Saturday, December 19, 2009
It’s a number so large that, to put it in perspective, we will now begin measuring the damage done to the global economy in "Madoff Units" ($50Bn rip-offs). That’s right - $2.5Tn is 50 TIMES the amount of money that Bernie Madoff scammed from investors in his lifetime, yet it is also LESS than the MONTHLY EXCESS price the global population is being manipulated into paying for a barrel of oil.
Where is the outrage? Where are the investigations?
Goldman Sachs, Morgan Stanley, BP, TOT, Shell, DB and Societe General founded the Intercontinental Exchange in 2000. ICE is an online commodities and futures marketplace. It is outside the US and operates free from the constraints of US laws. The exchange was set up to facilitate "dark pool" trading in the commodities markets. Billions of dollars are being placed on oil futures contracts at the ICE and the beauty of this scam is that they NEVER take delivery, per se. They just ratchet up the price with leveraged speculation using your TARP money. This year alone they ratcheted up the global cost of oil from $40 to $80 per barrel. (more)
Could the next black/green/dark gray swan be so obvious that it has avoided everyone? Well, except for the deputy governor of the Bank of China, who just gave the world a startling reminder of economics 101, when he said that it is “getting harder for governments to buy United States Treasuries because the US’s shrinking current-account gap is reducing the supply of dollars overseas.” Oops.
The funny thing about natural (and economic) systems: they can only be pushed so far before they snap back to default state. With the entire world embarking on an unprecedented spree of domestic bubble blowing to mask the collapse in global GDP, everyone forgot to trade. Zero Hedge has long emphasized that the drop in world trade can only sustain for so long before it brings the current destabilized system back to some form of equilibrium. Because with every country intent on merely printing more of its own currency, whether it is to build bridges or to make the stock of electronic book fads trade at 100x earnings, said countries ran out of non-domestic cash. Alas, this is most critical for the United States, now that Treasury monetization is over, as the US needs to constantly find foreign buyers of its debt to fund unsustainable deficits. Foreign buyers who have US dollars. And according to Shanghai Daily, this could be a big, big problem. (more)
The 2010 Food Crisis Means Financial Armageddon
Over the last two years, the world has faced a series of unprecedented financial crises: the collapse of the housing market, the freezing of the credit markets, the failure of Wall Street brokerage firms (Bear Stearns/Lehman Brothers), the failure of Freddie Mac and Fannie Mae, the failure of AIG, Iceland’s economic collapse, the bankruptcy of the major auto manufacturers (General Motors, Ford, and Chrysler), etc… (more)
Just so you have a short list of what’s at stake if Washington DC doesn’t change policy here and now (which means before the collapse in equities comes, which could start as soon as today, if the indicators I watch have any validity at all. For what its worth, those indicators are painting a picture of the Apocalypse that I simply can’t believe, and they’re showing it as an imminent event – like perhaps today imminent.)
* All pension funds, private and public, are done. If you are receiving one, you won’t be. If you think you will in the future, you won’t be. PBGC will fail as well. Pension funds will be forced to start eating their “seed corn” within the next 12 months and once that begins there is no way to recover.
* All annuities will be defaulted to the state insurance protection (if any) on them. The state insurance funds will be bankrupted and unable to be replenished. Essentially, all annuities are toast. Expect zero, be ecstatic if you do better. All insurance companies with material exposure to these obligations will go bankrupt, without exception. (more)
But for a growing segment of the U.S. population, there is nothing experimental or temporary about that life.
The author of "Nickel and Dimed" sees no quick recovery in sight for formerly middle class Americans ground down by job losses, the burst housing bubble and constricted credit.
Many of those families have gone from living the American dream to relying on Uncle Sam and other charities to feed themselves.
Reuters recently spoke with Ehrenreich about the new American poverty. An edited transcript follows. (more)
“And that could be happening very soon:
“The chart above, which should look familiar, shows the two peaks in this long-term housing conundrum. The first mountain is comprised of subprime ARM resets. And the second is mostly constructed of option ARM resets. We appear to be in the eye of the storm.
“That alone shook our nerves when we first discovered it. But it was a different chart in Tilson and Tongue’s most recent presentation that really got us startled… It’s also the reason I’m predicting the dollar spike in 2010.
“Instead of resetting as expected after the first five years, many option ARMs are so negatively amortized that they are hitting their automatic reset cap.
“That means they are resetting early…like right now -- with unemployment reaching quarter-century highs every month, and a massive number of homeowners about to receive mortgage bills for two-three times what they are used to paying.
“It takes anywhere between three-12 months for most homes to actually go into foreclosure. It’s tough to say exactly when the storm will come. But my guess is the second half of 2010.”
In November of 2007, we predicted the “Panic of ’08.” There was a panic. In November of 2008, we forecast the “Collapse of ’09.” In March ‘09, the global equity markets collapsed. But before they could crash all the way to the ground, a scaffold of emergency props was erected. An unparalleled array of government cash infusions, rescue packages, bailouts and incentives papered over the crisis.
Today, even as government spokesmen and the major media proclaim that the world is emerging from its near-cataclysmic recession, we predict the “Crash of 2010.” The rising equity markets, on which claims of recovery are based, are worlds away from the hard reality of the streets. Unemployment statistics tell the real story of real money that millions of real people no longer have and can’t get, regardless of rising equity markets. This is no time to be caught off guard.
As times get tougher and money gets scarcer, one of the hottest new money-making, mood-changing, influence-shaping trends of the century will soon be born. Those that see it first and follow it through will profit the most.
With unemployment, bankruptcies and foreclosures hitting record highs, the spirits of Americans are hitting record lows. People are becoming desperate to find something – anything – that will make them feel better, to do something to pick themselves up, dust themselves off, and start all over again.
We forecast that something will be “Elegance” in its many manifestations. The trend will begin with fashion — a rejection of the gangsta pants/hat-on-sideways look in favor of a move toward quality and individuality — and will spread through all the creative arts, as the need for beauty trumps the thrill of the thuggish. A strong, do-it-yourself aspect will make up for reduced discretionary income, as personal effort provides the means for affordable sophistication.
While The Trends Research Institute can’t predict precise dates or the magnitude of terror attacks, we can be fairly certain they are on the way. As 2009 draws to a close, the “Fort Hood Gunman” is being recognized by the intelligence community as the poster boy for an alarming new terror phenomenon termed “lone-wolf, self-radicalized gunmen.” Years of war in Afghanistan and Iraq – and now Pakistan – have intensified anti-American sentiment and increased the number of individuals seeking revenge. NATO allies contributing troops to the wars will also be targeted.
Back in the Cold War days, survivalism meant building a bomb shelter and stocking it with enough food to outlast nuclear fallout.
In the late 1970’s, with inflation soaring, Iran raging, and gold and oil prices skyrocketing, survival meant cashing out of paper money and heading for the hills with enough ammunition and pork & beans to wait out the economic and political storms.
In 2000, the Y2K crowd – the most recent breed of survivalists – expecting computer clocks to crash, infrastructure to break down and the world to go dark, were armed and barricaded with enough food to feed an army and enough ammunition to hold one off.
In 2010, survivalism will go mainstream. Unemployed or fearing it, foreclosed or nearing it, pensions lost and savings gone … all sorts of folk who once believed in the system, having witnessed its battering, have lost their faith.
The realities of failing financial institutions, degrading infrastructure, manipulated marketplaces, soaring energy costs, widening wars, and terror consequences have created a new breed of survivalist. Motivated not by worst-case scenario fears but by do-or-die necessity, the new non-believers, unwilling to go under or live on the streets, will devise ingenious stratagems to beat the system, get off the grid (as much as possible), and stay under the radar.
Not Welcome Here
When economies boom and cheap labor is needed, immigrants are welcome. But when crises shrink the economic pie and/or waves of immigrants threaten to change the complexion of the nation, the welcome mat is pulled away.
In 2010, the anti-immigration movement, long building, will arrive and stay in the US and abroad. With the world’s population increasing by nearly a billion a decade, more people than jobs are being created. America and Europe, with their immigrant populations close to double digits, are experiencing an identity crisis. In Europe, fear and resentment of Muslims has led to huge gains for anti-immigrant political parties. In the US, with mid-term elections coming up, what to do about the “illegals” will be a hot- button issue that will top the political agenda and serve as a galvanizing force for a new party.
TB or Not TB
About two-thirds of Americans are Too Big (TB) for their own good and everyone else’s. In the wake of the national debate on health care, which has failed to focus on the enormous financial costs of obesity and overweight, 2010 will mark the outbreak of a concentrated War on Fat.
In fact, we forecast a massed revulsion for TB in all its manifestations – obesity is only the most obvious. Everything in America is TB – not just the waistlines, giant sodas, super-sized fries and ten-gallon cartons of popcorn. Houses, cars, debt loads, deficits, state budgets, the states themselves, foreign aid, military budgets, bureaucracies local, state, federal and “too big to fail” businesses – they’re all Too Big. Apart from government action, the “Shape Up” trend will provide a wide array of business opportunities.
Mothers of Invention
The ongoing shock to the economic system is rebooting “Yankee ingenuity.” Innovation and the “can do” spirit that was once a signature of the American Way of Life, but that fell prey to a bottom-line corporate mentality and Wall Street’s obsession with next quarter profits, is alive and well again.
The need to overcome the effects of reduced individual buying power will lead to the invention of a new class of product which will be a major trend of 2010 and into the future: “Technology for The Poor.” Growing with the same speed as the Internet Revolution, the trend will be recognized, explored and exploited by legions of skilled but jobless geeks, innovators and inventors. They will design and launch a new class of products and services affordable by the millions of newly downscaled Western consumers.
Not Made In China
Consumers are preparing to deliver a big “No” to unrestrained globalism. Three decades of outsourcing well-paying jobs has failed to deliver the high-standard service-sector economy promised by politicians. In the developed nations, living standards have declined as more jobs are sent abroad. Even less-developed nations such as India, Indonesia and Vietnam have filed complaints against China for unfair trade practices.
A “Buy Local/My Country First” backlash will be the first sign of what we forecast will become a massive, “circle-the-wagons” movement. As economies continue to decline and even more jobs are lost and/or sent abroad, it will be seen as politically incorrect and financially self-defeating to plunk down money to enrich multinationals at the expense of local and domestic producers.
We forecast a “Not Made in China” consumer crusade that will spread among developed nations, leading to trade wars and protectionism. While governments still give lip service to free trade, over 200 protectionist measures were put in place in 2009 alone.
Craftspeople and small manufacturers that can establish a reputation for quality products will be able to build thriving micro-brands, while marketers who can amalgamate micro-cooperatives into true local commerce organizations will carve a solid niche for themselves.
The Next Big Thing
In little more than a decade, the Internet Revolution has overthrown the traditional world of print. Unable to adapt to the digital age, august newspapers, magazines and book publishers that had thrived for centuries went under, drastically downsized in an effort to stay alive, or were forced to establish a web-only presence.
Who would have believed such “must reads” as the Chicago Tribune, San Francisco Chronicle, Minneapolis Tribune, Seattle-Post Intelligencer and The Philadelphia Inquirer would be reduced to has-beens and are-no-mores. In 2009, 15,000 newspaper journalists lost their jobs. Major magazines folded. Sales of books stagnated and profits fell, victims of cutthroat competition and inroads made by alternative publishing methods and technologies.
The next colossal casualty of the Internet Revolution will be TV/cable networks. Technological innovations already in place will enable enterprising upstarts to gouge out large chunks of market share from daytime, primetime, news and opinion-based programming.
Just as the print media was blindsided by the online assault and responded with strategies that proved counterproductive, the networks are already making moves guaranteed to weaken their franchises. Techno-guerilla warriors, producers, impresarios, entrepreneurs and investors that understand the vast markets beyond the realm of network consciousness and the possibilities opened by the new technology will not only carve out lucrative niches, but will also prove influential in effecting sociological, cultural and even political change.
When I started working for myself, I made my very first money, enough to save for the very first time, but I was working so hard, over 80 hours a week! I guess God finally caught up to me, because, at some point, I began to think. And that's when it all started.
I thought: Why am I working myself to the bone, sleep depriving myself, to save up little pieces of paper in a bank, that does not even have the pieces of paper that they say are in my account? It's fraud upon fraud.
Yes, yes, I know what they tell us, that they are lending my money out, to be able to provide a return, enough to pay me the "interest". Sorry, 1% is not enough to get excited about, not when I've been living with 4-5% inflation my whole life. I saw the increases in the prices of candy and comic books in the 70's when I was a kid. I know. (more)