This Is The Reality Of It: “We Are Factually In A Recession. Period.”

We can cite scores of statistics and financials that prove without a shadow of a doubt that the U.S. economy is in a tail spin and won’t be recovering any time soon. Abysmal home sales, continued degradation in the national employment numbers, sky rocketing national debt, and ever rising consumer prices all point to serious problems.

But one number in particular pretty much sums it all up. It depicts not just the worsening state of our economy, but puts the lies and machinations of the U.S. government on full display for the world to see.

You’ll often hear the media cite the U.S. Growth Domestic Product (GDP) as a measure of economic growth. It measures the rate at which our economy grows.

In 2013, for example, our GDP was $17.08 trillion, up from the previous year’s $16.42 trillion. So, all of the goods and services sold throughout the United States (essentially, all of the money spent by Americans) rose about $661 billion dollars year-over-year.

Most people might look at the number, see 4% growth, and say it’s a no-brainer. How can the economy not be growing if the GDP rose?

The answer is simple. And when you look at it from the perspective Karl Denninger of the Market Ticker outlines below, you can’t help but realize that you’ve been purposely duped into believing that things are getting better. Just the opposite is true.

When looking at GDP you absolutely must account for the manufactured credit infused into the system during this same time period. When you do you’ll see just why the economy is not growing in any way, shape or form.

It is, in fact, contracting.

However, The Federal Reserve added $1.112 trillion in credit (unbacked by anything) during the same period of time; that’s a debasement of the units in which GDP is reported of 6.51%.
So the real change in the economy is in fact negative 2.51%.
We are factually in a recession.
Period.
There can be no progress economically or politically until the lies are stopped.  These are not mistakes; both the hosts and guest are fully-aware of The Fed’s balance sheet.

That extra trillion dollars slammed into the system by The Fed pretty much wipes out any growth noted by the Federal government’s statistics, because we never actually earned that money. It’s debt. Not growth!

Incidentally, the other oft cited measure of economic health is the Dow Jones Industrial Average, which currently sits around record all-time highs of 16,000 points, is likewise benefiting from this illusion. Guess where that stock market “growth” came from? Yes, the very same credit being used to prop up the economy (that $85 billion or so in Fed Treasury purchases every month) is also keeping stocks at record highs.

Back on Main Street, where most Americans live, we’re feeling the effects. Do we need to mention that the Patient Affordable Care Act has just forced working Americans to spend up to quadruple on their monthly premiums? Or that millions of Americans who are unemployed and no longer counted in the official statistics have absolutely no income whatsoever because their unemployment insurance has run out? Or that the price of everything from food and energy to rent and clothing is rising?

That kind of thing tends to happen when you debase your currency.

Last week famed contrarian economist John Williams noted that the economy gave apowerful recessionary signal in January that had not been seen since right before the market crash in 2007. Furthermore, one of the leading economic indicators of a recessionary environment is the price of copper because it is so closely associated with global growth. It has dropped significantly in recent months and it could well besignaling a coming crash in stocks just as it did in 2008.

When, not if, this thing buckles again we’re going to be in for an unprecedented period in U.S. history.

The system was on the brink of total collapse in 2008, as evidenced by Representative Brad Sherman on the House floor:

Many of us were told in private conversations that if we voted against this bill on Monday, that the sky would fall, the market would drop two or three thousands points the first day, another couple thousand the second day, and a few members were even told that there would be martial law in America if we voted no.
House Representative Brad Sherman (D-California)
Debate on the House Floor, October 2, 2008

They’ve used up all of the tricks in their magic hat. One misstep here and we’re going down. Any number of domestic or geo-political events could trigger a meltdown in U.S. stock markets and send the broader economy crashing.

Living Wage Calculator – Poverty in America

Ted Butler: Why Not Just Close the COMEX

This column tonight from Ted Butler at Butler Research set me back a bit. It would be like one of the most die hard economist Fed watchers, after forty years in the business, coming out and saying that the Fed has gone so far off the rails that we ought to just shut it down.

It is a subscription only site, and so I cannot do justice to his reasoning which was far more extensive and complete than what I excerpt here.

Rather than closing the COMEX, engaging in some substantial reform and bringing it back to its original purposes would be preferable. But in the current climate of financial corruption and regulatory weakness it is not practically achievable, at least not yet. 

Here is just a snippet of what Ted had to say.

"Not to be delusional, I have little expectation that the COMEX will be closed; but I think the idea has merit and should be considered. In fact, the vast majority of market participants and society as a whole would benefit from a closing of the COMEX for the simple reason that all the commodities traded there have been manipulated in price. The simplest way of ending these manipulations is to shut down the mechanism of manipulation...

Since it can be demonstrated and proven thru CFTC data that prices are set on the COMEX with no input from the real world producers or consumers, society as a whole would benefit if the COMEX didn’t exist. This is a private club that has no legitimacy in dictating to the world what prices should be.

The COMEX has undermined and replaced the free market law of supply and demand with a phony price-setting mechanism never intended when Congress authorized regulated futures trading. The COMEX is not functioning as intended and it’s hard to see what might change that. As such, it should be shut down."

DERIVATIVES: HOW THE TINY SILVER MARKET COULD TAKE DOWN THE SYSTEM

Precious metals naked shorting is just another streamlined way to pick up nickels in front of a steamroller. Do it on a large enough scale and with some form of subsidy, margin, or grantee, and it can be a massive business unto itself.   That is, until it explodes and spills over into the densely connected network of other paper derivative structures.
This is part of why it is never absurd to consider that the tiny silver market can be the Achilles heel that might take down the system. 
Everything is tied and the trigger could come from any place along the tangled web.

By Dr. Jeffrey Lewis, Silver Coin Investor:

Disaster, by over-optimization, is another important way to frame the much-heralded “just in time” inventory practices which are used broadly by industry and grafted to monetary assets like precious metals.

The overgrowth of the financial system and serial bailouts are akin to allowing fuels to build up in the forest, preventing the natural burn off needed to replenish the soil and pave the way for new growth. Superficially, intentions are certainly good. But many suffer despite the well-intended. No one wants to see suffering or be held responsible for it for even a microsecond.

The modern world and the West in particular are extremely over-optimized and, therefore, dependent on a fragile array of artificial systems and networks. The degree of over-optimization can be measured by relative impact of the average developed world household losing power for a few hours or a day.

And we can see this growing process fracturing on many levels. The weakness comes from physical resource and the proximity of key inputs scarcity. Most of you are aware of the brittle reliance on a tiny physical “float” of available silver for industrial processes. We are one rumor away from a shortage that would create panic and wreak havoc across the spectrum.

We observe the phenomenon over a many industries, albeit with different manifestations.

Suburban sprawl has uprooted and disconnected vast segments of modern societies. We have stretched the commute time for what is left of the workforce. We have also added dependency on liquid fuels while selling and subsidizing an asset for a bloated financial system by creating debt.

The causality is certainly not linear, but liquid fuel consumption depends on a vast network of delivery operations that also happen to run on credit, which is in large part supplied by the very same financial institutions.

Similar delivery operations are responsible for the constant delivery of food and water far from the source.

Crisis and bailouts have led to massive consolidation in banking and finance, which has reduced the redundancy necessary to enable the efficient flow of credit and money. It is not difficult to imagine a long list of potential disruptions that could very quickly bring these extended networks and the people who rely on them to their knees.

Health and medicine have also succumbed to the same over-optimization – from pharmaceutical development and production and hospital administration to how care is delivered. Even the philosophy of medicine has fallen victim, where the standard of care evolves inwardly and often fails to identify risk on the front lines.

Over-optimization and Silver Duality

Turning to the poster child for how far we’ve gone down the proverbial rabbit hole in the fragilizing of finance, we can turn to silver.

Precious metals naked shorting is just another streamlined way to pick up nickels in front of a steamroller. Do it on a large enough scale and with some form of subsidy, margin, or grantee, and it can be a massive business unto itself. That is, until it explodes and spills over into the densely connected network of other paper derivative structures. This is part of why it is never absurd to consider that the tiny silver market can be the Achilles heel that might take down the system. Everything is tied and the trigger could come from any place along the tangled web.

Paper trading is a form of borrowing by not having primary exposure to underlying metal or asset. Price management not only serves the profit centers, but it also has the curious and optimizing effect of negating the macro picture – at least temporarily. Obviously, this is occurring to a degree in all markets, especially equities which have been prone to and infested by high frequency trading for the longest.

Financial System will break what’s left of the economy. The problem is that many assume that we can rebuild what we have today overnight. That another bailout will reflate the infrastructure underlying physical and social cohesiveness.

Out over optimization has made this impossible. And complex systems bloated with fragility are as unpredictable as they are in fixable when they break.

If one looks long enough, it almost seems that miraculous systems so complex could have evolved to begin with. Or that it doesn’t break down more often. That is the magic caused by over-optimization.

Of course, it goes much deeper on each of those levels, leaving a potential gulf that most could never imagine – nor want to.

Considering how far wealthy societies could fall from any number of truly random events makes preparation seem a bit more fashionable. Sadly, our dominate information networks will very likely keep that trend “safely” sequestered from the mainstream.

The inverse of the fragile is the robust. The physical metal is most robust. We have the opportunity to prepare accordingly. And physical metal held in possession is a cheap option that can also be stored in a disaster kit.

BANK RUNS BEGIN IN CRIMEA AS DEPOSITORS SWARM UKRAINE’S LARGEST BANK

As the US & EU prepare to level economic sanctions on Russia over the Ukrainian crisis (& Russia threatens to retaliate with economic sanctions of its own against the dollar and freezing all US assets) a bank run appears to have begun in Crimea as citizens lined up Thursday to withdraw funds from Ukraine’s largest bank, Oshad. 

 

Florida Makes Off-Grid Living Illegal – Mandates All Homes Must Be Connected To An Electricity Grid

It’s no secret that an opposition to sustainable living exists. Earlier this year, Texas state brought several SWAT teams to a sustainable community and threatened to shut it down. Each one of the community members were initially handcuffed at gunpoint. It was called “The Garden of Eden Community,” and was totally self sustainable. You can read more about that here.

This time, it’s Robin Speronis that’s come under fire. She lives off the grid in Florida, completely independent of the city’s water and electric system. A few weeks ago, officials ruled her off-grid home illegal. Officials cited the International Property Maintenance Code, which mandates that homes be connected to an electricity grid and a running water source. That’s just like saying our dependency on corporations isn’t even a choice. The battle to live without most utilities has been ongoing for Robin, the self-sufficient woman has lived for more than a year and a half using solar energy, a propane camping stove and rain water.

In the end, she was found not guilty of not having a proper sewer or electrical system; but was guilty of not being hooked up to an approved water supply.

So what exactly is off grid living?

“It means living independently, mainly living independently of the utility companies. Providing your own power. It does not mean living in the stone age, it’s not about bush craft. It’s about generating your own power, your own water, dealing with your own waste. Probably as part of a community, not living on your own like a hermit. It’s also about being more self-reliant and being less dependent on the system. Perhaps realizing that the system isn’t really protecting us anymore and we have to look after ourselves.” - George Noory

Our potential as a human race is quite extraordinary, we just don’t realize it. Sustainable living is not about giving up a certain lifestyle, can still have all the modern amenities, design and beyond. Living off the grid wouldn’t be a problem, we have technologies that can generate over-unity power, we have technologies that can provide unlimited amounts of clean energy. I’m talking about free energy, which goes far beyond solar energy. We can have neighborhoods exactly like we do today, even better. They would be totally green, off the grid and self-sufficient.

The only problem with off the grid living is that corporations lose their ability to control others. With a completely self-sustaining life style, no body would ever have to work. What would happen then? Think about that for a moment. We would be free to expand and create, to discover our full potential as a race and move forward into the world of exploration and discovery, all the while living in harmony with nature, not against it.

We’ve accepted the monetary system, and deem it necessary for the proper function of society. Money doesn’t ever have to come in the way of necessity, we’ve just been made to believe that it does. It’s time for the human race to move past the concepts of competition and greed into one that benefits the whole.

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozled has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” - Carl Sagan

 The human race does not need to be dependent on these corporations. While we continue to feed this dependency, the planet continues to suffer. In order to move forward, we must start cooperating with each other, and realize just how much potential we have to create something magical and amazing. Bottom line, anybody who has the desire to live off-grid should not be hassled for it, it should be a free choice.

Sources:

http://america.aljazeera.com/watch/shows/the-stream/the-stream-officialblog/2014/2/25/florida-court-challengesoffthegridliving.html

http://www.offthegridnews.com/2014/02/22/court-rules-off-the-grid-living-is-illegal/

A Market Crash Waiting To Happen

It has been almost four years since the infamous flash crash that occurred on May 6, 2010.   There have been numerous mini-flash crashes in individual stocks since then.  It has been about one and a half years since Knight Capital imploded when one of their high frequency algorithms went rogue and caused them to lose $460 million in a matter of minutes.

The SEC has done nothing of substance to prevent a replay of those unnerving market events because it has done nothing to address the root of the problem.  Instead, the growth in high frequency algorithmic (HFA) trading has gone unchecked as more and more firms seek ways to shave a few milliseconds or microseconds off the time it takes to receive data from market exchanges and execute a trade.  A tiny sliver of a second is all that’s needed to gain an unfair advantage over unsuspecting investors.  The quest for a HFA trading edge has firms paying exchanges large sums of money to receive special access to trading data a few milliseconds ahead of the general public.  Companies co-locate their servers as close to the exchanges as possible so data, traveling near the speed of light, finds its way home to their computers and into their algos as rapidly as possible.  Companies opt for microwave transmissions or lasers to supplant light waves traveling through fiber-optic cables because those pathways are incrementally faster.  It’s a race to riches.

Speed and greed go hand in hand in the world of high frequency traders, who routinely front-run and juke investors and retail traders out of pennies and nickels in huge volume every single trading day.  The proprietary trading desks at big Wall Street banks routinely score tens of millions of dollars almost every trading day through HFA trading.  They report unbelievable consecutive daily profitable trading gains quarter after quarter, which are statistically impossible unless they are cheating.  Yet, the SEC sees nothing untoward with these kinds of results.  See a previous InvestmentWatch article on this subject: http://investmentwatchblog.com/u-s-officials-and-wall-street-traders-react-to-continuing-hfa-glitches/

The problem, of course, is that HFA trading comprises well over half of total market volume.  High frequency trading proponents argue that such trading provides needed liquidity to the market and everyone benefits as the difference between bid and ask prices narrow.  In fact, the ones who benefit the most are high frequency traders themselves who need high volume for their manipulative algos to work effectively and churn out obscene profits.  Why else would HFA traders go to such pains to acquire trading data a few milliseconds ahead of other market participants?   The perverse beauty of the practice, in the eyes of HFA traders, is that most investors don’t notice the difference.  Investors aren’t aware that they are paying a few pennies more than they should have to complete a transaction.

HFA trading has nothing to do with green eyeshade analysts who try determine the prospects of various companies and advise their clients accordingly.  It has everything thing to do with removing almost all risk by dramatically increasing the speed of data flowing between HFA computers and the market exchanges.  Technical and fundamental market analyses are old-school in such an environment.  Why take any chances when surefire profits are available for the taking each and every trading day through the wonders of high speed trading?  While the SEC dithers, HFA traders and their programmed computers are hauling in boatloads of dough in a risk-free, essentially unregulated environment.  It doesn’t get much better than that.

HFA traders are astute enough to know the soft underbelly of their enterprise.  The wise guys know better than to get caught flat-footed and, therefore, take preemptive measures to bail out at the first sign of an incipient market collapse.  That is why they design safety release valves into their algorithms, which will automatically sell out their long positions and pull back their bids in a matter of seconds as soon as an unusually large imbalance appears between buy and sell orders.  In effect, HFA computers are programmed to sell first and ask questions later.  This collective computerized response on the part of HFA traders creates a vacuum under stock prices sending them into freefall.

HFA traders appear to have all their bases covered.  They profit from gathering trading data milliseconds before other market participants.  They cut their losses well before other market participants have a chance to react.  It’s a win-win for HFA traders and a lose-lose for everyone else.

The SEC is fully aware of how a market or an individual stock reacts when liquidity dries up suddenly.  It goes down and it goes down abruptly.  After the flash crash of 2010, the SEC instituted a few changes that they believe would mitigate a devastating crash when HFA traders leave the market en masse in a matter of seconds.  To address these types of market perturbations, the SEC decided it would suspend trading temporarily for a prescribed period of time to give the market or an individual stock a chance to recover from what could be a momentary trading imbalance.  In fact, that is exactly what happened during the flash crash.  The Dow dropped several hundred points in a matter of minutes and just as quickly recovered most of its losses within an hour.

Temporarily suspending trading, however, is a questionable patch, which may or may not stop a market collapse.  In fact, the so-called circuit breakers could exacerbate a market fall as easily as they could halt it.  When market trading is suspended after a circuit breaker trips, uneasy investors could pile up anxiously waiting to unload their shares when the circuit breaker resets and trading resumes.  A simple waterfall could turn into a cascading waterfall that is deeper and longer as panic sets in.

The thing that distinguishes this market environment from those in the past is the dominance of HFA trading.  Who can say what will trigger another flash crash or when it will occur?  Further, we don’t know if the next crash will be another flash in the pan or the nerve-shattering start of a long bear market.  The current bull market is long in tooth and the percentage of bears is near a record low level.  But this doesn’t necessarily mean that a reversal is imminent, especially with a Fed that will do almost anything to keep the market from plunging.  What is more predictable is the likelihood that the next market crash could be a steep scary one, like none ever seen before.  This is what happens when a stock market is underpinned by the fragile liquidity of high frequency trading.  It is no different than a house built on sand, which is destined to collapse under its own weight.

So what can be done to forestall or prevent such a scenario?  Unfortunately, not much at this point.  Our market regulators should have never allowed HFA trading to grow to the extent it has.  HFA trading has attained critical mass and government regulators are not about to burst the bubble.  They have signaled that the most they will do is try to contain the problem rather than cure it.  Not only do they fear the political backlash that would accompany any move to ban or seriously curb HFA trading, they are even more fearful that any action on their part to eliminate or reduce a major fraction of market volume will in itself cause the market to collapse.  The SEC may believe, at this point, that they are damned if they do and damned if they don’t.

The SEC has been studying the issue for years, but has yet to do anything meaningful to eliminate the potential threat posed by HFA trading on the health and wealth of the general market and honest investors.  They will put band-aids on the problem, but they refuse to attack the problem at its root.  Other than sporadic market anomalies, it is fortuitous that the market hasn’t experienced any long-lasting setbacks due to HFA trading.  That luck may not last much longer, nor will the bull market that is camouflaging the danger.

Unfortunately, it may take a market crash before any meaningful action is taken to address the self-evident systemic risk associated with HFA trading.  Complaisant investors, who place their trust in our market regulators to provide a level playing field, can see their paper gains evaporate and fresh losses appear in a matter of moments.  It is a matter of time before an unsettling market collapse occurs, aggravated by HFA trading.  When it does, burnt investors will be leery, perhaps for a very long time, to trust our financial markets.  Perhaps then, and only then, will market regulators take meaningful steps to protect investors from predatory high frequency traders.  In the aftermath of a brutal market collapse, the American public will demand that the integrity of the marketplace be restored.

No privileged, well-connected class of traders should have the ability to see the bid and ask prices of other market participants before making their move.  It is otherwise known as cheating and anyone paying attention knows it.  To make matters worse, HFA trading has woven itself into the fabric of the market to such an extent that its flight at the onset of a market dislocation will quickly make a bad situation worse, leaving investors holding the bag and wondering why our market watchdogs didn’t see this coming.

-   LV