Osama bin Laden got a 660,000,000% return on his investment. SIX HUNDRED AND SIXTY MILLION PERCENT. He’s dead, but we’ve bankrupted ourselves. He would have died eventually. We didn’t have to bankrupt ourselves. But we did. He won.
http://www.nytimes.com/interactive/2011/09/08/us/sept-11-reckoning/cost-graphic.html
Make no mistake about it, without plentiful, cheap, and easy to access oil, the United States of America would descend into chaos and collapse. The fantasies painted by “green” energy dreamers only serve to divert the attention of the non critical thinking masses from the fact our sprawling suburban hyper technological society would come to a grinding halt in a matter of days without the 18 to 19 million barrels per day needed to run this ridiculous reality show. Delusional Americans think the steaks, hot dogs and pomegranates in their grocery stores magically appear on the shelves, the thirty electronic gadgets that rule their lives are created out of thin air by elves and the gasoline they pump into their mammoth SUVs is their God given right. The situation was already critical in 2005 when the Hirsch Report concluded:
“The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking.”
In the six years since this report there has been unprecedented oil price volatility as the world has reached the undulating plateau of peak cheap oil. The viable mitigation options on the demand and supply side were not pursued. The head in the sand hope for the best option was chosen. The government mandated options, ethanol and solar, have been absolute and utter disasters as billions of taxpayer dollars have been squandered and company after company goes bankrupt. The added benefit has been sky high corn prices, dwindling supplies and revolutions around the world due to soaring food prices. The last time the country went into recession in 2008, the price of oil plunged from $140 a barrel to $30 a barrel in the space of six months. I’d classify that as volatility. We’ve clearly entered a second recession in the last six months. So we should be getting the benefit of collapsing oil prices.
But, a funny thing happened on the way to another oil price collapse. It didn’t happen. WTI Crude is trading for $87 a barrel, up 23% since January 1. Unleaded gas prices are up 54% in the last year and 43% since January 1. Worldwide oil pricing is not based on WTI crude but Brent crude, selling for $113 per barrel, only down 10% from its April high of $125. The U.S. and Europe consume 40% of all the oil in the world on a daily basis. Multiple European countries have been in recession for the last nine months. The U.S. economy has been in free fall for six months.
Some short term factors will continue to support higher oil prices. The Chinese continue to fill their strategic petroleum reserve, Japan is still relying on diesel generators for electricity post-tsunami, and the Middle East is developing a love affair with the air conditioner. But, it’s the long term factors that will lead to much higher oil prices for myopic oblivious Americans.
John Hussman describes the situation on the ground today based upon six economic conditions presently in effect:
There are certainly a great number of opinions about the prospect of recession, but the evidence we observe at present has 100% sensitivity (these conditions have always been observed during or just prior to each U.S. recession) and 100% specificity (the only time we observe the full set of these conditions is during or just prior to U.S. recessions).
With 40% of the world in or near recession, how come oil prices are still so high and much higher than last year, when the economies in Europe and the U.S. were expanding? The number of vehicle miles driven in the U.S. is still below the level reached 43 months ago and at the same level as early 2005. The price of a barrel of oil in early 2005 was $42. The U.S. is using the same amount of oil, but the price is up 112%. It seems the U.S. isn’t calling the shots when it comes to the worldwide supply/demand equation.
It would probably be a surprise to most people that U.S. oil consumption today is at the same level it was in 1997 and is 10% lower than the peak reached in 2005. This is not a reflection of increased efficiency or Americans gravitating towards smaller vehicles with better mileage. Americans are still addicted to their SUVs and gas guzzling luxury automobiles. It’s a reflection of a U.S. economy that has been in a downward spiral since 2005.
| 1996 | 18,476.15 | 3.89 % |
| 1997 | 18,774.07 | 1.61 % |
| 1998 | 18,946.01 | 0.92 % |
| 1999 | 19,603.83 | 3.47 % |
| 2000 | 19,717.92 | 0.58 % |
| 2001 | 19,772.60 | 0.28 % |
| 2002 | 19,834.31 | 0.31 % |
| 2003 | 20,144.82 | 1.57 % |
| 2004 | 20,833.01 | 3.42 % |
| 2005 | 20,924.36 | 0.44 % |
| 2006 | 20,803.93 | -0.58 % |
| 2007 | 20,818.37 | 0.07 % |
| 2008 | 19,563.33 | -6.03 % |
| 2009 | 18,810.01 | -3.85 % |
If the U.S. isn’t driving oil demand in the world, then why are prices going up? There are three main factors:
The Energy Information Administration issued their latest forecast and it does not bode well for lower prices:
Despite continued concerns over the pace of the global economic recovery, particularly in developed countries, the US Energy Information Administration expects worldwide oil consumption to increase this year and next spurred by demand in developing countries. US oil consumption, however, is forecast to contract from a year ago. Worldwide oil demand, led by China, will increase by 1.4 million b/d in 2011 to average 88.19 million b/d and by 1.6 million b/d in 2012, outpacing average global demand growth of 1.3 million b/d from 1998-2007, before the onset of the global economic downturn.
China is now consuming over 9 million barrels per day. This is up from an average of 7 million barrels per day in 2006. Platts, a global energy analyst, put China’s 2010 figures at 8.5 million barrels per day, up 11.43% from the previous year. The forecast for China’s crude throughput in 2011 is an average of 9.24 million barrels per day up 8.5% from 2010. In the first seven months of this year, total crude throughput stood at average of 8.95 million barrels per day.
Standard Chartered Bank predicts that, by the year 2020, China will overtake all of Europe as the second largest consumer of oil in the world, and should catch up to the U.S. by the year 2030 as China’s demand continues to rise while U.S. demand is expected to be flat. Chinese crude imports grew 17.5% in 2010 to 4.79 million barrels per day. China is importing 55% of its oil today versus 40% in 2004.
China’s oil consumption per capita has increased over 350% since the early 1980s to an estimated 2.7 barrels per year in 2011. Consumption per capita has risen nearly 100% in just the past decade. Oil consumption per capita in the U.S. currently ranks among the top industrialized nations in the world at 25 barrels per year. However, today’s consumption levels are approximately 20% lower than they were in 1979. The chart below paints a picture of woe for the United States and the world. China overtook the United States in auto sales in 2009. They now sell approximately 15 million new vehicles per year. India sells approximately 2 million new vehicles per year. The U.S. sells just over 12 million new vehicles per year. In China and India there are approximately 6 car owners per 100 people. In the U.S. there are 85 car owners per 100 people.
They call China, India and the rest of the developing world – Developing – because they will be rapidly expanding their consumption of goods, services and food. There will certainly be bumps along the way, as China is experiencing now, but the consumption of oil by the developing world will plow relentlessly higher. China isn’t the only emerging country to show big increases in per capita consumption. The growth in consumption for several other countries far outpaces China. Consumption per capita in Malaysia has nearly quadrupled since the mid-1960s. Consumption in Thailand and Brazil has more than doubled to roughly 5.7 barrels and 4.8 barrels per year, respectively.
Developed countries, especially those in Western Europe, have experienced substantial declines in oil consumption. Today’s per capita consumption in Sweden is roughly 12 barrels per year, down from 25 barrels per year in the mid-1970s. France, Japan, Norway and U.K. all use less oil on a per capita basis than they did in the 1970s. These countries have been able to drive down the consumption of oil by taxing gasoline at an excessive level.
Americans pay 43 cents in taxes out of the $3.70 they pay at the pump for a gallon of gasoline. A driver in the UK is paying $4 per gallon in taxes out of the $9 per gallon cost. Gasoline costs between $8 and $9 per gallon across Europe today. The extreme level of gas taxes certainly reduces car sizes, consumption and traffic. Too bad the mad socialists across Europe spent the taxes on expanding their welfare states and promising even more to their populations. Maybe a $6 per gallon tax will do the trick. Forcing Americans to drive less by doubling the gas tax is a quaint idea, but it is too late in the game. Europe is still made up of small towns and cities with the populations still fairly consolidated. Biking, walking and small rail travel is easy and feasible. The sprawling suburban enclaves that proliferate across the American countryside, dotted by thousands of malls and McMansion communities, accessible only by automobiles, make it impossible to implement a rational energy efficient model for moving forward. We cannot reverse 60 years of irrationality. Even without higher gas taxes, the price of gasoline will move relentlessly higher due to the stealth tax of currency debasement.
The US dollar has fallen 15% versus a basket of worldwide currencies (DXY) since February 2009. This is amazing considering that 57% of the index weighting is the Euro. If you haven’t noticed, Europe is a basket case on the verge of economic disintegration. The US imports a net 9.4 million barrels of oil per day, or 49% of our daily consumption. Our largest suppliers are:
These eight countries account for over 70% of our daily oil imports. You hear the “experts” on CNBC declare that our oil supply situation is secure because close to 60% of our daily usage is sourced from North America. The presumption is that Canada and Mexico are somehow under our control. There is one problem with this storyline. US oil production peaked in 1971 and relentlessly declines as M. King Hubbert predicted it would. Mexico will cease to be a supplier to the U.S. by 2015 as their Cantarell oil field is in collapse. Most of the oil supplied from Canada is from their tar sands. Expansion of these fields is difficult as it takes tremendous amounts of natural gas and water to extract the oil.
The rest of the countries on the list dislike us, hate us, or are in constant danger of implosion. When the Neo-Cons on Fox News try to convince you that Iraq has been a huge success and certainly worth the $3 trillion of national wealth expended, along with 4,500 dead and 32,000 wounded soldiers, you might want to keep in mind that Iraq was exporting 795,000 barrels of oil per day to the U.S. in 2001 when the evil dictator was in charge. Today, we are getting 415,000 barrels per day. Dick Cheney was never good at long term strategic planning.
We better plant more corn, as our supply situation is far from stable. Maybe we can install solar panels from Obama’s Solyndra factory on the roofs of the 65 Chevy Volts that were sold in the U.S. this year, to alleviate our oil supply problem. The reliability and stability of our oil supply takes second place to the price increases caused by Ben Bernanke and his printing press. The average American housewife driving her 1.5 children in her enormous two and a half ton Chevy Tahoe or gigantic Toyota Sequoia two miles to baseball practice doesn’t comprehend why it is costing her $100 to fill the 26 gallon tank. If she listens to the brain dead mainstream media pundits, she’ll conclude that Big Oil is to blame. The real reason is Big Finance in conspiracy with Big Government.
Ben Bernanke is responsible for Americans paying $4 a gallon for gasoline. Zero interest rates, printing money out of thin air to buy $2 trillion of mortgage and Treasury bonds, and propping up insolvent criminal banks across the globe have one purpose – to deflate the value of the U.S. dollar. The rulers of the American Empire realize they can never repay the debts they have accumulated. They have chosen to default through debasement. It’s an insidious and immoral method of defaulting on your obligations. Let’s look at from the perspective of our two biggest oil suppliers.
A barrel of oil cost $40 a barrel in early 2009. The U.S. dollar has declined 30% versus the Canadian dollar since early 2009. The U.S. dollar has shockingly declined 20% versus the Mexican Peso since early 2009. How could the mighty USD decline 20% against the currency of a 3rd world country on the verge of being a failed state? Ask Ben Bernanke. Our lenders can’t do much about the continuing debasement of our currency, but our oil suppliers can. They will raise the price of oil in proportion to our currency devaluation. Since Bernanke’s only solution is continuous debasement, the price of oil will relentlessly rise.
“By 2012, surplus oil production capacity could entirely disappear, and as early as 2015, the shortfall in output could reach nearly 10 MBD. At present, investment in oil production is only beginning to pick up, with the result that production could reach a prolonged plateau. By 2030, the world will require production of 118 MBD, but energy producers may only be producing 100 MBD unless there are major changes in current investment and drilling capacity.” – 2010 Joint Operating Environment Report
We’ve arrived at the point where demand has begun to outpace supply and even the onset of another worldwide recession will not assuage this fact. World oil supply has peaked just below 89 million barrels per day. Supply has since fallen to 87.5 million barrels per day, as Libyan supply was completely removed from world markets. The International Energy Agency is already forecasting worldwide demand to reach 90 million barrels per day in the second half of 2011 and reach 92 million barrels per day in 2012. The IEA warns that “just at the time when demand is expected to recover, physical limits on production capacity could lead to another wave of price increases, in a cyclical pattern that is not new to the world oil market.”
The world is trapped in an inescapable conundrum. As supply dwindles, prices increase, causing global economies to contract, and temporarily causing a drop in prices, except the lows are higher each time. The drill, drill, drill ideologues do nothing but confuse and mislead the easily led masses. We have 2% of the world’s oil reserves and consume more than 20% of the daily output. We consume 7 billion barrels of oil per year.
Drilling for oil in the Arctic National Wildlife Refuge in Alaska and areas formerly off limits in the Outer Continental Shelf will not close the supply gap. The amount of recoverable oil in the Arctic coastal plain is estimated to be between 5.7 billion and 16 billion barrels. This could supply as little as a year’s worth of oil. And it will take 10 years to produce any oil from this supply. The OCS has only slightly more recoverable oil at an estimated 18 billion barrels and the BP Gulf Oil disaster showed how easy this oil is to access safely. The new over hyped energy savior is shale gas. The cheerleaders in the natural gas industry claim that we have four Saudi Arabias worth of natural gas in the U.S. This is nothing but PR talking points to convince the masses that we can easily adapt. The amount of shale gas that can be economically produced is far less than the amounts being touted by the industry. The wells deplete rapidly and the environmental damage has been well documented. And last but certainly not least, we have the abiotic oil believers that convince themselves the wells will refill despite the fact that there is not one instance of an oil well refilling once it is depleted.
I wrote an article called Peak Denial About Peak Oil exactly one year ago when gas was selling for $2.60 a gallon. I railed at the short sightedness of politicians and citizens alike for ignoring a calamitous crisis that was directly before their eyes. Just like our accumulation of $4 billion per day in debt, peak oil is simply a matter of math. We cannot take on ever increasing amounts of debt in order to live above our means without collapsing our economic system. We cannot expect to run our energy intensive world with a depleting energy source. There is no amount of spin and PR that can change the math. Un-payable levels of debt and dwindling supplies of oil will merge into a perfect storm over the next ten years to permanently change our world. The change will be traumatic, horrible, bloody and a complete surprise to the non-critical thinking public.
“In the longer run, unless we take serious steps to prepare for the day that we can no longer increase production of conventional oil, we are faced with the possibility of a major economic shock—and the political unrest that would ensue.” – Dr. James Schlesinger – former US Energy Secretary, 16th November 2005
We were warned. We failed to heed the warnings. If we had begun making the dramatic changes to our society 5 to 10 years ago, we may have been able to partially alleviate the pain and suffering ahead. Instead we spent our national treasure fighting Wars on Terror and bailing out criminal bankers. Converting truck and bus fleets to natural gas; expanding the use of safe nuclear power; utilizing wind, geothermal, and solar where economically feasible; buying more fuel efficient vehicles; and creating more localized communities supported by light rail with easy access to bike and walking options, would have allowed a more gradual shift to a less energy intensive society.
We’ve done nothing to prepare for the onset of peak oil. Until this foreseeable crisis hits with its full force like a Category 5 hurricane, Americans will continue to fill up their M1 tank sized, leased SUVs, tweet about Lady Gaga’s latest stunt, and tune in to this week’s episode of Jersey Shore. Meanwhile, economic stagnation, catastrophe and wars for oil are darkening the skies on our horizon.
“Dependence on imported oil, particularly from the Middle East, has become the elephant in the foreign policy living room, an overriding strategic consideration composed of a multitude of issues. …. Taken in whole, the National Energy Policy does not offer a compelling solution to the growing danger of foreign oil dependence. … Future military efforts to secure the oil supply pose tremendous challenges due to the number of potential crisis areas. ….. Economic stagnation or catastrophe lurk close at hand, to be triggered by another embargo, collapse of the Saudi monarchy, or civil disorder in any of a dozen nations.”– America’s Strategic Imperative A “Manhattan Project” for Energy
You knew I had to post about the Michael Vick contract. Below are two opposing views of Michael Vick. The first is a response to the second. I know Smokey and Stuck are huge Vick supporters and will rally to his defense if anyone attacks him.
Michael Vick has a shiny new, six-year, $100 million NFL contract, and that’s swell.
Mazel tov. Really. May your creditors be paid off soon, your bankruptcy lifted and your tribe increase.
But what’s even more interesting — to me, at least — is a column last week by an ESPN Magazine writer named Toure who poses the question: “What if Michael Vick were white?”
As in, what if Vick were white and raised not in the low-income, predominantly black southeast community of Newport News, but in some generic white neighborhood, far from the “projects” culture that apparently corrupted him? Would he have ended up serving 18 months in federal prison for running an underground dogfighting operation out of Surry County?
And what’s really, really interesting is the accompanying photo-shopped image of Vick, showing him as Caucasian. You can check it out here:
Toure has taken heat for posing his question and for the digitized image of Vick in “whiteface” — which Toure apparently had nothing to do with — but has also been praised for discussing the issue thoughtfully.
“Would a white kid have been introduced to dogfighting at a young age and would it become normalized to the extent that he builds it into his life after he joins the NFL? It’s possible, but it’s far less likely because what made Vick stand out among dogfighters is less race than class. … Vick’s stunningly stupid moral breakdown with respect to dogs is certainly related to the culture of the world he grew up in, which he says fully embraced dogfighting. But it’s also related to the household he grew up in.”
Toure then mentions Vick’s father, Michael Boddie, had admitted to The Washington Post that he abused drugs and alcohol around young Vick and even set up a dogfighting ring in the family garage so Vick could stage fights there.
Too many men “left to define manhood on their own,” Toure writes, gravitate toward “ghetto celebrities who are unsavory role models with bad habits.”
But a big hole in Toure’s analysis is that dogfighting isn’t just a “ghetto” thing. It isn’t even a “black” thing. Poor white country boys, some of whom also do drugs and alcohol, fight dogs, too.
As reprehensible as dogfighting is, the “culture” of dogfighting is that it truly is a blood sport — emphasis on “blood,” of course. But dog owners tend to take a certain pride in their dogs, even as they send them into a pit to rip others to pound pieces.
This is where Vick went far beyond merely fighting dogs — he reveled in the blood, the power over life and death. He became a death-dealing beast, himself.
He attacked, tortured and killed his own underperforming dogs in creative and cruel ways.
Drowning, electrocution, hanging, grabbing them by the legs and slamming them to the ground over and over to break their backs.
He did this while he was an NFL star with a $130 million contract. A college graduate who’d been exposed to enough non-ghetto cultures to know that dogfighting wasn’t just illegal, but immoral.
This is not a “stupid moral breakdown” — this is sheer absence of a conscience or soul. This is knowingly and willfully breaking bad.
To say socio-economics or culture crafted Vick the boy into Vick the man is an insult to the majority of black kids who grow up poor and don’t torture and kill animals.
I hope Vick makes the most of his second chance. But I would never trust him with another animal.
Because Vick didn’t just gravitate toward unsavory role models — he became one, himself.
And he did it not because he grew up black or he grew up poor, but because he wanted to.
Posted by Tamara Dietrick on Wednesday, August 31, 2011 at 11:29 AM
This story appears in the Sept. 5 issue of ESPN The Magazine.
WHEN MICHAEL VICK PLAYS, I see streetball. I don’t just mean that sort of football where you have to count to four-Mississippi before you can rush the quarterback, nearly everything breaks down and it’s all great fun. I also mean street basketball. Vick’s style reminds me of Allen Iverson — the speed, the court sense, the sharp cuts, the dekes, the swag. In those breathtaking moments when the Eagles QB abandons the pocket and takes off, it feels as if he’s thumbing his nose at the whole regimented, militaristic ethos of the game.
All of that is why, to me, Vick seems to have a deeply African-American approach to the game. I’m not saying that a black QB who stands in the pocket ain’t playing black. I’m saying Vick’s style is so badass, so artistic, so fluid, so flamboyant, so relentless — so representative of black athletic style — that if there were a stat for swagger points, Vick would be the No. 1 quarterback in the league by far.
Race is an undeniable and complex element of Vick’s story, both because of his style as well as the rarity of black QBs in the NFL. A decade after he became the first black QB to be drafted No. 1 overall, about one in five of the league’s passers is African-American, compared with two-thirds of all players. But after his arrest for dogfighting, so many people asked: Would a white football player have gotten nearly two years in prison for what Vick did to dogs?
This question makes me cringe. It is so facile, naive, shortsighted and flawed that it is meaningless. Whiteness comes with great advantages, but it’s not a get-out-of-every-crime-free card. Killing dogs is a heinous crime that disgusts and frightens many Americans. I’m certain white privilege would not be enough to rescue a white NFL star caught killing dogs.
The problem with the “switch the subject’s race to determine if it’s racism” test runs much deeper than that. It fails to take into account that switching someone’s race changes his entire existence. In making Vick white, you have him born to different parents. That alone sets his life trajectory in an entirely different direction. Thus when this hypothetical white Michael Vick … wait, I can’t even continue that sentence in good faith. I mean, who would this white Vick be? That person is unknowable. When you alter his race, it’s like those Back to the Future movies where someone goes back in time, inadvertently changes one small thing about his parents’ dating history and then the person starts to disappear. If Vick had been born to white parents, you wouldn’t even be reading this right now. That Vick would have had radically different options in life compared with the Vick who grew up in the projects of Newport News, Va., where many young black men see sports as the only way out.
This is not to say there aren’t insights to be gained from hypotheticals. One pertinent question: Would a white kid have been introduced to dogfighting at a young age and have it become normalized to the extent that he builds it into his life after he joins the NFL? It’s possible, but it’s far less likely because what made Vick stand out among dogfighters is less race than class. The deep pockets of an NFL star led to a kennel that was too big not to fail eventually. But if it did, though, would this white kid have been busted? Remember, it wasn’t suspicion of dogfighting that started the investigation that put Vick in jail. It was that element that we’ve all seen hold back or bring down so many athletes from the hood — the entourage. Vick’s cousin Davon Boddie was arrested and charged with possession of marijuana with intent to sell in Hampton, Va. When police asked him for his address, he led them to the home where Bad Newz Kennels was located. After that, Vick never had a chance.
Here’s another question: If Vick grew up with the paternal support that white kids are more likely to have (72 percent percent of black children are born to unwed mothers compared with 29 percent of white children), would he have been involved in dogfighting? I ask this not to look for an excuse but to explore the roots of his behavior. Vick’s stunningly stupid moral breakdown with respect to dogs is certainly related to the culture of the world he grew up in, which he says fully embraced dogfighting. But it’s also related to the household he grew up in.
Vick’s father, Michael Boddie, was not a positive influence on him growing up. Boddie admitted to The Washington Post that he was a cocaine user and had been high and drunk around young Vick. He says he often prepared the family garage so Vick could have pit bull fights there. Boddie’s account is disputed by a family friend, who says Vick’s mother would not have allowed that. Either way, at some point in Vick’s youth, his father became estranged from the family. This breakdown of Vick’s paternal relationship is a pattern that’s all too common among black men of his generation. Too many are left to define manhood on their own, so they gravitate toward the most charismatic and inspiring men in their world. Sometimes those men are gritty local sports coaches who teach them the value of hard work, but sometimes they’re ghetto celebrities who are unsavory role models with bad habits.
Ultimately, there is no separating Vick from his circumstances: his race, parents, economics and opportunities. Alter any of those elements and everything about him and how the world sees him would be unrecognizable.
So let’s look at him a different way. Let’s see him as someone in the third act of the epic movie that is his life, leading a team that many expect to see in the Super Bowl. Bob Marley’s “Redemption Song” is playing underneath because the humbled protagonist has finally overcome his personal demons and has begun living up to his athletic promise. And to those who believe we should judge a man by how he responds when dealing with the worst life has to offer — with how he climbs after he hits rock bottom — Michael Vick has become heroic.
And that has nothing to do with race.
The Junior Administrator turned 18 today. He can vote. We’ve got one more onboard the Ron Paul bandwagon. This is his first birthday in 18 years not spent at home.
Avalon can’t stop herself from thinking of him like this. Tears are flowing.
I prefer to think of him winning his high school hockey championship. He is trying out for the Penn State Altoona hockey team this week. Good luck Kev. Channel the intensity you displayed in that championship series and you’ll do fine.
Happy Birthday Kevin!!!!!
I know you are probably too busy studying to celebrate, but remember your mommy today. And Jimmy has moved into your room and really likes it.
The warm and fuzzy Administrator is about to disappear. The summer is over. Vacations are over. My relaxing 45 minute summer commute to work is OVER!!!!! The traffic this week is already bad. Next week it will be horrific. I listened to the traffic report this morning and they said the Schuykill Expressway was clear. So, I exited I476 onto the Schuykill this morning and entered a parking lot. It seems that between the initial report and my getting on the Schuykill, there was a 5 vehicle accident involving a tractor trailer. The tractor trailer won and the 4 cars lost. Let’s say my blood pressure rose a few points. I hope you are ready for a less forgiving, angrier, ballistic Administrator. The soft hearted, kind, civil Administrator has left the car.
This is one of the finest pieces that Gonzalo has ever written. His passion regarding right and wrong, moral and immoral, and punishment fitting the crimes is dead on. Our country is warped and in rapid decline. There is only one way to save it. Prosecute the criminals. Make bankers accept the consequences of their actions. Let failures fail. Let the debt go bad. Enforce the rule of law equally. Throw Dick Cheney into Guantanomo before he reaches his final destination in hell.
Dick Cheney is taking a lap around all the talk shows, peddling his memoir while giving his reputation one final spit-shine before he dies and goes straight to hell.
Dick Cheney
Oh—so you actually doubt he’ll go to hell? With the shit he’s pulled? Cabrón, please . . .
It is remarkable that relatively few people seem outraged by Mr. Cheney. Here is the man who, as Vice-President of the United States, violated some of the most important rights, freedoms and liberties that America has defended for over two-hundred years. Not only did he commit what in other times would have been considered war crimes and crimes against humanity—he is proud of having done so!
He boasts about the torture he ordered, he defends the wars of aggression that he fomented, and he is silent about the sweetheart deals he gave his former employer, Halliburton, in the “reconstruction” of countries that he helped destroy.
In short, he violated every rule in the book—yet no one is throwing the book at him. There are no Congressional hearings into his violation of the Constitution. There are no prosecutors sharpening their chops, getting ready to indict him on charges of corruption.
Most of all, there is no public outrage at him.
Sure, some loony Lefties and some old-style hard-ass Conservatives such as myself bitch and moan about him—but no one is seriously arguing for his arrest, indictment and prosecution for the despicable things he did while in office. Or if they are advocating his arrest and prosecution—like me, and perhaps you—then they are on the extreme fringes of the political discourse—like me, and perhaps you: Marginal, and inconsequential.
The wrath of Smokey is about to rein down upon his enemies and all who dare to cross swords with him. He has returned to TBP. He is out for revenge upon anyone who motherfucked him after his departure. He has a long memory to go along with that long cock.
Everyone duck. The shit is about to fly. Hide the women and children. Our PG13 rated site is about to go XXX.
I have one thing to say to Smokey. China is a bubble and will burst in the near future. Smokey will have to kiss my ass on the 50 yard line at the Super Bowl this year.
Another good article from http://www.mybudget360.com/.
At this point it doesn’t matter whether you were lured into the fantasy of a cushy retirement by Wall Street shysters or you decided to live for today with a leased BMW and a McMansion twice the size of what you needed or you thought you could retire off your internet stock profits and never ending equity in your house or you were just a dumbass and forgot to save for your retirement – YOU’RE PRETTY MUCH SCREWED. Stocks aren’t going up in the next decade. Bonds will fall in the next decade. And most of the Boomers have less than $100,000 saved for retirement. I hope they like the taste of Alpo.
The days of dreaming about long days playing golf on a green course and taking luxurious cruises around the world are appearing more and more like a foggy memory for those in the middle class planning for retirement. As Wall Street bankers and hedge fund managers rob the public blind, the mission statement sold to baby boomers is starting to become a large bait and switch catchy enough to make it on a Hallmark card. For decades Wall Street begged and lured the public in either directly or through pension funds into their web of easy money. Save $100 a month and you’ll retire a millionaire! As it turns out, the golden parachute was only available to a tiny fraction of the population while the oligarchy in the financial sector offloads their toxic bets onto the taxpayers struggling balance sheet. The end game? No retirement. At least no retirement like those plastered on glossy mutual fund brochures. What the Wall Street banking charlatans failed to tell you is that you eventually need to sell those stocks to use the money for real world spending. What they also failed to mention is that the baby boomer generation is now going to sell into unrelenting headwinds of demographics bringing on a younger and poorer generation to purchase their stocks. Of course Social Security is in the crosshairs of the financial elite since they already secured their financial piece of the pie. You know things are bad when the Federal Reserve is stating that stocks are not exactly a winners bet in the years going forward.
Retirement becoming more of a postcard fantasy
The middle class has been pillaged and ransacked by financial thievery for decades. The debt bubble and mass delusion is now imploding. The graft and con games taking place in the financial sector would be comical if they weren’t so real and economically tragic. The Federal Reserve has given covert loans to big banks while big banks publicly stating all was well. The Federal Reserve has grown their balance sheet to a stunning $2.8+ trillion of questionable assets and other junk with little redeemable market value. It would have a hard time selling these items on eBay let alone the natural marketplace. There is no easier way to make a profit than stealing from the taxpayer. Of course the problems in the system are coming at the expense of the working and middle class. For those who bought into the Wall Street mantra of buy and hold, making a profit has gotten much harder:
This is fascinating data to look at. This decade has been horrible for stocks. The S&P 500 stands today where it did in 1998. The massive stock volatility is simply a reflection of the problems deep in our financial system. The above chart examines P/E ratios over time. Really fascinating information but the Fed study finds that P/E ratios are likely to go lower because of demographic shifts and also the reality that we have a lower wage employment force dominating our economy. The latest decade is a reflection of the bubble era machinery that has hoisted up the financial sector into an untouchable corner yet middle class Americans have taken it squarely in their stock portfolios. Why? Because Wall Street has been preaching buy and hold as if it were some patriotic mission but many of these hedge funds and banking managers have placed bets that openly aim against American middle class success. In fact, some have made bets on flat out American failure and have made billions of dollars with lower tax rates that are given to hedge funds.
The stock market casino
The stock market has been on a wild ride for well over a decade:
Source: Mish Global Economic Analysis Blog
You have a crazy expansion in the 1980s and 1990s with the peak productive years of baby boomers but also the carefree attitude with the debt bubble and the “deficits don’t matter” mentality that has harmed this nation and is leaving the Eurozone in tatters. Of course all of that has come to a crashing halt first with the tech bubble bursting and then the real estate bubble imploding. So you have to ask, when these baby boomers sell out of their 401ks and pension plans who will buy the stocks? The 46,000,000 Americans on food stamps? Or what above the average per capita worker making $25,000 a year? Household incomes have been stagnant for well over a decade:
To use an often quoted cliché, this is the perfect financial storm. For the financially and politically connected the free market rules do not apply. For the working and middle class they do. This massive contraction is happening when millions are entering the retirement pipeline. Now it would be one thing if people had vibrant retirement accounts. 1 out of 3 Americans have no savings account. But for those with a retirement account they likely do not have funds to support their life as they age and this is seen in a Transamerica retirement study:
“Workers estimate their retirement savings needs at $600,000 (median), but in comparison, fewer than one-third (30 percent) have currently saved more than $100,000 in all household retirement accounts.”
And the fears most have are based on real life issues:
Source: Transamerica
These aren’t fears about not having enough yachts or trips to Paris but whether they will eat decent food or Alpo. Workers are accurate in how much they need but less than one third have even saved $100,000 or more for retirement. For a median household income pulling in $50,000 a year in working years, the funds would likely last 3 or 4 years. The biggest fear is outliving the money while coming in at a close second is simply not meeting basic family needs. The next fear is cuts to Social Security because of course, the bankers and investment banks had to get their bailouts first before setting the U.S. economy on fire.
The Federal Reserve study found that P/E ratios are likely to become compressed as time goes on:
“Between 1981 and 2000, as baby boomers reached their peak working and saving ages, the M/O ratio increased from about 0.18 to about 0.74. During the same period, the P/E ratio tripled from about 8 to 24. In the 2000s, as the baby boom generation started aging and the baby bust generation started to reach prime working and saving ages, the M/O and P/E ratios both declined substantially. Statistical analysis confirms this correlation. In our model, we obtain a statistically and economically significant estimate of the relationship between the P/E and M/O ratios. We estimate that the M/O ratio explains about 61% of the movements in the P/E ratio during the sample period. In other words, the M/O ratio predicts long-run trends in the P/E ratio well.”
In other words, lots of money chasing the Wall Street illusion yet there will be fewer (poorer) buyers ahead. The P/E ratios surged when baby boomers entered their peak earnings years. Given the massive problems in our economy the fact that P/E will take it on the chin is no surprise. What is more stunning is the fact that no real financial reform has taken place and that the political system is so utterly broken. Money has infiltrated politics to a degree never before seen. We have career politicians in the SEC basically training for plush gigs at Goldman Sachs or Morgan Stanley. A revolving door out of D.C. and into big investment banks and back to D.C. No wonder why there has been no true enforcement of the investment banks when many are simply using it as a training ground for future jobs! If the working and middle class actually saw what went on trading floors they would never even think about playing the stock market. The fact that we have millions now needing to dump stocks into the open market is simply another issue we will be facing. These are people that have to sell (you can’t eat your stocks or pay for a medical bill with a stock). Many are now realizing after a lifetime of work that retirement only meant more work with fewer benefits to compensate for the big banking bailouts.
Here is the story of Camden NJ. It has been under Democratic Party control for five decades. The population was 125,000 in 1950. Today the population is 77,000. The population is 50% black and 35% Puerto Rican. A full 26% of the households consist of married couples. The per capita income is $12,000. Median household income is $18,000. A full 52% of the population lives in poverty. The average home value is $35,000. The official unemployment rate is 20%.
The real question is how did the white man cause this. Surely this shithole became a shithole due to racism. It couldn’t have been the policies implemented by liberal Democrats over the last five decades. I feel tremendous guilt for causing this horrific result. Please take more of my taxes to hand over to the lazy good for nothing free shit army in Camden NJ. I know if we just give them more money Camden will surely revive itself.
November 4, 2010
Camden, New Jersey, with a population of 70,390, is per capita the poorest city in the nation. It is also the most dangerous. The city’s real unemployment—hard to estimate, since many residents have been severed from the formal economy for generations—is probably 30–40 percent. The median household income is $24,600. There is a 70 percent high school dropout rate, with only 13 percent of students managing to pass the state’s proficiency exams in math. The city is planning $28 million in draconian budget cuts, with officials talking about cutting 25 percent from every department, including layoffs of nearly half the police force. The proposed slashing of the public library budget by almost two-thirds has left the viability of the library system in doubt.
Corruption is rampant, with three mayors sent to prison in a little more than two decades. Five police officers, two of whom are out on bail and three of whom have pleaded guilty, have been charged with planting evidence, making false arrests and trading drugs for information from prostitutes. County prosecutor Warren Faulk has had to drop charges against some 200 suspects, including some who’d spent years in prison, because of the misconduct. The city is dominated by an old-time party boss, George Norcross III. Although he does not live in Camden, his critics contend that he decides who runs for office and who does not, who gets city and state contracts and which projects get funded. Tens of millions in state funds have been used for city projects, from an aquarium on the waterfront to a new law school to an expansion of the Cooper University Hospital and construction of a medical school. In 2002 the state approved a $175 million recovery package to save the city, but according to a yearlong investigation by the Philadelphia Inquirer, only 5 percent had been used to combat crime, improve schools, provide jobs or bolster municipal services. Those who oppose Norcross insist he has turned the poverty and despair of Camden into a business. His critics charge that the new medical school, for example, was approved because it was part of a back-room deal Governor Jon Corzine cut with Norcross in Corzine’s failed re-election bid. When I met with him, Norcross dismissed the allegations and defended his huge infrastructure projects as crucial to revitalizing the bleak downtown.
Camden, like America, was once an industrial giant. It employed some 36,000 workers in its shipyards during World War II and built some of the nation’s largest warships. It was the home to major industries, from RCA Victor to the New York Ship Building Corporation and Campbell’s Soup, which still has its international headquarters in a gated section of Camden but no longer makes soup in the city. Camden was a destination for Italian, German, Polish and Irish immigrants, who in the middle of the last century could find decent-paying jobs that required little English or education. The city’s population has fallen by more than 40 percent from its 1950 level of 120,000. There are no movie theaters or hotels. There are lots with used cars but no dealerships that sell new vehicles. The one supermarket is located on the city’s outskirts, away from the endemic street crime.
There are perhaps a hundred open-air drug markets, most run by gangs like the Bloods, the Latin Kings, Los Nietos and MS-13. Knots of young men in black leather jackets and baggy sweatshirts sell weed and crack to clients, many of whom drive in from the suburbs. The drug trade is one of the city’s few thriving businesses. A weapon, police say, is never more than a few feet away, usually stashed behind a trash can, in the grass or on a porch. Camden is awash in guns, easily purchased across the river in Pennsylvania, where gun laws are lax.
Camden is the poster child of postindustrial decay. It stands as a warning of what huge pockets of the United States could turn into as we cement into place a permanent underclass of the unemployed, slash state and federal services in a desperate bid to cut massive deficits, watch cities and states go bankrupt and struggle to adjust to a stark neofeudalism in which the working and middle classes are decimated.
* * *
I found the city’s homeless congregated in a collection of blue and gray tents, protected by tarps, set up under the shelter of a Route 676 ramp. The tent city, or “Transitional Park,” was overseen by Lorenzo “Jamaica” Banks, 57, who bought damaged tents from Wal-Mart and Kmart at a reduced price, repaired them and provided them to the homeless—at $10 a pop, police told me. Banks insisted he offered them for free.
When I walked into the encampment with my colleague, comics artist Joe Sacco, Banks was chopping firewood. A man with receding black hair and a beard, Banks was dressed in carpenter’s jeans and a plaid shirt over a gray hooded sweatshirt. There were about fifty tents in the park, and Banks owned forty of them. He spoke in the drumbeat staccato of a man who seems about to snap at any moment. He claimed to be a Vietnam vet, to have been a heroin addict now “clean for thirty-seven years,” to have ended up after the war in a mental institution, to have jumped off the Ben Franklin Bridge in a suicide attempt because of “a lot of flashbacks” and to have spent “twenty-two years, six months, three hours and thirty-three seconds” in prison for shooting to death his best friend because he was “killing his baby in front of me.”
“I’m better now,” he assured us as the commuter train into Philadelphia rumbled along the tracks overhead. “I’m on medication. I live here because it reminds me of the jungle.”
Banks, who called himself “the mayor,” ran the tent city, which had a population of about sixty, ranging in age from 18 to 76, like a military encampment. He had a second-in-command, his “CEO,” who took over when Banks had to buy supplies. There were weekly tent inspections on Saturday, weekly meetings every Tuesday night and a list of sixteen rules written on plywood tacked to a tree. These included restrictions on fighting and arguing, admonishments to clean up the trash, an order not to sell food stamps and several other blunt prohibitions, including: “Don’t bring your tricks here” and “No borrowing money or sex from anyone.” Residents received two warnings for infractions before they were evicted. Drugs were banned. Alcohol was not. Banks had even set up a bank account for the enclave. At night there were shifts when someone—Banks said he preferred a vet—had to stand guard. There was a Dumpster filled with trash at the edge of the encampment, white folding tables with white plastic chairs and five-gallon plastic water containers outside many tents. Firewood lay scattered about the site.
“Take a look at the American Dream,” Banks said as he guided us through the tents, stepping around rusted bicycles and shopping carts. “In today’s society no one is exempt from Transitional Park. Everybody is one paycheck away from being here.”
Officially, Camden has 775 homeless, but there are only 220 beds in the county, so city officials nervously tolerated the encampment, despite its illegality, until late spring, when they swiftly dismantled it. Those tossed out scattered, and about a half-dozen migrated to live in squalor under the concrete ramps of Route 676, where it runs across the river into Philadelphia.
Camden’s streets are filled with the unemployed. Ali Sloan El, who recently got out of prison, is chatting with some men in the street, several of whom are Muslims like him and have shaved heads and long black beards. The group of men around Sloan El have just witnessed a botched robbery at a barbershop a few minutes before Joe and I arrive. A young gunman, nervous and unsure of himself, had pulled out a pistol and tried to rob the barbers. He was chased out of the shop by a group of men and tackled on the sidewalk. One of the barbers is at the police station filing a report.
The mood inside the shop is hostile. “How did you know about the stickup?” asks a barber who says his name is Sam. “We were told about it on the street,” I answer. He arches his eyebrows in disbelief. “No one would talk to you on the street. No one would tell you nothin’,” he says coldly. “A mother with a 2-year-old in a stroller told us,” I tell him. “Yeah,” he admitted reluctantly, “maybe that’s right, maybe a mother would talk.”
The rumor on the street, Sloan El informs us, is that the robber was high on a narcotic called wet. The drug of choice of Camden’s criminal class, wet is made by soaking marijuana in embalming fluid, which is a mixture of formaldehyde, methanol, ethanol and other solvents. Phencyclidine, or PCP, known on the street as angel dust, is often added to the mix. Wet is smoked dry but the leaves, which glisten, give the drug its liquid name. Wet numbs its users and endows them with what seems to them like superhuman strength. Their body temperatures rise, their blood pressure drops and they frequently hallucinate. The high can last up to six hours. Two Camden police officers who do not want to be named tell us they fear confronting street thugs on wet. “You shoot them and they just keep coming,” one says warily.
Those who do not join street gangs live like minnows, darting through the currents to avoid the predatory fish. Darnell Monroe, 33, wearing a new pair of brown Timberlands, a black leather jacket, jeans and a black-and-white checked kaffiyeh as a scarf, sits with us in the barbershop. One of the barbers immediately turns up the radio to a deafening roar, I suspect to drive us out. Monroe, also a Muslim, is a tall man with a shaved head and a full black beard. He spent four years in prison for dealing drugs. He became a father when he was 13. The mother was 16. “I’m sociable,” he says when I ask him about surviving in Camden, “but I keep moving. I don’t want to draw the wrong kind of attention. I don’t want a conflict.”
Monroe was shot three times in the stomach in 1998, when he was coming out of a bar and tried to break up a fight. “To this day I don’t know who shot me,” he says. He awoke in the hospital twelve weeks later. His kidney, liver and upper and lower intestine had been badly damaged. He lifts his shirt and exposes a massive scar on his stomach that looks like a brownish mountain range with jagged edges. “It was a .380 automatic,” he says. Until he was laid off last year, Monroe had a job as a forklift operator in the scrap yards by the port. On the back of his right hand is a tattoo of a padlock with his current wife’s initials, EGK, and under his left eye is a tattooed teardrop he got in jail, in 1993, when his sister died.
The city is busily cannibalizing itself in a desperate bid to generate revenue. Giant scrap piles rise in hulks along the banks of the Delaware. The piles, filled with discarded appliances, rusted filing cabinets, twisted pipes, old turbines and corrugated sheet metal, are as high as a three- or four-story house, and at their base are large pools of brackish water. A crane, outfitted with a large magnet, sways over the pile and swings scrap over to a shredding machine. A pickup and a U-Haul filled with old refrigerators, gates, screen doors and pipes are unloading in front of a small booth when we arrive. There are about twenty scrap merchants in the city, and they have created a market for the metal guts of apartments and houses. As soon as a house is empty—even if only for a few days between renters or because it is being painted—the hustlers break in and strip every pipe, radiator, screen door and window. Over the past three or four decades thousands of owners, faced with the destruction, have walked away from their properties. Camden produces a million tons of scrap a year. Its huge shredding machines in the port can chop up automobiles and stoves into chunks the size of a baseball. Ships from Turkey, China and India pull into the port and take the scrap back to smelters in their countries.
The only white people visible daily on the city’s streets are the hookers. Congregated near the highway ramps on Ferry Street, most are heroin addicts and nearly all are infected with AIDS, hepatitis C or other sexually transmitted diseases. The women sleep in abandoned apartments without running water, heat or electricity.
If arresting someone on wet is the least pleasant duty for Camden police, arresting hookers is the second. “Ninety-nine percent of them are heroin addicts,” a sergeant tells us. “I try not to deal with them. They have diseases. You pat them down and you find needles. You can get stuck with a needle. And they have MRSA, a skin disease with open sores. We have to get our cars disinfected afterward. Ninety-five percent have outstanding warrants, although they usually give us a wrong name.”
* * *
Despite Camden’s bleakness, despite its crime and its deprivation, despite the lost factory jobs that are never coming back—despite all this, valiant souls somehow rise up in magnificent defiance. In a room across the street from Sacred Heart Catholic Church, where meals are provided for the homeless on Saturdays, a group of African-American women bow their heads over a table and hold hands. They are led by Lallois Davis, 67, a heavyset woman who radiates an indomitable, unbroken spirit.
“The poor have to help the poor,” Davis says, “because the ones who make the money are helping the people with money.”
Davis raised four children and then, when a neighbor died, leaving behind her two orphaned grandsons, Davis took them in and raised them as well. She wears a large cross around her neck. She is known as Aunt Lallois.
“My heart is heavy,” says a 69-year-old woman named Brenda Hayes, her head bowed and her eyes shut. “There is so much heaviness. It is wounding me. How can I not worry?”
“Yes, Jesus. Yes, Jesus,” the other women respond.
“I know you didn’t carry us this far to drop us now,” she says. “I know there is no burden so heavy that we can’t carry it with your help. I thank you, Lord, for friends who have carried me through the roughest times.”
“Yes, Jesus. Nothing is impossible with you, Jesus,” the women say.
“Bodies,” Hayes says after the prayer. “Bodies out back. Bodies upstairs. People stabbed. I don’t go out at night. The last one was twenty feet away from me on my floor. There was one kid, he lived in the back of the projects, 18 years old. They buried him two months ago. Gunshot. There were four kids I knew murdered, one in the parking lot who was killed last year. He was 12 or 13. He was sleeping—some say he was living—in a car.”
“There are parents who are addicts who send their children out to sell drugs,” Hayes adds. “I know a mother who is a prostitute. Her oldest daughter sells weed to go to school, and one day the mother stole the weed and sold it to buy crack.”
Father Michael Doyle, an Irish priest, has been in the Sacred Heart parish for thirty-five years. He has witnessed the violence of poverty devastating his congregation. Father Doyle was a member of the Camden 28, a group of left-wing Catholics and anti–Vietnam War activists who in 1971 raided the city’s draft board to destroy files. He was sent to Camden as punishment by church leaders who disapproved of his activism.
“Today’s a very hard time to be poor,” says Father Doyle, seated in the church rectory. “Because you know you’re poor. You hear people my age get up and say, ‘We were poor. We put cardboard in our shoes.’ We talk like that. But we didn’t know we were poor. Today you do. And how do you know you’re poor? Your television shows you that you’re poor. So it’s very easy to build up anger in a, say, a high-voltage kid of 17. He knows he’s poor, he looks at the TV and all these people have everything and I have nothing. And so he’s very angry…. I’m talking about the violence that rises out of the marketing that shows the kid what he could have, creates a huge anger that explodes easily. That I discovered very quickly when I came to Camden. I discovered the anger was so near the surface, you just rub it and it explodes. And there’s no respect for you if you have no money.”
I ask him why the rage is invariably self-destructive. “They can’t get at it,” he said. “You have an enemy, and that enemy is greed and prejudice and injustice and all that type of thing, but you can’t get at it. There’s no head, there’s no clarity, so you take it out on your neighbor. It’s just horrendous what people do.”
“Women have some dignity in a poor ghetto because they bear children and raise them,” Father Doyle goes on. “Men are adding nothing and feeding from the trough. A woman walks down the street pushing a little cart, and a child on it—she’s somebody. But the man standing watching her is nobody.”
It is a bleak, rainy afternoon when we visit Harleigh Cemetery. Walt Whitman’s tomb, based on a design drawn by William Blake, is here with its heavy stone front and peaked roof with the poet’s name in imposing stone letters. So is the grave of another Camden poet, Nicholas Virgilio, who, as Father Doyle says, “mined beauty out of the gutters of Camden.” Virgilio died of a heart attack in 1989. The priest designed his grave in the shape of a podium. One of the poet’s verses is engraved on the stone:
lily:
out of the water…
out of itself.
Virgilio, who wrote his poems in his basement under a naked light bulb next to his washing machine, chronicled the slow strangulation of his city. The hookers knitting baby booties on a bus; sitting alone as he orders eggs and toast in an undertone on Thanksgiving; latchkey children “exploring the wild on public television”; the frozen body of a drunk found on a winter morning in a cardboard box labeled “Fragile: Do Not Crush”; as well as laments for his brother Larry, killed in Vietnam. I open his thin book, Selected Haiku, to a passage and place it on the marble top of his grave. Droplets of rain splatter the page:
the sack of kittens
sinking in the icy creek
increases the cold
Ingvar Kamprad, the owner of IKEA, is the gift that keeps on giving. More revelations about his “youthful indiscretion” of belonging the the Swedish Nazi party from 1943 through the early 1950s. Usually youthful indiscretions end in your youth, not your mid twenties after knowing that the Nazis had murdered 6 million Jews. It seems even at the age of 85 he still thinks the Nazis were a decent bunch. They were just misunderstood. This fucking prick is the reason I got shown the exit at IKEA. If you are new to the site, here is my story at IKEA:
http://www.theburningplatform.com/?p=10638
The funniest part of this is that if you google the name of the bitch CEO who fired me at IKEA – Pernille Lopez – the first thing that comes up on google is my article trashing her. She must love that. Serves the bitch right.
By Nina Larson (AFP) – 5 hours ago
STOCKHOLM — The founder of Ikea admitted long ago he foolishly flirted with Nazism in his youth, but a new book is making waves in Sweden with claims his ties to the fascist movement went much deeper than he has acknowledged.
Ingvar Kamprad, the 85-year-old Swedish billionaire who founded and still largely controls furniture giant Ikea, confessed in the 1990s that he had had links to the Nazi youth movement during World War II, when Sweden was neutral, describing it as the “greatest mistake of my life.”
He has always described the decision as the “folly of youth,” but a book published this week by journalist Elisabeth Aasbrink quotes Kamprad in an interview last year still hailing the Swedish fascist leader Per Engdahl.
“That was perhaps what was most surprising,” Aasbrink told AFP. “He has always said he got involved due to teenage confusion, but actually in August last year he was still loyal to this fascist leader.”
“He told me: ‘He (Engdahl) was a great human being and I will maintain that as long as I live’,” she said.
Swedish media have in recent days debated the book’s revelations, with an editorial the Dagens Nyheter newspaper ironically stating Thursday: “It was his life’s biggest mistake. And yet he keeps repeating it, for the rest of his life.”
Daniel Poohl of the anti-racist magazine Expo said the revelations were serious.
“Everyone has the right to make a mistake and get a second chance, but it is obvious that Kamprad still sees Per Engdahl as a great person,” he said in an interview with public broadcaster SVT.
“This was not just about happening in on a meeting by accident,” Poohl added.
Neither Kamprad, who lives in Switzerland, nor his spokesman could be reached for comment, but a statement on Ikea’s website stressed: “What happened almost 70 years ago is something Ingvar has apologised for numerous times … and has nothing to do with Ikea’s activities.”
“Ingvar has dedicated his adult life to Ikea and the democratic values Ikea stands for,” it added.
Aasbrink’s book “And in Wienerwald the trees remain” tells the story of Otto Ullman, a Jewish boy sent from Austria to Sweden right before the outbreak of World War II and soon becomes friends with Kamprad.
“Ingvar said to me: ‘don’t misunderstand me, but I fell in love.’ And they immediately became very close friends. They were 17 and 18 years old,” the author explains.
She says she did not start the project to dig into Kamprad’s Nazi past, but had wanted to understand how the Ikea founder could have been such good friends with Otto and at the very same time involved in a movement “with ideas that his friend was suffering the consequences of.”
“His parents were murdered in Auschwitz,” she pointed out.
But when she repeatedly asked Kamprad to explain what he was thinking at the time, he had finally said: “I cannot see any contradiction in this.”
Kamprad remained friends with Engdahl for years after the war ended, and Aasbrink’s book details a wedding invitation the Ikea founder sent the fascist leader in 1950 describing how he was proud to belong to the same circle as him.
Aasbrink also discovered that Kamprad, who has admitted activity in the far-right New Swedish Movement, had previously been a member of the more extreme Swedish Socialist Unity (SSS) party, with the member number 4014.
Sweden’s intelligence police Saepo had started a file on him in 1943, when he was 17, titled “Nazi”, she said.
“They obviously thought he was Nazi enough to create a file,” she said, adding she had been disappointed not to get access to possible file documents from after 1949 to probe how long Kamprad’s link to the SSS had lasted.
According to the part of the file she had seen, though, she said Kamprad claimed he “had recruited members … and doesn’t seem to miss an opportunity to serve the party.”
Aasbrink says she has received a lot of support, but also a number of angry letters and emails from people upset she was tarnishing a man widely respected for spreading a positive image of Sweden in the world.
“A lot of people think he’s a good representative for Sweden,” she said, adding: “I have also been criticised because he is an old man, but I didn’t interview him in an old people’s home. I interviewed him in Ikea’s headquarters.”
My University uses this website to get a more accurate prediction for snowfall amounts. Meteorologists post every day. Their prediction accuracy is much better than the network TV crap. It seems all the models are shifting Irene’s track westwards. One model has it hitting NYC directly. That would be a damned shame.
A few caveats I’ll put out there. First, Irene will be a large storm when it gets to this latitude and will impact many (especially if the “close to coast” or inland track verifies) but it should not pack the same intensity punch (Category 3 status) to our latitude as ocean temperatures in this part of the world are lower than they are in the Bahamas. Hurricanes thrive on hot water and ocean temperatures locally are not conducive to supporting high intensity storms. Irene will probably not be as strong as she is now but still pack a wallop when it visits us on Sunday. Second, we probably have not seen the last of the nudges with this storm’s modeled path in either direction and it’s possible that we see a bit more nudging west or east in the coming day or two.
The models have shifted the storm’s projected track to the west, with the Euro taking Irene’s eye up the Chesapeake Bay through the western suburbs and north through the Poconos into Upstate New York after initial landfall in Eastern North Carolina. Irene could bring near hurricane force sustained winds on its eastern side to South Jersey Shore Points in this scenario, with higher gusts. Winds in Philadelphia could reach 50 mph in this scenario but the worst impacts would definitely be felt at the Shore from a wind and storm surge standpoint, with everyone impacted from heavy rainfall on the order of several inches. The surge of water pushing up Delaware Bay would result in potentially significant coastal flooding on southern facing beaches (NJ side) in Delaware Bay and then lead to the risk of reverse coastal flooding on the northern facing beaches (Lewes) as winds veer around after the eye passes by. The “saving grace” is that the landfall point being in the Carolinas would result in an inland track for Irene. The result of Irene’s center being removed from the Atlantic for a period of time could weaken the storm some from its landfall intensity. Definitely an ugly scenario but Irene is not as strong here as in the GFS’ case.
The GFS has a landfall point along the Jersey Shore and tracks the storm nearly over New York City. This is nearly as ugly a scenario as the models can envision for track. The storm will have had more time over water (granted, water not as warm but it’s still water and not land) and will be a bit stronger when it makes landfall. The storm track could result in hurricane force winds hammering the Jersey and Delaware coastlines and bring heavy rain to the entire region. Winds in Philly are not as strong in this scenario but we get a bit more rain in this scenario as we would be on the western side (rainy) of the storm.
One last point to make this morning: East of the “eye” will have stronger winds than west of the eye, with the eastern side of the storm providing a better potential for quick spin-up tornadoes compared to the western side. The west side of the storm provides a better potential for heavier rainfall. Unless the storm takes a track over 100 miles east of the coastline, the region will see impacts from it…unfortunately, some of those will be rather significant.
“Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth.” – John Maynard Keynes – The Economic Consequences of the Peace
While Barack Obama vacations on Martha’s Vineyard this week he’ll be thinking about his grand vision to save America – again. There is one thing you can say about Obama – he’s predictable. He promises to unveil his “new” plan for America in early September. The White House said Obama will give a speech after the September 5 Labor Day holiday to outline measures to boost hiring and find budget savings that surpass the $1.5 trillion goal of a new congressional deficit-cutting committee. It is heartening to see that Barack has turned into a cost cutter extraordinaire. He should be an inspiration to the Tea Party, except for one little problem. The plan he unveils in a few weeks will increase spending now and fret about spending cuts at some future unspecified date.
I can reveal his plan today because the White House has already leaked the major aspects of his plan. He will call for an extension of the Social Security payroll tax cut of 2% for all working Americans. This was supposed to give a dramatic boost to GDP in 2011. Maybe it will work next time. He will demand that extended unemployment benefits be renewed. Somehow providing 99 weeks of unemployment benefits is supposed to create jobs. It’s done wonders thus far. He will propose some semblance of an infrastructure bank or tax cuts to spur infrastructure spending. It will include a proposal for training and education to help unemployed people switch careers. He will attempt to steal the thunder from the SUPER COMMITTEE of 12 by coming up with $2 trillion of budget savings by insisting the Lear jet flying rich fork over an extra $500 billion.
You may have noticed that followers of Keynesian dogma like Paul Krugman, Larry Summers, Brad Delong, Richard Koo, John Galbraith, every Democrat in Congress, and every liberal pundit and columnist have been shrieking about the Tea Party terrorists and their ghastly budget cuts that are destroying our economy. They contend the stock market is tanking and the economy is heading into recession due to the brutal austerity measures being imposed by the extremists in the Republican Party. There is just one small issue with their argument. It is completely false. It is a bold faced lie. This is 2011. The economy has been in freefall since January 1. No spending cuts have occurred. Nada!!! As the CBO chart below reveals, the horrendous slashing of government will amount to $21 billion in 2012 and $42 billion in 2013. Of course, those aren’t even cuts in spending. They are reductions in the projected increases in spending. Politicians must be very secure in the knowledge that Americans are completely ignorant when it comes to anything other than the details of Kim Kardashian’s wedding and who Snooki is banging on Jersey Shore.
I’d like to remind the Harvard educated Keynesian economists that Federal government spending is currently chiming in at $3.8 trillion per year. Federal spending was $2.7 trillion in 2007 and $3.0 trillion in 2008. Keynesians believe government spending fills the gap when private companies are contracting. Obama has taken Keynesianism to a new level. Federal spending will total $10.8 trillion in Obama’s 1st three years, versus $8.4 trillion in the previous three years. Even a Harvard economist can figure out this is a 29% increase in Federal spending. What has it accomplished? We are back in recession, unemployment is rising, forty six million Americans are on food stamps, food and energy prices are soaring, and the middle class is being annihilated. The standard Keynesian response is we would have lost 3 million more jobs, we were saved from a 2nd Great Depression and the stimulus was too little. It would have worked if it had just been twice as large.
The 2nd Great Depression was not avoided, it was delayed. Our two decade long delusional credit boom could have been voluntarily abandoned in 2008. The banks at fault could have been liquidated in an orderly bankruptcy with stockholders and bondholders accepting the consequences of their foolishness. Unemployment would have soared to 12%, GDP would have collapsed, and the stock market would have fallen to 5,000. The bad debt would have been flushed from the system. Instead our Wall Street beholden leaders chose to save their banker friends, cover-up the bad debt, shift private debt to taxpayer debt, print trillions of new dollars in an effort to inflate away the debt, and implemented every wacky Keynesian stimulus idea Larry Summers could dream up. These strokes of genius have failed miserably. Bernanke, Paulson, Geithner and Obama have set in motion a series of events that will ultimately lead to a catastrophic currency collapse. We have entered the 2nd phase of the Greater Depression and there are no monetary or fiscal bullets left in the gun. Further expansion of debt will lead to a hyperinflationary collapse as the remaining confidence in the U.S. dollar is exhausted. We are one failed Treasury auction away from a currency crisis.
John Maynard Keynes argued the solution to the Great Depression was to stimulate the economy through some combination of two approaches: a reduction in interest rates and government investment in infrastructure. Investment by government injects income, which results in more spending in the general economy, which in turn stimulates more production and investment involving still more income and spending and so forth. The initial stimulation starts a cascade of events, whose total increase in economic activity is a multiple of the original investment.
It sounds so good in theory, but it didn’t work in the Depression and it hasn’t worked today. It is a doctrine taught in every business school in America with no actual results to support it. Who needs facts and actual results when a good story believed and perpetuated by non-thinking pundits will do? Every Keynesian play in the playbook has been used since 2008. The American people were told by Obama and his Keynesian trained advisors that if we implemented his $862 billion shovel ready stimulus package, unemployment would peak at 7.9% and would decline to 6.5% by today. The cascade of recovery was going to be jump started by a stimulus package that equaled 27% of the previous year’s entire spending. Obama’s complete package was implemented. The outcome was an eye opener. If you show a Keynesian this chart, their response would be: “Imagine how bad it would have been if we didn’t spend the $862 billion.”
John Maynard Obama got everything he asked for in January 2009. He had both houses in Congress and did not need to consult Republicans to pass his Keynesian $862 billion porkulus bill. It seems that $252 billion, or 29% of the package was nothing more than transfer payments. Of course, according to Keynesians, the $252 billion should have had a multiplier effect when it was handed out. I think they were right. Obama was able to multiply the number of people on food stamps in January 2009 from 32 million to the current tally of 45.8 million. The monthly food stamp transfer payment has gone from $3.6 billion to $6.1 billion. Keynesians should be thrilled by this success story.
![[Review & Outlook]](http://sg.wsj.net/public/resources/images/ED-AI932_1stimu_NS_20090127200020.gif)
Obama’s Keynesian dream bill included:
Obama declared in December 2008 there were shovel ready projects across the land that would create immediate jobs. Too bad he didn’t tell the American public only $30 billion of the $862 billion mountain of pork was earmarked for highways and bridges. Obama declared his stimulus would create 3.5 million jobs, later changed to “create or save”. There were 144 million Americans employed in January 2009. Today, there are 139 million Americans employed. Obama gives the term “success story” a new meaning. The Keynesians had their chance and now they want a do-over. Sorry, that isn’t how it works in the real world. As Speaker Nancy Pelosi put it, “We won the election. We wrote the bill.” No truer words have ever been spoken.
As we know, that was only the beginning of our Keynesian debt nightmare. Let’s do some critical thinking and assess the results of Obama’s other Keynesian solutions:
The usual suspects are now declaring that we can’t make the same mistakes FDR made in 1937 resulting in a dramatic downturn in 1938. As usual, the Keynesian storyline about the Great Depression is false.
One thing to remember is that while the depression that started in 1929 may have come to a bottom in 1933, it took a long time to recover. There was a cyclical recovery in 1937, and why was that? Roosevelt had the good luck to have been elected dead flat at the bottom. So it wasn’t his policies that cured the last depression, it was luck and good timing, combined with the fact that they were creating a lot of money after Roosevelt took the dollar off the gold standard. That resulted in a false recovery, from 1933 to 1937, and it went downhill again. – Doug Casey
Keynes′ theory suggested that active government policy could be effective in managing the economy. Rather than seeing unbalanced government budgets as wrong, Keynes advocated what has been called countercyclical fiscal policies, that is, policies that acted against the tide of the business cycle: deficit spending when a nation’s economy suffers from recession or when recovery is long-delayed and unemployment is persistently high—and the suppression of inflation in boom times by either increasing taxes or cutting back on government outlays. He argued that governments should solve problems in the short run rather than waiting for market forces to do it in the long run. Keynes had too much faith in the wisdom of politicians and Federal Reserve bankers. They mastered the art of deficit spending, but fell a little short on paying off the debts during boom times. About $14.6 trillion short so far.
The Great Depression had the same origins as our current Greater Depression. The three Republican administrations of the 1920s practiced laissez-faire economics, starting by cutting top tax rates from 77% to 25% by 1925. Non-intervention into business and banking became government policy. These policies led to overconfidence on the part of investors and a classic credit-induced speculative boom. Gambling in the markets by the wealthy increased. While the haves got richer, millions of have-nots lived below the household poverty line of $2,000 per year. The rip roaring party came to an abrupt end in October 1929, with the Great Stock Market Crash.
Between 1929 and 1932, the market fell 89% from its high. The Keynesian storyline is that Herbert Hoover’s administration did nothing to try and revive the economy. It took Franklin Delano Roosevelt and his New Deal Keynesian policies to save the country. It’s a nice story, but entirely phony. Between 1929 and 1933 the Hoover administration increased real per-capita federal expenditures by 88%, not exactly the austerity measures described in fantasy stories concocted by the mainstream media.
|
Table 1.1.6A. Real Gross Domestic Product, Chained (1937) Dollars [Billions of chained (1937) dollars]
|
|||||||||||
|
1929
|
1930
|
1931
|
1932
|
1933
|
1934
|
1935
|
1936
|
1937
|
1938
|
1939
|
|
| Gross domestic product |
87.3
|
79.8
|
74.6
|
64.9
|
64.0
|
71.0
|
77.3
|
87.4
|
91.9
|
88.7
|
95.9
|
| Personal consumption expenditures |
63.1
|
59.7
|
57.8
|
52.6
|
51.5
|
55.1
|
58.5
|
64.5
|
66.8
|
65.8
|
69.4
|
| Gross private domestic investment |
12.2
|
8.1
|
5.1
|
1.5
|
2.3
|
4.1
|
7.6
|
9.7
|
12.2
|
8.0
|
10.3
|
| Net exports of goods and services |
0.8
|
0.4
|
0.2
|
0.0
|
-0.1
|
0.2
|
-0.5
|
-0.3
|
0.1
|
0.9
|
1.0
|
| Government consumption expenditures and gross investment |
9.2
|
10.2
|
10.6
|
10.2
|
9.9
|
11.1
|
11.5
|
13.4
|
12.8
|
13.8
|
15.0
|
The Great Depression officially lasted from 1929 until 1940. What is not well known is that real GDP was at the same level in 1936 as it had been in 1929. In no small part because real GDP soared by 37% between 1933 and 1936. The unemployment rate in 1929 was 5%. In 1936, even after real GDP had recovered to pre-depression levels, the unemployment rate was still 15%. It spiked back to 18% in 1938 and stayed above 15% until World War II. Tellingly, in 1936, private domestic investment was 21% below the level of 1929.
By contrast, government expenditures surged by 46% between 1929 and 1936. With the government creating new agencies and employing people in make-work projects, private industry was crowded out. The extensive governmental economic planning and intervention that began during the Hoover administration swelled drastically under Roosevelt. The bolstering of wage rates and prices, expansion of credit, propping up of weak firms, and increased government spending on public works prolonged the Great Depression.
The facts powerfully contradict the notion endorsed by Krugman and other Keynesian devotees that the supposed 1937-38 Depression within the Great Depression was caused by Roosevelt slashing spending. In fact, real GDP only dropped by 3.5% in 1938 and rebounded by 8.1% in 1939. What actually collapsed in 1938 was private investment, which fell 34%. By contrast, government spending declined by only 4.5% in 1938, proving that Roosevelt did not drastically cut spending. To the extent that he eased up on the accelerator, it was by cutting back on useless jobs programs like those provided by the Works Progress Administration and the Public Works Administration. Austerity did not derail the recovery.
The reason private investment collapsed in 1938 was Roosevelt’s anti-business crusade. He denounced big business as the cause of the Depression. In March 1938, FDR appointed Yale University law professor Thurman Arnold to head the antitrust division of the Justice Department. Arnold soon hired some 300 lawyers to file antitrust lawsuits against businesses. Arnold launched cases against entire industries, with lawsuits against the milk, oil, tobacco, shoe machinery, tires, fertilizer, railroad, pharmaceuticals, school supplies, billboards, fire insurance, liquor, typewriter, and movie industries.
Paul Krugman’s recent veiled yearning for a war or staged crisis to revive the economy through spending to fight the war is another Keynesian fallacy perpetuated by the mainstream media. These mindless non-critical thinking talking heads actually believe World War II ended the Great Depression. Doug Casey obliterates their fantasy:
“People say that World War II cured the Depression, but in fact, it made it worse. As bad as things were in the ‘30s, they were worse during the war in the ‘40s. You couldn’t get shoes. You couldn’t get gasoline. You couldn’t get tires. You couldn’t get just about anything that was being used for the war. The war prolonged and deepened the Depression. The thing that ended the Depression was not the war but the fact that since people could not consume, they were forced to save. That delayed consumption resulted in a huge amount of savings, and that’s what caused the recovery in the late 1940s.”
The fact that the entire world was left in smoldering ruins after World War II, except for the United States, may have contributed slightly to our recovery from the Great Depression.
According to Murray Rothbard, in his book America’s Great Depression, the artificial meddling in the economy was a disaster prior to the Great Depression, and government efforts to prop up the economy after the crash of 1929 only made things far worse. Government intrusion delayed the market’s correction and made the road to complete recovery more difficult. Today’s myopic politicians, captured monetary authorities and Harvard trained Keynesian economists have learned the wrong lessons from the Great Depression. The upshot will be a second Greater Depression and further impoverishment of the dwindling middle class. The implications of more wasteful government stimulus programs, more quantitative easing and more debt are: further debasement of the currency and ultimately a hyperinflationary collapse. The great economist John Maynard Keynes understood currency debasement:
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.”
“Those to whom the system brings windfalls, beyond their deserts and even beyond their expectations or desires, become ‘profiteers,’ who are the object of the hatred of the bourgeoisie, whom the inflationism has impoverished, not less than of the proletariat. As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless; and the process of wealth-getting degenerates into a gamble and a lottery.” – John Maynard Keynes – The Economic Consequences of the Peace
Obama’s plan to revive America will be announced with great fanfare in two weeks. We know for sure he will propose these two brilliant ideas:
It is a certainty that Obama will announce an infrastructure bank or some variation to spur investment in our national infrastructure that is crumbling by the day. Top Keynesian, and architect of the Obama stimulus plan, Larry Summers has been blathering about this for months. Even though the first stimulus plan was sold as an infrastructure plan, they mean it this time. As usual, the storyline is false. You can’t drive anywhere in this country and not be inconvenienced by road widening, bridge building, and repaving projects. The Keynesians act like infrastructure projects are highly unusual and need new Federal dollars to jump start the engine. The fact is that every Federal, State and municipal government has a capital fund that is budgeted every year. Most of the projects have multiple year lead times. They require planning and coordination. The reason we have 160,000 structurally deficient or obsolete bridges and thousands of miles of crumbling underground pipes is because politicians decided to spend their budgets on something more useful like train museums, murals, turtle crossings, and studies on the mating habits of ferrets.
The country has lost approximately seven million jobs since 2007. Five million of the jobs were lost in sales industries and manufacturing industries. There are 139 million jobs in America today and only seven million, or 5% of all jobs, in the construction industry. How do Keynesians expect to revive the job market with an infrastructure bank that will benefit, at most, 5% of the U.S. workforce? Let me guess. They will propose billions of new spending on education so they can retrain sales clerks from Wal-Mart into architects for designing 160,000 new bridges.
Barack Obama will stand in front of the American people and lie. He is a born again cost cutter, who will propose new spending. As anyone with a calculator can figure out, the two guaranteed proposals from his upcoming speech will increase spending by $165 billion in 2012. If you go back to the handy dandy chart from the CBO showing the “horrific spending cuts” from the recent debt ceiling deal you will see these “cuts” total $122 billion between 2012 and 2014. Barack will wipe out all of the supposed savings through mid 2015 with his new Keynesian plan. But don’t worry. His plan will have huge spending cuts in 2017 after his hoped for 2nd term is finished. Keynesians always promise to cut spending once their current emergency ends.
The Keynesians had their chance. They controlled the Presidency and both houses of Congress. A Keynesian runs the Federal Reserve. They implemented everything they proposed. The $862 billion porkulus program, the $700 billion TARP program, home buyer tax credits, energy efficiency credits, loan modification programs, zero interest rates, QE1 and QE2. They increased social welfare transfers for Social Security, Unemployment Compensation, food stamps, Medicare, Medicaid, and Veterans by $600 billion since 2007, a 35% increase in four years. No one has foiled their plans. The Tea Party didn’t really exist until 2010. They didn’t lose the House until November 2010. They cannot blame the Tea Party extremists, but they do.
The Keynesians have successfully increased Federal spending by $1.1 trillion, or 41% since 2007, and are running deficits exceeding 10% of GDP, but they call the Tea Party extremists. Domestic investment is still 9% below 2008 levels as the Federal government has crowded out the small businesses that create the jobs in this country. And now the Keynesians declare we need more stimulus, more programs, more debt, more quantitative easing and lower interest rates. It just wasn’t enough the first time. You have to give the Keynesians credit. Despite the utter absolute failure of every scheme they have implemented, they will worship their models and theories until they successfully collapse our economic system. Then they’ll blame the Tea Party terrorists who foiled their plans.
None of the Keynesian solutions worked during this crisis, just as they didn’t work during the Great Depression. The solution was simple, yet painful. The banking system needed to be saved, not the banks. The bad debt needed to be purged from the system. Wall Street criminals needed to be prosecuted. Bondholders and stockholders needed bear the losses from their foolish investments. Saving and investment in the country needed to be encouraged, while borrowing and consuming needed to be discouraged. Our leaders have failed to lead. The American people have failed to accept the consequences of their actions. And now we are going to pay a heavy price as Ludwig von Mises predicted:
“There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.”
We know what Muck thinks. I’m For, but I do think George Carlin’s rant is really funny.
What do you think?
Sunday, August 21, 2011 3:09
In Favour Of God
I believe in God, only I spell it “Nature”.
> Frank Lloyd Wright
God is the great mysterious motivator of what we call nature and it has been said often by philosophers, that nature is the will of God. And, I prefer to say that nature is the only body of God that we shall ever see. If we wish to know the truth concerning anything, we’ll find it in the nature of that thing.
> Frank Lloyd Wright in Truth Against the World
When we say God is a spirit, we know what we mean, as well as we do when we say that the pyramids of Egypt are matter. Let us be content, therefore, to believe him to be a spirit, that is, an essence that we know nothing of, in which originally and necessarily reside all energy, all power, all capacity, all activity, all wisdom, all goodness.
> John Adams in a letter to Thomas Jefferson
God is not a limited individual who sits alone up in the clouds on a golden throne. God is pure Consciousness that dwells within everything. Understanding this truth, learn to accept and love everyone equally.
> Amma
God, the supreme being, is neither circumscribed by space, nor touched by time; he cannot be found in a particular direction, and his essence cannot change. The secret conversation is thus entirely spiritual; it is a direct encounter between God and the soul, abstracted from all material constraints.
> Avicenna as quoted in 366 Readings From Islam
God alone is real, nothing matters but love for God.
> Meher Baba
When with bold telescopes I survey the old and newly discovered stars and planets, when with excellent microscopes I discern the unimitable subtility of nature’s curious workmanship; and when, in a word, by the help of anatomical knives, and the light of chemical furnaces, I study the book of nature, I find myself oftentimes reduced to exclaim with the Psalmist, ‘How manifold are Thy works, O Lord! In wisdom hast Thou made them all!
> Sir Robert Boyle
An outlook through this peephole [that manned space flight had opened] at the vast mysteries of the universe should only confirm our belief in the certainty of its Creator. I find it as difficult to understand a scientist who does not acknowledge the presence of a superior rationality behind the existence of the universe as it is to comprehend a theologian who would deny the advances of science.
> Wernher Von Braun
To say that I am made in the image of God is to say that Love is the reason for my existence, for God is love. Love is my true identity. Selflessness is my true self. Love is my true character. Love is my name.
> Thomas Merton in Seeds of Contemplation
I believe in a spiritual world — not as anything separate from this world — but as its innermost truth. With the breath we draw we must always feel this truth, that we are living in God.
> Rabindranath Tagore
The Opposition To God
Not only is there no God, but try getting a plumber on weekends.
> Woody Allen in Getting Even
God was a clever idea … The human race came up with a winner there.
> J. G. Ballard as quoted in ‘The benign catastrophist’
To the lexicographer, God is simply the word that comes next to go-cart
> Samuel Butler
Religion easily has the greatest bullshit story ever told. Think about it. Religion has actually convinced people that there’s an invisible man living in the sky who watches everything you do, every minute of every day. And the invisible man has a special list of ten things he does not want you to do. And if you do any of these ten things, he has a special place, full of fire and smoke and burning and torture and anguish, where he will send you to live and suffer and burn and choke and scream and cry forever and ever ’til the end of time! But He loves you. He loves you. He loves you and he needs money! He always needs money! He’s all-powerful, all-perfect, all-knowing and all-wise, but somehow, just can’t handle money!
> George Carlin
I don’t believe in God because I don’t believe in Mother Goose.
> Clarence Darrow
The God of the Old Testament is arguably the most unpleasant character in all fiction: jealous and proud of it; a petty, unjust, unforgiving control-freak; a vindictive, bloodthirsty ethnic cleanser; a misogynistic, homophobic, racist, infanticidal, genocidal, filicidal, pestilential, megalomaniacal, sadomasochistic, capriciously malevolent bully.
> Richard Dawkins in The God Delusion
God says do what you wish, but make the wrong choice and you will be tortured for eternity in hell. That, sir, is not free will. It would be akin to a man telling his girlfriend, ‘Do what you wish, but if you choose to leave me, I will track you down and blow your brains out.’ When a man says this we call him a psychopath and cry out for his imprisonment/execution. When a god says the same, we call him loving and build churches in his honor.
> Chuck Easttom computer programmer
I see only with deep regret that God punishes so many of His children for their numerous stupidities, for which only He Himself can be held responsible; in my opinion, only His nonexistence could excuse Him.
> Einstein in Letter to Edgar Meyer
God is dead. Marx is dead. And I don’t feel so well myself.
> Eugène Ionesco as quoted in Jewish American Literature
God is cruel, sometimes he makes you live.
> Stephen King in Desperation
John Mauldin is cautious guy. He hedges his bets and his comments. He says we are in a recession or going into a recession shortly. He backs it up with unequivical facts. He is warning you to get out of the stock market. There is a long way to go on the downside. Ignore his warning at your own peril. He is not a chicken little. He is usually overly optimistic.
By John Mauldin
August 20, 2011
The Recession of 2011?
The Streettalk/Mauldin Economic Output Index
Is There a Recession in Our Future?
The Bright Side of Europe’s Dysfunctionality
The “Treasonous” Fed
Some Final Thoughts
Some Hope and Needed Help, Plus Travels
The data this week was just ugly. Even the uptick in the leading economic indicators, seized upon by so many talking heads, must have a large asterisk beside it. This week we look at the increasing probability that we are headed for recession, and the follow-on implications. Then I take a perilous and speculative journey into the realm of the political, commenting on Texas (and my) Governor Rick Perry’s rather interesting comments about the Fed and Ben Bernanke. There is a lot to cover, and lots of charts, so we will jump right in. But please read at the end about two events coming up in the next few months that you might be very interested in attending.
It was relatively easy for me to forecast the recessions of 2001 and late 2007 over a year in advance. We had an inverted yield curve for 90 days at levels that have ALWAYS heralded a recession in the US. Plus there were numerous other less accurate (in terms of consistency) indicators that were “flashing red.” (For new readers, an inverted yield curve is where long-term rates go below short-term rates, a [thankfully] rare condition.)
And since stocks drop on average more than 40% in a recession, suggesting that you get out of the stock market was not such a challenging call. Although, when Nouriel Roubini and I were on Larry Kudlow’s show in August of 2006, we got beaten up for our bearish views. And you know what? The stock market then proceeded to go up another 20% in the next six months. Ouch. That interview is still on YouTube at http://www.youtube.com/watch?v=9AUoB7x2mxE. Timing can be a real, um, problem. There is no exact way to time markets or recessions.
My view then was based on the inverted yield curve (as an article of faith) and, not much later in 2006, my growing alarm as I realized the extent of the folly of the subprime debt debacle and how severe a crisis it would become. I changed my assessment from a mild recession to a serious one in early 2007 as my research revealed more and more fault lines and the damning interconnection of the global banking system (which has NOT been fixed, only made worse since then). I should note that my early views were rather Pollyannaish, as I thought (originally) that losses to US banks would only be in the $400 billion range. I keep telling people that I am an optimist.
With the Fed artificially holding down rates on the short end of the curve, we are not going to get an inverted yield curve this time, so we have to look for other indicators to come up with a forecast for the US economy. We grew at less than 1% in the first half of the year. That is close to stall speed. And that was with a full dose of QE2! So now, let’s look at a series of charts that cause me to be very concerned about the near-term health of the economy. Then we turn to Europe and problems compounding there.
Last year I was having a discussion with Lance Roberts of Streettalk Advisors in Houston about how to build an indicator that might give us a clue as to the direction of the economy. Most indicators use one or two data points and thus can be suspect.
For instance, the Philly Fed Economic Index went from 3.2 in July to -30.7 in August, helping to tank the market. Almost every subcomponent (new orders, employment, etc.) was not just down but negative. This was truly a shocker. You can see the gory details at http://www.philadelphiafed.org/research-and-data/regional-economy/business-outlook-survey/2011/bos0811.cfm.
The Empire Index (New York) went from -3.8 to -7.7. The Empire Index suggests that the August ISM manufacturing number will be 49, or in a state of negative growth. The Philly Index suggests a very dismal 42, which if true would suggest we are already in recession. But these are regional indexes.
Now, just for fun, let’s look at a combined index that David Rosenberg created from the Philly Index plus the Michigan Consumer Confidence Index. (Those of us old enough can remember Jack Nicholson playing the Joker in Batman back in 1989. When Batman escaped with the help of something from his tool kit, Nicholson said, “Where does he get all those wonderful toys?” When I read Rosie’s newsletter, I have the same reaction. “Where does he get all those wonderful charts?” He swears he makes them himself. I stand in awe.)
Notice that with Rosie’s combined index where it is today, we are either at the beginning of a recession or already in one. And the Philly Fed Index is consistent with a 90% chance of a recession.
And that is again consistent with the following chart from Rich Yamarone, which I used last month but that bears looking at again. Rich is chief economist at Bloomberg. (By the way, for Conversation subscribers, I just recorded a powerhouse session with Rich, which will be available as soon as we can get it transcribed.)
I previously wrote, in late July:
“And the last chart is one I had not seen before, and is interesting. Rich notes that if year-over-year GDP growth dips below 2%, a recession always follows. It is now at 2.3%.”
Oops. Last week David Rosenberg updated that chart. This from Rosie:
If Rich is right, then the next revisions to second-quarter GDP will be down from an already abysmal 1.3%. And the growth in the second half is not going to be all that good for jobs and consumer spending
But these are charts of single data points. You can quibble that the Philly Fed could be influenced by something local or that the 1.6% number might be different this time. So Lance Roberts of Streettalk Advisors (with me looking over his shoulder) created an index that combines a number of economic indexes in an effort to build an index that is not subject to single (or double) indicators. The Streettalk/Mauldin Economic Output Index is composed of a weighted average of the following indexes:
Chicago Fed National Activity Index
Chicago PMI
The Streettalk ISM Composite Index
Richmond Fed Manufacturing Survey
Philly Fed Survey
Dallas Fed Survey
Kansas City Fed Survey
The National Federation of Independent Business Survey
Leading economic indicators
Note that there are six regional and national indicators, plus the NFIB survey, which is national. Lance’s index is not driven by one region or index or survey. When the combined indicator falls below 30, it has always indicated either that we are in a recession or about to be in one. The chart is overlaid, below, against GDP and LEI (leading economic indicators) – both tend to have a fairly high correlation to our Economic Output Composite Index. And LEI is currently supported by the yield spread and money supply (more on that below).
A few quick notes before the chart. First, note the increases in the index with the onset of QE1 and QE2 and the sharp drops when QE ends. The red at the end of the chart is the recent drop, and it takes us into recession territory. Recessions are indicated by gray bands
Note: I will be speaking at the Streettalk conference on October 14 in Houston, and tickets are currently on sale at www.streettalklive.com. David Rosenberg will also be speaking. They put on a very good conference at a reasonable price.
Now, a comment on the uptick in the leading economic indicators this week. Even the ECRI noted that it was because two of the financial components added to the positive numbers. One was the sharp rise in M2 money supply. But a lot of that is because people are going to cash, which is not all that positive from a macro viewpoint. The other is the steepness of the yield curve, which is being manipulated at the short end. Without their positive contributions, the index would be down 0.5%, down three of the last four months, and in a pattern that led to a recession in late 2007. Coincidence?
One last chart from Batman, I mean Rosie. Here he gives us the latest data from Larry Meyer’s Macroeconomic Advisers, where they track the real GDP index (inflation-adjusted). It is also in recession territory.
Housing is terrible. Existing-home sales were bad. The inventory for homes for sale grew, even as mortgage rates are at all-time lows. A 30-year mortgage is at 4.15%. It is possible we could see a 30-year mortgage with a “3” handle if we slip into recession. I could go on and on about the negative data, and may do so in future letters, but I will resist writing another book tonight, as we have a few other topics to cover.
To say that the government of Europe is dysfunctional is an no-brainer. The bright side is that it makes the US government look slightly better, and that’s not saying a lot. This past week Nicholas Sarkozy asked Angela Merkel out, so they could decide what to do about the euro crisis. What they said was, we need yet another eurozone governing body overseeing fiscal debt and promises by governments not to run large deficits – like that has ever worked. And they unequivocally said “non” and “nein” to the idea of eurobonds, which everyone else says is vital if the euro is to survive. Oh, and we will harmonize our tax structures within five years. As if that solves the crisis today. Note to Nick and Angela: the problem is not tax structures, it is debt that cannot be repaid.
Lars Frisell is the chief economist for the Swedish group that regulates that nation’s banking system. Yesterday he was quoted as saying:
“It won’t take much for the interbank market to collapse. It’s not that serious at the moment, but it feels like it could very easily become that way and that everything will freeze.” (hat tip, Art Cashin)
My friend Porter Stansberry wrote today:
“In Europe, the problem is a bit different … and slightly more technical. Most of the debt in Europe is held by the big banks, not the sovereigns. Look at just two French banks, for example. Credit Agricole and BNP Paribas have combined deposits of a little more than 1 trillion euro. But they hold assets of 2.5 trillion euro. Those assets equal France’s entire GDP.
“And those are only two of France’s banks. Right now, the tangible capital ratios of these banks have fallen to levels that suggest they are probably bankrupt – like UniCredit in Italy and Deutsche Bank in Germany. BNP’s tangible equity ratio is 2.85%. Credit Agricole’s tangible equity ratio is 1.41%. (UniCredit’s is 4.42%, and Deutsche Bank’s is 1.92%).
“These banks have long been instruments of state policy in Europe. They’ve funded all kinds of government projects and favored industries. Making loans is far more popular with politicians than demanding repayment for loans. As a result, these banks are left with nothing in the kitty to repay their depositors. If there’s a run on these banks (and there will be), how will they come up with money that’s owed?”
I totally agree (although Porter is wrong about US debt). If there is a sovereign debt credit crisis in Europe, it is entirely possible that 80% of Europe’s banks will be technically insolvent, depending on the level of the crisis. Frisell could be eerily prescient. We gave them subprime; they may pay us back with their own crisis and in spades, as Dad used to say.
I really need to do a whole letter on Europe again soon. The next real crisis in Europe that is not bought off with yet more debt will push the world into recession. It is that serious. That is why the ECB keeps ignoring its charter and taking on bank debt and buying sovereign debt they know will be marked down.
The entire world economy now swings on the German voters and whether they will take on all of Europe’s debt, risking their own AAA status and putting themselves at serious risk. Supposedly, Finland wants collateral from Greece if it contributes its portion of a guarantee. Think every other country will not want some of that action? I simply do not have the space to go into it tonight, but this is VERY serious. Maybe next week. And just as I was getting ready to hit the send button, economy.com sent me an email entitled “Article: Europe’s Leaders Know the Way but Lack the Will, by Tu Packard. Summary: The stability facility lacks credibility.”
That more than sums it up. Dysfunctional indeed.
We now need to turn to Governor Perry, our newest candidate for president.
I have been asked many times what I think about Governor Perry getting into the presidential race. Over six months ago he told me personally there was no way he would run, and he was serious when he said it. I believed him. But what I think happened in the interim is that he looked at the field of candidates and said, “I can play in that league.” And as long as he can keep from making any more gaffs like he did with his Fed comments, he can indeed play in the current field. He has the charm of being plainspoken and blunt, and that might just play well this year. Whether the country is ready for another Texan is a different question.
(Sidebar: my personal bet is that there are at least two and possibly three other potential candidates who would be taken seriously if they got into the race. They, too, have got to be saying, “Is this all I’m up against? I can play in this league. In fact, I might just be the MVP.” The lure of the presidency is a powerful one. My bet is we have not seen the final field of candidates. And it is not impossible that a challenger emerges on the Democratic side as well. Obama’s poll numbers, even among Democrats, are not good. This is a very interesting political year and as wide open as I can remember.)
But however injudicious Perry’s actual remarks were, he is right to call into question Fed actions. Why do I as your humble analyst get that right and politicians don’t? Let me be clear. I want a VERY independent Fed. I do not want Congress or the President dictating Fed policy. I do not like Senators holding up Fed nominations for political gain, whether it was Dodd fighting Bush over his nominees or current GOP senators fighting Obama over his. That is simply wrong in every way. But I think Fed actions are fair game for comment and disagreement. And I agree with Perry that QE2 was not helpful. It was not very wise policy – but that is a long way from “treasonous.” Let’s see if the electorate gives him a “mulligan” on that comment.
Think about this. The Fed announced this week that it would extend low rates until 2013. They are practically pushing people into higher-risk assets in a search for yield, at PRECISELY the time we may be slipping into recession, which will put those assets at their highest risk. I think this could end in tears and land those who are close to retirement in even worse shape.
Note to Governor Perry: If you want to learn how to properly criticize the Fed and the US government, go read the last ten speeches of another Texan, Dallas Fed President Richard Fisher (who should be the next Fed chair!). Let’s take a look at a few paragraphs from his latest speech, this week (again, hat tip Art Cashin).
“I have spoken to this many times in public. Those with the capacity to hire American workers―small businesses as well as large, publicly traded or private―are immobilized. Not because they lack entrepreneurial zeal or do not wish to grow; not because they can’t access cheap and available credit. Rather, they simply cannot budget or manage for the uncertainty of fiscal and regulatory policy. In an environment where they are already uncertain of potential growth in demand for their goods and services and have yet to see a significant pickup in top-line revenue, there is palpable angst surrounding the cost of doing business. According to my business contacts, the opera buffa of the debt ceiling negotiations compounded this uncertainty, leaving business decision makers frozen in their tracks.
{Mauldin note: Opera buffa (Italian; plural, opere buffe) is a genre of opera. It was first used as an informal description of Italian comic operas variously classified by their authors as ‘commedia in musica.’ Us Texans have our literary abilities.}
“I would suggest that unless you were on another planet, no consumer with access to a television, radio or the Internet could have escaped hearing their president, senators and their congressperson telling them the sky was falling. With the leadership of the nation―Republicans and Democrats alike―and every talking head in the media making clear hour after hour, day after day in the run-up to Aug. 2 that a financial disaster was lurking around the corner, it does not take much imagination to envision consumers deciding to forego or delay some discretionary expenditure they had planned.
“Instead, they might well be inclined to hunker down to weather the perfect storm they were being warned was rapidly approaching. Watching the drama as it unfolded, I could imagine consumers turning to each other in millions of households, saying: ‘Honey, we need to cancel that trip we were planning and that gizmo or service we wanted to buy. We better save more and spend less.’ Small wonder that, following the somewhat encouraging retail activity reported in July, the Michigan survey measure of consumer sentiment released just recently had a distinctly sour tone.
“Importantly, from a business operator’s perspective, nothing was clarified, except that there will be undefined change in taxes, spending and subsidies and other fiscal incentives or disincentives. The message was simply that some combination of revenue enhancement and spending growth cutbacks will take place. The particulars are left to one’s imagination and the outcome of deliberations among 12 members of the Legislature.
“Now, put yourself in the shoes of a business operator. On the revenue side, you have yet to see a robust recovery in demand; growing your top-line revenue is vexing. You have been driving profits or just maintaining your margins through cost reduction and achieving maximum operating efficiency. You have money in your pocket or a banker increasingly willing to give you credit if and when you decide to expand.
“But you have no idea where the government will be cutting back on spending, what measures will be taken on the taxation front and how all this will affect your cost structure or customer base. Your most likely reaction is to cross your arms, plant your feet and say: ‘Show me. I am not going to hire new workers or build a new plant until I have been shown what will come out of this agreement.’
“Moreover, you might now say to yourself, ‘I understand from the Federal Reserve that I don’t have to worry about the cost of borrowing for another two years. Given that I don’t know how I am going to be hit by whatever new initiatives the Congress will come up with, but I do know that credit will remain cheap through the next election, what incentive do I have to invest and expand now? Why shouldn’t I wait until the sky is clear?’”
You can read the whole speech at http://www.dallasfed.org/news/speeches/fisher/2011/fs110817.cfm. In addition to his reasoning for his latest dissent at the Fed, Fisher also goes into detail about the Texas job-growth machine, which is what Perry will be touting.
Again from Art Cashin:
Bullard, of the St. Louis Fed, said “Policy should be set by the state of the economy, not according to the calendar,” pointing to the Fed’s decision to stand pat until mid-2013.
Next came the Philly Fed’s Plosser, who said, “There is a price to be paid” for monetary policy and that the Fed’s decision was “inappropriate policy at an inappropriate time.”
Now that, Rick, is how to take the Fed to task.
If we are headed into recession, and I think we are, then the stock market has a long way to go to reach its next bottom, as do many risk assets. Income is going to be king, as well as cash (and cash is a position, as I often remind readers).
If we go into recession, we’ll know several things. Recessions are by definition deflationary. Yields on bonds will go down, much further than the market thinks today. And while the Fed may decide to invoke QE3 to fight a deflation scare, the problem is not one of liquidity; it is a debt problem.
It is not unusual for a recession to last a year, which means it could well take us into next summer and election season. And while the NBER (the people who are the “official” recession scorecard keepers) will tell us when the recession started, about nine months after it has, it is unlikely they will give an all-clear before the election.
There is little stomach for more fiscal stimulus. The drive is to cut spending. Fed policy is impotent. Unemployment will rise yet again and tax receipts will fall and expenses related to unemployment benefits will rise, putting further pressure on the deficit. Already, 40 million of our citizens are on food stamps. Wal-Mart notes that shoppers come into their stores late at night on the last day of the month and wait until midnight, when their new allotment of food stamps is activated.
It is hard to see at this moment what pulls us out, other than the blood, sweat, and tears of American entrepreneurs. Fisher is right; the US government should create certainty, create policies to foster new business, and get out of the way.
So, I guess I am going out on a limb, without any help from an inverted yield curve, and saying that we will be in recession within 12 months, if we are not already in one. This will be unlike any recession we have seen, as there is not much that can be done, other than to just get through it as best we can. Sit down and think about your own situation and prepare.
And frankly, for those of us who are entrepreneurs, this will offer some very interesting opportunities. I am not one for digging a hole and crawling in it. Stay aware of what can be done and create your own solutions!
Source: JohnMauldin.com (http://s.tt/134MA)
Nice factual reasoned analysis from Comstock Partners on why this bear market has a long way to go. People tend to focus on the day to day fluctuations of the market rather than stepping back and looking at the big picture. The world runs in long term cycles. The stock market also operates in long term cycles going from undervaluation to overvaluation and back. The markets experience alternating secular bull and bear markets that generally last for 15 to 20 years at a time. Investors get fooled by the cyclical bear and bull markets that las one or two years within a secular trend.
We had a secular bear market that lasted from 1966 to 1982. We then had a secular bull market that lasted from 1982 to 2000. We are now 11 years into a secular bear market, with stock prices lower than they were in 1998. We have at least five years left. Valuations are still extremely high. We have just completed a cyclical bull market from the March 2009 lows. The artificial stimulus is wearing off and the economy is headed into the tank. Corporate profits will crash and the stock market will drop at least 30% from here.
Ignore CNBC and concentate on valuations and the long term cycles.
What is currently happening in the market and the economy was predictable and is following the sequence we have long expected. Households accumulated enormous debts in the past decade, leading to the credit crisis and recession of 2007-2009. The government stepped in with massive monetary ease and fiscal expansion that produced only a weak recovery and a vast increase in government debt. The market erroneously assumed that the recovery would follow the pattern of typical post-war expansions and rallied strongly from the early 2009 bottom to the recent highs.
A similar pattern developed in Europe where sovereign debt of the weaker EU members has become a serious problem that EU leaders have been unable to solve. Now we are undergoing the aftershocks of the crisis.
As we have repeatedly stated, crisis recoveries are characterized by short sub-par recoveries and numerous recessions as household debt burdens dampen consumer spending for long periods. We did see the short sub-par recovery and now it seems to be ending at a time when the Fed has already used its best weapons and fiscal policy is due to become more restrictive. First half GDP was revised down sharply. Housing has continued to weaken. Consumer spending has been sluggish. Initial jobless claims for the latest period jumped back over 400,000. The ECRI leading index has declined to 127.9 from its April peak of 131.1.
Even more shocking was the plunge in the August Philly Fed Index to minus 30.7 from 3.2 in July. The drop was the weakest since October 2008. In addition, the August University of Michigan Consumer Confidence Index dropped to 54.9, lower than any level during the recession and the lowest in 31 years. These are the types of readings seen only in recessions. Although the Fed only recently lowered its economic outlook for the second half of this year and 2012 these projections already seem outdated. Today the New York Fed lowered its outlook while numerous brokerage firms and banks have belatedly been scrambling to cut their forecasts as well.
If anything the situation looks even worse in Europe. Germany reported second quarter GDP growth of 0.1% and growth in France was zero. Moreover European banks with exposure to PIIGS debt have been turning to the ECB for emergency loans. Today the ECB reported that one bank (not named) has borrowed 500 million Euros a day for seven days.
The remaining areas of the world cannot stop global GDP growth from shrinking. Japan is in a recession. China is still tightening to dampen inflation. China as well as the other emerging nations are export-driven economies that depend heavily on American and European consumers.
We, therefore, believe that the market has now entered a major downtrend. It is a mistake to dismiss the slide we’ve seen to date as mindless and devoid of fundamentals as many strategists maintain. These are not just scary headlines—-they are scary fundamentals. As usual, there will undoubtedly be some more sharp rallies that will be interpreted as new bull markets. In our view, however, the bear market has only begun, and has a long way to go.
