  If rates were normal and subsidies eliminated, can you imagine where prices might be?  You don't have to imagine as Yale economist Shiller has done a projection:
 
 
This is a chart I've shown before and as you can see we are well on our way back to the average of 100.  When that will happen is unclear, but it will happen. 
 
A couple of more charts and we'll call it a day.  The President and Congress are always using the projections of the Congressional Budget Office to assess their proposals.  Just how accurate is the CBO?  As it turns out, not very....
  
 
 
What you see above, and it can be a little confusing, is the debt projections of the CBO in 2001 compared to reality.  The lower gray dashed line with the red shading above it is where we are supposed to be while the yellow line up top is where we are.  Next time you hear politicians using "projections" as an endorsement for passing legislation, think about this chart.
 
Lastly, there is a brand new debt clock that has the world debt.  Here is a snapshot and the live version can be found here.
  
 
This is a pretty cool site and you can click on the map to get the debt for any particular country.  Scary numbers
 
Positions
GORO (closed $23.50, up $3.53, average price paid $6)
Mexus Gold (closed $.11.8, down $.012, average price paid, $.22)
Alexco Resource Corporation - AXU (closed $8.06, up $1.02, recommended at $7.90)
Stocks (Current status, short, short initiated October 15)
Physical Gold (Closed $1738, up $96, average price paid $395)
Physical Silver (Closed $35.40, up $4.00, average price paid $5.31
 
Closing this week with a crazy talented artist who works with pumpkins.  Have a great week!