The Never Ending Recession — Should I Trust the Government?

We know the BEA has deflated GDP by only 32 percent since 2000. We know the BLS reports the CPI has only risen by 37 percent since 2000. Should I trust the government or trust the facts and my own eyes? Americans know what it cost for food, energy, shelter, healthcare, transportation and entertainment in 2000, but they unquestioningly accept the falsified inflation figures produced by the government. The chart below is a fairly comprehensive list of items most people might need to live in this world. A critical thinking individual might wonder how the government can proclaim inflation of 32 percent to 37 percent over the last fourteen years, when the true cost of living has grown by 50 percent to 100 percent for most daily living expenses. The huge increases in:

  • property taxes,
  • sales taxes,
  • government fees,
  • and income taxes

aren’t even factored in the chart. It seems gold has smelled out the currency debasement.

Living Expense

You should not trust government statistics – any government statistic. They have systematically under-reported inflation. The reality that we remain stuck in a fourteen year recession is borne out by:

  • the continued decline in vehicle miles driven (at 1995 levels) due to declining commercial activity,
  • the millions of shuttered small businesses,
  • and the proliferation of Space Available signs in strip malls and office parks across the land.

The fact there are only 8 million more people employed today than were employed in 2000, despite the working age population growing by 35 million, might be a clue that we remain in recession. If that isn’t enough proof for you, than maybe a glimpse at real median household income, retail sales and housing will put the final nail in the coffin.

The government and their media mouthpieces expect the masses to believe they have advanced their standard of living, with median household income growing from $40,800 to $52,500 since 2000. But, even using the badly flawed CPI to adjust these figures into real terms reveals real median household income to be 7.3 percent below the level of 2000. Using a true inflation figure would cause a CNBC talking head to have an epileptic seizure.

household-income-monthly-median-since-2000

The picture is even bleaker when broken down into the age of households, with younger households suffering devastating real declines in household income since 2000. I guess all those retail clerk, cashier, waitress, waiter, food prep, and housekeeper jobs created over the last few years aren’t cutting the mustard. Maybe that explains the 30 million increase (175% increase) in food stamp recipients since 2000, encompassing 19 percent of all households in the U.S. The increase credit card, auto and student loan debt over the fourteen year period 2000 to 2014 is likely an attempt by households to maintain their standard of living via debt.

household-median-income-by-age-bracket-2012-table

When you get your head around this unprecedented decline in household income over the last fourteen years, along with the 50 percent to 100 percent rise in costs to live in the real world, as opposed to the theoretical world of the Federal Reserve and BLS, you will understand the long term decline in retail sales reflected in the following chart. When you adjust monthly retail sales for gasoline (an additional tax), inflation (understated), and population growth, you understand why retailers are closing thousands of stores and hurdling towards inevitable bankruptcy. Retail sales are 6.9 percent below the June 2005 peak and 4 percent below levels reached in 2000. And this is with millions of retail square feet added over this time frame. We know the dramatic surge from the 2009 lows was not prompted by an increase in household income. So how did the 11 percent proliferation of spending happen?

Retail-Sales-ex-gas-adjusted-for-population-and-inflation

The up swell in retail spending began to accelerate in late 2010. Considering credit card debt outstanding is at exactly where it was in October 2010, it seems consumers playing with their own money turned off the spigot of speculation. It has been non-revolving debt that has skyrocketed from $1.63 trillion in February 2010 to $2.26 trillion today. This unprecedented 39 percent rise in four years has been engineered by the government, using your tax dollars and the tax dollars of future generations. The Federal government has complete control of the student loan market and with their 85 percent ownership of Ally Financial, the largest auto financing company, a dominant position in the auto loan market. The peddling of $400 billion of subprime student loan debt and $200 billion of subprime auto loan debt has created the illusion of a retail recovery. The student loan debt has been utilized by University of Phoenix MBA wannabes  to buy iGadgets, the latest PS3 version of Grand Theft Auto and the latest glazed donut breakfast sandwich on the market. It’s nothing but another debt financed bubble that will end in tears for the American taxpayer, as hundreds of billions will be written off.

The fake retail recovery pales in comparison to the wolves of Wall Street produced housing recovery sham. They deserve an Academy Award for best fantasy production. The Federal Reserve fed Wall Street hedge fund purchase of millions of foreclosed homes across the nation has produced home price increases of 10 percent to 30 percent in cities across the country. Withholding foreclosures from the market and creating artificial demand with free money provided by the Federal Reserve has temporarily added $4 trillion of housing net worth and reduced the number of underwater mortgages on the books of the Too Big To Trust Wall Street banks. The percentage of investor purchases and cash purchases is at all-time highs, while the percentage of first time buyers is at all-time lows. Anyone with an ounce of common sense can look at the long-term chart of mortgage applications and realize we are still in a recession. Applications are 35 percent below levels at the depths of the 2008/2009 recession. Applications are 65 percent below levels at the housing market peak in 2005. They are even 35 percent below 2000 levels. There is no real housing recovery, despite the propaganda peddled by the NAR, CNBC, and Wall Street. It’s a fraud.

MBAMar122014

It is the pinnacle of arrogance and hubris that a few Ivy League educated economists sitting in the Marriner Eccles Building in the swamps of Washington D.C., who have never worked a day in their lives at a real job, think they can create wealth and pull the levers of money creation to control the American and global financial systems. All they have done is perfect the art of bubble finance. Their policies have induced unwarranted hope and speculation on a grand scale. Greenspan and Bernanke have provoked multiple bouts of extreme speculation in stocks and housing over the last 15 years, with the subsequent inevitable collapses. Fed encouraged gambling does not create wealth it just redistributes it from the middle class to the elites. The Fed has again produced an epic bubble in stock and bond valuations which will result in another collapse. Normalcy bias keeps the majority from seeing the cliff straight ahead. Federal Reserve monetary policies have distorted financial markets, created extreme imbalances, encouraged excessive risk taking, and ruined the lives of working class people. Take a long hard look at the chart below and answer one question. Was QE designed to benefit Main Street or Wall Street?

sp-500-vs-federal-reserve-balance-sheet1

The average American has experienced a fourteen year recession caused by the monetary policies of the Federal Reserve. Our leaders could have learned the lesson of two Fed induced collapses in the space of eight years and voluntarily abandoned the policies of reckless credit expansion, instead embracing policies encouraging saving, capital investment and balanced budgets. They have chosen the same cure as the disease, which will lead to crisis, catastrophe and collapse. 

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises

The Never Ending Recession — Currency Debasement

“When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain.”Napoleon Bonaparte

inflation-purchasing-power-of-dollar-since-1871-log-scale

“A great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men … [W]e have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world—no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”- Woodrow Wilson

When you consider the implications of allowing a small group of powerful, wealthy, unaccountable men to control the currency of our nation over the last one hundred years, you understand why our public education system sucks. You understand why the government created Common Core curriculum teaches children that 3 x 4 = 13 — as long as you feel good about your answer.

George Carlin was right. The owners of this country (bankers, billionaires, corporate titans, politicians) want more for themselves and less for everyone else. They want an educational system that creates ignorant, obedient, vacuous, obese dullards who question nothing, consume mass quantities of corporate processed fast food, gaze at iGadgets, are easily susceptible to media propaganda and compliant to government regulations and directives. They don’t want highly educated, critical thinking, civil minded, well informed, questioning citizens understanding how badly they have been screwed over the last century. We’re sorry to say, the elites are winning in a landslide.

The government controlled public education system has flourished beyond all expectations of the elites. We’ve become a nation of techno-narcissistic, math challenged, reality TV distracted, welfare entitled, materialistic, gluttonous, indebted consumers of Chinese produced crap. There are more Americans who know the name of Kanye West and Kim Kardashian’s bastard child (North West) than know the name of our Secretary of State (John Kerry). Americans can generate a text or tweet with blinding speed but couldn’t give you change from a dollar bill if their life depended upon it. They are whizzes at buying crap on Amazon or Ebay with a credit card, but have never balanced their checkbook or figured out the concept of deferred gratification and saving for the future. While the ignorant masses are worked into a frenzy by the media propaganda machine over gay marriage, diversity, abortion, climate change, and never ending wars on poverty, drugs and terror, the elite use their complete capture of the financial, regulatory, political, judicial and economic systems to pillage the remaining national wealth they haven’t already extracted.

The financial illiteracy of the uneducated lower classes and the willful ignorance of the supposedly highly educated classes has never been more evident than when examining the concept of Federal Reserve created currency debasement – also known as inflation. The insidious central banker created monetary inflation is the cause of all the ills in our warped, deformed, rigged financialized economic system. The outright manipulation and falsity of government reported economic data is designed to obscure the truth and keep the populace unaware of the deception being executed by the owners of this country. They have utilized deceit, falsification, propaganda and outright lies to mislead the public about the true picture of the disastrous financial condition in this country. Since most people are already trapped in the mental state of normalcy bias, it is easy for those in control to reinforce that normalcy bias by manipulating economic data to appear normal and using their media mouthpieces to perpetuate the false storyline of recovery and a return to normalcy.

This is how feckless politicians and government apparatchiks are able to add $2.8 billion per day to the national debt; a central bank owned by Too Big To Trust Wall Street banks has been able to create $3.3 trillion out of thin air and pump it into the veins of its owners; and government controlled agencies report a declining unemployment rate, no inflation and a growing economy, without creating an iota of dissent or skepticism from the public. Americans want to be lied to because it allows them to continue living lives of delusion, where spending more than you make, consuming rather than saving, and believing stock market speculation and home price appreciation will make them rich are viable life strategies. Even though 90 percent of the population owns virtually no stocks, they are convinced record stock market highs are somehow beneficial to their lives. They actually believe Bernanke/Yellen when they bloviate about the dangers of deflation. Who would want to pay less for gasoline, food, rent, or tuition?

Unless you are beholden to the oligarchs, that sense of stress, discomfort, feeling that all in not well, and disturbing everyday visual observations is part of the cognitive dissonance engulfing the nation. Anyone who opens their eyes and honestly assesses their own financial condition, along with the obvious deterioration of our suburban sprawl retail paradise infrastructure, is confronted with information that is inconsistent with what they hear from their bought off politician leaders, highly compensated Ivy League trained economists, and millionaire talking heads in the corporate legacy media. Most people resolve this inconsistency by ignoring the facts, rejecting the obvious and refusing to use their common sense. To acknowledge the truth would require confronting your own part in this Ponzi debt charade disguised as an economic system. It is easier to believe a big lie than think critically and face up to decades of irrational behavior and reckless conduct.

Submitted by Jim Quinn via The Burning Platform blog

Lies, Damned Lies and Government Statistics

My grandfather grew up in small town Wisconsin.  He worked long hours at a community drug store to support his wife and nine kids. Their family never had much money. He never had access to the opportunities of today, and yet he was one of the wisest people I have ever known. 

He taught me many life lessons, one of which went like this: “Joe, most folks will lie even when the truth works better.”

Not an especially positive view of humanity, but it is accurate.

Nowhere is the truth of his admonition better seen than when man is collectivized and given authority.  Whether in government, corporation or union, the fact is that most people are liars. Liars lie. Good liars rise to the top. And when good liars are collectivized they lie more frequently and more effectively.  When they have control of the numbers, it makes their deceit more difficult to discover.  When they can make up the numbers, it can make unwinding them a near impossibility.

Take the recent unemployment numbers that took the U.S. stock market to fresh three month highs.  According to the U.S. Department of Labor, 163,000 new jobs were created in July, 2012.

Sounds good enough, but like most numbers, even if it is accurate, which it is not, it creates an intended deceit. 

Looking at the Bureau of Labor Statistics own tables reveals the following startling fact: The U.S. actually lost 1,204,000 jobs in the month of July, 2012.  Don’t believe it?  Take a look at the actual unadjusted data from the Bureau of Labor Statistics

During July, 2012, the private sector added a net 27,000 jobs which represented an added 76,000 goods-producing jobs less 49,000 jobs lost in the service sector.  The other million plus were lost in the public sector.  The 163,000 represents a number that has nothing to do with reality, but rather represents a model that supposedly takes into account the seasonality of certain jobs. 

In short, the BLS report showing 163,000 added jobs is statistical wizardry by bureaucrats with calculators following the demands of liars who want the numbers spun.    

If you give it some thought, it makes no sense that employment is expanding.

GDP is falling, in part because fewer people are working, which might also explain why tax receipts per employee are also falling.  A contracting, not expanding, workforce might also explain these numbers from the ISM’s July Manufacturing Purchasing Manager’s Index (PMI) report.  The PMI registered 49.8 percent, which was a contraction in the manufacturing sector for the second consecutive month, following 34 consecutive months of expansion.  And, the New Orders Index registered 48 percent, indicating contraction in new orders for the second consecutive month.

A rising number of unemployed might also be consistent with:

  • ISM’s New Orders Index of 48 percent in July, represented a contraction in new orders for the second time since April, 2009.
  • The Inventories Index registered 49 percent in July, 5 percentage points higher than the 44 percent reported in June. ISM’s Employment Index registered 52 percent in July, 4.6 percentage points lower than the 56.6 percent reported in June.
  • ISM’s New Export Orders Index registered 46.5 percent in July, 1 percentage point lower than the 47.5 percent reported in June, and represents the second month of contraction in the index since June, 2009.
  • ISM’s Imports Index registered 50.5 percent in July, 3 percentage points lower than the 53.5 percent reported in June.

The employment numbers are even belied by garbage, not just the government’s garbage, but real garbage.  Recently Bloomberg interpreted the number of carloads of trash being hauled by U.S. railroads.  “As Bloomberg explains: 

One closely watched economic indicator is the rail car loads of waste and scrap materials.” Logically: “The more we demand, the more waste is generated by that production.” In other words, if one is seeking validation that numbers reported by the BEA are even remotely credible, the best place to turn to is railcar loads of garbage. However, not surprisingly, such validation will not be found in the actual data. As the chart of the day, courtesy of Bloomberg Brief, demonstrates, if garbage is the benchmark, the US economy is now contracting faster than it has at any one point in the past 3 years and is on pace to recreate the economic collapse last seen after the Lehman bankruptcy. Perhaps another reason why central planners have latched on to stock markets and will just not let go.

As the following chart, courtesy of Bloomberg Brief, demonstrates, if garbage is the benchmark, the US economy is now contracting faster than it has at any one point in the past 3 years and is on pace to recreate the economic collapse last seen after the Lehman bankruptcy.

Railcar Loads of Waste

Perhaps another reason why central planners have latched on to stock markets and will just not let go.

In the big picture, the numbers still don’t add up.  The “civilian labor force participation rate” is now at 63.7 percent of the total workforce. The total employment to population rate is 58.4 percent.   This puts these rates back to about 1982 (see where blue and red lines intersect the black line).

If participation keeps falling precipitously, does it make sense that jobs are being added and filled? 

Civilian Employment Population Ratio

From employment to GDP, government skews the numbers to the favor of, well, government.  Obama does it, Bush did it, and the next up in the liar’s list of America’s “leaders,” will do it and for the same reasons:  to keep the people calm and compliant. 

And, while it appears government is lying to its advantage, in fact it is lying when the truth would work better.  Why?  The lies upon lies will soon become incredible.  The people will look around and see that more, not less, of the people they know – their neighbors and their friends – are unemployed, and one day the published numbers will mean nothing anymore.  No doubt the truth would be taken hard today, but the truth would provide a foundation for solutions that make sense.  Relentless denial is rarely, if ever, the answer to any problem.

A good starting point for anyone interested in analyzing government numbers is to assume that any number publicized by government is a lie.  The first question to be asked is, “to whose advantage?”  The second question, “Where is the raw data?”  Then, combining common sense with a little research you may still not get to the real number, but you will get closer than the lies being fed to the willing by the liars who lie even when the truth would work better.

This is What Depression Looks Like; Real Corporate Earnings Collapse – Nearly 50 Percent Below 1973 Levels

In a recent article John Williams, publisher of ShadowStats writes:

“Temporary consumption gains could be fueled by debt expansion, but that option also is not available to most consumers.  With limited prospects for income growth and debt expansion in the near future, broad economic activity remains likely to bottom-bounce for the foreseeable future, while healthy, sustainable gains in real retail sales remain improbable.

Adjusting government-provided income and sales figures might seem unnecessary when reported inflation is running at 2.5 percent. But, in reality adjusting for inflation provides the only meaningful and accurate look behind the federal government’s “headline” numbers – whether they be for retail sails, income or the CPI. Government provided numbers are heavily massaged and manipulated. While it may be a stretch to outright call them a lie, they are in the least misleading.

Middle class income peaked in 1972

As shown in the preceding graph, the peak in real average weekly earnings was hit in October 1972.  The official accounting for March of 2012—almost 40 years later—still is 14.8 percent below that pre-1973 recession high.  The bounce higher in real earnings starting the mid-1990s was due to post-1990 changes made to the CPI-W and the CPI-U, which lowered official inflation reporting.  The blue line shows roughly what those numbers would have looked like today, as estimated by the SGS-Alternate CPI Inflation (1990-Base), had the changes not been made.

Structural Liquidity Problems Continue to Impair Economic Prospects.  Consumer income currently is in contraction, while consumer credit continues to show no net growth in areas that could buy short-lived expansion in consumption of consumer goods.  The issues here involve long-term structural problems with income and an ongoing systemic solvency crisis.

With consumer liquidity so impaired, and with the consumer confidence and sentiment measures still showing levels so low that they have not been seen outside of the deepest post-World War II recessions, the prospects of a near-term, sustainable economic recovery are nil.”  Not only is Shadow Government Statistics (SGS) unemployment in the US above 22 percent, only comparable to the Great Depression, but for those who are working, their real earnings have been collapsing for more than a decade.  Real earnings are nearly 50 percent below 1973. 

That chart is critical for readers around the world to understand the systematic destruction of the middle class in the United States.  This is what depressions look like.  Do not believe lies from the mainstream media.  There will be no recovery in the United States for the foreseeable future.

Are You Smart Money?

You’ve probably heard the term “smart money” used by various investing pundits. It’s a reference to those investors (often professionals) that are consistently better informed and better at making money than the uninformed masses. What makes an investor a member of the “smart money” cadre. Are you one of them?

Smart MoneyLet’s take a look at a few of the characteristics of smart money. Hopefully that will give us an idea of what makes this group of investors successful.

Smart money buys when others are fearful. A recent example of this is last year’s Gulf oil disaster. After the explosion and during the worst of the spill speculation of British Petroleum’s imminent bankruptcy caused panicked selling. The stock lost roughly half its value in less than two months. There was blood in the streets – and that was the time to buy. You’re the smart money if you bought BP after its stock price was hammered. If you had, you’d be sitting on a roughly 50 percent gain.

Smart money sells when others are greedy. In the Nasdaq Internet stock bubble of the late 1990s, many investors who had purchased Internet stocks watched their brokerage accounts swell to levels never seen before. The greed and unbridled optimism in the market was palpable. Everyone was talking about the latest internet stock sensation, the classic sign of a mania in full bloom. Many stock positions had logged spectacular gains, but the herd was convinced there was more to come. But, the smart money (I wish I could say I had been one of them) said to themselves “this can’t go on forever”. The smart money sold their Internet stocks prior to the 2000 top, just as the greed reached a pinnacle.

Smart money sees trends others don’t. A few lone voices urged investors in 1999 to buy gold. But not one was listening. No one wanted to talk about the metal or mining stocks. Gold has increased in value seven-fold (unleveraged) in the past 12 years. Enormous profits have been made in gold and gold stocks, with many stocks earning doubles on top of doubles.

Smart money ignores the headlines. This goes beyond the traditional advice of “buy the rumor/sell the fact”. Smart money largely ignores the chatter from mainstream media and instead focuses on the factors that drive headlines. When it reaches mainstream coverage, the smart money is already invested, and is looking at what will be tomorrow’s headlines.Admittedly the ability to peer into the future and divine emerging trends isn’t easy to develop or maintain. It may require years of experience to learn to sift through reams of electronic and printed information to find the nuggets. It also requires the willingness to sift through all that data. That, or you need to have the resources to pay someone else to do it for you.

Smart money doesn’t count its money before it’s made. Smart investors understand there is no sure thing – that no one is going to bail them out if their analysis is wrong. They keep a realistic expectation – and an eye – on their investments. And if they take a loss, they learn from it and refuse to let it keep them from investing again.

And now the characteristic that’s becoming increasingly critical to investing success…

Smart money ignores official government reports and relies on its own research. There are many examples of government reporting that is patently off base (i.e. a lie). A current example is the Bureau of Labor Statistics Consumer Price Index (CPI) number. That number hovers around an annual core inflation of a mere one percent. Consider your real world experience with rising energy, in particular gasoline, and food prices. When looking at all your expenses over the past year, have they risen just one percent since last summer?

Here’s what real inflation looks like compared to what the U.S. government reports. (Graph courtesy of Shadow Government Statistics).

Real Rate of Inflation

As you can clearly see from the graph, there has been a growing divergence between the government produced CPI numbers and the Shadow Government Statistics (SGS) Alternate CPI – “the real rate of inflation”. For more information on how SGS calculates their CPI measure go here.

Costs in every major area of our lives have risen far more than what the government states in its core figure. The smart money ignores the official report and instead focuses on its own research and data.

With the above description of smart money, the next logical question to ask is, how do I start thinking like smart money?

To answer that question, you first must understand their investing time horizon. They’re not looking at next week or next month like a trader would. Nor are they looking so far out that it would take the rest of their lives to realize a profit. The smart money is looking at the likely trends over the next few years.

I think they’re asking themselves questions like these:

  • Is real inflation likely to rise or fall over the next few years?
  • What are the best sectors to invest in over the next few years – is it commodities, biotechnology or stocks?
  • What’s more likely – that interest rates will remain at historic lows or move higher?
  • Is the U.S. dollar likely to be stronger or weaker in the next few years?
  • What is the best way to hedge against egregious debt and runaway government spending?
  • In general which assets are most likely to make money over the next few years? Which should be avoided?
  • Is it time to invest in real estate again, or will it take the rest of my life to see big profits?
  • Will the global economy be on solid footing during the next few years?
  • What’s the best energy investment (is oil, or something else)?
  • Are gold and silver viable investments. Will the bull market in precious metals continue in the coming years?

The answers to these questions will dictate, to a large extent, how the smart money invests in the next few years.

No one, of course, can predict the future. If you refer to the above graph you’ll notice some interesting and possibly recurring trends in the rate of inflation and value of the dollar. During the crisis of 2008 the inflation rate plunged, dipping into deflation briefly according to the government CPI numbers. During the late summer and early fall of 2008 the dollar rallied by 20 percent – a huge currency move in a four month period.

As the Federal Reserve embarked on its monetization policy, they were temporarily successful in re-establishing inflation.

This summer as the crisis has worsened (or re-worsened as the case may be) the dollar has yet to strengthen appreciably and gold continues its move higher. And QEII has successfully increased inflation far beyond what the government will public admit. It is my belief that we are due for another bout of falling inflation – possibly deflation – and a strengthening US dollar.

What does this mean:

  • Stocks will fall, possibly significantly.
  • Commodities will be hammered – including gold and silver.
  • Treasury yields will continue to fall. The bull market in Treasury will continue – at least for the remainder of the year.
  • The dollar will rally, perhaps strongly. The dollar rally presents perhaps the best contrarian investment opportunity of the year. Nearly everyone, and I mean everyone, is sure the dollar is doomed as a currency – it will continue it’s fall into oblivion. I’m not suggesting that ultimately won’t  happen. But, nothing goes straight down. The dollar is due for a rally. It may be short lived, but I believe it will be sharp.