Extreme Symptoms & Hidden Menace: Jim Willie

Some competent analysts claim the United States and Western nations are stuck in the eye of the hurricane. Maybe so, but the internal stresses are so great that they will move beyond the eye into a zone of clearly apparent destruction soon. Some aware analysts believe the bond monetization plans will lift the financial markets. Maybe so, but the ensuing and continuing damage to the economies is profound from rising cost structures. Some awakening analysts no longer look to the USFed as a source of solutions. They see the central bank as increasingly desperate, pushing the same levers that accomplished nothing in the past. In fact, the failing central bank franchise system is visible in the open for all to see, with the embarrassment noticeable when the good chairman speaks as high priest of hollow dogma. New money backed by nothing swims around, financing the USGovt deficits, redeeming toxic bonds, adding nothing to the capital base. In the background is a pernicious effect, having come full circle. The Chinese industrial expansion since year 2000 came largely at the expense of the Western economies. They forfeited thousands of factories in the mindless pursuit of lower costs, while overlooking the abandoned wealth engines that produced legitimate income. In the last couple years, the Western economies have served as weakened customers for the Chinese production. The effect finally has slammed China, which complains of weaker US and European demand. Any trip through Spain will demonstrate that smaller Spanish factories and mills are shut down, with Chinese imports in replacement, as local shops stock mainly Chinese products.

The global financial system is empty of ideas, has no solutions, and is rotting on the vine. The solution is a new trade payment system centered upon Gold, no longer on the toxic USDollar. The solution is a banking system that turns its back on USTreasury Bonds, the delinquent foreclosed step-child of the US Federal Reserve. The list of extreme symptoms and hidden menaces is as long as a roll of fiat toilet paper. It reads like a bad novel, like an endless nightmare, like an obituary. The distortions are far past extreme. The United States is locked in a trade war with China, the financial battles played out in the financial ministries and the press, the actual hot war played out in Southern Africa among smugglers. All Chinese investment within the United States has been secretly banned. The dependence upon Plunge Protection Team props and High Frequency Flash trading to keep stocks up is extreme. The phenomenon is reported regularly, but is no longer news since it is engrained as a constant feature.

The charred financial and economic landscape has transformed so radically since 2008, that aberrant distorted disconfigured bizarre and twisted are considered as normal. The nation has become a surreal depiction economically, financially, politically, and ethically in the last decade, since September 2001. The former USFed Chairman Greenspan was wise to walk away and retire with laurels from knighthood. His work was done. The Bernanke Fed will be known as the Weimar engineers and Mafia bagholders. Even Greenspan could not image the extreme measures required by the central bank, with assorted liquidity facilities (none worked), TARP Fund enabling (pure bait & switch deceptive fraud), hidden bond monetization (drained fuel), bloated toxic balance sheet (never to find value), massive narco money laundering (fully dependent for survival), rafts of mortgage lawsuits (motive for QE3), rising food & energy costs (painful consequence), and much more (not reported in the subservient financial press).

Review some of the extreme features that serve as prevalent signposts scattered across the American landscape, none of which existed in the 1990 decade. The US is stuck in an end road heading over the cliff. Many like the Jackass argue that given the profound widespread insolvency, the nation is descending after having gone over the cliff. It is not approaching a fiscal cliff. It has fallen over it, ever since the Budget Super Committee formulated by the USCongress disbanded in utter failure on the public stage with zero progress on anything. The USGovt spending is so out of control, the political process so broken, that the fascist collectivist nation could not make a New Politburo council work. The broken financial apparatus should be more recognizable. Spending is rabid out of control. The bond monetization is the only defense to prevent a USGovt debt default. The ZIRP birds chip at 0% frequency, due to interest rate derivatives working around the clock under great strain, with no buyers and $trillion deficits as far as the eye can see. The national perspectives are usually late in coming. Eventually the broken national machinery will be understood and perceived. The pundits and experts did not notice the subprime mortgage crisis until 12 to 18 months after it struck. They spent the following year denying its crisis and wreckage. The pundits and experts did not notice the housing market bust until 12 to 18 months beyond peak. They spent the following year denying its crisis and wreckage. Perception inside the United States is not a strong suit. Accurate perceptions are almost considered unpatriotic.

EMPTY QUANTITATIVE EASING SOLUTION

The ultra-low near 0% interest rate environment is a massive wet blanket on the USEconomy. The Zero Interest Rate Policy has an undercurrent to makes for higher costs, lower profit, business segment shutdown, job cuts, and lower income. It remains the biggest blind spot among US economists, whom the Jackass has very little if any respect for, deservedly. The absent foreign bond demand provides a constant motive to conduct the next QE program. The dependence upon monetization to finance the USGovt deficits is slowly entering the mindset of financial analysts and investment managers. The QE3 should be called Global QE or more accurately QE to Infinity, since all the major central banks have joined, whether out of enthusiasm or pressure. They wish to avoid a currency war, so a coordinated currency debasement is the active plan. That approach leaves them all vulnerable to simultaneous rising commodity costs, only kept down by a deteriorating economic base.

Such is the bitter fruit of failed central bank franchise systems. Witness the unlimited USFed and EuroCB and Japanese bond purchases, to prevent a collapse. The Interest Rate Swap device is heavily used to hold down USTBond yields, amidst unending $1.4 trillion annual deficits, low bond demand, and lost global prestige. The hidden motive for the next QE3 round is to cover bury and remove the mortgage fraud that acts as a gigantic logjam on the financial structure and foreign flows. The criticism grows on the theme of questionable quality of new money, the toxic paper to replace toxic paper. The frustration grows on the theme of better quality and higher subordinated debt to replace toxic debt. Solutions are nowhere.

ECONOMY DISTORTIONS

The USEconomy has been stuck in a powerful recession of at least minus 3% since 2008, with only extreme statistical gimmickry and outright accounting fraud to pull up the reported growth. The only sector with rising profits is the banking sector, due to USFed bond purchases, due to the easy USTreasury carry trade, due to the accounting fraud on mortgage portfolios (still no mark to market), due to the lack of derivative contract accounting altogether, due to the convenient debt value adjustment scam. The short home sales are not adequately counted in housing market price data, enabling the charlatans to claim a recovery just in time for the presidential election. Shiller seems like a dope with his blind eye to the excluded short sales in the index that bears his name, and to the racked up home inventory from foreclosures. Hundreds of thousands of homeowners do not pay anything on monthly mortgage, the new scoff-law crowd. They are increasingly challenging the big US banks to produce title, a story the press does not cover any longer since so volatile and visceral.

The Federal Housing Admin (step-father to Fannie Mae) has quietly ramped up subprime home loans, but all under the USGovt auspices. The 3% or 5% down payments are no problem for loans. Step right up. The car market is propped by the next subprime push, with banks practically ordered to extend easy loans to buyers. Some loans are for seven to eight years, and go negative equity in the first few months. The crude oil price remains over $90 per barrel despite a powerful entrenched recession, due to USDollar hedging. Tangible investment stubbornly remains a fixture in global portfolio management, as distrust for the USDollar continues. The deadly decline in California state sales tax receipts, down 40% from July 2011 to July 2012, in my view serves as the most deadly of highly visible signposts. The land of rotten fruits and bitter nuts is being racked by gasoline shortages.

LABOR MARKET STRAINS

Nowhere is the damage to the US systems more visible than the labor market. It is hard to hidemillions of jobless workers. It is hard to hide the shuttered factories whose business went to China and the Pacific Rim. The jobs data is an exercise in deception and fiction. The deception is with the unemployment rate, which runs steadily at 16% to 17% even on the official U6 statistic, but runs steadily at 22% to 23% in the Shadow Govt Statistics that reflects the world in which we live. The deception is with the jobless claims data, since 99 weeks is the limit, and millions of workers have passed the limit, unable to collect more insurance, no longer counted in the official reports. They are like abandoned Missing in Action soldiers left behind to rot in Vietnam, denied to exist, suffering still.

The fiction lies with the Birth Death Model, transformed into the main new employer in fantasy land, lifting the Jobs Report. Several hundred thousand new fictitious jobs appear almost monthly, surely to be corrected in March when nobody is looking. Most of what the President claims as job growth is derived from the BDModel, complete with Cheshire Cat as the guard in a Wonderland. The National Federation of Independent Businesses routinely contradicts the official USGovt propaganda about a robust small business sector. The Birth Death Model is designed to factor in the missing small businesses from the sampling process. It has become a fudge factor to the extreme. Around 50% of new college graduates cannot find work, deeply frustrated and disillusioned. Over 3 million young people are fast losing faith in the system, adults living with parents. They will serve as the demonstrators on the street, if the nation ever wakes up. The nation of Spain had 2500 demonstrations in 2011 that took place in Madrid alone. The United States is fast asleep, flouridated, awash with propaganda, deceived in almost every area of life.

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