Tag Archives: economic

Proof Of U.S. Greater Depression

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(Bullion Bulls Canada) — It has become increasingly difficult to engage in credible economic analysis, especially with respect to the U.S. economy. The problem: ever more limited sources of uncorrupted data, while the farcical “official statistics” have long since been totally divorced from the real world. Fortunately we have been presented with some raw, uncorrupted data that demonstrates in conclusive terms that the U.S. economy is literally shriveling before our eyes: a 21st century economy with plummeting energy consumption, and even a declining use of electricity.

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Warnings Of World Economic Failure

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A grim report just issued by the Finance Ministry that is circulating in the Kremlin today says the United States Clearing House Interbank Payments System (CHIPS) has ground to a virtual halt signaling that a major global economic collapse is currently underway and could very well likely enter into the dreaded “freefall zone.”

Virtually unknown to all but the global financial elite, CHIPS is the main privately held clearing house for large-value transactions in the United States, settling well over $1 trillion a day in around 250,000 interbank payments that together with the Fedwire Funds Service, which is operated by the Federal Reserve Banks, forms the primary US network for large-value domestic and international US dollar payments where it has a market share of around 96%.

The cause underlying the collapse of CHIPS, this report says, is due to the “unprecedented” demand for immediate liquidity relief being sought by the largest banks in the US and EU that are being crushed under of the combined debt of both the United States and Europe said to total near $39 trillion.

Important to note is that what is currently happening is a virtual repeat of the 2008 Financial Crisis that the United States Senate’s Levin–Coburn Report found “was not a natural disaster, but the result of high risk, complex financial products; undisclosed conflicts of interest; and the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street.”

Grimly echoing this Ministry report is the latest data [see chart 2nd photo left, or click on link] from The Baltic Dry Index (BDI) that is a number issued daily by the London-based Baltic Exchange and shows it in freefall dropping 65% in the past 30 days alone, a terrifying amount of loss not seen since the dark days of late 2008.

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Foreigners Dump US Treasury In Record Numbers

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by Tyler Durden, ZeroHedge

With year end fund flows making absolutely no sense for the most part, thank you global central planning, as the euro plunges and the market refuses to follow, with risk assets rising on speculation the ECB (and/or Fed) are about to restart printing yet gold collapsing (on one or two hedge funds liquidating, yet econ PhDs already rewriting their theses on why the “gold bubble has popped”), and finally with Treasurys soaring to near all time highs (10 Year under 1.9% yesterday even as stocks surged on data from the National Advertisers of Realtors, aka NAR, of all fraudulent and corrupt entities), here is the latest observation to make the confusion complete. As the Fed’s critical H.4.1 weekly update shows (which is leaps and bounds more accurate than the Treasury’s TIC international fund flow data), in the week ended December 28, foreign investors sold the second highest amount of US bonds in history, or $23 billion, bringing total UST custodial holdings to $2.67 trillion, a level first crossed to the upside back in April. This number peaked at $2.75 trillion in mid-August, and as the chart below shows the foreign holdings of US paper have been virtually flat in all of 2011, something which is in stark contrast with what the price of the 10 Year would indicate vis-a-vis investor demand. And going back further, the last week is merely the latest in a series of Custodial account outflows. In fact, in the last month (trailing 4 weeks), foreigners have sold a record $69 billion in US paper, a monthly outflow that was approached only once – in the aftermath of the US downgrade (when erroneously it is said that a surge in demand for US paper pushed rates lower – obviously as the chart shows nothing could be further from the truth).

So here is the conundrum for today: did China continue to dump US paper in the year end, something we saw started with the October TIC data, or was it French banks continuing to sell off any non-EUR assets, and in the process repatriate proceeds, keeping the EUR higher. We don’t know, nor frankly, in this uber-centrally p(l)anned market, do we care much any longer.

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Federal Deficit To Reach $1.5 Trillion – Largest Gap In History

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By Lori Montgomery
Washington Post Staff Writer
Wednesday, January 26, 2011; 10:28 AM

The weak economy and fresh tax cuts approved last month will help drive the federal budget deficit to $1.5 trillion this year, the biggest budget gap in history and one of the largest as a share of the economy since World War II, congressional budget analysts said Wednesday.

“Economic developments, and the government’s responses to them, have – of course – had a big impact on the budget,” the Congressional Budget Office said in its semi-annual budget outlook.

“We estimate that if current laws remain unchanged, the budget deficit this year will be close to $1.5 trillion, or 9.8 percent of [gross domestic product]. That would follow deficits of 10 percent of GDP last year and 8.9 percent in the previous year, the three largest deficits since 1945. As a result, debt held by the public will probably jump from 40 percent of GDP at the end of fiscal year 2008 to nearly 70 percent at the end of fiscal year 2011.”

If current laws remain unchanged, the CBO said, budget deficits “would drop markedly over the next few years as a share of output,” averaging 3.6 percent of GDP from 2012 through 2021 and totaling nearly $7 trillion over the decade. However, that projection assumes all the Bush tax cuts will expire in 2012 and that Congress will make other changes to raise taxes — an uncertain bet.

montgomeryl@washpost.com

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The Great, Great, Great Depression – Lawrence W. Reed

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Introduction

By LAWRENCE W. REED | Jan. 1, 1998

Many volumes have been written about the Great Depression of 1929-1941 and its impact on the lives of millions of Americans. Historians, economists and politicians have all combed the wreckage searching for the “black box” that will reveal the cause of the calamity. Sadly, all too many of them decide to abandon their search, finding it easier perhaps to circulate a host of false and harmful conclusions about the events of seven decades ago. Consequently, many people today continue to accept critiques of free-market capitalism that are unjustified and support government policies that are economically destructive.
How bad was the Great Depression? Over the four years from 1929 to 1933, production at the nation’s factories, mines and utilities fell by more than half. People’s real disposable incomes dropped 28 percent. Stock prices collapsed to one-tenth of their pre-crash height. The number of unemployed Americans rose from 1.6 million in 1929 to 12.8 million in 1933. One of every four workers was out of a job at the Depression’s nadir, and ugly rumors of revolt simmered for the first time since the Civil War.
“The terror of the Great Crash has been the failure to explain it,” writes economist Alan Reynolds. “People were left with the feeling that massive economic contractions could occur at any moment, without warning, without cause. That fear has been exploited ever since as the major justification for virtually unlimited federal intervention in economic affairs.”[1]
Old myths never die; they just keep showing up in economics and political science textbooks. With only an occasional exception, it is there you will find what may be the 20th century’s greatest myth: Capitalism and the free-market economy were responsible for the Great Depression, and only government intervention brought about America’s economic recovery.View Source

Chapters:

A Modern Fairy Tale
The Great, Great, Great Depression
Phase I: The Business Cycle
Central Planners Fail At Monetary Policy
The Bottom Drops Out
Buddy Can You Spare $40 Million?
Phase II: The Disintegration of the World Economy
The Greatest Spending Administration In All Of History
You Tax Me, I Tax You
Free Markets or Free Lunches?
Phase III: The New Deal
Nothing To Fear But Fear Itself
New Dealing From The Bottom Of The Deck
Blue Eagles, Red Ducks
The Alphabet Commissars
An Astonishing Rabble of Impudent Nobodies
Signs Of Life
Phase IV: The Wagner Act
An Unfriendly Climate For Business
Whither Free Enterprise
Postscript: Have We Learned Our Lessons?

Minority leader Boehner: Fire Obama’s economic team, extend tax cuts

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By Paul Kane and Michael D. Shear
Tuesday, August 24, 2010

CLEVELAND — House Minority Leader John Boehner (R-Ohio) called Tuesday for the mass firing of the Obama administration’s economic team, including Treasury Secretary Timothy F. Geithner and White House adviser Larry Summers, arguing that November’s midterm elections are shaping up as a referendum on sustained unemployment across the nation and saying the “writing is on the wall.”

Boehner said President Obama‘s team lacks “real-world, hands-on experience” in creating jobs that are needed for a full economic recovery. The Republican lawmaker cited reports that some senior aides complained of “exhaustion,” including the recently departed budget chief Peter Orszag.

(44: Boehner not the only one who wants Geithner out)

“President Obama should ask for – and accept – the resignations of the remaining members of his economic team, starting with Secretary Geithner and Larry Summers, the head of the National Economic Council,” Boehner said in the morning speech to business leaders at the City Club of Cleveland. The mass dismissal, he added, would be “no substitute for a referendum on the president’s job-killing agenda. That question will be put before the American people in due time. But we do not have the luxury of waiting months for the president to pick scapegoats for his failing ‘stimulus’ policies.”

Vice President Biden lashed back at Boehner, called his “so-called” economic plan nothing but a list of what Republicans are against and devoid of innovative new ideas that can help move the country forward.

In a sarcastic tone, Biden thanked Boehner for the suggestion that the president fire his top economic advisers.

“Very constructive advice and we thank the leader for that,” Biden said.

With President Obama on vacation Martha’s Vineyard, the White House largely left it to Biden to respond to the speech. He accused Boehner and the GOP of wanting to take the country back to failed policies of the past.

“Mr. Boehner is nostalgic for those good old days, but Americans are not…We’ve seen this movie before Mr. Boehner,” Biden said. “We’ve seen it before. And we know how it ends.”

Calls for Cabinet officials to be fired is nothing new for the party out of power — during the Bush administration many Democrats called for the ouster of Defense Secretary Donald Rumsfeld, a demand that was not met until Democrats swept the 2006 midterms.

Bill Burton, the White House deputy press secretary, said he had reviewed Boehner’s speech and found “what was most surprising was his full-throated defense of the indefensible,” a reference to the congressman’s proposal to give tax breaks to companies that Burton said “ship jobs overseas.”

He rejected Boehner’s call for Obama to dismiss Geithner and Summers, saying the “irony of this is that Boehner would fire the people who made the tough decisions, who did the hard work to get the economy going again.”

In his speech, Boehner sought to personalize mounting concerns among voters about Obama’s handling of the economic recovery – arguing that Obama’s advisers unfairly highlight brief signs of marginal improvement to suggest a coming surge in job creation.

“The American people are asking, ‘where are the jobs?’ and all the president’s economic team has to offer are promises of ‘green shoots’ that never seem to grow,” Boehner said. “The worse things get, the more they circle the wagons and defend the indefensible.” After the speech, he held a question-and-answer session with business leaders in this economically distressed Rust Belt city.

Democratic National Committee officials organized a conference call Monday to critique what they consider a lack of new proposals from the GOP and unveil a Web ad rehashing attack lines against the minority leader, including a 15-year-old story about handing out campaign checks from tobacco companies to Republicans on the House floor.

“It was John Boehner and Republicans who invented the ways of Washington,” the narrator says in the ad.

House Republicans do not plan to unveil a detailed policy agenda until late September, and Boehner’s speech did not expand the GOP’s existing economic proposals in any significant way. The speech was part of a bus tour of battleground House districts, focusing on manufacturing-centric regions such as Indiana, Ohio and western Pennsylvania.

Boehner told the City Club officials that the key to sparking job growth is extending the tax cuts implemented by then-President George W. Bush in 2001 and 2003. Republicans want to extend the tax cuts across the board, while Democrats have argued for extensions to all but the top 2 percent of income earners. Both proposals would result in sharp increases in deficit spending — more than $3 trillion under the Democratic plan and $3.7 trillion for the GOP plan — but both sides argue that some extension of tax cuts would provide an additional stimulus to spur consumer purchasing power.

Boehner needs a net gain of 39 or more Republican seats to seize control of the House and fulfill his self-proclaimed campaign of “Boehner for Speaker.” No issue will be more key to that effort than the economy. In Boehner’s home state of Ohio — a critical battleground in the past two presidential campaigns — unemployment has remained higher than the national average, at 10.3 percent in July. Neighboring Indiana is barely better, at 10.2 percent.

Vulnerable House Democrats from Ohio have embraced Obama’s stimulus legislation as something that has, at the least, helped mitigate the damage to the region. Rep. Zack Space (D), elected in 2006, last week hailed a $66 million grant from the Recovery Act to expand high-speed access to the Internet in his eastern Ohio district. Rep. John Boccieri (D-Ohio) trumpeted a $1.6 million grant to a local port authority for a project that would ultimately create 500 jobs in his district. Republicans, however, say Obama’s Recovery Act has been a failure.
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Boehner said that extending the tax cuts for all income brackets would help small business owners, who have been the toughest hit since the financial collapse of 2008. “Raising taxes on families and small businesses during a recession is a recipe for disaster – both for our economy and for the deficit. Period. End of story,” he said. “That’s why President Obama should work with Republicans to stop all of these job-killing tax hikes.”

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Staff writer Scott Wilson also contributed to this report. kanep@washpost.com