Category Archives: economic recovery

High stock prices are a danger to the US economy

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How could high stock prices be a danger to the US economy? It just can’t be so, but it is. Paradox? Not really. How could persistently rising stock prices be bad for any economy? That is not possible, because people who own stocks feel wealthy. They will spend more, consumption goes up. Firms rev up production, hire more workers, wages rise, and the virtuous cycle is established; if only this were true!

Persistently rising stock prices suck the blood out of the economy and direct financial energy into the stock market. Corporations buy their own stock with cheap borrowed money, close plants, move operations overseas and leave US cities delapidated ghost towns. Tax revenues collapse, infrastructures collapse and the US slowly turns into a third world nation. This is the dark side of persistently rising stock prices.

In rising stock oriented society, wages do not grow.  In fact, the buying power of wages actually falls. Poverty, anxiety, chronic illnesses, obesity, and violence increase.

Economists, academics, decision makers, politicians sing the same ol’ song: “The US economy is resilient!”, and they point to the rising stock market. It is not!

Another component contributing to the rising stock market are persistently low interest rates, draining savers of their deserved interest income.

It would be better if the stock market was at 5000 and the economy was humming with rising wages, job growth, universal single payer health care system, affordable quality education, massive infrastructure renewal programs, quality affordable housing, etc. but this will never happen.

It will never happen as long as the rising stock market sucks the blood out of the economy, turning the country into an economic desert with areas of oases where the 2% ownership class lives with the 5% overseer class.

It will never happen as long the Federal Reserve and US Treasury’s economic policy is to support the stock market. The stock market will continue to suck the blood out of the economy until the final collapse.

No change will occur without the final collapse.

 

Is the US facing the same problems as Third Century Rome?

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The world, but particularly the US, is entering a period of great uncertainty, as did Rome in the third century AD. There were external threats and internal instability. Inflation was destroying the internal fabric. The coinage was diluted of its precious metals, silver and gold. People lost faith in its institutions, its army and its emperors. Through such inflation, the people were getting poorer. The longevity of its emperors was very short after the assassination of the Emperor Alexander Severus in 235 AD  The Empire fragmented and was in danger of collapsing. Two external threats were ever present: the Tribes of Northern and Eastern Europe were pressing on the Empire and in the East, there were Persian threats. Three emperors lost wars with Persia, and one, Emperor Valerian, was even captured by the Persians in 260 AD through a ruse.

The 42nd Emperor Claudius Gothicus, (268-270), stabilized the frontiers by defeating the Alemani and the Goths, but unfortunately, died of some kind of infection.  The 51st Emperor Deocletian, (284-305), further strengthened the Empire by reducing inflation, further stabilizing the frontiers, and introducing tetrarchy to government. Tetrarchy is four person rule.  Deoclitian split the administration into a Western Empire centered in Rome, and an Eastern Empire centered in the future city of Constantinople to be founded by Emperor Constantine the Great in 330 AD. When the Western Empire fell in 476 AD, the Eastern Empire or Byzantine Empire lasted for almost one thousand years until Contantinople fell to the Turks in 1453.

Is the US in a similar situation? Possibly?  The US has been in decline since President Nixon defaulted on the gold obligation of 35 dollars for one ounce of gold. Nixon proclaimed it would be temporary, but almost 50 years later is still going. As a result inflation became rampant, Congress became generous and passed the law that allowed Americans to own gold again. President Roosevelt and Congress banned ownership of gold except in jewelry in 1933.

Economic conditions were deteriorating slowly. Inflation in the seventies, Reaganomics in the eighties, Clintonomics in the nineties, subprime mortgages and the tech bubble in the first decade of the new millennium and a severe bust in 2007-09 that nearly collapsed the entire system. Throughout this period, living standards for Americans were going down. The main culprits were debt, public and private, quality job losses, inflation, lack of affordable universal health care, expensive education, and foreign military interventions.

As I mentioned in my previous posts, the three pillars of paper, all based on debt, are keeping this system afloat, but just barely, and they are the dollar, the stock market, and the bond market. The Federal Reserve and the Treasury are keeping the system going by shunting new money into stocks and bonds creating conditions for a financial shock that is becoming inevitable. Zero interest rates and quantitative easing are propping up the system, but not curing it; it cannot be cured.

One could call the US economy a “mirage” because there has been no actual growth since the late 1960’s. The living standards of the people have been going down and down, but the lies and deceptions have been going up. One does not know whom to believe. In socio-economic terms, three economic classes have developed in the US: the owner class of 1%, the overseer class of 4-5%, and the Precariat class of around 95%. The Precariat Class is composed of all ethnic groups, religions, and races, but it is kept divided by the Ownership Class for its own interests. The Precariat is on the whole totally dispossessed, and they live from pay cheque to pay cheque, with the loan sharking firms eating them in between.

The present recovery after the almost system collapse 0f 2007-8, has been nothing but “a mirage”, a statistical “recovery” propped by a series of quantitative easings and zero interest rates. The ownership class and the overseer class are doing extremely well, but the precariat class is barely surviving.

In foreign policy, the US, a hegemonic power, has become a reactionary force in order to maintain its world wide empire based on dollar indebtedness and exploitation of the rest of the world. Through its policy in the Middle East, it has lost Iran and now may lose Turkey, two large countries dominating the key strategic areas of the Afro-Eurasia. It is true, the US has gained  eastern Europe through the European Union and NATO, but Europe itself has become unstable.

In the Middle East, some claim that the US and Israel have created ISIS and Al-Qaeda  to destroy Syria and Iraq in order to get to Iran, and take total control of the Middle East and its natural resources. If Turkey switches to Eurasia, and a compromise is reached between Syria and Turkey, the US will lose the Middle East. The next shoe to drop will be Saudi Arabia because of its disastrous war in Yemen, as well as internal dissension.

Never before in its history has the US faced such complex problems as a dying economy  reflected in dying cities, dilapidated infrastructure, poor but costly education and health care; city violence could be a precursor to a general revolt.

The world is waiting with bated breath the results of the US presidential elections, The precariat class is flocking to Mr. Trump for salvation and the ownership class is in a panic. How the elections will turn out nobody knows, but if there is a financial collapse Trump would win massively. In that case, it is quite likely that martial law would be proclaimed and the elections postponed. Only time will tell.

The new economic Black Death

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The Black Plague, also known as the Black Death, took place in Europe from 1346 to 1353. In a span of seven years almost half the population of Europe was dead. Anywhere from 75 to 200 hundred million people died. It was the most horrible experience since the Fall of the Roman Empire in 476 AD. It was caused by a bacteria, Yersenia Pestis, aka, Pasteurella Pestis. It originated somewhere in China or Central Asia, and via the Black Sea trade entered Europe. The agent of transmission or vector was a rat aboard the trading ships. The population of Europe was estimated at around 250 to 350 million, and the population of the whole, known world was around one billion people. The Western Hemisphere was not known or had been discovered yet. Christopher Columbus discovered the New World in 1492.

In 2016, mankind ( with a world population of over 7 billion people) is facing another Black Death, caused not by bacteria but by human evil. There is no economic recovery in the West, and there will be no recovery until the West restructures totally and completely by embracing  a new system that will cherish life and the environment of the earth.

The economic system of the West, the new Neo-liberalism, has entered a phase of exhaustion from which there is no escape. The reason for the exhaustion is the immense debt which can no longer be sustained. There are several components to this world debt that must be explained.In 1944, the dollar became the official currency of the world as decreed by the Anglo-American Powers. All of the world’s trade would be done in dollars, and, the dollar would be the reserve currency of the world. The US became, in effect, the ruler of the world. The only country who opposed this arrangement was the USSR. That same year, Winston Churchill suggested,                “Operation Unthinkable”, the plan that Anglo-Americans join with Germans in fighting the Russians. The Cold War was in full swing. The official proclamation of Cold War was announced by Churchill in Fulton Head, Missouri in 1947.

The West, aka, the Anglo-American countries, realized that debt could be used as an instrument of power in re-enslaving the newly independent countries of Africa and Asia, by lending them money for so called “development.” The already independent Latin American countries were subjected to the same treatment with similar results, as were the Eastern European countries.

Domestically speaking, Americans were encouraged to go into debt. The reason for this was the fear that the slack in demand would lead into another “Great Depression”, and that was no,no policy in a time of “Cold War.” Wasteful consumption and debt was encouraged. Credit cards were created to increase consumption and debt. Economists glorified debt as good. Debt was no problem, the Americans were told, “after all we owe it to ourselves.”

Debt can be considered “safe and useful” in an economy that is growing, if wages and jobs are also rising. People feel good and secure. Buying houses on a mortgage is a sound economic policy. Also, in a prosperous economy, the crime rate decreases.

Internationally speaking, no effort is spared to indebt as much of the world as possible in dollars. The dollar indebtedness is the “Carte Blanche” for giant Western corporations to exploit the Third World. This situation enhances the power of the West and enslaves the rest.

The largest corporations are moving factories to the Third World because of the very cheap labor, and the cheap products are re-exported to the entire world at immense profits. By this policy, the US has de-industrialized itself, but enriched the trans-national corporations. This was the Age of Globalization which was pushed on the rest of the world. The World Trade Organization was established, which is above the law of each individual member country, as is the City of London above the British law, and the Federal Reserve Bank of the US, a private bank, is above the US laws. The trans-national corporations are modelled after the Dutch East India Company and the British East India Company. These two companies controlled the world trade in slavery, spices, and the opium trade with China. They were progenitors of modern globalization. Nothing has changed in the last five hundred years except technology and the intensity of plunder and exploitation.

The Third World is already in maximum debt and depression where the poor are already dying and the anger is growing. Third World countries are trying to pay the interest on their debt, and some are trying to pay the debt off, so commodities are cheap and the dollar is strong.

Domestically speaking, the West is suffering from lack of consumption, because the vast majority of people are barely making enough to survive. Unemployment rates of the European Union and the US are sky high. According to John Williams of Shadow Stats, the unemployment rate is 23 percent in the US, and the work force participation of 62.8 percent has been the lowest in years. The number of people out of the labor force who can and want to work is around 95,000,000. The number of people on food stamps is around 47,000,000. The velocity of money has collapsed which implies that people have no money to spend. Pay Day Loans with monthly interest rates of 20 percent or more are increasing. One should not wonder why crime, prostitution, and drug use are increasing. ( Incidentally, the Baltic Dry Index is decreasing, which is a sign of collapsing world trade.)

The economic system of the West and the World has entered the phase of exhaustion, and nothing can save it. The ruling elite of the West thinks that a massive war with Russia or China, even nuclear war, will save the system, but nothing will. There will be collapse of the monetary system based on usury, and those responsible will be punished. Hunger, starvation, and deprivation is on the horizon. Violent revolution is inevitable, and nuclear war cannot be excluded. Only time will tell.

 

The role of oil in geo-economics

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The Indios of Latin America call petroleum [ the oil of rock], the blood of Mother Earth. Oil comes from the innards of the earth and fills numerous huge caverns as it seeps to surface. It is not dead trees and animals. The discovery of oil in Titusville, Pennsylvania in 1859 changed the world. The individuals and countries who controlled the petroleum resource had obtained such a power that is almost unimaginable.

Oil is not only fuel, but also building material. It is the raw material for pharmaceuticals, for cosmetics, for plastics of all kinds, for clothing of all kinds, and many other products. It is also the essence of US power. After the October War of 1973, which Israel was about to lose, a massive US military resupply intervention ordered by President Nixon saved the day. The US was able to convince OPEC to price oil in US dollars. Overnight, the Dollar was not only backed by the full faith and credit of the US Government, an empty promise, but also by the most  valuable commodity for the modern world, OIL. The dollar became the most powerful instrument of US Power and it no longer needed gold. President Nixon was a great President. His reward: Impeachment.

Entering the New Millenium, the World and the US have faced new economic problems. The economic meltdown of 2008 led to a so called “Recovery” from which the world has never recovered and the US economy is still ” recovering…”

The recovery is impossible, because by decreasing the price of oil intentionally to punish the Russians , the world’s liquidity started to decrease. There is a shortage of dollars. Value of the dollar went up. Debt burden of the Developing  World increased and is becoming unbearable. To service the debt, they had to sell their natural resources at any price. The price of the commodities has collapsed. The Third World countries, especially the oil producers have decreasing revenues to buy manufactured goods. Hence, China, South Korea, Japan, and Europe are slowing down, and that further puts pressure on the commodities, especially the Oil. Also the first world economies of Canada and Australia are in collapsing mode.

Ivy League economists are gloating that lower gasoline prices are positive for the economy, but they never ask why consumption of gasoline is decreasing in the US if there really is a recovery. It is not dropping because of electric cars or modern public transportation system, which does not even exist in the US. The consumption of gas is dropping because people have no money. The US has three economic classes: ownership class, 1%, doing exceptionally well; the overseer class,4%, doing well; and the Precariat Class, 95%, doing very poorly and not being able to afford gas.

The world may be entering a new and very severe economic winter or even a new economic ice age because of human evil, which is using oil as an instrument of economic war. Only time will tell.

The velocity of money and the Baltic Dry Index.

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The world economy is dying. Powerful people of the world are in denial. They think they will be able to correct the situation, but the world economy cannot be saved. The two indicators of a dying economy are the velocity of money and the Baltic Dry Index.

Let us examine the velocity of money. The simple definition is the speed with which money circulates through the economy. The more dynamic the economy, the more optimistic people feel about jobs and economic security, the more they feel relaxed and the more likely they will spend, travel, feel good about the country, the government, the people, and themselves. Presently, the velocity of money is collapsing. Whatever money ordinary people earn and have they do not want to spend. Also, many, many people have no money to spend. The situation is very dire, but one would not know by watching the “evil vision”. On evil vision, attractive women in eternal spring dresses, and men in impeccable suits with or without neckties constantly proclaim prosperity. The only people enjoying prosperity are the less than one percent of the ownership class and about five to ten percent of the overseer class to which the stars of the evil vision belong. (Evil vision is TV.) There is so much discontent in the country that it threatens the stability of the country. The economy is getting worse. Just look the stock market and the high yield bond market!

Another measure of how bad the US and world economy are is the Baltic Dry Index. Just last week it dropped below four hundred. Before the “Great Recession” of 2007-09, it was registering in the several thousands. After the so called Great Recession ended, it recovered to almost 2000. Now, after seven years of recovery it dropped to below 400, in the year of 2016. Any intelligent person, non-brain washed, knows that there was no recovery. In one of my previous posts, I stated that economic recovery in the US is impossible, because the energy entering the US economic system is decreasing, while the energy needed to maintain its internal and external operations is increasing. The Reserve Status of the dollar in the world is enabling the US to maintain its operation internally and world wide as long the rest of the world is accepting the dollar. That ability to maintain its operations is based on debt. As long as the rest of the world accepts American debt there is no problem. But that is ending and that is the problem. When the dollar is rejected it will be kaput.

The Baltic Dry Index {BDI} is indicating that world trade is collapsing. Empty ships are being anchored in ports. Oil tankers, full of crude, are anchored. There are few buyers of crude. Some experts are telling it is going to get worse. Collapsing BDI is possibly signaling world wide depression. Decreasing velocity of money is indicating that the majority of people have no money to buy even basic necessities.  Why are 94,000,000 people not in the labour force? Why are 47,000,000 people on food stamps? Why are wages for the non overseer class stagnant and decreasing? Why is the infrastructure of this nation dilapidated? Up until 2016, there was plenty of money for Wall Street. Now the stock markets and the bond markets of the world are collapsing. It could be that the world is entering the Economic Black Plague State. Only time will tell.

 

Dollar vs. Gold II

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In my previous posts I stated that gold does not need any paper currency, but that the dollar needs gold. The dollar has to be convertible into gold, because the gold price world wide is quoted primarily in dollars, and that’s due to the dollar being the official currency of the world. Everything in the world is traded in dollars. Just imagine the power that the US possesses by owning the official currency of the world, so it goes without saying that the US will do anything in its power to retain that authority over the financial system of the world; it will even resort to war.

The key to financial world domination is not the petro-currency status of the dollar but its relationship to gold, Nature’s Money. The Bretton Woods agreement of 1944 made the dollar official currency of the world. The dollar was pegged at 35 dollars an ounce of gold, and the rest of the world’s currencies were pegged to the dollar. The US would keep the gold and print the dollars, while the rest of the world would keep the dollars in US Treasury Notes. The US had free use of their hard earned money, the perfect scam. General Charles de Gaulle immediately saw this for the scam that it was and took action. He exchanged the French dollar surplus for gold, as was allowed by the Breton-Woods Agreement. Run on gold began, in 1971, President Nixon closed the gold window. This is how the dollar became the “Petro” currency. Nixon told OPEC to increase the price of oil as much as they could but make sure it is traded in dollars. Surplus dollars flowed into US Treasuries, more than ever before, and the US got free breakfast, lunch, and dinner. This policy continues to this day…

The Crisis of 2007-8 was very severe. It nearly collapsed our entire economic system. Massive infusion of artificial money {printed dollars} only managed to prop up the system, and did not ultimately save it. The System barely meanders. A series of quantitative easing was introduced, QE I, QE 2, and QE 3. No real improvement. QE 4 is coming down the road. During the crisis, gold rose from around 250 dollars in 2001 to 1920 in 2011. Interest rates went down to almost zero. There was the danger that if the price of gold went any higher,  that dollar would not be convertible to gold. If that had happened, the Capitalist System would have collapsed. Something had to be done.  “Paper shorting” of precious metals was begun. The dollar can only have validity if it is convertible into gold.  Presently, the convertibility of dollars into gold has a severe price. Dollar surplus countries and individuals are buying gold on the cheap.

Gold, presently, is in backwardation. Individuals and countries are paying higher prices for gold delivery now than in the future. Shortages of gold availability are coming. The price of gold may sky rocket over night. By shorting paper gold the monetary policy of the US is extremely tight. It is in essence destroying the economy of the world. Increasing interest rates is sheer lunacy. Gold, silver, platinum, and palladium will demand their rightful value which is precious. They will be not be available in any currency at any moment. The rush for Nature’s Money, gold, will be the beginning of the end of the Capitalist System, as was the rush for gold the beginning of the Capitalist System, and when Christopher Columbus first “discovered” the “New World”. If the World survives, a totally new age will begin. Only time will tell.

No economic recovery is possible,if ever.

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There is constant talk that economic recovery in the US is taking place. Bluntly stated, there is no recovery. What is taking place is economic “shunting” of electronic money created by the Federal Reserve into paper assets. The Federal Reserve calls this shunting “channeling”. They must be psychic. No channeling will save the system. The life force (or energy) is leaving the US economic system. This is evident in that 94.5 million people are not working. 47 million people are on food stamps. The infrastructure is collapsing. In other words, the Main Street is dying. It means that energy is leaving the Main Street and going to Wall Street. Medically speaking , in septic shock shunting is a very grave sign…

Channeling is a very ineffective policy. It is also brutal. It seems to imply that as Wall Street gets richer they will spend more but things don’t really operate that way: the people who have been blessed by Wall Street already spend as much as they need. Instead, the denizens of Wall Street with excess profits speculate even more. Bubbles are created in which the rich wallow, be they stocks, bonds, high end real estate, and various forms of derivatives. They serve no useful purpose. They are parasites. They extract wealth from working people and Mother Earth. How long can this go on? Not very long.

Wall Street claims that it is the center of wealth creation. False!! In the casino which Wall Street is money is lost by the majority; only the casino wins. Gambling chips are no wealth, neither are paper investments. They are very , very ephemeral like late spring snow. All wealth comes from Mother Nature using human labor and ingenuity. As Leonardo da Vinci said, “God sells everything for the price of labor”. If labor is cheap or free as in slavery, Mother Nature sells its treasures for essentially nothing. For more than five centuries Western Europe and subsequently the US harvested the wealth of the world. Now,  this harvesting or plunder is decreasing.  Not enough wealth is harvested from the rest of the world to keep the system going.

Enticing the Third World Countries into debt was another way of controlling the resources of the country. If  the leader of the country rejected the policy of indebtedness, that person was demonized and subsequently overthrown. From Mossadegh of Iran, Patrice Lumumba of the Belgian Congo, Sukarno of Indonesia, to Allende of Chile, (and many others such as Saddam Hussein and Gaddafi), attempting to control the resources of the earth has been and is a very bloody business. The natural resources of the world are the food of capitalism; human labor its’ oxygen. There is plenty of oxygen, but the amount of food is decreasing. Right now, there is a struggle going for control of the food. Developing countries want to control their own natural resources. That means saying no, no to the US and to multinational corporations. Presently, natural resources are very cheap because the demand for resources is slowing the world over. Also, Third World Countries are also slashing prices to gain dollars to service the debt which is denominated in US dollars. This is one of the reasons why the dollar is so strong at the moment. The indebted countries of the world are caught in a vice  between a strong dollar and a huge debt denominated in US currency.  The end result will be  multiple country defaults, riots, violence, and revolution. This will have boomerang effect on  the US economy. The US depends on the rest of the world. If the debt of the rest of the world slows down as it is doing already the US economy cannot grow, hence it cannot recover. The US economy depends on the exploitation of the rest of the world…

What is in store for the West? Slow decay initially, then sudden collapse. The US will be one of the last dominoes to collapse.  One of the three pillars of paper on which the US economy is based has already started to collapse, and that is the Stock Market. The month of October is crucial. The Federal Reserve and Plunge Protection Team will do everything to save the system. Hopefully, they might succeed, but, it is unlikely. When the stock market starts falling in earnest, multiple bankruptcies will occur in banks, large and small; corporations, large and small; insurance companies large and small; private pension funds, large and small; fracking and mining companies large and small; hedge funds and derivatives, large and small. Personal bankruptcies on a large scale will occur. A year or two later the bond market and the dollar will follow. Possibly, all three will collapse almost at the same time. No recovery will happen. What will happen after is anybody’s guess. Possibly chaos, a long transition, and the development of a new socially responsible system. Or, nuclear war. Only time will tell.

The bullshit of the Fed raising or not raising rates.

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It is amazing how the whole world is awaiting the Fed decision. Economic decisions of great importance will be made in the economy of the world that will affect countries and millions of people. It is tragic that a group of individuals of average intelligence, who are unelected ,hold the fate of the world in their hands. Other “lesser” individuals study their every move. Economically speaking, the Fed is considered to be the “Fountain of Wisdom”; in actual fact it is a “Fountain of Nonsense”.

The “Great Recession” lasted from 2007 to 2009. The economic system was on the verge of collapse. Wall Street money centered banks were failing. A bazooka was used to save it. The Federal Reserve introduced a near zero interest policy and quantitative easing. Banks had to be saved and after all,that is the primary function of the Central Bank. That price stability and employment are primary functions of the Fed is nothing but a façade. The essence of finance capitalism is  banking, hence, the Federal Reserve is its guardian. It will do anything to save it, including financing wars and overthrowing governments. It must protect and protect the “Reserve Status of the dollar”.

No recovery occurred in 2009. Growth in the US is impossible because the energy entering the US economic system is decreasing, but the energy needed to maintain its internal and external obligation is increasing. This sitation is sustainable only because the dollar is the “Official Currency of the World”. The dollar position must be maintained at all costs, and that is the real function of the Federal Reserve.

There is no recovery in 2015. Third World countries are  or are entering hyperinflationary depression. Their currencies are collapsing vis a vis the dollar and gold. The prices of various commodities are in free fall. Their debt burden in dollars has become unbearable because the ever increasing export commodities are earning them less and less dollars. As a result, the export of manufactured goods is also in free fall. The world’s economy is in severe contraction, possibly entering a severe depression. The world’s stock markets are also in free fall. Interest rates cannot go up naturally or be raised by the central bank. The velocity of money is also in free fall. The only time interest rates will rise will be to protect the dollar. This will happen when the world starts to abandon the dollar in earnest. There has been no recovery and there will never be one until this economic system is radically altered or replaced by something totally new. Only time will tell.