Thursday, June 26, 2014

Last Time Corporate America Did This, The Stock Market Crashed

The S&P 500 stock index bumbles to new highs no matter what. But it has been a slog: serial GDP downward revisions forward and backward, unceremonious abandonment of “escape velocity” for the fifth year in a row, wars or civil wars in Ukraine and Iraq with consequences for gas supplies to Europe and oil supplies to the world, US inflation heating up. And stocks nevertheless rise up because….The Fed Rules, Metrics and Ratios Are Just for Decoration.
In the Business Roundtable’s second quarter CEO survey, the chiefs of the largest US corporations weren’t exactly in an ecstatic mood either. They lowered their GDP growth forecast for the year to 2.3%; among other tidbits, they also expected to spend less money on capital investments.
Capital investments are crucial to the economy. One, they crank up GDP when the money is spent. And two, investing in productive assets creates future growth. But only 44% of these CEOs are planning to increase capital investment, down from 48% last quarter.
Companies axe capital investments brutally when dark clouds appear at the horizon. It started in early 2000 as the stock market was blowing up and lasted through the recession that followed. Then capex recovered and peaked in the summer of 2008, even as the financial crisis was spreading. In either case, that sudden cut in corporate investment deepened the recessions. This chart of new orders of non-defense capital goods (St. Louis Fed) shows the brutality of the cuts – for example, slashing them by a third from $69 billion in August 2008 to $46 billion in April 2009:
But note how the chart has stayed within its range over the last two decades – a time when the US population has soared 19% and GDP, adjusted for inflation, 51%. Turns out, corporations had found other things to do with their money: stock buybacks.
Which have been skyrocketing. In the first quarter, buybacks jumped 50% from a year ago to $154.5 billion, according to FactSet‘s report released yesterday. It was the third-largest in the data series, behind only 2007 when in Q2 and Q3 $161.8 billion and $177.9 billion were spent on buybacks, while the financial crisis was already fermenting underneath.
Tech blew $47.4 billion on buybacks, a record in the data series, up 175% from a year ago. A cool $18.6 billion of that came from Apple. IBM was in second place with $8.3 billion. Industrials, up 119% from a year ago, also set an all-time high. Overall, Apple and IBM led the pack, followed by FedEx, Boeing, Abbott Laboratories, Corning, and eBay.
For the trailing 12 months, our corporate heroes bought back $535 billion – funded largely with borrowed money – a notch below the $603 billion record set during the trailing twelve months ended in Q3 2007, on the eve of the financial crisis (chart by FactSet):
Buybacks peaked precisely at the top of the market in Q3 2007 then plunged over 80%. By Q2 2009, when stocks were cheapest, buybacks had nearly stopped. It seems like a clockwork of bad timing: buybacks soar when stocks go into bubble mode and collapse when stocks get cheap. But the relationship works the other way around.
The purpose of buybacks is to use shareholder equity to manipulate up the stock price. It works in three ways: one, through the sheer buying pressure – especially easy during these times of super-low trading volume; two, through this form of financial engineering that boosts earnings per share by lowering the share count, though it does nothing for actual earnings; and three, through the hype surrounding the buyback announcements and even the whispers of them.
And it works even when, as for example in IBM’s case, revenues and actual earnings are crummy for two years in a row, and when the stock should be roasting in purgatory. At every earnings announcement, the stock plunges, but then over the next three months, mirabile dictu, the share price rises again, fired up by buybacks. The Wall Street hype machine uses them as bait. Investors swallow them hook, line, and sinker. But that’s all buybacks do.
What they don’t do is generate future revenues and earnings, unlike R&D or capex or any of the other productive activities companies undertake. In this way, the moolah blown on buybacks simply disappears as a driving force from the economy – an issue that has been dogging the US for two decades, as the range-bound chart above shows.
But the tide seems to be turning, and the money seems to be ebbing. Most of the top buyers have already indicated that they’re cutting back. A couple of days ago, FedEx announced that it whittled down its buybacks from $2.8 billion in Q1 to $1 billion this quarter. When Apple raised its buyback authorization through December 2015, it worked out to be $6.3 billion per quarter – down from $18.6 billion in Q1. IBM slashed its full-year buybacks by about $2 billion per quarter for the remainder of 2014. GE disclosed that it would cut its buybacks. Exxon Mobil, AT&T, Oracle, and Wal-Mart already reduced their buybacks in Q1 from the average quarterly amounts in 2013.
So what happens to the stock market when these huge and reckless buyers with their nearly endless resources and ability to borrow at practically no cost start cutting back after such a phenomenal peak? Well, we know what happened when they did the last time: the stock market crashed.
There comes a time when risk just disappears, when nothing can go wrong, when there are no dark clouds on the horizon. The Fed has a measure for it: the Financial Stress Index.
Delivered by The Daily Sheeple

Silver & Gold Are Honest Money, $$$ = Dishonest Currency

More: We have a very, very corrupt monetary system. Honest money is gold and silver, they’ve been called that for hundreds and hundreds of years. Well, what is the currency that we are using then? It’s dishonest currency. It creates the enormous financial sector and distorts the economy by enriching the credit creators, and credit’s first users. It blows things like real estate and the financial sector into bubbles. The financial sector shouldn’t be this enormous portion of the economy that it is…

Inflation? Only If You Look At Food, Water, Gas, Electricity And Everything Else

Have you noticed that prices are going up rapidly?  If so, you are certainly not alone.  But Federal Reserve chair Janet Yellen, the Obama administration and the mainstream media would have us believe that inflation is completely under control and exactly where it should be.  Perhaps if the highly manipulated numbers that they quote us were real, everything would be fine.  But of course the way that the inflation rate is calculated has been changed more than 20 times since the 1970s, and at this point it bears so little relation to reality that it is essentially meaningless.  Anyone that has to regularly pay for food, water, gas, electricity or anything else knows that inflation is too high.  In fact, if inflation was calculated the same way that it was back in 1980, the inflation rate would be close to 10 percent right now.

From The Economic Collapse Blog:

Have you noticed that prices are going up rapidly?  If so, you are certainly not alone.  But Federal Reserve chair Janet Yellen, the Obama administration and the mainstream media would have us believe that inflation is completely under control and exactly where it should be.  Perhaps if the highly manipulated numbers that they quote us were real, everything would be fine.  But of course the way that the inflation rate is calculated has been changed more than 20 times since the 1970s, and at this point it bears so little relation to reality that it is essentially meaningless.  Anyone that has to regularly pay for food, water, gas, electricity or anything else knows that inflation is too high.  In fact, if inflation was calculated the same way that it was back in 1980, the inflation rate would be close to 10 percent right now.
But you would never know that listening to Federal Reserve chair Janet Yellen.  In the video posted below, you can listen to her telling the media that there is absolutely nothing to be concerned about…
And it is really hard to get too upset with Janet Yellen.

After all, she reminds many people of a sweet little grandmother.
But the reality of the matter is that she is simply not telling us the truth.  Everywhere we look, prices are aggressively moving higher.
Just the other day, the Bureau of Labor Statistics announced that the price index for meat, poultry, fish, and eggs has just soared to a new all-time high.
This is something that I have repeatedly warned would happen.  Just check out this article and this article.
And it isn’t just meat prices that are going up.  One of the largest coffee producers in the entire world just announced that it is going to be raising coffee prices by 9 percent
It took the Fed long enough but finally even it succumbed to the reality of surging food prices when, as we reported previously, it hiked cafeteria prices at ground zero: the cafeteria of the Chicago Fed, stating that “prices continue to rise between 3% and 33%.” So with input costs rising across the board not just for the Fed, but certainly for food manufacturers everywhere, it was only a matter of time before the latter also threw in the towel and followed in the Fed’s footsteps. Which is what happened earlier today when J.M. Smucker Co. said it raised the prices on most of its coffee products by an average of 9% to reflect higher green-coffee costs.
Not that coffee isn’t expensive enough already.  It absolutely stuns me that some people are willing to pay 3 dollars for a cup of coffee.
I still remember the days when you could get a cup of coffee for 25 cents.

Also, I can’t get over how expensive groceries are becoming these days.  Earlier this month I took my wife over to the grocery store to do some shopping.  We are really ramping up our food storage this summer, and so we grabbed as much stuff on sale as we could find.  When we got our cart to the register, I was expecting the bill to be large, but I didn’t expect it to be over 300 dollars.
And remember, this was just for a single shopping cart and we had consciously tried to grab things that were significantly reduced from regular price.
I almost felt like asking the cashier which organ I should donate to pay the bill.
Sadly, this is just the beginning.  Food prices are eventually going to go much, much higher than this.
Also, you should get ready to pay substantially more for water as well.
According to CNBC, one recent report warned that “your water bill will likely increase” in the coming months…
U.S. water utilities face a critical economic squeeze,according to a new report—and that will likely mean higher prices at the water tap for consumers.
A survey by water-engineering firm Black & Veatchof 368 water utility companies across the country shows that 66 percent of them are not generating enough revenue to cover their costs.
To make up for the financial shortfall, prices for water are heading upward, said Michael Orth, one of the co-authors of the report and senior vice president at Black & Veatch.
“People will have to pay more for water to make up the falling revenues,” he said. “And that’s likely to be more than the rate of inflation.”
Of even greater concern is what is happening to gas prices.
According to Bloomberg, the price of gasoline hasn’t been this high at this time of the year for six years…
Gasoline in the U.S. climbed this week, boosted by a surge in oil, and is expected to reach the highest level for this time of year since 2008.
The pump price averaged $3.686 a gallon yesterday, up 1.2 cents from a week earlier, data posted on the Energy Information Administration’s website late yesterday show. Oil, which accounts for two-thirds of the retail price of gasoline, gained $2.49 a barrel on the New York Mercantile Exchange in the same period and $4.88 in the month ended yesterday.
The jump in crude, driven by concern that the crisis in Iraq will disrupt supplies, may boost pump prices by 10 cents a gallon at a time when they normally drop, according to forecasts including one from the EIA.
And the conflicts in Iraq, Ukraine and elsewhere could potentially send gas prices screaming far higher.
In fact, T. Boone Pickens recently told CNBC that if Baghdad falls to ISIS that the price of a barrel of oil could potentially hit $200.
Of course the big oil companies are not exactly complaining about this.  This week energy stocks are hitting record highs, and further escalation of the conflict in Iraq will probably send them even higher.
Meanwhile, a “bipartisan Senate proposal” (that means both Democrats and Republicans) would raise the gas tax by 12 cents a gallon over the next two years.
Our politicians have such good timing, don’t they?
And our electricity rates are going up too.  The electricity price index just set a brand new record high and there are no signs of relief on the horizon…
The electricity price index and the average price for a kilowatthour (KWH) of electricity both hit records for May, according to data released today by the Bureau of Labor Statistics.
The average price for a KWH hit 13.6 cents during the month, up about 3.8 percent from 13.1 cents in May 2013.
The seasonally adjusted electricity price index rose from 201.431 in May 2013 to 208.655 in May 2014—an increase of about 3.6 percent.
If our paychecks were increasing at the same rate as inflation, perhaps most families would be able to weather all of this.
Unfortunately, that is not the case at all.
As I wrote about recently, median household income in the U.S. is nowabout 7 percent lower than it was in the year 2000 after adjusting for inflation.
And if realistic inflation numbers were used instead of the government-manipulated ones, it would look a lot worse than that.
Inflation is a hidden tax that all of us pay, and it is systematically eviscerating the middle class.
So what are prices like in your neck of the woods?
Is your family feeling the pain of inflation?
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Cancel Detroit’s debt!

The following is a statement from Lawrence Porter, the assistant national secretary of the Socialist Equality Party and chairman of the Workers Inquiry into the Attack on the DIA and the Bankruptcy of Detroit.
Lawrence Porter addresses the rally to defend the DIA in October
While tens of thousands of retired workers in Detroit spent an anxious Christmas worrying about the fate of their hard-earned pensions, they were greeted with the news that a deal had been reached to pay Bank of America-Merrill Lynch and Swiss bank UBS $165 million. If approved, as expected, by the bankruptcy court, Detroit will pay the money to the banks to “unwind” a complex financial scheme that has already drained hundreds of millions of dollars from the city.
The US bankruptcy judge and the news media have presented the deal as an example of “equal sacrifice” because the original agreement signed by Emergency Manager Kevyn Orr would have given the banks $230 million. The truth is, not a penny should be paid to the Wall Street speculators whose semi-legal, if not outright criminal, activities are largely responsible for the crisis of the city.
In his report for the liberal think tank Demos (The Detroit bankruptcy), Wallace Turbeville, a former Goldman Sachs banker, noted that Detroit officials were essentially swindled into signing credit default swap deals in 2005-06 by bankers who claimed they would protect the city from future interest rate hikes on its municipal bonds. As with the teaser rates promoted by the banks in the subprime mortgage fraud, these institutions were well aware that the precarious state of the city’s finances and almost certain credit downgrade would cost the city hundreds of millions in increased debt service payments.
Since 2009, Detroit has been paying $45.2 million a year to the two banks. According to an investigative report by the Detroit Free Press, “How Detroit Went Broke,” the swap agreement “represents one-fifth of the city’s debts and stands as the key reason the city filed for chapter 9 bankruptcy on July 18.”
The original settlement with Bank of America and UBS signed by Orr—whose former law firm Jones Day counts both financial firms among its clients—was a blatant handout to the banks, providing 72 cents on the dollar. In his testimony last week, Orr refused to release details of the supposed negotiations with the banks or answer why he did not challenge the legality of the swaps. In order to maintain at least the appearance that the court is impartial, US Bankruptcy Judge Stephen Rhodes ordered Orr to renegotiate the terms of the deal.
The new settlement reached by a federal mediator appointed by Rhodes will give the two banks 56 cents on the dollar. In contrast, Orr has said he will pay as little as 16 cents on the dollar towards pension obligations owed to 23,500 retired city workers.
The deal will involve a new $285 million loan—this time from Barclays Bank of England—which will load even more debt onto the city. This means even deeper cuts in the future to pay Barclays, which was fined for fixing international lending rates (LIBOR), impacting trillions of dollars in mortgages, student loans and financial derivatives.
The settlement exposes the charade of the whole bankruptcy proceeding. When it comes to the interests of the financial aristocracy, the courts insist that the banks have “absolute priority” over workers’ pensions no matter how criminal their financial manipulation. The New York Times noted that Congress specifically introduced “safe harbor” provisions in the bankruptcy law to guarantee full payment to traders in derivatives such as swaps, even when a city is broke and paying pennies to other creditors.
Judge Rhodes has made it clear there is no “absolute priority” or “safe haven” for the working class in the bankruptcy court. On December 3, he ruled that pensions could be slashed even though the Michigan state Constitution explicitly protects them. This is the brutal reality of the capitalist justice system!
It is the position of the Socialist Equality Party that society’s priority must be the jobs, living standards, pensions and other social needs of the working class—not the profits of the super-wealthy. We say cancel the debt and impound the ill-gotten gains of the banks and big corporations, which crashed the economy and have gotten even richer ever since. Instead of paying billions to these financial parasites, the money should go to hire hundreds of thousands of unemployed workers in the Detroit area at good wages to rebuild the city and guarantee high quality services to all residents.
From the beginning, the bankruptcy proceeding has been a conspiracy against the working class. It has been organized by state and local politicians from both big business parties, the Obama administration, and big financial and legal institutions to loot pensions and other city assets, including the priceless collection at the Detroit Institute of Arts. If successful in Detroit, it will become the model for a nationwide attack to destroy all the past gains won by workers, including Social Security, Medicare and Medicaid.
To stop this, workers need the facts that have been concealed by the media and all the defenders of big business, including the unions. The exposure of the predatory role of the banks will be a major aspect of the Workers Inquiry on February 15 at Wayne State University. I urge workers, students, the unemployed, retirees, artists, professionals and all those who defend the social and democratic rights of working people to attend. (Register today at

David Morgan – Will ‘We The People’ Survive the Coming Financial Storm?

Ellis Martin, Ellis Martin Report, Released on 6/23/14
“I am a huge believer that the people at large are far more capable, and that we the people can come out of this thing on the other side – certainly not unscathed, there’s going to be huge hardships – but I think a reigniting of what makes us important, what make us great.”

I think Home Modification Program plans to foreclose on my house

Fourteen years ago I went through a local Not-for-profit that offered free home buying classes and gave reduced FHA interest rates for participating in these classes. I found them extremely helpful and have been a proud homeowner ever since.

After becoming unemployed and using my entire 401k to care for my elderly parents in my home, I anticipated I may have problems paying my mortgage. The Not-for-Profit recommended asking my bank about the Making Homes Affordable Act. I did some research online and saw it had worked for many people. The people who had problems did so because of Mortgage companies who were initially hostile about the program. Or so I thought at the time. 

MY mortgage company seemed very helpful and the process easy. They reduced my mortgage payment by $230/mo for a trial period of 4 months, whereupon as long as there were no judgements on my house (there are not), the program and payment would be made permanent.

I made my payments on time as I was told if I were even a minute late, the agreement would be null and void. During the trial period, I continued to receive letters from the Mortgage Co. saying I was delinquent on my original payment. I called them a number of times about this, and they told me to “disregard” those letters, they had to go out but they were aware I was in a modification trial period and was making my payments on time.

NOW after paying my last payment in my trial period, the mortgage company is harassing me. They repeatedly call and ask why I was able to make my payments “early?” I made the payments at the time of month I had for 14 years. 

Now I realize what I’ve done. Now I see what HAMP (Home Modification Program) is REALLY doing to people. They told me this was really just a “refinance” for an 8% FHA loan.

What do they really do? They tell you your payment is lower for four months, deny your modification, then foreclose on your house for not making the proper payments. 

I know I am in for one of the biggest fights of my life, and now I know what their next step will be. I was wrong. I was naive. 

Thousands of people are being foreclosed on across the country because of this program. Some of us were decent hard-working folks that were living within our means but got screwed anyway, due to life’s unforeseen circumstances.

“Fed Creates A Perilous Landscape In Which There Is No Honest Pricing – EVERYTHING Has Been Distorted – Even At The Consumer Level. ” – The Mises View – Jeff Deist

Published on Jun 25, 2014
Jeff Deist discusses how the Fed creates a perilous landscape in which there is no honest pricing—everything has been distorted—even at the consumer level. Deist is the president of the Mises Institute. For more information, visit the Mises Institute online at

Ireland's banking inquiry cannot investigate government cabinet meetings that led to bank guarantee

The Oireachtas banking inquiry has been told it cannot inquire into the Cabinet meeting which led to the introduction of the bank guarantee.
The committee has been told that Cabinet confidentiality protects any discussions leading to the ill-fated guarantee.
However, the committee will have the power to obtain any paperwork which helped ministers to reach their decision.
Meanwhile, the committee investigating the banking crisis has given itself until the end of next year to issue its final report.
Source:  Irish Examiner, 25 June 2014

Economy in freefall? 1Q revision shows shrinkage of 2.9%

America's economy shrank at a drastic 2.9 percent annual rate in the first quarter, a far more alarming picture than ones painted in two previous government estimates -- including one that actually claimed modest growth.
The new figure released Wednesday by the Commerce Department is nearly three times lower than last month's preliminary estimate of 1 percent shrinkage -- at the time the worst three-month performance since 2009 -- and far greater than the 0.1 percent growth estimate in April. The sluggish economy's woes have been widely attributed to an unusually cold winter, but the latest figure -- the biggest difference between second and third estimates since 1976 -- could indicate far greater problems.
While economists attributed those bad numbers to weather and other factors, the jarring number, dubbed "an absolute disaster" by Wall Street blog -  is more difficult to dismiss.
Fox New contributor and economist Peter Morici said there were several factors that can help explain away the lousy performance. But he said there are reasons for concern.
"Businesses scaled back their investment, and that is a bit foreboding," said Morici. "They just don't believe the president's ballyhoo about this being a breakout year."
The number will be revised once more next month, when the Commerce Department's Bureau of Economic Analysis makes historical revisions. But the negative 2.9 percent  figure is nearly three times lower than the  preliminary estimate of 1 percent released last month, and marks the worst performance for a three-month period since 2009. A still earlier initial estimate, in April, predicted growth of .1 percent for the quarter. The wide gap between estimates was problematic to many economists.
"That disparity really calls into question the accuracy of the measurement," noted Morici.
The White House sought to downplay the precipitous drop, by looking ahead toward what it believes will be solid growth in the current quarter.
"First-quarter GDP was revised down today, largely reflecting a re-estimation of consumer spending on health care, which was substantially lower than originally reported, as well as exports, which were below the initial estimates," said Jason Furman, chairman of the Council of Economic Advisers, which counsels President Obama on the economy. "The GDP data can be volatile from quarter to quarter; a range of other data show a more positive picture for the first quarter, and more up-to-date indicators from April and May suggest that the economy is on track for a rebound in the second quarter."
But Republicans blamed Obama policies for holding up the economy.
“It’s clear the White House doesn’t know which way is up, just two months ago bragging that ObamaCare was helping the economy and now we’re seeing the worst economic report since the low point of the recession in 2009," said RNC Chairman Reince Priebus. "The Republican House has sent Harry Reid and Democrats in the Senate dozens of bills to help jump-start our economy and it’s time they stop standing in the way.”
The economy grew at a 2.6 percent pace in the final three months of 2013, and some economists are optimistic that the poor performance in January, February and March was a mere blip. Data such as employment, manufacturing and services sectors point to a sharp acceleration in growth early in the second quarter. Macroeconomic Advisers recently forecast the economy will grow at a 3.6 percent annual rate in the April to June period, according to The Wall Street Journal.
Economists have previously estimated severe weather slashed as much as 1.5 percentage points from GDP growth in the first quarter, but even taking that into account would still leave a precipitous drop in performance.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased at a 1 percent rate. It was previously reported to have advanced at a 3.1 percent pace. Exports declined at a 8.9 percent rate, instead of 6 percent pace, resulting in a trade deficit that sliced off 1.53 percentage points from GDP growth. Weak export growth has been tied to frigid temperatures during the winter.

Businesses accumulated $45.9 billion worth of inventories, a bit less than the $49 billion estimated last month. Inventories subtracted 1.70 percentage points from first-quarter growth, but should be a boost to second-quarter growth.
Depsite the gloomy news, the Dow Jones Industrial Average rose modestly in morning trading.

Macro Analytics – Mysterious Buying w/ John Rubino – ‘Clearly, There Is Alot Of Mainipulations Going On In The Market Right Now’

S&P Bear Flag, Oil Stocks Weak, Charts Reveal Profits

The U.S. Economy Has Collapsed: “This Is A Monstrous Negative Revision”

economic-collapseFor months the administration, financial pundits and Wall Street analysts made it a point to inform Americans about the healthy state of our economy. One of the key metrics they’ve used as proof of recovery was the Gross Domestic Product (GDP) which measures the productive output of the U.S. economy as a whole.
Earlier this year the U.S. Bureau of Economic Analysis noted that this measure was showing positive growth. But now, after a second official revision, all of that purported growth used to goad consumers into spending more money on homes, cars and other goods has been revealed to be nothing but conjecture. According to the BEA, not only did economic growth stall during the first quarter of 2014, it completely collapsed, signalling a significant shift in consumption habits amid increasing food and energy prices:
Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 2.9 percent in the first quarter of 2014 according to the “third” estimate released by the Bureau of Economic Analysis.
The government first made consumers believe that the economy grew. Then they revised this down to slight negative growth. The latest revision of -2.9% growth is significant, because even with official inflation at over 2% America’s economic output has declined. It seems that no matter how much money they pump into the system, it isn’t enough to offset the lack of income or job growth.
This is a monstrous negative revision.
A big part of it was non-residential fixed investment.  Rather than invest, companies have issued debt and bought back stock.  But this does nothing for the economy — it simply blows a bubble in the market.  How long before that comes home to roost?  Not long now, I suspect.
If you think companies don’t expect a recession inbound, you’re nuts.  Inventory draw-downs subtracted 1.7% from the GDP number.  Companies don’t build inventories if they don’t think they can sell them — as such this is a forward indicator.
Oh, and current production profits?  They’re down while current taxes were up.  Obamacare anyone?  Worse is that undistributed profits decreased too and this is the second quarter sequentially in which they did.  What does a company pay dividends with?  Undistributed profits.
So for two quarter the markets has risen like a rocket while the fuel for that rise has been exhausted for the last six months.
This will turn out well, I’m sure.
Source: Karl Denninger’s Market Ticker
Officially, we have not yet entered a recession. That requires two quarters of negative growth. However, the current trend indicates that’s exactly what’s going to happen. In the next 30 days the BEA should be releasing the GDP rate for the second quarter of 2014. According to economist John Williams that will more than likely show a negative print and will lead to an official confirmation that the U.S. has entered another recession.
What’s worse, unlike the previous recession that followed the collapse of 2008, there is no way out of this one.
The reason for this is that the consumer is strapped… doesn’t have the liquidity to fuel the growth in consumption.
Income… the median household income, net of inflation, is as low as it was in 1967. The average guy is not staying ahead of inflation.

As a result – personal consumption is more than two thirds of the economy – there’s no way you can have positive sustainable growth in the U.S. economy without the consumer being healthy.

As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure.  When someone starts selling, it’s going to be a race for the door, and I am looking for a dollar selling panic to be the trigger for the onset of hyperinflation.

I don’t see what will save it at this point.
To cries of fear mongering and ‘doom porn’ contrarian economists and analysts warned that these numbers were being fabricated, despite the fact the the underlying fundamentals showed a clear draw-down in consumer confidence, company inventory, home sales and overall spending.
Now all of those warnings are coming to pass.
We have entered the next leg down and given that the governments of the world have pretty much used up all of the arrows in their quivers, there is nothing to stop what’s coming.
And what’s coming is nothing short of a complete collapse of our way of life. Hard to believe? Yes. Implausible? No.
It is so plausible, in fact, that well known radio commentator Mark Levin recently noted that the U.S. government has been actively preparing for and simulating the collapse of our financial system, as well as the widespread violence that will follow.
I’ll tell you what I think they’re simulating.
The collapse of our financial system, the collapse of our society and the potential for widespread violence, looting, killing in the streets, because that’s what happens when an economy collapses.
I’m not talking about a recession. I’m talking about a collapse, when people are desperate, when they can’t get food or clothing, when they have no way of going from place to place, when they can’t protect themselves.
There aren’t enough police officers on the face of the earth to adequately handle a situation like that.
This is happening right here and now. The streets may not devolve into madness tomorrow or next month, but piece by piece the foundations of America’s economic health and social structure are crumbling. The time to finalize preparations for what’s coming is now.
It’s going to go from bad to worse.

The US government spends over $5000 on each Walmart employee since their employer won't cover their basic needs

More recently, Wal-Mart’s holiday public-relations headache began when a Canton, Ohio, store decided to hold a food drive for needy local families for the holidays. What made this a PR nightmare was that the needy families were full time Wal-Mart employees who were working in the store holding a food drive.
Thus, our questions over the arc of these columns about some of the largest retailers in America -- Wal-Mart is the single largest private employer in the country; McDonald's, the largest fast food chain – are simply this:
What should it mean to be employed full time in America?
Should taxpayers be supplementing the salaries of these often minimum-wage workers at large profitable firms?
What would it mean if higher salaries were mandated by an increased minimum wage?
Wal-Mart has 2.2 million employees, including 1.3 million hourly workers. It employs 1.2 million people in the U.S. alone. Gross revenue is $475 billion, generating profits of $17.20 billion. It dominates the discount retail space, and according to Bloomberg, has a 66.70 percent market share.
The size of Wal-Mart is sometimes difficult to visualize. To put it into some context, consider the following: 100 million U.S. shoppers patronize Wal-Mart stores every week. Wal-Mart has twice the number employees of the U.S. Postal Service, a larger global computer network than the Pentagon, and the world's largest fleet of trucks. Americans spend about $36 million dollars per hour at the stores. Wal-Mart now sells more food than any other company in the world, capturing one of every four dollars spent on food in the U.S. The average American family of four spends over $4,000 a year there. Each week, it has 200 million customers at more than 10,400 stores in 27 countries. If the company were an independent country, it would be the 25th largest economy in the world.
Given the sheer size of Wal-Mart, how it pays "associates" is likely to have an outsized impact on their local and state communities, according to a number of studies.
Wal-Mart's low wages have led to full-time employees seeking public assistance. These are not the 47 percent, lazy, unmotivated bums. Rather, these are people working physical, often difficult jobs. They receive $2.66 billion in government help each year (including $1 billion in healthcare assistance). That works out to about $5,815 per worker. And about $420,000 per store. But the federal and state aid varies widely; in Wisconsin, a study found that it was at least $904,542 a year per store. (See the accompanying chart.)
Why, I keep asking myself, do we effectively want to subsidize a private company’s employees? Wouldn’t it make much more sense to raise the minimum wage to a level that a full-time worker could support the average American family of four? Just $11.33 puts a 40-hour employee over the poverty line. The costs of this increase would be borne by the company and its consumers -- not the taxpayer.
Perhaps the most ironic aspect of this are the advantages to the retailer of higher associate salaries. Some stores have discovered that raising wages provides a competitive advantage. Retailers like Trader Joe's and Costco pay significantly more than their giant competitor. At Costco, employees earn 40 percent more than at Wal-Mart’s Sam’s Club. Average employees wages at the warehouse retailer are $21.96 per hour, and most of Costco’s U.S. employees are eligible for benefits.
The “underinvestment in labor” is part of the reason Wal-Mart has such enormous turnover. Estimated as high as 70 percent, the retailer incurs enormous costs for recruitment, administration and training.
Harvard Business School study found higher wages decreased employee turnover, increased morale, and improved customer satisfaction ratings. This adds up to increased sales and improved profitability for the retailer.

People pressure starts to pay off over Ireland's oil and gas giveaway

If ever a story shows that persistent pressure by concerned people can yield results then the Irish gas and oil story is one that has just hit the hundredth monkey.
After a decade of pressure put on government and media by citizen journalists, activists and protests revealing the sordid details of the oil and gas giveaways by successive governments from the 1980s to the present day, this government has finally (reluctantly) been forced to take the first steps towards reclaiming our assets for the nation.
This article by Eddie Hobbs confirms that it is only the first step, and does not go anywhere near far enough, but the principles of the Wood McKenzie report go a lot further and have been adopted by government. However this will only happen if the pressure stays on them.
The old deal leaves ownership of the oil and gas finds in the hands of private prospectors with an extremely generous if not negligible tax regime in place. It also leaves Ireland no better off than at present, where we import all our oil and gas, as we can only buy our oil and gas back at market rates. However the pressure ordinary people have put on the political establishment through media, protest, and on the doors over recent years has caused this issue to because a major problem for the status quo that gave it away.
Source and full story: Direct Democracy Ireland, 25 June 2014

The Calm Before the Storm | Alasdair Macleod

- It’s starting to feel like the calm before a storm in the markets ?0:56
- Putin says, “Russia and China need to secure their gold and foreign reserves” ?6:05
- Ahead: gold bear squeeze ?7:38
- How will the end of the silver fix affect the silver market? ?11:37
- “The central bankers have woken up to a lesson in life – and that is: printing money does not get the economy going” ?14:57
- High inflation ahead and how to prepare ?18:07

Gold Price Manipulation Confirmed! Physical Metal BOOM!

Gold Euphoria Won’t Last With Yellen’s Rally Fading: Commodities
Central Bank Gold Agreements
On 19th May 2014, the European Central Bank and 20 other European central banks announced the signing of the fourth Central Bank Gold Agreement. This agreement, which applies as of 27 September 2014, will last for five years and the signatories have stated that they currently do not have any plans to sell significant amounts of gold.
Gold buyers and sellers to explore reform of London fix
Representatives of bullion banks, exchange traded funds, refiners, exchanges, industry bodies, central banks and miners to meet to discuss changes
China’s gold market: progress and prospects

Gerald Celente: ‘Recipe For Disaster’ Happening Now! (Video)

Trends Journal publisher Gerald Celente joins RT in this short video clip below as he talks about the escalation in Ukraine in conjunction with the instability in Iraq and the rising gas prices, and states that what we have is a “recipe for disaster,” in the works.

Not only for the countries in play, but for for all of Europe and across the globe….

Fragile American Food Supply: Mad Cow, E. Coli, And Coming Riots

IMF Paper: Corporate Tax Avoidance Hurts Global Economy and Poor Countries

The International Monetary Fund (IMF) released a staff paper noting that corporate tax avoidance negatively impacts all economies, but hurts developing countries the most. The IMF’s release comes as the G20, the Organization for Economic Cooperation and Development and United Nations bodies seek vehicles to diminish corporate tax avoidance.
“The developing world loses more in corporate tax avoidance than it receives in aid from developed countries,” stated Eric LeCompte, Executive Director of the religious anti-poverty group, Jubilee USA Network. “The paper shows that when multinational corporations shift their profits to another country to pay less taxes, we see higher levels of global inequality.”
The IMF paper is entitled “Spillovers in International Corporate Taxation.”  “Spillovers” are the impact of one country’s policies on another country. By shifting profits to countries with low tax-rates (often so-called “tax havens”), corporations avoid paying their taxes in the countries where they make those profits. The paper notes that this is a particularly large problem in developing countries, which need corporate taxation to fund social services. The paper argues that “many developing countries…need to be better protected against the avoidance of tax on capital gains on natural resources.”
“These ‘spillovers’ are more like a flood,” noted LeCompte. “For every $1 poor countries are receiving in official aid, nearly $10 is leaving through corruption and tax avoidance.”
Read the IMF paper.

Congress to Grill Ex-Im Bank Chairman Over Corruption Charges

On Thursday, Fred Hochberg, chairman and president of the Export-Import Bank, will be grilled by members of the House Financial Services Committee over charges of corruption and mismanagement at the 80-year old agency. His task to defend the agency appears formidable, especially with its charter coming up for renewal at the end of September.
On Tuesday the Wall Street Journal reported that four Ex-Im employees have either been suspended or fired over the last few months as a result of “investigations into allegations of gifts and kickbacks.” But that’s just the tip of the iceberg. The Heritage Foundation reported on the same day that there have been at least 74 cases of “integrity” investigations by the Office of Inspector General (OIG) at the agency, plus dozens of other cases of outright fraud that have been referred to the Justice Department for prosecution. Not bad for an agency that employs just 402 people.
Hochberg’s problems are compounded by the committee’s chair, Rep. Jeb Hensarling (R-Texas), who says that the agency deserves to have its charter withdrawn because of its reputation as a funnel for taxpayer dollars to large companies as a form of corporate welfare. In addition, the newly-minted Majority Whip Kevin McCarthy, who replaced Eric Cantor in a surprise upset last week, has also weighed in against the agency, saying that the bank ought to be shut down its operations are “something that the private sector [is] able to do.”
Created by an executive order issued by then-President Franklin Roosevelt in 1945, the Ex-Im Bank was established as an agency of the executive branch. Its task, allegedly, was to offer financing to assist in the export of American products and services where private financing wasn’t available due to excessive credit risk. The agency’s stated goal at inception was “to aid in financing and to facilitate exports and imports and the exchange of commodities between the United States and other Nations or the agencies or nationals thereof.”
Read more

BP to sign US$20 billion gas deal with China

BP to sign US$20 billion gas deal with China

BP is to sign $20 billion LNG deal with China's National Offshore Oil Company.

World Bulletin / News Desk
BP is due to sign a 20-year Liquefied natural gas supply deal Tuesday worth US$20 billion with China National Offshore Oil Company (CNOOC), said BP's head in Moscow on Tuesday.
"BP will be signing a deal with Chinese CNOOC. It will be a 20-year term contract for trading liquefied natural gas (LNG) worth $20 billion dollars," said BP Group Chief Executive Bob Dudley during a press conference at the 21st World Petroleum Congress in Moscow.
In recent years the growth in demand for natural gas has led China to become the third largest LNG importer and to accelerate development of its LNG. China consumed 161.6 billion cubic meters of natural gas in 2013.
News about the deal highlights the country's strong will for greater LNG imports for its urbanization and industrialization without having the environmental impact of China's power generation through coal.
The deal will be one of the biggest long term LNG supply deals and Dudley said that "It is a very big LNG deal with such a magnitude"
The deal will be signed in London in front of Chinese Premier Li Keqiang and British Prime Minister David Cameron.
"It is a good deal that will create a bridge between China and the U.K. in terms of trade," said Dudley.
The Chinese premier arrived in the U.K. for an official visit on Monday to sign trade deals in energy, the car industry, high-speed trains, high-end technology and in finance.

US business to run ads against Russian sanctions

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Two top US business lobbies plan to run newspaper adverts warning that more Russian sanctions risk harming US workers and businesses. The trade associations warn that economic sanctions will translate into huge damages from lost trade with Russia.
The adverts will be published in the New York Times, Wall Street Journal and Washington Post by the US Chamber of Commerce and National Association of Manufacturers on June 26, Bloomberg cites a person familiar with the plans, who asked not to be identified.
US trade associations fear even temporary sanctions would inflict long-lasting damage on exports to Russia. Besides spoiling relations with Russia sanctions will force a reassessment of the political risk associated with exports and raise the cost of future financing.
Even a limited group of large Russian banks impacted by the sanctions would slow the national economy and make US imports more expensive as the ruble declines.
According to industry executives US energy companies would be required to apply for licenses for exporting technology to Russia if sanctions were agreed. Moreover, those companies exporting products with more than 10 percent of US technology content won’t be granted licenses at all.
If restrictions on technology transfer applied, exports to Russia will become more complicated. That will lead to additional expenses for US companies, especially in the energy sector which is full of high technology.
The only effect of imposing additional sanctions will be “to bar US companies from foreign markets and cede business opportunities to firms from other countries,” Bloomberg cites a copy provided by the person familiar with the plans.

President and CEO Jay Timmons of the National Association of Manufacturers (NAM), (Alex Wong / Getty Images / AFP)
President and CEO Jay Timmons of the National Association of Manufacturers (NAM), (Alex Wong / Getty Images / AFP)
The White House’s intentions face opposition from both US business and European countries who say that Washington’s unilateral action will deal nothing than a competitive disadvantage to the national economy.
The Yamal LNG gas project between France's Total and Russia's Novatek is highly dependent on US technology and will experience serious difficulties if sanctions are imposed, says Yves-Louis Darricarrère the President of the Exploration & Production Division at Total.
Yes, we need US technologies. Oil industry involves the use of the technologies of different countries around the globe. That’s why we need cooperation instead of a conflict,” Vedomosti quotes Darricarrère as saying.
German Chancellor Angela Merkel told members of her party on Tuesday that further sanctions against Russia could be back on the agenda at the Brussels summit on Friday, if Russia doesn’t take measures to de-escalate crisis in Ukraine.
Merkel praised Russian President Vladimir Putin for asking the Russian upper house of parliament to cancel his right to deploy troops abroad, describing it as a “a first step” in de-escalating the crisis.
However the Chancellor stressed that “substantial progress” with which they can go into sustained negotiations is needed.
We help, wherever we can. But when nothing helps, then sanctions can come back on to the agenda,” she added.

The IMF’s Anti-Market Mission: Rescue Bond-Gamblers; Scalp Taxpayers; Whine About Central Bank “Spillovers”

The IMF was lulled into its comfort zone by worldwide central-bank money-printing to bail out and enrich bondholders, bank investors, counterparties, and other investors via the masterful creation of magnificent asset bubbles. Now it’s waking up to the reality that the Fed, which instigated all this, is thinking out loud about pulling back. And that sent IMF heads fretting about “spillovers” to the rest of the world.
Bailing out holders of government debt is the IMF’s purpose. These bondholders are usually big banks; and when things curdle, hedge funds. The entire body of reports and other work and the bureaucracy that produces them are just decoration.
In return for extending emergency loans to bail out certain bondholders, the IMF pressures the debt-sinner country to impose “adjustments” on its people – usually cuts in wages, benefits, pensions, healthcare, and what not, joined by tax hikes that hit everyone but the elite. These adjustments are also known as “structural reforms” and have been lovingly dubbed “austerity.”
There are other options, such as letting the market do its job. Bondholders, who’ve benefited from the income stream, would lose their shirts in return for buying these crappy high-risk bonds in the first place. Countries would bear the consequences of their governments’ reckless spending and borrowing policies. Governments would either resort to prudent budgets or print and devalue the currency until the infuriated people throw the scoundrels out.
If the market were allowed to take over, much of the debt would be wiped out. The elite holding it would still be the elite, but less wealthy. A few banks might crater. But instead, the IMF intercedes, pushes out market forces, inserts international taxpayers, and voilà.
Greece has become the poster boy for this strategy. So its problems were self-inflicted. It’s one of the most corrupt Western countries. It cheated its way into the Eurozone, with the top-shelf help of Goldman Sachs, to get access to unlimited amounts of cheap euro-debt. Or it seemed cheap at the time.
Holders of Greek debt should have been forced to take their losses. OK, private-sector bondholders were given a haircut, but most of the bonds were held by the European System of Central Banks and other public institutions, and they were bailed out. But the Greeks have watched how their country got pushed into a six-year depression. The lucky ones suffered cuts in wages and benefits, accompanied by more taxes. The unlucky ones joined the mega-ranks of the unemployed.
Now the country is deeper in debt than before. More “structural reforms” are likely to be inflicted on the people, though the IMF is under withering fire. Spokesman Gerry Rice tried to put a positive spin on it when he said on Friday that the IMF supported the government’s “desire to avoid across-the-board cuts in wages and pensions.” But there will be more cuts – instead of making bondholders eat the losses. He conceded some IMF missteps but… “There is no apology in what I said,” he said.
This institution has been run by tainted French politicians, currently Managing Director Christine Lagarde, who is mired in a corruption affair in France. She’s alleged to have abused her position as President Sarkozy’s finance minister to shuffle €400 million in taxpayer money to the controversial businessman Bernard Tapie. In 2011, she’d replaced another French luminary and erstwhile presidential contender, Dominique Strauss-Kahn, after he’d gotten tangled up in some, let’s say, very unsavory scandals in the US and France.
Under this sort of management, the IMF is now fretting about the “spillovers” from the Fed’s winding down of QE and the eventual possibility of raising interest rates from nothing to almost nothing – a possibility that has been getting pushed out on a rolling 18-months schedule for years.
In an interview, Siddharth Tiwari, Director of the Strategy, Policy, and Review Department at the IMF, pointed out that the issues related to the unwinding of “unconventional monetary policy” – a formal euphemism for QE, ZIRP, and financial repression – would be “high on the IMF’s work agenda.”
For developed economies that have these policies in place, “the question is when and how” to undo them “smoothly,” given that there would be “repercussions for the rest of the world” – the “spillovers” – and for the countries unwinding them, currently the US – the “spillbacks.”
The IMF is full of euphemisms. “Spillovers” from the Fed’s policy changes, or perceived policy changes, are the gigantic sucking sound left behind when the hot money leaves the emerging markets. They got a taste of it last summer after the taper cacophony caused the hot money to suddenly evaporate. How developing countries respond “if capital flows and currencies become more volatile in this process,” he said, that’s the to-be-or-not-to-be question for those countries.
The IMF would produce some reports to help these countries become financially resilient so that they could “manage spillovers,” Tiwari explained. The IMF has already been “urging” these countries to implement solutions, namely – you guessed it – “structural reforms.” Hence, cuts in wages, benefits, pensions, and the like to make investors feel better about these crappy bonds.
In his mellifluous bureaucratese, it came out this way:
Indeed, with the space for supportive macroeconomic policies narrowing in many countries, structural reforms are increasingly needed as a policy lever. Structural reforms can take many forms, such as reforms to labor market policies, and education and health policies, just to name a few.
Greeks know all about the “many forms” that these “structural reforms” can take.
In addition, the IMF would “take a more fundamental look at how monetary policy should be conducted once financial conditions normalize,” he said.
Aha! Now the IMF is going to tell the Fed what to do – as if it weren’t bad enough that Goldman et al. are telling the Fed what to do. Lagarde shared her end of the fretting: “Excessive volatility in capital flows and major currencies, tighter financial conditions for emerging and developing countries, and subsequent spillbacks to source countries warrant attention.”
So, unless the IMF steps in, winding down QE and ZIRP are going to be chaos. With “subpar global growth” and markets that are “jittery from time to time,” like during last summer’s mini-mayhem, Tiwari warned it was “of utmost importance that we cooperate to support growth” – he means, stir up inflation – “and limit policy risks” – he means, stop the implosion of asset bubbles.
Didn’t the geniuses at the Fed, at the IMF, and at the other pillars of the financial cabal think about spillovers, spillbacks, shockwaves, hot money, giant sucking sounds, and bursting asset bubbles when they started that whole money-printing and financial repression binge? You’d think. But no! Six years into it, they’re suddenly fretting about it. And their vision of these issues appears to be a lot darker than the delusional optimism of the record-breaking financial markets.
So what happens when these huge and reckless buyers with their nearly endless resources start cutting back after a phenomenal peak? Well, we know what happened in 2008. Read…. Last Time Corporate America Did This, The Stock Market Crashed