Making informed decisions about political candidates, business strategies, or one’s own personal economic situation is challenging under any circumstance. It becomes even more difficult in our highly political economy, where our so-called Representatives and public servants, along with their surrogates in the media, will say and do anything to protect their self-interest. Beyond the normal convoluted political rhetoric, there are well-intentioned analysts and economists that are also feeding us erroneous information based on flawed economic theories and models, primarily because they rely on a US-centric view of the world, and data that lacks the historic depth for accurate back-testing. The world is way more complicated and inter-connected to rely on simple, one-dimensional, if this, than that explanations.
To make matters worse, one has to deal with the insidious propagandists that use a wide range of techniques to misinform and brainwash the unwashed, such as subversion, conspiracies, and false flags. The purpose of all of these strategies is to focus the light away from those responsible, and to erode the foundation on which we base our decisions.
We have been living through the results of flawed economic models and theories for at least 15 years, and if you live in Japan, it has been over 20 years. The “well-educated” theoreticians, that have been directing our economy from their ivory towers, still don’t understand that you cannot solve a debt problem by adding more debt. To help their bankster banks and overly indebted govt’s, central bankers reduced interest rates to near zero, and kept them there for over seven years. Instead of fanning the flames of inflation, which is a flawed, repressive strategy on its own, this Zero Interest Rate Policy (ZIRP) has sucked the oxygen out of the economy and punished savers. Yet, how many govt and Wall Street representatives have come on TV to tell you things are better than before the financial crisis in 2008? For example, when talking about the economy in his SOTU speech, Obama said, “Anyone claiming that America’s economy is in decline is peddling fiction”. The charts above, and the 21 New Numbers That Show That The Global Economy Is Absolutely Imploding paint a picture of reality that is a bit different.
What does an ignorant, and quite frankly, insane person do when something doesn’t work? They repeat the same mistakes expecting a different result, and in the case of Europe and Japan, they double down by taking rates negative. Forgetting the obvious punishment of savers and the fact that people can move their money or park it in other assets (i.e. fine art, expensive cars, real estate, etc.); these brain-dead officials think they can force people to spend their money if they charge you to hold it in the bank. Is it any wonder why the economy and velocity of money has collapsed? Yet, the captured media want us to believe the same economic geniuses and politicians that they parade in front us daily. Really?
Just in case you may be wondering, the trend toward electronic money has nothing to do with making shopping more convenient, and everything to do with thwarting your ability to combat their idiocy and desperation, including their “solution” to the next financial crisis – the bail-in. If you haven’t followed this new development, or lived through its deployment in Cyprus, Greece, and MF Global, western govt’s have decided that if banks fail again, they shouldn’t be bailed out by taxpayers, this time. Instead, they will be “bailed-in” by the banks depositors and bond holders, as if these people are not tax payers. Just as the NSA is not about tracking terrorist, and global warming is not about saving the planet, negative interest rates and electronic money is not about helping anyone except govt and the bankster banks. The same thing can be said about Obamacare and Sanders’ followers, who often cite other countries in the world that have govt provided healthcare. Do they realize these countries are on the verge of bankruptcy and Medicare and Medicaid are set to go negative in 2017?
Current examples of the flawed reporting of well-intentioned analysts and economists can be seen in the explanations for the collapse in oil and why the Fed raised interest rates. If you listen to these “experts”, you would believe that the decline in oil is the result of US fracking and horizontal drilling. Never mind that all commodities are in the toilet.
I guess if they told you the truth, you might realize the glut in oil is more related to feeble demand. The other misinformed analysis is that the Fed started raising rates now because the economy is strong enough, even though commodity prices say the opposite, and the leaders of international economies, that have been hammered by a rising dollar, and have been begging for the Fed not to raise rates. Do these people not realize that govt pensions and insurance funds, that are mandated to hold large percentages of govt bonds, are in severe trouble due interest rates being near zero for over seven years? These funds model 7-8% returns, just to stay even. One would think that the Fed would realize that risk-averse retirees, and Social Security, that must invest 100% in treasuries, might also have needed higher returns over the last seven years. Are they more afraid of raising rates in a world that holds over $200 trillion in debt? At the end of the day it doesn’t matter what the Fed thinks or wants, they can’t control market rates, which will rise in anticipation of govt defaults.
The tactics of the propagandists have been demonstrated when they say Saudi Arabia is intentionally pumping more oil in order to bankrupt US fracking companies, and Russia, who is getting in the way of its efforts to replace Russian gas for Europe that flows through Syria (yes, the reason the US armed the rebels that became ISIS was to overthrow Putin’s partner, Assad). The reason oil-dependent countries like Russia and Saudi Arabia have continued to pump at such high levels, even though demand is weak, is they must meet budget requirements that are locked in and they can’t risk political up-evil by cutting spending.
There are countless numbers of concerned citizens and true Patriots that understand their history and what the American experiment is all about, and fear it is slipping away. Others that base their history on current events and misguided American hegemony after WWII fail to appreciate what our Founding Fathers sacrificed, and are willing to throw it away because they fail to understand the govt no longer represents the people.
Thousands of dots of corruption, fraud, and abuse have been documented by real investigative journalists, bloggers, and whistleblowers, but how are the dots connected and where do they lead? Govt, of course, does not want the dots to lead to them, which is why they go to extreme measures to point the finger at anything else, and would never consider looking in the mirror or admitting a mistake.
Tactics like false flags that kill innocent people demonstrate how far govt’s will go to impose their will. As discussed, there are also more subtle propaganda techniques that are used to herd the sheeple, like conspiracy theories. If one begins to connect the dots, they will see where they come from and where they lead. Only then can one begin to think about solutions to the current economic crisis. First, let’s make sure we understand the real issues.
As mentioned, the current crash in oil prices has economists scrambling for explanations and propagandists unleashing conspiracy theories to distract the masses from focusing on the real reasons for oil’s decline – normal supply-demand factors, coupled with the collapse of socialism.
A normal cycle in oil prices is caused by capacity being brought online to chase higher prices, which eventually leads to price declines when supply exceeds demand. When prices decline enough, the speculative and over-indebted projects go bankrupt, removing their supply, eventually causing prices to rise, and starting the cycle all over.
Coincidentally, govt’s around the world have amassed $200 trillion in debts over 30 years when interest rates were declining, enabling them to roll increasing amounts of debt for the same interest payment. With rates being zero bound for over seven years, govt’s can at best borrow the same amount of debt, at least until rates rise, then they can’t even roll existing debt without increasing interest expenses. Deleveraging, and the govt’s aggressive “need” to confiscate more from citizens has resulted in a deflationary spiral that can’t be halted by more debt creation. This is why the economy seems to be constantly gasping for air.
Two of the strongest economies in the world, the US and Germany, have accumulated interest expenditures that are around 60% of their total debt, and this is with average interest rates on their debt below 2%. What happens when rates rise? In short, the crash and burn process starts, aided by the rising safe-haven dollar that blows up the balance sheets of countries, companies, and individuals that took on too much dollar-based debt.
Since govt’s deficit spending is included in GDP, over 40% of our so-called growth since 1980 has been the result of producing nothing, and worst of all, the govt’s waste has been pulled forward through borrowing with interest. It is estimated that 40% of China’s GDP is also due to debt creation. This exponential growth in debt has resulted in govt’s going bankrupt, which has caused them to become increasingly oppressive in their tactics to save themselves. The more aggressive govt gets to confiscate wealth from its citizens, the more capital parks in safe assets, making it unavailable to grow the economy.
The oil speculation and debt during this oil cycle is way worse than normal because of artificially low interest rates, and oil-dependent countries like Saudi Arabia, Canada, Russia, and Brazil that must pump more oil at lower prices to meet their revenue requirements. While US fracking projects did bring more supply on to the market, it was the bloated budgets of the big oil producing countries that is the biggest reason for the glut of oil, which will persist until fracking bankruptcies accelerate, eliminating supply.
The popular belief of economists has been that lower gas prices would put more money into the hands of consumers. Did they conveniently forget about the massive rise in health care premiums that is now consuming 10% of incomes on average. The other “benefit” of Obamacare for the propagandist’s is that the health care costs, which is a tax on the economy, actually counted for 25% of consumer spending, which was almost double the next category. How can anyone mistakenly believe the service sector is still strong? Respected research groups have also said that the current decline in stocks is not going to lead to a repeat of 2008, because prior to 2008 the economy was already falling into recession and the banking system was very fragile between 2008-2010. As the charts below demonstrate, along with the recently released durable goods reports , Regional Fed data, and real time tax data shows, the US may already be in recession, and current problems are worse than 2008.
One thing economist agree on is that high market volatility is going to be with us for a while. Although, they fail to mention the real reason why, which should be clear from the chart above that shows the collapse in the velocity of money, caused by the loss of economic confidence (the only real tool of the Fed and politicians). We have more debt, less income, and the govt has it’s self-interested grubby big hands deeper in our pockets. Not only is the state of our economy and standard of living worse now than in 2008, but debt is much higher, and economies in Europe, Japan, Russia, Canada, Australia, Brazil, and the Middle East are much worse.
Economies in Europe are collapsing under a sea of debt, and are being economically rapped by unelected politicians in Brussels, who are forcing negative rates on savers and austerity on countries like Greece to pay interest back to banksters. Financial repression, coupled with the fact that govt’s are getting increasingly desperate to confiscate taxes, fees and assets to save the jobs, perks, and power of career politicians is causing economies to contract and capital to flee to safer havens. If Greece is the tip of the debt iceberg for Europe’s sovereign debt crisis, Chicago may be our socialist bell cow. Granted, politician’s in the windy city may be full of more hot air and hubris than most, but their debt problems are certainly not unique, nor is the high level of incompetence and irresponsibility, as demonstrates in Flint, MI and other cities that have not maintained the assets under their control.
US debt is less than 10% of the $200 trillion in world debt, and the US markets are the only one deep enough to absorb capital flows from foreign reserves, which is why the safe-haven has been dollar-based assets, including stocks, fine art, expensive cars and real estate. The higher dollar makes dollar-based oil imports (and our exports) more expensive for foreign countries, which only exacerbates their problems. Throw in the mountains of speculative debt funding bankrupt oil and gas projects, which now exceeds sub-prime mortgage debt at the peak of the financial crisis, and you have a tinder box that could set off a much bigger crisis.
For those that think the current bounce in the euro (decline in the dollar) is a sign of euro strength, I would remind you that major collapses are almost always proceeded by a rise in the currency as distressed capital needs to sell foreign holding and bring it home. It’s possible for the euro index to break the 116 level and even reach 125, but the chances are dwindling fast. If the euro cracks the 110.7 level, then the critical 109 support level comes into focus, which if broken, foretells fresh new lows.
A popular junk bond fund, JNK, clearly shows speculative debts are headed for crisis lows, along with big foreign banks like Europe’s biggest, Deutche Bank (DB), which has actually fallen below crisis lows. Europe’s biggest bank, HSBC, just posted an unsurprising $858 million loss, and the ECB has admitted that at least five (5) banks don’t meet capital requirements. The US Regional Bank ETF, KBW, has clearly broken down, driven by lower spreads due to deflation fears and increased credit concerns. Throw in bubbles in subprime auto loans (see Auto Nation stock) and student loans, and one begins to see that the problem is not just oil.
Since the primary cause behind this oil crisis is caused by excessive debt by world govt’s, the govt naturally doesn’t want the spotlight on them, which is why you are hearing the conspiracies of foreign boogieman and the “Masters of the Universe“, that are intentionally using their pawns around the world to bankrupt oil shale producers and evil Russians and Iranians, while simultaneously destroying their host. As we wrote almost two years ago, conspiracy theories are another propaganda tactic of the establishment that assigns WAY too much intelligence to the “Masters of the Universe”.
Do these propagandist expect people not to notice that all commodities are down, along with the companies that transport them? Have they not looked at the Baltic Dry Shipping Index, that is well below crisis lows, or the Dow Transports that is down almost 30% in the last year? What about Haliburton, the Master of the Masters, which is down almost 60% since its 2014 high? Steel demand is also collapsing due to reduced demand from oil and gas producers, and also for the same reason oil is falling – China and other emerging economies are contracting. All of these deflationary forces are feeding on each other, which is why the money printing by Central Banks can’t meet their idiotic, and not-stable 2% inflation targets.
The other misconception is that one Presidential candidate or another can prevent or start WWIII. We are spiraling toward war for the same reason it has happened throughout history – economic collapse. Wars have their roots in economic deterioration, which is caused by collapsing govt’s that dig in their heels and confiscate freedoms and increasing amounts of wealth from the masses to save themselves. Whether the means of confiscation is higher taxes, fees, FATCA, or civil asset forfeitures, the results are the same – decreased economic activity and job losses, as capital seeks safety and preservation. The chart below from the OECD can’t make it any clearer – higher taxes produces lower economic growth.
No President can stop the economic collapse in Europe or Japan, which is being driven by the sovereign debt crisis caused by the fiscal mismanagement of politicians. This irresponsibility requires increasing amounts of wealth to be extracted from citizens to mask the self-interested fraud of career politicians, who must insure the financiers of their political promises get repaid. The last straw for Europe, may be the refugee crisis, which is taxing an already fragile welfare state and reversing the open boarder policy that increased trade. Japan has been living for over 20 years with the same economy that we have been coping with the last 7-8 years, which is why they are poking their long time boogieman, China, in case they need the distraction of war. The collapse in oil prices and other commodities, and the subsequent economic decline in resource-dependent countries is only fanning the flames of war, which is set to peak in 2017-2020.
If Trump truly isn’t beholden to the desires of the establishment, he will likely get knocked off, as was already attempted with United Kingdom Independence Party (UKIP) founder, Nigel Farage. All other remaining candidates are owned by one or more of the industrial complexes, or brainwashed by Marxist ideology that has ALWAYS failed throughout history. Real solutions for today and tomorrow, along with methods of analyzing their chances of success will be presented shortly.