There Is No Inflation (Unless You Eat Food, Use Water, Live In A House, Get Sick, Go To School, Or Do Taxes)

Posted on February 4th, 2015

3D Hand Cursor Cpi ButtonBy Jim Quinn

Government data reports are so funny. The blaring headlines today tells us that prices dropped in December. We are all saving billions from the drop in oil and gas. Hallelujah!!!

The corporate MSM never digs into the numbers to get the real truth. These reports and their distribution to the sheep are designed to keep you sedated and calm. Facts are not necessary. How this data pertains to your everyday life is not important to the .1% who control the flow of information.

Here is a link to the detailed inflation numbers by category. We already know they massage these numbers to achieve a happy ending, but even the massaged numbers tell an entirely different story than the one peddled to the masses by the government and corporate media.

http://www.bls.gov/news.release/cpi.t07.htm

Below are the annual price increases for items that might impact your life on a daily basis:

Food at home – 3.7%

Food away from home – 3.0%

Meat – 12.7%

Fish and seafood – 5.6%

Eggs – 10.7%

Milk – 5.2%

Fruits & vegetables – 4.1%

Coffee – 4.2%

Butter – 22.5%

Natural gas – 5.8%

Footwear – 2.8%

Prescription drugs – 6.4%

Newspapers & magazines – 4.8%

College textbooks – 5.0%

Cigarettes – 3.1%

Apartment rent – 3.4%

Owners equivalent rent – 2.6%

Hotels – 7.3%

Water & sewer – 5.6%

Medical care -2.4%

Hospital care – 4.9%

College tuition – 3.4%

Postage – 4.1%

Tax preparation – 6.1%

I don’t know about you, but the costs listed above account for a significant amount of my budget. Do those price increases jive with the message being spewed by the government controlled media?

The credibility of their numbers is highly questionable in that they say health insurance accounts for .75% of a person’s annual budget. They actually have the balls to say health insurance fell by 0.5% over the last year. I’d love to hear from anyone out there whose health insurance premiums fell in the last year. Mine went up by 20%.

Your government keepers will continue to drown you in propaganda and misinformation. But the average person should know they are being lied to. They see how much money they have left over at the end of every month. If any.     (my emphasis)

By Jim Quinn for The Burning platform

By permission Jim Quinn

www.theburningplatform.com

http://www.theburningplatform.com/2015/01/16/no-inflation-unless-you-eat-food-use-water-live-in-a-house-or-apartment-heat-your-home-get-sick-travel-pay-car-insurance-go-to-school-mail-letters-or-do-your-taxes/

Tsunamis Most Often Come Without Warning

Posted on February 2nd, 2015

Tsunami Hazard Zone

By John Browne, Senior Market Strategist, Euro Pacific Capital, Inc.

On Thursday, January 15th, the Swiss National Bank (SNB) discontinued its three year effort to maintain its minimum currency floor of the Swiss franc. In a single day the move sent the Swiss Franc (SWF) climbing a massive 21% against the U.S. dollar and 41% against the euro. The move sent shockwaves of unprecedented ferocity through the massive foreign exchange (FX) market, which is by far the largest, and most highly levered, trading market in the world. The monetary tsunami threatened both FX participants and even their brokers. But more importantly, even as the rest of Europe looks to suffocate itself in a blanket of debased currency, the Swiss have opened a window of reality on the massive central bank scheme. Hopefully some of the fresh air will spread throughout the rest of the world.

Most of the so-called developed world has followed the U.S./UK-led ‘Anglosphere’ in pursuit of Keynesian economics, focusing on consumption-based economic growth that can supposedly be stimulated by currency debasement.

On the other hand, the Germans and the Swiss have long been seen as the champions of Austrian economics, which favored an economic growth based on savings, production and sound money. During the second half of the 20th Century this philosophy lent tremendous strength to both currencies and led private investors and corporations to rely on the Swiss Franc and the Deutsche Mark as highly liquid and interest-yielding alternatives to gold as a store of wealth. It is interesting to note that both economies developed strong exports in the post-War years despite the consistently strengthening currencies. The Germans entered the Eurozone in part to protect their exporters. Outside the EU, the Swiss had no such shield.

But the financial crisis of 2008 and the Eurozone crisis of 2011 inspired investors to seek safe haven assets. But with the larger Deutsche Mark out of the picture, the Franc emerged as the only viable currency alternative to the U.S. dollar. This sent the Franc soaring in 2010 and 2011. Panicked that the surging currency would hurt its exports, the Swiss National Bank (SNB) decided to introduce a cap to prevent the euro falling below SWF 1.20. To maintain this peg, the SNB had to expend hundreds of billions of Francs in order to buy euros on the open market, a policy that became increasingly unpopular among Swiss citizens (for more on the this see Peter Schiff’s recent commentary).

As deflation spread within the Eurozone in late 2014, a greater consensus began to build that the European Central Bank (ECB) would finally unleash Fed-style quantitative easing. The euro then began to tumble. On January 14, 2015, the highly politicized European Court of Justice hinted that despite expressed prohibitions in the European Treaty, it would allow the ECB to buy Eurozone-member government bonds.

Furthermore, the Court opined that the ECB should dictate monetary policy, not the judiciary. This appeared to be a deliberate swipe at the German Constitutional Court, seen by many as the EU’s last bastion of honest money. It appeared also to give Draghi a free hand over unlimited QE, possibly in the trillions of euros. This caused the euro to flounder, threatening the SNB with spending even more billions of its peoples’ hard-earned Francs to add to its vast hoard of debased euros.

Apparently, with an economy performing significantly better than those within the Eurozone, the SNB decided that it was time to protect the savings of its people and their way of life. Even at a serious cost to its own exporters, the Swiss felt obligated by national interest to take no further part in the ECB’s scheme of inflation by any means necessary. Time will tell whether the decision is an act of salvation or suicide. Certainly share prices of Swiss exporters like Swatch sold off dramatically with the announcements (at least in Franc terms, but they strengthened if priced in dollars or euros). The world should now pay close attention to the balance sheets of these Swiss corporations. If their earnings persist, the lie that a weak currency leads to growth should finally be laid to rest.  On the other hand, Swiss banks that have lent vast sums in Swiss Francs to foreign borrowers at low interest rates now may experience serious default levels.

But more important than Swatch’s income statement is the effect that the surprise move will have on the world’s foreign exchange markets. Normally, major currencies move only in fractions of a percent in a day. High leverage therefore has been seen as acceptably prudent. In London, where almost half of international currency transactions occur, participants can leverage at 100 percent, if not more, should certain creditworthiness conditions prevail. Gearing up so tightly leaves very little margin for error.

The carnage on January 15th was gruesome. In London, Alpari, in New York, FXCM, and in New Zealand, NZ Limited, were just some of the brokerage firms set to follow many of their customers, like Everest Capital’s $830 million Global Hedge Fund, into vaporization. Perhaps these casualties are just the first in what could become a massacre if currencies were ever to emerge more freely from the control of central bankers.

SNB President Thomas Jordan attempted to soften the impact saying that, “We have a free exchange rate once again.”  Meanwhile, market participants and the central banking establishment were apoplectic.

Possibly, the worst damage has been to the credibility of central bank pronouncements in general. In the future, so-called ‘forward guidance’ on low interest rates likely will become increasingly difficult. Further, the Swiss may be perceived as having ‘left’ the Eurozone. If so, their departure may lend a certain legitimacy for actual members such as Greece to leave also, precipitating fresh concerns about the future of the euro, now the world’s second fiat currency.

In the meantime, gold has rallied considerably, reflecting increasing investor concern. Perhaps investors still heavily committed in bubble markets, and trusting in a well-timed exit if danger threatens, should remember the speed with which the stunning Swiss announcement hit the markets. Although the SNB had denied that any such move would happen, even just days before the knife was thrust, it should reveal to all just how important denial has become in the lexicon of the modern economy. Seismic events occur usually with savage suddenness and seldom gradually. Investors would be well served in looking ahead to future shocks, and structuring their portfolios accordingly.   (my emphasis)

By John Browne, Senior Market Strategist, Euro Pacific Capital, Inc.

www.europac.net

John Browne is a Senior Economic Consultant to Euro Pacific Capital. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific Capital, or its CEO, Peter Schiff.

If the Fed Has Nothing to Hide, It Has Nothing to Fear

Posted on January 26th, 2015

Open Door with Welcome MatBy Ron Paul

Since the creation of the Federal Reserve in 1913, the dollar has lost over 97 percent of its purchasing power, the US economy has been subjected to a series of painful Federal Reserve-created recessions and depressions, and government has grown to dangerous levels thanks to the Fed’s policy of monetizing the debt. Yet the Federal Reserve still operates under a congressionally-created shroud of secrecy.

No wonder almost 75 percent of the American public supports legislation to audit the Federal Reserve.

The new Senate leadership has pledged to finally hold a vote on the audit bill this year, but, despite overwhelming public support, passage of this legislation is by no means assured.

The reason it may be difficult to pass this bill is that the 25 percent of Americans who oppose it represent some of the most powerful interests in American politics. These interests are working behind the scenes to kill the bill or replace it with a meaningless “compromise.” This “compromise” may provide limited transparency, but it would still keep the American people from learning the full truth about the Fed’s conduct of monetary policy.

Some opponents of the bill say an audit would somehow compromise the Fed‘s independence. Those who make this claim cannot point to anything in the text of the bill giving Congress any new authority over the Fed’s conduct of monetary policy. More importantly, the idea that the Federal Reserve is somehow independent of political considerations is laughable. Economists often refer to the political business cycle, where the Fed adjusts its policies to help or hurt incumbent politicians. Former Federal Reserve Chairman Arthur Burns exposed the truth behind the propaganda regarding Federal Reserve independence when he said, if the chairman didn’t do what the president wanted, the Federal Reserve “would lose its independence.”

Perhaps the real reason the Fed opposes an audit can be found by looking at what has been revealed about the Fed’s operations in recent years. In 2010, as part of the Dodd-Frank bill, Congress authorized a one-time audit of the Federal Reserve’s activities during the financial crisis of 2008. The audit revealed that between 2007 and 2008 the Federal Reserve loaned over $16 trillion — more than four times the annual budget of the United States — to foreign central banks and politically-influential private companies.

In 2013 former Federal Reserve official Andrew Huszar publicly apologized to the American people for his role inthe greatest backdoor Wall Street bailout of all time — the Federal Reserve’s quantitative easing program. Can anyone doubt an audit would further confirm how the Fed acts to benefit economic elites?

Despite the improvements shown in the (government-manipulated) economic statistics, the average American has not benefited from the Fed’s quantitative easing program. The abysmal failure of quantitative easing in the US may be one reason Switzerland stopped pegging the value of the Swiss Franc to the Euro following reports that the European Central Bank is about to launch its own quantitative easing program.

Quantitative easing is just the latest chapter in the Federal Reserve’s hundred-year history of failure. Despite this poor track record, Fed apologists still claim the American people benefit from the Federal Reserve System. But, if that were the case, why wouldn’t they welcome the opportunity to let the American people know more about monetary policy? Why is the Fed acting like it has something to hide if it has nothing to fear from an audit?

The American people have suffered long enough under a monetary policy controlled by an unaccountable, secretive central bank. It is time to finally audit — and then end — the Fed.     (my emphasis)

By Ron Paul for Ron Paul Institute for Peace and Prosperity

By permission Ron Paul Institute

http://www.ronpaulinstitute.org/

Former Congressman Dr. Ron Paul’s work can be found at RonPaulInstitute.org where this article first appeare

The Myth of State Power Takes a Hit

Posted on January 19th, 2015

FedPrint

 

By Monte Pelerin

The myth of State power over markets took a big hit last week when the Swiss Central Bank reneged on its oft-repeated promises to support the euro. Markets were thrown into panic when this central bank support was removed. It is probable that this is only the first step in markets wresting back control from the Statist pretenders.

Inexplicably high financial asset prices have been maintained as a result of a faith in central banks. What happened last week is a direct conflict with that belief and likely the current level of markets. Bruce Krasting described the action as follows:

We’ve just taken a huge leap into chaos. The linchpin of the capital markets has been the trust in the CBs. The market’s anchors have now been tossed overboard.

The omniscience of central banks has been in question since Ben Bernanke made some of his early and ridiculously wrong assessments of what was happening in the economy. That didn’t rattle markets because central bank omnipotence seemed enough to make up for forecasting errors. After all, fiat money was potentially infinite and central banks assured us that they would do whatever was necessary to protect economies and markets. The old “Greenspan Put” had returned and now everyone seemed to believe it. Mr. Krasting explained deification of central banks thusly:

We [central banks] will do anything it takes to achieve the stability we desire. We are stronger than the markets. We can overwhelm all forces. We will never let go – just trust us!

Feds Shrinking Stature

What happened last week calls the notion of central bank omnipotence (and integrity) into question. The Swiss banking industry used to be considered the most trustworthy in the world. The Swiss Central Bank blinked, just as their banking industry had done earlier regarding customer privacy matters. The US forced the latter. The recent event was likely mandated by market conditions. No central bank is or ever will be omnipotent.

If there is omnipotence in such matters, it is markets that hold this power. They are bigger, stronger and relentless. The myth of State power is that markets can be controlled by central force. They cannot and we may have just seen the beginning of the end of the myth. What happened last week is likely the first shot fired in this battle. It will not be the last, nor will it be considered the biggest. Subsequent revelations of market forces are coming and they will obliterate the myth of State control over markets.    (my emphasis) 

By Monte Pelerin for Economic Noise

By permission Monte Pelerin

www.economicnoise.com

http://www.economicnoise.com/2015/01/15/myth-state-power-takes-hit/

Predictions of Economic Disaster in 2015 from Top Experts All Over the Globe

Posted on January 15th, 2015

2015 SignBy Michael Snyder

Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression?  Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger.  Despite predictions that they could burst at any time, they have just continued to expand.  But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.  Personally, I am entirely convinced that the financial markets are more primed for a financial collapse now than they have been at any other time since the last crisis happened nearly seven years ago.  And I am certainly not alone.  At this point, the warning cries have become a deafening roar as a whole host of prominent voices have stepped forward to sound the alarm.  The following are 11 predictions of economic disaster in 2015 from top experts all over the globe…

#1 Bill Fleckenstein: “They are trying to make the stock market go up and drag the economy along with it. It’s not going to work. There’s going to be a big accident. When people realize that it’s all a charade, the dollar will tank, the stock market will tank, and hopefully bond markets will tank. Gold will rally in that period of time because it’s done what it’s done because people have assumed complete infallibility on the part of the central bankers.”

#2 John Ficenec: “In the US, Professor Robert Shiller’s cyclically adjusted price earnings ratio – or Shiller CAPE – for the S&P 500 is currently at 27.2, some 64pc above the historic average of 16.6. On only three occasions since 1882 has it been higher – in 1929, 2000 and 2007.”

#3 Ambrose Evans-Pritchard, one of the most respected economic journalists on the entire planet: “The eurozone will be in deflation by February, forlornly trying to ignite its damp wood by rubbing stones. Real interest rates will ratchet higher. The debt load will continue to rise at a faster pace than nominal GDP across Club Med. The region will sink deeper into a compound interest trap.”

#4 The Jerome Levy Forecasting Center, which correctly predicted the bursting of the subprime mortgage bubble in 2007: “Clearly the direction of most of the recent global economic news suggests movement toward a 2015 downturn.”

#5 Paul Craig Roberts: “At any time the Western house of cards could collapse. It (the financial system) is a house of cards. There are no economic fundamentals that support stock prices — the Dow Jones. There are no economic fundamentals that support the strong dollar…”

#6 David Tice: “I have the same kind of feel in ’98 and ’99; also ’05 and ’06.  This is going to end badly. I have every confidence in the world.”

#7 Liz Capo McCormick and Susanne Walker: “Get ready for a disastrous year for U.S. government bonds. That’s the message forecasters on Wall Street are sending.”

#8 Phoenix Capital Research: “Just about everything will be hit as well. Most of the ‘recovery’ of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you’re going to see more and more ‘risk assets’ (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.

If things really pick up steam, there’s over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you’ve got a decent idea of the size of the potential impact on the financial system.”

#9 Rob Kirby: “What this breakdown in the crude oil price is going to spawn another financial crisis.  It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.  It is reported to be in the area of half a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world.  When these bonds start to fail, they will jeopardize the future of these financial institutions.  I do believe that will be the signal for the Fed to come riding to the rescue with QE4.  I also think QE4 is likely going to be accompanied by bank bail-ins because we all know all western world countries have adopted bail-in legislation in their most recent budgets.  The financial elites are engineering the excuse for their next round of money printing . . .  and they will be confiscating money out of savings accounts and pension accounts.  That’s what I think is coming in the very near future.”

#10 John Ing: The 2008 collapse was just a dress rehearsal compared to what the world is going to face this time around. This time we have governments which are even more highly leveraged than the private sector was.

So this time the collapse will be on a scale that is many magnitudes greater than what the world witnessed in 2008.”

#11 Gerald Celente: “What does the word confidence mean? Break it down. In this case confidence = con men and con game. That’s all it is. So people will lose confidence in the con men because they have already shown their cards. It’s a Ponzi scheme. So the con game is running out and they don’t have any more cards to play.

What are they going to do? They can’t raise interest rates. We saw what happened in the beginning of December when the equity markets started to unravel. So it will be a loss of confidence in the con game and the con game is soon coming to an end. That is when you are going to see panic on Wall Street and around the world.”

If you have been following my website, you know that I have been pointing to 2015 for quite some time now.

For example, in my article entitled “The Seven Year Cycle Of Economic Crashes That Everyone Is Talking About“, I discussed the pattern of financial crashes that we have witnessed every seven years that goes all the way back to the Great Depression.  The last two major stock market crashes began in 2001 and 2008, and now here we are seven years later.

Will the same pattern hold up once again?

In addition, there are many other economic cycles that seem to indicate that we are due for a major economic downturn.  I discussed quite a few of these theories in my article entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“.

But just like in 2000 and 2007, there are a whole host of doubters that are fully convinced that the party can continue indefinitely.  Even though our economic fundamentals continue to get worse, our debt levels continue to grow and every objective measurement shows that Wall Street is more reckless and more vulnerable to collapse than ever before, they mock the idea that a financial collapse is imminent.

So let’s see what happens in 2015.

I have a feeling that it is going to be an extremely “interesting” year.    (my emphasis)

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/11-predictions-economic-disaster-2015-top-experts-globe

Scenes from a (Suddenly) Nude Beach

Posted on January 15th, 2015

Inflation and Deflation SignpostBy John Rubino

Warren Buffett’s classic observation that “You only see who’s swimming naked when the tide goes out” is being tossed around more frequently these days, as the world gets yet another deflation scare. Zero Hedge just published a great piece on this topic, which should be read in its entirety. In the meantime here’s a summary of the story with a few added bits.

Let’s begin with the common sense premise that overly-easy money sends a false-positive signal to market participants, leading them to buy and build things that maybe shouldn’t be bought or built. Then, when money goes back to a more reasonable price, the bad decisions (malinvestment in economist-speak) are revealed and financial turmoil ensues.

Today’s situation has its roots in the 1980s, when the developed world got too lazy to live within its means and started borrowing way too much money. It then tried to inflate away its debts by creating a tidal wave of new currency and pushing interest rates down to unnaturally low levels. Flush with extra cash and cheap credit, consumers (especially in the US) bought huge amounts of imported junk. This in turn led China — the main producer of said junk — to go on an infrastructure/factory building spree of epic proportions, which shifted into hyper-drive after the 2008 crash. Chinese demand for industrial materials like copper, iron ore, and oil soared, pushing their prices far above historical averages.

This in turn led miners and drillers to mine and drill on an unprecedented scale, which caused the supply of industrial materials to surge. The flashiest case in point is the US shale oil boom, which sent domestic oil production back to levels not seen since Texas’ blockbuster oil fields were young.

But it was all a money illusion, and every part of this process has recently hit a wall. Consumers refuse to go more deeply into debt to buy non-necessities, even when money is nearly free. Faced with lower demand and poor cash flow from the past decade’s overbuilding, China has tapped the brakes on its infrastructure build-out. The US is trying to stop monetizing its debt, which has sent the dollar through the roof on foreign exchange markets, thus making life even harder for about half the world’s population.

As a result of the above, demand for basic materials is returning to normal levels, which, in the face of inflated supply, is tanking prices across the commodity complex.

In other words the tide has gone out, leaving a whole beach full of naked (and unfortunately not very attractive) bodies. Specifically:

Shale oil junk bonds. Back when oil was over $100 a barrel, everybody wanted to lend to drillers, especially in the exotic (and as it turns out fatally-flawed) shale oil sector. $170 billion of energy-related junk bonds are now outstanding, and they are tanking along with the price of oil.

High Yield Energy Price Graph

Emerging market economies. These countries and their major companies have accumulated about $6 trillion of dollar-denominated debt, and with the dollar up more than 10% in the past year, the aggregate losses on those loans could exceed half a trillion dollars. Suddenly, the emerging market miracle looks disturbingly like the Asian Contagion that nearly brought down the 1990s global economy.

Mining/drilling firms. These guys ramped up in response to soaring oil, copper, iron ore prices. Now many of them are earning less per unit of product than it costs to mine/drill it. Massive bankruptcies and consolidations are coming. One dot-comish sign of things to come is Civeo, which provides living quarters for workers pouring into oil fields and mines in Canada, Australia, and the US. With people pouring out instead of into these suddenly non-viable fields, the company’s services are no longer required.

Civeo 2014

The Texas economy. Texans are cool. But a big source of their cockiness vis-a-vis the rest of the country was due to the fact that the price of their main export — oil — was at historically high levels. Now that it’s not anymore, the Texas economy — like those of Brazil and Russia, is falling back to earth. JP Morgan Chase predicts a recession in 2015.

The US economy. It turns out that most of the full-time jobs gained in the past five years have come from the energy sector. Otherwise, it’s been part-time secretarial/fast food/temp work that no one actually wants and in any event can’t support a family. Reverse out the oil patch jobs and the $10 or so trillion it took to engineer the “recovery” will look like just another piece of money-illusion malinvestment.

Anyhow, that’s just a sampling of the badly-maintained bods suddenly on display. Most are now running for cover, which is an amusing sight for anyone not directly affected by their problems. Trouble is, it’s hard not to be affected by energy, debt and deflation   (my emphasis)

By Jon Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/the-economy/nude-beach/

10 Key Events That Preceded the Last Financial Crisis That Are Happening Again RIGHT NOW

Posted on January 8th, 2015

10 Key EventsBy Michael Snyder

If you do not believe that we are heading directly toward another major financial crisis, you need to read this article.  So many of the exact same patterns that preceded the great financial collapse of 2008 are happening again right before our very eyes.  History literally appears to be repeating, but most Americans seem absolutely oblivious to what is going on.  The mainstream media and our politicians are promising them that everything is going to be okay somehow, and that seems to be good enough for most people.  But the signs that another massive financial crisis is on the horizon are everywhere.  All you have to do is open up your eyes and look at them.

Bill Gross, considered by many to be the number one authority on government bonds on the entire planet, made headlines all over the world on Tuesday when he released his January Investment Outlook.  I don’t know if we have ever seen Gross be more negative about a new year than he is about 2015.  For example, just consider this statement

“When the year is done, there will be minus signs in front of returns for many asset classes. The good times are over.”

And this is how he ended the letter

And so that is why – at some future date – at some future Ides of March or May or November 2015, asset returns in many categories may turn negative. What to consider in such a strange new world? High-quality assets with stable cash flows. Those would include Treasury and high-quality corporate bonds, as well as equities of lightly levered corporations with attractive dividends and diversified revenues both operationally and geographically. With moments of liquidity having already been experienced in recent months, 2015 may see a continuing round of musical chairs as riskier asset categories become less and less desirable.

Debt supercycles in the process of reversal are not favorable events for future investment returns. Father Time in 2015 is not the babe with a top hat in our opening cartoon. He is the grumpy old codger looking forward to his almost inevitable “Ides” sometime during the next 12 months. Be cautious and content with low positive returns in 2015. The time for risk taking has passed.

So why are Gross and so many other financial experts being so “negative” right now?

It is because they can see what is happening.

They can see the same patterns that we saw in early 2008 unfolding again right in front of us.  I wanted to put these patterns in a single article so that they will be easy to share with people.  The following are 10 key events that preceded the last financial crisis that are happening again right now…

#1 A really bad start to the year for the stock market.  During the first three trading days of 2015, the S&P 500 was down a total of 2.73 percent.  There are only two times in history when it has declined by more than three percent during the first three trading days of a year.  Those years were 2000 and 2008, and in both years we witnessed enormous stock market declines.

#2 Very choppy financial market behavior.  This is something that I discussed yesterday.  In general, calm markets tend to go up.  When markets get choppy, they tend to go down.  For example, the chart that I have posted below shows how the Dow Jones Industrial Average behaved from the beginning of 2006 to the end of 2008.  As you can see, the Dow was very calm as it rose throughout 2006 and most of 2007, but it got very choppy as 2008 played out…

The Dow 2006 to 2008

As I also mentioned yesterday, it is important not to get fooled if stocks soar on a particular day.  The three largest single day stock market gains in history were right in the middle of the financial crisis of 2008When you start to see big ups and big downs in the market, that is a sign of big trouble ahead.  That is why it is so alarming that global financial markets have begun to become quite choppy in recent weeks.

#3 A substantial decline for 10 year bond yieldsWhen investors get scared, there tends to be a “flight to safety” as investors move their money to safer investments.  We saw this happen in 2008, and that is happening again right now.

In fact, according to Bloomberg, global 10 year bond yields have already dropped to low levels that are absolutely unprecedented…

Taken together, the average 10-year bond yield of the U.S., Japan and Germany has dropped below 1 percent for the first time ever, according to Steven Englander, global head of G-10 foreign-exchange strategy at Citigroup Inc.

That’s not good news. The rock-bottom rates, which fall below zero when inflation is taken into account, show “that investors think we are going nowhere for a long time,” Englander wrote in a report yesterday.

#4 The price of oil crashes.  As I write this, the price of U.S. oil has dipped below $48 a barrel.  But back in June, it was sitting at $106 at one point.  As the chart below demonstrates, there is only one other time in history when the price of oil has declined by more than $50 in less than a year…

The only other time there has been an oil price collapse of this magnitude we experienced the greatest financial crisis since the Great Depression shortly thereafter.  Are we about to see history repeat?  For much more on this, please see my previous article entitled “Guess What Happened The Last Time The Price Of Oil Crashed Like This?

Price Of Oil 2015

#5 A dramatic drop in the number of oil and gas rigs in operation.  Right now, oil and gas rigs are going out of operation at a frightening pace.  During the fourth quarter of 2014, 93 oil and gas rigs were idled, and it is being projected that another 200 will shut down this quarter.  As this Business Insider article demonstrates, this is also something that happened during the financial crisis of 2008 and it continued well into 2009.

#6 The price of gasoline takes a huge tumble.  Millions of Americans are celebrating that the price of gasoline has plummeted in recent weeks.  But they were also celebrating when it happened back in 2008 as well.  But of course it turned out that there was really nothing to celebrate in 2008.  In short order, millions of Americans lost their jobs and their homes.  So the chart that I have posted below is definitely not “good news”…

Gas Price 2015

#7 A broad range of industrial commodities begin to decline in priceWhen industrial commodities go down in price, that is a sign that economic activity is slowing down.  And just like in 2008, that is what we are watching unfold on the global stage right now.  The following is an excerpt from a recent CNBC article

From nickel to soybean oil, plywood to sugar, global commodity prices have been on a steady decline as the world’s economy has lost momentum.

For an extended discussion on this, please see my recent article entitled “Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?

#8 A junk bond crashJust like in 2008, we are witnessing the beginnings of a junk bond collapse.  High yield debt related to the energy industry is on the bleeding edge of this crash, but in recent weeks we have seen investors start to bail out of a broad range of junk bonds.  Check out this chart and this chart in addition to the chart that I have posted below…

High Yield Debt 2015

#9 Global inflation slows down significantlyWhen economic activity slows down, so does inflation.  This is something that we witnessed in 2008, this is also something that is happening once again.  In fact, it is being projected that global inflation is about to fall to the lowest level that we have seen since World War II

Increases in the prices of goods and services in the world’s largest economies are slowing dramatically. Analysts are predicting that inflation will fall below 2pc in all of the countries that make up the G7 group of advanced nations this year – the first time that has happened since before the Second World War.

Indeed, Japan was the only G7 country whose inflation rate was above 2pc last year. And economists believe that was because its government increased sales tax which had the effect of artificially boosting prices.

#10 A crisis in investor confidenceJust prior to the last financial crisis, the confidence that investors had that we would be able to avoid a stock market collapse in the next six months began to decline significantly.  And guess what?  That is something else that is happening once again…

Investor confidence that the US will avoid a stock-market crash in the next six months has dropped dramatically since last spring.

The Yale School of Management publishes a monthly Crash Confidence Index. The index shows the proportion of investors who believe we will avoid a stock-market crash in the next six months.

Yale points out that “crash confidence reached its all-time low, both for individual and institutional investors, in early 2009, just months after the Lehman crisis, reflecting the turmoil in the credit markets and the strong depression fears generated by that event, and is plausibly related to the very low stock market valuations then.”

Are you starting to get the picture?

And of course I am not the only one warning about these things.  As I wrote about earlier in the week, there are a whole host of prominent voices that are now warning of imminent financial danger.

We are moving into a time of extreme danger for the global economy.  There has never been a time when I have been more concerned about a new year since I began The Economic Collapse Blog back in 2009.

Over the past couple of years, we have been very blessed to be able to enjoy a bubble of relative stability.  But this period of stability also fooled many people into thinking that our economic problems had been fixed, when in reality they have only gotten worse.

We consume far more wealth than we produce, our debt levels are at record highs and we are at the tail end of the largest Wall Street financial bubble in all of history.

It is inevitable that we are heading for a tragic conclusion to all of this.  It is just a matter of time.     (my emphasis)

By Michael Snyder for Economic Collapse

By permission Economic Collapse Blog

http://theeconomiccollapseblog.com

http://theeconomiccollapseblog.com/archives/10-key-events-preceded-last-financial-crisis-happening-right-now

This Is What a Currency Collapse Looks Like: Shopping Frenzy: “We Have A Lot Of Rubles Losing Value Every Second”

Posted on December 19th, 2014

Ruble Rubble by Rick McKee, The Augusta Chronicle

By Max Slavo

Russians have seen the writing on the wall and they know that they’re economy and currency are in serious trouble. Though the Russian central bank has pledged to protect and stabilize the Ruble, which has collapsed by nearly 50% versus the dollar in the last several months, people aren’t taking any chances.

It’s a scenario we’ve seen repeated throughout history when a nation’s currency was threatened with destruction and it’s one we may soon witness in America should confidence in the dollar as the world’s reserve currency ever be lost.

This is what a currency collapse looks like:

It is a real panic,” said Kirill Rogov, an independent political and economic analyst who is often critical of the Putin administration. The ruble is being devalued by 5 or 6 percent every day, and nobody knows how to stop it.”

The ruble has lost 50 percent of its value since the beginning of the year. Russian consumers afraid of losing their savings, as happened in a financial crisis in 1998, flooded stores, rushing to dump rubles that seemed to shrink in worth by the minute.

Source: New York Times

“I don’t need this car,” he said with a shrug. He already owns two Porsches and a Land Rover. But, he figured the prices will soon go up and the ruble will probably go down. “We are headed for a crisis,” he said.

Electronics stores were packed late into the evening as shoppers scooped up iPhones and iPads at prices over $100 lower than what they cost in the United States. Apple’s Russian website halted online sales “due to extreme fluctuations in the value of the ruble… while we review pricing.”

We came here because we have a problem. We have a lot of rubles which are losing value every second and we were too late to buy dollars at good price. We came here because prices on cars will increase tomorrow,” Katya said.

Source: ABC News

What’s happening in Russia with the collapse of the Ruble is that merchants are being forced to raise their prices on goods every day. If the slide in the Ruble continues that could turn to hourly adjustments as was seen in Zimbabwe when their dollar crashed.

It’s a scenario that closely mimics the Argentine hyperinflation of the early 2000′s. As noted by author Fernando “Ferfal” Aguirre in his first-hand account The Modern Survival Manual: Surviving The Economic Collapse, when the country’s currency collapsed citizens had no choice but to spend their money immediately on anything they could get their hands on. Failure to do so would cut their purchasing power in half within a matter of hours.

Ferfal explains:

The banks had closed, and no one knew how much the paper currency was going to be worth tomorrow, or even in the next couple of hours.

I vividly remember being at the local Home Depot (called “Easy in Argentina), and buying a few tools. The clerks would run around like crazy, replacing the old prices with the new ones, which sometimes changed within the same hour. 

It was depressing to see a price and notice that after peeling it off, the old price was still there. There was no time for the clerks to remove them. There would be a five layer sandwich of ever increasing prices that were maybe just a couple of days old.

After a few months, people found that they were in a very delicate position. Many were without a job, and those who had a job were paid in a currency where the value was dropping by the hour. Sometimes you had the problem of reaching the cash register and finding out that the price had already changed.

Excerpted From: The Modern Survival Manual: Surviving The Economic Collapse

This isn’t some theoretical forecast of what might happen during a currency crisis. This is how it was for people in Argentina in 2001-2002.

People didn’t believe it was happening at first and figured their government would save them. Of course, government officials saved themselves and their rich cohorts, but left the people with nothing. Eventually the banks shut down, ATM’s ran out of money and cash became scarce. As Ferfal recollects, the economy quickly turned into a barter system where currency became physical assets like gold, silver, food, real estate and cars.

Russia is yet another warning sign of what’s to come for the United States.

The timeline for the collapse of the U.S. dollar is unclear. But that it will happen is an inevitable fact of life. And given the current national debt, long-term liabilities, economic malaise and deteriorating wages, it is only a matter of time.

When that time comes it is in your best interests to already positioned for it. You need to answer the question: What is money when the system collapses?

The answer, when you think about it, is pretty simple. When currency becomes worthless, physical assets will become money.

In her book The Prepper’s Blueprint Tess Pennington outlines some key “assets” that will still have value – both for your use and as barter – should your dollars become worthless.

Things like foods that last a lifetime, precious metals, fuel, clothing, footwear and firearms will be essential. Beyond that are other consumables that we take for granted today but will be worth a great deal should the currency collapse and stores run out of offerings. Cigarettes, alcohol, lighters, hygiene products, over the counter medicines, antibiotics and as Ferfal noted, hardware tools, are all worthwhile investments that will pay off in the future.

While most Americans refuse to even contemplate the possibility of something like this happening in the United States, history has proven that every fiat paper currency ever invented has eventually fallen. We can pretend that this time is different, but we’d only be deluding ourselves.

Confidence is a very fragile thing and given the economic, financial and monetary troubles we face, it wouldn’t take a whole lot to crush the world as we have come to know it. When it starts it will happen fast.     (my emphasis)

Be prepared for it or face the horrific consequences that will follow.

By Max Slavo for SHTF Plan

By permission Max Slavo

www.shtfplan.com

http://www.shtfplan.com/headline-news/this-is-what-a-currency-collapse-looks-like-shopping-frenzy-we-have-a-lot-of-rubles-losing-value-every-second_12172014

Central Banks’ 2% Plan to Impoverish You

Posted on December 17th, 2014

FYI - 3D Modern Signboard For Your Information BasicBy Charles Hugh Smith

The 2% target is low enough that the household frogs in the kettle of hot water never realize they’re being boiled alive because the increase is so gradual.

A comment by correspondent David C. suggested the importance of demonstrating the impoverishing consequences of central banks reaching their 2% inflation target. David observed: “That central bankers aren’t all hanging by their necks from lamp posts everywhere is a testament to how scarce are those who grasp exponents and compounding.”

Anyone with basic Excel skills can calculate the cumulative impoverishment caused by central banks’ “modest” 2% annual inflation. Here is my worksheet:

Column 1: year
Column 2: index starting with 100
Column 3: annual inflation sum (2% of previous year’s total index)
Column 4: cumulative total index

1    100.00  2.00  102.00
2    102.00  2.04  104.04
3    104.04  2.08  106.12
4    106.12  2.12  108.24
5    108.24  2.16  110.41
6    110.41  2.21  112.62
7    112.62  2.25  114.87
8    114.87  2.30  117.17
9    117.17  2.34  119.51
10  119.51  2.39  121.90

Ten years of modest 2% inflation robs households of nearly 20% of their purchasing power. What was $100 in year 1 costs about $122 after 10 years of “modest” 2% inflation. Put another way, $100 in year one is only worth $81 in year 10.

11  121.90  2.44  124.34
12  124.34  2.49  126.82
13  126.82  2.54  129.36
14  129.36  2.59  131.95
15  131.95  2.64  134.59
16  134.59  2.69  137.28
17  137.28  2.75  140.02
18  140.02  2.80  142.82
19  142.82  2.86  145.68
20  145.68  2.91  148.59

Two decades of “modest” 2% inflation robs households of one-third of their purchasing power. What was $100 in year 1 costs about $150 after 20 years of “modest” 2% inflation. Put another way, $100 in year one is only worth $66 in year 20.

Even when central banks fail to reach their 2% annual-thievery target, incomes decline across the entire spectrum. The middle class (however you define it) lost roughly 10% as of 2012. In Japan, famous for essentially no inflation, wages have fallen by 9% in real terms since 1997.

Real Household Income 2012

While wages go nowhere, costs continue lofting ever higher as central banks print and pump money and credit:

CPI Since 2000
source: What Inflation Means to You: Inside the Consumer Price Index (Doug Short)

Imagine central banks overshoot their 2% theft per year target and reach 3% annual inflation. If 2% is good, 3% must be even better, right?

In one decade of 3% annual inflation, the purchasing power of $100 declines to $73, and after 20 years of central bank inflation, it drops almost in half to $54. The central banks’ inflation is a steady transfer of wealth from households to the banking sector and those holding ballooning assets like stocks. This is why central banks cling to their target so vociferously: their reason to exist is to enrich the banking sector at the expense of the rest of us.

The 2% target is low enough that the household frogs in the kettle of hot water never realize they’re being boiled alive because the increase is so gradual. The central banks assume their 2% plan to impoverish us all escaped our notice. Apparently it has.    (my emphasis) 

By Charles Hugh Smith for Of Two Minds

By permission Charles Hugh Smith

www.oftwominds.com

http://www.oftwominds.com/blogdec14/central-bank-poverty12-14.html

If They Only Knew How Little You Know

Posted on December 15th, 2014

World Financial Crisis Word 44853460EDITOR’S COMMENT: Another very insightful and timely commentary from John Rubino for Dollar Collapse, which is written from the perspective of a beleaguered money manager trying to ‘manage’ with all the ‘manipulation’ everywhere these days.

By John Rubino

Pretend, for a minute, that you’re a money manager in today’s manipulated world. You understand that most of what’s happening is the result of governments and central banks forcing down interest rates and pumping up asset prices. You don’t trust this process but since “the markets are recovering” you’ve felt compelled to play along, putting your clients into a standard mix of stocks, bonds and cash.

But you’re not feeling the love. With stocks outperforming bonds and cash, your blended portfolios have failed to match the S&P 500 and your clients are asking snarky questions like “What exactly am I paying you for when I could do better by just buying an ETF?”

So finally, as equity prices march ever higher and governments around the world reiterate their promises of unlimited cheap money from here to eternity, you throw up your hands and give the clients what they want, loading up on growth stocks, especially from the hottest emerging markets.

Then, out of the blue, the dollar spikes, oil tanks and the world tips into chaos. US stocks have their worst week in three years, emerging markets collapse, and clients who last month demanded double-digit gains now start begging for reassurance that their savings won’t just melt away.

You, of course, have no idea what to tell them. Your training was all about markets and cash flows and how to analyze them. And today there are no markets. Instead of millions of more-or-less rational, self-interested producers and consumers, all you see when you look out the window is a handful of large, politically-motivated entities playing games with make-believe currency to get through the next election cycle or bonus period. Fundamentals like P/E ratios and dividend yields offer no insight into what might happen, and traditional asset allocation formulas, based as they are on the assumption of free capital flows and rational actors, give results that are random at best and exactly the opposite of what was intended at worst.

And this is just the first month in what might — if oil keeps falling and energy-company junk bonds blow up and the eurozone falls back into recession and Greece, Italy, Spain, and France elect anti-euro leaders and emerging market governments start defaulting and some other less obvious black swans all land at once — turn out to be 2008 all over again. You barely made it to 2010 with your career and sanity intact, and now here you are again, staring into the abyss and hoping the abyss doesn’t stare back.

OR, some central bank talking head might appear on TV with a promise of free money for every imprudent bank and insane oil driller, and the markets might resume their march into fantasy land. So here you sit on a Sunday morning wondering whether to sell everything and move your clients to 100% cash — as you wish you had when the housing bubble started to burst in 2007 — or load up on high-beta growth stocks, trusting the Fed, ECB, and BoJ to pay off on the Greenspan put one more time.

The killer is that whatever you do, it’s strictly a guess. Financial fundamentals don’t matter, geopolitics doesn’t matter, and those cook-book financial planning guidelines are irrelevant. You’re flying blind with the fate of dozens of people in your hands, people who trust you and have no idea how little you know.

Sometime in the next 24 hours you’ll simply roll the dice with their futures. There must, you think, be an easier, more honest way to make a living.   (my emphasis)

By John Rubino for Dollar Collapse

By permission John Rubino

http://dollarcollapse.com

http://dollarcollapse.com/money-management/if-they-only-knew-how-little-you-know/

Do you have an interesting news story that just doesn't "add up," or is not receiving the appropriate coverage in the news, just let us know. We'd love to hear it! And, we'll investigate. CLICK HERE.
Get What Am I Missing Here delivered to your inbox for FREE!