A report on MSN news estimates US unemployment at 20%, citing inaccuracies and bias in data collection and methods of calculating the unemployment rate in America. Ah, America, the nation where Freedom of Speech really means freedom of the rich to tell lies with impunity. It’s the nation drunk on ignorance, the land of make-believe, where Michael Jackson with his Neverland and Disney with his Disneyland were quite at home and nothing out of the ordinary.
Any reports about economic developments, positive or negative, coming out of mainstream U.S. media, need to be taken with a grain of salt. However, when you get an official unemployment rate at just under 10% (which people think is already staggeringly high), and an expert opinion claiming it is more like 20%, it’s worth a second thought. There certainly has been an ongoing trend of absolute bollocks posing as news over the past few years. The Iraq War was going to be a rip-roaring success, with soldiers greeted by cute Iraqi children in folk dress, with tears of joy, laying flowers at the curbside as American tanks rolled in. It was supposed to usher in a “new Springtime” for the US economy and peace in the Middle East. The Lehman Bros. company collapse was going to be isolated, easily patched up. The world would chuckle and move on. That is, according to all the major newspapers and news networks. Many people suspected, however, that it was complete rubbish. They were dead right.
What can be predicted from a society that lies to itself to the extent that occurs in America is the same as could be predicted of a con man. People believe him at first, but after a while the trail of destruction becomes a little too obvious, the cons too ambitious, and suddenly a few intelligent people take the time to do a bit of background reading. Soon enough, the con man is busted and the game is up.
This brings us to another issue: expiring unemployment benefits. Continuing unemployment claims fell 53,000 to 6.7 million last week, but Deutsche Bank’s chief U.S. economist Joseph LaVorgna wonders how much of this decline is due people exhausting their standard 26-week benefit. He says: “We are concerned about what will happen when a significant share of out-of-work individuals’ benefits completely expire, because this could lead consumer spending to re-weaken, hence jeopardizing a fragile recovery.”
It’s likely that unemployment is massively understated in America, as it is in most countries. No politician likes to boast about the figures, and aspiring politicians are cautious to doubt them, lest they themselves get elected and are forced to revise the figures upwards.
The usefulness of this information lies in avoiding bad investments in the short term (like shares or apartments), and planning for one’s own unemployment. A 1 in 5 figure means that any safety nets in place are likely to be already strained to breaking point. If the figure advances to 2 in 5, then the term “safety net” is not even worth remembering. At this stage, people ought to stop believing newspapers and be well on their way to preparing to hunker down for a long, cold economic winter. Survival is the name of the game now.
Industries likely to ride out the difficult times are those that provide essential services, support military infrastructure or produce food. However, for America, new opportunities are going to appear when, finally, the U.S. dollar collapses. Local manufacturing will suddenly become a good idea, but at the expense of working conditions. Belonging to the military will suddenly become an obviously bad idea. What exists now in Mexico is prehaps a foretaste of things to come for those who are North of the Border. Who knows, there may not even be a border anymore.
Articles on Bloomberg are entertaining, juicy, and just a tad biased. That’s what makes Bloomberg a much better read than most news outlets (since the news is additionally entertaining and juicy).
In a recent article with the understated and rather misleading title “Goldman Sach’s Investment in Trading Code Put at Risk by Theft”, a computer geek employed at the company is accused of running off with a vital piece of company software, it is quoted:
Aleynikov transferred the code, which is worth millions of dollars, to a computer server in Germany, and others may have had access to it, Facciponti said, adding that New York-based Goldman Sachs may be harmed if the software is disseminated.
The man was travelling. Anyone who knows about travel in the United States understands that one must not, under any circumstances, carry any information on a hard drive that could be worth something to anyone. So it is standard practice to transfer one’s information (including any projects one might be working on) in a secure manner to the Internet, like a VPN, and securely wiping the hard drive prior to leaving for the airport.
But the comment that makes one laugh comes from the prosecution:
The prosecutor added, “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.”
The proprietary code lets the firm do “sophisticated, high-speed and high-volume trades on various stock and commodities markets,” prosecutors said in court papers. The trades generate “many millions of dollars” each year.
In other words, the software allows Goldman Sachs to, basically, cheat. And if the software was released, it would let everybody, well, cheat. And that would not be fair, because it goes against the whole principle of, err, cheating. That is, if everybody cheats the same way, then it ceases to be cheating.
The defense attorney is also quoted:
“If Goldman Sachs cannot possibly protect this kind of proprietary information that the government wants you to think is worth the entire United States market, one has to question how they plan to accommodate every other breach,” she said.
The defense is right of course, but it’s not that the government has any more dignity to lose. Many know very well how Wall Street operates and how the government helps, but not everybody believes it yet.
Perhaps George H.W. Bush’s infamous 2006 quotation will some day come true:
“if the American people knew what we have done, they would string us up from the lamp posts.”
Perhaps the real worry for Goldman Sachs is that the leakage of such sensitive software would reveal just how the markets are rigged by the big players, and how the honest majority is swindled at every turn.
Our suspicions, just a day or two ago, that gold may not be the metal of choice in a standardised (non-fiat) monetary system, grow stronger today. Russia is likely to take the “palladium standard” as the basis of the Ruble. But first, a short history of alternative toilet paper.
Back in the days of the Soviet Union, in Brezhnev’s era, the edition of Pravda (possibly the most inaccurately named newspaper in history) featuring his speeches was highly prized, not for its content, but for its utility as toilet paper. The Brezhnev editions went so much further than the regular rag. The main disadvantage of newsprint was that it had to be folded and cut, and that it left a nasty black residue on the skin. Things improved somewhat with the dissolution of the Union and the debasement of the Ruble. Rubles were softer, smoother and pre-cut to a convenient size. Users of it still complained of the ink running and the occasional tear during use. Plus, it didn’t come in rolls.
Today, however, things are looking different. Pravda is no longer such a worthless read, and the Ruble is no longer looking like always being such a waste of dead tree. The State Duma’s speaker made this statement:
“We could offer the world the Russian ruble made of palladium. It would be a very strong currency. One may recollect the golden ruble, which Russia had during the tsarist times. It was a freely convertible currency and was circulating very well”
That gold is not the only choice for a standard monetary unit is not a new idea in the least. Silver has also been touted as being a worthy candidate, but both metals are abundant, really, and far too much of these metals exists in the public arena for there to be a fair transition to a new currency basis. Discussion around the Internet still revolves mainly around gold, which is still highly regarded as the currency standard of first choice, although in reality things are not so clear cut:
Goldbugs and Fiatbugs are actually sort of similar; both insisting that it’s an “either-or” situation where gold and paper are mutually exclusive. That’s hogwash. Anything that is able to achieve widespread recognition as a medium of exchange is a viable currency, be it gold, silver, paper, or sand dollars. Empirical evidence shows us that gold has had quite a successful run as a widely recognized form of currency, and suggests that it will continue to enjoy status as currency into the future, despite fiatbugs’ protestations to the contrary.
Palladium is just another one of the group of metals (including gold, silver, platinum) which could be used in minted coins and as the metallic strip in notes. It is already used in Canadian currency. Its price is very highly, currently at around US$250/oz, it was at over US$1000/oz at the beginning of the 21st century.
Russia’s favouritism for Palladium is, of course, because Russia is one of the world’s major sources of the metal, alongside South Africa. It is, therefore, unlikely that other nations would take Russia’s lead and take on the same precious metal as their currency base. This could be a very good thing:
If Russia takes on Palladium for its currency standard, and other nations choose not to (as they well should), it may save the world from a single world currency and the grip of the IMF.
The past week saw some important stories break on the mainstream media, including revelations of an explosion in funding of intelligence services in the UK, which reportedly are poorly run, targeting the innocent more often than the guilty. Clearly, the perception of the British Government is that the massive funding boosts are necessary in anticipation of coming major developments around the world.
We found out this week that those calling the latest stock market rise a “sucker’s rally” were right. The pessimists are back in business, with predictions of a fall in the Dow Jones Index to 2,000. It’s a big deal, as the conditions for such a fall in stocks are unlikely to be imaginable for most Americans, even now. Yet two groups in America are conscious of the possibilities: the Government (which has been quietly expanding its prison system and domestic law enforcement) and civilians who are arming up and buying ammunition. But to say that this is merely an American problem would be very narrow minded. Indeed, some of the greatest shifts in economies around the globe are outside the US, such as Japan, having just recorded a record 4 percent contraction in the first three months of 2009.
In a G2 world (the United States and China), he who is the piper calls the tune, and China holds a US$2-trillion mortgage on the United States and is not happy. This country, along with others that lend money to the United States, such as Saudi Arabia, will determine the value of the U. S. dollar and gold. And they have spoken. They are not buying more U. S. treasuries and are buying gold as a new asset class.
It’s estimated (by John Ing) that the gold price will reach US $9000, which is not a reflection of a meteoric rise in the value of gold, but a total debasement in the value of the American economy. The unmentioned and possibly unmentionable thing in all this is that such a debasement in US currency cannot occur without a significant change in the global military balance. Indeed, if this change is not taken into account, assessments tend to conclude that China (and others) will not recover quickly to take the global lead away from the US. The same degree of extreme economic instability is forecast (and is already coming) for the UK (and other first world countries), although it will likely take different forms. The interesting thing is that talk of conspiracies of world government and globaly tyranny, once only conducted in hushed tones by people suspected of having paranoid delusions, is now the stuff of the regular press, making simple arithmetic easier than ever. Perhaps this is because the notion of coming social upheaval is now a foregone conclusion, making it an acceptable thing to discuss in the public arena.
On a cultural level, the undermining of British social structure appears to be complete, with the sexual equality war now having been lost well and truly in favour of Feminism, where it is reported that advertisers now consider mocking maleness as an advantageous strategy. The significance of advertising trends should not be underestimated, since it is one field where sciences of psychology and sociology are applied effectively, where the current status of a society is accurately assessed. It marks a total disorientation in British society from what could be termed a natural social order.
There is very little left in Western society that reflects the biological realities of being a human being. The lives of men and women are distorted, artificial, medicated. This false way of life guarantees their unhappiness and vulnerability to social pressures. As such, Western society is weaker than it was during the first Great Depression, which is likely to make matters much worse in coming years. Even if people woke up to these facts tomorrow morning, it would take generations for them to relearn what has been lost. It’s unlikely that this will occur, in any case. That particular civilisation has passed its turning point.
There isn’t much anyone can do now to avoid the problems which will arise in the next couple of years. If this were to be compared to the story of Noah and his Ark, then the time now would be that of the first rains of the coming deluge. That said, the people of the world who have been quietly preparing themselves, mentally, spiritually, and materially, are in a position of great advantage. This “advantage” is not the kind that is understood by opportunists or materialists. Indeed, those who only view current events as a way to make some money are going to be rather surprised.
The Reserve Bank of Australia (RBA) has released its May “Statement on Monetary Policy”, where it continues its up-beat report on Australia’s economic prospects in the face of the global financial crisis, pulling together all the positive evidence it can muster to support the idea that a recovery is closer than around the corner:
Reflecting the recent signs of stabilisation in the global economy, sentiment in financial markets has improved in recent weeks. Global equity markets have risen by around 30 per cent from their troughs in mid March, with a number of financial institutions reporting better-than-expected profits. There has also been a further easing of credit spreads, and businesses and financial institutions have found it easier to issue debt. Encouragingly, over the past month, a number of banks – including those in Australia – have been able to issue long-term debt without a government guarantee.
There is a lot of reassuring economic news of late. In addition to the things mentioned by the RBA, including the quite mild assessment of US banks by the Government “stress-test”, showing what is a very small capital short-fall of less than $80 billion dollars. I say small, because, considering that the future value of the US dollar must be much lower than it is now (after the new money issued by the Fed over the last year washes into the world economy), $80 next year might feel a bit more like $20 now.
RBA’s point, though, is that the size of unemployment shifts, price shifts and activity decline is small compared with elsewhere. Housing prices have not yet crashed in Australia in the way they have in the UK or the US. Recent unemployment figures even showed a decline in the jobless rate (although the statistics are disputed). Banks in Australia claim to still be in a healthy state (as a result of the lack of housing crash). One point it makes to support its case is the rate of inflation, at around 4%, which is roughly where the RBA has its interest rate. This has happened due to higher import costs, because the Australian dollar has fallen in value.
The RBA report reads as though, in their opinion, the whole economic crisis is rather overblown (using terms like ‘ongoing risk aversion’) and that there is less substance to it than the numbers might indicate. It cites less ‘bad’ numbers coming from China as signs that the market is improving:
The clearest signs of improvement in economic conditions are from China. While on a year-ended basis, Chinese growth slowed further in the March quarter to 6.1 per cent, RBA estimates suggest that the pace of quarterly growth picked up in the March quarter, and other indicators of activity generally tell a similar story
The question is, though, where is demand for Chinese stuff going to spring up from? It’s doubtful that it will be the old. credit based sources in the US which no longer exist. Also, how much can we trust China’s figures? Do we also believe the official line on other things like human rights, territorial aims, military capability and so on? If China is recording a rise in production, why are similar classes of producers, Philippines, Thailand, Japan and Taiwan recording ongoing massive falls in production?
It is not difficult to imagine that if prices fell low enough (and there has been deflation in prices in major economies), and if consumers held off spending on essential items, they would eventually come out of hiding and buy some of those goods: clothing for the coming Summer, cars, and so forth. Population shifts occur continually and this spurs some demand for housing, even in depression times. They are not, of themselves, signs of the next economic boom, or even recovery.
The IMF is forecasting slight growth in the large economies, by and large, but this is on the back of incredible deficits due to stimulus packages and the printing of new money. Because the IMF measures money in its current value, any growth will be nonexistent when currency devaluation ensues.
The small tick in the massively down-trending graphs is seen by the RBA as a ray of hope, a sign of the inevitable return to prosperity in the First World.
Other issues, such as the bond market bubble and other amazing phenomena are also covered by the RBA. In short, massive amounts of new money are being poured over the world like a bucket of maple syrup over a scoop of ice cream, through the miracle of fractional reserve banking and thanks to fiat money. The catch is that it’s imitation maple syrup, much of it made with artificial sweetener.
This is the big problem with how governments have dealt with the financial crisis. Fiat money has to ultimately find backing in real things, such as goods, good will, and physical force. If these things are not forthcoming, or if there is a major imbalance in them, then no amount of money printing will put it right. Real problems ultimately need real solutions.
In the current economic situation globally, the problem is not that of recession, which consists of a market correction to undo various imbalances that develop in an otherwise healthy and believable financial system. The fundamental problem in the crisis is that the amount of money people say they have, and the tangible things they can use to back up that money, are seriously out of balance. For example, America no longer produces enough goods to exchange for the goods it imports. It has lost its moral authority internationally as a result of many serious scandals. Its military superpower is lessening and may well be eclipsed in a year or two. China’s goods need to find new customers, and China is very aware that its US dollar reserves are soon to be savagely debased, unless, of course, something dramatic happens outside the sphere of economics.
Domestic circumstances are far from natural, currently, as a result of the Australian Government’s stimulus packages. This, for example, has resulted in the mitigation of the housing correction, where the low-end of the market is now recording a growth in prices, funded by the ever more generous First Home Buyer’s Grant (FHBG). The RBA calls the housing market a “softening” rather than a correction, because it probably does not hold the opinion that housing prices in Australia are excessive:
Looking ahead, low mortgage interest rates and the increase in grants for first-home buyers have made home purchase more affordable, and this is expected to help support residential building construction in the second half of 2009.
The problem is that the FHB housing boom, occurring in the face of a global economic depression, is entirely credit based. The FHBG is based on Government debt and the rest is private debt. In other words, the lack of housing crash in Australia is happening on borrowed time and borrowed money.
In the commercial sector, things are less artificial. Empty offices accumulate and their prices fall.
But there is something to the RBA’s positivity. Australians still eat, and demand for farm produce continues to rise. Also, because prices of imported goods have risen, Australia is importing less. This has managed to buffer the fall in exports, so that a trade surplus might result. In the background, however, is the looming shadow of government deficit which is set to skyrocket. Claims of a fall in unemployment need to be taken with a grain of salt as well, since this has not been backed up by an increase in job advertisements.
Saving rates are rising in Australia, which is a great sign (a sudden outbreak of commonsense?), but ultimately, this is not the business model for banks and governments, whose aim is to issue debts and charge interest, encourage the movement of money and the tax collection that results. To that end, bank bonds are being issued again without government guarantees, suggesting that, for banks in Australia at least, business as usual is resuming. That is, for the time being, and to a small degree. It appears to represent a spike in loan approvals as a result of the FHBG, which itself is a mini-bubble which will likely pop into the next financial year.
The stock market is the main indicator used to suggest impending recovery, driven by the resources sector. Resources are tangibles, and in a depressive economic climate, it was predicted that companies in that sector would fare better than the rest of the Australian economy, because demand exists for resources within China itself which is cashed up. Otherwise, even during the boom, Australia’s performance was lackluster in other areas apart from finance and real estate. Bank profits are still high also, as a result of not passing on interest rate cuts. These positive trends do not reflect any improvement in the way Australia’s economy is run. Rather, they are a result of the banks screwing consumers, and a dip in the Australian dollar value. Calling the bottom of the market at this stage, although popular, is not particularly convincing.
In summary, it appears that the RBA has somewhat tempered its optimism over its previous reports. The idea of a V shaped economic recession is being recognized for the fantasy that it is, but the analysis still fails to take into account the big questions of how the US expects to climb out of the debt hole it is still digging for itself at a frantic pace, or how other nations will respond to the US Federal Reserve’s “fiscal easing” policies, reminiscent of the Weimar Republic.
Our expectation would be that the world economy will not see as sharp declines in the next year or so as has occurred in the last six months, but that any recovery is a very long way off. This is not because the economic stimulus packages around the world will fail, which they are destined to in the long run, but because “recovery” is not the likely outcome for many of the nations that are expecting one. Rather, there is sure to be a major shift in the global balance of power, economically, politically and militarily. People don’t like to think of war in a rich country as a possibility, and mentioning it always raises eyebrows, especially on a clam day with the warm sun shining overhead. Nonetheless, since American money has been exposed as a farce, the card players at the table have quietly put their cards down and are reaching for the holster. A conflict may develop rapidly, and not necessarily at a time of America’s choosing. It is this scenario that makes one a skeptic when reading the RBA’s rose colored view of the world.
(Graphs are sourced from RBA’s report. Download the full text of the RBA assessment here.)
Whew. With all the pigs flying around, it’s hard to keep your eye on the important things in life. Hysteria, while once considered an uncommon disorder of uterine function, is now so widespread, traversing the sexes and affecting all age groups, that if you are not in a panic about Swine Flu, then people think you should have your head read. Meanwhile, other, more real things are happening to the world.
If you beat a dead horse hard enough, it will probably move a few inches. Actually, if you hit it with a freight train, it will probably roll a few hundred meters. That can look rather dramatic, especially if you ignore the freight train. In the news today, it is reported that Japan’s industrial output rose by 1.6%, on the back of continuous sharp declines over the last year or so. It’s like a flicker of light in the dark, which would once have been considered dire news. Instead, today it’s seen as the flicker of sunlight over the horizon at the crack of dawn. In the land of the rising sun, no less.
Until now, Japan’s production was practically at a stand still, with people laid off work, factories shut down, nothing in, nothing out (or at least, not much). This has reached the point that basic items, the demand for which can only dip for a time, are running out. Yes, companies are delaying the purchase of new fleet cars and others are holding onto their used cars a little longer, but in the end, people are still driving around everywhere, and mechanical objects wear out and die.
What can be expected is something of an economic recovery in manufacturing nations such as Japan and China. The stimulus money being distributed around the world is of such a massive sum that it cannot but have some effect, but the situation has changed from one that may have existed during previous recessions. The meaning of fiat money is being called into question like never before. The world is realigning itself, political and economic powers are changing rapidly and severe imbalances are developing.
If all else were equal, if the US dollar maintained its value, one could expect a recovery sometime soon (if you expand the money supply and put it into everybody’s pockets without there being any inflation, suddenly everyone thinks they are richer). However, the laws of mechanics are analogous to all natural systems, in that every action invokes an inverse reaction to maintain equilibrium. Spreading out the money supply only dilutes its value, and the US dollar cannot logically maintain its current value without some kind of extraordinary pressure on other nations to pretend that it does. If nature takes its course, we can reasonably expect an economic recovery only when the US accepts its loss of superiority as an economic power and takes a back seat, allowing other markets to emerge. That could take many years.
But this is not a natural system. The US will probably not want to accept a peaceful and graceful decline, but will throw itself into turmoil and take others with it. In the meantime, it will try to bully itself out of the mess it is in, Swine Flu notwithstanding. Rather, Swine Flu is a very convenient distraction at the moment, since it’s a disaster that has no obvious human cause. It allows the American public to forget a much greater threat, but only for a time.
Have you ever noticed that when you want someone to give you something useful for free (or sometimes even for money), such as the Government, there are pages and pages of forms to fill out, hour-long queues to stand in and innumerable supporting documents to bring with you? But when it comes to paying a bill, it’s just a swipe of a card, a click of a button. It’s because, when something is in your interests, you do all the work. Getting robbed takes very little effort at all.
Two pieces of news came out at almost the same time in Australia regarding the housing market and banking sectors:
- House sales are rising sharply (4.2% in March, on the back of a similar trend since January)
- Bad debts are eroding the profits of the major banks. The latest, ANZ, reported a 43% fall in its cash profit.
This is on the background of rising unemployment, no evidence of a real turnaround in the global economy, the new threat of Swine Flu (real or imagined) and the Australian Government’s desire to boost military funding (yet some how crawl itself towards a balanced budget over years), which implies that first home buyer grants, gratuitous thousand-dollar cheques in the mail and mortgage relief programs are a thing of the present but not the near future.
If you had no significant savings, an unsteady job, the threat of dying of pneumonia over the next two months and read about all the dire economic news as abounds in the media, would you take out a mortgage on a house? Before you say no, remember that a whole lot of people are saying yes. They are probably saying yes because, in amongst all the negative facts, there are a few ‘experts’ giving glowing opinions of an imminent turnaround in the world economy. Of course they don’t have a vested interest in off-loading their own bad investments, do they?
A good proportion of those people who are buying new homes today must be oblivious to what’s coming to them. Have they got life insurance? Income protection insurance? If not, how are their spouse and children going to manage without them if something should happen? Who will pay the debt? Whereas before, those families entering a mortgage agreement only had to worry about next week’s rent, now they are faced with the next thirty years on the property which, who knows, may be worthless in a short while, because they and many others will be forced to sell. It’s a big risk to take if you have dependents to look after. Even those with insurance can’t depend on the insurer paying out in the long run. Many of those institutions might still be wiped out.
It’s so obvious that it hardly needs saying, that people, in general, cannot save money. Have money, will spend. Offer people a ‘bonus’, and they’ll go and get pregnant, even if they don’t want children. Offer a bonus, and they’ll spend it on Chinese electronic goods, or buy something on-line at a store located outside Australia. Offer a bonus (FHB grant), and people will sign themselves into a thirty year mortgage with a bank (heartless, soulless). Nobody seems to have a sense of danger. Perhaps it’s because they no longer remember fairy tales, with their big bad wolves, village destroying giants, deceiving witches, poverty stricken children, cruel step-mothers, lazy rabbits, poor widows and pestilence. Instead, it’s all Post-man Pat, the Telletubbies, Thomas the Tank Engine and those brain-numbing Wiggles. For the current home-buying generation, though, it was probably Fat Cat and Friends, Playschool and Sesame Street. That stuff wasn’t even well presented, let alone equally content-free.
What hope is there for these first home buyers, when they are so clueless? What about everyone else, who they are unwittingly dragging down with them? Just as it is said, “Thou shalt not tempt the Lord thy God, as thou temptedst him in the place of temptation.”, so we should realize that, if we tempt the Government, it will call our bluff. If everybody throws themselves into ridiculous debt, in the pursuit of the “home ownership” dream, they will break the whole system of property ownership. The Government will turn around and take away everybody’s property and we be left with a very nasty form of socialism, run, not by governments (which at least get embarrassed if you don’t vote for them), but by heartless, soulless banks, who don’t care an iota if you were to die in the gutter tomorrow.
The blame, though, does not really fall upon the heads of the populace. It has been robbed of its culture, tricked out of believing the sound wisdom of its ancestors, brainwashed by a four-cornered electric puppet-box which sits in every lounge room, even the bedrooms of teenagers. People’s heads are filled with illogical, unbalanced rubbish. It is no surprise, then, that their decision making is of similar quality.