Why the US is in an invisible Depression

[Burt Gummer]

It is simply a future snapshot of every major US city. Hopefully later than sooner.

"As expected, the final breath of the United States economy will not be one heard by citizens of the world. Instead, the colossal gap between the ultra rich and the ultra poor will expand both drastically yet quietly, ultimately swallowing up any assertion of recovery lest radical changes are imposed.

But even with radical changes, it seems that the United States economy is now an automobile with virtually all of the key components gutted underneath the hood by the banking mafia. Right now the rusty automobile that is the United States has 3 flat tires, a missing engine, taped up windows, and is being pushed down the freeway by the dwindling workforce — and they're getting quite tired of pushing this dying vessel with no end in sight.

Add that in with the new report that reveals 4 out of 5 adults face joblessness or poverty for at least a portion of their lives, and we really see to that the financial assault on the engine of the United States automobile truly requires immediate repairs. The kind of repairs that involve firing the mega banks that generate 83 billion dollars a year thanks to taxpayers on record. Funds they use, by the way, to fund Mexican drug cartels and terror cells within the US. After all, they need to finance the highly profitable drug trade in order to maximize their profits.

These are the kind of financial repairs that will never happen short of a major intellectual revolution taking this country by storm. (GOOD LUCK WITH THAT!)

What's amazing to me is that even when we read the reports like the one I'm about to cover, the media still says we are ‘coming out of a recession', or that we are ‘recovering' right now thanks to bailouts and other laughable assertions."




<broken link removed>

 

[Blitzkrieg]

Well, we're half way there. If only we could find Plissken.

Detroit used to be referred to as "The Paris Of The Midwest". WHAT THE HELL HAPPENED?!?! Oh yeah, unions were a big help.

I've retired but am available for select missions

 

[unklekippy]

I've retired but am available for select missions

Well, "The Siege Of Detroit" would be one that I personally would be sitting out. There's nothing there for me, if you know what I mean. Though I have been a Detroit Tigers fan since I was 6 years old. I would go on a mission to rescue Jack Morris from Detroit if necessary. Or Ted Nugent, but that's it.

 

[Burt Gummer]

The city of Detroit says that it is totally broke and has no money for pensions...

...but somehow the city has 444 million dollars to spend on a new hockey arena for the Detroit Red Wings.

Have no fear though - the police are there to protect you.

 

[ATCclears]

So the US debt has remained at exactly the same level for the past 70 days, and it is $25M under the maximum limit. Someone is lying...

70 Straight Days: Treasury Says Debt Stuck at Exactly $16,699,396,000,000.00 | CNS News

Peter

 

[knuckle Head]

yeah if they say so I believe.

Funny thing, it is the end of July that means gooberment agencies are spending every dollar they have been allocated and doing it like crazy, because most of those dollars turn to dust on their books on 30 September.

 

[ATCclears]

The Most Important Number In The Entire U.S. Economy | Zero Hedge

 

[Brutus57]

My old philosophy professor, a libertarian, used to remind us that we cannot survive by doing each other's laundry. In realistic terms, that is what a "service" economy is. In order to fuel an economy, someone somewhere has to take something out of the ground, make it into a product that didn't previously exist, and sell it at a profit. Selling information to each other doesn't qualify. Making furniture out of trees, or making cars out of iron ore, aluminum ore, and plastic does. How much of the latter is America doing these days? Almost none. That's why there are no livable wage jobs for high school graduates.

The Right is fond of saying that small business is our greatest job creator, but small business typically doesn't manufacture things. Small businesses typically sell services. Such businesses typically offer less than full time jobs, paying minimum wage, with no benefits and no future.

A service based economy can exist only upon the foundation provided by manufacturing businesses. The US has no such manufacturing foundation any more. All that went to China, India, and Mexico long ago. The dollar has been devalued in relation to actual commodities (inflation) to the point where we are becoming cost competitive in the labor market with Japan. Things won't turn around employment-wise until we're cost competitive with China, India, and Mexico where the bulk of manufacturing is going on now. What does that future look like for American manufacturing workers? Take a look at lifestyles in those three countries.

This is where unregulated capitalism always takes us, and we never learn the lesson.

It is actually where regulated capitalism takes us. Government regulations, lets just start with the EPA have driven 1,000s of small businesses out of business. See what it takes to open a paint shop, maybe even raise your own cattle for market.... I've personally worked in several small businesses that made things . To me this is the most troubling, the loss of our industrial infrastructure. Many causes but ridiculously high emissions controls are a major part of it along with taxes. Look at how many taxes you pay when you renew a auto tab. I pay a weight tax on a motorcycle ! Really, seriously, my Axle loading really must tear up the road. I a, not for no regulation but over regulation is stifling to our economy.

Brutus out.

 

[Brutus57]

The city of Detroit says that it is totally broke and has no money for pensions...

...but somehow the city has 444 million dollars to spend on a new hockey arena for the Detroit Red Wings.

Have no fear though - the police are there to protect you.

So a broke cop resorts to crime to offset the loss of his pension....It is the motor city right?

Corrupt leaders lead to corrupt followers.

Brutus out

 

[ATCclears]

Where the money goes:
<broken link removed>

You can mouse over it to see some of the detail without buying it.

Peter

 

[Hangfire]

Media Blackout

 

[ATCclears]

I got this in email from a friend. He did not include the source/URL. I will update the posting with the URL if he sends it.

Peter

Three Reasons Why the Stock Market's Gains Are Highly Misleading
By Bob Wiedemer

Some call my outlook on the economy bearish. And yes, it's true I don't think today's economy is sustainable.

However, I'm not bearish for the sake of being contrarian. Some key indicators point in a bullish direction. So, even though I predict a long-term economic downturn, I don't deny that the stock market and other parts of the economy can rise in the short term.

The problem in recent years is that even when we've had positive indicators, they're often weak and misleading.

Is the economy really strong enough right now to justify a stock market as high as it was in 2007 (let alone higher), when almost every segment of the economy was firing on all cylinders? I would argue that it's not.
I'm going to look at some of these "positive" indicators for the markets and explain why it's misleading to use them as justifications for a record-high stock market or an economy on the rebound.


Misleading Indicator No. 1: Quantitative Easing (Money Printing) Is Boosting the Stock Market

Although Federal Reserve Chairman Ben Bernanke discussed reducing the amount of money printing at some point in the future, the reality is that the Fed is still printing a whopping $85 billion a month as part of its quantitative easing (QE) program. The fact that the market reacted poorly even to the possibility of eventually reducing the amount of money printing only emphasizes that continued money printing is a good indicator for rising stock prices. However, keep in mind that the Fed doesn't directly influence the stock market through money printing &#8212; the new money goes toward purchasing government bonds &#8212; but money printing does help the stock market in some important ways.

First, by purchasing bonds in such large amounts, the Fed keeps interest rates on bonds very, very low. In some cases the real interest rate (the rate after adjusting for inflation) on bonds is negative. This naturally sends a lot of investors to the stock market, where they hope they can see much greater returns.

Moreover, when the Fed purchases bonds on the market, it is effectively displacing money from the bond market into stocks. That is, money that investors had tied up in Treasurys and mortgage-backed bonds is now freed up to be invested elsewhere. And the stock market is an obvious choice.

When the Fed launched this most recent round of quantitative easing, it initially committed to $40 billion worth of bond purchases a month. That in itself was a remarkable amount, totaling almost a half-trillion dollars a year. And yet, perhaps in response to an underwhelmed market, that number jumped to $85 billion a month &#8212; over $1 trillion a year &#8212; only a few months later.

The market has certainly responded, passing its previous high earlier this year before soaring up another 1,000-plus points. And even though stock market gains tapered off somewhat in late May, the market can take some comfort knowing just how committed the Fed is to rising stock prices. That the Fed is so willing to increase its bond purchases &#8212; as we saw late last year &#8212; and that the public is so supportive of it, means the number could easily grow in the near future if the stock market begins a major downturn.

So what's the problem with all this? Frankly, it's obvious enough for just about anyone to understand; the only people who don't are economists and financial professionals. Put simply, creating $1 trillion worth of printed money is not the path to long-term prosperity or stock market growth. If it were, economies and stock markets around the world would be able to grow simply by printing more and more money.

Even in the short term, while money printing is generally a good indicator for stock market gains, it is no guarantee.

The Japanese government is printing $75 billion a month, a breathtaking amount when one considers how much smaller Japan's economy is than ours. And as the recent dramatic pullback in Japan's stock market shows, money printing doesn't always have its intended effect.

The problem in the long term, of course, is inflation. When a government prints more money, it becomes less valuable. And when a government prints a lot more money, it becomes a lot less valuable. What begins as a buoy to a struggling economy becomes a millstone dragging it down.

But wait a second. We don't have inflation right now. Well, that brings me to the next misleading indicator.


Misleading Indicator No. 2: Inflation Is Low

In spite of a huge increase in the money supply since 2008, inflation has yet to increase significantly. According to the Bureau of Labor Statistics, the chief measure of inflation &#8212; the consumer price index (CPI) &#8212; has been consistently under 2.5 percent.

We need to take official inflation numbers with a grain of salt, however, for a couple reasons: the nature of inflation and how it takes effect, and the measurement itself.

Some have been quick to praise Bernanke for his willingness to open the money printing spigot, reasoning that there's no need to cut back on money printing as long as inflation stays low. In the meantime, we can enjoy all the benefits of an increased money supply with none of the detrimental effects.

This is a misunderstanding of the relationship between money printing and inflation. There is a lag between an increase in the money supply and a rise in inflation. It can typically last two years or more, but will be longer or shorter depending on the economy and public trust. In an economy as large and with as strong a track record as the U.S. economy, the lag can be considerable.

Once inflation does get going, though, it can rise very quickly. By the time inflation is on the rise, it will be too late for the Fed to stop it. Even worse, it will be just at that moment that the Fed can least afford to cut back on money printing. A rise in inflation will put upward pressure on interest rates, forcing the Fed to print even more money to keep rates low &#8212; or else risk the collapse of asset values in the highly inflated stock, bond, and real estate markets. The money printing machine is easy to turn on; not so easy to turn off.

The other problem with putting too much emphasis on low inflation numbers is the measurement of CPI, which has changed considerably in the past few decades. Euro Pacific Capital CEO Peter Schiff recently ran a series of data comparisons showing that CPI in the past decade has a tendency to understate inflation by as much as 50 percent! Other firms that measure inflation, such as Shadowstats, show inflation running at 7 percent, which is much more likely the level of inflation you are feeling instead of 2 percent.

Why would the government change its inflation measure? There's little reason to think it's anything other than self-interest. A low inflation number helps keep the government and the financial community happy, and it allows the Fed to keep printing money to boost the stock market without causing too much alarm.

Have Bernanke and the Fed figured out a way to drastically increase the money supply without causing inflation? No. It simply doesn't happen that way. The Fed itself has even confirmed this view. A report on money printing and inflation published in 1995 by the Federal Reserve Bank of Minneapolis concluded, "A central bank can be confident that over the long run a higher growth rate of the money supply will result in a proportionately higher inflation rate."
In other words, inflation may appear low now (generally a good sign for the stock market). But there's simply no way to avoid a rise in the long term. We shouldn't let a low CPI fool us into thinking everything will be just fine.


Misleading Indicator No. 3: Housing Is on the Rise

Many people eagerly point to the rise in new home construction as justification for a stock market at record levels. New home sales rose from a low of 307,000 a year and a half ago all the way to a recent 476,000 on an annualized basis. That 65 percent jump seems impressive until you remember that in 2007, when the stock market was at its then-peak, annualized new home sales were 1.5 million.

Granted, we have to start somewhere, and any improvement is worth noting. But is an uptick in new home sales &#8212; not even a third of 2007 levels &#8212; enough to justify a stock market at record highs? And what about a slowing global economy and dwindling revenue figures for much of the S&P 500?

We can take the housing rebound for what it is: a small rebound in a marketplace still trying to shake off a devastating collapse. The fact that this is as much as we can do six years after the financial crisis, and with all the government stimulus since, is the more telling indicator.

Equally telling is the fact that mortgage interest rates spiked to a two-year high in early July, to 4.68 percent. The result, according to the Mortgage Bankers Association, is a steep drop in mortgage applications and refinancing activity. If higher rates are crimping mortgage demand, can a decline in new home sales be far behind?


Why Are There So Few Bright Spots in the Economy?

I don't mean to be a killjoy. But these indicators are as misleading as they are few. The economy is not firing on all cylinders. It's not even close. That's why so many people tend to read too much into every positive indicator, without the slightest bit of scrutiny.

Some might point to a growing manufacturing sector as the driver of stock market gains. But if you exclude shipments of aircraft and defense products (which see quite a bit of volatility) from the Commerce Department's reports on factory orders, the results in that department have been quite anemic since late 2011. Likewise, the Institute for Supply Management's Non-Manufacturing Survey reflects similar trends. The rate of change in business activity and new orders has been in a downtrend for many months and inventory levels are on the rise.

In 2007, when the market hit its previous high, the economy was booming across all sectors. Today, the most anyone can do is find one or two bright spots to focus on at any given time.

These indicators may be good for the short term &#8212; and we might see the stock market rise even higher than it is now.
But it's a house built on sand, and it points to an economic environment better at producing hype than fundamental growth.

 

[Burt Gummer]

MASSIVE amounts of money printing and payoffs to the criminal banking cartels and Wall St are the only reason this Ponzi of an economy is still afloat. The debt is much higher than what people believe via the banker controlled MSM.

More debt has been accumulated in the last fifteen years than in the entire history of the nation dating back to 1776.

This charade of an economy simply cannot continue.

<broken link removed>

 

[erudne]

Well, "The Siege Of Detroit" would be one that I personally would be sitting out. There's nothing there for me, if you know what I mean. Though I have been a Detroit Tigers fan since I was 6 years old. I would go on a mission to rescue Jack Morris from Detroit if necessary. Or Ted Nugent, but that's it.

I know, you know, that I know that you know that we both know,,,,,,,,,,,,,,,,,,,,,,,

 

[ATCclears]

Illinois Revenue Freefall: Fiscal Year-to-Date -8.1% and Worsening | MishTalk

Watch how Chicago and the State of Illinois handle their debt problems and pension obligations in the next 2-3 years. Something is going to break. States, Counties, Cities, and similar organizations do not have the ability to print money like the Feds.

 

[ATCclears]

Bankrupt Cities, Municipalities List and Map since 2010

Bankrupt Cities, Municipalities List and Map

 

[HB of CJ]

If things are so bad for these public agencies RIGHT NOW, can one imagine what will happen if we experience another 2008?

 

[jsparks747]

@ATCclears you officially have the longest post on this site.

 

[ATCclears]

Required Pension Contributions of California Cities Will Double in Five Years says Policy Institute: Quadruple is More Likely | MishTalk

Cali taxes are about to go way up.