The Economy is Worse than You Think.

 

 

Don't Look Now, But Stagflation May be Here 

 

 

Economy faces weaker growth, higher prices




Many Of Us Won't Be Able To Retire Until Our 80s




Worsening Greek Debt Crisis Sinks Stocks, Euro




Late Credit Card Payments Hit Pre-Recession Levels

 

"Greece On The Verge Of A Precipice" As A "Lehman-Like" Avalanche Could Be Set In Motion As Soon As Sunday 

Submitted by Tyler Durden on 06/16/2011 22:33 -0400

Keeping a track of all the fluid, hourly changing developments in Greece can be unbearably complex, and as a result one may be left with the impression that things are better than they really are. They aren't. As the SocGen report below summarizes, Greece may have about 72 hours before it gives itself a Pass/Fail grade on Sunday, which in turn will have massive repercussions on the Troica bailout, on the eurozone, on the EUR, and on all those "Lehman-like" consequences you have been reading about. Once again, just like 2000 years ago, the fate of the western world (we would say democracy but that has not been the case for centuries), is about to be decided by a few popularly elected parliamentarians in Athens. 

 

 

 

 

The Printman Always Rings Twice 

Submitted by Tyler Durden on 06/16/2011 21:41 -0400

We won't bore readers with the Fed's balance sheet: yes, it is at a new record, and will be at a new record until the week of July 7. Which sure makes for click inducing headlines week after week. It will make for even more headlines after the announcement of QE3 when the same meme will be abused for another 1.5 years, at which point everyone will be so habituated to the idea of "record" anything, not to mention a record low dollar, that the Fed's mission will be complete. There are two things that do need noting however: FX swap lines were not used in the past week, although they will see about a trillion worth of use when Greece defaults, and discount window borrowings jumped to the third highest in 2011, or by 25% W/W (to $91 million, and by 62.5% in the Primary credit facility), another number which will shortly surge. Yet the most notable number, or as the case may be, chart, is as usual the Adjusted Monetary Base, which continues to track the asset side of the Fed's balance sheet well into the stratosphere, and is up by 20% YTD. There is about another $80 billion left on this number before it tops out. What is disturbing however, is that despite the ongoing rise in the AMB, coupled with an actual decline of $100 billion in excess reserves in the past week to $1.57 trillion, the market continues to trickle lower. What happens when the incremental additions to the AMB and to reserves end in precisely 24 days?

Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly 

Submitted by Tyler Durden on 06/16/2011 23:57 -0400

About a month ago we reported on an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and "other owners of large metals warehouses" which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process. Specifically, "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities. Coca-Cola and other consumers say that Metro in particular is allowing the minimum amount of aluminum allowed by the LME—1,500 metric tons a day—to leave its facilities, and that Metro could remove much more, erasing supply bottlenecks and lowering premiums for physical delivery in the process. Coca-Cola, which has complained to the LME, says it can take months to get the metal the company needs, even though warehouses are allowing aluminum to come in much more quickly. Warehouses, meantime, collect rent and other fees." It is not only Goldman's Metro operations, but includes JP Morgan's Henry Bath division, and naturally commodities behemoth Glencore, all of which are taking advantage of the LME's guidelines and rules which make the imposition of a pseudo-monopoly an easy task. The primary driver of this anti-competitive behavior is the fact that GS, JPM and Glencore now control virtually the entire inventory bottlenecking pathways: "In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street. The LME has licensed about 600 warehouses around the world. The transformation has raised questions about whether the investment banks, which also have big commodity-trading arms, are able to use their position as owners of warehouses to manipulate prices to their advantage."And since the outcome of this anti-competitive delayed tolling collusion ends up having quite an inflationary impact on end prices, the respective administrations are more than happy to turn a blind eye to this market dominant behavior which buffers the impact of deflation on input costs. We may have seen the end of the OPEC cartel. Alas, it has been replaced with a far more vicious one - this one having Goldman Sachs and JP Morgan as its two key members.

Thirty-Year Mortgages = Mortgage Rape

As a natural “contrarian” I was forced to incorporate a “quirk” into my research going all the way back to my days in university. Not being able to find research materials which coincided with my own positions, I would read materials which supposedly supported an opposite point of view – and then explain how such research actually supported my own viewpoint.

I had another opportunity to resort to that technique this morning, as I scanned a rather absurd piece of Bloomberg propaganda. Bloomberg had managed to find an anecdotal account of a U.S. homeowner who had actually shortened the term of their mortgage. Bloomberg then proceeded to call this a “trend”, and kicked-out a laughable headline about “equity-building” by U.S. homeowners.

Meanwhile, back in the real world, nearly 30% of U.S. homeowners have “underwater mortgages” meaning that overall, U.S. homeowners have less equity in their homes than at any time in history. Bloomberg could have found a more credible topic if it had chosen to talk about “sunbathing in Antarctica”. However, as is often the case, in attempting to present a totally ridiculous scenario and market it as “fact”, it has instead disclosed one of the banksters’ “dirtiest little secrets”: the economic rape, or debt-slavery which these big-banks have created by extending the length of mortgages for countless millions of homeowners.

To illustrate this principle, I need only revert back to the anecdotal account supplied by Bloomberg. It noted that the U.S. couple which had cut in half the length of term of their mortgage from thirty years to fifteen years was only paying $250/month more on their mortgage but repaying principal twenty times as fast. This was accomplished largely due to the fact that by dramatically reducing the term of their mortgage, the couple qualified for an interest rate more than 30% lower than their previous interest rate (i.e. from 7% to 4.5%).

Now let’s once again return to the real world. In the real world, for every U.S. homeowner shortening the length of their mortgage there are ten other mortgage-holders (twenty? one hundred?) increasing the length of their mortgage. Indeed the favorite “mortgage modification” being offered by the banksters to homeowners on the verge of foreclosure is to dupe them into refinancing over a longer term.

Given that reality, let’s simply take the Bloomberg anecdote and reverse it. In going from a 15-year mortgage to a 30-year mortgage; in return for a modest savings of $250/month on the mortgage-payment, the mortgage-holder gets the “privilege” of spending an extra fifteen years doing nothing but paying interest to a banker. Again using the Bloomberg numbers, the homeowner going from the 15-year mortgage to the 30-year mortgage would only be paying 5% as much principle in the early years of that mortgage – and would likely be forced to pay an interest rate roughly 50% higher (using the Bloomberg numbers). Read more: Thirty-Year Mortgages = Mortgage Rape 





 

Audio: Sinclair – You’re Out of Your Mind If You Sell Gold Assets Now

June 16, 2011, at 7:25 pm
by Eric King 

Jim Sinclair’s King World News audio interview is now available!

Click here to listen to the interview…

Dear CIGAs,
While stock markets and other asset classes are getting mauled, real money, gold and silver, are attempting to hold their ground, today King World News interviewed legendary Jim Sinclair.  When asked about the action Sinclair stated, “Well I think the gold market today is acting extraordinarily well being on the positive side when every other asset that people can find are being thrown out the window, especially in the equity markets… Where gold is concerned you are dealing with the condition of the international banks, with the balance sheets of the financial entities of the world.
So the potential right now, right here, right at this point for an error in judgment that would set off a loss of confidence is present, clear and in all probability something that we are going to be facing well into the summer months.  Yeah, gold can rally (here), contrary to the opinions of those who believe in seasonality in monetary items….
Click here to read the written interview on KingWorldNews.com…

Jim’s Mailbox

June 16, 2011, at 11:42 am
by Jim Sinclair in the category Jim's Mailbox |  Print This Post |  Email This Post

Thin Red Line Between Order and Chaos 

CIGA Eric
Jim’s comments are important. Global economic growth has been supported by QE1, QE2 and other liquidity injection programs. The global economy, highly leveraged, would have unwound with frightening speed without this liquidity.
A similar unwinding occurred in 1930′s Great Depression. Yet, despite massive liquidity injections and revaluation of the gold from $20 to $35, over 1/4 of the workforce was unemployed by 1933. Liquidity remains the thin red line between order and chaos. The Fed knows it.

Dear Monty,
QE1, QE2, TARP and all similar programs were "infinitely successful." They prevented a depression worse than any in history. When QE stops, if they ever do stop, you will get to see how successful they were as the world economy unwinds in months and gold unfortunately goes to $12,500.
Regards,
Jim


Stock collapse and $12,000 gold?
Commentary: Two certified doomsters are (slightly) more cautious
By Peter Brimelow, MarketWatch
NEW YORK (MarketWatch) — After six down weeks and a savage slump on Tuesday, the specter of a 2008 Crash haunts Wall Street. But two certified doomsters are (slightly) more cautious.
This is the problem, as summarized by the latest Aden Forecast:
“Many respected analysts are warning that another financial crisis could be on the horizon similar to the one in 2008. They claim that since the 2008 meltdown was not allowed to end naturally, the conclusion is still coming. This is a real possibility since the fundamental, underlying factors that triggered the crisis to begin with still persist. Another possibility is just a renewed recession.”
One service that indisputably did call the Crash of 2008 (“a financial tsunami”) was Harry Schultz’s International Harry Schultz Letter. Schultz had a long and checkered career, especially as monitored by the Hulbert Financial Digest in its closing phase. But its last years were brilliant. Greatly to the disappointment of columnists seeking colorful copy, the letter closed last winter after 45 years of publication. ( See Jan. 10 column .)
However, Schultz still publishes a monthly essay in the Aden Forecast. The good news: As of last week, he doesn’t seem to see another Crash…yet.
Schultz has always had a scatter-shot style, combining eccentricities and insight, and this tendency seems to have become more pronounced. This is his only comment on the stock market:
Source: marketwatch.com
More…




You’re Out of Your Mind If You Sell Gold Assets Now, Jim Sinc… 

CIGA Eric

Jim is right,

Paper shufflers have been beating the grass the startle the snakes (weak hands) because investors, reluctant to do their own homework, have a tendency to act based on emotions rather than intellectual discipline. While intellectual discipline recognizes fundamental-driven secular bulls, it’s easily overridden by emotions of the short-term trend. For example, a sharp decline in gold causes investors to become fearful. This fear makes investors reluctant to buy. This tips the scale towards selling. Falling prices reinforce growing fears, such as what if I am wrong? This new and intensifying fear, in turn, supports further declines. This describes a classic short-term fear cycle. The paper shufflers know and use it to control the trend.
The paper shufflers following historical precedence have been using the fear to reposition on the long side into weakness. The silver and oil markets illustrate this price management tactic.
Policies makes will choose to kick the can down the road, because it’s either kick the economic can or get their cans kicked. The choice is obvious.
“The problem is so serious, the problem is so present time, the problem is so real that it has inherent in it the probability that the economy is not going to have a significant recovery for more than a decade. And the standard of living in the United States, the standard of many who are reading this now, especially those who have taken no measures whatsoever to protect themselves, who simply look at it as reading something of interest but not really acting on it, is going to be so significantly impacted as to make the middle-class or higher middle-class join the serf class. This is as serious as it gets.
…This has gone so far that there is no solution that can be applied and the only practical method is to continue to expand their (the Fed’s) monetary aggregates to continue to hold down interest rates. And hopefully kicking the can down the road until somebody else is in charge and that’s exactly what they are doing.
Well let’s just assume for a moment that QE is in fact limited to June 30th and let’s assume for a moment that the central bank of the United States would take a conservative restrictive approach towards monetary policy, I would suggest to you that the stock market would peel off 4,000 points so fast you would get wind burns. I suggest that if anything like that happened exposing the balance sheets of the financial institutions, that you would have to return to QE with a vengeance, unparalleled, unprecedented in history….
Source: kingworldnews.com
More…