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January 29, 2012

Issue 184  -  The Continuing
World Crack Up 
 
 
The world is on a crash course with disaster.  The exact path and turns to this eventual disaster are unknown, only that the destination will be hit, and hit hard.  The die has been cast and there is only delaying that which will occur.  Averting the crash is now a non starter, as it CAN'T happen.  We will fall and the only question is when.   The main reason for this is debt.  Our debt has accelerated at an alarming rate.  This great graphic shows the delta from 1957 until 2010.
 
Of course it's even worse now and over $200k per person.  This is EVERY man, woman and child!  There is no way to pay that back.  Not mathematically possible.  In the government sector we have had a soaring increase also.  For the longest time, the largest contributors were the domestic financial sector and households.  A few years ago, the domestic financial sector and household sector put on the brakes:
 
 
As these debt bubbles started to collapse, feds stepped in and picked up the slack.  Without the federal government, we would be in a serious depression.  This hasn't avoided it, just postponed it.  The jaw boning in the presidential race is rather humorous as it is unlikely any of the candidates (with the possible exception of Ron Paul) would have changed much compared to Obama.  A huge change to this unending debt issuance would have had gigantic effects on the economy.  Great depression 2 anyone?  Of course this is going to happen anyway.
 
I've written quite a bit about the government twisting of numbers to suit their needs.  Here is an awesome graph of unemployment with an added touch:  what the unemployment would have been if the government hadn't "disappeared" people.  These are the "adjustments" made to the unemployment through the participation rate.  The lower the participation rate, the lower the unemployment.
 
 
So let me get this straight, without the declining participation rate, and these people are still living in the country, the unemployment would prettty much be the same as three years ago.  Some countries, it seems, are either MUCH worse off than us, or just not as good at lying to the public:
 

Q4 Spanish Unemployment Soars By Most Since Lehman, Hits "Astronomical" 23.3%

Submitted by Tyler Durden on 01/14/2012 - 13:16 Lehman Lehman Brothers Mean Reversion ratings Recession Unemployment

For anyone convinced that yesterday's S&P two notch downgrade of Spain to A is the last one for a while, we have some bad news: in Q4 Spanish unemployment soared by the most since the Lehman collapse, hitting what new PM Mariano Rajoy called an "astronomical" 5.4 million. This compares to 4.978 million people unemployed at the end of Q3 2011. Since the official number is not yet public and will be released on January 27 we will take his word for it. In which case it becomes clear that in Q4 the Spanish economy experienced a Lehman-like collapse, losing more than 400K people, or the most since the bankruptcy of Lehman brothers. In percentage terms this means that Spanish unemployment rose by a ridiculous 2%, or from 21.5% to 23.3%, in one quarter! And since Spain is a country of the Keynesian persuasion, we can only assume the number includes a whole bunch of meaningless birth/death and seasonal adjustments, but we'll leave it at that. Incidentally, it means that by the time the mean reversion exercise, with cost-cutting and what not is complete, Spanish unemployment will be well north of 30%, and 2 out of 3 people aged between 16 and 25 will be out of a job, if ot more. It also begs the question just what the real unemployment picture in the US, which lately has put the Chinese Department of Truth to shame, would be if reported on a realistic, unadjusted, and not "workforce contracted" basis.

Think about this for a second.  Unemployment rising 2% in a month!  Wow!  That's a lot of people sucking on the government udder. Not sure that's going to work out too well.  These socialist countries are imploding as their ponzi schemes come crashing down.  The socialist "pay for everything" plans are predicated on one thing: a growing population.  Without that growth, they are unsustainable.  How is that working out:
 
 
To MAINTAIN a population requires a birth rate of 2.1 per female.  The only country in Europe even over 2 is Ireland.  This is bad news for the welfare state.  In fact, fatal news.  These economies have zero chance of taxing their way out.  At least we aren't sliding down that path of perdition....right????

United Welfare States of America: In 2011 Nearly Half The Population Received Some Form Of Government Benefit

           
 

While politicians may debate whether or not America is the most "generous" (with other generations' money of course) socialist welfare state in the history of mankind, the undoctored numbers make the affirmative case quite clear and without any chance for confusion. The single most disturbing statistic: in 2011 nearly half of the population lived in a household that receives some form of government benefit, which in turn accounted for 65% of total federal spending, or $2.5 trillion, and amount to 15% of GDP. And yet some people out there still think these people, long since indoctrinated to do little but mooch off the welfare state (which will continue subsidizing its existence so long as debt rates are so low that the government can issue trillions each year without fears of consequences) will halt their iTunes purchases, will voluntarily stop subsisting on the government's teat, or will rebel against a government which is their only source of income? Why? Especially since something tells us that there will be a peculiar overlap between this 50% and the 50% of Americans that pay zero taxes.

 
Oh, I guess we are on a socialist path.  Over half of all people receive a check from the government?  Doesn't that seem crazy?  It is.  How is it possible to pay that many people from a "limited" government?  Oh, we don't have a limited government anymore?  My bad.  In case you are wondering how this money is doled out, here is the overview:
 
 
The government is paying out an average of $6640 per person in the U.S.  That seems like a lot considering at least 50% of the people don't pay anything in federal taxes.  I wonder how that will work out in the end......mmmmmm......bad....real bad.
 
So we stand at a crossroads, not just in this country, but the whole planet.  Here's a graphic of that situation:
 
 
Looking at the key, you will see that the redder you are, the worse off you are.  Wow, what a shock!  The U.S., Japan and Europe are in the worst shape.  Knock me over with a feather.  Not really.  It's no accident that the countries tipping on the edge of disaster are up to their eyeballs in debt.  These are the countries with the oldest CENTRAL BANKS!  Central banks are vampires.  Sucking the very life out of the countries they "help."  They create debt upon debt, putting the citizenry into serfdom.
 
There is no escape from this tidal wave of debt.  It will bring us down.  How far?  Probably back to the mid 1990s levels for the stock market, housing and debt.  That will not play out pretty, and all of the puffery and "positive" talk that comes from the Congress and White House won't mean a damn:

First lady Michelle Obama cites 'remarkable progress' on the economy

By Alicia M. Cohn - 02/01/12 07:54 AM ET

First Lady Michelle Obama cited "remarkable progress" on the economy during a speech for a small crowd of high-profile Hollywood names in Los Angeles on Tuesday evening.

"In the last three years, we've worked hard to get out of this mess and we've made some remarkable progress," the first lady told a group of about 135 supporters at a private campaign event for her husband. She listed President Obama's accomplishments on healthcare reform, the removal of troops from Iraq and the repeal of "Don't ask, don't tell" among other items on the list of "promises kept" touted by Obama's reelection campaign.

"We know there are people still suffering and there is a long road left to travel," she continued, citing unfinished work as another reason to reelect Obama.

According to pool reports, the Beverly Hills event included some high-profile names from Hollywood, such as top Obama donors Jeffrey Katzenberg and Harvey Weinstein. Singer-songwriter Joshua Radin performed before Obama spoke. Netflix CEO Reed Hastings, music industry representatives Quincy Jones, Berry Gordy and Jerry Ross, film producer Steve Bing, Rob and Michele Reiner and Will Ferrell's wife, Vivica, were also in attendance.

"You’re here because you know that we stand at a fundamental crossroads for our country," Michelle Obama told them. "You’re here because you know that in less than a year from now, we are going to make a choice that will impact our lives for decades to come." She spoke about the struggles of the middle class and of hearing their stories as she traveled the country. She said Obama's "toughness and fight" comes from hearing the stories of struggling Americans.

"I hear the passion and the determination in [Obama's] voice," she said. "He says, 'You won’t believe what folks are still going through.' That’s what he tells me. He says, 'Michelle, this ain’t right, and we have to fix this. We have so much more work to do.' "

She added that her husband is "very cute and he can sing, go figure." The line was a reference to the moment last month when Obama broke into the song "Let's Stay Together" at a campaign event.

Obama urged the crowd to get involved in the campaign in order to keep "fighting the good fight."

What in the world are they smoking?  Remarkable progress?  Really?  Do they think we're stupid?  Just where in the hell is this progress?  Faked employment numbers?  Declining real wages?  No one believes what comes out these people's mouths so I'm not even sure why they go through the exercise of lies.  The truth will win out and too bad for us, the truth is very, very ugly.  Make sure you have physical gold and silver.
 
Positions
GORO (closed $26.20, up $1.81, recommended at $6)
Mexus Gold (closed $.07, flat, recommended at $.15)
 
AXU (closed $7.72, up $1.06, recommended at $7.90)
MBI (closed $12.18, down $.28, recommended at $10.58)
Stock Market (still out)
 
I'll close this week with a funny.  Too bad it probably isn't too far from truth.  Have a great week!