Wednesday, June 5, 2013

Banks loosen standards on down payments

Average down payment dropped to 16.1% last month, one survey finds

Aside from rising home prices and reports of bidding wars, here’s one sure sign the housing market is improving: banks seem to be loosening standards for down payments.
The average down payment in purchases with a 30-year fixed rate mortgage dropped to 16.1% nationwide in May from 17.6% two years ago, according to a report released Monday by LendingTree, an online mortgage marketplace. In some states, like Mississippi and West Virginia, the average down payments are as low as 12%, the survey found.

Washington isn’t just neckties and politics anymore. Lauren Schuker Blum has an inside look at the D.C. real-estate boom. Photo: Eli Meir Kaplan for The Wall Street Journal
After sustaining huge losses during the financial crisis when borrowers — many of whom put no money down — foreclosed, lenders raised credit standards, with many requiring 20% down payments. But now that the broader economic picture has improved, some banks are willing to approve mortgages with much smaller down payments. “Lenders have increasing confidence that the loans they’re originating today are less likely to default,” says Doug Lebda, founder and chief executive of LendingTree.
For prospective home buyers, smaller down payments can make it easier to take advantage of today’s lower interest rates and home prices, says Lebda. Homeowners can also use any cash they’re not putting toward the loan to cover other expenses like home improvements and furniture, he says. They might also keep extra money on hand as a cash cushion to cover emergencies, he says.
But the decision to buy a home with less money down could come with consequences. Homeowners with little equity in their property could have a hard time selling their homes down the line if home prices decline, says Keith Gumbinger, vice president with, a mortgage information website. They could find themselves owing more than their homes are worth, says Gumbinger, as many have in recent years. This could force them to stay in the home longer than they would like while they wait for home prices to rise.

And even if their homes aren’t technically under water, some people with slim equity stakes in their homes may still struggle to sell the house, advisers caution. They may find that the size of their loan, combined with the costs of selling the house, such as a broker commission and property upgrades, could add up to more than the sale price, says Scott Halliwell, a financial planner with USAA. “When you tell someone to put a 20% down payment you’re trying to help them prepare for the unforeseen,” he says.
Borrowers who put down less than 20% are also typically required to make larger monthly mortgage payments and may pay more in interest, says Lebda. And in a competitive housing market, the buyer offering a smaller down payment, say 5%, might lose out to a competing offer from a person who is willing to pay 20% of the loan up front, says Lebda.
The shrinking down payments are partly due to the growth of mortgage insurance, which is typically required for homebuyers who want to put less than 20% down, says Gumbinger. Insurers became more willing to offer the coverage as the credit quality of borrowers improved. Could this eventually lead to a comeback of no-money down mortgages? “ I would never say never,” says Gumbinger.


Atlanta Fed Chief Lockhart Says FOMC Backs Stimulus Amid 'Mixed Message' on QE

Federal Reserve Bank of Atlanta President Dennis Lockhart said Fed officials are committed to record stimulus even as divergent views on when to start paring back bond purchases create a “mixed message” to investors.
“To the extent that the markets are seeing mixed messages, it simply reflects the debate that’s going on among the colleagues on the Federal Open Market Committee,” Lockhart said in a Bloomberg Television interview in New York with Michael McKee. “The bigger picture is that any adjustment is not a major policy shift.”
The yield on the 10-year Treasury note has surged in the past month as some Fed officials have said the Fed could slow bond purchases. Chairman Ben S. Bernanke, responding to a question, said May 22 that the Fed could consider reducing the amount of Treasurys and mortgage debt it buys within “the next few meetings” if officials see signs of sustained improvement in the labor market.
The 10-year note yield rose to 2.13 percent at 2:45 p.m. in New York trading from 1.63 percent on May 2.
Lockhart, 66, said recent data, including a monthly decline in manufacturing, reported by the Institute for Supply Management, suggest the economy isn’t strong enough to justify a reduction in bond buying.
‘Very Mixed’
“The data we’re receiving are still very mixed,” he said. “The ISM report this morning is a good example. I’m not getting a clear picture of an economy that really is tracking with considerable momentum.”
“I’d tend to be a little more cautious, and say maybe August, September or later in the year” would be time to consider slowing purchases. “The issue can be on the table in any of those meetings.”
Lockhart also said a departure of Bernanke as Fed chairman at the end of his second term in January isn’t a “foregone conclusion.”
“The important point is that speculation about Chairman Bernanke’s retirement is not having any effect on our ability to formulate policy,” the Atlanta Fed chief said. It’s “not really in any way feeding into the policy deliberations.”
The policy-setting FOMC said May 1 that it will keep buying $85 billion a month in bonds to bolster growth and cut unemployment. The central bank also pledged to keep interest rates near zero as long as joblessness is above 6.5 percent and inflation is no more than 2.5 percent.
‘Modest Adjustment’
A “modest adjustment downward, in our purchase program” is possible as “early as this summer,” San Francisco Fed President John Williams said today. He doesn’t hold a policy vote this year.
Manufacturing in the U.S. unexpectedly contracted in May at the fastest pace in four years, the Institute for Supply Management’s factory index showed. The index fell to 49 from the prior month’s 50.7, with 50 the dividing line between growth and contraction.
Inflation is not an immediate concern, Lockhart said. “Inflation expectations appear to be well anchored and measures of inflation expectations are really not indicating a move toward deflationary territory,” he said. Still, “I don’t think we can dismiss downside risk related to inflation.”
Inflation has fallen below the central bank’s 2 percent target. Price gains were 0.7 percent from a year earlier in April, according to the Fed’s preferred price gauge, which is tied to consumer spending patterns.
Reduce Pace
In a May 22 interview, Williams said any move to reduce the pace of bond buying could be followed by an increase should the economy weaken again.
“Even if we do adjust downward our purchases, it doesn’t mean we’re now in some autopilot of moving in the same direction,” Williams, 50, said. “You could even imagine a scenario where we adjust it downward based on good data and then adjust it back” if the economy weakened.
A former Georgetown University professor, Lockhart has led the Atlanta Fed since 2007. The Atlanta Fed district includes Alabama, Florida, Georgia, and portions of Louisiana, Mississippi and Tennessee.
© Copyright 2013 Bloomberg News. All rights reserved.

Venezuela goes for ban on GM seeds

Venezuela Goes For Law Against Transgenic Seeds            
Prensa Latina, June 1 2013

Caracas - Venezuela is going forward in the defintive elaboration and approval for a law guaranteeing security and sovereignty against the threat of transgenic seeds, said Socialist deputy Alfredo Urena.

Urena said in an interview to Venezolana de Television how important this is to preserve the biological diversity of the nation and food sovereignty, since the transgenic seed market is under the monopoly of a few transationals, such as renowned enterprise MONSANTO.

The new legislation would protect small and medium producers, favour the use of seeds for the environment and human health, and the creation of an institution working on the topic, he said.

Urena said the law project - included last year in the parliamentary agenda - should be in general discussion next month, and includes the foundation of a National Seed Institute that legalizes and certifies agricultural production in the country.

He said legal regulations against transgenic seeds and technological packages are needed and that the project will be later taken to debate before the social movements of Venezuela, farmers, and even producers supporting the use of transgenic seeds.

Urena, however, said that the great development of agricultural production by the use of transgenic seeds in member countries of the South Common Market (MERCOSUR) such as Argentina, Brazil, and Uruguay, is now a reality and states an alternative.

Professor Olga Domenech, coordinator of the National Plan of the Agro Ecology Formation Program of the Bolivarian University of Venezuela, said that the use of transgenics not only damages the environment, but also contaminates varieties of local cultivations and human beings.

The specialist - who collaborates in the formation of the law - said that professionals for a transition in agro-ecology are being trained.

The law should include the vision of farmers, producers, and customers, said Domenech finally.

Overdraft (Full Version)

“Overdraft” is a public television documentary sponsored by the Travelers Institute that presents a compelling explanation of America’s federal debt crisis, how it impacts Americans’ lives, and choices to address the problem.

Obama Authorizes New Iran Sanctions Targeting Currency

Bloomberg – by Hans Nichols
President Barack Obama is targeting Iran’s currency for the first time under sanctions authorized yesterday as the U.S. increases economic pressure on the Islamic Republic to halt its nuclear program.
Obama signed an executive order that would impose penalties on “foreign financial institutions that knowingly conduct or facilitate significant transactions for the purchase or sale of the Iranian rial,” according to a statement yesterday from White House press secretary Jay Carney. It was the ninth executive order that Obama has signed sanctioning Iran, which will hold presidential elections June 14.  
“While the rial has lost half of its value since the beginning of 2012 as a result of our comprehensive sanctions, this is the first time that trade in the rial has been targeted directly for sanctions,” Carney said.
Iran has been hit by financial and trade sanctions as the U.S. and the European Union accuse its government of seeking to build a nuclear weapon. Iran, with the world’s No. 4 proven oil reserves, contends its nuclear program is for peaceful purposes and has refused to back down from what it calls its right to pursue the technology.
Iran’s economy has suffered under the international sanctions. The currency has plunged and inflation has surged to 32.3 percent in the past year while oil output is the lowest since the 1980s. Iran exported 1.1 million barrels a day in March, about 50 percent less than a year earlier, according to International Energy Agency estimates. Iran’s oil revenues fell 27 percent last year, the U.S. Energy Department said April 26.

Iran Election

The timing of the U.S. move was not specifically related to next week’s election, according to an Obama administration official, who asked not to be identified to discuss the move. The administration’s dual-track strategy on Iran seeks to impose sanctions while offering the Iranian government an opportunity to restart talks on its nuclear programs, according to the official.
Yesterday’s sanctions, which take effect July 1, also target Iran’s automotive sector, penalizing companies that sell goods or services to Iran for vehicle manufacturing.
The latest round of sanctions were announced the same day that officials of the International Atomic Energy Agency said Iran’s lack of cooperation has hindered an investigation into the country’s nuclear work. The Iranian government has denied IAEA inspectors access to places and to people, and it has altered the terrain around a military site suspected of housing nuclear weapons work.

Petrochemical Industry

Last week, the Obama administration imposed sanctions intended to restrict Iran’s petrochemical industry, and the State Department in an annual report on terrorism said Iran’s sponsorship of terrorism and terrorist activity by Hezbollah, which Iran backs, “have reached a tempo unseen since the 1990s, with attacks plotted in Southeast AsiaEurope, and Africa.”
At the same time, the administration has eased some measures against Iran. Last week, the U.S. lifted sanctions that bar the sale of consumer communications equipment, in order to make it easier for Iranians communicate through social media and text messaging.

Why Suppressing Feedback Leads to Financial Crashes

by Charles Hugh-Smith
Central-planning manipulation “works” by closing all the safety valves of market feedback, creating a dangerous but politically appealing illusion of stability and “growth.”
If we see the economy as a system, we understand why removing or suppressing feedback inevitably leads to financial crashes. The essential feature of stable, robust systems (for example, healthy ecosystems) is their wealth of feedback loops and the low-intensity background volatility that complex feedback generates.
The essential feature of unstable, crash-prone systems is monoculture, an artificial structure imposed by a central authority that eliminates or suppresses feedback in service of a simplistic goal–for example, increasing the yield on a single crop, or pushing everyone with cash into risk assets.
Resistance seems futile, but the very act of suppressing feedback dooms the system to collapse.

Removing or suppressing feedback seems to work wonders because the systemic risks generated by this suppression are pushed out of sight. The euro is an excellent example of this dynamic.
The system of national currencies is in essence a gigantic feedback mechanism, as the relative value of a nation’s currency reflects its cost structure, trade deficits or surpluses, fiscal deficits, interest rates, central bank policies and a host of other inputs.
A currency that is allowed to fluctuate acts as a “safety valve” feedback when an economy become imbalanced. If the costs of production in one nation are relatively high, its exports will decline and its imports will rise. This leads to large trade deficits, which (except in the case of the reserve currency, the U.S. dollar) lead to lower currency valuations, which feeds back into imports and exports: imports become relatively more expensive as the currency loses buying power internationally, and exports rise as the nations’ goods and services become relatively less expensive to other nations.

The net result of this currency feedback loop is to lower imports and increase exports, bringing the trade deficit back into relative balance.
The euro effectively removed this complex feedback from all the economies that accepted the euro. This is the root cause of the European debt crisis: credit was allowed to reach insane levels of fragility and excess because the feedback that was once provided by national currencies and central bank/fiscal policies was removed from the system.
This is why claims that the European Central Bank (ECB) will “do whatever it takes” to maintain the euro’s suppression of feedback are doomed to failure.Removing or suppressing feedback allows risk and structural imbalances to pile up to the point they threaten the entire system. This is the case in Europe, Japan, China and the U.S.
In Japan and the U.S., the central banks and fiscal authorities in the central state have suppressed market feedback by pushing interest rates to near-zero and then using the central banks’ unlimited ability to create money to buy government bonds. This suppresses feedback from the bond market and from the political sphere, as cheap money and unlimited issuance of government debt (bonds) enables politicos to avoid painful restructuring and choices.
If you eliminate feedback from the markets, you get asset bubbles and huge deficits. Those extremes goose “growth” for the short-term, but the suppression of feedback only dams up risks and imbalances: out of sight, out of mind. But the imbalances haven’t vanished; they’re piling up unseen in the system, where they eventually break out at the system’s weakest point.
Central-planning manipulation “works” by closing all the safety valves of market feedback, creating a dangerous but politically appealing illusion of stability and “growth.” But the consequences of removing or suppressing feedback are catastrophic longer term, as the imbalances and risks pile up unseen until they bring down the entire system.

Does China Plan To Back The Yuan With Gold And Make It The Primary Global Reserve Currency?

by Michael
Chinese Renminbi Yuan - Photo by MiLu24
What in the world is China up to?  Why are the Chinese hoarding so much gold?  Does China plan to back the yuan with gold and turn it into a global reserve currency?  Could it be possible that China actually intends for the yuan to eventually replace the U.S. dollar asthe primary reserve currency of the planet?  Most people in the western world assume that China just wants a “seat at the table” and is content to let the United States run the show.  But that isn’t the case at all.  The truth is that China doesn’t just want to compete with the United States.  Rather, China actually plans to replace the United States as the dominant economic power on the planet.  In fact, China already accounts for more global trade than the United States does.  So what would happen one day if China announced that it was backing the yuan with gold and that it would no longer be using the U.S. dollar in international trade?  It would cause a financial shift so cataclysmic that it is hard to even imagine.  Most of those that write about the “death of the U.S. dollar” usually fail to point out that China is holding a lot of the cards as far as the fate of the dollar is concerned.  China owns about a trillion dollars of our debt, China is the second largest economy on the planet, and nobody uses the dollar in international trade more than China does except for the United States.  Up until now, China has had to use the U.S. dollar in international trade because there has not been an attractive alternative.  But a gold-backed yuan would change all of that very rapidly.
And without a doubt, the Chinese government has already been very busy promoting the use of the yuan in international trade.  In a recent note, John McCormick of RBS Group stated the following…
Financial crises in the US and Europe mean the world needs a new, more stable global reserve currency, and trade in RMB is growing rapidly. In the FX market, for example, our figures show that volumes are now worth around USD 5-6 billion daily – double what they were a year ago.
A number of factors suggest that the Chinese authorities want to make RMB internationalisation happen by 2015.
For China, having a global reserve currency is not just about economics.  It is also about power.
McCormick ended his recent note this way…
China’s new leadership faces a number of problems. The country’s economy is slowing and, although we would expect the rate of GDP growth to pick up a little, it is unlikely to be a steep rebound.
But promoting RMB as a global reserve currency, with all the economic benefits that will bring in addition to exerting more political influence on the global stage, clearly remains high on their agenda.
Similar sentiments were echoed in a recent article in the Wall Street Journal
Beijing is undertaking a long, gradual campaign to establish the yuan as a more market-oriented, international currency. China’s State Council, or cabinet, said in a statement this month that the country would draft a plan to allow the yuan to become fully convertible. Meanwhile, the People’s Bank of China is guiding the currency higher and set the median point of its permitted daily trading band last week at the strongest level ever.
We don’t hear much about these sorts of things in the western media, but the convertibility of the Chinese yuan is a very big deal.  Up until recently, the yuan was only directly convertible into dollars and yen.  But now that is rapidly changing.  So far this year, the Chinese government has entered into currency convertibility agreements with Australia and New Zealand.
So instead of having to change yuan into U.S. dollars to trade with Australia and New Zealand, now China can cut U.S. dollars completely out of the process.
But right now there is nothing that really gives the Chinese yuan a significant competitive edge over the U.S. dollar.  If Chinese authorities truly want the yuan to end up replacing the U.S. dollar as the primary reserve currency of the planet, they need to do something that will make the rest of the world want to use it.
And they could do that by backing the yuan with gold.  In fact, there are persistent rumors that China has been busily preparing for that.

For example, the Economic Policy Journal recently pointed out that Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush, is claiming that China has plans to turn the yuan into “a hard, gold-backed currency” that will have a distinct competitive edge over the rapidly depreciating paper currencies that the rest of the globe is currently using…
The most interesting piece of the puzzle is that the Chinese have emerged as the biggest buyers of gold, mainly off-market. They want the yuan to emerge as a hard, gold-backed currency in a world where everyone else has chosen to inflate and devalue.
The recent bilateral currency deals with Australia, France, Russia and Singapore, and many others, reflect this desire to displace the USD as the world’s reserve currency.
It may be an interesting and long race between the Chinese reaching for convertibility and the Western central banks straining credibility.
Other analysts are also fully convinced that the goal of the Chinese is a gold-backed yuan.  The following is what money manager Stephen Leebtold King World News recently
Countries have been battling each other in order to cheapen their currencies. The problem with a cheaper currency is that commodities cost more. So China has decided to opt for a higher currency.
The move in the yuan overnight was one of the most significant upticks I have seen. Like I said, the yuan moved to an all-time high. The yuan has advanced roughly 5% against the US dollar in just nine months. China also imported over 200 tons of gold for the most recent month. That is an extraordinary number. At that rate that’s over 2,400 tons of gold per year on an annualized basis.
This simply speeds up the point at which China will be the largest gold holder in the world. China saw gold come down and they didn’t just buy on the dip, instead they bought as much as the market would give them. And, again, you see the yuan going up so that is making the price of gold even cheaper for the Chinese.
It’s only a matter of time before the Chinese back the yuan with gold. This will push the yuan front and center as a key element in terms of being part of the world’s reserve currency basket. China gets the message. They are doing whatever it takes to establish their dominance in the world, particularly in the commodity arena. Their currency is flying and they are importing as much gold as they possibly can.
And without a doubt, China has been hoarding massive amounts of gold.  Everyone agrees on that.  But what nobody knows is exactly how much gold China currently has stockpiled, because China is not telling anybody.
One recent estimate put China’s gold reserves at more than 7,000 tons of gold, but it could potentially be far higher than that.  When China does finally tell the rest of us how much gold they have, they will probably be just a move or two away from checkmate.
What we do know is that China is importing absolutely enormous amounts of gold right now even though China is also the number one gold producer on the planet.
According to Reuters, more than 223 tons of gold was imported into China from Hong Kong in March.  That smashed the previous record of 114 tons in December.
Overall, Chinese imports of gold from Hong Kong tripled in 2012, and the final number for 2013 is going to absolutely smash what we saw in 2012.
Obviously something is happening.
China is massively hoarding gold at the same time that it is trying to substantially raise the international influence of the yuan.
It doesn’t take a genius to see where all of this is headed.
If China does decide to back the yuan with gold and no longer use the U.S. dollar in international trade, it will have devastating effects on the U.S. economy.  Demand for the U.S. dollar and U.S. debt would drop like a rock, and prices on the things that we buy every day would soar.  At that point you could forget about cheap gasoline or cheap Chinese imports.  Our entire way of life depends on the U.S. dollar being the primary reserve currency of the world and being able to import things very inexpensively.  If the rest of the world (led by China) starts to reject the U.S. dollar, it would result in a massive tsunami of currency coming back to our shores and a very painful adjustment in our standard of living.  Today, most U.S. currency is actually used outside of the United States.  If someday that changes and we are no longer able to export our inflation that is going to mean big trouble for us.
So keep an eye on China, and look out for any news about the yuan.
It won’t happen next week or next month, but eventually we could see China back the yuan with gold.
When that happens, it is going to be a complete and utter financial disaster for the United States.

It’s Official, the US is Back in Recession

by Phoenix Capital Research
As warned previously on these pages, the US is in a recession… again.
The latest ISM reading came in at 49. Any reading below 50 is considered recessionary. And an ISM of 49 is the worst in four years.
The Fed, as usual, is oblivious to this. Bernanke claims we’re going to see a 3% GDP growth in 2014. We haven’t seen annual GDP growth of 3% since Bernanke took office. And he and the Fed have been claiming that a recovery was just around the corner for five years now… that’s HALF a business cycle.
At this point we should ALREADY be in a massive economic expansion, not waiting on a recovery. And we certainly shouldn’t be seeing weak growth and higher costs, which is the worst possible combination: stagflation.
Indeed, Copper, the commodity with a PhD in economics, peaked two years ago implying that economic growth has been slowing ever since. This hardly gives any credence to Bernanke’s claims. If anything, it shows that the man is not paying any attention to obvious signs from the world that growth is slowing.

As I told Private Wealth Advisory subscribers over a month ago, if you remove the Fed’s phony inflation measure and measure GDP in nominal terms, it’s clear we’re already back in a recession:

And stocks are at all time highs? Buckle up, what’s coming is not going to be pretty.
Investors, take note… the financial system is sending us major warnings…

If you are not already preparing for a potential market collapse, now is the time to be doing so.

For insights on preparing for a market collapse visit us at:

Best Regards

Graham Summers

Britain has highest food and energy inflation in Europe, OECD says

Britain has the highest food and energy inflation in western Europe, according to the OECD.

Borough Market  
The OECD said food prices in April in the UK were 4.6 per cent higher than the same month a year ago.

Fears over the huge squeeze on cash-strapped households rose yet again after shock figures from the Paris-based think tank.
The OECD said food prices in April in the UK were 4.6 per cent higher than the same month a year ago.
This compares with 3.7 per cent in Germany, 1.6 per cent in France and just 1 per cent in the US.
Energy inflation in the UK was put at 2.2 per cent – more than four-times the rate of increase in Germany. In nearly a dozen European countries energy prices fell in the month – with France, Belgium, Denmark and Spain benefiting from a decrease.
Economists said UK consumers may be suffering from the low pound but also less competition than other markets.
Ross Walker, chief economist at the Royal Bank of Scotland, said: "The concentration of the big four supermarkets in the UK must given them pricing power."
Today's figures came just weeks after the OECD claimed rising prices were hitting the amount of spare cash in Britons' pockets. Britain has fallen from fifth to 12th on a global list of wealth based on disposable incomes since the credit crisis began.
The Office for National Statistics puts the country's official inflation rate 2.4 per cent. The Bank of England has missed its 2 per cent target since December 2009.
Supermarket industry insiders insist that inflationary pressures faced at the end of last year on items such as wheat and meat were beginning to ease. One stressed that promotional activity had never been higher and that UK customers get some of the best deals in Europe.
The OECD said that overall inflation in the UK had slowed from 2.8 per cent to 2.4 per cent in April. But the index dropped to 1.2 per cent in Germany, 1.1 per cent in Italy and just 0.7 per cent in France.

Come to Germany to work and find love, British are told

Germany has launched a £120 million drive to entice young workers from Britain to come to the country and work as apprentices by offering generous all-expenses-paid schemes.

Then prime minister, Gordon Brown, decreed that Jobcentre Plus should not employ any more staff despite the sharp incline in numbers losing their jobs.  
UK unemployment rose to 7.8% in the first three months of the year.

With the aim of plugging the skills gaps in Germany’s prosperous economy, Berlin will encourage hundreds of Britons aged 18 to 35 to take up the three-year apprenticeships.
Prospective candidates must be educated to ‘A’ level standard and will be offered the chance to come and work and study.
The package includes wages of almost £700 a month after tax, as well as 170 hours of language lessons thrown in for free, the Daily Mail reported.
The apprentices will have their moving costs paid for them, plus two expenses-paid visits home each year and training at one of Germany’s highly-esteemed vocational colleges.
It is hoped some British apprentices will even stay in the country after completing the scheme.
Germany has the lowest youth joblessness rate in Europe, while in Britain unemployment rose to 7.8% in the first three months of the year.
Bob Bischof, of the German-British Chamber of Industry and Commerce, said: “This is a great offer for young Britons to get top-flight training in Germany.
“We hope many of those who come over will like the life, maybe meet a German partner, and stay for good.
“It means British employers will have to try harder to get the best young apprentices as it is more competition.”
The scheme is being run in the UK by the International Business Academy.
The academy’s Wulf Schroeter said: “Generally, the brightest youngsters don’t like to be unemployed.
“Therefore they wouldn’t leave their country if there are enough alternatives.
“It’s the job of the governments everywhere to establish conditions for the economy to invest their money and create jobs.”

Wealth from economic “recovery” has gone to the richest Americans

A new study from the St. Louis Federal Reserve documents the vast disparity in the fortunes of American families since the financial crisis of 2007-08, with the bulk of the “recovery” in aggregate wealth going to the richest layers of the population.
The report, “After the Fall: Rebuilding Family Balance Sheets, Rebuilding the Economy,” found that “only about 45 percent of the average inflation-adjusted household wealth that was lost since the onset of the downturn in 2007 has been recovered.”

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To support claims of economic recovery, the Obama administration and the political establishment as a whole have cited the fact that aggregate net worth at the end of last year had almost reached the level it was prior to the crash of 2009. While total net worth was estimated at $67.4 trillion in 2007, it reached $66.1 trillion at the end of 2012, recovering 91 percent of its losses.
However, this masks the enormous growth of inequality. Of the $14.7 trillion accrued since 2009, the majority, $9.1. trillion, “was due to higher stock-market wealth,” the majority of which is owned by the wealthiest families. With more than a touch of understatement, the report states: “Considering the uneven recovery of wealth across households, a conclusion that the financial damage of the crisis and recession largely has been repaired is not justified.”
The wealth of the rich has surpassed pre-recession highs, while that of the vast majority has stagnated. In other words, the net impact of the crisis has been an aggregate transfer of wealth from the poor to the rich.
This outcome is a direct product of the response of the American ruling class, led by the Obama administration, to the crisis. Trillions of dollars have been allocated to bail out the banks, and the US Federal Reserve pumps $85 billion into the financial markets every month to maintain the new asset bubble. At the same, wages have been driven down and social services slashed, while nothing has been done to help those most severely impacted by the crisis.
The St. Louis Fed noted that prior to the economic crash, US households had accumulated an average debt-to-income ratio of 133 percent, due in large part to soaring housing prices and predatory lending by the banks. In the wake of the crash, average household wealth fell 15 percent.
The impact of the crisis disproportionately affected low-income Americans, though the primary categories examined by the report are those of race, age and education level. The class impact—both of the crisis and of the subsequent “recovery”—finds distorted reflection in these alternate categories.
“Although many subgroups experienced large declines, the Fed’s survey suggests that families that were young, that had less than a college education and/or were members of a historically disadvantaged minority group… suffered particularly large wealth losses.”
These families are among “the most economically vulnerable groups because of the particular occupation and sectors in which they were overrepresented, such as low-wage service-sector jobs and construction.”
Youth were particularly hard hit. The report found that from 2007 to 2010, homeowners under 40 saw a staggering 44 percent wealth loss in their homes, with a disproportionate impact on minority youth, including Hispanic and African American youth.
For lower-income families, homes tend to be the primary asset. For African American or Hispanic homeowners under the age of 40 who had not received a high school diploma, 85 percent of all wealth in 2007 was tied to real estate. For both college graduates and high school graduates in this category, 70 percent of wealth was tied to homes.
The report states that chances for post-secondary success increase seven-fold for a youth who had personal savings, regardless of family income. Inversely, lifetime earning potential is also hindered by excessive amounts of debt. The Federal Reserve found that those with a four-year college education and overhanging student loans had a net worth of $186,000 less than their non-indebted peers.
A recent New York Federal Reserve study found that, for those who had student debt, the average level of debt for youth aged 25 had risen to $25,000. Nearly one in five young people were at least three months delinquent on payments.
A number of recent reports corroborate the St. Louis Fed’s findings. Last year, a US Federal Reserve study found that the global economic recession had set families back by nearly 20 years, erasing 39 percent of all household wealth between 2007 and 2010.
Another recent study, released by the University of California, found that since 2009 average real income for families had grown by only 1.7 percent. However, behind this 1.7 percent growth, the top one percent saw their incomes jump by over 11 percent, while the income of the bottom 99 percent declined by half a percentage point during the same period.
Nearly five years after the onset of the greatest financial crisis in a century, bankers and wealthy hedge fund managers have been supplied with access to virtually endless funds by the Obama administratio, while simultaneously declaring there is “no money” for basic social programs benefiting the working class.
The results, reflected in the St. Louis Fed report, are the outcome of this process.

PIMCO Leader Takes Federal Reserve Chairman Ben Bernanke To Task Over Low Interest Rates, Saying They Aren't Working And May Be Part Of The Problem

By | June 04 2013 12:35 PM
The head of the world's largest bond fund has unloaded on the head of the world's largest central bank, saying the Federal Reserve's unprecedented policy of monetary easing -- effectively, money printing -- is failing and, worse, setting up the economy for serious trouble.

IRS Agent Exposes IRS Fraud!! - Joe Banister

Marc Faber: The Market Is ‘Quite Vulnerable’

On The S&P I wouldn’t bet on it. as i said before, if someone put a gun on my head and said you have to be long or short, i would take the short side.

Public Banking Conference good news: solutions already here for deficits, debt

Examiner – by Carl Herman
Public Banking Institute’s 2013 conference explains, documents, and proves that economic solutions for deficits, debt, and full-employment are structurally:
  • easy to understand and self-evident upon inspection
  • easy to implement
  • would improve our economy amazingly quickly and thoroughly  
The conference link contains a complete schedule for access to each speaker’s contributions. The details on any one issue are many, and available at one’s interest to look.
What’s missing for the implementation of these solutions is that our 1% “leaders” will not and can not implement solutions without becoming visible in criminal culpability for having the current system that parasitically transfers literal trillions from the 99%.
Matt Taibbi: “If the public isn’t educated quickly, we won’t have a chance. The current system (of banking and finance) is completely corrupt.”
The solution to this problem is also obviousprosecute obvious criminals in “leadership” in government, economics, and corporate media for fundamental fraud by lying to the 99% that debt is “money,” and lying in omission by failing to inform that public credit and money would solve all current economic issues. The public costs of this fraud are trillions of dollars, and needed-to-be-estimated harm to millions of Americans and significant totals of deaths. An alternative to criminal prosecution is Truth and Reconciliation.
Please remember: for 18 years I worked with both parties’ “leadership” to end poverty that had full academic agreement, full political agreement on paper, and two UN Summits. The 1990 World Summit for Children was the largest meeting of heads of state in world history, yet even the political organization at that level has been thwarted in policy realization. Poverty continues because the 1% use “leadership” in government and media to take no action and keep their inaction quiet from public attention.
Therefore, while I welcome anyone and everyone to learn whatever details of interest in public banking and monetary reform, I lived the intense learning and work to have appreciable command of the facts inclusive in the areas of ending poverty, I lived the work to help organized political agreement and meetings at the highest levels on the planet, and lived the life-changing defeat of all that work through political, economic, and media interest in competing areas. The 1% destroy democratic civic participation by removing choices from public consideration through their silence, despite obvious public enthusiasm when informed of the facts.
That said, the 100 million families who’ve received microcredit and worked their way out of poverty are surely appreciative of our work. These benefits saved ~100 million human lives, reduces population growth, and according to the CIA reduces the sole statistic most linked to global terrorism (infant mortality).
I see no policy realization in public banking without removal of our criminal 1% with competing interests in living off parasitic debt (full explanation here).
One of the ways to achieve that result is certainly through broad public education, providing choice to legislators of whether they wish to reclaim their hearts with public solutions, and local media and community outreach.
The solutions are here, with only parasites between humanity and their realization.

Fiat Currencies Are Derivatives

Gold & Fiat Currency
Over the last few months I’ve tried to nail-down an underlying reality, a meaning, the ‘nature’, of both physical Gold and Fiat Currencies. Neither are obvious to the average person, and there are many, many versions as to what they both are, depending upon which camp you are in (Trader, Economist, Politician, PM Bug, Investor, Mum & Dad, Business Owner, Banker, Wanker, Central Planner etc-etc).
My reasoning for trying to identify this is simple; I have not been overly comfortable with what the majority of people on this forum, as well as other sectors, have declared them to be.
Not knowing the true nature of Gold and Currencies manifests into a failure to understand the relationships both have in the real world. Add to that a deficiency in understanding them as a financial tool and/or investment.
I would like to share with you what I’ve come up with…and I’ve kept them simple.
CAVEAT: I refer to currencies in a general sense, not one in particular, and not one in relation to the another. I do not refer to any Gold Derivatives.
Fiat Currencies are Derivatives
Since the abolition of the Gold Standard, Fiat Currencies have become a Derivative; as they are traded in the open market they point to an economy of origin, they point tothat country’s Bond and Treasury Bills, and they point to the ‘Balance Sheet’ of that country’s Central Bank. Destroy the Bonds, Treasuries, Economy or Balance Sheet and you destroy the Fiat Currency as well. This was not necessarily the case when Currencies were backed by Gold and/or conformed to a Gold Standard, as the underlying value was preserved within the physical Gold…Currencies were indeed a ‘Claim Cheque’.

Gold has two lives (Dr Jekyll and Mr Hyde); it spends most of its live as perpetual Commodity, but every now and then it becomes ‘Flux Money’. We all know its Dr Jekyll manifestation as a metal and traded commodity, so there’s no need to elaborate on that. In its Mr Hyde manifestation (Flux Money) it phases in and out of favour throughout history under certain conditions. When things are going well Gold is almost hated for its lack of return performance and cost of storage, but when things deteriorate, that’s when Gold comes out of psychological hiding. When wealth moves into Gold for safety, by virtue of its demand, it becomes the vessel of choice. Once this starts to happen, a bottle-neck appears as more and more wealth converges upon a finite Gold supply. Demand forces the value of Gold upward and this is precisely when Gold recaptures its reputation and all of the ill feelings as a non-returning commodity are forgiven. I believe the reason Gold has this ability, this power, is simple; it’s etched into the psyche of every society since every society has historically been through dark times. Also, as the saying goes “there no such thing as an atheist in a fox hole”, well, there’s no such thing as a Paper Bug in a [global] Collapse, whether that be Deflation, hyperinflation or societal.
In simple terms, Currencies are derivatives which relate to the modern economy, and Gold is both a permanent commodity and occasional safe storage.
If you can relate to this, then you can proceed with the $64,000 question; where are Currencies going and where is Gold going?
So really, the answer to this question – since currencies are a derivative – relates directly to the actions of Central Banks, Government Treasuries, and Global Consumers.
And what are we seeing? Central Bank balance sheet expansion, Government Treasury Ponzi schemes, and a protracted contraction of Global Consumption.
If you believe Central Banks will keep printing, Governments will keep Deficit Spending, and Global Consumers are on the edge, then Gold will come out of flux and solidify back into money once again.
These who defy their intuition, those who defy the psyche of the market, will burn in a paper bonfire, should the current path be defended and this erosion continue.


Friday’s Drop Was Just a Hint Of What’s Coming

by Phoenix Capital Research

The economic gaming continues in the US.

On Friday it was announced that consumer confidence hit its highest level in nearly six years. Indeed, the last time we saw confidence in the economy as this reading was July 2007…

Here’s a riddle… how can consumer confidence be so high when:

  1. Household wealth remains 45% lower than it was before the Crisis?
  2. Incomes are falling?
  3. Prices are generally rising?

Technically we’re all poorer than we were before 2008 happened. Most of us are making less money. And we’re spending more just trying to get by thanks to higher food, energy, and healthcare prices. Heck, housing is now even soaring again, pricing most beginning homebuyers out of the market.

And yet… supposedly we’re all feeling much better about things. Either we’re all delusional… or the data is being massaged to look better than reality.

Against this backdrop, Bernanke continues to talk about how removing stimulus could damage the “recovery.”

This is extraordinary.

We’re five years into a financial crisis. The typical business cycle is 10 years. So just based on historical cycles alone we should be witnessing a roaring recovery by now. And yet, the Fed Chairman is worried that removing stimulus (which is now north of $85 billion by the way) would damage the “recovery.”

Folks this entire mess is one big house of cards that is getting ready to collapse again. The Fed doesn’t have an exit plan. It never had a plan to begin with except to leave the paperweight on the “print” button. The fact that they’re still talking about a recovery five years and $2+ trillion after the Crisis hit makes it clear they’re losing control.

The market is beginning to sense this as Friday’s collapse indicates. As I’ve stated many times in the past weeks, stocks were ready to correct. Friday we got a hint of what’s coming:

Investors take note… now is the time to be prepping for a market correction. As Friday’s action showed, when it comes, it’s going to be fast and violent.

For insights on preparing for a market collapse visit us at:

Best Regards

Graham Summers

Gold Premium Surges In China – Wise ‘Aunties’ And Wealthy Buying

by GoldCore

Today’s AM fix was USD 1,405.25, EUR 1,074.68 and GBP 918.64 per ounce.
Yesterday’s AM fix was USD 1,396.75, EUR 1,072.61 and GBP 915.00per ounce.
Gold climbed $27.10 or 1.96% yesterday to $1,412.00/oz and silver also gained 2.57%.

Bloomberg Chart of Day (June 3, 2013)

Gold inched down today after yesterday’s 2% gain. Gold was higher in Australian dollars after the Aussie dollar fell on concerns about the Australian economy.
Monday’s economic data showed U.S. manufacturing activity had slowed to the lowest level in almost 4 years. The still fragile nature of the U.S. economy will support gold.
Poor economic data is confusing the bulls who continue to under estimate risk. The monthly nonfarm payrolls figures out on Friday will give further guidance regarding whether the U.S. is tipping into recession.
Deutsche Bank has recommended buying gold in Japanese yen and Australian dollars.
The bank cites the significant increase in Japan’s balance sheet as likely to cause the yen to weaken further and says the Australian dollar is overvalued.
While gold in yen is down just 3.6% in 2013, in the last 12 months the yen has fallen by 10.1% against gold showing gold’s importance as a hedge against currency devaluations.
As long as the world’s economy remains in tatters then safe havens will be few and far between.
While gold’s safe haven credentials have taken a bit of a battering of late, they will again prove themselves over the long term.
The banking crisis in Cyprus has shown that even bank deposits are not safe and globally there are plans for so called ‘bail ins’ or deposit confiscation for banks that become insolvent.

Cross Currency Table – (Bloomberg)

The premium gold buyers in China are willing to pay to take immediate delivery of gold, as bullion jumped four-fold in April after prices fell sharply.
Store of wealth buyers thronged jewellery stores and bullion brokers in China in order to buy gold jewellery, coins and bars.
Photos of Chinese “aunties,” a term of respect for older women, clearing shelves in goldsmith shops made headlines in government media such as the People’s Daily and millions of Weibo microblog accounts after the 14% plunge in prices in the two days through April 15.
The biggest such drop since 1983 was seen as an unprecedented opportunity by some, which prompted fabricators to replenish inventory by taking delivery on the Shanghai bourse.
The Bloomberg CHART OF THE DAY (above) shows that in the 12 months through April 12, before the rout, gold for immediate delivery in China traded at an average premium of $7.22 an ounce to the prevailing London counterpart, according to Shanghai Gold Exchange data.
The premium has averaged $32 an ounce since mid-April, as physical demand surged, and was at $17.15 at 2:17 p.m. in Shanghai.
“Premium is a function of demand and supply, and right now you could interpret the high premium in Shanghai as a sweetener to entice the overseas gold supply to flow into China,” Qu Mingyu, a trader at Bank of China Ltd. in Shanghai said on May 24.
Even before the mid-April price drop, China’s gold imports jumped to a record in the first quarter, according to official data, and probably rose further through May, Qu said.
China’s output of 403 metric tons in 2012 made it the world’s largest producer for a sixth straight year, according to the China Gold Association. Domestic demand was 776 tons last year, which outpaced supply and spurred imports, according to the World Gold Council.

Gold $/oz, 5 Years, Daily – (Bloomberg)

The store of wealth demand is not just from Chinese ‘aunties.’ There remains an under estimation of the demand coming from wealthy Chinese and high net worth and ultra high net worth individuals (HNWs and UHNWs).
This has not been commented upon or analysed but we have direct experience of wealthy Chinese people looking to store gold in Hong Kong and Switzerland, as have other storage providers.
Given the significant cultural affinity for gold in China, there is likely to be sizeable demand from wealthy Chinese people looking to diversify and protect their new found wealth.
To characterise Chinese demand for physical gold as solely from “aunties” is to simplify Chinese demand. Indeed, besides Chinese people buying gold, Chinese companies and of course the official sector and the People’s Bank of China are also likely accumulating gold.
The significant broad based demand for gold in Asia, and particularly from India and China, continues to be ignored and under estimated by gold bears such as Nouriel Roubini.

Why inflation matters: How the Fed is creating real estate inflation and hiding behind inflation data to continue their expansionary ways

Inflation matters.  It matters a lot.  Contrary to what you may hear in the mainstream press the Federal Reserve has done everything to stoke the fires of inflation.  The reasons for this include creating asset inflation that is understated in CPI data and also setting up a system where consumption is almost forced upon consumers.  How so?  With negative interest rates consumers are losing money by simply having their money in a savings account.  Even a modest rate of inflation will erode purchasing power when banks are paying zero percent on your hard earned deposits.  Yet this is all part of the design.  Inflation matters because it does encourage spending.  You want to spend today given that your current dollars will lose value tomorrow.  The Fed likes inflation so much that it has reignited the housing market once again while it has expanded its balance sheet to over $3.3 trillion.  Inflation absolutely matters.
 A brief history of inflation on the dollar
What is interesting is the US dollar held steady for nearly 60 years between 1870 and 1933:
inflation on prices
Once the gold standard was abandoned, the US dollar has been on a steady decline since the 1930s.  It is an interesting trajectory including the era when Nixon closed the gold window.  We are merely making an observation of the data here.  Without a doubt the US dollar has lost its purchasing power over the decades.  This matters because it has also had a major impact on wages and the standard of living especially for the US middle class.
Adjusting for inflation household wages are back to levels last seen in 1995:
inflation adjusted income
This matters because gas is no longer $1 a gallon and no longer can you work part-time at a minimum wage job and put yourself through college.  Those days are gone.  The cost of living for most Americans has gotten more expensive.  We found out this week that home values are increasing at their fastest pace since 2006.  The annual increase in prices is over 10 percent.  Of course much of this is not coming from wage growth and this should be obvious because of the previous chart.  This is largely coming from the actions being taken on by the Fed which is funneling trillions of dollars into the housing market via negative rates and encouraging the financial sector to speculate once again in housing.
The Fed which relies heavily on CPI data is likely to continue on this road given that inflation as measured by this metric is looking rather timid:
According to the latest data the annual change in inflation is only moving at 1 percent.  But if housing is the biggest line item for Americans and just went up by 10 percent, why is this not reflected in the CPI?  Once again we run into the problem of the CPI using the owners’ equivalent of rent (OER) measure.  This measure missed the last housing bubble and is going to miss it once again.
Just to exemplify how poorly a job OER does on measuring price changes in the housing market let us examine annual changes of OER versus those in the Case Shiller Index:
oer and case shiller
As you would expect, rents are fairly stable over time since they reflect the actual ability of someone to pay out of net income.  Yet home values can be manipulated by the Fed by the tweaking of interest rates to make housing payments more affordable yet home prices more expensive.  Or in this case, a flurry of investors from Wall Street buying up rentals.  At the end of the day, you are paying more for less.
Inflation absolutely matters and you need to know where to look to see these changes.  The fact that the Fed is pushing on the housing angle again yet is ignoring the divergence between OER and the Case Shiller is troubling.  The lessons should be clear and housing is the biggest expense for Americans.  They fully understand this and continue to stoke the fires of inflation.

Holder Laid the Groundwork for “Too Big to Jail” In 1999


Everyone knows that Eric Holder – the head of the Department of Not-Much Justice – has said that the big banks are too big to jail.
And many people know that – prior to becoming the Attorney General – Holder was a partner at a big firm which did some despicable things to represent the big banks and MERS.
But Holder’s see-no-evil act actually started more than a decade ago.
Specifically, in 1999, as Deputy Attorney General, Holder wrote a memo arguing against prosecuting large financial service companies:
Prosecutors may consider the collateral consequences of a corporate criminal conviction in determining whether to charge the corporation with a criminal offense.
One of the factors in determining whether to charge a natural person or a corporation is whether the likely punishment is appropriate given the nature and seriousness of the crime. In the corporate context, prosecutors may take into account the possibly substantial consequences to a corporation’s officers, directors, employees, and shareholders, many of whom may, depending on the size and nature (e.g., publicly vs. closely held) of the corporation and their role in its operations, have played no role in the criminal conduct, have been completely unaware of it, or have been wholly unable to prevent it. Further, prosecutors should also be aware of non-penal sanctions that may accompany a criminal charges, such as potential suspension or debarment from eligibility for government contracts or federal funded programs such as health care. Whether or not such non-penal sanctions are appropriate or required in a particular case is the responsibility of the relevant agency, a decision that will be made based on the applicable statutes, regulations, and policies.
Virtually every conviction of a corporation, like virtually every conviction of an individual, will have an impact on innocent third parties ….
Matt Taibbi points out that – when the Department of Justice subsequently prosecuted accounting giant Arthur Andersen for covering up Enron’s fraudulent schemes – Anderson ran with Holder’s argument, and threatened the DOJ “using their employees as human shields”.
Specifically, Andersen said that – unless the DOJ dropped the prosecution – innocent Andersen employees would lose their jobs.
Andersen was prosecuted and convicted, and some innocent employees – as well as the big time fraudsters – lost their jobs.  Since then, the Justice Department has gotten so gun-shy that we basically haven’t had any criminal indictments against a large financial services company since then.
In the wake of the recent revelations that the big banks manipulate virtually every market in the world, and that HSBC blatantly laundered drug cartel money, Holder has said that we can’t indict big companies because that might harm the U.S. or world economy.
And Matt Taibbi notes that – for the first time -  Holder is now saying that not only can’t we indict the companies, but we can’t even indict any of the individual criminals at the companies.  In other words, Holder is implementing a permanent shield for employees and executives at large institutions.

BP to drill in Alaska’s pristine Prduhoe, after GOP Gov. slashes oil taxes

–Tax proposal could cost Alaska up to $4.6 billion through fiscal year 2019 –Effort is under way to let voters decide whether to keep or repeal huge oil company tax cuts
03 Jun 2013 BP Alaska plans to bring two new drill rigs to the North Slope by 2016, part of an additional $1 billion investment the company envisions over the next five years following the state’s rollback of oil production taxes. BP is the second of the North Slope’s three major players, after ConocoPhillips, to announce plans following passage of the tax overhaul that was signed into law by Gov. Sean Parnell (R-Nutjob) last month. Exxon Mobil Corp. hasn’t made its intentions public. Besides the new drill rigs, the company said it has the support of the other working-interest owners of Prudhoe Bay, ConocoPhillips and Exxon, to start evaluating an additional $3 billion in projects on the western end of the Prudhoe. .