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Go past the text section to hear my enlightening message
Thu Jul 12 2012
Jeff Nielson / LewRockwell.com
Regular readers of my work know that I have been outlining (and warning people about) two potential economic scenarios; as the West’s terminally-ill economies lurch towards their final collapse. These hollowed-out, debt-saturated economies would (will) either crash under the weight of their own insolvency; or our governments will create a hyperinflation death-spiral – in a last desperate attempt to avoid that bankruptcy event.
While both paths represent utter, economic suicide; the road to ruin is much different in these two scenarios. This has severely limited the investment options and strategies for any prudent investor. Forced not only to “play defense” with our investing but to prepare for two more-or-less opposite events has made precious metals the one asset class which can protect investors from either of these fates.
I’ve explained on multiple occasions in the past why precious metals will outperform other asset classes in both a debt-default crash or hyperinflation-spiral scenario. The purpose of this piece is not to repeat that analysis, but rather to point out that as of this moment the “crash” scenario has become not only the most likely scenario, but an imminent event.
For those who have been paying attention recently as the West plummets deeper into Depression and the global economy teeters; the news that came out today was enough to send shivers down one’s spine. On a single day we hear that Europe’s interest rates have descended closer to the zero-percent graveyard already occupied by Japan and the U.S.; China has slashed its own interest rates again; and the (ridiculously inflated) U.S. “ISM” service sector measurement has reached its lowest level in 2½ years.
Each of these news items has dire implications, and so I’ll spend a moment dissecting each of them. As I have detailed in past commentaries, any fiat-currency produced at zero cost (i.e. with interest rates set at 0%) is worthless as a basic tautology of logic and arithmetic. There can be no possible debate or equivocation here. Just as with the yen and the USD, the euro now lurches much closer to the same worthless status.
Meanwhile we see China, the growth-engine of the 21st century global economy, again lowering its own interest rates. With China’s 1-year deposit rate on the renminbi now set at 3%, while the 1-year lending rate is now at 6%; China’s interest rates are still sane (unlike the West) – and it’s own paper is not (yet) officially worthless. However, China’s latest cut in its interest rates signals another deeply disturbing aspect to the economic carnage created by the reckless/greedy/incompetent Western banking cabal.
What most other economic commentators still totally fail to grasp is that the terminal, economic death-spiral in which virtually all Western economies are now trapped bears absolutely no resemblance to any other deflationary collapse in the limited experience of these pseudo-experts. In a “normal” deflationary episode, by definition the value of the currency in circulation rises. This makes that currency an effective “safe haven”.
Similarly, in previous deflationary episodes when our economies were still solvent, bonds also represented a safe haven: loaning money to the most reliable debtors, sovereign governments. Neither of these parameters exists today.
As Western economies accelerate toward their debt-default crash (i.e. bonds going to zero), we see inflation raging all around us (i.e. currencies going to zero). “Official” numbers on inflation have become such absurd lies that they are now entirely irrelevant numbers. In the real world, inflation is now a double-digit plague in virtually every economy – and cutting interest rates stokes that inflation still further. Worse, because inflation (by definition) is the destruction of our purchasing power; such crippling inflation causes the collapse of these hollowed-out economies to accelerate. Thus we have a world where inflation and insolvency can and are simultaneously worsening.
While Europe and China are stoking the inflationary side of this economic nightmare with their interest rate cuts, simultaneously we get more terrible news out of the world’s great, economic black-hole: the U.S. economy. While absurd statistical lies have transformed the U.S.’s Greater Depression into an “economic recovery” for the past 3 years, the short-term benefits of this propaganda campaign come at a terrible price.
Deluded Americans who should have spent the last three years bolstering non-existent savings and paying down their extravagant debts have instead done the opposite: they have stopped saving, while once again piling on more debt which they have no hope of servicing over even the medium term.
As usual, our greatest condemnation must be reserved for the mainstream media, a corporate propaganda machine which is entirely owned by a handful of Oligarchs. To protect the paper-empire of the felonious banking cabal, we have been fed an endless diet of “don’t worry, be happy” tripe from the shameless shills employed by these Oligarchs.
News from the U.S. economy has been totally unequivocal, once realistic numbers on inflation are used to translate the economic fiction distributed by the U.S. government. Manufacturing has collapsed. The housing sector remains mired in the worst depression in U.S. history, and saturated with mortgage-fraud there is no prospect of this market healing during our lifetime.
Several months of terrible retail sales numbers are being accompanied by a marked sag in the official readings for the U.S. services sector. With consumption directly or indirectly accounting for well over 80% of the U.S. economy; each percentage-point drop in this sector of the economy translates almost point-for-point into a decline in GDP. While the crippled economies of Europe at least attempted (suicidal) “austerity”; the U.S. economy is drowning in such extreme levels of debt that its cowardly two-party dictatorship has refused to even attempt to control the exponential explosion in U.S. debt.
The U.S. economy is nothing but a credit card which is past the point of being “maxed-out”. The ludicrous notion that the U.S. can “print” its way out of insolvency is nonsense, for (among many) a reason which I’ve already provided: the U.S. dollar is already totally worthless. As a basic proposition of arithmetic, worthless paper cannot mitigate insolvency. However trying to do so is how governments produce hyperinflation.
It is the act of attempting to ward-off bankruptcy by printing ever larger mountains of (worthless) paper currency which has always been the catalyst for hyperinflation; as such extreme/reckless conduct shatters the final delusion of the Sheep that this worthless paper actually has value.
The analogy of a government which claims it can ward-off insolvency with a printing-press is a simple one. It is identical to the Deadbeat who assures a creditor that he can “resolve” the problem when one of his bad-cheques “bounces” by simply writing another (bad) cheque. It doesn’t matter if the Deadbeat writes one more bad-cheque or a million; none of his debts can be reduced, let alone repaid.
So it is with Deadbeat Governments claiming they can “pay their bills” by simply printing more and more and more and more paper. It is not a question of “if” the Sheep finally and totally reject all of this fiat-paper. The only question which remains is how many months until this occurs?
Understand that during the Panic of the crash which looms ahead of us that it is entirely possible that the (nominal) prices of our precious metals assets (whether bullion or the shares in the miners) could decline still further. This must not deter us, and above all we must not attempt to become “traders” in this extreme/insane environment.
Those (amateur) investors who naively believe they can trade in and out of such markets overlook one, gigantic variable which can (will?) destroy them. As our economies collapse it is inevitable that both our banking system and markets will be forced to shut down – likely for extended periods.
Those who sell their precious metals assets for the bankers’ “magic beans” (i.e. fiat paper currencies) risk being caught holding that paper when our banks and markets are closed. By the time the financial system re-opens there is the very real possibility that any/all paper in their possession will no longer have any value whatsoever. Instead of prospering through their trading, such people can/will annihilate themselves financially.
Understand that what looms ahead of us is an economic cataclysm more severe than anything we have even read about in our history books, let alone experienced in our own lives. Understand what it means to “play defense”, and do so now – before it’s too late. Seats still remain in the Financial Lifeboats known as gold and silver, but the Titanic is sinking fast and the party is over.
Reprinted with permission from Silver Gold Bull.
July 12, 2012
Jeff Nielson is Senior Precious Metals Analyst for SilverGoldBull.com.
Copyright © 2012 Silver Gold Bull
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Just Open Up Your Eyes And Look – 65 Signs That The Economic Collapse Is Already Happening
Do you want to know when the “economic collapse” is going to happen? Just open up your eyes and take a look. The “economic collapse” is already happening all around us. So many people talk about the coming economic collapse as if it is some massively hyped event that they will be able to point to on the calendar, and a lot of writers spend a lot of time speculating about exactly when it will happen. But as I have written about before, the economic collapse is not a single event. The economic collapse has been happening, it is happening right now, and it will be getting a lot worse. Yes, there will be moments of great crisis. We saw one of those “waves” back in 2008 and another “wave” is rapidly approaching. But all of the waves are part of a process that is continually unfolding. Over the past 40 years, the United States and Europe have piled up the greatest mountain of debt in the history of the world, and now a tremendous amount of pain is heading our way. Economic conditions in the United States and Europe have already deteriorated badly and they are going to continue to deteriorate. Nothing is going to stop what is coming.
But many people are still in denial about our economic decline. Some people still believe that everything is going to be just fine. Way too often I get comments on my site that go something like this….
“I just don’t know what you are talking about. Where I live everything is just fine. The malls are packed, the restaurants are full and everybody I know is going on vacation this summer. Personally, I am doing great. I just bought a 60 inch television and a new boat. Every year all the ‘doom and gloom’ types such as yourself proclaim that an economic collapse is right around the corner but it never happens. And you know what? It is not going to happen. Those in charge know what they are doing and America has the greatest economy on earth. We have overcome challenges before and we will be able to handle whatever comes this time. Your lack of faith in America and in the American people astounds me. Everything is going to be just fine, so why don’t you just *************************************.”
You get the idea.
I definitely understand that most Americans are terribly self-involved these days, but when I read comments like this I am once again amazed at just how delusional some people can be.
Why can’t people just open their eyes and look at the evidence of economic collapse that is all around us?
Yes, there are wealthy enclaves all over the country where things may seem better than ever, but that is not the reality for most Americans.
All over the country, our infrastructure is in shambles.
All over the country, our once proud cities are being transformed into hellholes.
All over the country, formerly middle class families are living in their cars.
There are dozens and dozens of economic statistics that clearly show that we are in the midst of a long-term economic decline. I have listed 65 of them below, but I could have easily doubled or tripled the size of the list.
I simply do not understand how anyone can believe that things are “great” or that the U.S. economy is going to be “just fine”.
We are living through a complete and total economic nightmare, and hopefully we can get more Americans to wake up from their entertainment-induced comas so that they can begin to understand exactly what is happening to this country.
The following are 65 signs that the economic collapse is already happening all around us….
1. Since Barack Obama entered the White House, the number of long-term unemployed Americans has doubled from 2.7 million to 5.4 million.
2. The average duration of unemployment in the United States is nearly three times as long as it was back in the year 2000.
4. Unemployment in the eurozone has hit another brand new record high. It is now sitting at 11.2 percent. It has risen for 14 months in a row.
5. The U.S. economy lost more than 220,000 small businesses during the recent recession.
6. The percentage of Americans that are self-employed fell by more than 20 percent between 1991 and 2010.
7. Overall, the number of “new entrepreneurs and business owners” dropped by a staggering 53 percent between 1977 and 2010.
8. The unemployment rate in Spain is now up to 24.6 percent.
9. Morgan Stanley is projecting that the unemployment rate in Greece will exceed 25 percent in 2013.
10. Since Barack Obama became president, the price of a gallon of gasoline has risen from $1.85 to $3.49.
12. About three times as many new homes were sold in the United States in 2005 as will be sold in 2012.
13. While Barack Obama has been in the White House, home values in the United States have declined by 12 percent.
14. According to AARP, 600,000 American homeowners that are 50 years of age or older are currently in foreclosure.
15. Right now there are now 20.2 million Americans that spend more than half of their incomes on housing. That represents a 46 percent increase from 2001.
16. According to Gallup, the current level of homeownership in the United States is the lowest that they have ever measured.
17. Federal housing assistance increased by a whopping 42 percent between 2006 and 2010.
18. In some areas of Detroit, Michigan you can buy a three bedroom home for just $500.
19. All around us our cities are crumbling. According to the American Society of Civil Engineers, 2.2 trillion dollars is needed just to repair critical infrastructure in the United States.
20. The unemployment rate in New York City is now back up to 10 percent. That equals the peak unemployment rate in New York City during the last recession.
22. The U.S. Postal Service is about to default on a 5.5 billion dollar payment for future retiree health benefits.
23. According to Graham Summers, “when we account for all the backdoor schemes Germany has engaged in to prop up the EU, Germany’s REAL Debt to GDP is closer to 300%.”
24. According to the Federal Reserve, the median net worth of families in the United States declined “from $126,400 in 2007 to $77,300 in 2010“.
25. The U.S. trade deficit with China during 2011 was 28 times larger than it was back in 1990.
26. The United States has lost more than 56,000 manufacturing facilities since 2001.
27. During 2010 alone, an average of 23 manufacturing facilities permanently shut down in the United States every single day.
28. The U.S. government says that the number of Americans “not in the labor force” rose by 17.9 million between 2000 and 2011. During the entire decade of the 1980s, the number of Americans “not in the labor force” rose by only 1.7 million.
29. Eight million Americans have “left the labor force” since the recession supposedly ended. If those Americans were added back into the unemployment figures, the unemployment rate would be somewhere up around 12 percent.
31. At this point, one out of every four American workers has a job that pays $10 an hour or less. If that sounds like a high figure, that is because it is. Today, the United States actually has a higher percentage of workers doing low wage work than any other major industrialized nation does.
33. According to one study, between 1969 and 2009 the median wages earned by American men between the ages of 30 and 50 declined by 27 percent after you account for inflation.
34. In 2007, the unemployment rate for the 20 to 29 age bracket was about 6.5 percent. Today, the unemployment rate for that same age group is about 13 percent.
35. According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.
36. Medicare spending increased by 138 percent between 1999 and 2010.
37. Over the next 75 years, Medicare is facing unfunded liabilities of more than 38 trillion dollars. That comes to $328,404 for each and every household in the United States.
38. Back in 1990, the federal government accounted for 32 percent of all health care spending in America. Today, that figure is up to 45 percent and it is projected to surpass 50 percent very shortly.
39. Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid, and things are about to get a whole lot worse. It is being projected that Obamacare will add 16 million more Americans to the Medicaid rolls.
41. Since Barack Obama entered the White House, the number of Americans living in poverty has risen by 6.4 million.
42. The number of Americans on food stamps has risen from 32 million to 46 million since Barack Obama became president.
44. The number of children living in poverty in the state of California has increased by 30 percent since 2007.
45. Child homelessness in the United States has risen by 33 percent since 2007.
46. According to the National Center for Children in Poverty, 36.4 percent of all children that live in Philadelphia are living in poverty, 40.1 percent of all children that live in Atlanta are living in poverty, 52.6 percent of all children that live in Cleveland are living in poverty and 53.6 percent of all children that live in Detroit are living in poverty.
47. Approximately 57 percent of all children in the United States are living in homes that are either considered to be either “low income” or impoverished.
48. According to the U.S. Census Bureau, the percentage of Americans living in “extreme poverty” is now sitting at an all-time high.
49. In the United States today, somewhere around 100 million Americans are considered to be either “poor” or “near poor”.
50. It is now being projected that about half of all American adults will spend at least some time living below the poverty line before they turn 65.
51. Total home mortgage debt in the United States is now about 5 times larger than it was just 20 years ago.
52. Total consumer debt in the United States has risen by 1700 percent since 1971.
53. Recently it was announced that total student loan debt in the United States has passed the one trillion dollar mark.
54. According to one recent survey, approximately one-third of all Americans are not paying their bills on time at this point.
55. In 1983, the bottom 95 percent of all income earners in the United States had 62 cents of debt for ever dollar that they earned. Today, the bottom 95 percent of all income earners in the United States have $1.48 of debt for every dollar that they earn.
56. The United States was once ranked #1 in the world in GDP per capita. Today we have slipped to #12.
57. According to the U.S. Census Bureau, 49 percent of all Americans live in a home where at least one person receives benefits from the federal government. Back in 1983, that number was below 30 percent.
58. Incredibly, 37 percent of all U.S. households that are led by someone under the age of 35 have a net worth of zero or less than zero.
59. Today there are approximately 25 million American adults that are living with their parents.
61. During the Obama administration, the U.S. government has accumulated more debt than it did from the time that George Washington took office to the time that Bill Clinton took office.
62. Overall, the U.S. national debt has grown by nearly 10 trillion dollars over the past decade.
63. The U.S. national debt is now more than 22 times larger than it was when Jimmy Carter became president.
65. As Financial Armageddon recently point out, so many homeless people are pooping on the escalators at San Francisco’s Civic Center Station at night that the escalators are breaking down and repair teams have been called in to clean up the mess. As the economy gets even worse, will scenes like this start playing out in all of our cities?
Bob Renner very well done and so dam true it makes me sick and strenghtens my sanity on how insane they really are.thx Dan