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A prudent person foresees danger and takes precautions. The simpleton goes blindly on and suffers the consequences.

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there is a decay of conscience, the pulpit is responsible for it))) --


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In Defense Of A Nation

Monday, February 8, 2016

Collapse Is Coming? Timing Difficult to Pin - Contact info - to get info sent to your e mail<<<<<--------------- Former IRS Auditior

Collapse Is Coming? Timing Difficult to Pin
For a long time I had a misconception of how the financial sector worked itself out of jams.

When the U.S. Congress refuted it's Constitutional authority and allowed the Federal Reserve to run the money show, I thought he dollar's days were numbered. After the U.S. formally renounced the gold standard, I knew the dollar's days were numbered.

What I forgot to take into account was almost everyone else on the planet had done the same thing. The currency wars raged over, essentially, the relative worthlessness of one currency to another. But the financial sector appeared then and appeared up to now to be doing well. What I missed, in those early decades, was the power of perception of value overall against the inevitable collapse.

Now, more than four decades after we dropped any pretense of a gold standard, the birds I feared are coming home to roost. Across the globe nations decide to devalue their currency at will either with a formal announcement or by simply letting the central banker of choice print more of the fiat. Inflation should be settling in like it did in the late 1970s in America, but it hasn't.

The reason it hasn't is a three-headed beast.. First you have a decreasing standard of living that has been accepted as the norm. Second the Earth's resources could be counted on to yield more to advancing technology. A third factor is the many manners in which the leadership found ways to deceive America by cooking the books but that has always been a currency problem through history.

Well-known American investor and businessman Jeremy Grantham, founder and chief investment officer of GMO, wrote an interesting piece recently. He warned that while Wall Street may be heading into a bear market, the volatility is not a sign of the "big crash" like America experienced in 1929. He thinks the stock market will recover from its recent drop and reinflate into a bigger bubble before that finally pops.

Grantham wrote, "We can agree that uncertainties are far above average. I must admit to feeling nervous for this year's equity outlook in the U.S. but I am not entirely convinced. We can have a bear market, but the BIG ONE? I doubt it."

He goes on to explain why he thinks the markets will do better than the bears think because of the relatively low commodity prices--particularly natural resources like energy--and the advantages of much larger capacity in labor and machinery.

I am not so sure. I think people like Grantham always overestimate the ability of the market because they have forgotten the lesson of having some tangible standard of value for the fiat involved. They always think the central bankers can and will jump in to reduce the total effects of a recession. Besides, for the past year consumers have fooled the experts by not spending the commodity savings. 

Smoke and mirror will not help the markets now. The central bankers have mostly exhausted the normally reliable means of averting a bear--printing fiat at a reckless pace and dropping interest rates. While those worked in the financial sectors, they did nothing to revive Main Streets around the globe.

It is precisely because Main Streets are still feeling the pinch, the financial sector is starting to feel the pinch of recession once again--hence the volatility in the markets.

Average people who planned ahead got caught in the backwash from the housing collapse. Those folks, either now at retirement age or nearly a decade closer to the end of their working career, are not feeling as confident about the government's ability to control the fiat or protect the dollar's value any longer. That is a strange new problem that has never had to be dealt with before on American soil.

Oh, people might have lost faith in the current Administration or the current leadership from time to time, but it was always on to the next election the problem could be fixed. That isn't the case now. The anti-government or anti-Washington feeling sweeping the country is very close to the antipathy the rural economy states felt for Washington in the 1850s. Only this time we seem to have a more universal distaste for insiders.

A favorite slogan of the 1990s was "It is the economy, stupid." That is more true today than it was then.

But we haven't had a Congress or an Administration who wanted to take back the control they gave up to the Federal Reserve. We might be seeing a voting population that wants to change direction because of the hardship they are facing in their own pockets.

The financial sector is now trading, on average, below the financial crisis levels instigated by the housing crash. In fact they are dangerously close to the levels at which the government enacted TARP.

Despite what some top money managers are saying, I'm not certain that will be the time to invest in either the financial or corporate bond sector. There is that massive $2.6 quadrillion corporate bond derivative swaps trade already weighing on many company decisions. That doesn't make those executives any better than a government that has hit the $19 trillion debt level.

I'll give Grantham the benefit of the doubt and agree 2016 may not see the collapse. But he agrees with me the collapse is near. That, in itself, is spooky to a person who has spent 52 years trying to come to grips with a dollar that is demonstrably proven to be supported by nothing but public perception. 

"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson
Economic Recession Closes In
Just meandering through economic news reports yesterday gave a fistful of problems yet the American markets rose again, demonstrating beyond a doubt the disconnect between the markets and the economy while clearly showing direct links instead to government.

Here are some of the troubling headlines:
    Jobs Market Signals Loss of Momentum as Weekly Claims Rise; Productivity Falls a Sharp 3%, Capping Fifth Year of Weak Growth; There's Recession Warning in Utilities Results; and Euro Banks Collapsing.

There were more but that foursome will serve as harbingers of the Four Horsemen of the Economic Apocalypse for now.

While it seems everyone was fixated on the collapse in the oil markets (the price is so low the ever vigilant Barack Obama proposed a $10 barrel tax hike to generate more government revenue and revive his flagging green agenda) these other little tidbits are what should be alarming the national leader wanna-bes. But you heard nary a word from the campaign trail.

Actually the first two, rising unemployment claims and loss of productivity, go hand-in-glove and are a rebuke of the policies we've lived with for more than seven years. For some reason our government sees business as a cash cow to tap for revenue when in actuality those businesses exist solely to make money. As the Administration pushes for higher wages to generate "economic growth" it failed to recognize increased regulation deprived those businesses of discretionary income by increasing the amount of money they expended on compliance.

This makes it difficult for business to continue existing. But the second factor is more detrimental. If productivity falls, meaning the business has less revenue to show for each employee, the only thing it can do is release employees. So either headline, by itself, would have been a bad omen for the economic future but together they make for a problem that has its answer in Main Street woes but was created by both Wall Street and Washington over-reach.

The item about Utilities' results offering a warning on economic slowdown should be given front-page headlines. Through the first month of the year utilities are one of two sectors in the S&P 500 in positive territory and far away the best performing sector. But Southern Company's fourth quarter earnings report sent a shock wave rippling through this otherwise energetic area.

While its actual earnings beat Street expectations the problem is about 31% of Southern's retail electricity sales (mostly in Georgia and Alabama) go to industrial customers. In the fourth quarter, those sales fell 2.74%. That's the biggest year-over-year decline since the recession of 2008 so it rang some warning bells. Digging deeper it was discovered Southern's industrial sales have been slowing or in actual negative territory, year-over-year, for five straight quarters.

While that is alarming what immediately caught my attention was the fact there was one headline proclaiming a 3% drop in productivity and 2.74% drop in industrial sales is awfully close to that. It is so close it provided another direct link in the chain that was developing.

A quick glance at reasons given were laughably predictable. First was the stronger dollar, China's economic struggles and lower commodity prices. The stronger dollar is a secondary effect meaning Southern's customers are losing customers abroad. The fact that much of the material going to these industries originates now in China is further proof the GDP of America is falling which means the economy is well overstated here.

If Southern was alone, that might indicate a regional problem, it wasn't. Yet the market continues to make utilities the top sector and hasn't yet caught onto the problems lurking to pounce on the unwary investor.

The key here is utilities' performances are usually where economic recessions have finally been recognized over the past three and a half decades. A slowdown in this arena that is 15 months in the making fits rather well with the decline in both commodity and energy prices.

Finally we get to the concerns in the European banking sector. If there was alarm coming from small, regional banks on the Continent it might be brushed aside. The problem is these lowering values are coming from some of the heavyweights through the first 31 days of this year. The listing was compiled by Accuity from information available in the Banker's Almanac.

For example, try HSBC Holdings where value has dropped 14.8%, or Royal Bank of Scotland (down 20.1%), or UBS Group (down 20.6%) or Barclay's PLC (down 21.1%) or Deutsche Bank (down 29.8%) or Credit Suisse (down 31.4%). These losses were accumulated in 31 DAYS!!!! These are the among the biggest banks in the world with asset holding listed in the trillions of dollars. So their losses amount to hundreds of billions at best and stretch into the trillion dollar level at worst.

Yet our stock markets had a decent day UP even after this was known to the financial sector. It does not make sense. You did not hear this on CNBC, MSNBC, Fox or any of the other news outlets. It was buried in internet print that was omitted by the Wall Street Journal, the New York Times and Washington Post in a timely fashion. "Rally around the market boys, we must keep up the illusion of economic growth!"

Those are four indicators, again, that the economic collapse is not inching ahead but is in a headlong gallop towards us.

This is a definite drop-dead bell for economic reality over fantasy. Get prepared by thinking about a world in which fiat has lost all value. It isn't like anything any American alive has known before.

"I have sworn on the altar of God eternal hostility against every form of tyranny over the mind of man"--Thomas Jefferson

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