ALL TIME HIGHS

The stock market has reached new all-time highs this week, just two weeks after plunging over the BREXIT result. The bulls are exuberant as they dance on the graves of short-sellers and the purveyors of doom. This is surely proof all is well in the country and the complaints of the lowly peasants are just background noise. Record highs for the stock market must mean the economy is strong, consumers are confident, and the future is bright.

All the troubles documented by myself and all the other so called “doomers” must have dissipated under the avalanche of central banker liquidity. Printing fiat and layering more unpayable debt on top of old unpayable debt really was the solution to all our problems. I’m so relieved. I think I’ll put my life savings into Amazon and Twitter stock now that the all clear signal has been given.

Technical analysts are giving the buy signal now that we’ve broken out of a 19 month consolidation period. Since the entire stock market is driven by HFT supercomputers and Ivy League MBA geniuses who all use the same algorithm in their proprietary trading software, the lemming like behavior will likely lead to even higher prices. Lance Roberts, someone whose opinion I respect, reluctantly agrees we could see a market melt up:

“Wave 5, “market melt-ups” are the last bastion of hope for the “always bullish.” Unlike, the previous advances that were backed by improving earnings and economic growth, the final wave is pure emotion and speculation based on “hopes” of a quick fundamental recovery to justify market overvaluations. Such environments have always had rather disastrous endings and this time, will likely be no different.”

As Benjamin Graham, a wise man who would be scorned and ridiculed by today’s Ivy League educated Wall Street HFT scum, sagely noted many decades ago:

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

Continue reading “ALL TIME HIGHS”

Chart Of The Day: Subprime Auto Delinquencies Surging Higher

Who woulda thunk that loaning serial defaulters living on EBT cards $35,000 to temporarily use a Cadillac Escalade wouldn’t work out in the long run. But at least the MSM and Obama could claim auto “sales” are booming. So it goes.

Via David Stockman


7 Million People Haven’t Made A Single Student Loan Payment In At Least A Year

Tyler Durden's picture

Perhaps it’s all the talk about across-the-board debt forgiveness or maybe the total amount of outstanding student debt has simply grown so large ($1.3 trillion) that even those with no conception of how much money that actually is realize that it’s simply never going to paid back so there’s no point worrying about, but whatever the case, the general level of concern regarding America’s student debt bubble doesn’t seem to be at all commensurate with the size of the problem.

And it’s not just the sheer size of the debt pile that’s worrisome. There’s also the knock-on effects, such as delayed household formation and the attendant downward pressure on the homeownership rate, and of course hyperinflation in the rental market.

Of course one reason no one is panicking – yet – is that the severity of the problem is masked by artificially suppressed delinquency rates. As we’ve documented in excruciating detail, if one excludes loans in deferment and forbearance from the numerator in the delinquency calculation, but includes those loans in the denominator then the delinquency rate will be deceptively low. In any event, as WSJ reports, even if one looks at something very simple like, say, the number of borrowers who haven’t made a payment in a year, the picture is not pretty and it’s getting worse all the time. Here’s more:

Continue reading “7 Million People Haven’t Made A Single Student Loan Payment In At Least A Year”

BREAKING BAD (DEBT) – EPISODE THREE

In Part One of this three part article I laid out the groundwork of how the Federal Reserve is responsible for the excessive level of debt in our society and how it has warped the thinking of the American people, while creating a tremendous level of mal-investment. In Part Two I focused on the Federal Reserve/Federal Government scheme to artificially boost the economy through the issuance of subprime debt to create a false auto boom. In this final episode, I’ll address the disastrous student loan debacle and the dreadful global implications of $200 trillion of debt destroying the lives of citizens around the world.

Getting a PhD in Subprime Debt

“When easy money stopped, buyers couldn’t sell. They couldn’t refinance. First sales slowed, then prices started falling and then the housing bubble burst. Housing prices crashed. We know the rest of the story. We are still mired in the consequences. Can someone please explain to me how what is happening in higher education is any different?This bubble is going to burst.” Mark Cuban

 http://www.nationofchange.org/sites/default/files/StudentLoanDebt070313_0.jpeg

Now we get to the subprimiest of subprime debt – student loans. Student loans are not officially classified as subprime debt, but let’s compare borrowers. A subprime borrower has a FICO score of 660 or below, has defaulted on previous obligations, and has limited ability to meet monthly living expenses. A student loan borrower doesn’t have a credit score because they have no credit, have no job with which to pay back the loan, and have no ability other than the loan proceeds to meet their monthly living expenses. And in today’s job environment, they are more likely to land a waiter job at TGI Fridays than a job in their major. These loans are nothing more than deep subprime loans made to young people who have little chance of every paying them off, with hundreds of billions in losses being borne by the ever shrinking number of working taxpaying Americans.

Student loan debt stood at $660 billion when Obama was sworn into office in 2009. The official reported default rate was 7.9%. Obama and his administration took complete control of the student loan market shortly after his inauguration. They have since handed out a staggering $500 billion of new loans (a 76% increase), and the official reported default rate has soared by 43% to 11.3%. Of course, the true default rate is much higher. The level of mal-investment and utter stupidity is astounding, even for the Federal government. Just some basic unequivocal facts can prove my case.

There were 1.67 million Class of 2014 students who took the SAT. Only 42.6% of those students met the minimum threshold of predicted success in college (a B minus average). That amounts to 711,000 high school seniors intellectually capable of succeeding in college. This level has been consistent for years. So over the last five years only 3.5 million high school seniors should have entered college based on their intellectual ability to succeed. Instead, undergraduate college enrollment stands at 19.5 million. Colleges in the U.S. are admitting approximately 4.5 million more students per year than are capable of earning a degree. This waste of time and money can be laid at the feet of the Federal government. Obama and his minions believe everyone deserves a college degree, even if they aren’t intellectually capable of earning it, because it’s only fair. No teenager left behind, without un-payable debt.

Continue reading “BREAKING BAD (DEBT) – EPISODE THREE”

BREAKING BAD (DEBT) – EPISODE TWO

‘If you’re committed enough, you can make any story work. I once told a woman I was Kevin Costner, and it worked because I believed it’ Saul Goodman – Breaking Bad

“As calamitous as the sub-prime blowup seems, it is only the beginning. The credit bubble spawned abuses throughout the system. Sub-prime lending just happened to be the most egregious of the lot, and thus the first to have the cockroaches scurrying out in plain view. The housing market will collapse. New-home construction will collapse. Consumer pocketbooks will be pinched. The consumer spending binge will be over. The U.S. economy will enter a recession.”Eric Sprott – 2007

In Part One of this article I provided the background of how our current debt saturated economy got to this point of ludicrousness. The “crazy” bloggers, prophets of doom, and analysts who could do basic math were warning of an impending financial crisis in 2006 and 2007, which would be caused by the issuance of hundreds of billions in subprime slime by the Too Big To Trust Wall Street shysters. Subprime mortgages, auto loans, and credit card lines provided the kindling for the 2008 conflagration.

Under normal circumstances we wouldn’t have seen such irrational, reckless, greedy behavior from Wall Street for another generation. But, Wall Street didn’t have to accept the consequences of their actions. They were bailed out and further enriched by their puppets at the Federal Reserve, the lackey politicians they installed in Washington D.C., and on the backs of honest, hard-working, tax paying Americans. The lesson they learned was they could continue to take excessive, reckless, unregulated risks without concern for losses, downside, or consequences.

In reality, the Fed and government have worked in tandem with Wall Street to create the subprime economic recovery. The scheme has been to revive the bailed out auto industry by artificially boosting sales through dodgy, low interest, extended term debt. With the Feds taking over the entire student loan market, they have doled out hundreds of billions to kids who don’t have the educational skills to succeed in college, in order to keep them out of the unemployment calculation.

That’s why you have a 5.7% unemployment rate when 41% of the working age population (102 million people) is not working. The appearance of economic recovery has been much more important to the ruling class than an actual economic recovery for average Americans, because the .1% have made out like bandits anyway. Who has benefited from the $650 billion of student loan and auto debt disseminated by the oligarchs in the last four years, the borrowers or lenders?

Continue reading “BREAKING BAD (DEBT) – EPISODE TWO”

BREAKING BAD (DEBT) – EPISODE ONE

“At this juncture, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.”Fed chairman, Ben Bernanke, Congressional testimony, March, 2007

“Capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.”James Grant, Grant’s Interest Rate Observer

The Federal Reserve issued their fourth quarter Report on Household Debt and Credit last week to the sounds of silence in the mainstream media. There were minor press releases issued by the “professional” financial journalists regurgitating the Federal Reserve’s storyline. Actual analysis, connecting the dots, describing how the massive issuance of student loan and auto loan debt has produced a fake economic recovery, and how the accelerating default rates in auto loans and student loans will produce the next subprime debt implosion, were nowhere to be seen on CNBC, Bloomberg, the WSJ, or any other status quo propaganda media outlet. Their job is not to analyze or seek truth. Their job is to keep their government patrons and Wall Street advertisers happy, while keeping the masses sedated, misinformed, and pliable.

Luckily, the government hasn’t gained complete control over the internet yet, so dozens of truth telling blogs have done a phenomenal job zeroing in on the surge in defaults. The data in the report tells a multitude of tales conflicting with the “official story” sold to the public. The austerity storyline, economic recovery storyline, housing recovery storyline, and strong auto market storyline are all revealed to be fraudulent by the data in the report. Total household debt grew by $117 billion in the fourth quarter and $306 billion for the all of 2014. Non-housing debt in the 4th quarter of 2008, just as the last subprime debt created financial implosion began, was $2.71 trillion. After six years of supposed consumer austerity, total non-housing debt stands at a record $3.15 trillion. This is after hundreds of billions of the $2.71 trillion were written off and foisted upon the backs of taxpayers, by the Wall Street banks and their puppets at the Federal Reserve.

The corporate media talking heads cheer every increase in consumer debt as proof of economic recovery. In reality every increase in consumer debt is just another step towards another far worse economic breakdown. And the reason is simple. Real median household income is still below 1989 levels. The average American family hasn’t seen their income go up in 25 years. What they did see was their chains of debt get unbearably heavy. Non-housing consumer debt (credit card, auto, student loan, other) was $800 billion in 1989.

Continue reading “BREAKING BAD (DEBT) – EPISODE ONE”

SHOULD YOU BELIEVE WHAT THEY TELL YOU OR WHAT YOU SEE?

Sometimes I wish I could just passively accept what my government monarchs and their mainstream media mouthpieces feed me on a daily basis. Why do I have to question everything I’m told? Life would be much simpler and I could concentrate on more important things like the size of Kim Kardashian’s ass, why the Honey Boo Boo show was canceled, the Victoria Secret Fashion Show, whether I’ll get a better deal on Chinese slave labor produced crap on Black Thanksgiving, Black Friday, or Cyber Monday, fantasy football league standings, the latest NFL player to knockout their woman and get reinstated, Obama’s latest racial healing plan, which Clinton or Bush will be our next figurehead president, or the latest fake rape story from Rolling Stone. The willfully ignorant masses, dumbed down by government education, lured into obesity by corporate toxic packaged sludge disguised as food products, manipulated, controlled and molded by an unseen governing class of rich men, and kept docile through never ending corporate media propaganda, are nothing but pawns to the arrogant sociopathic pricks pulling the wires in this corporate fascist empire of debt.

I’m sure my blood pressure would be lower and my mood better if I just accepted everything I was told by my wise, sagacious, Ivy League educated, obscenely wealthy rulers as the unequivocal truth. Why should I doubt these noble, well intentioned, champions of the common folk? They’ve never misled us before. They would never attempt to use two highly publicized deaths as a lever to keep black people and white people fighting each other and not realizing all races are now living in a militarized police surveillance state supported by the one Party. They would never use their complete control over the financial, political, judicial, and media organisms to convince the masses that voting for one of their hand selected red or blue options will ever actually change anything. They would never engineer the overthrow of a democratically elected government, cover up the shooting down of an airliner, and attempt to blame their crimes on the leader of a nuclear power in their efforts to retain a teetering global empire. They would never overthrow or wage economic warfare on countries that don’t toe the line regarding the continued dominance of the petrodollar in global commerce.

Sadly, I’m cursed with a mind that questions everything and trusts no one in authority or associated with the status quo. It’s the reason I don’t read newspapers or watch mainstream media television entertainment propaganda, disguised as news. It’s the reason I will never vote in a national election again. The lesser of two evils is still evil. I’m skeptical of every piece of data fed to the sheep by the government apparatchiks working for the state. The faux journalists being paid millions by one of the six corporations controlling the media and dependent upon the government, Wall Street bankers, and mega-corporations for their advertising revenues regurgitate whatever they are told by those pulling the purse strings. The mainstream media are nothing but propaganda peddlers for the Deep State and truth telling is prohibited in their world of deception, debt, and denial. Their job is to sustain, enhance, and further enrich the status quo by engineering consent through what they report and what they do not report. The true ruling powers who operate in the shadows behind the scenes are men of power, wealth, status and education who truly believe they are better equipped to consciously manage and manipulate the public mind to achieve their ends. They are disciples of the Edward Bernays School of deception, manipulation and propaganda.

“If we understand the mechanism and motives of the group mind, is it not possible to control and regiment the masses according to our will without their knowing about it? The recent practice of propaganda has proved that it is possible, at least up to a certain point and within certain limits.” Edward Bernays

The Nazis were pikers compared to the technologically savvy Madison Avenue maggots and Silicon Valley snakes who mold the opinions, tastes, and beliefs of the iGadget addicted, vapid, unintelligent, unquestioning, zombie-like masses who beseech to be led, told what to do and what to believe. A vast swath of the population don’t read books or even know how to read above a grade school level. They couldn’t write a coherent paragraph if their life depended upon it. But they can twitter, text, Instagram, and facebook at the speed of light. Try walking down any street in an American city without some iGadget distracted oblivious moron bumping into you. The addicting nature of today’s technology is being used by the ruling elite to monitor, control, and make you respond the way they choose.

Facebook, corporate media organizations, quasi-government organizations, and the NSA are creating a corporate totalitarian state where the slaves willingly sacrifice their privacy, liberty and freedom for mindless entertainment and distractions. The 21st Century totalitarian state captures your political beliefs, daily activities, habits, interests, spending behaviors, organizational associations, love life, pictures, psychological makeup, and fears from your own postings on the internet. With the right algorithms they can uncannily predict how you will react to different situations and messaging. They can also uncover threats to the status quo. Under the guise of keeping you safe from terrorists they are actually ferreting out subversives and radicals who refuse to conform to their idea of a good citizen slave. We will all be subject to our own Room 101.

Dan Kaplan in his recent article about Facebook as a tool for totalitarianism lays out the extreme threat to our future:

Today’s totalitarian demands a more subtle way to influence cultural and political sentiment. But if you got your hands on an algorithmically filtered newsfeed? One that could control the stories people see every day and influence their emotions across geographic, political and economic lines? You’d be in business.

But then there was the mood-influence study that scandalized us for a couple of weeks this year. Facebook changed the tone of content showing up in people’s feeds to test the impact it could have on their moods. The results, not too surprisingly, suggested that Facebook has the power to manipulate sentiment at scale.

Given how easy it is to scare people about the scary-seeming-but-actually-low-risk Ebola, and how dumb we all get when we are afraid, it is not crazy to think that under the wrong circumstances — like one or two more mass-scale terrorist attacks on major cities — modern democracy gives way to something akin to 1984.

If Big Brother were to seize the reins of power, sure, he’d use the cable news the way it’s being used today. But Facebook’s data maw, targeting power and sentiment-manipulation capabilities would be far more insidious. Whether this is what we become or not comes down to the future we choose to build.

The saddest part of this episode of mass delusion, mass confusion, and mass media collusion is that even though we are moving towards Orwell’s totalitarian vision of society, thus far, technology, triviality and an unending array of distractions have lured the masses into passive preoccupation with egotistical pleasures. We’ve been persuaded to love our servitude while drowning in a sea of irrelevance, diversions, and trifles. We continue to amuse ourselves to death while forging our own chains of debt and yielding to the direction of an all-powerful welfare warfare surveillance state that promises to protect us from phantom threats while actually abolishing our rights, freedoms, and liberties. No coercion necessary. We have been trained to love our servitude.

“A really efficient totalitarian state would be one in which the all-powerful executive of political bosses and their army of managers control a population of slaves who do not have to be coerced, because they love their servitude.” Aldous Huxley – Brave New World

Arrogance, Desperation, Lies & Truth

 “Facts do not cease to exist because they are ignored.” – Aldous Huxley

The level of data massaging by the government and their co-conspirators on Wall Street and in the corporate media is a futile attempt at a happy ending that will never come to fruition. The intensity and relentlessness with which the state and its quasi-state minions attempt to paint a false picture of economic recovery is equal parts arrogance and desperation. The arrogance is a function of successfully pulling off the greatest heist in world history from 2003 through 2008 with no adverse consequences, no criminal charges, no penalties for their crimes, and more power and wealth than they had prior to 2003. The only way to stop sociopaths is to throw them in jail or kill them. In our dystopian paradise of greed, they were rewarded with trillions in rescue packages by their cohorts in crime at the Federal Reserve and in Congress. They’ve paid themselves billions in bonuses for gorging at the Federal Reserve trough of QE and ZIRP. The desperation is borne from the fact that after $7.5 trillion of debt added by the Federal government and $3.5 trillion of debt created by the Federal Reserve since 2009, the Greater Depression for average Americans deepens by the day.

The men pulling the strings behind the scenes are drunk with power and their hubris allows them to believe their own infallibility and blinds them to the dire consequences for our country when their debt Ponzi scheme fails. But, as we grow ever closer to the day of reckoning, they will use every means at their disposal to paint a positive picture, regardless of the facts and reality for the average person. The examples of twisting, distorting and outright lying about the economic reality of our times are endless. These are some of the major false storylines peddled by our benevolent corporate fascist leaders:

The BLS reported 321,000 jobs added in November and the unemployment rate at 5.8%. Jobs are plentiful, based upon these statistics.

A skeptical critical thinking individual might ask a few questions or point out a few inconvenient facts the government purveyors of propaganda might not want us to ponder:

  • The non-manipulated, non-seasonally adjusted number of jobs in November FELL by 270,000. The BLS added 600,000 jobs as an adjustment to achieve the headline grabbing result.
  • If the jobs market is so good, why is the labor participation rate at a 30 year low of 62.8%?
  • Since 2007 the number of working age Americans has risen by 17 million, while the number of employed has risen by less than 1 million, but the unemployment rate is about the same.
  • Why would almost 14 million working age Americans leave the labor force since 2007 if the economy is booming and jobs plentiful, with 1.2 million leaving in the last 12 months?
  • Why would payroll tax receipts be flat with last year if millions of new jobs have been created?
  • If the country has really added 8 million jobs since 2010, how could real median household income FALL by 2.3%?

According to the government reported figures, the economy hasn’t been this strong since 2007. GDP has supposedly grown at greater than 4% over the last two quarters.

Anyone who is sentient knows consumer spending accounts for 68% of GDP. Capital investments that lead to long term prosperity continue to decline as a percentage of GDP from 20% in 2000 to 16% today. We’ve chosen consumption and financialization over savings and investment. This fact leads to some observations:

  • If GDP has actually grown by 20% since 2008 how does this correlate with a 6.9% decline in real median household income?
  • GDP has been goosed by a $69 billion increase in government spending, with the majority going to the military industrial complex. ISIS has been a godsend for our GDP and arms dealer profits.
  • GDP was increased retroactively by $500 billion last year based on a new way the government accounts for intangibles.
  • The surge in consumer expenditures over the last two quarters has been in the purchase of services. The higher costs for Obamacare are a boon for GDP. Are they a boon for your bank account?
  • The trade deficit has fallen as exports of petroleum products have temporarily provided a boost to GDP. The collapse in oil prices will reverse that trend rapidly.

According to the quasi-governmental mouthpieces at the Conference Board, consumer confidence is near a 5 year high, reflecting what should be robust spending.

So we are told by the representatives of corporatism that we are confident about the economy and the future. How does that measure up to the facts on the ground:

  • Black Friday weekend sales collapsed by 11% versus the previous year. As the pundits tried to blame it on on-line sales (10% of total retail sales), Cyber Monday also proved to be a dud.
  • If the average person is confident about the future and happy with their economic circumstances, why did they just vote to throw out the bums in November?
  • If consumers are confident, why have real retail sales, excluding subprime debt goosed auto sales, been flat for the last three months and up only 1% in the last year?
  • If consumers are so confident, why are credit card balances still $138 billion BELOW where they were in 2008? If all these new jobs are being created why is credit card debt lower than it was in mid-2010? Maybe consumers are so desperate they are using credit cards to pay utility and tax bills and not using them for frivolous Chinese crap at big box retailers.
  • The increased spending at grocery stores and restaurants is driven by food inflation, not foot traffic. Discretionary spending at furniture, electronics, and sporting goods stores is flat.
  • Department store sales continue to fall. Sears and JC Penney teeter on the verge of bankruptcy. Delia’s is liquidating and Radio Shack isn’t far behind. The major chains have completely stopped building new stores. The great bricks and mortar unwind relentlessly plods forward. In addition, online growth is stalling as states implement sales taxes.

According to the government, the deficit was ONLY $483 billion in 2014.

This is a real doozy. Obama has been touting how he has cut the deficit through his wise management of the budget. This is where government accounting is used by apparatchiks to mislead the public and obscure the truth. A few pertinent facts are always left out by the politicians touting deficit reduction:

  • Because of the budget impasse in 2013, the Federal government stopped updating the national debt on a daily basis, but we know from when they started counting again, the debt went up by $2.3 billion per day. Therefore, the national debt on October 1, 2013 was approximately $17.038 trillion. On October 1, 2014 the national debt was $17.875. Therefore, the national debt went up by $837 billion in 2014. Just a smidge higher than the reported deficit of $483 billion.
  • Interest is not paid on reported deficits. It’s paid on the national debt, so the massaged, manipulated and made over deficit is meaningless. The national debt was always slightly higher than reported deficits, but in the last few years the deviation has grown to a Grand Canyon size.
  • The deficit number has been artificially lowered by nothing other than accounting entry hocus pocus. The Federal Reserve increasing its balance sheet to $4 trillion out of thin air creates approximately $80 billion of phantom interest profits that are paid to the Treasury. Why don’t they increase their balance sheet to $40 trillion and eliminate deficits all together?
  • The biggest accounting scam is Fannie and Freddie. Just as the Wall Street banks have created fake profits through accounting entries regarding future losses, Fannie and Freddie have gone the extra mile in helping fake deficit reduction. These bloated insolvent government run pigs required a $187 billion taxpayer bailout in 2009. Amazingly, when you allow criminals to value their assets at whatever they choose, phantom profits flow like honey.
  • These two horribly run institutions of fraud “generated profits” of $129 billion in 2014 which were “paid back” to the Treasury. That is four times more than Apple or Exxon’s profits during a non-existent housing recovery. Why are their stocks trading at just over $2 per share if they are generating vastly more profits than they were in 2007 when their stocks were north of $70 per share? It’s because the profits are fake. Everyone knows it, but the Federal Deficit is reported $129 billion lower because these insolvent entities pretended to pay the taxpayer back. Accounting entries do not reduce deficits. Spending less than you generate in revenues reduces deficits.

According to the government, we’ve experienced a strong housing recovery since 2010.

The supposed housing recovery storyline continues to be beaten like a dead horse by the Wall Street media (CNBC) and the shills at the NAR. Anyone with a functioning brain (eliminates CNBC bimbos, hacks, and Ivy League economists) can see there has been no real housing recovery:

  • The 24% rise in home prices (Case Shiller Index) since the 2012 low has been nothing more than a Wall Street hedge fund/Federal Reserve scheme to elevate prices and make Wall Street bank balance sheets less insolvent. Wall Street banks withholding foreclosures from the market while Wall Street hedge funds (Blackstone) use free money from the Fed to buy up housing and rent it out to former homeowners has enriched the .1% while destroying the dream of home ownership for millions.
  • The percent of first time home buyers remains near record lows, while speculators, flippers, hedge fund managers, and rich Chinese businessmen make up a record number of purchasers. The fact this is a fake housing recovery is proven by mortgage applications to purchase a home sitting at 1995 levels and 30% below 2009 recession lows. Maybe the fact real median household income is also at 1995 levels, real wages keep declining, and labor force participation is at 1978 levels has something to do with real people not being able to purchase a home.

  • Even with the artificial hedge fund demand, existing home sales are lower than 2013 and languishing at 1999 levels. They are still 25% below 2005 levels, despite the lowest mortgage rates in history. New home sales are a disaster, with no appreciable increase in two years. Apartment construction has far outpaced single family housing construction. After a five year housing recovery, new home sales languish at levels seen at the bottom of our last six recessions. New home sales are 65% below the 2005 peak and at levels seen in the early 1960’s when there were 130 million less people living in the country.

According to the corporate media, the auto market is hitting on all cylinders with annual sales of 16.4 million, the highest since 2006.

Pretending to sell automobiles to people without the means to pay you for the automobile is always a good business idea. Of course, when you have Ally Financial and the rest of the Wall Street banking cabal doling out 7 year 0% loans and subprime auto loans like candy, it’s easy to move inventory. The temporary boost to GDP by issuing more bad debt always works out in the long run. Right?

  • If the auto business is booming why have GM profits fallen from $9.2 billion in 2011 to $5.4 billion in 2013, and on course to fall to $4 billion in 2014? Record levels of channel stuffing produces sales gains, but no profits. Why is their stock 25% below its 52 week high and lower than it was in 2010 when it was IPO’d after being rescued by Obama?
  • If the auto business is booming why are Ford’s profits falling by 35% versus last year and lower than they were in 2010? Why is their stock price 16% below its 52 week high and still 20% below its 2010 price?
  • Auto loan debt is at an all-time high of $950 billion, up 33% since 2010 when the Fed, Wall Street, and the political class in the fetid D.C. swamp decided they needed new debt bubbles in auto loans and student loans to jump start our moribund economy.
  • There are 65 million auto loans outstanding, and the average debt now stands at $17,352. Over 30% of auto “sales” are actually leases. The rest are financed over an average of 65 months. Virtually all new car sales are nothing more than 3 to 7 year rentals. It’s amazing what easy money from the Fed can produce.
  • Over 31% of all new auto loans this year were to subprime borrowers. They now account for 36.5% of all outstanding auto loans. You become a subprime borrower by defaulting on previous debt obligations. In a shocking development, auto loan delinquencies surged by 13% in the last quarter, with subprime loan delinquencies skyrocketing by 18%. When has issuing billions of debt to subprime borrowers ever caused problems before?
  • Only a University of Phoenix African Studies major is more of a subprime risk than the millions of ecstatic Escalade drivers cruising around our urban ghetto paradises. The average student loan debt is now $33,000. Until the Obama administration went Keynesian, student loan debt was primarily in the private sector. When Obama entered the White House total student loan debt was $620 billion and delinquencies totaled $50 billion. There are now $1.3 trillion of student loans outstanding, with the Federal government accounting for $830 billion and guaranteeing a large portion of the rest. Delinquencies have skyrocketed to $125 billion, as another taxpayer bailout beckons.

According to the corporate mainstream media pundits, the plunge in oil prices from $100 per barrel to $61 per barrel is unequivocally good for the economy. The shale oil boom has worked its magic and happy times are here again.

Sometimes you have to wonder whether the highly educated spokesmodels on the corporate mainstream media are really as vacuous and clueless as they appear or whether they are just paid to look pretty and mouth the corporate line. They seem incapable of comprehending the unintended consequences of various events. The collapse in oil prices is one of those events.

  • There is no doubt that lower oil prices will lower the price of gas for the average American. Estimates say they will save $368 per year, which can be spent elsewhere. The highly paid shill economists who declare this will boost spending seem to be math challenged. Retail sales figures include gas stations. What isn’t spent there will be spent in another category, most likely healthcare or groceries as prices in both areas continue to escalate. It’s a zero sum game. No new spending will occur.
  • The worldwide supply of oil has only increased marginally over the last few years. The U.S. shale boom has been offset by declines elsewhere (Libya, Iran, Mexico). The reason for the collapse is the same reason for the 2009 collapse – worldwide demand is contracting. Europe is in a depression. Japan is in a depression. Russia’s economy is contracting. China is decelerating rapidly. The U.S. demand is flat. The implications of another global recession after five years of central banks printing trillions of fiat currency are alarming to say the least.
  • The cost to extract shale oil and transport it to a refinery capable of processing it is high. Honest analysts will tell you that a price of $70 to $80 is required to breakeven. Most companies don’t build breakeven into their plans. Bakken shale oil sells at a discount of about $14 per barrel due to the difficulty of extraction, transport, and processing. It is now selling for $47 per barrel. The number of permits for new rigs fell by 40% in November when oil was still selling for $75 per barrel. Do you think permits for new wells will fall at a price of $61 per barrel? Capital spending by the energy industry accounted for 33% of all capital spending in the last few years. I’m sure some other industry will pick up the slack. Right?
  • It seems the shale oil boom has resulted in a few jobs being created since the 2010 recession trough. In fact the states where fracking is prevalent have accounted for all the job growth in the nation. I wonder if a shale oil bust will have any employment implications. There are 9.3 million jobs related to the energy industry across the country. The plunge in oil prices created by Saudi Arabia in the 1980s created a depression in Texas which contributed to the S&L crisis. This plunge will reveal who has been swimming naked in the high yield bond market and derivatives market.

These are just a few examples among a multitude of lies. Others include: stocks aren’t overvalued, gold isn’t money, inflation is good for you, and ISIS terrorists are an imminent threat to your way of life. Every feel good story fed to the masses by the oligarchs running this shitshow we call America is no different than the propaganda doled out by other infamous totalitarian regimes throughout history. We believe things because we’ve been conditioned to believe them. The crony capitalist oligarchs are intelligent enough to invent theories to explain how the world should work, but not intelligent enough to interpret their models correctly. When they act on their theories (Keynesianism), their actions appear to be those of a lunatic. Despite all evidence refuting their theories, their arrogance and hubris lead them to destruction. The collective insanity of this world is almost too much for a rational thinking person to grasp. The extremely wealthy men operating in the shadows will use every means at their disposal to retain power, enhance their wealth, and crush dissent.

“Being a card carrying member of the privileged class means never having to say I’m sorry, much less ‘not guilty.’  Power is doing what you want when you want, and consequences are for everyone else. Or perhaps these titans of modern industry and the halls of power are at heart just good natured bumblers, who in a genuine belief destroy lives and crash economies, while pursuing insane ideological assumption put forward by vested interests, all the while stuffing their pockets, and crushing all dissent with the political skills of a Machiavelli and the ruthlessness of Al Capone.” – Jesse

The two party system is nothing but a ruse designed to keep the people believing they have a say in how things are run in this country. Both parties support the military industrial complex. Both parties support the militarization of police forces around the country. Both parties support the mass surveillance of its citizens. Both parties do the bidding of their rich corporate and special interest benefactors. Both parties favor deficit spending for eternity. Both parties believe the government should expand its role in our everyday lives. Both parties do the bidding for and protect the Wall Street interests who really run this country. No more proof is needed than what has occurred over the last five years, as criminal Wall Street bankers were rewarded for their malfeasance with trillions of dollars from taxpayers and their puppets at the Federal Reserve. While we were allowing ourselves to be distracted, amused, entertained, and indebted, the oligarchs were busy conducting a silent coup.

“Let’s be clear about this, the oligarchs are flush with victory, and feel that they are firmly in control, able to subvert and direct any popular movement to the support of their own fascist ends and unslakable will to power.

This is the contempt in which they hold the majority of American people and the political process: the common people are easily led fools, and everyone else who is smart enough to know better has their price. And they would beggar every middle class voter in the US before they will voluntarily give up one dime of their ill-gotten gains.

But my model says that the oligarchs will continue to press their advantages, being flushed with victory, until they provoke a strong reaction that frightens everyone, like a wake-up call, and the tide then turns to genuine reform.” – Simon Johnson

The oligarchs have had a good run. The system cannot be reformed from within. The corruption runs too deep. The system is broken and can’t be fixed. There is no doubt in my mind that a collapse approaches which will make 2008/2009 look like a walk in the park. The anger, blame and retribution will sweep away the existing social order and replace it with something new. It will be up to the people to decide what happens next. We were warned two centuries ago by a wise man. Hopefully, we’ll get a 2nd chance.

“However political parties may now and then answer popular ends, they are likely in the course of time and things, to become potent engines, by which cunning, ambitious, and unprincipled men will be enabled to subvert the power of the people and to usurp for themselves the reins of government, destroying afterwards the very engines which have lifted them to unjust dominion.” George Washington

 

AVAILABLE

“Facts do not cease to exist because they are ignored.” – Aldous Huxley

 

 

Six months ago I wrote an article called Are You Seeing What I’m Seeing?, describing my observations while traveling along Ridge Pike in Montgomery County, PA and motoring to my local Lowes store on a Saturday. My observations were in conflict with the storyline portrayed by the mainstream media pundits, Ivy League PhD economists, Washington politicians, and Wall Street shills. It is clear now that I must have been wrong. No more proof is needed than the fact the Dow has gone up 1,500 points, or 11%, since I wrote the article. Everyone knows the stock market reflects the true health of the nation – multi-millionaire Jim Cramer and his millionaire CNBC talking head cohorts tell me so. Ignore the fact that the bottom 80% only own 5% of the financial assets in this country and are not benefitted by the stock market in any way.

The mainstream corporate media that is dominated by six mega-corporations (Time Warner, Disney, Murdoch’s News Corporation, Comcast, Viacom, and Bertelsmann), has one purpose as described by the master of propaganda – Edward Bernays:

“The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. …We are governed, our minds are molded, our tastes formed, our ideas suggested, largely by men we have never heard of. This is a logical result of the way in which our democratic society is organized. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. …In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons…who understand the mental processes and social patterns of the masses. It is they who pull the wires which control the public mind.

These media corporations’ task is to use propaganda and misinformation to protect the interests of the status quo. The ruling class has the power to manipulate public opinion, obscure the truth, alter government data, and outright lie, but they can’t control the facts and reality smacking the average person in the face every day. Based on the performance of the stock market and the storyline of economic recovery being peddled by the corporate media, the facts must surely support their contention. Here are a few facts about what has really happened in the last six months since I wrote my article:

  • The working age population has grown by 1.1 million, the number of employed Americans is up 500k, while the number of people who have left the labor force has gone up by 600k. The BLS reports the unemployment rate has fallen without blinking an eye or turning red with embarrassment.
  • The number of Americans entering the Food Stamp Program in the last six months totaled 1 million, bringing the total to 47.8 million, or 20% of all households (up 15 million since the Obama economic recovery began in December 2009).
  • Existing home sales have increased by a scintillating 2.9% on a seasonally adjusted annual basis and average prices have fallen by 6% in the last six months. It is surely a great sign that 32% of all home sales are to Wall Street investors and 25% are either foreclosure sales or short sales. A large percentage of the remaining sales are funded by 3% down FHA government backed loans.
  • There were 31,000 new homes sales in January versus 34,000 new home sales six months prior. Through the magic of seasonal adjustment, this translates into a 15% increase.
  • Single family housing starts were 41,600 in February versus 51,400 six months prior. Even using seasonal adjustments, the government drones can only report a pathetic 4.7% annualized increase and flat starts over the last three months, with mortgage rates at all-time lows.
  • The National Debt has gone up by $750 billion in the last six months, while Real GDP has gone up by less than $150 billion.
  • Real hourly earnings have not increased in the last six months.
  • Consumer debt has risen by $65 billion as the Federal Government has doled out student loans like candy and auto loans (through the 80% government owned Ally Financial – aka GMAC, aka Ditech, aka ResCap) like crack dealer in West Philly.
  • The Federal Reserve has increased their balance sheet by $385 billion in the last six months by buying toxic mortgages from Wall Street banks and the majority of Treasuries issued by the government to fund the $1 trillion annual deficits being produced by the Obama administration. It now totals $3.2 trillion, up from $900 billion in September 2008, and headed to $4 trillion before this year is out.
  • Retail sales have increased by less than 2% over the last six months and are barely 1% above last February. On an inflation adjusted basis, retail sales are falling. Other than internet sales and government financed auto sales, every other retail category is negative year over year. This is reflected in the poor sales and earnings reports from JC Penney, Sears, Best Buy, Wal-Mart, Target, Lowes, Kohl’s, Darden, McDonalds, and Yum Brands. I’m sure next quarter will be gangbusters, with the Obama payroll tax increase, Obamacare premium increases, 15% surge in gasoline prices, and continued inflation in food and energy.

Considering that 71% of GDP is dependent upon consumer spending (versus 62% in 1979 before the financialization of America), the dreadful results of retailers and restaurants even before the Obama tax increases confirms the country has been in recession since the second half of 2012. In 1979 the economy was still driven by domestic investment that accounted for 19% of GDP. Today, it wallows at all-time lows of 13%. In addition, our trade deficits, driven by debt fueled consumption, subtract 3.5% from GDP. These facts are reflected in the depressed outlook of small business owners who are the backbone of growth, hiring and entrepreneurship in this country. Small businesses of 500 employees or less employ half of all the private industry workers in the country and account for 65% of all new jobs created. There are approximately 27 million small businesses versus 18,000 large businesses. The chart below does not paint an improving picture. The small business optimism has dropped from an already low 92.8 in September 2012 to 90.8 in March 2013.

Small business optimism report for March 2013

The head of the NFIB couldn’t make the situation any clearer:

While the Fortune 500 is enjoying record high earnings, Main Street earnings remain depressed. Far more firms report sales down quarter over quarter than up. Washington is manufacturing one crisis after another—the debt ceiling, the fiscal cliff and the Sequester. Spreading fear and instability are certainly not a strategy to encourage investment and entrepreneurship. Three-quarters of small-business owners think that business conditions will be the same or worse in six months. Until owners’ forecast for the economy improves substantially, there will be little boost to hiring and spending from the small business half of the economy. NFIB chief economist Bill Dunkelberg

If consumers, who account for 71% of the economy, aren’t spending, and small business owners, who do 65% of all the hiring in the country, are petrified with insecurity, why is the stock market hitting all-time highs and the corporate media proclaiming happy days are here again? It can be explained by the distribution of wealth and income in this country. Every media pundit, politician, Wall Street shill, Ivy League PhD economist, and corporate titan you see on CNBC, Fox or any corporate media outlet is a 1%er or better. The chart below shows the bottom 99% saw their real incomes decline between 2009 and 2011, while the top 1% reaped the stock market gains and corporate bonuses for using “creative” accounting to generate record corporate profits. The trend in 2012 through today has only widened this gap, as real worker wages have continued to decline and the stock market has advanced another 20%.

The feudal financial industry lords are feasting on caviar and champagne in their mountaintop manors while the serfs and peasants scrounge in the gutters for scraps and morsels. This path has been chosen by the king (Obama) and enabled by his court jester (Bernanke). Money printing and inflation are their weapons of choice. We are living in a 21st Century version of the Dark Ages.

On the Road Again

I’ve been baffled by a visible disconnect between deteriorating data and the storyline being sold to the ignorant masses by the financial elitists that run the show. The websites and truthful analysts that I respect and trust (Zero Hedge, Mish, Jesse, Karl Denninger, John Hussman, David Stockman, Financial Sense and a few others) provide analytical evidence on a daily basis that confirm my view that our economic situation is worsening. We are all looking at the same data, but the pliable faux journalists that toil for their corporate masters spin the data in a manner designed to mislead and manipulate in order to mold public opinion, as Edward Bernays taught the invisible ruling class. As you can see, numbers and statistical data can be spun, adjusted, and manipulated to tell whatever story you want to depict. I prefer to confirm or deny my assessment with my observations out in the real world. I spend 12 hours per week cruising the highways and byways of Montgomery County and Philadelphia as I commute to and from work and shuttle my kids to guitar lessons, friends’ houses, and local malls. I can’t help but have my antenna attuned to what I’m seeing with my own eyes.

As I detailed in my previous article, Montgomery County is relatively affluent area with the dangerous urban enclaves of Norristown and Pottstown as the only blighted low income, high crime areas in the 500 square mile county of 800,000 people. The median household income and median home prices are 50% above the national averages. Major industries include healthcare, pharmaceuticals, insurance and information technology. It is one of only 30 counties in the country with a AAA rating from Standard & Poors (as if that means anything). On paper, my county appears to be thriving and healthy, with white collar professionals living an idyllic suburban existence. One small problem – the visual evidence as you travel along Welsh Road towards Montgomeryville or Germantown Pike towards Plymouth Meeting reveals a decaying infrastructure, dying retail meccas, and miles of empty office complexes.

I don’t think my general observations as I drive around Montgomery County are colored by any predisposition towards negativity. I see a gray winter like pallor has settled upon the land. I see termite pocked wooden fences with broken and missing slats. I see sagging porches. I see leaky roofs with missing tiles. I see vacant dilapidated hovels. I see mold tainted deteriorating siding on occupied houses. I see weed infested overgrown yards. I see collapsing barns and crumbling farm silos. I see houses and office buildings that haven’t been painted in 20 years. I see clock towers in strip malls with the wrong time. I see shuttered gas stations. I see retail stores with lights out in their signs. I see trees which fell during Hurricane Sandy five months ago still sitting in yards untouched. I see potholes not being filled. I see disintegrating highway overpasses and bridges. I constantly see emergency repairs on burst water mains. I see malfunctioning stoplights. I see fading traffic signage. I see regional malls with rust stained walls beneath their massive unlit Macys, JC Penney and Sears logos. I see hundreds of Space Available, For Lease, For Rent, Vacancy, For Sale and Store Closing signs dotting the suburban landscape. These sights are in a relatively affluent suburban county. When I reach West Philly, it looks more like Dresden in 1945.

                      Dresden – 1945                                                     Philadelphia – 2013

 

I moved to my community in 1995 when the economy was plodding along at a 2.5% growth rate. The housing market was still depressed from the early 90s recession. The retail strip centers and larger malls in my area were 100% occupied. Office parks were bustling with activity. Office vacancy rates were the lowest in twenty years during the late 1990s. National GDP has grown by 112% (only 50% after adjusting for inflation) since 1995, with personal consumption rising 122%. Domestic investment has only grown by 80%, but imports skyrocketed by 204%. If the economy has more than doubled in the last 18 years, how could retail strip centers in my affluent community have 40% to 70% vacancy rates and office parks sit vacant for years? The answer is that Real GDP has not even advanced by 50%. Using a true rate of inflation, not the bastardized, manipulated, tortured BLS version, shows the country has essentially been in contraction since the year 2000.

The official government sanctioned data does not match what I see on the ground, but the Shadowstats version of the data explains it perfectly.

My observations also don’t match up with the data reported by the likes of Reis, Trepp, Moody’s and the Federal Reserve. Reis reports a national vacancy rate of 17.1% for offices, barely below its peak of 17.6% in late 2010. Vacancy rates are 35% above 2007 levels and more than double the rates in the late 1990s. But what I realized after digging into the methodology of these reported figures is the true rates are significantly higher. First you must understand that Reis and Trepp are real estate companies who are in business to make money from commercial real estate transactions. It is in their self -interest to report data in the most positive manner possible – they’ve learned the lessons of Bernays. These mouthpieces for their industry slice and dice the numbers according to major markets, minor markets, suburban versus major cities, and most importantly they only measure Class A office space.

I didn’t realize the distinctions between classes when it comes to office space. The Building Owners and Managers Association describes the classes:

Class A office buildings have the “most prestigious buildings competing for premier office users with rents above average for the area.” Class A facilities have “high quality standard finishes, state of the art systems, exceptional accessibility and a definite market presence.” Class B office buildings as those that compete “for a wide range of users with rents in the average range for the area.” Class B buildings have “adequate systems” and finishes that “are fair to good for the area,” but that the buildings do not compete with Class A buildings for the same prices. Class C buildings are aimed towards “tenants requiring functional space at rents below the average for the area.”

So we have landlords self-reporting Class A vacancy rates in big markets to a real estate company that reports them without verification. Is it in a landlord’s best interest to under-report their vacancy rate? You bet it is. If potential tenants knew the true vacancy rates, they would be able to negotiate much lower rents. There is a beautiful Class A 77,000 square foot building near my house that was built in 2004. Nine years later there is still a huge Space Available sign in front of the building and it appears at least 50% vacant.

I pass another Class A property on Welsh Road called the Gwynedd Corporate Center that consists of three 40,000 square foot buildings in a 13 acre office park. It was built in 1998 and is completely dark. The vacancy rate is 100%. As I traveled down Germantown Pike last week I noted dozens of Class A office complexes with Space Available signs in front. I’m absolutely certain that vacancy rates in Class A offices in Montgomery County exceed 25%. When you expand your horizon to Class B and Class C office space, vacancy rates exceed 50%. The only booming business in my suburban paradise is Space Available sign manufacturing. We probably import those from China too. Despite the spin put on the data by the real estate industry, Moody’s reported data supports my estimates:

  • The values of suburban offices in non-major markets are 43% below 2007 levels.
  • Industrial property values in non-major markets are 28% below 2007 levels.
  • Retail property values in non-major markets are 35% below 2007 levels.

The data being reported by Reis regarding vacancies in strip malls and regional malls is also highly questionable, based on my real world observations. The reported vacancy rates of 8.6% for regional malls and 10.7% for strip malls, barely below their 2011 peaks, are laughable. Again, there is no benefit for a landlord to report their true vacancy rate. The truth will depress rents further. This data is gathered by surveying developers and landlords. We all know how reputable and above board real estate professionals are – aka David Lereah, Larry Yun. A large strip mall near my house has a 70% vacancy rate, with another, one mile away, with a 50% vacancy rate. Anyone with two eyes and functioning brain that has visited a mall or driven past a strip mall knows that vacancy rates are at least 15%, the highest in U.S. history. These statistics don’t even capture the small pizza joints, craft shops, antique outlets, candy stores, book stores, gas stations and myriad of other family run small businesses that have been forced to close up shop in the last five years.

The disconnect between reality, the data reported by the mouthpieces of the status quo, and financial markets is as wide as the Grand Canyon. Even the purveyors of false data can’t get their stories straight. Trepp has been reporting steadily declining commercial delinquency rates since July 2012, when they had reached 10.34%, the highest level since the early 1990s. The decline is being driven solely by apartment complexes and hotels. Industrial and retail delinquencies continue to rise and office delinquencies are flat over the last three months. Again, the definition of delinquent is in the eye of the beholder.

The quarterly delinquency rates on commercial loans reported by the Federal Reserve is less than half the rate being reported by Trepp, at 4.13%. Bennie and his band of Ivy League MBA economists have reported 10 consecutive quarters of declining commercial loan delinquency rates. This is in direct contrast to the data reported by Trepp that showed delinquencies rising during 2012.

Real estate loans

All

Booked in domestic    offices

Residential 1

Commercial 2

Farmland

2012:4

7.57

10.07

4.13

2.67

2011:4

8.48

10.34

6.11

3.26

2010:4

9.12

10.23

7.96

3.59

2009:4

9.59

10.54

8.73

3.42

2008:4

6.04

6.67

5.49

2.28

2007:4

2.91

3.08

2.75

1.51

2006:4

1.70

1.95

1.32

1.41

The data being reported doesn’t pass the smell test. Commercial vacancy rates are at or above the levels seen during the last Wall Street created real estate crisis in the early 1990’s. During 1991/1992 commercial loan delinquency rates ranged between 10% and 12%. Today, with the same or higher levels of vacancy, the Federal Reserve reports 4% delinquency rates. When the latest Wall Street created financial collapse struck in 2008 and commercial property values crashed while vacancy rates soared, there were dire predictions of huge loan losses between 2010 and 2012. Commercial real estate loans generally rollover every 5 to 7 years. The massive issuance of dodgy subprime commercial loans between 2005 and 2007 would come due between 2010 and 2012. But miraculously delinquency rates have supposedly plunged from 8.78% in mid-2010 to 4.13% today. The Federal Reserve decided in 2009 to look the other way when assessing whether a real estate loan would ever be repaid. A loan isn’t considered delinquent if the lender decides it isn’t delinquent. The can’t miss strategy of extend, pretend and pray was implemented across the country as mandated by the Federal Reserve. This pushed out the surge in loan maturities to 2014 – 2016.

In an economic system that rewarded good choices and punished those who took ridiculous undue risks and lost, real estate developers, mall owners, and office landlords would be going bankrupt in large numbers and loan losses for Wall Street Too Stupid to Succeed banks would be in the billions. Developers took out loans in the mid-2000’s which were due to be refinanced in 2012. The property is worth 35% less and the rental income with a 20% vacancy rate isn’t enough to cover the interest payments on the loan. The borrower would have no option but to come up with 35% more cash and accept a higher interest rate because the risk of default had risen, or default. Instead, the lenders have pretended the value of the property hasn’t declined and they’ve extended the term of the loan at a lower interest rate. This was done on the instructions of the Federal Reserve, their regulator. The plan is dependent on an improvement in the office and retail markets. It seems the best laid plans of corrupt sycophant central bankers are going to fail.

Eyes Wide Open

There are 1,300 regional malls in this country, with most anchored by a JC Penney, Sears, Barnes & Noble, or Best Buy. The combination of declining real household income, aging population, lackluster employment growth, rising energy, food and healthcare costs, mounting tax burdens, and escalating on-line purchasing will result in the creation of 200 or more ghost malls over the next five years. The closure of thousands of big box stores is baked in the cake. The American people have run out of money. They have no equity left in their houses to tap. The average worker has only $25,000 of retirement savings and they are taking loans against it to make the mortgage payment and put food on the table. They can’t afford to perform normal maintenance on their property and are one emergency away from bankruptcy. In a true cycle of doom, most of the jobs “created” since 2009 are low skill retail jobs with little or no benefits. As storefronts go dark and more “Available” signs are erected in front of these weed infested eyesores, more Americans will lose their jobs and be unable to do their 71% part in our economic Ponzi scheme.

The reason office buildings across the land sit vacant, with mold and mildew silently working its magic behind the walls and under the carpets, is because small businesses are closing up shop and only a crazy person would attempt to start a new business in this warped economic environment of debt dependent diminishing returns. The 27 million small businesses in the country are fighting a losing battle against overbearing government regulations, increasingly heavy tax burdens, operating cost inflation, Obamacare mandates, a low skill poorly educated workforce, and customers with diminishing resources and declining disposable income. Small business owners are not optimistic about the future because they don’t have a sugar daddy like Bernanke to provide them with free money and a promise to bail them out if their high risk investments go bad. With small businesses accounting for 65% of all new hiring in this country and looming healthcare taxes, mandates, regulations and penalties approaching like a freight train, there is absolutely zero probability that office buildings will be filling up with new employees in the next few years. With hundreds of billions in commercial real estate loans coming due over the next three years, over 60% of the loans in the office and retail category, vacancy rates at record levels, and property values still 30% to 40% below the original loan values, a rendezvous with reality awaits. How long can bankers pretend to be paid on loans by developers who pretend they are collecting rent from non-existent tenants who are selling goods to non-existent customers? The implosion in the commercial real estate market will also blow a gaping hole in the Federal Reserve balance sheet, which is leveraged 55 to 1.

federal reserve balance sheet

I regularly drive along Schoolhouse Road in Souderton. It is a winding country road with dozens of small manufacturing, warehousing, IT, aerospace, auto repair, bus transportation, retail and landscaping businesses operating and trying to scratch out a small profit. Most of these businesses have been operating for decades. I would estimate that most have annual revenue of less than $2 million and less than 100 employees. It is visibly evident they have not been thriving, as their facilities are looking increasingly worn down and in disrepair. Their access to credit has been reduced since the 2008 crisis, as only the Wall Street banks and mega-corporations with Washington lobbyists received Bennie Bucks and Obama stimulus pork. These small businesses have been operating on razor thin margins and unable to invest in their existing facilities or expand their businesses. The tax increases just foisted upon small business owners and their employees, along with Obamacare mandates which will drive healthcare costs dramatically higher, and waning demand due to lack of income, will surely push some of these businesses over the edge. There will be some harsh lessons learned on Schoolhouse Road over the next few years. I expect to see more of these signs along Schoolhouse Road and thousands of other roads in the next few years.

The mainstream media pawns, posing as journalists, have not only gotten the facts wrong regarding the current situation, but their myopia extends into the near future. The perpetual optimists that always see a pot of gold at the end of the rainbow are either willfully ignorant or a product of our government run public education system and can’t perform basic mathematical computations. As pointed out previously, consumer spending drives 71% of our economy. As would be expected, the highest level of annual spending occurs between the ages of 35 to 54 years old when people are in their peak earnings years. Young people are already burdened with $1 trillion of government peddled student loan debt and are defaulting at a 20% rate because there are no decent jobs available. Millions of Boomers are saddled with underwater mortgages, prodigious levels of credit card and auto loan debt, with retirement savings of $25,000 or less. Anyone expecting the young or old to ramp up spending over the next decade must be a CNBC pundit, University of Phoenix MBA graduate or Ivy League trained economist.

There will be 10,000 Boomers per day turning 65 years old for the next 18 years. Consumers in the 65-74 age segment spend 28% less on average than during their peak years. It is estimated that between 2010 and 2020 there will be approximately 14.5 million more consumers aged 65 or older. The number of Americans in their peak spending years will crash over the next decade. This surely bodes well for our suburban sprawl, mall based, cheap energy dependent, debt fueled society. Do you think this will lead to a revival in retail and office commercial real estate?

We’ve got $1 trillion annual deficits locked in for the next decade. We’ve got total credit market debt at 350% of GDP. We’ve got true unemployment exceeding 20%. We’ve had declining real wages for thirty years and no change in that trend. We’ve got an aging, savings poor, debt rich, obese, materialistic, iGadget distracted, proudly ignorant, delusional populace that prefer lies to truth and fantasy to reality. We’ve got 20% of households on food stamps. We’ve got food pantries, thrift stores and payday loan companies doing a booming business. We’ve got millions of people occupying underwater McMansions in picturesque suburban paradises that can’t make their mortgage payments or pay their utility bills, awaiting their imminent eviction notice from one of the Wall Street banks that created this societal catastrophe.

We’ve got a government further enslaving the middle class in student loan debt with the false hope of new jobs that aren’t being created. We’ve got a shadowy unaccountable organization, owned and controlled by the biggest banks in the world, that has run a Ponzi scheme called a fractional reserve lending system for 100 years, and inflated away 96% of the purchasing power of the U.S. dollar. We’ve got a self-proclaimed Ivy League academic expert on the Great Depression (created by the Federal Reserve) who has tripled the Federal Reserve balance sheet on his way to quadrupling it by year end, who has promised QE to eternity with the sole purpose of enriching his benefactors while impoverishing senior citizens and the middle class. He will ultimately be credited in history books as the creator of the Greater Depression that destroyed the worldwide financial system and resulted in death, destruction, chaos, starvation, mayhem and ultimately war on a grand scale. But in the meantime, he serves the purposes of the financial ruling class as a useful idiot and will continue to spew gibberish and propaganda to obscure their true agenda.

It is time to open your eyes and arise from your stupor. Observe what is happening around you. Look closely. Does the storyline match what you see in your ever day reality? It is them versus us. Whether you call them the invisible government, ruling class, financial overlords, oligarchs, the powers that be, ruling elite, or owners; there are powerful wealthy men who call the shots in this global criminal enterprise. Their names are Dimon, Corzine, Blankfein, Murdoch, Buffett, Soros, Bernanke, Obama, Romney, Bloomberg, Fink, among others. They are using every means at their disposal to retain their control and power over the worldwide economic system and gorge themselves like hyenas upon the carcasses of a crippled and dying middle class. They have nothing but contempt and scorn for the peasants. They’re your owners and consider you as their slaves. They don’t care about you. They think the commoners are unworthy to be in their presence. Time is growing short for these psychopathic criminals. No amount of propaganda can cover up the physical, economic, social, and psychological descent afflicting our world. There’s a bad moon rising and trouble is on the way. The time for hard choices is coming. The words of Edward Bernays represent the view of the ruling class, while the words of George Carlin represent the view of the working class.

“There’s a reason that education sucks, and it’s the same reason it will never ever be fixed. It’s never going to get any better, don’t look for it. Be happy with what you’ve got. Because the owners of this country don’t want that. I’m talking about the real owners now, the big, wealthy, business interests that control all things and make the big decisions. Forget the politicians, they’re irrelevant.

Politicians are put there to give you that idea that you have freedom of choice. You don’t. You have no choice. You have owners. They own you. They own everything. They own all the important land, they own and control the corporations, and they’ve long since bought and paid for the Senate, the Congress, the State Houses, and the City Halls. They’ve got the judges in their back pockets. And they own all the big media companies so they control just about all the news and information you get to hear. They’ve got you by the balls.

They spend billions of dollars every year lobbying to get what they want. Well, we know what they want; they want more for themselves and less for everybody else. But I’ll tell you what they don’t want—they don’t want a population of citizens capable of critical thinking. They don’t want well informed, well educated people capable of critical thinking. They’re not interested in that. That doesn’t help them. That’s against their interest. You know something, they don’t want people that are smart enough to sit around their kitchen table and figure out how badly they’re getting fucked by a system that threw them overboard 30 fucking years ago.” George Carlin