Must Read: UBS' Andy Lees On Why The US Economy Is, All Else Equal, Doomed

"With all the mess going on at the moment, I thought it was worth while stepping back a little and trying to look at the bigger picture." So begins Andy Lees' latest must read letter to clients whch explains succinctly virtually the entire story of where we were, how we got to where are now, how the current trajectory is unsustainable, why due to decades of capital misallocation anything that the Fed does now is essentially irrelevant, why our untenable debt pile does nothing but perpetuate an unsustainable ponzi scheme which will result in an unseen explosion in the true cost of capital: gold, and why the bond market will eventually, and inevitably, force an epic repricing in the cost of non-gold capital absent the arrival of the deux ex machina of real, actionable innovation that the Fed, and all global central planners, keep hoping for. Because the longer we keep plugging away with that worthless substitute, financial innovation, which is anything but, the greater the final collapse. Andy's conclusion: "Until the debt is cleared and capital starts to be properly allocated, economic growth per unit of additional debt will continue to sour. Until we get some real breakthrough technology, requiring large amounts of capital to both innovate and then roll out, we have no chance of supporting the economy." Too bad than that this absolutely spot on observation reflect precisely the opposite of what the Fed is pursuing. Which is why, all else equal, and it will be unless the Fed is finally eliminated from existence, America, and the entire western way of life, is doomed... But don't take our word for it. Here is Andy.




You might want to download a copy and read this...
Weimar hyperinflation "When Money Dies" PDF file

July California Tax Revenues Plunge More Than 10% Below Expectations

Even as the Fed continues to pretend that keeping interest rates at zero for what is now becoming apparent will be an infinite amount of time is an appropriate substitute for the absence for the elimination of actual cash flows, we once again get a reminder that life in the real economy, there were people can not just print their way out of trouble, practical issues such as reality still matter. One such example comes to us by way of California which just announced that state tax revenue plunged in July, falling more than 10% below expectations, and as the LA Times blog says, "making it more likely that deeper cuts to public schools built into the state budget in case of a stalled economic recovery will occur." It adds: "Gov. Jerry Brown and state lawmakers patched up the final $4 billion of California’s budget shortfall this year by hoping for a windfall economic recovery. Those hopes are now fading fast. Tax collections in July were $538.8 million below budget forecasts, according to state Controller John Chiang." And just like the proposed Deficit Reduction Plan will crash and burn courtesy of the completely unknown trillions in yet undisclosed savings, so California is now waking up to a bad hangover after realizing that the deus ex machina in unidentified billions of "revenues" forgot to make an appearance.

Free money for at least two more years -- maybe forever?

Submitted by cpowell on Tue, 2011-08-09 18:40. Section: Daily Dispatches And they complain that gold doesn't pay interest, just 46 percent appreciation since January.

Think gold is high? Wait till dollar bonds are dumped, Davies says

 

 

Reg Howe: Constitutional money -- Don't ask, don't tell

 

 

In The News Today

August 9, 2011, at 2:42 pm
by Jim Sinclair in the category In The News |  Print This Post |  Email This Post

My Dear Friends,

You can see the importance of the $1764 Angel today.

Regards,
Jim




Jim Sinclair’s Commentary

Much to do about nothing. The Fed is in freeze frame, shocked by the failure of business to hold any recovery and the downgrading of US treasuries.

Fed to Hold Rates Exceptionally Low Through Mid-2013 By BINYAMIN APPELBAUM
Published: August 9, 2011
WASHINGTON — The Federal Reserve said Tuesday that it would hold short-term interest rates near zero through mid-2013 to support the faltering economy, but it announced no new measures to further reduce long-term interest rates or otherwise stimulate renewed growth.
The Fed’s policy-making board said in a statement that growth “has been considerably slower” than it had expected, and that it saw little prospect for rapid improvement, prompting the change in policy. It had previously said that it would maintain rates near zero “for an extended period.”
“The committee now expects a somewhat slower pace of recovery over the coming quarters,” the Fed’s statement said. “The unemployment rate will decline only gradually.”
Many economists and outside analysts argue that the Fed should act more aggressively in response to rising unemployment and faltering growth. But internal divisions are limiting the central bank’s ability to pursue additional steps.
Even the modest commitment announced Tuesday was passed only by a vote of 7 to 3. The central bank prefers to act unanimously whenever possible.
More…

 

 

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