Real Disposable Income is Falling at 2008 Rates

by Phoenix Capital Research

The biggest single most important item in the GDP report yesterday was the collapse in disposable income for Americans.
Most investors will focus on the drop in GDP growth for 1Q13 and view it as opening the door for the Fed to continue with QE 3 and QE 4 without any tapering in sight.
After all, the markets have believed that bad economic news is good news for the markets for four years based on the belief that a weak economy will mean more money printing from the Fed.
However, the real issue in the BEA’s report on GDP growth was the collapse in real per capita disposable income which fell at a annualized rate of 9.21%.
That is a truly staggering collapse in incomes. The last time we say anything even close to this was in the third quarter of 2008.  
That was right after Lehman failed and the entire economy and stock market were melting down. Buckle up, things are getting worse in the US at a truly alarming rate.
I’ve been warning subscribers of Private Wealth Advisory that the economy was going to turn sharply weaker this year. It’s already begun.

Indeed, while most investors will look at the GDP report as indicating more QE is coming, commodities certainly didn’t get that signal at all. The commodity index continues to plunge diverging wildly from the S&P 500.



One of these asset classes is completely mispricing the economy and the likelihood of more QE. Guess which one it is.

This is just the start. I warned Private Wealth Advisory subscribers in our most recent issue that higher rates were coming noting a collapse in bonds in Europe and the emerging market space.

This could easily become truly catastrophic. The world is in a massive debt bubble and the Central banks are now officially losing control. The stage is now set for a collapse that could make 2008 look like a joke.

If you are not preparing in advance for this, the time to get started is NOW.
For more market insights and commentary, visit us at:
www.gainspainscapital.com
Best Regards
Graham Summers

The Fed Has Ordered The U.S. Pension Funds To Begin To Acquire U.S. Debt

With the United States having reached unprecedented levels of debt and no end in sight, Europe close to widespread destabilization, and Japan now having lost control of their bond market, it should be quite apparent that there is no turning back.
Governments around the world are doing everything in their power to maintain the perception that all is well. Despite their best efforts, however, the coming catastrophe cannot be stopped.
The following video and accompanying excerpt recorded on the Hagmann and Hagmann Report Nightly Radio Show features Steve Quayle and financial insider “V,” also known as the Guerrilla economist.
This is critical knowledge and foresight into what is happening, what the triggers for the next collapse will be, and how the world’s elite plan on making their exits.
You will never hear information like this from mainstream media sources until after the fact, if ever.
Be forearmed and forewarned, because as “V” notes, what’s coming will leave no one on this planet untouched.
Video excerpt produced by The Daily Sheeple with permission from The Hagmann and Hagmann Report

The collapse that’s going to occur here is going to be a trifecta of bonds, stocks and real estate combined.
…
The Fed over here has ordered – and I want everybody to listen because this is insider information – the Fed has ordered the U.S. pension funds to begin to acquire U.S. debt. That is coming down the pike, it’s going to start happening, the states are going to start carrying it in order to fatten up their books… So, we are moving into the last stages before an all out collapse.
That’s exactly where we’re headed.
Now the Rubicon has been crossed… the armies are surrounding the Capital itself.

QE Is Being Cut For A Number Of Valid Reasons That Seem To Escape Most People:

1. It hasn’t worked: no meaningful improvement in aggregate demand in spite of trillions of govt debt having been monetised.
2. Asset bubbles are everywhere (stocks, IG bonds, Junk) and their popping would be far more calamatous than what we are now seeing  were they allowed to grow as before
3. Inflation IS already a problem, its just hidden in manipulated official data. For example, Owners Equivalent Rent is a huge part of PCE and yet somehow as house prices shoot up 12% it is not showing up. You ask any middle class American if their “basket” is 0.7% more expensive than last year and they will laugh in your face. I’d hazard a guess of 4-5% right now.
4. The Fed now sees their actions are the great enabler of absurd levels of public spending and bad policy generally. Politicians looking at 10 year financing cost of 1.5%  feel no pressure to exercise restraint and will merrily continue to steer the country towards bankruptcy at an accelerating pace.
5. Americans know that QE and fiscal profligacy is inherently bad and there will be payback at some point. Knowing that, they naturally hold back on discretionary spending. Why is a 2% GDP growth rate such an emergency that it requires historic measures like QE? I dont get it. It  isn’t great for the US but it’s no disaster either. American’s implicitly understand this and know in the back of their minds that Washington is feeding us sugar water and it will end badly.
LET THE MARKETS CLEAR, CUT THE DRUNKEN PUBLIC SPENDING & TAX and then we can restart this amazing wealth-generating machine that is the US economy.
81.5% of Money Created through Quantitative Easing Is Sitting There Gathering Dust … Instead of Helping the Economy
Robert D. Auerbach – an economist with the U.S. House of Representatives Financial Services Committee for eleven years, assisting with oversight of the Federal Reserve, and now Professor of Public Affairs at the Lyndon B. Johnson School of Public Affairs at the University of Texas at Austin – notes today:

There is a massive misconception about where the Bernanke Fed’s stimulus landed. Although the Bernanke Fed has disbursed $2.284 trillion in new money (the monetary base) since August 1, 2008, one month before the 2008 financial crisis, 81.5 percent now sits idle as excess reserves in private banks. The banks are not required to hold excess reserves. The excess reserves exploded from $831 billion in August 2008 to $1.863 trillion on June 14, 2013. The excess reserves of the nation’s private banks had previously stayed at nearly zero since 1959 as seen on the St. Louis Fed’s chart. The banks did not leave money idle in excess reserves at zero interest because they were investing in income earning assets, including loans to consumers and businesses.
This 81.5 percent explosion in idle excess reserves means that the Bernanke Fed’s new money issues of $85 billion each month have never been a big stimulus. Approximately 81.5 percent (or $69.27 billion) is either bought by banks or deposited into banks where it sits idle as excess reserves. The rest of the $85 billion, approximately 18.5 percent (or $15.72 billion) continues to circulate or is held as required reserves on banks’ deposit accounts (unlike unrequired excess reserves).

http://www.washingtonsblog.com/2013/06/81-5-of-money-created-through-quantitative-easing-is-sitting-there-gathering-dust-instead-of-helping-the-economy.html
Will Ben Bernanke’s QE3 Work? No, It’s Already Failed
People can stop wondering if QE3, Fed Chairman Ben Bernanke’s latest effort to “do more”, will work.  It has already failed.
The futility of QE3 was made clear by the financial markets’ reaction to the Fed’s announcement.  The Real Dow, which is the Dow Jones Industrial Average divided by the price of gold, actually fell by 0.65% on September 13, the day that QE3 was announced.  While the Dow gained 1.6% on the day, gold went up by 2.2%.  In real terms, QE3 made the economic outlook worse, not better….
http://www.forbes.com/sites/louiswoodhill/2012/09/19/will-ben-bernankes-qe3-work-no-its-already-failed/
QE Has Been and Will Be a Complete and Utter Failure
The Fed is now blaming Congress for the failures of its QE policies.
This is to be expected, given that no one in the power elite ever accepts responsibility for their own failures. Congressional members blames each other (depending on which party they’re in), the Fed blames Congress, the White House blames the GOP, and on and on.
Behind this façade of bickering is the total and complete failure of the Fed’s policies to generate economic growth OR jobs. Regarding #1, the US has not had a single year of 3% GDP growth since Bernanke became Fed Chairman. End of story.
As for QE… there is not one single example in history in which QE has successfully created jobs. The UK has engaged in QE equal to over 20% of its GDP and hasn’t seen a real recovery in employment. Similarly, Japan has employed QE equal to nearly 25% of its GDP and GDP growth continues to slow while unemployment stays elevated.
As for the US, the Fed has spent roughly $2 trillion in the last year via QE. During that time a little over, 500,000 jobs were created… So the Fed is spending roughly half a MILLION dollars to create each job.
http://gainspainscapital.com/2013/05/02/qe-has-been-and-will-be-a-complete-and-utter-failure/
britinus

Old Swiss Banker tells me that Gold will fall to $750; Silver to $12 in 7 weeks -> quotes forced liquidation at central banks incl. SNB!!! An horrific event imminent?

Russian Market‏@russian_market1 m 
Old Swiss Banker tells me that Gold will fall to $750; Silver to $12 in 7 weeks -> quotes forced liquidation at central banks incl. #SNB
Gold Is Falling Again
Check out this intraday chart from FinViz.

FinViz

http://www.businessinsider.com/gold-prices-are-falling-2013-6

Gold Slam Down Could Lead To An Horrific Event Days From Now

“Billionares are starting to leave and cash out. Hedge founds are trying to sell their real state. Investment companies who bought the real estate, trying to pump up the bubble, are getting out also. When you see major people getting out. That means something is up. It´s only the small investor, the people, who thinks this gonna continue and go higher and higher….”

Risk of 1937 Relapse As Fed Gives Up Fighting Deflation – Tightening Monetary Policy Even Though Core PCE Inflation Has Fallen To The Lowest Levels In Living Memory- Gold Keep Falling, Outrage Liquidation Continues, Banks Stopped Lending

It has set off an emerging market shock and risks “blowback” from a fresh spasm of the eurozone debt crisis, and it is letting all this happen at the same time, before the US economy is safely out of the woods.
It has violated its own counter-deflation strategy, tightening monetary policy even though core PCE inflation has fallen to the lowest levels in living memory and below levels deemed dangerous enough in the past to warrant a blast of emergency stimulus. It is doing so even though the revival of bank lending has faded.
The entire pivot by the Federal Open Market Committee is mystifying, almost amateurish, and risks repeating the errors made by the Bank of Japan a decade ago, and perhaps repeating a mini-1937 when the Fed lost its nerve and tipped the US economy into a second leg of the Great Depression. “It’s all about tighter policy,” was the lonely lament by St Louis Fed chief James Bullard.
The Fed seems to be acting in the belief that the US economy will shake off this year’s fiscal tightening – 2pc to 3pc of GDP – and that a housing recovery is now entrenched. The sharp fall of Wall Street’s homebuilders index would suggest caution. Unlike the surging Case-Shiller index of house prices, it looks forward, not three months backwards.
The Fed could have kept policy steady, welcoming the shake-out in frothy markets over the past month as a useful “fire-drill” for future QE exit, without pushing its point too far. It chose to escalate.
http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/10144451/Risk-of-1937-relapse-as-Fed-gives-up-fight-against-deflation.html
Gold Is Falling Again
Gold crashed through $1,300 days ago, and it’s heading toward $1,200 today.
The yellow metal appeared to be getting its footing earlier today, but the bottom fell out again minutes ago.
Check out this intraday chart from FinViz.

FinViz

Read more: http://www.businessinsider.com/gold-prices-are-falling-2013-6#ixzz2XQ1gNcoo

Is this the next key support price for Gold?

CLICK ON CHART TO ENLARGE
Almost two years ago the Power of the Pattern shared that Gold looked to be forming a Bearish Eiffel Tower pattern (see Gold Eiffel here) and that the Swiss Franc was suggesting Gold will be flat to down for years to come (see Franc here)
The above chart reflects that the Eiffel Tower pattern is still putting downside pressure on Gold, as it freshly breaks below an 8-year support line.
http://blog.kimblechartingsolutions.com/2013/06/is-this-the-next-key-support-price-for-gold/
Goldman On China: ‘Sufficient’ Liquidity But Tightening Bias To Stay
The People’s Bank of China (PBOC) released an official statement addressing directly the latest liquidity conditions in the banking system and indicating that the central bank intends to maintain sufficient liquidity conditions in the interbank market. As Goldman notes, this clear communication of policy intentions is highly important to guide market expectations, avoid liquidity hoarding, and contain excessive volatility of market. While they hope this calms markets in coming days, Goldman notes that theinterbank rates are likely to settle back to a level higher than before to rein in leverage growth. However, in a helpful prompt for more jawboning, the squid notes, continued communications on policy intentions and actions will be helpful to further ease market uncertainties, given the extreme volatility in recent weeks; though we note the tightening bias will remain as the new leadership appears to prefer to take their pain early (and blame previous parties) than wait.

http://www.zerohedge.com/news/2013-06-26/goldman-china-sufficient-liquidity-tightening-bias-stay
Leeb – There Is Outright Panic & Liquidation Now Taking Place
I’m trying to focus on the reasons for the collapse, not only in gold and silver, but most of the stock markets across the globe. A lot of investors read Bernanke’s comments about ending QE, if certain economic conditions were achieved, as a reason to liquidate.
Investors firmly believe that the end of QE is like cutting the floor out from underneath the stock market. At the same time, China has decided to curb a lot of bad investments in their economy.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/6/24_Leeb_-_There_Is_Outright_Panic_%26_Liquidation_Now_Taking_Place.html

The U.S. dollar slipped Thursday, down after six straight days of gains and ahead of the release of U.S. consumer spending and labor-market figures which could affect the Federal Reserve’s policy outlook.

The ICE dollar index DXY -0.06%  , which measures the U.S. unit against six other major currencies, fell to 82.836 from 82.964 late Wednesday, when the index notched its sixth consecutive win, the longest streak since May 2012, according to FactSet data.

http://www.marketwatch.com/story/dollar-slips-after-longest-win-streak-in-a-year-2013-06-27?link=MW_latest_news

China’s Banks Stop Lending due to Liquidity Freeze – Giant Ponzi Scheme Wont End Well. Panic Sets In!

If one thought the schizophrenic lies out of Europe between 2010 and 2013 were bad enough (the bulk of which it now appears were orchestrated by Mario Draghi), here comes China, a country which already has a “credibility” issue so to say, which has no choice but to lie as blatantly as possible in order to preserve some semblance of stability. Not unexpectedly following news that various retail and online banking services had been impaired in the early part of the week at China’s biggest banks, now Caixin reports that banks are simply shutting lending to both businesses and individuals.
From Caixin:

http://www.zerohedge.com/news/2013-06-26/chinese-banks-stop-lending-due-liquidity-freeze

http://investmentwatchblog.com/breaking-chinas-banks-stop-lending-due-to-liquidity-freeze-giant-ponzi-scheme-wont-end-well-panic-sets-in/

Two Of China’s Biggest Banks Have Stopped Lending At Some Of Their Branches Read more: http://www.businessinsider.com/some-chinese-banks-halt-lending-2013-6#ixzz2XQ3UmUrP

Eurozone Banks Stop Lending To Each Other
EUROZONE banks are refusing to lend to peers in other countries in the common currency bloc, signalling a worrying fall in confidence that appears to have worsened since the Cyprus bailout earlier this year, data analysed by Reuters shows.
European Central Bank data shows the share of inter-bank funding that crosses borders within the eurozone dropped by one-third, to just 22.5pc in April from 34.5pc at the start of 2008.
The silent retreat to within national borders is most pronounced in the troubled economies of southern Europe, but is even seen in Germany.
http://www.independent.ie/business/world/eurozone-banks-stop-lending-to-rivals-in-currency-bloc-29363905.html

Russian Market‏@russian_market1 m 
Old Swiss Banker tells me that Gold will fall to $750; Silver to $12 in 7 weeks -> quotes forced liquidation at central banks incl. #SNB

Force Majeure is Just Months Away! That is Why They are Crashing the Paper Gold & Silver Price!

JP Morgan and Comex are rapidly running out of Gold in their vaults.
According to zerohedge:
“Whoever is “running the JPM vault” shows no sign of relenting. At this pace, the world’s biggest gold vault located below 1 CMP, and just next to the Fed’s own gold vault, will be empty in about 1.5-2 months.” (emphasis added)
http://www.zerohedge.com/news/2013-06-11/jpm-vault-gold-drops-284-overnight-slides-fresh-record-low-withdrawals-accelerate
Also, the Comex vault is emptying at a similarly alarming rate:
http://srsroccoreport.com/gold-continues-to-bleed-from-comex/gold-continues-to-bleed-from-comex/
The Feds have abandoned any effort to keep the paper price in line with the physical price. They are purposely breaking the link between paper and physical for one purpose and one purpose only: When the vaults run out and Force Majeure is declared, all paper contracts will be cash settled at the fake, manipulated, driven down, low balled, paper price.
People who think that they own Gold, but do not posses it, will be forced to settle with freshly printed $ at the fake low ball price.
Zerohedge says that JP Morgan’s vault will be empty within 2 months at the present rate of depletion.
Prepare for Imminent Force Majeure!
Sky Pilot

Gold Controls In India – Premiums Double As Strong Demand For Gold and Silver

by GoldCore


Today’s AM fix was USD 1,232.00, EUR 945.51 and GBP 806.07 per ounce.
Yesterday’s AM fix was USD 1,229.00, EUR 942.85 and GBP 799.97 per ounce.
Gold fell $53.20 or 4.17% yesterday and closed at $1,224.10/oz. Silver slid to a low of $18.421 and finished down 5.46%.

Cross Currency Table – (Bloomberg)
Gold inched upward today after investors and speculators viewed the recent price falls as excessive and some began to dip their toes back into the market.
Gold tumbled to its lowest level in nearly three years yesterday after concentrated selling in electronic trading on the COMEX, less liquid Asian trading Tuesday night that led to stop loss orders being triggered and further price falls.
Bullion dealers, mints and refineries have seen a small increase in clients liquidating physical bullion in June but nothing that would justify the scale of price weakness seen. There has been a small bit of panic selling which suggests capitulation and the market may be close to exhausting itself to the downside.
There are also many retail and wealthy buyers looking to accumulate at these lower prices – both in western markets and in Asia.
Physical demand remains robust internationally especially in China and India where premiums are moving higher again.  In China, physical demand remains robust and premiums remain at elevated levels near $35/oz. In India, premiums charged shot to $20 an ounce overnight from $8-$10 on Tuesday.
Demand in both countries and in Asia in general is set to continue due to real and valid concerns about currency devaluations.
Despite futures prices falling in India to their lowest in more than a month, gold premiums doubled as dealers struggled to meet surging demand after a ban on bullion consignment imports.
India, the world’s biggest buyer of gold, now requires importers to pay upfront for inventory, making it difficult for smaller jewellers with lower working capital to source supplies. The government also raised the import duty to 8% in May. India has ruled out a blanket ban on gold imports or any increase in customs duty from the current 8%.
Attempts to prevent Indians from buying gold are contributing to them buying poor man’s gold, or silver. There has been a massive increase in silver demand in India in recent months and the governments meddling and controls in the gold market will likely led to even more demand for silver.
While India imported 1,900 tonnes of silver in 2012, in the first five months of 2013 alone, imports have touched 2,400 tonnes.

Silver in USD, 5 Year – (GoldCore)
According to industry estimates, silver imports during the January-March quarter stood at 760 tonnes. Imports shot up 720 tonnes in April alone, and in May, they further swelled by 920 tonnes.
Gold Coin and Bar Sale Controls Create Deep Concern In India
Gold buyers in India are concerned after the India Gems & Jewellery Trade Federation asked its 42,000 member companies to stop selling gold coins and bars from July 1. The Indian government is believed to have put pressure on the powerful trade group in order to curtail India’s massive demand for gold.



Gold in Indian Rupees (2008 to 2013)
Indians are seeking ways to circumvent any prohibition and acquire gold which is the most popular form of saving in India. Many are concerned about the status of gold savings schemes that they had invested in to accumulate gold coins for future use.
The All India Gems and Jewellery Trade Federation, which represents 90% of jewellers, had come out with an open call on Monday to its members to stop selling gold bars and coins.
This has triggered a lot of concerns among consumers who have put their money in a few gold savings schemes – some of which were launched during the recent crash of the gold price in April.
Assuaging fears, president of the Madras Jewellers and Diamond Merchants’ Association Jayantilal Challani said, “Though we have asked our members to stop sales of coins by July 1, all the schemes will continue and consumers will get the promised quantity of gold, but may be in the form of jewellery of their choice.”
However, this has caused a lot of concern among the public as they stand to lose out due to the very high premiums on jewellery versus those on coins and bars. There are concerns that gold dealers will use this as an opportunity to sell much more expensive jewellery.
Another unintended consequence of the Indian government’s extremely anti gold policies will be the growth of smuggling and a black market in gold.
Ironically, it may also lead to Indian people, particularly the wealthier middle classes and high net worth Indians to store their bullion in safe jurisdictions which treat gold favourably such as Hong Kong, Singapore and Zurich. In a worst case scenario, it could lead to capital flight.