Investor Profit & Protect Despite Bogus Official Data & The Coming HyperinflationStock-Markets / Financial Markets 2012 Dec 07, 2012 - 03:52 AM GMT
“Set by Uncontained Fiscal Malfeasance, and Exacerbated by Still-Unfolding Effects of the 2008 Systemic Panic and Near-Collapse, U.S. Hyperinflation Looms by End of 2014. After decades of U.S. government fiscal mismanagement, by 2004, the U.S. budget deficit was so out of control that it had become both unsustainable and uncontainable. Using generally accepted accounting principles (GAAP-accounting), the deficit for just the fiscal-year 2004 exploded to $11.0 trillion&h
“Adjusted for distortions from one-time accounting changes, the actual, or GAAP-based, federal deficit has run roughly $5 trillion per year since 2004, and it likely topped $7 trillion in 2012, with total federal debt and the net present value of federal-government obligations approaching $90 trillion (see Table I in Section III). No amount of spending cuts, outside of the politically-untouchable social programs, and no amount of tax increases, can bring the GAAP-based annual U.S. budget deficit into balance.
“Faced with structural impairments to individual income growth, the Federal Reserve (under Chairman Alan Greenspan) actively encouraged the excessive growth of consumer debt as a way to support economic activity, continuously borrowing economic growth from the future.
“With an inevitable day of reckoning, the U.S. financial and banking systems came literally to the brink of collapse in September 2008. To prevent the unthinkable, the Federal Reserve and the U.S. government created, spent, loaned, guaranteed, and gave away whatever money was necessary, and otherwise bailed out or acquired a number of failing large corporations…
“Those actions forestalled a systemic collapse, but they did not resolve the fundamental underlying difficulties. Contrary to official GDP reporting, there has been no subsequent economic recovery.
“The ultimate costs for saving the system in 2008 and beyond, comes down to inflation, which will be reflected eventually in the complete debasement of the U.S. dollar. Accordingly, actions taken during the crisis-containment of 2008, and later, brought the outside timing for the hyperinflation forecast of 2018, into 2014.
“…the U.S. dollar, as we know it, is not likely to survive until the next congressional election in 2014…”
“Special Commentary: Review of Economic, Systemic-Solvency, Inflation, U.S. Dollar and Gold Circumstances, #485”
John Williams, shadowstats.com, 11/27/2012
Official Data Purveyors would have you believe that U.S. inflation is “contained,” GDP is growing healthily, and Sovereign Debt is sustainable. Not true! The U.S. for example is already Threshold Hyperinflationary at 9.82% and GDP growth is a negative 2.10% and the net present value of downstream Federal government obligations is nearly $90 trillion.
And other major nations are similarly afflicted with the Bogus Statistics Disease – see quote regarding China’s fake GDP below.
But investors who know the Real Numbers and can distinguish them from the Lies have Substantial Advantages, key ones which we identify here.
“A fake Libor rate, the scandal involving global benchmark interest rates that has raised the level of distrust in major banks and markets, is nothing compared to the damage that could be done if China’s true economic growth figures were revealed, according to Larry McDonald’s newsletter.
“Is Chinese GDP the new Libor? …More and more investors are starting to question the Chinese math on GDP.
“Annual gross domestic product came in at 7.6 percent in the second quarter, according to China’s government on July 13th. The report was better than investors expected…
“But slowing imports and industrial production, as well as harder-to-fudge electricity usage data, points to much slower growth, according to McDonald and other investors. Barclays believes the number should have been more like 7.15 percent.
“What worries McDonald… is that lying by governments and banks — be it Libor rates or GDP statistics — raises the systemic risk to the markets, which is much worse than just economic risk.”
“Lying Libor Is Nothing Compared to China’s Fake GDP: Report”
John Melloy, CNBC, 7/22/2012
Indeed, if one considers all the salient Chinese data together, one concludes that the Barclays estimate of Chinese GDP at 7.15% is still high.
In order to obtain a realistic view of economic performance it is necessary to look beyond the Official Data to data that are more difficult to manipulate. For China, for example, consider:
China’s shipbuilding industry has suffered a 60% decline in gross tonnage of orders; some builders may go bankrupt. China has vast stockpiles of as-of-yet-unused coal, iron ore, and copper. In the first half of 2012, Shanghai land sales fell close to 60%. The June 2012 Chinese electrical grid usage was flat. Prices in some Asian sectors sank an incredible 25% in June because of collapsing demand. China’s neighbor Singapore reported that its GDP growth fell 1.1% during the second quarter of 2012 following a 9.4% gain during the first quarter.
Similarly in the Eurozone, the Spanish and Greeks for example are suffering with 25% unemployment rates.
Switching focus back to the U.S. we recently see that some Mainstream Media are claiming that the Housing Market has bottomed and is recovering. It is not.
“The headline 3.6% monthly gain in October 2012 housing starts was not statistically-significant and was in the context of downside revisions to August and September reporting. As shown in the accompanying graphs, October activity was at the highest level since July 2008, when the market was in free-fall, but it still was 61% off the 2006 peak in housing starts.
“Hurricane Sandy appears to have had minimal impact on October’s activity, but disruptions from the storm should have meaningful impact on November reporting, with subsequent rebuilding certain to provide a temporary boost to building-permit and housing-starts activity in December and into first-quarter 2013. Nonetheless, given the underlying economic fundamentals, there is no longer-term recovery or relief in sight, and the relatively strong reports of September and October likely will revise sharply lower or be balanced in later reporting by offsetting seasonal adjustments.”
“Preview of Special Commentary, Housing Starts, #484”
John Williams, shadowstats.com, 11/20/2012
Yet Real U.S. Inflation is (already!) Threshold Hyperinflationary and reflects the effects of excessive Fed and ECB Fiat Money and Credit Creation. Indeed, Bogus Official Statistics mask a wide variety of Negative Effects of ongoing Q.E. and related Actions. Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported November 15, 2012
2.16% / 9.82%
U.S. Unemployment reported November 2, 2012
7.9% / 22.9%
U.S. GDP Annual Growth/Decline reported November 29, 2012
2.49% / -2.10%
U.S. M3 reported November 17, 2012 (Month of October, Y.O.Y.)
No Official Report / 3.56%
Shadowstats Forecast of Impending Hyperinflation beginning no later than the end of 2014, is quite significant.
Of Great Significance also is the fact that the consequent degradation of the U.S. Dollar’s status as World Reserve Currency (and the ascending of a Gold-backed Chinese Yuan as the World’s Reserve Currency) is already well under way.
China has already entered into bilateral Currency Deals with several nations including Russia, Iran, Brazil, and (soon to be former) financial allies Japan and Australia. Consequently the Purchasing Power of the $US will suffer a huge hit in the next very few years.
Given the Real Numbers (per Shadowstats and Deepcaster, et al.) it is no wonder Economist Nouriel Roubini characterizes U.S. Recovery as a “Fairy Tale.”
“…the first-half growth rate looks set to come in closer to 1.5 percent at best, even below 2011’s dismal 1.7 percent. And now, after getting the first half of 2012 wrong, many are repeating the fairy tale that a combination of lower oil prices, rising auto sales, recovering house prices and a resurgence of U.S. manufacturing will boost growth in the second half of the year and fuel above-potential growth by 2013.
“…the gravity of weaker growth will most likely overcome the levitational effect on equity prices from more quantitative easing, particularly given that equity valuations today are not as depressed as they were in 2009 or 2010. Indeed, growth in earnings and profits is now running out of steam…”
“We’re Not Even Close to a Robust Recovery”
Nouriel Roubini, Project Syndicate, 7/22/2012
And it is not just Doctor Doom Roubini who sees beyond the Bogus Official Data. Former Reagan Budget Director, David Stockman sees the Real Data, the Consequences, and the Challenges clearly.
“I don't think we are at the beginning of the recovery. I think we are at the end of a disastrous debt supercycle that has gone on for the last thirty or forty years, really. It started when Nixon defaulted on our obligations under Bretton Woods and closed the gold window. Incrementally, year after year since then, we have been going in a direction of extremely unsound money, of massive borrowing in both the private and the public sector. We now have an economy that is saturated with debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off the charts from where it was for a hundred years prior to the beginning of this. The idea that somehow all of that debt is irrelevant, as the Keynesians would tell us, is fundamentally wrong – and the reason why the economy can't get up off the mat.
“We're doing all the wrong things. We're adding to the problem, not subtracting. We are not allowing the debt to be worked down and liquidated. We're not asking people to save more and consume less, which is what we really need to do. And so therefore I think policy is just making it worse, and any day now we will have another recurrence of the kind of economic crisis we had a few years ago.”
“Austerity Is Not Discretionary,” Interviewed by Alex Daley, Casey Research
David Stockman, Congressman and former Reagan Budget Director, 7/20/2012
Official data sources have Powerful Interests to protect and Truth is often sacrificed. Thus it is essential to rely on other entities and persons such as Shadowstats, Deepcaster, Stockman, and Roubini for Genuine Data and Honest Analyses, prior to making Investment Decisions.
Nonetheless, amid all the uncertainty in the Markets and Economy there are three “Fortress Asset” Sectors which will likely return profits regardless of Boom or Bust, Inflation or Deflation. To understand why we select just these three Sectors first consider:
“The Bureau of Labor statistics reported the increase/decrease in non-farm payrolls and the unemployment rate for June 2012 on Friday, July 6th. Stocks plunged on the news. Why? The BLS reported that non-farm payrolls increased by 80,000 new jobs in June. Isn’t that good? Well first of all, it is a false figure. The true figure is there was a net loss of 44,000 jobs in June. The BLS decided in their infinite wisdom that they think, they guess, they pretended that new businesses that started up in June created 126,000 new jobs. They have no idea what new businesses started, nor did they count new jobs in these phantom new businesses. This 126,000 phony figure was added to the loss of 44,000 jobs to fudge a positive number for the release of the June jobs report. This phony figure is called the CESBD adjustment, or the Birth/Death adjustment. Birth/Death refers to businesses, not people. The truth is the economy lost 44,000 jobs in June. This is abysmal. This is recession. This is an indictment of government fiscal policy, of Fed monetary policy, of tax policy and regulation of businesses. We need a true increase of 150,000 new jobs each month just to break even with population growth, and need millions more to put displaced workers back in a job.
“The truth is, the economy is falling off a cliff, housing transactions are essentially non-existent, jobs are declining, growth is shrinking.”
“Current Weekend Report”
Robert McHugh, Ph.D., Main Line Investors, 7/7/12
There is a War going on between the forces of Inflation (e.g. Central Bank Money Printing) and the forces of Deflation (e.g. several contracting Economies around the world resulting in increasing Unemployment and a slowing Velocity of Money). That war is disguised by Bogus Official Numbers which conceal, for example, the USA’s 9.82% Real Inflation rate and 22.9% Unemployment rate.
The Central banks will ultimately “Win” via QE-to-Infinity but that “Win” will be a Pyrrhic victory because it will bring full-blown Hyperinflation. In sum, the Real Numbers are being Masked by the Bogus Official Ones.
Consider Adrian Douglas’ point:
“There are frequent claims that the U.S. economy has entered a period of “deflation.” These claims are totally unfounded and are false. Deflation can only be a persistent state of general price decline. In fact, in examining price trends, the U.S. is experiencing shocking price increases of over 15% per annum. To illustrate this, …the Continuous Commodities Index, CCI over the past ten years.”
“Deflation – Nowhere to be Seen”
Adrian Douglas, Market Force Analysis, 7/7/12
Fortunately three “Fortress Profit Sectors” should suffice to Protect and Profit. We identify these, including a Mini-Sector with Spectacular Profit Potential in our recent Letters and Alerts.
For Deepcaster’s specific recommendations (in the three Fortress Profit Sectors) aimed at Profit and Protection despite Bogus Official data and Impending Hyperinflation see Notes 1, 2, 3, and 4 below.
Necessary also, is having Courage to see the Truth, because the Truth is not always Pretty; but seeing it is essential for Profit and Protection.
Finally, important to note is the fact that, absent manipulation, Gold and Silver would be the monetary “Canaries” of the Financial World, whose prices would warn of Excessive Monetary and Credit Creation even more than they have in the past decade.Indeed, in the past decade their price appreciation (well in excess of any other Asset classes) certainly has “warned” of that, but not in the past few months. Gold and Silver prices are subject of ongoing Price Suppression by a Fed-led Cartel as described in Note 5 below. But with the Physical Supply situation increasingly tightening, Gold and Silver Price Suppression cannot last forever.
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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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