Tuesday, January 31, 2012

MARKET NOTES................

Blessed is the nation whose God is the LORD

A REAL GOAT RODEO..........

Once again, we now have a set of market conditions that is associated almost exclusively with steeply negative outcomes. In this case, we're observing an "exhaustion" syndrome that has typically been followed by market losses on the order of 25% over the following 6-7 month period (not a typo). 

Worse yet, this is coupled with evidence from leading economic measures that continue to be associated with a very high risk of oncoming recession in the U.S. - despite a modest firming in various lagging and coincident economic indicators, at still-tepid levels. Compound this with unresolved credit strains and an effectively insolvent banking system in Europe, and we face a likely outcome aptly described as a Goat Rodeo.

Goat Rodeo - Appalachian slang for a chaotic, high-risk, or unmanageable scenario requiring countless things to go right in order to walk away unharmed.

Finally, while we typically discourage drawing inferences from any single indicator, it's at least worth noting that with the release of Q4 GDP figures, the year-over-year growth rate of real U.S. GDP remains below 1.6% (denoted by the red line below). A decline in GDP growth to this level has always been associated with recession, usually coincident with that decline, though with a two-quarter lag in two instances (1956 and 2007), and with one post-recession dip in growth during the first quarter of 2003. As it happens, the GDP growth rate dropped below 1.6% in the third quarter of 2011.

Given the strong and rather obvious relationship between the most recent year-over-year rate of GDP growth and the prospect of oncoming recession, it's difficult to understand why Wall Street so completely rejects the likelihood of an economic downturn. Then again, that's exactly why we're expecting a Goat Rodeo.

WALL STREET IS SELFISH AND ONLY INTERESTED IN THEIR PROFITS, NOT THE PROFITS OF THE HARDWORKING LITTLE MAN OR HOW THEIR LIES AFFECT AMERICA.

COLLAPSE...........

If the banksters and government cannot find a way to run another geometric debt scam then the entire ponzi scheme that has held up asset prices for the last 30 years will collapse. 

Not "might collapse", or "could collapse."

Will collapse !!!!!!

TALK ABOUT COLLAPSING.............

DON'T MISS THIS VIDEO CLIP

Pontiac Michigan For Sale, all of it!

http://video.msnbc.msn.com/nightly-news/46169922/#46169922

YOU HAVE TO LOVE BOB LUTZ, A HUGE PART OF THE PROBLEM, SAYING HE HOPES IT CAN COME BACK, WHILE SURROUNDED BY THE WEALTH HE STOLE WHILE HE WAS A PART OF THE FAILED SYSTEM.


2011 GDP: 1.7%

That's the final, pathetic growth number for 2011.

From the just-released GDP report:

Real GDP increased 1.7 percent in 2011 (that is, from the 2010 annual level to the 2011 annual level), compared with an increase of 3.0 percent in 2010.  The increase in real GDP in 2011 primarily reflected positive contributions from personal consumption expenditures (PCE), exports, and nonresidential fixed investment that were partly offset by negative contributions from state and local government spending, private inventory investment, and federal government spending.  Imports, which are a subtraction in the calculation of GDP, increased.

Will Portugal follow Greece?

Portuguese bond yields have increased on the back of downgrades and fears that Portugal will follow in the footsteps of Greece.
 chart
Another Chart That Looks Exactly Like The 

Crash Of 2008


chart

SAVINGS IS A KEY METRIC...........

The US economy is trapped, not because of a sharp increase in the demand for money, but because loose monetary policies have depleted the pool of real savings. What is required to fix the economy is not to generate more inflation but the exact opposite. Setting a higher inflation target, will only weaken the pool of real savings further and will guarantee that the economy will stay in a depressed state for a prolonged period of time. THE PEOPLE AT THE FED ARE EITHER REAL STUPID OR MOTIVATED BY AN ALTERNATE AGENDA OTHER THAN WHAT'S GOOD FOR AMERICA.

Once the economy falls into a recession because of a falling pool of real saving, any government or central-bank attempts to revive the economy must fail.

Not only will these attempts not revive the economy; they will deplete the pool of real savings further, thereby prolonging the economic slump.

Likewise any policy that forces banks to expand lending "out of thin air" will further damage the pool and will reduce further banks' ability to lend.

The essence of lending is real savings and not money as such. It is real savings that imposes restrictions on banks' ability to lend. (Money is just the medium of exchange, which facilitates real savings.)

Note that without an expanding pool of real savings any expansion of bank lending is going to make banks' nonperforming assets worth even less.

THE IRAN SITUATION.............

While talking tough, the U.S. is showing ever greater concern with the possibilities of an uncontrollable Iran. There has been increasing chatter that President Obama is now prepared to talk directly with Tehran, a willingness that may upset other anti-Iranian allies such as Turkey and Saudi Arabia. If the Saudis feel sidelined or if they come to see the U.S. as an unreliable guarantor of Middle East peace, they may decide to abandon their long held support for American policy interests.

As a result of the diplomatic mess, investors should consider the renewed possibility of armed conflict in the Persian Gulf. It should not be ignored that, in a possibly tight election this fall, a "wag the dog" scenario with Iran is not beyond the realm of possibility. A war, or even an escalation in tensions, could be a deciding factor in allowing an incumbent president to maintain power. By secretly encouraging conflict, a sitting president could find substantial political benefit, even while maintaining dovish rhetoric. Although Obama came to office promising change, some things never do. RISKING YOUNG AMERICAN LIVES TO MAINTAIN POLITICAL POWER. WHAT KIND OF COWARD DOES THAT?

Investors should harbor no illusions that the recent surge in petroleum prices will ebb anytime soon, if ever.



The Worlds Massive Debt Bomb

$7,600,000,000,000 Dollars Of Debt Must Be Rolled Over In 2012

When it comes to government debt, it is not just new debt that is the problem.  Every single year, governments around the world must "roll over" gigantic mountains of debt that come due.  That means that the actual borrowing that takes place each year is far greater than the yearly budget deficits that you see talked about on television.

In 2012, a total of 7,600,000,000,000 dollars of debt must be rolled over by the G-7 nations, Brazil , Russia , India and China.  When you add in interest payments, that number rises to over $8 trillion.  And that does not even include any new borrowing that all of those nations will do in 2012.  

This is a debt bomb that could devastate the entire global economy at any time.  Everything will be fine as long as global lenders are willing to lend these countries gigantic mountains of very cheap money.  But if that changes, and there are already a multitude of signs that a massive global credit crunch has begun, it will mean a complete and total financial nightmare for the entire world.

The following list compiled by Bloomberg shows the amount of debt that these various nations must roll over in 2012….

Japan: 3,000 billion
U.S.: 2,783 billion
Italy: 428 billion
France: 367 billion
Germany: 285 billion
Canada: 221 billion
Brazil: 169 billion
U.K.: 165 billion
China: 121 billion
India: 57 billion
Russia: 13 billion

Up until recently, these powerful nations have been able to easily roll over their debts each year because lenders have been willing to shower them with gigantic quantities of very cheap money.

But in 2011 bond yields for many European nations really started to soar.  When the cost of borrowing goes up, that puts a lot more pressure on the finances of nations that are already very deep in debt.

According to Bloomberg, it is being projected that borrowing costs for G-7 nations will rise very rapidly in 2012 as well….

Borrowing costs for G-7 nations will rise as much as 39 percent from 2011, based on forecasts of 10-year government bond yields by economists and strategists surveyed by Bloomberg in separate surveys.

Rising borrowing costs are a major reason why Italy is on the verge of financial collapse right now.

One thing is for sure – the world will never be the same after this debt crisis plays out. Enjoy the prosperity of today while you can, because there is no way that it can last.

A massive financial collapse is coming, and it is going to shake the entire globe.

Sadly, most people remain ignorant about the debt bomb that is hanging over the nations of the world, and the coming crisis is going to devastate their lives without any warning.


This Chart Will Literally Make People's Jaws Drop........


The extent of how bad it is is not well known.

Youth Unemployment


The Mother Of All Head And Shoulders...............

Not only is the market currently in a mini "head and shoulders" pattern, this head and shoulders pattern is in itself the second shoulder in a larger pattern.

chart of the day, dow jone sindustrial 1987 to present, jan 30 2012

4 Reasons The Future Of The Global Economy Rests 'On A Knife's Edge'................


4 Reasons The Future Of The Global Economy Rests 'On A 

Knife's Edge'


The world faces a monumental but "unsettling" choice right now, writes PIMCO CEO and co-chief investment officer Mohammad El-Erian in a Foreign Policy article published today.

"It can either break out of its current malaise and deliver economic prosperity, jobs, and greater social fairness; or, instead, it can slip deeper into unemployment, inequality, financial instability, and trade wars."

The outcome of this make-it-or-break-it moment hinges on the outcomes of four major issues:

"European economic and financial fragmentation," which threatens to plunge the global economy into recession

"Disruptions in the Middle East" that could disrupt the entire region

"Central bank exhaustion" after they have run out of options to ease struggling economies

"Social unrest," in particular the inability of grassroots movements with complaints to transform themselves into forward-looking organizations that will influence policy

On the other hand, four "best case scenarios" could easily unsettle this trend. However, all these scenarios revolve around an efficient, forward-looking political leadership—and the people who vote that leadership into office:

It is not due to complicated technical difficulties that many of the world's economic problems persist and deepen. In most cases, today's malaise is a reflection of political dysfunction and ineffective leadership, both of which pre-empt any meaningful effort to take the difficult yet necessary decisions. Witness how the U.S. Congress has torpedoed President Barack Obama's job initiative. As a result, the credibility of the system itself suffers. Fortunately, several key countries, including the United States, are holding elections this year, giving citizens an opportunity to send a message to their elected representatives. The greater the clarity and urgency of that message, the higher the probability that bickering politicians can overcome real and perceived legacies to unite in doing the right thing for current and future generations of citizens.

NEVER GOING TO HAPPEN IN THE U.S.!  BIG MONEY AND CORPORATIONS PICK THE CANDIDATES ON BOTH SIDES AND THEN CITIZENS BELIEVE THEIR VOTE COUNTS, IT'S A COMPLETE JOKE! 

OUR ECONOMY IS A GIANT PONZI SCHEME AND OUR LEADERS ARE ELECTED IN A SYSTEM THAT IS NOTHING BUT A SHAM.

Eurogeddon: What Next?..............

Eurogeddon: What Next?

The entire world is presently fixated with the Eurozone's financial struggles, and for good reason. Will this currency union of 17 nations collapse? Will some European countries default on their debt? Could a group of countries emerge in a fiscal union with a "new euro"? The consequences of a break-up of the Eurozone are truly dire. Why? For quite a number of reasons, but the most contagious of these being that numerous banks would collapse.

Should this occur, it would ripple out to the entire world financial system in a matter of nanoseconds. Credit markets would again seize up, contributing to another Great Recession … if not worse. 

The fact is that perhaps hundreds of banks (including some of the largest in the world) are already technically insolvent. It explains why key central banks are working together to ensure that no major banks get pushed to the wall should their funding dry up. On November 30th, the central banks of five key nations (U.S., Japan, Canada, UK Switzerland) together with the European Central Bank (ECB) announced joint actions to backstop the liquidity requirements of the European banking sector.

With the threat of potential bankruptcies, it only follows that investors are pulling their money out of European banking paper. As these banks roll over their debts (when they come due) they find that there are no takers for their new debt. That's were the central banks come in.

Debates are raging as to what could be done to alleviate Europe's financial problems. What makes the situation all the more dangerous than the first stage of Global Financial Crisis, is that Ground Zero is now found in the sovereign government bonds of the richest nations.

Whereas much of the blame for the first stage of the GFC (which began back in early 2008) was pinned on over-valued real estate securities and Wall Street alchemy, this time it is in an asset-type that is supposed to be a risk-free — namely government bonds of O.E.C.D. (Organization of Economic Cooperation and Development) nations.

Of course, nothing is entirely risk free. However, the world's financial system has been built upon the throne of O.E.C.D. debt. For the purposes of regulating bank's reserve ratios, these bond holdings are considered risk-free. Yes, it is government debt, not savings nor gold nor anything else tangible that underpins the value of money and the world's financial system. And, now the very heart and core of this system has been shown to be subject to massive collapse.

You couldn't dream up a more lethal coronary for the world's financial system.

This dire situation now ushers in an era of complete lawlessness. Of course, aspects of the financial dislocations that have unfolded to date have always involved greed and corruption at various levels. As such, these developments have therefore been against the intent of the original laws and regulatory structure. In this sense, lawlessness is not new. But, no one imagined back in the days when global financial systems were formalized under the auspices of the Bank of International Settlements that an O.E.C.D. nation could ever go bankrupt!  OUR ARROGANCE AND EGO MANIA GO WAY BACK! 

While it is true that no O.E.C.D nation has yet officially defaulted (not even Greece nor Ireland), the value of their government bonds have disintegrated. Banks who hold these securities will have incurred losses of as much as 50% and more. As such, O.E.C.D. debt — the core of modern-day wealth — has grossly failed.

That means that the rule of law is now conveniently put aside for what is deemed to be the "greater good." For example, the terms of credit default insurance have been ignored in order that the credit write-downs and restructuring of Greece's government bonds would not be considered a technical default. Everybody knows that Greece has effectively defaulted on some of its debts. But not officially. Were that the case, perhaps trillions of dollars of default insurance would have been triggered, the realization of which would have abruptly caused the collapse of numerous other financial institutions.  THERE IS NO AVOIDING THIS, IT WILL EVENTUALLY HAPPEN AND THE DEBT JUST KEEPS RISING.  

Of course, almost no one wants to see financial markets collapse and economies to crash into a nuclear winter of economic depression. As such, all of this gerrymandering and rigging is overlooked. In the end, none of these and other financial manipulations by policymakers will succeed in solving the fundamental causes of the current crisis.

The basic problem is very simple to understand. Imbalances amongst European nations have become so extreme, that the fundamental creditworthiness of some nations has deteriorated to the point that their government bonds have collapsed in value. This in turn is hugely destructive for the capital base of banks and other financial institutions. Even while such countries as Germany and Switzerland and a few others have prospered with large structural trade surpluses, others such as Greece, France, Italy and others have run large and chronic deficits. One condition is the mirror image of the other. For one nation to be in surplus, another must be in deficit. But, understandably, when this imbalance becomes chronic, it is not sustainable and will end up in disaster. This is indeed what has happened.

Looking ahead, what can we conclude? For one, the current situation is extremely dangerous. There is no telling how things will unfold. The fact is that there are no immediate and easy solutions. It is a difficult, plodding road back to honest balance. This would involve the repayment of loans and/or the writing off or forgiveness of debts. For example, one recent study estimated that approximately $15 trillion in debt forgiveness would be required were America and Europe to reduce their total debt levels to a manageable 180% of GDP. Could this ever happen? Would the capital holders, the rich, the powers of this age allow this? 

Despite the fact that all market participants around the world should now well understand that unsustainable, non-self-supporting trends must come to an end, we should not be surprised if short-term shenanigans continue. That the GFC even occurred is proof of this message.


The key question of the moment is this: Will the solution to current troubles be real and cooperative, or will an uncontrolled disaster unfold? Hollow, bogus policy actions will not work. We anticipate that, eventually, a patchwork of countries will be cobbled together into a new financial union. Initially, this would comprise only European nations.

But this likely will not be the end of the transition One must recognize that none of this can happen without the aid and approval of America and other non-European nations. If it wasn't for the massive swap facilities extended by America's Federal Reserve, Europe's financial system today would already have imploded. In any case, any type of union such as we surmise will only happen with a further escalating crisis. Things are not yet critical enough for such measures to come to implementation. When it finally does, it will be a arrangement that will also not last. If so, perhaps only for "one hour" (Revelation 17:12).

As a final conclusion, the same problems that applied to Europe could next affect America. It is also caught in a similarly imbalanced situation. It is running huge deficits (both in its government budgets and externally on its trade accounts). At some point, the world's attention will again be turned to the financial deterioration of America. Then, U.S sovereign bonds will no longer be so popular.

A METAPHOR FOR OUR ECONOMY.......... A MUST READ

A METAPHOR FOR OUR ECONOMY

What do you do when flood waters threaten the dam? If you're the Federal Reserve, you close the floodgates and let the water rise.

Metaphors have an uncanny ability to capture the essence of complex situations. 

Here is a metaphor that distills and explains the entire global financial system in 2012. The way to visualize the current situation is to imagine a dam holding back rising storm waters.

The dam is the regulatory system, the rule of law, trust in the transparency and fairness of the system and the machinery of perception management. All of these work to keep risk, fraud and excesses of speculation and leverage from unleashing a destructive wave of financial instability on the real economy below.

As legitimate regulation and transparency have been replaced with simulacra and manipulated data, the dam's internal strength has been seriously weakened.

Depending on how you date various rivers of financialization, water has been piling up behind the dam since either 1982, 1992 or 2000. In this metaphor, the water is comprised of multiple sources of destabilization: rising money supply, debt, speculation, leverage, fraud, shadow banking and lax regulation.

Common sense suggests that water rising to dangerous levels would trigger an official response of opening the floodgates to relieve the pressure. Unfortunately for the real economy, common sense has nothing to do with the official response of central governments and banks. Their entire raison d'etre (reason to be) is self-preservation and the preservation of the financial Elites that set the context and policy of the State and central bank.

In effect, the State and central bank recognize that it is highly dangerous to let any water out, lest the toxic waste of fraud, speculative incentives, excessive leverage, etc. corrode the spillway and cause the entire dam to give way.

The official rationalization for keeping the gates closed even as the water is rising to the very lip of the dam is that the flood water released might harm the real economy downstream.

The truth is less savory: letting any water out might reveal the vulnerability of the entire system to collapse and the complicity of the official State agencies and central bank in the decades-long process of piling up too much debt, leverage, fraud and speculation in the first place.

To avoid the exposure of their own complicity and incompetence, the officials would rather risk systemic collapse of the dam. 

The global exercise of masking the true risks in the system can be summarized as "extend and pretend," and for the the past four years, officials have promised that closing the floodgates and keeping all the toxic debt, leverage and fraud safely behind the dam is the "solution" to rising floodwaters.

That "solution" was temporary, and 2012 is the year that the water reaches the lip of the dam and starts spilling over. The only question for those in the real economy downstream is whether this spillage will be enough to relieve the mounting pressure or whether the dam will suddenly give way.

If the rivers of toxic debt, leverage and fraud continue flowing into the system, then the only way to relieve the pressure is to release more of the debt, leverage, risk and fraud than is entering the system. "Extend and pretend" does nothing to limit the inflow of toxic debt, leverage, fraud, etc., nor does it release any bad debt or shut down the sources of toxic flodwaters, i.e the shadow banking system and the Financial Elite perpetrators of fraud.

Will the dam of extend and pretend hold another week? month? quarter? year? Who knows? But I suspect the toxic waters have corroded the spillways of trust and resiliency to the point that any official attempt to relieve the pressure will trigger the dam's collapse.

Why Home Prices Have Much Further To Fall............

Why Home Prices Have Much Further To Fall

There has been a deluge of articles recently about the upticks in the housing data. The consensus is that these data points are surely indicating a bottom in the depressing decline of real estate. 

The point I specifically want to address today is home prices. After the past few bloody years of price declines, and repeated calls of a housing bottom each year, 2012 proves to be no different with yet more calls for a bottom. However, why shouldn't there be? Home prices have declined, according to our NAR/Core Logic Composite Index (an average of the two), by a whopping 36%. Interest rates are at their lowest levels ever, and you can still get a low downpayment mortgage if you can qualify. (That last part is a bit tricky though). Therefore, the assumption is that, if home building is stabilizing, then it is only a function of time until home prices began to rise as well. Right? Not so fast.

People Buy Payments - Not Houses

When the average American family sits down to discuss buying a home they do not discuss buying a $125,000 house. What they do discuss is what type of house they need, such as a three bedroom house with two baths, a two car garage and a yard. That is the dream part. The reality of it smacks them in the face, however, when they start reconciling their monthly budget.

Here is a statement I have not heard discussed by the media. People do not buy houses - they buy a payment. The payment is ultimately what drives how much house they buy. Why is this important? Because it is all about interest rates.

Over the last 30 years, a big driver of home prices has been the unabated decline of interest rates. When declining interest rates were combined with lax lending standards, home prices soared off the chart. No money down, ultra-low interest rates and easy qualification gave individuals the ability to buy much more home for their money. The demand for home ownership, promulgated by the Fed, the finance and real-estate industry, drove prices far beyond rational levels. Easy credit terms combined with a plethora of psychological encouragement, from home flipping and house decorating television to direct advertisement of the "dream of homeownership", enticed families to bite off way more than they could ever hope to chew.

In 1968 the average American family maintained a mortgage payment, as a percent of real disposable personal income (DPI), of about 7%. Back then, in order to buy a home, you were required to have skin in the game with a 20% down payment. Today, assuming that an individual puts down 20% for a house, their mortgage payment would consume more than 15% of real DPI. In reality, since many of the mortgages done over the last decade required little or no money down, that number is actually substantially higher. You get the point. With real disposable incomes stagnant as inflationary pressures rise, that 15% of the budget is becoming much harder to sustain.

The decline in home prices so far has largely been due to the initial process of the real estate bust and the deleveraging of the American household balance sheet. According to recent data, as much as 2/3rds of the sales completed so far have been distressed in some form or fashion. 

However, the real potential for declines in price will come when interest rates began to rise.

At some point in the future interest rates will begin to rise back towards the long term median of 8.9%. From the current 4% rate, that is a substantial rise. However, before you guffaw the idea entirely, let me just remind you that 30-year interest rates were almost 7% in mid-2006. Therefore a rise to the long term median is not entirely out of the question - the only debate will be the timing and the trigger of the event.

With this in mind, let's review how home buyers are affected. If we assume a stagnant purchase price of $125,000, as interest rates rise from 4% to 8% by 2024 (no particular reason for the date - in 2034 the effect is the same), the cost of the monthly payment for that same priced house rises from $600 a month to more than $900 a month - a 33% increase. However, this is not just a solitary effect. ALL home prices are affected at the margin by those willing and able to buy and those that have "For Sale" signs in their front yard. Therefore, if the average American family living on $55,000 a year sees their monthly mortgage payment rise by 33%, this is a VERY big issue.

Let's look at this another way. Assume an average American family of four (Ward, June, Wally and The Beaver) are looking for the traditional home with the white picket fence. Since they are the average American family, their median family income is approximately $55,000. After taxes, expenses, etc., they realize they can afford roughly a $600 monthly mortgage payment. They contact their realtor and begin shopping for their slice of the "American Dream."

At a 4% interest rate they can afford to purchase a $125,000 home. However, as rates rise, that purchasing power quickly diminishes. At 5% they are looking for $111,000 home. As rates rise to 6% it is a $100,000 property, and at 7%, just back to 2006 levels mind you, their $600 monthly payment will only purchase a $90,000 shack. See what I mean about interest rates?

Since home prices on the whole are affected by those actively willing to sell, the rise of interest rates lead to declines in home prices across the board as sellers reduce prices to find buyers. Since there are only a limited number of buyers in the pool at any given time, the supply / demand curve is critcally affected by the variations in interest rates.

This is why the Fed has been so adamant to suppress interest rates at very low levels and have injected trillions of dollars to achieve that goal. They understand the ramifications of rising interest rates, not only on home prices, but also on the $3 Trillion in debt they are currently carrying on their balance sheet.

There are basically two possible outcomes from here. 

First, Ben Bernanke and his gang artificially suppress interest rates for a very long period of time creating the "Japan Syndrome" in the US, which leads to rolling recessions and a general economic malaise. 

Or, secondly, interest rates rise back towards more normalized levels as the economy begins a real and lasting recovery. 

In either case there is a negative and sustained impact to housing going forward. The excesses that were created over the last 30 years will have to be absorbed into the system, allowing prices to return to a more normalized and sustainable level.

None of this means that home construction, sales, etc. can't stabilize at these lower levels even as prices revert to their long term median price. However, stabilization and a recovery, such as the media is currently hoping for, are two vastly different things. 

We are very early in the entire deleveraging process, and until the excesses are removed from the system, the real housing bottom may be more elusive than anyone expects.

Monday, January 30, 2012

A RECIPE FOR DISASTER............... AT THIS POINT THERE IS NO WAY OUT

A RECIPE FOR DISASTER

All of the Major Central Bank Balance Sheets Are Exploding Higher, Or Engaged In QE

The degree to which central banks around the world are printing money is unprecedented.

The charts below show the balance sheets of the largest central banks in the world. They are the European Central Bank (ECB), the Federal Reserve (Fed), the Bank of Japan (BoJ), the Bank of England (BoE), the Bundesbank (Germany), the Banque de France, the People's Bank of China (PBoC) and the Swiss National Bank (SNB).  Noted on the charts are significant events or growth rates.

Shown is the size of each respective balance sheet in its local currency.  Note that all are exploding higher as every chart goes from the lower left to the upper right.  Most are still making new all-time highs. If the basic definition of quantitative easing (QE) is a significant increase in a central bank's balance sheet via increasing banking reserves, then all eight of these central banks are engaged in QE.

Massive central bank involvement in the markets risks returning us to a de facto centrally planned economy. 

The tipping point between balance sheet expansion being bullish for risk assets versus bearish is impossible to know.  Given the growth rate of central bank balance sheets around the world over the past few years, we might not have to wait too long to find out. 

DESPERATE,ARROGANT,FOOLS ARE IN CHARGE OF THE WORLDS ECONOMIES, THEIR ACTIONS CLEARLY CONVICT THEM. THE IMPORTANT QUESTION NOW IS WHERE DOES THE TIPPING POINT LIE? THESE MEN HAVE NO INTENTION OF DOING WHAT IS NECESSARY, BECAUSE IT WOULD EXPOSE THEM ALL FOR THE FRAUDS THAT THEY ARE. WE ARE ALL SIMPLY WATCHING AND WAITING TO SEE JUST HOW FAR, IS TOO FAR?   










‘Fool in the Shower’ to Give Fed a Good Scalding.........AN ABSOLUTE MUST READ!

The Fed Signals That a Full Recovery Is Years Away............


What amazes me is not one reporter at last weeks news conference asked Dr. Bernanke what it COSTS to ARTIFICIALLY keep rates 3.75% below what his own board considers "normal" for another 3 - 4 years.  NOT TO MENTION WHAT THE RISKS MIGHT BE!


THE COST IS GOING TO BE OUR CURRENCY, 

OUR ECONOMY AND OUR COUNTRY! 
**************************************
'Fool in the Shower' to Give Fed a Good Scalding

 Caroline Baum

Long and variable lags. That's all I could think of when I read the Federal Reserve statement and learned that economic conditions "are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014."

My first instinct was to mark the date on my household calendar, but I couldn't find one that goes out that far!

What the Fed is saying, in essence, is that as the economy improves, it's appropriate to provide as much stimulus, or support, as it did in late 2008, when the economy was contracting and the financial system was imploding.  THAT WOULD LEAD AN INTELLIGENT PERSON TO SUSPECT THAT THE ECONOMY IS NOT REALLY IMPROVING AS MUCH AS BEING PROPPED UP! 

This is a dramatic shift. Given the long and variable lags with which monetary policy operates, past Fed officials at least paid lip service to the notion of acting preemptively: withdrawing excess stimulus -- a fancy way of saying they will raise interest rates -- as the economy improved.

Not so the current committee, which is tilted toward doves after the annual rotation of voting members. This group seems to think it should "continue to ease as long as there is economic slack," said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut. "It's a classic, elemental mistake," he said, one described by the late Nobel economist Milton Friedman as the "fool in the shower."

The fool turns on the water in the shower, steps in and finds that it's still cold. So he turns the knob all the way to hot, only to get scalded when the water heats up with a predictable lag. WE ARE ALL ABOUT TO GET SCALDED.

Encouraging Risk

The application to monetary policy is obvious. Yet Fed chief Ben Bernanke and his committee seem certain they can use their communication strategy to placate the bond market.

Good luck with that. The market is as data-driven as the Fed -- and reacts a whole lot faster. When the economy turns, and turns with a vengeance, the Fed won't know what hit it. It will be staring at a $2.9 trillion balance sheet, including a portfolio of mortgage and Treasury securities. More than 90 percent of its Treasuries carry maturities of one year or more and are subject to bigger losses from rising interest rates than the short-term bills the Fed traditionally holds.

In addition, the Fed will face a chasm between the current funds rate and something close to the long-term neutral rate of 4 percent to 4.5 percent, according to the Fed's long-run interest-rate projections, released for the first time yesterday. It will have to contend with the consequences of negative inflation-adjusted interest rates, and all the risk that implies.  ARROGANT, INCOMPETENTS RUN THE FED!

Think of the incentives the Fed is creating. In explaining how monetary policy works when the overnight rate is at zero, Bernanke relies on something known as the portfolio balance channel theory. The idea is that when the Fed buys long-term Treasuries, it depresses yields and forces investors to buy other assets that carry increased credit or interest-rate risk, such as long-term corporate bonds, mortgages and equities.

To the extent that higher stock prices and lower bond yields facilitate investment, employment and production, it's beneficial for the economy. Often the result is too much of a good thing, such as a misallocation of capital into a tax- advantaged, nonproductive asset such as housing. Or Wall Street may create risk with some new, financially engineered product.

The bottom line is, when financial institutions can borrow for free and are encouraged, verbally and nonverbally, to take risk, eventually they will.

Why should we expect the outcome to be any different than the last time, when the Fed held the benchmark rate too low for too long in 2003 and 2004 and fueled a housing bubble? No one knows what kind of risk investors will take. (Don't tell anyone: Neither do the regulators.)

Broken Promises

That's not all. The Fed is bound to find itself with what academics refer to as a "time inconsistency problem," according to Stanley. Often it may be advantageous to advertise one policy -- in this case, holding interest rates low for years -- in order to steer expectations and get maximum effect. But the Fed "can't follow through on its promise if conditions dictate something else," Stanley said.

The choice, then, is: "stick to the promise and run bad policy, or change policy and lose credibility." THEY HAVE DONE BOTH IN MY BOOK!

Then there's the small matter of forecasting accuracy. Anyone who's perused the recently released transcripts from 2006 knows that to err is human. The housing bubble that was already in the process of deflating and about to engulf the U.S. and global economy was a tiny blip on the Fed's radar screen. Former Governor Susan Bies, a banker by training, was one of the lone voices expressing concern about mortgage risk. (Maybe real world experience really does matter.) Meanwhile, the Fed's econometric models were mum.

Asked about the Fed's track record at yesterday's news conference, Bernanke said the ability to forecast several years out was "limited." The Fed's projections are "not unconditional pledges" and are "subject to revision," he said. IF THESE MEN WORKED IN THE REAL WORLD THEY WOULD HAVE BEEN CALLED CHARLATANS AND FIRED LONG AGO. 

Two policy makers -- no names were attached to the forecasts -- expect the funds rate to first begin rising in 2016. (My money is on New York Fed President Bill Dudley and Governor Janet Yellen.) That would mean eight years of 0 percent interest rates. There will be a revolution in this country before then if the economy is lousy enough to warrant 0 percent interest rates for that long. Even the fool in the shower knows that.

 

THEY WON'T SHOW YOU THIS CHART (BELOW)......... THIS IS REALITY, NOT THE HAPPY, HOPEFUL, HEADLINE NUMBER!  I THINK THIS THING IS GOING ALL THE WAY TO THE BOTTOM AGAIN. BANKS CAN'T LEND AND WHO IS GOING TO BUY IF BANKS WON'T LEND? MORE IMPORTANTLY, WHEN WE GET TO THE BOTTOM, WHO IS GOING TO SAVE US? THE FED?      

 

BLOWING BUBBLES AND PROMOTING DELUSION, THE FED'S REAL MANDATE........

Ben Bernanke


The Fed Is Worried----And You Should Be Too

The Fed Is Worried----And You Should Be Too

COMSTOCK 

The Fed is worried, and you should be too.  That is the major take-away from last week's FOMC statement, combined with its release of updated projections and Bernanke's press conference.  Despite the market's cheering of the promise of a near-zero fed funds rate until late 2014 and the prospect of QE3, the Fed is fighting a lonely battle against severe economic headwinds----and they know it.  

In answering a reporter's question, Bernanke made it crystal-clear that he does not believe that the recently optimistic economic releases are sustainable. 

The FOMC reduced its current central tendency 2012 GDP growth projection from 2.5%- 2.9% to 2.2%-2.7% and its 2013 number from 3.0%-3.5% to 2.8%-3.2%.  The previous projections were made in November.  Although they reduced their unemployment projection slightly, they are still projecting unemployment rates as high as 8.2% to 8.5% for 2012 and 7.4% to 8.1% in 2013. THE ONLY REASON THE UNEMPLOYMENT RATE IS DROPPING IS THAT MILLIONS OF FOLKS HAVE BEEN REMOVED FROM THE ROLLS OF THE UNEMPLOYED DUE TO BEING ON BOARD FOR THEIR ALLOTTED LENGTH OF TIME. COMBINE THAT WITH COMPANIES AND CORPORATIONS NOT LAYING OFF AT THE EXTREME RATES OF THE CRISIS PERIOD AND YOU HAVE A MODESTLY IMPROVING RATE. THERE IS NO REALLY GOOD NEWS IN THIS MODERATING UNEMPLOYMENT RATE. THE NEXT CRISIS WILL SEND IT SOARING AGAIN. IF YOU COUNTED EVERYONE WHO WANTED A JOB THE RATE WOULD BE MUCH HIGHER THAN REPORTED. OUR GOVERNMENT DEALS IN DELUSION AND SUBTERFUGE, NOT REALITY!

It's significant that these reductions were made despite better than expected economic releases in the last few months in jobs, production and consumption.  Although some may wonder what the Fed knows that others don't, the reasons for their caution are no mystery to anyone familiar with the numbers.  Disposable income is growing very slowly, and even this tepid pace is a largely a result of temporary tax cuts and transfer payments, while real wages are flat.  Consumer spending growth was supported mainly by a reduction in household savings rates from 5% in June to 3.5% in November.  December retail sales have already weakened as holiday sales were disappointing. 

Employment growth is still not enough to raise real wages or reduce unemployment by much.  While initial unemployment claims have declined, new hiring is still disappointing and household wealth has been declining as a result of the continuing slide in home prices. We also point out again that household debt is still far too high and there is a long period of deleveraging ahead, meaning more saving and less spending.

Capital spending growth is likely to slow down as well.  While the recent report on durable goods orders for December was fairly strong, few mentioned that the 100% tax credit for capital goods spending expired at year-end.  It is highly likely that potential orders for 2012 were crammed into 2011.  Exports, too, will probably be impacted by the turmoil in Europe and the slowdown in global growth including the emerging nations and China.

All of these headwinds are valid concerns even before considering the risks associated with the EU debt crisis, potential conflict with Iran, the outcome of the Arab Spring and uncertainty in Iraq, Afghanistan and Pakistan.  And let's not forget the continuing paralysis in Congress regarding debt ceilings, deficits, budgets, taxes and efforts to increase jobs in the middle of an election year.

The Fed's new policy is an act of desperation rather than something to celebrate.  

The FOMC has used all of its conventional weapons and a lot of unconventional ones and is essentially out of ammunition.  The banking system is swimming in excess reserves that it is not using----adding more won't make much of a difference.  This is a classic liquidity trap where further easing will not be much help.  

The stock market strength assumes that the economy is getting stronger and that company earnings will remain at elevated levels.  We think that this will not be the case, and that the market is subject to substantial downside risk.

A VERY ACCURATE PICTURE OF WHERE WE ARE HEADED............

Disdain for the uber-rich................

"It wasn't the crash of 2008 that led to their fall from grace, nor exposure of the greed and stupidity that required a massive public rescue. It was their graceless reaction to the bailouts: no apologies, remorse or gratitude — even faked; just more arrogance, bonuses, takeovers, foreclosures. Wall Street begged to be occupied. The Unrepentant Financier could have been Time's Person."

                                                                                                                           Rick Salutin

We can't clean up Wall street until we clean up

Washington.

OUR SOCIETY HAS NEVER FACED AS PERILOUS A FUTURE AS WE DO RIGHT NOW.......... AND MOST CITIZENS ARE CLUELESS.  THINKING THAT WE HAVE ALWAYS FIXED THINGS IN THE PAST IS A PRESCRIPTION FOR DISASTER!

IF YOU GO TO A STOCK BROKER RIGHT NOW, ANY STOCK BROKER, THEY WILL TELL YOU IT'S A GOOD TIME TO BUY. NOT BASED ON TRUTH OR FACTS OR ANYTHING HE OR SHE KNOWS OR HAS ANALYZED. THEIR STORY IS BASED SIMPLY ON THAT'S WHAT THEY DO FOR A LIVING, THAT'S WHAT THEY HAVE ALWAYS DONE AND THEY WANT AND NEED TO KEEP ON DOING IT. DITTO, REALTORS, BUILDERS, POLITICIANS ANY AND EVERY SALES PERSON ON EARTH AND MORE. DOING THE SAME THING, THE PRESCRIBED THING WITHOUT THINKING AND WITHOUT REGARD FOR THE FACTS IS VERY DANGEROUS. YET THAT IS EXACTLY WHAT MOST AMERICANS DO.    

THEY ALL HAVE A STORY, AND IT'S ALWAYS A HAPPY STORY, ALWAYS. SADLY THE STORY IS SELDOM BASED ON THE TRUTH, THE FACTS OR ANY GOOD ANALYSIS OR REAL UNDERSTANDING.

IF YOU WANT TO SEE WHERE WE ARE HEADED AS A SOCIETY, YOU NEED LOOK NO FARTHER THAN THIS........ WE ARE A SOCIETY OF PROFESSIONAL LIARS AND GULLIBLE FOOLS WHO DON'T WANT TO THINK! WE ARE LED BY SELFISH, GREEDY, DUPLICITOUS, CON MEN POSING AS SAVIORS ALL THE WHILE GAMING THE SYSTEM FOR PERSONAL GAIN. LIKE IT OR NOT, WE ALL KNOW EXACTLY WHERE THIS LEADS AND HOW IT ENDS.  

Fukushima: The Unspoken Crisis Of Worldwide Nuclear Radiation .....................

I AM AFRAID THAT THE HORROR OF FUKUSHIMA MAY HAVE ONLY JUST BEGUN. BECAUSE OF THE DISASTERS PROXIMITY TO THE PACIFIC OCEAN IT IS A PROBLEM FOR THE WORLD, NOT JUST FOR JAPAN.  

Fukushima: 

The crisis in Japan has been described as "a nuclear war without a war".

The long-term repercussions of the Fukushima Daiichi nuclear disaster are yet to be fully assessed, they are far more serious than those pertaining to the 1986 Chernobyl disaster in the Ukraine, which resulted in almost one million deaths (New Book Concludes - Chernobyl death toll: 985,000, mostly from cancer Global Research, September 10, 2010, See also Matthew Penney and Mark Selden The Severity of the Fukushima Daiichi Nuclear Disaster: Comparing Chernobyl and Fukushima, Global Research, May 25, 2011)

Moreover, while all eyes were riveted on the Fukushima Daiichi plant, news coverage both in Japan and internationally failed to fully acknowledge the impacts of a second catastrophe at TEPCO's (Tokyo Electric Power Co Inc) Fukushima Daini nuclear power plant.

The shaky political consensus both in Japan, the U.S. and Western Europe is that the crisis at Fukushima has been contained.

The realties, however, are otherwise. Fukushima 3 was leaking unconfirmed amounts of plutonium. According to Dr. Helen Caldicott, "One millionth of a gram of plutonium ingested causes cancer".

An opinion poll in May 2011 confirmed that more than 80 per cent of the Japanese population do not believe the government's information regarding the nuclear crisis.


The Unspoken Crisis Of Worldwide Nuclear Radiation 

PART I

The Fukushima Nuclear Disaster: How it Happened

Nuclear Apocalypse in Japan
Lifting the Veil of Nuclear Catastrophe and cover-up
- by Keith Harmon Snow - 2011-03-18
Humanity now faces a deadly serious challenge coming out of Japan -- the epicenter of radiation.
VIDEO: Full Meltdown? Japan Maximum Nuclear Alert
Watch now on GRTV
-by Christopher Busby- 2011-03-30
Fukushima: Japan's Second Nuclear Disaster
 
- by Sherwood Ross - 2011-11-10
Secret Weapons Program Inside Fukushima Nuclear Plant?
U.S.-Japan security treaty fatally delayed nuclear workers' fight against meltdown
- by Yoichi Shimatsu - 2011-04-12
The specter of self-destruction can be ended only with the abrogation of the U.S.-Japan security treaty, the root cause of the secrecy that fatally delayed the nuclear workers' fight against meltdown.
Fukushima: "China Syndrome Is Inevitable" … "Huge Steam Explosions"
"Massive Hydrovolcanic Explosion" or a "Nuclear Bomb-Type Explosion" May Occur
- by Washington's Blog - 2011-11-22
VIDEO: New TEPCO Photographs Substantiate Significant Damage to Fukushima Unit 3
Latest report now on GRTV
- by Arnie Gundersen - 2011-10-20


PART II

The Devastating Health and Social Impacts in Japan

VIDEO: Surviving Japan: A Critical Look at the Nuclear Crisis
Learn more about this important new documentary on GRTV
- by Chris Noland - 2012-01-23
Fukushima and the Battle for Truth
Large sectors of the Japanese population are accumulating significant levels of internal contamination
- by Paul Zimmerman - 2011-09-27
FUKUSHIMA: Public health Fallout from Japanese Quake
"Culture of cover-up" and inadequate cleanup. Japanese people exposed to "unconscionable" health risks
- by Canadian Medical Association Journal - 2011-12-30
VIDEO: Cancer Risk To Young Children Near Fukushima Daiichi Underestimated
Watch this important new report on GRTV
- by Arnie Gundersen - 2012-01-19
The Severity of the Fukushima Daiichi Nuclear Disaster: Comparing Chernobyl and Fukushima
- by Prof. Matthew Penney, Prof. Mark Selden - 2011-05-24
Uncertainty about the long-term health effects of radiation
Radioactivity in Food: "There is no safe level of radionuclide exposure, whether from food, water or other sources. Period," - by Physicians For Social Responsibility - 2011-03-23

71,000 people in the city next to the Fukushima nuclear plant "We've Been Left to Die" - 2011-03-19

Tokyo Water Unsafe For Babies, Food Bans Imposed - by Karyn Poupee - 2011-03-23

PART III

Safe? This map shows cities within the evacuation zones surrounding Japan's Fukushima nuclear plant

Hidden Nuclear Catastrophe: Cover-up by the Japanese Government and the Corporate Media

VIDEO: Japanese Government Insiders Reveal Fukushima Secrets
GRTV Behind the Headlines now online
- by James Corbett - 2011-10-06
Fukushima and the Mass Media Meltdown
The Repercussions of a Pro-Nuclear Corporate Press
- by Keith Harmon Snow - 2011-06-20
Emergency Special Report: Japan's Earthquake, Hidden Nuclear Catastrophe
- by Yoichi Shimatsu - 2011-03-13
The tendency to deny systemic errors - "in order to avoid public panic" - is rooted in the determination of an entrenched Japanese bureaucracy to protect itself...
The Dangers of Radiation: Deconstructing Nuclear Experts
- by Chris Busby - 2011-03-31
"The nuclear industry is waging a war against humanity." This war has now entered an endgame which will decide the survival of the human race.
Engineers Knew Fukushima Might Be Unsafe, But Covered It Up …
And Now the Extreme Vulnerabilty of NEW U.S. Plants Is Being Covered Up
- by Washington's Blog - 2011-11-12
PART IV

The Process of Worldwide Nuclear Radiation

VIDEO: Japan's Nuclear Crisis: The Dangers of Worldwide Radiation
 
- by Dr. Helen Caldicott - 2012-01-25
An Unexpected Mortality Increase in the US Follows Arrival of Radioactive Plume from Fukushima, Is there a Correlation?
- by Dr. Joseph J. Mangano, Dr. Janette Sherman - 2011-12-20
In the US, Following the Fukushima fallout, samples of radioactivity in precipitation, air, water, and milk, taken by the U.S. government, showed levels hundreds of times above normal...
Radioactive Dust From Japan Hit North America 3 Days After Meltdown
But Governments "Lied" About Meltdowns and Radiation
- by Washington's Blog - 2011-06-24
VIDEO: Fukushima Will Be Radiating Everyone for Centuries
New report now on GRTV
- by Michio Kaku, Liz Hayes - 2011-08-23
Radiation Spreads to France
 
- by Washington's Blog - 2011-11-15

Implications for the Global Nuclear Energy Industry

After Fukushima: Enough Is Enough
 
- by Helen Caldicott - 2011-12-05
VIDEO: Radiation Coverups Confirmed: Los Alamos, Fort Calhoun, Fukushima, TSA
New Sunday Report now on GRTV
- by James Corbett - 2011-07-04
VIDEO: Why Fukushima Can Happen Here: What the NRC and Nuclear Industry Don't Want You to Know
Watch now on GRTV
- by Arnie Gundersen, David Lochbaum - 2011-07-12
VIDEO: Safety Problems in all Reactors Designed Like Fukushima
Learn more on GRTV
- by Arnie Gundersen - 2011-09-26
VIDEO: Proper Regulation of Nuclear Power has been Coopted Worldwide
Explore the issues on GRTV
- by Arnie Gundersen - 2011-10-05
VIDEO: New Nuclear Reactors Do Not Consider Fukushima Design Flaws
Find out more on GRTV
- by Arnie Gundersen - 2011-11-24
Nuclear Energy: Profit Driven Industry
"Nuclear Can Be Safe Or It Can Be Cheap … But It Can't Be Both"
- by Washington's Blog - 2011-12-23
VIDEO: Fukushima and the Fall of the Nuclear Priesthood
Watch the new GRTV Feature Interview
- by Arnie Gundersen - 2011-10-22
Why is there a Media Blackout on Nuclear Incident at Fort Calhoun in Nebraska?
 
- by Patrick Henningsen - 2011-06-23
  Startling Revelations about Three Mile Island Disaster Raise Doubts Over Nuke Safety
 
- by Sue Sturgis - 2011-07-24
Radioactive Leak at Fort Calhoun Nuclear Power Station
 
- by Rady Ananda - 2011-07-01
VIDEO: US vs Japan: The Threat of Radiation Speculation
Dangerous double standards examined on GRTV
- by Arnie Gundersen - 2011-06-25


Nuclear Radiation: Categorization

At Fukushima, reports confirm that alpha, beta, gamma particles and neutrons have been released:

"While non-ionizing radiation and x-rays are a result of electron transitions in atoms or molecules, there are three forms of ionizing radiation that are a result of activity within the nucleus of an atom.These forms of nuclear radiation are alpha particles (α-particles), beta particles (β-particles) and gamma rays (γ-rays).

Alpha particles are heavy positively charged particles made up of two protons and two neutrons. They are essentially a helium nucleus and are thus represented in a nuclear equation by either α or n1. See the Alpha Decay page for more information on alpha particles.

Beta particles come in two forms: n2 and n3n3 particles are just electrons that have been ejected from the nucleus. This is a result of sub-nuclear reactions that result in a neutron decaying to a proton. The electron is needed to conserve charge and comes from the nucleus. Itis not an orbital electron. n2particles are positrons ejected from the nucleus when a proton decays to a neutron. A positron is an anti-particle that is similar in nearly all respects to an electron, but has a positive charge. See the Beta Decay page for more information on beta particles.

Gamma rays are photons of high energy electromagnetic radiation (light). Gamma rays generally have the highest frequency and shortest wavelengths in the electromagnetic spectrum. There is some overlap in the frequencies of gamma rays and x-rays; however, x-rays are formed from electron transitions while gamma rays are formed from nuclear transitions. See the Gamma Rays for more" (SOURCE: Canadian Nuclear Association)


"A neutron is a particle that is found in the nucleus, or center, of atoms. It has a mass very close to protons, which also reside in the nucleus of atoms. Together, they make up almost all of the mass of individual atoms. Each has a mass of about 1 amu, which is roughly 1.6×10-27kg. Protons have a positive charge and neutrons have no charge, which is why they were more difficult to discover." (SOURCE: Neutron Radiation)

 

"Many different radioactive isotopes are used in or are produced by nuclear reactors. The most important of these are described below:

1. Uranium 235 (U-235) is the active component of most nuclear reactor fuel.

2. Plutonium (Pu-239) is a key nuclear material used in modern nuclear weapons and is also present as a by-product in certain reprocessed fuels used in some nuclear reactors. Pu-239 is also produced in uranium reactors as a byproduct of fission of U-235.

3. Cesium (Cs-137 ) is a fission product of U-235. It emits beta and gamma radiation and can cause radiation sickness and death if exposures are high enough. ...


4. Iodine 131 (I-131), also a fission product of U-235, emits beta and gamma radiation. After inhalation or ingestion, it is absorbed by and concentrated in the thyroid gland, where its beta radiation damages nearby thyroid tissue (SOURCE: Amesh A. Adalja, MD, Eric S. Toner, MD, Anita Cicero, JD, Joseph Fitzgerald, MS, MPH, and Thomas V. Inglesby MD, Radiation at Fukushima: Basic Issues and Concepts, March 31, 2011)