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Not According to Plan

2011-12-14T06:32:00.000-08:00

Not According to Plan

The market fell again Tuesday and although three down days in four is nothing for central banksters to truly worry about (and there is plenty of lower support in the S&P) – it nevertheless is not going according to plan. The Fed’s QE1 plan did work – it saved the markets from total annihilation. However QE2, QE Lite, ZIRP, the Twist, secret loans, unlimited swap lines, etc has done little if anything. Moreover, the market is right back to where it was when the Fed announced its latest bid-rigging scheme with multiple other central banking mafia heads in tow.

So I’d say that overall it simply isn’t going as they had planned and Bill Bonner of the Daily Reckoning agrees in a recent article.

http://dailyreckoning.com/when-a-great-correction-doesnt-stick-to-the-script/

12/13/11 Baltimore, Maryland – Darkness without a dawn…

The Dow down 167 yesterday. Gold down $48. Nothing to get excited about.

The excitement is still ahead. When the Dow cuts through the 10,000 mark and heads to 6,000. Stay tuned…

In the meantime, yesterday’s Financial Times told us that the industrialized nations will borrow $10 trillion this year. Next year, the figure should be higher.

Where does all that money come from? It’s more than the world’s total savings. Not that we know exactly, but total world GDP is about $50 to $60 trillion. Savings should be about 10% of that — or only about $5 to $6 trillion.

So how are the developed nations able to borrow so much?

With so much debt turning over, it makes the world financial system extremely vulnerable to inflation…or just a change of sentiment in the bond market. Which makes us wonder. What would happen if the lenders balk?

We are, as all Dear Readers know, in a Great Correction. And in a great correction asset prices fall…along with a general fall-off in employment, consumer spending, investment, GDP growth and all the other things that make a robust economy. Demand drops…which typically causes prices to fall (or at least not to rise as quickly as before). There is less demand for credit as for everything else. So, the pool of available bonds falls…forcing up bond prices and forcing down bond yields.

Got that?

Well, don’t worry if you don’t. Because there’s at least a 50/50 chance it won’t happen that way.

So far, the Great Correction has followed the usual script. Bond yields have fallen. Price inflation has generally come down. But demand for credit — as evidenced by the aforementioned $10 trillion government financing costs — is running hot. ‘Typically’ may not matter. Because this is no typical downturn. And it wouldn’t be too surprising if all this demand for credit pushed up bond yields.

Wouldn’t that be a drag?

And here we find ourselves with a grim, but philosophically amusing, insight. Typically, every cloud has a silver lining. Every glass that is half empty is also half full. And dawn follows even the darkest night. That’s just the way the world works. But what if the cloud has no lining, neither of silver nor of anything else that reflects light? And what if the glass is completely empty?

In the normal economic world, low interest rates are the half-full part of the correction glass. A correction comes. Asset prices go down…along with all the other things mentioned above. But interest rates go down too…which make it easier for new projects to clear the “hurdle rate.” At 6% interest, for example, a new project has to return at least 6% to breakeven. Any new investment that won’t produce more than a 6% minimum gain is quickly abandoned. But as the correction drives down yields, to say 3%, all of a sudden a lot more investments begin to make sense. Dawn comes.

Lower inflation rates…and lower asset prices…help too. As prices fall, shrewd investor and careful businessmen can put their money to work again. Employees are re-hired. Household earnings recover.
Soon, the downturn is over.

Both booms and busts are, normally, self-correcting.

But leave it to the feds to stop the sunrise. This huge demand for credit from the industrialized governments could drive up interest rates. Imagine what that will do. Already in a slump, households, businesses and investors could find their borrowing costs going up, not down. They could find prices rising, too, especially the prices of energy and food. What a world…a major slump, but with rising prices and rising interest rates!

And then, consider what happens next. The feds will err again. They will feel obliged to finance government borrowing themselves. Here’s the Bank of International Settlements, giving us the heads up:
The Bank for International Settlements Sunday issued an oblique endorsement of coordinated action by the world’s largest central banks to ease funding conditions for banks. “A freezing of interbank markets in major funding currencies, as during the recent crisis, may require the ability to supply official liquidity in major currencies in an elastic manner,” the BIS wrote in its regular quarterly report.” — MarketWatch

It was only a week ago that 6 major central banks announced a coordinated rate cut — expected to juice up the markets. And now all major central banks seem ready and willing to sacrifice the integrity of their currencies in order to protect their bond speculators.

This is what we expected all along. But we didn’t expect it so soon. It causes us to revisit our “long, dark road to Tokyo” forecast. You remember our prediction: the US has already followed Japan through one “lost decade.” We figured it would lose another one as the Great Correction drags on.

But things could happen faster…and worser. Japan financed its own deficits with its own money. Now, everybody is running deficits. And the amounts to be refinanced are staggering. Bond buyers may balk…or simply be unable to swallow so much debt.

Which will cause the central banks to come into the picture — with coordinated money-printing. Instead of going down, bond yields and consumer prices could go up.

Think things are bad now? Wait until the economy has to deal with a Great Correction and inflation.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
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Martial Law

2011-11-17T09:59:00.000-08:00

Are we seeing a preview of martial law?

Yields Soar

2011-11-17T09:55:00.000-08:00

Before US equities opened Tuesday, markets were roiled by soaring bond yields in Italy, Ireland, Spain, France, and Belgium. What’s this? I thought Ireland was fixed? I thought Spain was no problemo? And France; doesn’t it have an AAA rating? Belgium? Seriously; the contagion is spreading to Belgium now?

Mike Shedlock gives us a quick rundown here http://globaleconomicanalysis.blogspot.com/2011/11/sovereign-debt-yields-and-spreads-soar.html

The ECB, IMF, EMU, and EU are on the verge of multiple emergency meeting, if indeed meetings are not already underway. A quick check of the following bond spread tables and today's yield action will explain.

Across the board, yields and spreads widened significantly today. Note in particular the jump in the 2-year bond yield of Belgium. Also note the inverted spread situation for Belgium.

The spread to German 2-year bonds is 3.49 while the spread to 10-year bonds is 3.13.

Belgium has been off nearly everyone's radar, but not for long. The EFSF is underfunded for Spain and Portugal alone. It's now time to add Belgium to the major problem list.

On second thought, the major problem list now includes every country but Germany.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com

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Rally Time

2011-08-24T05:55:00.001-07:00

Rally Time

There was quite a rally in the markets today. The Dow closed up over 300-points, with all the other indices up an equivalent percentage. The news must have been great so without further ado, let’s have a look.

The first economic data that hit the tape was the New Home Sales report and it, ahh, wasn’t good. It stunk. Bloomberg said the following “Bad news is building out of the housing sector. Last week's report on existing home sales showed surprising contraction as does today's report on new home sales where the annual sales rate fell to 298,000 units, down 0.7 percent in the month. The report includes significant downward revisions of 12,000 to June, now at 300,000, and of 6,000 to May, now at 315,000. Prices of existing homes contracted in July as they did for the median price on new homes, down a steep 6.3 percent in the month to $222,000.

“The outlook for the new home market and for home builders remains very difficult. Low interest rates may be a big plus but are being more than offset by heavy supply of low priced existing homes, by appraisal uncertainties, and by continuing tightness in the credit market.”

Well THAT report didn’t go well. Let’s have a look at The Richmond Fed data.

In the Richmond Fed’s report we read “In August, the seasonally adjusted composite index of manufacturing activity — our broadest measure of manufacturing — declined nine points to -10 from July's reading of -1. Among the index's components, shipments lost sixteen points to -17, and new orders dropped six points to finish at -11, while the jobs index inched down three points to 1.

“Other indicators also suggested additional softening. The index for capacity utilization declined eight points to -14 and the backlogs of orders fell seven points to end at -25. Additionally, the delivery times index moved down twelve points to end at -4, while our gauges for inventories were virtually unchanged in August. The finished goods inventory index held steady at 17 in August, while the raw materials inventories index added one point to finish at 19.”

Since the incompetent Fraud Street economists missed both reports by a wide margin, with the latter report being 100% worse than expected and the worst data since 2009, one would expect a negative reaction in equities. Ohhh, but this is Fraud Street, not the Wall Street hype of supply and demand that you have been told about over the decades.

Apparently the news was so bad that the hyenas of Fraud Street went into a feeding frenzy – eating as many short sellers as the pack could tear apart. And why would the nasty hyenas do such a thing? The answer lies with Ben S. Bernanke and the J-Hole symposium of the central banking mafia.

“What’s not to like in these reports?” says the banking mafia. “This now cinches the response we want from our puppet Bernanke: more free money for us via QE3.”

Boo-YA, baby! More horrific economic data and the markets take off like a rocket shot.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846 __

ZERO

2011-08-10T05:57:00.001-07:00

ZIRP is “zero interest rate policy” and what Ben Bernanke announced today was that the banking mafia will enjoy at least two more years of free money. But I don’t believe that; I deem today’s FOMC statement to mean ZIRP is here forever. Said another way, we are following the path of Japan. The country is in such a mess that the Fed’s prior TRILLIONS of “liquidity” has done absolutely nothing – but they’ll keep doing it anyway.

When the FOMC statement was released there was the usual back and forth trade; however, the market did not like the lack of a direct QE3 comment - initially. The S&P was slammed to a new daily low but didn’t stay there for long.

Once the low was in, Goldman Sachs gave its trading desk and all who listen to it the “buy signal” it wanted. In a note to clients Goldman said…

The committee adopted an even easier policy stance than expected. First, the committee now anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate "at least through mid-2013" instead of "for an extended period." Although some form of strengthening of the guidance language was expected and the new guidance remains conditional on the economic outlook, we see this step as a dovish surprise. Three members--Fisher, Kocherlakota and Plosser--dissented from this decision, the largest number of dissents since November 1992.

Moreover, the committee effectively signaled an easing bias saying that it discussed "the range of policy tools necessary to promote a stronger economic recovery" and that it "is prepared to employ these tools as appropriate." In our view, this leaves open the possibility of further asset purchases ("QE3") should the economic outlook deteriorate further from here.

When this was released, the S&P was roughly at 1107.00 and immediately went up. By the close the S&P exploded an additional 69.00-points!

Although the Fed is constantly saying the economy is on the mend (read: lying), it apparently sucks so badly that we need ZIRP for at least two more years. Additionally, you will find these uplifting comments in the FOMC release…

“moderated” (the economy)
“flattened out” (spending)
“considerably lower” (growth)
“deterioration” (economic indicators)
“downside risk” (to the future)
THREE DISSENTERS – first time since 1992

No but really, it’s all good!

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Liquidation

2011-08-09T06:36:00.001-07:00

Liquidation

Given the US debt downgrade late Friday night, a Monday sell-off wasn’t terribly surprising. The mass liquidation by the close, however, was surprising.

As I write this, the indices are down sharply on Globex because of global domino effect and more downgrades. After Monday’s close the expected downgrades of muni-debt hit the tape.

From Bloomberg http://www.bloomberg.com/news/2011-08-07/muni-market-prepares-for-loss-of-aaa-ratings-as-s-p-downgrades-u-s-credit.html

Standard & Poor’s cut the AAA ratings of thousands of municipal bonds tied to the federal government, including housing securities and debt backed by leases, following its Aug. 5 downgrade of the U.S.

The rating company assigned AA+ scores to securities in the $2.9 trillion municipal bond market including school- construction bonds in Irving, Texas; debt backed by a federal lease in Miami; and a bond series for multifamily housing in Oceanside, California. Olayinka Fadahunsi, an S&P spokesman, said he couldn’t provide a dollar figure on the affected debt.

S&P also cut ratings on securities backed by Fannie Mae andFreddie Mac, prerefunded issues and munis repaid by using federal assets, also known as defeased or escrow bonds. No state general-obligation ratings were affected.

Chris Mier, a managing director at Loop Capital Markets LLC inChicago who follows the municipal bond market, said the downgrades made sense, given the federal rating cut.

“In order to keep the system logical and coherent, there are going to be a lot of downgrades,” Mier said in a conference call with reporters and clients.

Matt Fabian, a managing director of Concord, Massachusetts- based Municipal Market Advisors, a financial research company, said in a telephone interview that he expected “hundreds and hundreds of municipal downgrades,” which may hurt investor confidence.

“Treasuries may be able to shake off a real impact from the downgrade,” he said. “Munis, I’m less sure about.”

In an effort to calm the markets, president Obama held a news conference today…and continued to play the Blame Game. Apparently the market was expecting him to act like a leader; a statesman; a president. Instead he acted like a typical politician and the market tanked further. Moreover, as the market continues to tank on Globex, he is pressing the flesh at a $15,000 per plate fund raiser and is surely telling the crowd that without his short speech today “the market would have been 300 points lower. So I saved or created 300 points today.”

The FOMC meets Tuesday with a statement at 2:15pm EST. Will Bernanke announce QE3?

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846 __

Technical Data

2011-08-04T06:35:00.001-07:00

Technical Data

The market has been hammered lower eight straight days, until today. If Wednesday had closed with even a miniscule loss it would have matched the worst consecutive losing streak since 1978. With that in mind, Fraud Street bought the dip with a vengeance and thus avoided all of the bad press and the sure-to-follow Jimmy Carter “malaise” comparisons.

Is this a support level? Although one never knows for sure and there is a great deal of news coming out soon (read: Italian banking crisis and Fri Jobs data) we may get some support Thursday. A major level of technical support that I mentioned on CNBC today was 1240.00 in the S&P. While the market traded through it, it eventually held and led to a strong reversal with a positive close. Moreover, ES (mini) volume was 52% higher than the recent average and closed with net aggressive buyers over sellers…even if it was only +0.22%.

If you wanted good news, that’s about all I’ve got and I don’t know how long a technical bounce will last. If it can hold together for more than a few hours and the market ignores the sure-to-be bad Jobs Report on Friday, it just may pop back to the 1295.00 / 1300.00 levels. A rally beyond there seems unlikely for the following reasons; fundamental economic news is awful, European banking crisis will soon be headline risk again, the S&P broke all of its higher support levels, the major indices have all closed below their respective 200-day MAs, and the S&P futures chart has finally broken the MAJOR channel going back to The Bernank’s intervention policies that began in 2009 to rig the market. Of course, this last point will be more influential if it has a weekly close under said channel.

Speaking of The Ben Bernank, don’t worry about the markets too much, he’s your ally: he does not believe in free markets and will soon undertake QE 3 to force the markets higher.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846 __

Downgrade

2011-07-28T06:21:00.001-07:00

Downgrade?

Below is a good video clip of The Kudlow Report in which Larry Kudlow interviews S&P’s global head of sovereign debt ratings – David Beers.

http://video.cnbc.com/gallery/?video=3000035313

This video clip was recorded before Speaker Boehner released at updated version of his plan to raise the debt ceiling and cut spending. In short, his plan is to “cut” an average of $91.7 billion a year for 10-years totaling $917 billion.

Of course almost all of it is back-end loaded, whereby only $22 billion will be cut in FY2012…but the deficit will be $1.7 TRILLION!

Oh, but the plan also requires Congress to draft plans for additional $1.8 trillion in cuts, umm, sometime in the future. Yeah, right! Like that will happen.

If I were David Beers, my response would be: Epic Failure boys & girls. You’ve been downgraded.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846 __

A New Low

2011-07-27T05:11:00.001-07:00

A New Low

Congress is doing a bad job. You know where I stand on that clown-posse, but as it turns out most Americans agree with me. In the following article we read about the Rasmussen poll, with a few highlights below.

Congressional Performance
http://www.rasmussenreports.com/public_content/politics/mood_of_america/congressional_performance

Voter approval of the job Congress is doing has fallen to a new low - for the second month in a row.

Just six percent (6%) of Likely U.S. Voters now rate Congress' performance as good or excellent, according to a new Rasmussen Reports national telephone survey. Last month, Congressional approval ratings fell to what was then a record low with eight percent (8%) who rated its performance good or excellent.

Sixty-one percent (61%) now think the national legislators are doing a poor job, a jump of nine points from a month ago.

Most voters don't care much for the way either party is performing in the federal debt ceiling debate. The majority of voters are worried the final deal will raise taxes too much and won't cut spending enough.

Only 11% of voters believe this Congress has passed any legislation that will significantly improve life in America. That ties the lowest ever finding in nearly five years of surveys, last reached in January 2009. Sixty-nine percent (69%) think Congress has not passed any legislation of this caliber, a six-point increase from June and the most negative assessment ever. Nineteen percent (19%) are not sure.

With divided control of Congress, neither party's voters are very happy. Eight percent (8%) of GOP voters give Congress positive marks, compared to five percent (5%) of Democrats and six percent (6%) of voters not affiliated with either of the major parties.

No doubt people are upset but who wants to bet me that most of these clowns will be reelected?

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846 __

The Ben Bernank

2011-07-14T05:56:00.001-07:00

The Ben Bernank

Wednesday’s tragic financial comedy came the way of Ben Bernanke and his testimony to the US Congress. In this testimony he said three important things; gold is NOT money (what it is, he did not say), QE3 is on the way, and that the Federal Reserve’s QE program has been a “PROFIT CENTER for the Treasury.” The two statements and the QE3 proclamation are all ridiculous; however, the “profit center” comment is the most absurd.

Have you thought through just what kind of relationship there is between the Treasury and the Fed? First, when the Treasury auctions bonds that are purchased by hedge funds, pension funds, or individual citizens, the purchaser uses his own funds to buy them and the Treasury pays him a rate of return for the use of his money. This is the way it is supposed to work; however, things get dicey when the Fed is involved.

When the Fed buys Treasuries it isn’t using cash on hand today from last quarter’s profit. It is conjuring up money out of thin air in order to pay for the bonds. When Bernanke was recently asked about this (not today) he said it wasn’t money printing. When asked where the money came from he smiled and said “from the Fed,” but it wasn’t money printing. When pressed again and asked if the money was on the books the prior day to pay for the multi-billion bond purchase he said no; it was indeed counterfeited for the purchase.

OK, we know that the Fed counterfeits money for these purchases (oh, and by the way, I DO understand that when a government prints money it is not actually counterfeiting but I don’t care – I will continue to use that analogy) but why was today’s statement laughably absurd? It was ridiculous because the Fed does not pay for bond purchases (QE) with its own money, it prints this money at a cost to the American people (read: INFLATION). Moreover, the Treasury pays the Fed the interest rate on the bond then the Fed remits that same interest payment back to the Treasury. And that’s a “profit center?” Are you kidding me? That’s a circle jerk!

How in the hell can that be a “profit center?”

If you’re married and your wife sells you a bond so she can go shopping, and you pay her with the kids Monopoly money, then she gives you some bucks from the money she “saved on sale items” for the cost of borrowing the Monopoly money, and then you “remit” those dollars back to her…was that a f%$!#* “profit center” for her? NO! It is a financial f%^$!#@ circle jerk that most people do not want to even understand.

“Bernanke is on TV? Who is that guy? I like his beard though, whoever he is. Is TMZ on yet?” Sadly, the average slack-jawed voting yokel is like this.

Here come the bears again. If you have NOT watched this whole video, please do so now. If you HAVE watched it, please view it again since it is relevant another time with today’s testimony of The Ben Bernanke.

Oh yeah, and he has a nice beard.

http://www.youtube.com/watch?v=PTUY16CkS-k

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

QE 2 Is Over

2011-07-01T05:54:00.001-07:00

QE2 is Over

There were many small bits of news today none of which seemed to matter much. Since there was a lot, I’ll get right to it.

QE2 is over. The Fed’s $600 billion Treasury purchase program has run its course. Who will buy the IOUs now? Will the PDs have enough cash on hand to keep the Ponzi scheme known as the US government rolling? Surely it will but won’t be as easy. Ex. This week’s Note auctions were horrible and the Primary Dealers (TBTF banksters) were stuck buying a large portion of them. Since there is no hope that a QE3 will be buying back 7-YR Notes any time soon, the banking mafia DUMPED a whopping 89.7% of those freshly minted 7-YR Notes right back to the Fed – its last chance to do so. The monetization of US debt, whereby the banking mafia temporarily holds the junk so as to somehow “fool” the American public and the dolts in the media, is monetization no matter how it’s done when the holding period of the PDs is just 22 hours like the recent 7-YR Note auction. If they can’t flip them back to the Fed via QE2 - thus having fresh cash from the Fed for high risk trading and new debt purchases – how smoothly will Tax-Cheatin-Timmy’s auctions go in the near future?
Speaking of Tim Geithner, the tax cheat that runs the Treasury and IRS, rumor has it he may be joining the ranks of the unemployed when Congress agrees to increase the debt ceiling. Good riddance!
Speaking of the unemployed, the morning’s weekly Jobless Claims data were horrible – again. This far into the supposed “recovery” the jobs picture never got better and is now getting worse.
Speaking of the morning data, the ISM was better than expected and who go the news first? HFT robots – that’s who. As I mentioned was happening a few days ago, the Chicago PMI will now be “flash released” to the HFT community and this morning it front-ran options like mad. You can read about it here http://www.nanex.net/Research/OPRA_063011/OPRA_063011.html
Oil has regained 100% of the drop following the IEA announcement of the 60 million barrel oil dump onto the world market.
Speaking of an oil dump, I wonder if that was really done for the benefit of an insatiable and well heeled buyer that wanted to make a large purchase: China.
Speaking of China, it continued to manipulate the Forex market today, specifically the Euro.
Now that the quarter and QE2 have ended, things may get a little livelier in the markets.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

More Lies

2011-06-23T07:14:00.001-07:00

More Lies

I have written on several occasions how the government has changed the CPI calculations to suit whatever administration is in power. Rather than tell the truth about consumer based inflation, both Republican and Democrat controlled governments have chose to lie.

The tradition will go on.

Rather than reading about something that happened in the past, we now get to see up close and personal just how both sides of the isle will attempt to change reality for their own benefit. In this case the liars on the left and the right – pardon, esteemed representatives – want to once again rig the CPI so that it erroneously shows less inflation rather than deal with the reality of their own budget/deficit/debt mess.

From Dow Jones Wires:
WASHINGTON -(Dow Jones)- Lawmakers are considering changing how the Consumer Price Index is calculated, a move that could save perhaps $220 billion and represent significant progress in the ongoing federal debt ceiling and deficit reduction talks.

According to congressional aides familiar with the discussions, the proposal would shift how the Consumer Price Index is calculated to reflect how people tend to change spending patterns when prices increase. For example, consumers tend to drive less when gas prices increase dramatically.
Such a move is widely seen by economists as resulting in a slower rise in inflation. That would impact an array of federal programs that are linked to CPI including the Social Security program and income tax brackets set by the federal government.
The proposal could lower federal spending by around $220 billion over the next decade, based on calculations by last year's White House deficit commission, which recommended the change as part of its final report.
According to two congressional aides familiar with the budget negotiations, the shift is being "seriously discussed" as part of the ongoing talks to strike a budget deal, that would be used to ease the passage of a required increase in the country's debt limit.
Those talks involve Democratic and Republican lawmakers from both chambers and are led by Vice President Joe Biden. The group held its latest meeting Tuesday as they strive to reach the broad outlines of a compromise on federal spending by the end of the month.
In a press conference that took place before the meeting, House Majority Leader Eric Cantor (R., Va.) declined to comment on the specific proposal, other than to say that "a lot of things are on the table." But asked whether the proposal would be interpreted as a tax increase and therefore a non-starter for Republicans, Cantor said it could be seen as both impacting tax rates and benefits paid out by the federal government.
When asked about the idea after the meeting, Rep. Jim Clyburn (D., S.C.) said everything is being discussed.

It is a rare proposal in that it would likely lead to both lower benefits paid to seniors and higher taxes paid by most people who pay federal income tax. As such, it could allow Republicans to argue they are tackling federal entitlement programs such as Social Security, and permit Democrats to say they are increasing taxes as part of any budget deal that is reached.

It could be easier for both parties to agree on than a significant overhaul to the Medicare proposal or an increase of taxes on wealthier Americans.
"It's certainly something that is going to be considered," said James Horney, director of federal fiscal policy at the Center for Budget and Policy Priorities, a liberal think tank. "There are questions whether it would be politically easy."

Several senators that are not party to the Biden-led talks voiced support for the proposal including Budget Committee Chairman Kent Conrad (D., N.D.), while Sen. John Thune (R., S.D.), a member of the Republican leadership team, said it should be looked at as part of the negotiations.

So instead of dealing with the actual problem, our so-called representatives are going to lie to you with yet another tortured CPI revision. It’s right out of their How-Can-We-Fool-‘Em-Today handbook.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Done Deal

2011-06-22T06:18:00.001-07:00

Done Deal

The most anticipated default of all time has been avoided – again - for now. Once again the politicians of Greece have given the middle finger to the Greek people, while receiving “atta boys” from the banking mafia.

In a final vote of 155 to 143 the Greek Parliament decided to saddle its citizens with higher taxes and more austerity in the form of job and pension cuts (among others) to pay back banking loans that went bad when its economy tumbled in 2008. Since then Greece has needed even more loans that are also going bad because, and this shouldn’t be a surprise, higher taxes and no wage growth lead to a lower GDP that leads to less money to pay back the old loans. How is the solution more debt? No matter what happens it won’t end well for the Greek people but I don’t think this is the right way.

Although this should be a done deal, there is one last thing that could gum-up the process: MTFS. SocGen explains…

George Papandreou’s PASOK government survived the confidence vote on Tuesday night. As expected, Papandreou obtained a relatively narrow majority, with 155 votes to 143 in the 300 seat Parliament (and two abstentions). The focus now shifts to next Tuesday’s Parliamentary vote of the Medium-Term Fiscal Plan (MTFS). The MTFS includes €28bn of additional austerity measures for 2011-2012 as well as an accelerated privatisation plan.

The formal Parliamentary approval of the MTFS is a necessary condition for the IMF’s quarterly disbursements, with the next €12bn tranche due in July.

The IMF will only disburse if the EU does

The IMF made it clear that the July tranche to Greece can only be disbursed if the EU provides concrete assurances that it will continue to provide funding to Greece as stipulated under the EU/IMF adjustment program.

Because of this conditionality, next Tuesday's Parliamentary passage of the MTFS remains a critical roadblock to provide Greece with a medium-term funding solution from the EU/IMF. Although not the most likely outcome, a failure to approve the MTFS could pave the way to anticipated elections.

Only the approval of the MTFS will remove the policy deadlock

Only after the MTFS is approved can the EU officially put forward a medium-term funding plan for Greece, through to 2014. And only once Greece is funded for at least the next twelve months will the IMF give its official consent to its share of the quarterly disbursement (€3.3bn).

Assuming a parliamentary majority is reached on the MTFS, a decision from the EU on Greece’s medium-term funding – at least in principle -- could be reached at the EU Meeting on 3 July, rather than 11 July as initially suggested by EU Commissioner Olli Rehn. That would then clear the way for the IMF to authorise its share of the quarterly disbursements, too.

The latest bailout hasn’t had much of an affect on the markets overnight. One wonders what the day session will bring.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Transitory

2011-06-10T05:41:00.001-07:00

Transitory

During Chairman Bernanke’s recent speech the word “transitory” was used often. Mr. Bernanke was trying to bamboozle us into believing that rising commodity inflation was “transitory”…and not his fault, of course.

Sadly, Mr. Bernanke did not give us a potential time frame of this so-called temporary inflation and that was probably by design. Since we know without question that this “transitory” inflation is DIRECTLY CORRELATED to his QE programs (read: free money for the TBTF banks) he may be signaling to us that inflation will slow quickly when QE2 ends, but so will the economy. Will it end on time and be no QE3 in the future? Doubtful.

What is clearly “transitory” and can be measured in just days, if not hours, are the Primary Dealer’s interests in holding US Treasuries. With each passing so-called successful auction, the Primary Dealers (PD) sell back the IOUs to the Fed in a multi-billion dollar game of hot potato. The length of time the PD community wants to play the monetization game is getting shorter and shorter. Monetization of debt is getting quicker.

ZeroHedge gives more detail here http://www.zerohedge.com/article/dealers-scramble-offload-treasury-exposure-ahead-qe2-end-flip-record-75-just-issued-7-year-a

For those who care what is happening behind the scenes even as everyone continues to predict there will be no snags associated with the transition from a QE2 to a non-QE2 world should look at this brief analysis. On May 26 the Treasury issued $29 billion in 7 Year bonds (Cusip QQ6)- the auction was considered a smashing success by all with the Bid To Cover coming at a record high 3.24 Bid To Cover, and pricing 2 bps inside of the When Issued: an indication of massive demand. Dealers were allocated $11.4 billion and as Stone McCarthy reported: "The $62.3 billion Dealer bid was up from $54.7 billion last month and it was the largest Dealer bid since February 2010."

So far so good right? Here is what happened next. On June 1, barely a day after the bonds had settled, Dealers shipped $5.393 billion right back to the Fed (making who knows how much in "fees" in the process) in that day's POMO. And today, just a week after the last 7 year targeting POMO, Dealers sold another $3.168 billion to Brian Sack (of the FRBNY).

Total tally: $8.561 billion monetized by the New York Fed in less than two weeks following the auction. Simply stated: the Dealers' unprecedented interest in the auction... was transitory. Just two weeks later, the Dealers have flipped back 75% of their entire position in the latest 7 Year On The Run bond. And this is the kind of sleight of hand that allows the Treasury to represent success after success in bond auctions, only to allow the Fed to do the backdoor switcheroo literally hours later, and compensate the conning Dealers for fooling the marks: in this case US taxpayers, naive believers that there is actual interest in US Paper, and of course China and other foreign investors who bought $13.8 billion of the same auction.

What happens when Dealers are unable to flip up to 75% of any given bond back to the Fed in under two weeks: stay tuned and find out in precisely 3 weeks.

Yes indeed, it should be interesting.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Ponzi Finance Part 2

2011-05-16T16:16:00.001-07:00

Ponzi Finance Part 2

In an online edition of the WSJ we read an interview with Stanley Druckenmiller, a legendary investor. Mr. Druckenmiller is of the same opinion of me, which is that the profligate spending of the US Congress is out of control and Bernanke’s Fed is simply aiding it along.

Below are a few highlights but the full article can be found herehttp://online.wsj.com/article/SB10001424052748703864204576317612323790964.html

The moment couldn't be better to consult Mr. Druckenmiller, who almost never gives interviews but is willing to speak up now because he thinks that fears about using the debt-limit as a bargaining chip for spending cuts are overblown—and misunderstand the bond market. "The Treasury borrowing committee letter speaks about catastrophic financial crises, comparing it to Fannie and Freddie. That's not what we're talking about here," he says.

He contemplates the possibilities for bond investors if a drawn-out negotiation in Washington creates a short-term problem in servicing the debt but ultimately reduces spending:

"Here are your two options: piece of paper number one—let's just call it a 10-year Treasury. So I own this piece of paper. I get an income stream obviously over 10 years . . . and one of my interest payments is going to be delayed, I don't know, six days, eight days, 15 days, but I know I'm going to get it. There's not a doubt in my mind that it's not going to pay, but it's going to be delayed. But in exchange for that, let's suppose I know I'm going to get massive cuts in entitlements and the government is going to get their house in order so my payments seven, eight, nine, 10 years out are much more assured," he says.

Then there's "piece of paper number two," he says, under a scenario in which the debt limit is quickly raised to avoid any possible disruption in payments. "I don't have to wait six, eight, or 10 days for one of my many payments over 10 years. I get it on time. But we're going to continue to pile up trillions of dollars of debt and I may have a Greek situation on my hands in six or seven years. Now as an owner, which piece of paper do I want to own? To me it's a no-brainer. It's piece of paper number one."

…Mr. Druckenmiller says that markets know the difference between a default in which a country will not repay its debts and a technical default, in which investors may have to wait a short period for a particular interest payment. Under the second scenario, he doubts that investors such as the Chinese government would sell their Treasury debt and take losses on the way out—"because I'll guarantee you people like me will buy it immediately."

Now suppose, Mr. Druckenmiller adds, that he's wrong. If the market implodes on day two of the technical default, Mr. Obama and Congress would be motivated to finally come to agreement. But he doesn't expect such market chaos. "My guess is that the bond market would rally as long as it believed the ultimate outcome was going to be genuine entitlement reform—that we wouldn't even have to find out about a meltdown because it wouldn't happen. And I have some history on my side here."

…Mr. Druckenmiller had already recognized that the government had embarked on a long-term march to financial ruin. So he publicly opposed the hysterical warnings from financial eminences, similar to those we hear today. He recalls that then-Secretary of the Treasury Robert Rubin warned that if the political stand-off forced the government to delay a debt payment, the Treasury bond market would be impaired for 20 years.

"Excuse me? Russia had a real default and two or three years later they had all-time low interest rates," says Mr. Druckenmiller. In the future, he says, "People aren't going to wonder whether 20 years ago we delayed an interest payment for six days. They're going to wonder whether we got our house in order."

…Mr. Druckenmiller is puzzled that so many financial commentators see the possible failure to raise the debt ceiling as more serious than the possibility that the government will accumulate too much debt. "I'm just flabbergasted that we're getting all this commentary about catastrophic consequences, including from the chairman of the Federal Reserve, about this situation but none of these guys bothered to write letters or whatever about the real situation which is we're piling up trillions of dollars of debt."

He's particularly puzzled that Mr. Geithner and others keep arguing that spending shouldn't be cut, and yet the White House has ruled out reform of future entitlement liabilities—the one spending category Mr. Druckenmiller says you can cut without any near-term impact on the economy.

…Some have argued that since investors are still willing to lend to the Treasury at very low rates, the government's financial future can't really be that bad. "Complete nonsense," Mr. Druckenmiller responds. "It's not a free market. It's not a clean market." The Federal Reserve is doing much of the buying of Treasury bonds lately through its "quantitative easing" (QE) program, he points out. "The market isn't saying anything about the future. It's saying there's a phony buyer of $19 billion of Treasurys a week."

Warming to the topic, he asks, "When do you generally get action from governments? When their bond market blows up." But that isn't happening now, he says, because the Fed is "aiding and abetting" the politicians' "reckless behavior."

"I think technical default would be horrible," he says from the 24th floor of his midtown Manhattan office, "but I don't think it's going to be the end of the world. It's not going to be catastrophic. What's going to be catastrophic is if we don't solve the real problem," meaning Washington's spending addiction.

With last week’s Treasury auctions settling Monday (today), the game is afoot.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Theodore Roosevelt

2011-05-16T16:14:00.001-07:00

Quote Of The Day

“Far better it is to dare mighty things, to win glorious triumphs, even though checkered
by failure, than to take rank with those poor spirits who neither enjoy much nor suffer much,
because they live in the grey twilight that knows not victory nor defeat.”

--Theodore Roosevelt--

LIARS

2011-05-10T05:18:00.001-07:00

Liars

Last Friday’s monthly NFP data wasn’t the only piece of news that hit the tape. By Friday’s last trade the indices had closed unchanged or barely positive because more news from Greece was rattling the European banking sector: if it didn’t get lower bailout rates pronto Greece it threatening to leave the European Union, which would lead to a default of its debt.

The “rumor” was made in a German newspaper that claimed a meeting was being held over the weekend to fashion a solution. When confronted about this rumor, all high ranking European officials denied the meeting was taking place. Moreover, they claimed the very idea was crazy.

As it turns out, the German newspaper was correct and the European officials flatly lied about the matter.

An earlier example of lying is found here and concerned the Portugal bailouthttp://ca.finance.yahoo.com/news/Market-jitters-bring-capress-2621033042.html?x=0

On March 29, when speculation swirled that Portugal needed a bailout, Prime Minister Jose Socrates denied — again — that that would happen despite clearly unsustainable market pressures.

"I'm sick of saying we won't" be requesting help, he told journalists.

Just eight days later, in a chastened appearance on national television, Socrates did just that.

For Jean-Claude Juncker, the prime minister of Luxembourg, the threat of immediate market turbulence means the usual norms of transparency don't apply.
"When it becomes serious, you have to lie," Juncker, who as the chairman of the regular meetings of eurozone finance ministers is one of the currency union's key spokesmen, said in recent remarks.

Was the threat of Greece leaving the EU serious? Yes. Was a resulting default serious? You betcha! And what happens “When it becomes serious…?” According to Mr. Juncker, “you have to LIE.”

Regarding the secret meeting that was denied we read here
http://blogs.wsj.com/brussels/2011/05/09/luxembourg-lies-on-secret-meeting/

So why the lie?

“I was told to say there was no meeting,” said Mr. Schuller, reached by telephone Monday. “We had certain necessities to consider.” (Mr. Schuller is the spokesman for Luxembourg Prime Minister Jean-Claude Juncker.)

Such as?

Evening in Europe is midday in the United States. “We had Wall Street open at that point in time,” Mr. Schuller said. The euro was falling on the Spiegel report, which had overhyped the meeting. “There was a very good reason to deny that the meeting was taking place.” It was, he said, “self-preservation.”

If someone were to say that this market is rigged; would you think he is a crack pot? There are many examples to be sure but this is a beauty: (paraphrased) Wall Street was open and we sure can’t allow reality to ever affect to market. No sir – just LIE!

I wonder how “serious” the upcoming situation will be regarding the US debt ceiling. I wonder if Tax-Cheatin-Timmy will lie as well. Surely the lil-ole stock market will be open and equities may fall, so be prepared for an avalanche of lies from everyone.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Employment?

2011-05-06T05:28:00.000-07:00

Employment?

For a while during Thursday’s trade, the market got it’s @$$ kicked – early, then again late. Apparently the market was “surprised” by the surprisingly bad employment picture that was snapped last week.

Weekly unemployment data was supposed to be 410,000; however, it was shockingly worse at 474,000. Moreover, the prior week’s data was once again revised WORSE than originally reported.

Bloomberg said the following, Initial claims came in at 474,000 in the April 30 week for an astounding contrast with expectations of 410,000 (prior week revised slightly upward to 431,000). The four-week average jumped 22,250 to 431,250 which shows a nearly 40,000 increase from a month ago.

Special factors or not, headline levels are startling especially ahead of tomorrow's monthly employment report where expectations were already weakening. Stocks are on the decline in reaction to the data.

In addition to that, oil futures were CRUSHED today. The first thought of most people is: what will happen to gasoline prices at the pump? Of course, this is quite rational. However, the first thought of traders is: how many margin calls will this liquidation cause and how many equities will be sold to meet them?

Keep that last thought in mind if commodities get slaughtered.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

Hayek vs Keynes Part II

2011-05-02T05:40:00.001-07:00

Hayek vs Keynes Part II

Several months ago I attached a link of an excellent video in which two actors rap economics. It sounds silly but it is both educational and very entertaining. One actor takes the persona of John Maynard Keynes, while the other is F.A. Hayek.

In the video Keynes explains why is big government spending model is proper to “steer” the economy; however, F.A. Hayek (in my opinion) destroys that preposterous idea telling us how it only leads to worse problems.

The video from EconStories can be found here http://www.youtube.com/watch?v=d0nERTFo-Sk

In an equally entertaining follow up, EconStories brings back the two economists with a 2008 meltdown perspective. Notice who gets knocked out in the end…but is declared the victor!

A perfect example of this would the finances of Japan. Following the Keynesian model of non-stop government spending, the Japanese government is about to cross the ONE QUADRILLION Yen debt level. Spending these Yen has done nothing to stop the Japanese deflation; however, it sure has racked up an insane level of debt that must be repaid.

Because economists are like politicians in the sense that they feel like they must “do something” to steer the economy, the clear epic failure of the policies are ignored. What’s more, they continue to be proposed going into the future…as if Keynes had actually won a boxing match with F.A. Hayek.

http://www.youtube.com/watch?v=GTQnarzmTOc
Notice who congratulates Keynes regardless of his failure: banksters, politicians and reporters. F.A. Hayek is congratulated by everyone else.

Trade well and follow the trend, not the so-called “experts.”

Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banksters.

larrylevin@tradingadvantage.com
Trading Advantage
(888) 755-3846__

The Milkman Indicator

2011-04-28T13:02:00.000-07:00

The Daily Reckoning Presents

The Milkman Indicator

Chris Mayer

Our family has a milkman. Yes, a milkman, just like in the old days.

He comes every Friday and drops off a crate full of cold bottles of milk, along with tubs of yogurt and butter, cheeses and sometimes meats. You place your orders online, and the milkman brings it your doorstep, fresh from a local family-owned farm not far from where I live.

I mention this because I got an interesting e-mail from the farm over the weekend, which I think sums up what we face in today's economy. The problem we face is particularly insidious because lots of people don't really understand what causes it, which allows it go on.

But before getting to abstractions, let's look at the e-mail I got from my milkman.

"We would like to take the time to tell you," it begins, "that due to some large price increases we are facing on materials we use to bottle milk...we must raise the price of our glass bottled products."

The e-mail then goes on to show, in some detail, exactly what price increases the farm sees. The milkman is a model of good disclosure and transparency. Many of our banks and corporations should use this e-mail as a model for communicating with the public.

The sources of the pain include a 4% increase in the cost of glass bottles and a 6% increase in the cost of plastic caps. The farm has also seen a 14% increase in shipping costs in just the last six months due to the rising price of fuel. There is more: a 2% increase in materials such as latex gloves and hairnets, a 5% increase in lab supplies for milk testing and an 8% increase in the chemicals used to clean the plant and equipment.

"I hope that you can all see that we have seen a huge increase in total," The e-mail continues. "This is why at this point it has become a must to increase the price of our bottled products 7%. This is always an agonizing decision for us, but sometimes can't be avoided."

We might call this the Milkman Indicator. I can tell you that this is happening across the economy right now. I follow a lot of companies, and rising raw material costs are at the top of the list of concerns facing anybody who makes anything.

Naturally, as investors, the idea would be to play those who benefit from such rising raw material costs and fade those who cannot pass on these costs to their customers. So for example, the rising cost of glass bottles makes me think of Owen-Illinois. This is the world's largest glass container company. I recommended it in my investment letter, Capital & Crisisin December. Part of the thesis there is that price increases in 2011 would help raise margins and profits. So far, the stock hasn't gained much ground, but the core idea behind owning it is still very much in play.

This has actually been something of a mini-theme in Capital & Crisis, where I have recommended several specialty producers of materials that are rising in price. Another idea is to own the producers of the commodities rising in price, like many of the energy and mining stocks I have recommended.

This phenomenon of rising raw material costs brings us around to causes. Why is this happening?

The short answer is that our Federal Reserve is printing a lot of money. It's funny how I can explain this to my 12-year-old using monopoly money - and he gets it - yet it seems economists with Ph.D.s and fancy titles in think tanks and government agencies don't get it all.

When you create a lot of money, that money loses some value. It buys less than it did before. That's what we're seeing, in essence.

The main barometer for monetary creation is the Fed's balance sheet. When it expands, so too does the amount of money sloshing around. All that money sloshing around has to go somewhere. People buy stocks, commodities and gold. There are many, many ways to show this, and I've seen many different kinds of charts that all show the same thing. But I grabbed the one below from today's Wall Street Journal to show you:

So "QE2" is the fancy name given to a very base and simple act: money printing. And you can see that as the Fed's balance sheet has swelled, so too have stocks and gold surfed the wave of cash. The dollar has also weakened (buying less), and rates on mortgages have gone up.

This is just the beginning. We know how past bouts of money printing ended. Badly.

[If you want to read up on the hazards, no book details it better than Adam Fergusson'sWhen Money Dies. Take 20% off when you buy a copy from Laissez Faire Books right here.]

Look again at that table above that shows mortgage rates. Those rates are in the 4-5% range. In the 1980s, it was rare to see new home mortgage rates below 10%. In 1982, the average interest rate on a new home mortgage was 15.12%.

These cycles often take a generation to play out from peak to trough and to peak again. Mortgage rates of 10% didn't just happen in one year. It was a slow buildup over a good two decades. The average mortgage rate in the 1970s was 8.8%, compared to 11.79% in the 1980s. In the 1960s, mortgage rates were in the 5%s.

Look at gold. It didn't jump to $1,500 in a year. It's been in a 10- year bull market.

So to wrap up here, I think we're looking at a long period when prices rise and the cost of money rises. I doubt the Fed's resolve to take back the cash it put in, until it gets really bad. Then another Paul Volcker will arrive on the scene to break the inflation and a deep recession will ensue, like a nasty hangover.

Until then, I think the Fed will keep the bar open and let the good times roll. This means gold up, dollar down, interest rates up and commodities up. And the prices the milkman charges will go up as well.

Regards,

Chris Mayer,
for The Daily Reckoning

Joel's Note: As Chris mentions above, it doesn't take a Ph.D. to understand that more money chasing the same or fewer things means higher prices. An intelligent 12-year old can grasp that...even if the concept remains beyond the nation's leading economists and central bankers. Take a look around your grocery store...the gas pump...the metals indexes. You already know what's going on. You see it every day.

Jesus - Do You Know Him?

2011-04-24T17:41:00.000-07:00

http://www.youtube.com/watch?v=yzqTFNfeDnE&feature=player_embedded

In other news, clashes continue between police and the populace continues in Greece, bringing it closer to default. Greek 2-YR debt yields have skyrocketed to a record 22%!

2011-04-23T19:15:00.001-07:00

http://futurespressagency.bm23.com/public/?q=ulink&fn=Link&ssid=17735&id=9nd10gbnmtza4g569mol2jydv0hie&id2=0ydn1xcb9r1pep6t5qp3bnqu5343z&subscriber_id=bmlzjmvupuvjorevqvvbslkcwbsebnn&delivery_id=cbanifyvpjwutdfydjupsbxihqxhbao&tid=3.RUc.BMS6FQ.CMsa.GHFW..GXIx.b..s.lAA.a.TbBTYA.TbBTYA.ljaP2Q

Corrupted!: 5 Shocking Examples Of Government Corruption That Will Blow Your Mind

2011-04-14T15:12:00.000-07:00

Corrupted!: 5 Shocking Examples Of Government Corruption That Will Blow Your Mind

At times it really is breathtaking how corrupted the U.S. government has become. Government corruption has become so endemic in our society that most people have just kind of accepted it as "normal". But shouldn't we all get hopping mad when we learn that the Federal Reserve sent billions of dollars in bailout money to addresses in the Cayman Islands? Shouldn't we all be furious when one of the leading candidates for the 2012 Republican presidential nomination, Mitt Romney, declares that he is "not going to spend my time focusing on the Federal Reserve"? Shouldn't we all be alarmed when Nancy Pelosi gives a speech in which she says that "elections shouldn't matter"? Shouldn't we all demand that someone be held accountable when we find out that a CBO analysis shows that the "$38.5 billion" in spending cuts will only reduce the budget deficit for this year by $352 million dollars? On top of everything else, shouldn't we all be absolutely horrified when the TSA gropes little 6 year old girls and virtually none of our politicians demand change?

$38.5 Billion In Budget Cuts Is Really Just $352 Million In Deficit Reduction?

Yesterday I wrote about how a close examination of the "budget cut deal" reveals that the 38.5 billion dollars in budget cuts are largely illusory.

However, even I was not ready for what the Congressional Budget Office had to say about this deal. What I read in the Washington Post today absolutely floored me. According to the Washington Post, the Congressional Budget Office is saying that the budget deal will only cut the budget deficit for this year by less than one percent of what was being claimed by Republican and Democrat leaders....

The Congressional Budget Office estimate shows that compared with current spending rates the spending bill due for a House vote Thursday would pare just $352 million from the deficit through Sept. 30. About $8 billion in cuts to domestic programs and foreign aid are offset by nearly equal increases in defense spending.

What a joke.

The reality is that U.S. government is increasing by over 2 million dollars every single minute. So the entire "savings" from this "budget deal" will account for approximately 3 hours of government spending.

Look, the U.S. government ran a budget deficit of $188 billion dollars for the month of March alone. We are in debt up to our eyeballs and it is getting worse at a mind blowing pace.

When are people going to wake up and realize that neither political party is the least bit serious about dealing with our debt problem any time soon?

The Federal Reserve Sent Billions In Bailout Aid To Millionaires and Billionaires In The Cayman Islands

Most Americans don't even understand what the Federal Reserve is, and yet they get to throw trillions of dollars around while being more or less completely unaccountable the entire time.

In a new article for Rolling Stone (which is a must read), Matt Taibbi exposes some of the folks that the Federal Reserve has been sending money to....

The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans eachto Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses. "Our jaws are literally dropping as we're reading this," says Warren Gunnels, an aide to Sen. Bernie Sanders of Vermont. "Every one of these transactions is outrageous."

How in the world does it benefit the American people to send billions of dollars to some ultra-wealthy people down in the Cayman Islands?

In light of what we have already found out, it is absolutely amazing that Congress is still refusing to authorize a complete audit of the Federal Reserve.

The corruption of the Fed is crying out to be investigated.

Unfortunately, many of our top politicians are openly declaring that they have no intention of going after the Federal Reserve.

Mitt Romney Declares That He Will Not Be Going After Ben Bernanke Or The Federal Reserve

In case anyone needs one more sign that Mitt Romney is just another shill for the establishment, just check out the two statements by Romney below.

According to Politico, Romney recently told CNBC's Larry Kudlow that he is not concerned about the Federal Reserve at all....

"I think Ben Bernanke is a student of monetary policy; he's doing as good a job as he thinks he can do," Romney said when Kudlow asked what kind of job Bernanke is doing. "I'm not going to spend my time going after Ben Bernanke. I'm not going to spend my time focusing on the Federal Reserve."

That's just great. The Republican candidate with perhaps the greatest amount of "establishment support" says that he thinks that Bernanke is doing a good job and he does not plan to spend any time focusing on the Federal Reserve.

So if Romney gets in the Federal Reserve will continue to be able to dish out trillions to their friends without any interference.

Nancy Pelosi Declares That "Elections Shouldn't Matter"

How are we supposed to respond when the top Democrat in the House of Representatives declares that "elections shouldn't matter as much as they do"?

During a recent speech, Pelosi implored establishment Republicans to "take back your party" so that elections won't "matter" as much....

To my Republican friends: take back your party. So that it doesn’t matter so much who wins the election, because we have shared values about the education of our children, the growth of our economy, how we defend our country, our security and civil liberties, how we respect our seniors. Because there are so many things at risk right now — perhaps in another question I’ll go into them, if you want. But the fact is that elections shouldn’t matter as much as they do… But when it comes to a place where there doesn’t seem to be shared values then that can be problematic for the country, as I think you can see right now.

Apparently what Pelosi wants is for America to go back to a time when all of us just went along with the false left/right paradigm and when we were all content to sleep while the establishment agenda rolled right along.

Well guess what Nancy? Some of us are starting to wake up.

6 Year Old Girl Molested By The TSA

How far have we fallen as a nation when a 6 year old girl has to have her private areas touched in public by the TSA before she is allowed to get on an airplane?

America is becoming a very strange place.

The following is video that was posted on YouTube of the recent incident involving a 6 year old girl....

So is this what we have become as a nation?

Will we subject ourselves to anything as long as the authorities insist that it will keep us a little bit safer?

Pretty soon America is going to be unrecognizable.

I have previously written about how in one town in Missouri, girls scouts have actually been banned from selling girl scout cookies in their own front yards.

How crazy is that?

In Cleveland, authorities haves announced plans to have "trash supervisors" go snooping through trash cans to ensure that people are actually recycling according to city guidelines.

The control freaks we keep voting into office seem to have an obsession with running ever detail of our lives.

In many areas of the nation we aren't even allowed to do acts of kindness anymore.

For example, in Houston, Texas a couple named Bobby and Amanda Herring that had been feeding homeless people for over a year has been banned by the city from doing so.

So what is next?

Are they going to ban kids from taking lunches to school?

It is already happening....

At one public school in the Chicago area, children have been banned from bringing their lunches from home. Instead, it is mandatory that they eat the food that the cafeteria serves.

Meanwhile, the Federal Reserve gets to create trillions of dollars out of thin air and they get to send it to whoever they want.

What a country we have, eh?

Our system has become corrupted beyond all recognition. Government corruption is out of control and it is getting worse with each passing day.

So when are the American people going to get sick of all this nonsense?

When are....

Wait.

American Idol is on tonight.

Perhaps all of this can just wait for another time.

After all, who wants to miss what J-Lo and Steven Tyler are going to say tonight?

Those two are really a couple of characters!

Our leaders know what they are doing, right?

We can trust our politicians to act in our best interest, right?

So instead of writing about all of this "doom and gloom", perhaps I should just lighten up and focus on fun things like American Idol a little bit more.

What do all of you think

Curse Words versus Blessing Words

2011-04-14T11:03:00.000-07:00

*Curse Words vs. Blessing Words*

You know what is amazing is that people take
that statement so lightly. If you continually
say one curse word a day in your life, and we
all know what a curse word is, guess what, you
are cursing your future and casting your future
into a sea of confusion full of fear...

*Simply Fear Ravages Your Success*

A blessing word, like when you sneeze,
people say 'God Bless You', and a two
seconds later they are cursing...

Let me explain something to you, that
'God Bless You' is casted out into the sea
of fear because of the curse words that
are said each and every day...

Start listening and start taking notice of the
people around you because more people will
speak Curse Words vs. Blessing Words...

Many of you are ashamed and embarrassed to say
things like.. *I am Fired Up* and *I am Excited*
when someone asks you *How are you today*...

Focus right now....

You must understand *YOU* control your future
by the Power of your Words, words you say,
the words you speak, and most importantly
the words you *Speak* into your future...

You choose whether you'll Bless your Future,
or you will Curse your Future

Right Now...

Take a look at your *Results* Today....

Replay the words you spoke in your life in
order to receive either the cursing or the
blessings in your life..

Being truthful to yourself will expose
to you if you have spoken more Curse
words or Blessing words...

It is a Challenging Question to ask yourself
if you have spoken blessing words or
curse words.

Here are a few examples of Words of blessings...

Words that speak Increase, Words of
Affirmations of Excitement, Enthusiasm,
Achievement, Belief, Commitment,
Determination, Focus

You may be asking why are they are
blessing words...

Here's Why...

Because the word 'Blessing'
in the original root word means
*Empowered to Prosper*

And...

When you speak blessings over yourself
and your life, your entire life will change
and will alter to achieve the results of where
you want to go...

That is where it takes Stepping out in
Faith vs.Walking in fear. Curse words
will definitely keep you walking in fear..

Make a conscious decision today to say,
*I am blessing my future*

*I am predicting my future
by words of Blessing*

And remember, if you are seeded with
people who curse and swear, those words
will go into your spirit and those words will
predict your future. You have to make
a conscious decision to only speak,
receive, and be around people who have
blessings coming out of their mouth >>
(With their words)

Blessings is words coming out of your month,
not just when someone sneezes and people
say *God Bless You*

That is the most overused statement by
people who don't have a clue about success
and life, you sneeze, and they say
*God Bless You* and the next word
is a curse or swear word. It doesn't
make a difference or any sense at all...

I say, don't "God Bless Me' because you
have no blessings inside you to come out
because of that. So I want you to
focus on that...

Curse Words vs. Blessing Words

Make a decision today to write down the
date you are reading this article and
start speaking only blessing words and
your entire life will alter, change and
empower you to fulfill your Champion Dream...

Someone will ask you 2-5 years from now...

What Happened?

What Miracle did you receive?"

Miracles are results only for people who are
stepping out in faith each day to expect a
miracle, you have to be stepping out in
expectation...

And the first step in the *Miracle
Expectation Journey* is speaking words
of favor, speaking words of increase,
speaking words of blessing over your life...

Motivating Champions WorldWide for 10+ Years!

John Di Lemme

Lunch With Robert Reich

2011-04-12T06:03:00.000-07:00

From the desk of John Thomas

The Mad Hedge Fund Trader

Tuesday, April 12, 2010

Lunch With Robert Reich.

The other day had me sharing a cold, congealed chicken salad for lunch with Bill Clinton’s Secretary of Labor, Robert Reich, at San Francisco’s posh Fairmont Hotel. We covered a wide range of market impacting topics, which I have summarized below. A Rhodes Scholar who dated Hillary Clinton at Yale, ran for governor of Massachusetts, and authored 12 books, Bob is never without an original thought, nor a stranger to controversy. Today he didn’t disappoint.

Bob says that easy money is creating new bubbles around the world, especially in China (FXI) and commodities, that will only end in tears. The Middle Kingdom is the first country where inflation may break out to the upside.

There is also a new form of protectionism that has emerged under the guise of competitive currency devaluations, where counties printing paper money are racing to the bottom. This will eventually force a revaluation of the Chinese Yuan (CYB), and there’s nothing the Chinese can do to stop it.

A US GDP that is 71% dependent on consumer spending is unsustainable, since they can no longer afford it, can’t get credit, no longer have a personal ATM in the form of home equity loans, are worried about losing their jobs, suffer under a huge debt burden, and are now unexpectedly having to save more for their retirement since their houses have dropped in value by half.

Scott Brown’s surprise win for the Massachusetts senate seat will only cause uncertainty in Washington to explode, not exactly a stock market friendly development. Brown is really “a sheep in wolves’ clothing,” as he is ideologically distant from the right wing that is currently running the Republican party, voted for Massachusetts’s state health care plan, and didn’t dare to use the word “Republican” in his campaign.

The Obama administration committed a major error by devoting one third of its massive $870 billion stimulus program to tax cuts, which in this environment, will get saved, not spent. You might as well have buried the money in your back yard.

The TARP money, while succeeding in rescuing the financial system, only ended up in Treasury bills, and never made it to Main Street. This is what the public is irate about. The loopholes in the proposed financial regulations are big enough for bankers to drive their Ferraris through. The best way to revive the economy is to give money to the states directly, which, unable to run deficits, and can only cut spending and raise taxes. This will create a $350 billion drag on the economy during 2010-2011, in effect an “anti stimulus” that cancels out a third of the federal government’s reflationary efforts.

I took two of Bob’s economics classes at UC Berkeley, and know too well his wry humor, acid wit, and preference for backing up arguments with mountains of empirical data. Entering students are obliged to buy 400 pages of photocopied charts, tables, and other raw data about the labor market which they are expected to commit to memory by the end of the semester. These are not basket weaving classes.

Bob warned me not to take his investment advice, as he bought his home in Berkeley at the 2006 market top, just before it dropped in value by half. On top of that he has had to eat a 10% cut in his Berkeley professor’s salary forced on him by drastic state budget cutbacks. UC Berkeley is the crown jewel of public education, but the state has little choice but to starve it to death. This is not good for the long term future of the Golden State, which has to create the educated class to earn the wealth to pay the taxes.

The real kicker of the lunch was Bob’s forecast that unemployment will remain stubbornly high at 9% a year from now. This is going to be a big problem for Obama in November. The jobs that have been exported to China or replaced by machines aren’t coming back. Because of the arcane way in which the surveys are conducted, someone who isn’t looking for work isn’t counted. But when the economy starts to improve, when they do start to look they are newly counted as jobless, causing the politically sensitive figure to shoot up. To avoid this trap, it is better to look at the Payroll Survey released on the first Friday of each month, which gives a much more accurate read on the economy. Even still, with the average work week at a record low of 33 hours, employers will make their existing staff work longer hours before they hire anyone new.

As we parted company, Bob left me on an upbeat note. “The good news is that the Great Recession of 2008-2009 is over. That’s because it’s now 2010.”

Investment Legends, Part I

2011-04-09T12:10:00.001-07:00

Joel Bowman, on his way to Montevideo, Uruguay...

What if you could ask half a dozen legendary investors their opinions on gold, the dollar and what to do with your money over the next year? That'd be pretty sweet, huh? Well, that's exactly what Jeff Clark did recently when he picked the brains of Jim Rogers, Bill Bonner, John Williams and a handful of other investment luminaries. We've included Part I of his interview below for your weekend reading. Please enjoy...and keep an eye out for part two...

Investment Legends, Part I
Jeff Clark, BIG GOLD
Stowe, Vermont

What will happen to the US economy and the dollar in the near term? Will inflation increase dramatically? What is the outlook for gold, and where should you put your money? BIG GOLD asked a world-class panel of economists, authors, and investment advisors what they expect for the future. Caution: strong opinions ahead...

Jim Rogers is a self-made billionaire, author of the best-sellers Adventure Capitalist and Investment Biker, and a sought-after financial commentator. He was a co-founder of the Quantum Fund, a successful hedge fund, and creator of the Rogers International Commodities Index (RICI).

Bill Bonner is the president and founder of Agora, Inc., a worldwide publisher of financial advice and opinions. He is also the author of the Internet-based Daily Reckoning and a regular columnist in MoneyWeek magazine.

Walter J. "John" Williams, private consulting economist and "economic whistleblower," has been working with Fortune 500 companies for 30 years. His newsletter Shadow Government Statistics provides in-depth analysis of the government's "creative" economic reporting practices.

Steve Henningsen is chief investment strategist and partner at The Wealth Conservancy in Boulder, CO, assisting clients interested in wealth preservation. Current assets under management exceed $200 million.

Frank Trotter is an executive vice president of EverBank and a founding partner ofhttp://www.EverBank.com, a national branchless bank that was acquired by the current EverBank in 2002. He received an M.B.A. from Washington University and has over 30 years experience in the banking industry.

Dr. Krassimir Petrov is an Austrian economist and holds a Ph.D. in economics from Ohio State University. He was assistant professor in economics at the American University in Bulgaria, then an associate professor in finance at Prince Sultan University in Riyadh, Saudi Arabia. He is currently an associate professor at Ahlia University in Manama, Bahrain. He's been a contributing editor for Agora Financial and Casey Research.

BIG GOLD: A lot of economists, including the government, believe the worst is behind us economically. Do you agree? If not, what should we be on the lookout for in 2011?

Jim Rogers: It is better for those getting all the government largesse, but the overall situation is worse. More currency turmoil. State and local problems, plus pension problems.

Bill Bonner: None of the problems that caused the crises in Europe and America have been resolved. They have been delayed and expanded by more debt and more money printing and will lead to more and worse crises. Deleveraging takes time. 2011 will, most likely, be a transition year...not unlike 2010. But the risk is that one of these latent crises will become an active crisis.

John Williams: An intensifying economic downturn – what formally will be viewed as the second dip of a double-dip depression – already has started to unfold. The problem with the economy remains structural, where household income is not growing fast enough to beat inflation, and where debt expansion – encouraged for many years by the Fed as a way to get around the economic growth problems inherent from a lack of income growth – generally is not available, as a result of the systemic solvency crisis. Accordingly, individual consumers, who account for more than 70% GDP, do not have the ability, and increasingly lack the willingness, to fuel the needed growth in consumption on which the US economy is so dependent.

Steve Henningsen: The governments worldwide (I don't pay much attention to economists) want us to believe that the worst is behind us because the financial system is built upon the foundation of trust and confidence. Both of these were battered badly when it was shown that much of the world's prosperity over the past few decades was simply a mirage that, once dispersed, left behind only debt with no means of future production. Now they want us to believe that they fixed the problem via more debt.

What I will be watching for this year is sovereign and US municipal debt corpses floating to the surface sometime in the months ahead.

Frank Trotter: Right now I have a somewhat dark but not dismal outlook. I think that over 2011, we will continue to experience a Jimmy Carter- style malaise that combines continuing high unemployment, tentative business investment, rising prices, low housing numbers when looked at on an absolute basis, and creeping interest rates.

As a very large mortgage servicer, we are not seeing significant improvements in payment patterns that would indicate the worst is fully behind us, and with mortgage rates moving upward, we see less ability for current mortgage holders to refinance and reduce payments.

Krassimir Petrov: No, the worst is yet to come. No structural changes have been made, no problems have been fixed. Printing money, a.k.a. Quantitative Easing, is a quick fix that has postponed the problem, yet also made it a lot worse. I would say that we are still in the early stages of the crisis and have another 4-8 years to go.

BG: Price inflation is creeping up, but the enormous amount of money printing hasn't really hit the system yet. Does that happen in 2011, further down the road, or not at all?

Jim Rogers: It is happening. The US and CNBC lie about it. Most other countries do not lie and acknowledge it is worsening.

Bill Bonner: Most likely, substantial consumer price inflation will not show up in 2011. The explosion of money printing is being contained by the bomb squad of deleveraging. That will probably continue in 2011. But not forever.

John Williams: The problems of the money creation will become increasingly obvious in exchange-rate weakness of the US dollar. Related upside pricing pressure already is being seen on dollar- denominated commodities such as oil. There is high risk of consumer prices rising rapidly before year-end 2011, setting the stage for a hyperinflation. The outside date for the onset of a US hyperinflation is 2014.

Steve Henningsen: My guess is further down the road, as the deleveraging cycle continues with deflationary-housing winds in our face and the banks still hoarding money like my 9-year-old daughter stockpiles American Girl doll paraphernalia. I still expect inflation to continue in areas such as energy, bread, circuses, and whatever else provides sustenance to the Romans – I mean people.

Frank Trotter: Most research has shown that over time the increase in money supply is not a short-term economic stimulus, but rather has a moderate effect in the 18- to 36-month range. In addition, this theory contends that a growth in the monetary base – which is what has happened so far – only increases economic activity when accompanied by a decent multiplier; this is not occurring. The real risk is that with rising rates and continued soft economy, the Fed will feel obliged to continue to QE3, QE4, and so on, all of which may have a significant inflationary impact.

I am more concerned about general price inflation here in the US and the potential it has to reduce global growth.

Krassimir Petrov: This is a tough one. I would have thought that price inflation would have been raging by now, but this is obviously not the case. I have the feeling that 2011 will be a repeat of early 2008, with commodity prices (CRB) making new all-time highs. A falling dollar will trigger a rush into commodities as a hedge against inflation. I am really tempted to make a totally outrageous forecast that oil could make a run for $200 as QE3 unleashes another dollar scare, or maybe even a dollar crisis.

To be continued...

Regards,

Jeff Clark
for The Daily Reckoning

US Is One Big Ponzi Scheme

2011-03-15T06:49:00.001-07:00

Congressman John Campbell's Moment Of Epiphany - Realizes US Is One Big Ponzi

By Tyler Durden

Created 03/14/2011 - 13:43

Zero Hedge first observed the duration mismatch in US Treasury holdings back in November 2009 [1], when we highlighted the concerning amount of debt [2]that the government has to roll every year courtesy of about 30-40% in outstanding paper that is of very short duration (under 2 years or so). We have also been pretty adamant that by now the US economic system is nothing but a ponzi scheme pure and simple. Today, we observe how this epiphany manifests itself when it occurs to a congressman, in this case John Campbell (California). The punchline: "I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel." Amen brother.

From John Campbell's website [3]:

Treasury Bonds: I learned something last week. I learned that fully 40% of the over $9 trillion in Treasury debt currently outstanding to the public has a maturity of 3 years or less. Put another way, it means that we are rapidly approaching $4 trillion in U.S. debt that matures by 2014 or sooner. As I write this, the yield (interest rate paid) on a 2-year Treasury note is 0.645% or about 2/3 of one percent. The yield, at the same time, on a 10 year Treasury note is 3.4%, and on a 30 year is 4.55%. In bond parlance, this is called a "steep yield curve" where interest rates get much higher as you go farther out in time.

It's pretty clear why the Treasury is doing this. By issuing mostly short-term notes, the Treasury is paying less interest, thereby keeping interest costs and, consequently, the deficit down. In addition, the Federal Reserve is in the middle of its "quantitative easing #2" (QE2) under which it is buying $600 billion of our own Treasury debt over about a 6 month period. The Fed is not buying the short-term notes, but is buying 10 year maturities and longer in order to hold those rates down. And, since the Fed is earning the interest thereon (paid by the U.S. Treasury), it is improving its yield. We are currently running a deficit of about $130 billion per month, so the Fed is basically buying all of the new bond issuance from the deficit for almost 5 months.

What does this all mean? I understand that the Fed and the Treasury are trying to keep interest rates low and improve the economy and the deficit. But, when coupled with the huge deficits, these moves look a bit like a Ponzi scheme that will soon unravel.

We are printing money ($600 billion) to buy our own debt so that the full effects of the deficit are not felt. We are buying long-term bonds to artificially hold down the rates on those bonds since home mortgages and many other things are based on those rates. We are selling the short-term bonds at cheaper rates to hold down costs now, but are leaving ourselves open to huge cost increases when interest rates go up. And, we are at historic lows on these short-term bond rates. If they were to rise by 3 points (which would put them where they were at as recently as 2008), our deficit would increase by another $150 billion per year, even if the long-term rates stay the same. And, once the Fed ends QE2, even if it doesn't reverse it, the markets will then have to absorb a new influx of long-term bonds at a time when our ability to pay them is in question. The Fed can cure a bunch of this simply by printing a lot more money. That, however, will result in an inflationary period with major wealth destruction and economic malaise.

In the period between 2005-2007, we were sowing the seeds of the 2008 financial crisis through too much leverage in the private sector. But, very few people could see it coming. Today, we are sowing the seeds of another crisis with too much leverage in the public sector. This time, though, it's easy to see it coming.

Making the Chicken Run

2011-03-04T06:46:00.001-08:00

Making the Chicken Run

By Doug Casey

With the U.S. government’s ever-increasing stranglehold on Americans’ assets, smart investors are now taking their wealth abroad. Doug Casey tells you how to do it, and why you shouldn’t put it off any longer.

“Making the chicken run” is what Rhodesians used to say about neighbors who packed up and got out during the ‘60s and ‘70s, before the place became Zimbabwe. It was considered “unpatriotic” to leave Rhodesia. But it was genuinely idiotic not to.

I’ve written many times about the importance of internationalizing your assets, your mode of living, and your way of thinking. I suspect most readers have treated those articles as they might a travelogue to some distant and exotic land: interesting fodder for cocktail party chatter, but basically academic and of little immediate personal relevance.

I’m directing these comments towards the U.S., mainly because that’s where the problem is most acute, but they’re applicable to most countries.

Rolling into 2011, the U.S. is in real trouble. Not as bad as Rhodesia 40 years ago, and definitely a different kind of trouble, but plenty serious. For many years, it’s been obvious that the country was eventually going to hit the wall, and now the inevitable is rapidly becoming imminent.

What do I mean by that? There’s plenty of reason to be concerned about things financial and economic. But I personally believe we haven't been bearish enough on the eventual social and political fallout from the Greater Depression. Nothing is certain, but the odds are high that the U.S. is going into a time of troubles at least as bad as any experienced in any advanced country in the last century.

I hate saying things like that, if only because it sounds outrageous and inflammatory and can create a credibility gap. It invites arguments with people, and although I enjoy discussion, I dislike arguing.

It strikes most people as outrageous because the long-running post-WW2 boom has been punctuated only by brief recessions. After 65 years, why should it ever end? The thought of a nasty end certainly runs counter to the experience of almost everyone now alive – including myself – and our personal experience is what we tend to trust most. But it seems to me we're very close to a tipping point. Ice stays ice even while it’s being warmed – until the temperature goes over 32 F, where it changes very quickly into something very different.

First, the Economy

That point – economic bankruptcy accompanied by financial chaos – is quickly approaching for the U.S. government. With deficits over a trillion dollars per year for as far as the eye can see, the U.S. Treasury will very soon be unable to roll over its maturing debt at anything near current interest rates. The only reliable buyer will be the Federal Reserve, which can buy only by creating new dollars.

Within the next 24 months, the dollar is likely to start losing value rapidly and noticeably. Foreigners, who own over 7.3 trillion of them (including T-bills and other IOUs), will start panicking to dump them. So will Americans. The dollar bond market, today worth $36 trillion, will be devastated by much higher interest rates, a rapidly depreciating dollar, and an epidemic of defaults.

And that will be just the start of the trouble. Since the U.S. property market floats on a sea of debt (and is easy to tax), it’s also going to be hit very hard – again. This time by stifling mortgage rates. Forget about property owners paying their existing mortgages; many won’t be able to pay their taxes and utilities, and maintenance will be out of the question.

The pain will spread. Insurance companies are invested mostly in bonds and real estate; many will go bankrupt. The same is true of most pension funds. If the stock market doesn’t collapse, it will only be because money is looking for a place to hide from inflation. The payout for Social Security will drop significantly in real terms, if not in dollars. The standard of living of most Americans will fall.

This rough sequence of events has happened in many countries in recent decades, and they’ve survived the tough times. But it has the potential, at least in relative terms, to be more serious in the U.S. than it was in Argentina, Brazil, Serbia, Russia, Mozambique or Zimbabwe, for two main reasons.

First, many people in those countries knew they couldn’t trust their government and acted accordingly, even in contravention of the law, by accumulating assets elsewhere. So there was a significant pool of capital available for rebuilding. Americans, on the other hand, tend to be much more insular, law-abiding and trusting in their government. When they lose their U.S. assets, they'll have lost everything.

Second, those societies were significantly more rural than the U.S. is today. As in the America of 100 years ago, much of the population lived quite close to the land and had practical skills and habits that helped them get through the tough times. For 21st-century Americans, it's a different story. Shortages and disorder are going to hit commuters who live in suburbs, and urban dwellers who think milk appears in cartons magically, like a ton of bricks.

One thing you can absolutely count on is that everyone will look to the government to “do something." Americans really do think governments control the way the world works. Another certainty is that the U.S. government will “step in” massively, because everyone will want them to, and the politicians themselves believe they should. This will greatly aggravate the crisis and make it last much longer than necessary.

Then It Gets Serious

But that’s just over the short run. The long run is much more serious, because the next chapter of the Greater Depression has every chance of radically, and at least semi-permanently, overturning the basic character of American life. Ice turned to water – suddenly and unexpectedly – in Russia in 1918, Germany in 1933, China in 1949, Vietnam in 1954, Cambodia in 1975, and Rwanda in 1995. Those are just the first examples that come to mind. There are scores more.

The economic events I’ve outlined are going to mean serious hardship and unpleasantness for many people. But that doesn't concern me nearly as much as the social and political reaction.

Everybody gets hurt in a serious depression, but if you understand what’s going on and prepare for it, you can do well enough. Of course, political and social change always follow economic and financial upheaval, but I think it’s going to be much more drastic this time, because the U.S. has been on the road to becoming a police state for quite a while. The trend was supercharged by the so-called War on Terror, starting in 2001. And it’s likely to go into hyper-drive in the months to come as the economy emerges from the eye of the storm. I know it seems asynchronous to think of a police state in a suburban country dotted with shopping malls. But not really.

Think in terms of science fiction, a genre that has far more predictive value than the work of any futurist or think tank.

Reality is mimicking art. In 1932, Aldous Huxley described a highly controlled utopia in Brave New World, where drugs made everybody think (actually feel, because thinking could only make you unhappy) that they were happy. The U.S. has pretty much done that drill, consuming massive quantities of everything on credit, watching American Idol and its clones in every spare moment, and using plenty of Ritalin and Prozac along the way.

Sixteen years later, George Orwell described an even more tightly controlled dystopia in 1984. Everybody knows that story, even if they haven’t read the book.

Interestingly, like good sci-fi writers, both authors were just a generation or so ahead of events. What we’re likely to see in the next few years is elements of both their worlds.

Actually, we’re seeing it right now, or at least a preview. Whenever I return to the U.S., dealing with Immigration and Customs makes my skin crawl. And they’re no longer just at airports and the border; they now range many miles inland and make random stops to see if your papers are in order.

They’re almost as objectionable as the TSA, which has developed a highly dangerous corporate culture, even as it’s grown in numbers and power, now reaching into busses, trains, and soon the highways. The FBI, the CIA, the DEA, the ATF, the Secret Service, the Federal Marshals, FEMA, and literally scores of other national law enforcement agencies are all expanding rapidly.

They’ve long constituted a veritable Praetorian Guard but now truly have lives of their own. Homeland Security is completing its new 400-acre campus in Washington, DC. Police forces all over the country are increasingly militarized in both equipment and attitude. And the military itself, bloated on a budget of hundreds of billions a year, has come a long way from the slapstick world of Beetle Bailey, full of steroid-pumped Black Ops wannabes who’ve picked up plenty of bad habits in the government's numerous undeclared wars. All these types endorse the dozens of “fusion centers” that have been created across the U.S. to collect and correlate information from every source imaginable, for some purpose.

All these organizations are bureaucracies. They serve themselves first. Their prime impulse is to grow and increase their budgets. They tend to attract the wrong kind of person and drive out people of good will. And it’s reached a stage where even if John Galt were elected president, he’d find them not just impossible to uproot but dangerous to confront.

So here’s another prediction. Riding the economic and social disorder, these new Praetorians, oriented as they are toward professional paranoia and the “national security” state, are going to become truly virulent. They’re going to use the continuing economic crisis to increase their power, like it or not. The American people will demand it, since they are so degraded that they really do prefer the appearance of security to the prospect of having to take personal responsibility.

If I’m right (and I feel as sure about this as I ever have about anything), then it’s not going to go well for libertarians, classical liberals, old-line conservatives, individualists, free-thinkers, non-conformists, people who subscribe to letters like this or who cruise suspicious websites, or gamma-rats generally. It was a dangerous environment for these types (not to mention those of Japanese or German descent and members of various religious groups) during America’s past crises. When the chimpanzees are hooting and panting, you’d better join them, or they’ll start wondering why not.

I expect what we’re looking at is going to be much more serious than any past crisis, partly because America has already evaporated, like the morning haze on a hot summer's day. You're not in Kansas anymore. Kansas isn't in Kansas anymore.

Practical Objections

All very well, you may say. But there are practical issues, you also say. A person can’t just pick up and leave and go where he wants and do what he wants… can he? Get real, Casey. There are reasons a person has to stay where he is, aren’t there?

Let’s look at some of those reasons.

“America is the best country in the world. I’d be a fool to leave.” That was absolutely true, not so very long ago. America certainly was the best – and it was unique. But it no longer exists, except as an ideal. The geography it occupied has been co-opted by the United States, which today is just another nation-state. And, most unfortunately, one that’s become especially predatory toward its citizens.

“My parents and grandparents were born here; I have roots in this country.” An understandable emotion; everyone has an atavistic affinity for his place of birth, including your most distant relatives born long, long ago, and far, far away. I suppose if Lucy, apparently the first more-or-less human we know of, had been able to speak, she might have pled roots if you’d asked her to leave her valley in East Africa. If you buy this argument, then it’s clear your forefathers, who came from Europe, Asia, or Africa, were made of sterner stuff than you are.

“I’m not going to be unpatriotic.” Patriotism is one of those things very few even question and even fewer examine closely. I’m a patriot, you’re a nationalist, he’s a jingoist. But let’s put such a tendentious and emotion-laden subject aside. Today a true patriot – an effective patriot – would be accumulating capital elsewhere, to have assets he can repatriate and use for rebuilding when the time is right. And a real patriot understands that America is not a place; it’s an idea. It deserves to be spread.

“I can't leave my aging mother behind.” Not to sound callous, but your aging parent will soon leave you behind. Why not offer her the chance to come along, though? She might enjoy a good live-in maid in your own house (which I challenge you to get in the U.S.) more than a sterile, dismal and overpriced old people’s home, where she’s likely to wind up.

“I might not be able to earn a living.” Spoken like a person with little imagination and even less self-confidence. And likely little experience or knowledge of economics. Everyone, everywhere, has to produce at least as much as he consumes – that won’t change whether you stay in your living room or go to Timbuktu. In point of fact, though, it tends to be easier to earn big money in a foreign country, because you will have knowledge, experience, skills, and connections the locals don't.

“I don’t have enough capital to make a move.” Well, that was one thing that kept serfs down on the farm. Capital gives you freedom. On the other hand, a certain amount of poverty can underwrite your freedom, since possessions act as chains for many.

“I'm afraid I won't fit in.” As I explained a little earlier, the real danger that's headed your way is not fitting in at home. This objection is often proffered by people who’ve never traveled abroad. Here’s a suggestion. If you don’t have a valid passport, apply for one tomorrow morning. Then, at the next opportunity, book a trip to somewhere that seems interesting. Make an effort to meet people. Find out if you’re really as abject a wallflower as you fear.

“I don’t speak the language.” It’s said that Sir Richard Burton, the 19th-century explorer, spoke 10 languages fluently and 15 more “reasonably well.” I’ve always liked that distinction although, personally, I’m not a good linguist. And it gets harder to learn a language as you get older – although it’s also true that learning a new language actually keeps your brain limber. In point of fact, though, English is the world’s language. Almost anyone who is anyone, and the typical school kid, has some grasp of it.

“I'm too old to make such a big change.” Yes, I guess it makes more sense to just take a seat and await the arrival of the Grim Reaper. Or, perhaps, is your life already so exciting and wonderful that you can't handle a little change? Better, I think, that you might adopt the attitude of the 85-year-old woman who has just transplanted herself to Argentina from the frozen north. Even after many years of adventure, she simply feels ready for a change and was getting tired of the same old people with the same old stories and habits.

“I’ve got to wait until the kids are out of school. It would disrupt their lives.” This is actually one of the lamest excuses in the book. I’m sympathetic to the view that kids ought to live with wolves for a couple of years to get a proper grounding in life – although I’m not advocating anything that radical. It’s one of the greatest gifts you can give your kids: to live in another culture, learn a new language, and associate with a better class of people (as an expat, you’ll almost automatically move to the upper rungs – arguably a big plus). After a little whining, the kids will love it. When they’re grown, if they discover you passed up the opportunity, they won’t forgive you.

“I don’t want to give up my U.S. citizenship.” There’s no need to. Anyway, if you have a lot of deferred income and untaxed gains, it can be punitive to do so; the U.S. government wants to keep you as a milk cow. But then, you may cotton to the idea of living free of any taxing government, while having the travel documents offered by several. And you may want to save your children from becoming cannon fodder or indentured servants, should the U.S. reinstitute the draft or start a program of “national service” – which is not unlikely.

But these arguments are unimportant. The real problem is one of psychology. In that regard, I like to point to my old friend Paul Terhorst, who 30 years ago was the youngest partner at a national accounting firm. He and his wife, Vicki, decided that “keeping up with the Joneses” for the rest of their lives just wasn’t for them. They sold everything – cars, house, clothes, artwork, the works – and decided to live around the world. Paul then had the time to read books, play chess, and generally enjoy himself. He wrote about it in Cashing In on the American Dream: How to Retire at 35. As a bonus, the advantages of not being a tax resident anywhere and having time to scope out proper investments has put Paul way ahead in the money game. He typically spends about half his year in Argentina; we usually have lunch every week when in residence.

I could go on. But perhaps it’s pointless to offer rational counters to irrational fears and preconceptions. As Gibbon noted with his signature brand of irony, “The power of instruction is seldom of much efficacy, except in those happy dispositions where it is almost superfluous.”

Let me say again, time is getting short. And the reasons for looking abroad are changing.

In the past, the best argument for expatriation was an automatic increase in one's standard of living. In the ‘50s and ‘60s, a book called Europe on $5 a Day accurately reflected all-in costs for a tourist. In those days a middle-class American could live like a king in Europe; but those days are long gone. Now it’s the rare American who can afford to visit Europe except on a cheesy package tour. That situation may actually improve soon, if only because the standard of living in Europe is likely to fall even faster than in the U.S. But the improvement will be temporary. One thing you can plan your life around is that, for the average American, foreign travel is going to become much more expensive in the next few years as the dollar loses value at an accelerating rate.

Affordability is going to be a real problem for Americans, who’ve long been used to being the world's “rich guys.” But an even bigger problem will be presented by foreign exchange controls of some nature, which the government will impose in its efforts to “do something.” FX controls – perhaps in the form of taxes on money that goes abroad, perhaps restrictions on amounts and reasons, perhaps the requirement of official approval, perhaps all of these things – are a natural progression during the next stage of the crisis. After all, only rich people can afford to send money abroad, and only the unpatriotic would think of doing so.

How and Where

I would like to reemphasize that it’s pure foolishness to have your loyalties dictated by the lines on a map or the dictates of some ruler. The nation-state itself is on its way out. The world will increasingly be aligned with what we call phyles, groups of people who consider themselves countrymen based on their interests and values, not on which government's ID they share. I believe the sooner you start thinking that way, the freer, the richer, and the more secure you will become.

The most important first step is to get out of the danger zone. Let’s list the steps, in order of importance.

1.Establish a financial account in a second country and transfer assets to it, immediately.

2.Purchase a crib in a suitable third country, somewhere you might enjoy whether in good times or bad.

3.Get moving toward an alternative citizenship in a fourth country; you don’t want to be stuck geographically, and you don’t want to live like a refugee.

4.Keep your eyes open for business and investment opportunities in those four countries, plus the other 225; you’ll greatly increase your perspective and your chances of success.

Where to go? The personal conclusion I came to was Argentina (followed by Uruguay), where I spend a good part of my year, and even more when my house at La Estancia de Cafayate is completed.

In general, I would suggest you look most seriously at countries whose governments aren’t overly cozy with the U.S. and whose people maintain an inbred suspicion of the police, the military, and the fiscal authorities. These criteria tilt the scales against past favorites like Australia, New Zealand, Canada, and the UK.

And one more piece of sage advice: stop thinking like your neighbors, which is to say stop thinking and acting like a serf. Most people – although they can be perfectly affable and even seem sensible – have the attitudes of medieval peasants that objected to going further than a day’s round-trip from their hut, for fear the stories of dragons that live over the hill might be true. We covered the modern versions of that objection a bit earlier.

I’m not saying that you’ll make your fortune and find happiness by venturing out. But you’ll greatly increase your odds of doing so, greatly increase your security, and, I suspect, have a much more interesting time.

Let me end by reminding you what Rick Blaine, Bogart’s character in Casablanca, had to say in only a slightly different context. Appropriately, Rick was an early but also an archetypical international man. Let’s just imagine he’s talking about what will happen if you don’t effectively internationalize yourself, now. He said: “You may not regret it now, but you’ll regret it soon. And for the rest of your life.”

[You may well regret it for the rest of your life if you don’t take appropriate steps now to internationalize and thus protect your wealth. To find out how to do it, what to watch out for, and which perfectly legal tactics to employ, read our free report “Does Your Bank Account Speak Spanish?”