Saturday, October 20, 2012

Money "well" spent

#4 Over the past four years, welfare spending has increased by 32 percent. In inflation-adjusted dollars, spending on those programs has risen by 378 percent over the past 30 years. At this point, more than 100 million Americans are enrolled in at least one welfare program run by the federal government. Once again, these figures do not even include Social Security or Medicare.
#5 Over the past year, the number of Americans getting a free cell phone from the federal government has grown by 43 percent. Now more than 16 million Americans are enjoying what has come to be known as an "Obamaphone".
#6 When Barack Obama first entered the White House, about 32 million Americans were on food stamps. Now, nearly 47 million Americans are on food stamps. And this has happened during what Obama refers to as "an economic recovery".
#7 The U.S. government recently spent 27 million dollars on pottery classes in Morocco.
#8 The U.S. Department of Agriculture recently spent $300,000 to encourage Americans to eat caviar at a time when more families than ever are having a really hard time just trying to put any food on the table at all.
#9 During 2012, the National Science Foundation spent $516,000 to support the creation of a video game called "Prom Week", which apparently simulates "all the social interactions of the event."
#10 The U.S. Department of Agriculture gave the largest snack food maker in the world (PepsiCo Inc.) a total of 1.3 million dollars in corporate welfare that was used to help build "a Greek yogurt factory in New York."
#11 The National Science Foundation recently gave researchers at Purdue University $350,000. They used part of that money to help fund a study that discovered that if golfers imagine that a hole is bigger it will help them with their putting.
#12 If you can believe it, $10,000 from the federal government was actually used to purchase talking urinal cakes up in Michigan.
#13 The National Science Foundation recently gave a whopping $697,177 to a New York City-based theater company to produce a musical about climate change.
#14 The National Institutes of Health recently gave $666,905 to a group of researchers that is studying the benefits of watching reruns on television.
#15 The National Science Foundation has given 1.2 million dollars to a team of "scientists" that is spending part of that money on a study that is seeking to determine whether elderly Americans would benefit from playing World of Warcraft or not.
#16 The National Institutes of Health recently gave $548,731 to a team of researchers that concluded that those that drink heavily in their thirties also tend to feel more immature.
#17 The National Science Foundation recently spent $30,000 on a study to determine if "gaydar" actually exists. This is the conclusion that the researchers reached at the end of the study....
Comment: Government is an evil, big government is a big evil and government debt is the greatest evil of all.

Tuesday, October 16, 2012

The wealth of Greece

Greece Is Not Poor - It Actually Has Massive Uptapped Reserves Of Gold, Oil And Natural Gas

It turns out that the poster child for the European debt crisis is not actually poor at all. In fact, the truth is that the nation of Greece is sitting on absolutely massive untapped reserves of gold, oil and natural gas. If the Greeks were to fully exploit the natural resources that are literally right under their feet, they would no longer have any debt problems. Fortunately, this recent economic crisis has spurred them to action and it is now being projected that Greece will be the number one gold producer in Europe by 2016. In addition, Greece is now opening up exploration of their massive oil and natural gas deposits. Reportedly, Greece is sitting on hundreds of millions of barrels of oil and gigantic natural gas deposits that are worth trillions of dollars. It is truly sad that Greece should be one of the wealthiest nations in all of Europe but instead the country is going through the worst economic depression that it has experienced in modern history. It is kind of like a homeless man that sleeps on the streets every night without realizing that a relative has left him an inheritance worth millions of dollars. Greece is not poor at all, and hopefully the people of Greece can learn the truth about all of this wealth and chart a course out of this current mess.
Comment: What counts in the end is not what is in the ground but what kind of people are on the ground. It's time for the Greek to wake up.

Monday, October 15, 2012

At the brink

21 Signs That The Global Economic Crisis Is About To Go To A Whole New Level

The global debt crisis has reached a dangerous new phase. Unfortunately, most Americans are not taking notice of it yet because most of the action is taking place overseas, and because U.S. financial markets are riding high. But just because the global economic crisis is unfolding at the pace of a "slow-motion train wreck" right now does not mean that it isn't incredibly dangerous. As I have written about previously, the economic collapse is not going to be a single event. Yes, there will be days when the Dow drops by more than 500 points. Yes, there will be days when the reporters on CNBC appear to be hyperventilating. But mostly there will be days of quiet despair as the global economic system slides even further toward oblivion. And right now things are clearly getting worse. Things in Greece are much worse than they were six months ago. Things in Spain are much worse than they were six months ago. The same thing could be said for Italy, France, Japan, Argentina and a whole bunch of other nations. The entire global economy is slowing down, and we are entering a time period that is going to be incredibly painful for everyone. At the moment, the U.S. is still experiencing a "sugar high" from unprecedented fiscal and monetary stimulus, but when that "sugar high" wears off the hangover will be excruciating. Reckless borrowing, spending and money printing has bought us a brief period of "economic stability", but our foolish financial decisions will also make our eventual collapse far worse than it might have been. So don't think for a second that the U.S. will somehow escape the coming global economic crisis. The truth is that before this is all over we will be seen as one of the primary causes of the crisis.
The following are 21 signs that the global economic crisis is about to go to a whole new level....
Comment:  The more bad news are out the less space is left for unpleasant surprises.

Endof the China cult

4 Reasons Why You Should Stop Believing In Chinese Leadership

 by Zarathustra of Also Sprach Analyst,

Did you know that Chinese government officials are all corrupt?
Did you know that many of Chinese statistics look either weird or totally unreliable to a point that even the Vice Premier can’t help admitting it?
Premier_WenPeople outside of China have never really trusted the Chinese Communist Party as far as politics are concerned, and probably never will. However, the seemingly unstoppable growth engine of China has produced a remarkable level of complacency among investors that China is going to do well. Indeed, our contacts in Europe even suggest that investors are looking to invest in China because China seems to be in better shape than Europe, and that seemingly depressed Chinese stocks represents a buying opportunity.
Read more: the death of China cult
While recent economic data from China are mixed at best, the market consensus is unanimously biased towards believing that the second quarter is the bottom. We acknowledge that there is a chance that the government does have enough ability to stimulate growth in the short-run, it was precisely that ability which made matters worse for the long-term. And with the current economic growth model in-place, we argued that China will be a very bad place to invest in even if growth can be artificially pumped up by massive stimulus.

By World Economic Forum from Cologny, Switzerland [CC-BY-SA-2.0], via Wikimedia Commons
We do not understand the reasons behind the faith in the Chinese leadership as far as running the economy is concerned. We do have a few reasons on why you should just stop believing in the Chinese leadership when it comes to running the economy.
Comment: State capitalism is in deep trouble - always and everywhere, by its very nature. It's a system of permanent crisis interrupted by short periods of stability and spurts of growth. In classical capitalism it would be the other way round. Steady high growth interrupted by a crisis once in a while. Politicians love state capitalism because it gives them power and importance - that's why it is the dominant system - globally.

Friday, October 12, 2012

Financial dynamite

Corporate Cash

US corporations are sitting on more cash than at any point since World War 2.
That's without including banks. I'm only talking about nonfinancial corporations – the ones that sell goods and services and make the economy go.
Those businesses hold $1.4 trillion. In absolute terms, that's the most ever. In relative terms, it's the most since World War II...
If these businesses could conjure up even the most marginal of projects to earn a meager 1% return, they would generate $14 billion profit. Instead, they're sitting on the cash and earning near zero for a guaranteed after-inflation loss.

See also Excess reserves of the banking system:

Tuesday, October 9, 2012

Messed up

IMF Sees ‘Alarmingly High’ Risk of Deeper Global Slump

The International Monetary Fund cut its global growth forecasts as the euro area’s debt crisis intensifies and warned of even slower expansion unless officials in the U.S. and Europe address threats to their economies.
Comment: What we see is the consequence of a silly stimulus policy. A scam, indeed.
See my article from March 2010
The Stimulus Scam

Monday, October 8, 2012

European Stability Mechanism becomes operational

Europe Launches $648 Billion Aid Fund, Rules Out Immediate Use

European governments set up a full-time 500 billion-euro ($648 billion) fund to aid debt-swamped countries and, not for the first time in the three-year crisis, expressed confidence that the financial muscle won’t be needed anytime soon.
Finance ministers from the 17 euro countries declared the European Stability Mechanism operational ...
Comment: The next debate will be about the TARGET system and then the topic of a common fiscal policy will be brought up. You may rest assured that the eurocrats will leave no crisis pass unused to tighten their grip. 

Wednesday, October 3, 2012

Economic Outlook October 2012

Economic Outlook October 2012

As indicated in the previous analyses at this place, the Great Recession continues and affects more and more parts of the world. Despite the massive fiscal and monetary stimulus, the U.S. economy remains weak and finds itself in a state that is not much different than that of Europe and Japan. While the economies of the industrialized countries continue its stagnation, the major other economies also suffer weak economic growth with a marked slowdown of economic growth in China and Brazil.
While there are signs of economic upturns in place, this should not provide reasons for complacency. If the world economy should pick up anytime soon, the overhang of liquidity could rapidly fire massive inflation.

Economic growth
After meager rates in 2011, U.S. economic growth accelerated slightly to 2.4% and 2.3% in the first and second quarter of 2012.  In the meantime, the rate of economic growth in the Euro Area worsened in each quarter since the beginning of 2011, reached a rate of zero in the first quarter in 2012 and became negative in the second half of 2012 with a rate of -0.4%. Germany, which still had robust growth rates in 2011, also recorded weaker rates of 1.2% in the first and 1.0% in the second quarter of 2012, while the UK slumped with growth rates of -0.2% in the first and 0.5% in the second quarter of 2012. The Japanese economy could get out of negative territory that it was in in the past year and surprised with strong economic growth of 3.1% in the first and 3.6% in the second quarter of 2012.
The economic growth data are in tune with the data of industrial production where the United States could register a jump in the second quarter of 2012 to 4.6% while in the Euro area industrial production registered a negative rate equal to that of the United Kingdom which suffered from negative rates of  -2.4% and -2.5% in this period.
After a sharp fall in industrial production in Japan in the second quarter of 2011, this country could register an increase in industrial production in the second half of 2012 by 4.8%.

International trade

The U.S. current account continues to be in deficit in 2012 more or less at the same rates as in 2011. After a current account deficit of 3.4% of GDP in the third quarter of 2011 and of 3.1% in the fourth quarter, the US current account deficit was 2.9% in the first quarter of 2012.
The Euro Area recorded a surplus in its overall current account of 1.5% in the last quarter of 201, while Germany continues with strong surpluses in the range of 7.3% in the fourth quarter of 2011 and of 6.3% in the first quarter of 2012.
Like the United States, the United Kingdom keeps on with current account deficits and suffered a deficit of -3.2% in the first quarter of 2012.
The current account surpluses of Japan and China were moderate due to weak economies in Europe and the United States. While China had a surplus in its current account of 3.5% and 3.0% in the second and third quarter of 2011, this figure fell to 2.5% in the last half of 2011 while Japan recorded a surplus of 0.8 % in the last half of 2011 and 1.7% in the first half of 2012.

Interest rates and currencies

The central bank of the United States continues to practice a policy of minimum interest rates as well as do the central banks of the Euro Area, the UK and Japan. The U.S. central bank has not changed its federal funds rate of 0.25% per year and Japan has maintained its rate of 0.10%. In Europe, the European Central Bank has kept its policy interest rate at 1.00% since April 2011 and the Bank of England continues to charge a rate of 0.50%. China has not changed its interest rate that remains at the level of 6.31%.
        The euro weakened slightly against the U.S. dollar from 1.32 in April to 1.23 in July 2012 together with the pound sterling that fell from 1.60 in April to 1.56 in July 2012. Looking at the past 12 months one can note that the turbulences in international markets such as the sovereign debt crisis in Europe and the fiscal problems in the U.S. have not affected very much the exchange rates among industrialized countries. Even the rate of the yen against the dollar hand hardly changed over the past 12 months with 79.40 yen per dollar in July 2011 and 78.98 yen per dollar in July 2012. China revalued its exchange rate only marginally from 6.46 yuan per dollar in July 2011 to 6.32 yuan per dollar in July 2012.
While not much has changed with the exchange rates of the countries, Brazil has managed to devalue its currency from 1.56 real to the dollar in July 2011 to 2.03 real per dollar in July 2012.


The gold price was relatively stable with US$$ 1,685.3 per ounce in August 2012. The price of oil in August 2012 had the same price as in August 2011 at a little more than US$114 per barrel. Over the past 12 months the price of oil recorded a maximum variation between US$ 122.7 in February 2012 and US$101.9 in May of the same year.
More accentuated movements occurred with the prices of other commodities, with coffee down from 289.1 in August 2011 to 164.6 cents per pound in August 2012 same as sugar that dropped from 29.7 in August 2011 to 19.8 cents per pound in August 2012 while other commodities such as corn, soybean price slightly rose.


The world economy is in a phase of treacherous tranquility with cracks and tensions all over the place. No clear investment preference is available and all runs down to the choice between bad and worse. Over the past couple of years there has been such a build-up of global liquidity that markets simply cannot recede even if they are clearly overprized. Stocks, bonds, commodities, for each and every investment item prices are high and given the avalanche of liquidity that has inundated the markets these prices can even go still higher. The link to sober valuations has been lost. The investment world is waiting for the final blow-off. 
Watch out for the economies to show more signs of economic growth. Instead of being cause for jubilation, investors should be aware that more economic growth can easily ignite the megatons of liquidity which central bankers have planted around the world over the past couple of years.

The Continental Economics Institute (CEI)
October 2012