Category Archives: economy

Financial Crisis is an ‘Inside Job’.


Having now experienced a confirmed Hindenburg Omen in the last week that portends a stock market decline, we may again try to turn our attention to the Financial Crisis that began in 2007. Inside Job is a documentary by Charles Ferguson that unequivocally reveals to us that the GFC was not an accident. Those who benefited from it foremost were all in on it and new full well what they were doing and what it would lead to.

Advertisements

The Marginal Productivity of Debt.


The key to understanding the problem is the marginal productivity of debt, a concept curiously missing from the vocabulary of mainstream economics. Keynesians take comfort in the fact that total debt as a percentage of total GDP is safely below 100 in the United States while it is 100 and perhaps even more in some other countries. However, the significant ratio to watch is additional debt to additional GDP, or the amount of GDP contributed by the creation of $1 in new debt. It is this ratio that determines the quality of debt. Indeed, the higher the ratio, the more successful entrepreneurs are in increasing productivity, which is the only valid justification for going into debt in the first place.

The stock market will start a new leg down the week of February 8 2010.


The money has been laundered. The stock market will start a new broad based decline the week of February 8th, 2010. This is round 2.

Conquer the crash: Bernanke defeats deflation.


At last, the news reports are now fully brimming with optimism and proclaiming victory after victory on the economic front. Despite the fact that the private (and total) credit in the US economy has been and is still contracting at unprecedented multitrillion dollar annual rate, which is deflation by definition in credit based monetary system, the Bloomberg news declares nevertheless that the honorable manager of the privately owned Federal Reserve, Ben Bernanke, has already defeated deflation. Oh say, can you see …

Retail Sales Data from NPD Shows Consumer Technology Revenue Declined the Week of Black Friday.


When you don’t have government meddling into the free-market price setting mechanisms the prices decline and help consumers save money. Such is the case of consumer electronics that has been experiencing deflation for many years now and the skies did not fall. To the contrary all consumers benefited from natural price declines while the quality and capability of consumer electronic goods have been continuously improving. Now, when most of us badly need lower prices the only bright spots of the economy are where the government is absent and not trying to prop up prices, with our stolen money by the way.

Japan sees long deflation in US, bets on falling Treasury yields.


“The recovery is very weak and the U.S. is running the risk of deflation…” say the Japanese investors as they are piling into US Treasuries while expecting the yields to drop sharply. They may be the only ones in current economic environment that have extensive experience investing in deflationary times and so it may be worth wile heeding their advice:

“Demand for Treasuries is very good because of the idle money in the banking system…”

“The medium term risk toward inflation is being caused by potential policy missteps by policy makers in regards to monetary and fiscal policy and the weakening dollar…”

“Any economics textbook would tell you that the massive stimulus from the central government will eventually cause inflation, but the Japanese know it doesn’t have to turn out that way…”

“The U.S. economy has faced a double whammy: the recession and credit contraction. The U.S. will face a triple whammy with deflation. That’s good for the Treasury market.”

Deflation is firmly taking root in USA. FED is still in denial.


Even though the signs of deflation are everywhere as expressed in contracting credit, money supply, and prices, the privately owned Federal Reserve’s executives continue to beat about the deflationary bush by referring to it as “disinflation” and talking about it in future tense. It has been happenning already for the past year and a half and it will continue as evidenced by record low long term Treasury yields this week. The below article provides a detailed discussion and solid evidence of deflation and how it works.

Total US Debt has reached at least $60 Trillion as of Q1 2009!!! Debt to GDP ratio 425%!!!


By that measure if we were to take the Q1 2009 reported US GDP of $14,097.2 billion and divide Q1 2009 total US debt level of $60 Trillion by that GDP number we would get an astonishing record Debt to GDP ratio of 425%.

The Power Of The FED And Deflation.


This article from GoldSeek makes good points and explains quite clearly why US is going to stay in deflation much longer than most people and so called “economists” think, and why the privately owned FED is unable to reinflate the debt bubble.

Credit crisis: What comes next?


As the ongoing debt crisis continues, we have transitioned from Stage One, the initial Wall Street impact of debt-deleveraging, to Stage Two, the Main Street impact, and are now well into Stage Three, the coordinated Fiscal and Monetary response to the debt crisis. The question, then, is what comes next?