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January 22, 2012
Issue 183  -  The REAL Reason
Things Aren't Collapsing
 
 
I've had several people ask me if things are ready to collapse yet.  There is no way to know when the collapse will happen.  That's just the way things are.  Too bad, for if we knew when, we could make big bucks right?  What I can tell you is WHY things haven't collapsed.  This isn't too hard to figure out actually.  In fact, the administration has recently admitted what any sentient being knew anyway:

Senior Obama Admin Official: "We Are Going to Kill the Dollar"

The Intel Hub
January 2, 2011

According to investor Kyle Bass, a senior Obama administration official stated that their economic plan moving forward involves killing the dollar.

Speaking at AmeriCatalyst 2011, which took place in early November 2011, Kyle explained what the Obama administration official apparently told him.
"The governments idea right now is we are going to export our way out of this and when i asked a senior Obama administration official last week how are we going to grow exports if we wont all nominal wage deflation, he said we are just going to kill the dollar."
 
Chris Duane, of
Dont-tread-on.me, wrote that this simply means that they are going to print more and more dollars until all of our purchasing power is destroyed which will cause Americans to need more and more dollars to buy the same amount of goods.
This is one of two ways out of this dilemma.  You can either default or inflate, there are no other options.  Our debt and liabilities are so large that we can only choose a or b.  That's it, end of story.  If one thinks logically through these two options, it becomes fairly obvious that politicians would only choose inflation.  To default would just be too large of a burden for the populace.  Of course, the eventual outcomes will be the same but inflation just makes things easier for politicians.  Politicians LOVE easy.  Therefore we will inflate.  Here's a little more proof that it is happening and will accelerate:  (urbansurvival.com)
So now the Fed is changing how the narrower M1 and M2 are measured:

"The Federal Reserve has revised the measures of the money stock and its components to incorporate the results of the Federal Reserve's annual review of seasonal factors and a new quarterly benchmark. This release includes revised monthly and weekly seasonal factors as well as comparisons of the revised monetary aggregates with previously published data. The revisions to the seasonal factors resulted in a higher growth rate for seasonally adjusted M2 in the first half of 2011 and a lower growth rate for seasonally adjusted M2 in the second half.

The benchmark incorporates minor revisions to data reported in the weekly and quarterly deposit reports, and it takes account of deposit data from Call Reports for banks and thrift institutions that are not weekly or quarterly deposit reporters. These revisions to deposit data start in 2002. In addition, this release incorporates data from Call Reports on the amount of small-denomination time deposits held in individual retirement accounts (IRAs) and Keogh accounts; related revisions to deposit data start in 2006. The benchmark also incorporates revisions to IRA and Keogh balances held at retail and institutional money market mutual funds; these revisions to data on money market mutual funds begin in 1996. This release also incorporates the receipt of historical information from other sources of data.

Seasonally adjusted measures of the monetary aggregates and components incorporate revised seasonal factors, which were derived from data through December 2011. Monthly seasonal factors were estimated using the X-12-ARIMA procedure. The effects of both the new benchmark and the revisions to seasonal factors on the growth rates of M1 and M2 are outlined in appendix tables 6 and 7.

Normally, if someone were doing a paper on revising the basis for monetary operations, a college prof at the post-grad level (we consult with one of these now and then) would perhaps ask for a few samples of the impact of  (I think China might call this kind of thing and example of capitalism's tendency toward revisionist economic history)  how the changes will make the data look when viewed backward a year or two out when we should really be in the throes of Depression 2's second big downer leg.

Seasonally adjusted, the past year has seen an 18.4% hike in M1 and a 9.6% hike in M2.  Unadjusted is up 18.5% and 9.7% respectively.

 

"Is this going somewhere?"

 

Pardon moi!  Just a guess:  M1 was up another .4% while M2 was down .2% when the revisions are combined with the latest data.  Makes me think the Fed may indicate even easier money when they meet next week.  Zero percent interest anyone?

 
If you remember back a few years, M3 was done away with to "save money."  Now it seems that M1 and M2 have been "adjusted" and of course this adjustment is going to make it look like these money supply totals are lower than they actually are.  This is very similar to the adjustments to other government figures including the CPI.  This is a typical trick used by governments to help conceal what is really happening for awhile longer.
 
This next chart is really all you need to prove that we are inflating:
 
 
This chart shows the balance sheet balances for the Bank of Japan, the Federal Reserve and the European Central bank.  These are the major monetary authorities for most of the world's money.  Notice what happened in 2008 when things blew?  That's right, they RAPIDLY started to increase their assets.  And what are those assets?  Treasuries, mortgages and other various crappy instruments.  They basically bought up the problems.  Of course the problems are still there, just hidden on their books.  They added over 4 trillion dollars in assets in a few short years.   
 
This is just a continuation of the trend which the U.S. has been engaged in since the last peek in interest rates.  How much has our total debt increased?
 
From 1978 to today, the U.S was able to grow its total debt from $719 billion to $56 trillion, an annualized growth rate of 13.7%.2 While U.S. debt was growing during this period of time the interest rate paid on that debt steadily declined. This confounded experts who would have predicted higher rates of inflation and certainly higher rates of interest. This can be explained. At the end of the 1970’s inflation rates were hovering over 14%, bond yields on U.S. treasuries had risen to over 15%. The US. Government had been financing its growing deficits by urging the Fed to monetize its debt by printing money to buy U.S. treasuries.
 
This is AMAZING!  From less than 1 trillion to over 56 trillion in 33 years.  As the excerpt says that is over 13% a year growth!  For 33 years!  NOTHING does that.  That's almost incomprehensible. 
 
I firmly believe that all of this nonsense will eventually end in tears and that there will be no economic recovery that will save the day.  The best that can be hoped for is mild bumps of growth which will quickly fade.  Here's some evidence that is tough to fake:  (Dave in Denver, GATA) 

Recovery?

To all; this link is to a chart of the "Baltic Dry Index"
 
 
in a nutshell it is a chart of rates charged to ship raw goods. This index topped out in 2007 and again in 2008, only to crash 90+%. It rallied and echo peaked in Nov. 2009 and has been basically downhill ever since. As it stands now, shipping rates are about to make another new low and have dropped 50% in just 19 days! Using plain old common sense, does it make any sense at all that shipping rates (which are definitely supply demand generated) are making new lows while equities are back pushing highs? While we are being "told" that all is well and "under control"?

First off, this index cannot be manipulated because the rates are the rates and shippers would know first hand if the index did not match what they are charging or paying to ship. There is no feasible way for this index to be altered as the market is so large, so diverse and most importantly "globally transparent". So while we are being told that "everything is under control", this index and these rates are not. I am sure that this index IS something that TPTB wish that they had "under control" but it is not. This is just one little loose end that is nowhere near consistent with what we are being told and what "they" would like us to believe!

If you gaze at the chart, you will see the 2009 "green shoots" that withered and died. This is a picture of global commerce slowing and demand waning. This is not a picture of a new technology where cargo ships are so much more efficient or using a new cheaper fuel with slaves aboard for cheap labor. Yes, there are more ships available for transport but it does not explain a 90%+ drop. No, the crash in rates is a function of the market place where ship owners are competitively lowering rates to keep usage up.

I show you this because as you know, I believe ALL paper markets are manipulated to "show us" how good everything is. It is all about perception! Were the Dow Jones trading at 1,000 or interest rates at 10%+ on Treasury paper, what would people (investors) think? Would CNBC be able to produce their clown parade of rosy scenario shills? Would ANY politicians have been re elected in the 2010 races? Would Merrill Lynch have been able to proclaim they were "bullish on America"? No, no and more NO! Please understand that I only pass this along to show you "truth" which in today's society is rarer than both Gold and Silver, for that matter it is rarer than "hen's teeth".

 
I deliberately left out the chart:
 
 
As you can see the dry index rate is now 893.  This is a very low level and indicates desperation by shippers.  They just want to have anything in their idle ships.  It's kind of like an airplane seat, as each day passes without a "rider," it's a lost opportunity.  This can never be recovered.  It's better to get something than nothing.  This chart tells us that commerce is slowing down and should start to impact economic numbers shortly.  Here's more evidence that a turnaround is not in the offing:
 

Fannie Mae unveils new forbearance program for unemployed

Posted By JON PRIOR On January 11, 2012 @ 4:28 pm | 4 Comments

Fannie Mae will require mortgage servicers to install a new program providing forbearance relief to unemployed borrowers beginning March 1, according to guidance released Wednesday.

Servicers will be able to provide up to six months of relief without getting approval from the government-sponsored enterprise. Special consideration can be given to borrowers who require up to 12 months of forbearance.

According to the GSE, the program "simplifies and streamlines the use of forbearance options" by providing specific guidelines.

Freddie Mac will begin offering [1] 12-month forbearance plans on Feb. 1. GSE servicers provided more than 7,000 forbearance plans in the third quarter, down from 8,000 the prior three months, according to the Federal Housing Finance Agency. Forbearance offers peaked in the second quarter of 2010 at around 20,000.

Delinquent borrowers and others on the verge of default are eligible for the program, however second homes and investment properties will not be considered. Servicers must determine that a borrower has less than 12 months worth of mortgage payments in reserves and has monthly housing expenses above 31% of their income before extending a forbearance plan.

For loans pooled into mortgage-backed securities, Fannie said the forbearance plan cannot extend past the last scheduled payment. For MBS pools issued between June 1, 2007 and Dec. 1, 2008, servicers can offer forbearance plans of up to six months. Longer plans can be granted for MBS issued before May 1, 2007 and after Jan. 1, 2009, according to the guidance [2].

Fannie requires servicers to evaluate borrowers deemed ineligible for the forbearance program to find other alternatives to foreclosure.

Servicers can make decision based on verbal information provided to them by the borrower, however the company must document it reasons in the loan file. For a borrower to receive an extension, he or she must submit a documentation package before the first forbearance plan runs out.

The servicer must determine the status of the borrower's employment between days 120 and 135 of the forbearance plan. The firm must also contact the borrower every month during an extended forbearance plan and redetermine the borrower's eligibility.

Fannie will require servicers to keep any prior mortgage insurance intact, and must get consent from the MI company before taking action if the policy requires it.

Also, servicers are not allowed to accrue late charges to the borrower during the forbearance program. If the borrower receives a modification through the Home Affordable Modification Program or another Fannie initiative, all unpaid late charges must be waived, according to the guidelines.

 
How in the world are things getting better if we are JUST initiating a 12 month forbearance program.  You would think that this wouldn't be necessary at this point in our "recovery."  How can we let people live in their homes rent free for a year?  Not sure how that works.  Can I get that deal?  Of course this is just to keep the wheels on a little while longer.  The longer the wheels stay on, the more time the elites have to make off with more booty.  Remember the MF Global scandal?  More details of just how crooked this was:
 

Wednesday, January 4, 2012

Happy New Year (LOL)

This is a crime on the same level as that of Bernie Madoff, only it involves an ex-Senator/Governor, the two most prestigious Wall Street investment banks, the CME, the CFTC, politicians, judges and even the Obama Administration. That this crime is going unprosecuted and the main perpetrator, Jon Corzine, is not waiting his justice in jail, is the latest, largest and most obvious signal that the United States as it was created and has existed is in full-scale collapse - Dave in Denver on MF Global

On that cheery thought, Happy New Year!

By now most of you have read the story about how MF Global sold assets to Goldman Sachs and JP Morgan "cleared" the trades right before MF Global filed. JP Morgan refuses to give up the funds that it is holding from these trades. Please keep in mind that the bankruptcy trustee could force JP Morgan to relinquish these funds but is not. Coincidentally (wink wink) JP Morgan happens to be a significant client of the bankruptcy trustee's law firm. Let's see: Jon Corzine was the CEO of Goldman Sachs and his number one lieutenant was Gary Gensler, who happens to be the chairman of the CFTC, the regulatory body that oversees firms like MF Global. Jon Corzine also happens to have been Vice President Biden's financial adviser and has spent plenty of time with Obama in the Oval office. See where this is going? This is grand scale theft in the billions and it is being enabled by those who were entrusted to enforce the laws and prevent this from happening, all the way up the President.

In other words, the United States is now a full-scale banana republic and we are watching the full-scale historic collapse of an Empire. From an intellectual standpoint, I find this thoroughly engaging and fascinating to observe. Fortunately I have come to the conclusion that there is nothing that can done about it so I've decided to look at it with a healthy dose of humor - the type of humor that is derived from the appreciation of the absurd. Try to enjoy your life as much as possible and don't let the full-scale theft and corruption going on agitate you. There's nothing you can do about it and Obama has made it crystal that not only is he not going to try and CHANGE it, he's actually become part of it. Period.

 
So there were trades "cleared" right before the bankruptcy.  Of course this is illegal.  If you try and avoid income or capital gain taxes by moving something right before another triggering event, the IRS will disallow the move.  But then again you aren't part of the "in" crowd.  They are allowed to do as they please with impunity.  When are we going to get fed up enough to change this?  It doesn't look like anytime soon as the Jersey Shore's ratings are still near the top.  Ugh.....
 
Positions
GORO (closed $24.39, up $.14, recommended at $6)
 
Mexus Gold (closed $.07, up $.005, recommended at $.15)
Mexus had some good rumors on the message boards.  It seems they are producing about 2 ounces of gold a day.  This is enough to pay the bills in my estimation.  That is good in that they will not need to raise anymore money.  They are trying to ramp up the production to 50 ounces a day.  This would most assuredly lead to higher prices.  If you're interested you can see some new pictures of their gold production here.  Just click on the Caborca Project once the page is loaded.
AXU (closed $6.66, up $.09, recommended at $7.90)
MBI (closed $12.45, down $.33, recommended at $10.58)
Stock Market  (still out)
 
 
I'll close this week with a video that relates to something near and dear to my heart: table tennis.  Ping pong, if you will, was my great time sink in college and I still love the game.  This is a video of the best shots from 2011.  Have a great week!