Deflation, Inflation, Hyperinflation, Signal to Noise Ratio, Gold, Silver, and the End of the Dollar

Everything that has happened so far was predictable.

The worldwide government response to the COVID-19 pandemic was as easy to see for cynics and skeptics as the eventual lying that would take place. First, back in January and early February, the federal government told the public that the threat to Americans from the coronavirus that was ravishing China was minimal. Gradually, that advice was replaced by travel restrictions to and from mainland China, then to and from Europe, until finally, infections and deaths from the virus began to multiply in America.

By mid-March and into the first days of Spring, the veil had been lifted and the virus was spreading rapidly across the United States, thanks to millions of international travelers on ships and airplanes that had been allowed to come and go as they pleased through the winter. Individual cases turned into clusters and clusters to severe outbreaks, especially in New York City, not surprisingly a hub for international travel.

By the time congress got around to passing emergency legislation, lockdowns and shelter-in-place recommendations were put into play by governors of the individual states. The legislation contained the usual: massive injections of currency into Wall Street (because we can't have a stock market crash), a pittance for the public, and payments to hospitals for treating patients infected with COVID-19: $13,000 for each patient admitted; $39,000 for each patient put on a ventilator.

Anybody who has been following government and Federal Reserve policy knew that the response would be to throw massive amounts of currency at the problem because that's all they know about how to handle crises.

And here we are. The government is now readying a fourth "stimulus" bill, chock full of more handouts, bailouts, and currency drops. This time, the public gets nothing. States and municipalities are going to get tons of currency to bail out their broken, drained public coffers and keep millions of teachers, cops, firemen, and paper-pushers on the job and their pensions partially funded because having the Fed backstop municipal bonds simply wasn't enough. Hospitals will get more currency. Small businesses will get another tranche of loans, pressing cynics to respond that cities get grants, while businesses have to pay it back.

All of this currency printing and government deficits won't amount to a hill of beans because the transmission mechanism for the velocity of money is broken. Cops, teachers, and firemen will get paid, but they'll be scared to take on new debt and will spend much of their money paying down credit card bills and overpriced mortgages. After another crash to lower levels, the stock market will stabilize.

The US will have deflation, widely, in big-ticket assets like stocks (market crash), bonds (rolling defaults), real estate (forbearance today leads to foreclosure tomorrow), trickling down to things like furniture (no interest for 5, 6, 7 years), cars (rebates, cash back, 0% financing), and appliances (oversupply). Food, especially meat, which is getting a bit pricey right now due to chinks in the supply chain, will not be affected much. Food was the one thing that didn't go up or down much during the Great Depression of the 1930s. It was cheap enough so that people didn't starve, though meats were generally considered close to being luxuries, so no worries there, until hyperinflation. Besides, even if you have a tiny back yard, you can grow some vegetables of your own to offset any price rises in meats. Why do you think your mother was always telling you to eat your vegetables? Sometimes there just isn't enough meat.

After six to 18 months of deflation, all the while the Fed printing dollars like maniacs and the government running massive deficits (probably over $8 trillion this fiscal year alone (through September 30), prices will seem to stabilize. By this time next year (2021), many will think the crisis has passed, mostly because that's what they'll be telling you on TV. But, it's just a lull. Inflation will return as all that currency begins to be spent into the economy. As the velocity of money ramps up, the Fed will respond by raising interest rates, but it won't matter. The game is on, with hyperinflation underway, the currency will continue losing value and eventually, there will be a massive default on dollar debt.

Forget, for for a few weeks or a few months what's happening on a day-to-day basis. It's mostly noise. The signal to noise ratio (SNR or S/N), a measure used in science and engineering that compares the level of a desired signal to the level of background noise, in today's economy, politics, and society, is very low, meaning the signal is barely transmitting the message as it is being drowned out by the noise.

In terms of decibels, to hear what's really happening in the world, the signal has to be about 60, the level of sound as conversational speech. If the noise is that of a rocket launch (180), the SNR is 0.33 and the noise drowns out the signal. When the SNR gets to above one (1), the signal can be heard. Putting that in perspective, a signal sound of a balloon popping is 125, a toilet flushing is 75, producing a SNR of 1.67. Those are appropriate today, as the balloon popping can metaphorically represent the debt bubble bursting and the toilet flushing the sound of US dollars losing value, going down the drain. That hasn't happened yet, but, as time progresses, the SNR will rise, pass 1.00 and the signal will eventually be loud and clear, one that everybody can hear. That's when inflation proceeds to hyperinflation, with prices rising faster than the Fed can print new currency.

It is at that point that you'll want to have gold, but especially, silver, because it will outperform the currency, just by standing still. Truth of the matter is that gold and silver don't really rise in price. An ounce of silver or a gram of gold is still an ounce or a gram. But the purchasing power of the currency is falling because there's more money circulating. Thus, in a very natural correspondence, gold and silver rise in value as the currency falls, which is why three 1964 dimes (90% silver) can buy more gas at the pump today, in 2020, than in 1964.

In the year 1964, the average retail price of gas in the U.S. was $0.30. So, back then, you could put a gallon of gas in your car with three 1964 (or earlier) dimes. Today, three dimes from 1964 or earlier are worth a silver melt value of about $1.10 each, so, with gas prices currently deflating to around $1.50 a gallon, you could buy more than two gallons of gas, even with silver (and gold) prices being suppressed. That's deflation. One could buy just one gallon and use the other roughly dime-and-a-half to help pay for the increased price of pork or beef. That's inflation. Inflation and deflation can and will occur - in different products or services - simultaneously.

Silver, even under the severe constraints imposed by the futures, central banks, the BIS, and other manipulators, has increased in value 1100% since 1964, an annual, non-compounded return of 16.67%. Try getting that from stocks or bonds. And silver is going higher. Much higher. The price of an ounce of silver in dollars is likely to double in the next few years, then double again, and again, as the dollar is gradually debased, losing all that's left of its purchasing power. Your 1964 dime will buy at least a gallon of gas or the equivalent in bread or beef or whatever items you wish to purchase. It will have value, as precious metals have for more than 5000 years. The dollar, and with it, the pound, yen, euro, yuan, and any other currency not backed by or tethered to a tangible asset (it doesn't have to be gold; it can be anything) will revert to its intrinsic value of ZERO, or close to it because every other country will be going through similar scenarios as the United States.

That's where this is all headed. Price deflation with currency inflation through Spring or Summer 2021, relative calm from 2021 to maybe the beginning of 2023, but likely before then, with inflation ramping up; then hyperinflation for two years before a complete monetary system reset is the only solution. It's not the length of time for these varying processes to occur that's importance, it's the sequence (deflation, calm (some inflation), inflation, hyperinflation) and the ability to spot the subtle changes that matters most.

Completely wrecking a global economy takes time. The Fed's been at it since 1913, and in 107 years have reduced the purchasing power of the dollar by about 97%. The last three percent - and the sopping up of all the malinvestment and toxic assets will take time... about three to four years.

Anything that has more upside than downside from random events (or certain shocks) is antifragile; the reverse is fragile.

We have been fragilizing the economy, our health, political life, education, almost everything… by suppressing randomness and volatility. Much of our modern, structured, world has been harming us with top-down policies and contraptions… which do precisely this: an insult to the antifragility of systems. This is the tragedy of modernity: As with neurotically overprotective parents, those trying to help are often hurting us the most.

-- Nasim Taleb

It would be nice if we started listening to the people who have been right rather than the people who have theories.

-- Mike Maloney, The Hidden Secrets of Money, Episode 7, Velocity & the Money Illusion

At the Close, Wednesday, May 6, 2020:
Dow: 23,664.64, -218.45 (-0.91%)
NASDAQ: 8,854.39, +45.27 (+0.51%)
S&P 500: 2,848.42, -20.02 (-0.70%)
NYSE: 10,999.99, -135.41 (-1.22%)

WEEKEND WRAP: Stocks End Long Weekly Win Streaks; Negative Interest Rates Will Destroy Advanced Economies

Oh, Snap! Weekly winning steaks were ended with the first down week in the last eight on the NASDAQ. The S&P 500 and NYSE Composite saw their winning streaks ended at six weeks, while the Dow saw the underside of the unchanged line after four straight positives.

That US stock indices were all lower by less than one-half of one percent points up the resiliency and absurdity of the markets. Eminently malleable, stocks have been guided higher seemingly by Adam Smith's invisible hand, the one that keeps pension plans from imploding, sovereign governments from defaulting, and fiat currencies from the ruinous effects of unacceptability.

Putting into focus the NASDAQ, its seven-week upside move was the second-longest of the year. It began 2019 with an eight-week short-crushing rally on the heels of the final two weeks of 2018, which saw the index rise from the December ashes of a 6,190 low. While that 10-week advance boosted the index by some 1400 points, the most recent weekly gains accounted for only 800 additional points, although it recorded a new high in the week prior to the most recent and has backed down only slightly.

Anyone wise enough to have put all their money into the NASDAQ at the start of this year would be up a whopping 25% with just over a month remaining to add onto those lush profits. For ordinary folks locked into a buy and hold fund strategy, the gains since the highs of August-September 2018 to the present add up to only five percent. That's a more realistic figure for the real world and one which fits like a glove with the slowing pace of GDP and the generally dull data drops over these past 14 months.

While the stock markets may have the appearance of being big, bold, large and in charge, the truth is a somewhat more sobering landscape. Recovering so quickly from 20% losses has kept the investing public soothed and subdued, the politics of passive investing intact, and the wheels of industry churning, albeit at a lower crunch rate.

While stocks took this brief pre-holiday pause, interest rates were moving in the same direction, only with quickened pace. Negative interest rates rode across the plain of developed nations (Europe, Japan), suggesting that US treasuries were underpriced. Indeed, the long end of the curve was where most of the drama occurred, with the 30-year bond trimmed 21 basis points - from 2.41% to 2.22% - since November 8 (10 trading days). The 10-year note shed 17 basis points, slumping from 1.84% to 1.77% over the same period.

That's a trend sure to continue, as it represents a massive carry trade for investors outside the US. With yields in their native nations prefaced with minus signs, your bold-thinking French, German, Swiss, or Japanese investor is afforded a nearly risk-free two percent or more on money that otherwise would be eroded over time if held in sovereign securities. It's a neat trick that only the biggest and richest can perform. The rest of the population is unwittingly blinded by the stagnation and destruction ongoing behind the scenes.

Only a savvy few see negative interest rates for what they really are: a devious central bank device designed to wind down the fiat currency regime. In thirty to fifty years, the euro, yen, pound and even the dollar will be remnants of the industrial and information ages, replaced by something, we hope. while that may sound like a distant projection into the future, anybody in their 20s, 30s, or 40s might be best to be scared to death, because currency death-watches and funerals are morbid events played out over long periods of time.

Those of advanced age may better survive the utterly deflationary effects of negative interest rates and the impending currency decapitation in lower prices on everyday goods, but saving for retirement might best be measured in canned goods and precious metals instead of scraps of paper with important people on them or digitized numerical amounts on smart phone screens.

For many, the future is going to be destroyed before it arrives.

That's right. The world as it is now known will be a vastly different place in 2050 and it's unlikely to be prettier unless one has made the proper preparations into hard assets that will maintain value over harder times. Keeping up with the Joneses will be replaced by outrunning the Zombies. Fuel, food, water, shelter, and arable land - which, by the way, can be had on the cheap in some areas - are life-sustaining. Debt will be repudiated and rejected by a class of people similar to those of the depression era, whose lives were ruined by the influence of a currency they did not control, one which held neither value nor promise for a generation after 1929.

In case one is unconvinced of the effects of negative interest rates, just consider the math. Most pension plans in developed nations are already underfunded and have targets of six or seven percent annual gains written into their accountancy. If the best one can expect is two percent or less, a long-term shortfall is not only inevitable, it is assured.

All of this occurs over a long period of time, not all at once, but the effects on economies will nevertheless be devastating. Pension plans will not fail nor will sovereign debt default outright, but like rows of dominoes falling in super-slow motion, major currencies and first-world economies will gradually, inexorably decline and self-destruct.

Ah, but you say, these are negative thoughts marring the cheery landscape of the holidays.

Nay, if you get coal in your stockings this Christmas, consider yourself lucky. At least you will stay warm over the coming long winter.

At the Close, Friday, November 22, 2019:
Dow Jones Industrial Average: 27,875.62, +109.32 (+0.39%)
NASDAQ: 8,519.88, +13.67 (+0.16%)
S&P 500: 3,110.29, +6.75 (+0.22%0
NYSE Composite: 13,440.95, +34.55 (+0.26%)

For the week:
Dow: -129.27 (-0.46%)
NASDAQ: -20.94 (-0.25%)
S&P 500: -10.17 (-0.335)
NYSE Composite: -52.01 (-0.39%)

Seas of Red Ink; Global Collapse In Asset Pricing Underway; US Markets In Denial

Was Apple (AAPL), Amazon (AMZN), or Microsoft (MSFT) ever worth a trillion dollars?

All were, for a while, supposedly worth that high until the market considered the madness of such lofty valuations. Then, they were probably not.

A little quickie math is appropriate. For a company to be worth a trillion dollars, in rough terms, it would have to make a profit of $143 off every person on the planet (we're using 7 billion as an estimate) in a calendar year. Figuring a 15-year capitalization period, it's possible.

However, with the global median individual annual income at about $3000, it's unlikely. And for three companies to be worth that would mean every person on the planet, including babies and the elderly in nursing homes or hospices, would have to spend enough so that combined, Apple, Amazon, and Microsoft would net a profit of $429. So, for three companies to have that kind of valuation simultaneously is something right out of science fiction, because these people would have to spend about $2000 (figuring a rough profit margin of 20%) on products from just those three companies. Were this to happen, a third of the planet would die off because they spent most of their money on smartphones, software and trinkets from Amazon (with much lower profit margins, BYW), instead of food.

And what about all the other companies on the planet? From the corner store to multi-national corporations like General Motors, Nestle, Samsung, etc.? How much money do they extract from every person in the world with these three biggies crowding out everybody else? It simply doesn't add up.

That's why asset prices are collapsing. Companies, or rather, the stock prices representing shares of these companies are not worth what they're selling for, the big money knows it, and they're selling their shares to people less informed or desperate to make their investments pay off in the global rat race.

Let's face facts. US Stocks have more than tripled in value over the past 10 years. That doesn't make any sense. Were Americans suddenly three times as wealthy as they were 10 years ago? No. No. And Hell No.

Today, as stock prices tumbled around the world, US markets barely suffered a scraped knee and a paper cut. The NIKKEI was down 459 points, or, 2.12%. Japan's economy shrank by 2.5% in the third quarter.

Stock markets in Australia, New Zealand, Hong Kong, India, China, Indonesia, South Korea, Germany, France, England, Belgium, Italy, Greece, Spain, Brazil, Argentina, Mexico, and Canada were all down between one and two-and-a-half percent, again, after weeks of declines. Many of these indices are in correction. Germany, South Korea, China, Japan, and others are in bear markets, down more than 20%. That's just a sampling. But the US carries on, though the Dow is less than 325 points away from correction territory. All the other US indices are in correction, down more than 10%.

Dow Industrials were down more than 500 points in the morning, but finished, magically (same as last Thursday) well off the lows, in fact, with a small gain. Magic! Denial! HFT Algorithms! Programmed Trading! Central Bank Intervention! It's only temporary.

US stocks have performed better than the rest of the world, so far, but they are trending in the same direction - lower. Brokers and dealers on Wall Street are living in a La-la Land that would put Hollywood to shame. Many in the financial sphere are in deep denial. They don't believe the US economy can contract, that stocks can be re-priced lower, down 20, 30 or 40 percent or more. It has happened in the past, many times, and it will happen again. It is happening right now.

But, but, but, we can't have a stock market crash during the Christmas season, can we? Maybe stocks will not exactly crash this month, but the performance has been - on a day-to-day basis - underwhelming. Winter is coming (Dec. 20).

According to Dow Theory, the Dow Jones Transportation Index confirmed the primary trend change - from bullish to bearish - that the Dow Jones Industrial Average signaled on November 23. That's the second time this year Dow Theory confirmed a primary trend change. The last was through March (Industrials signaled) and April (Transports confirmed), but stocks bounced back quickly through the spring and summer. By autumn, the bloom was off the rose, however, and the false rally began to unwind, and it continues to unwind.

And, with that, today's musical selection, "Turn, Turn, Turn," released October 1, 1965, written by Pete Seeger, performed by the Byrds.



Dow Jones Industrial Average December Scorecard:

Date	Close	Gain/Loss	Cum. G/L
12/3/18	25,826.43	+287.97	+287.97
12/4/18	25,027.07	-799.36	-511.39
12/6/18	24,947.67	-79.40	-590.79
12/7/18	24,388.95	-558.72	-1149.51
12/10/18	24,423.26	+34.31	-1115.20

At the Close, Monday, December 10, 2018:
Dow Jones Industrial Average: 24,423.26, +34.31 (+0.14%)
NASDAQ: 7,020.52, +51.27 (+0.74%)
S&P 500: 2,637.72, +4.64 (+0.18%)
NYSE Composite: 11,889.29, -52.64 (-0.44%)

Wealth Building Suggestions In The Age Of Idiocy

Here are some pretty simple ideas for building and preserving wealth. When it comes to debt, not all is bad, though excessive debt is a non-starter for most people. Manage debt wisely. Any business will tell you they needed a loan or an equity partner to make money; people aren't very different.

Here are a few suggestions:
1. Buy silver (dollar cost average; buy a certain amount, be it $20 or $2000, per month, regardless of price.
2. Hide silver (self-explanatory) and don't touch it. This is your secret stash, outside the govenment's hands.
3. Find a business you can operate from home, even if it's a little more than just a hobby. Deduct all allowable expenses. I've been telling people to do this for years and the number who have listened and done it approaches ZERO. The tax code makes it easy to deduct substantial portions of your expenses.
4. Read "The Richest Man In Babylon." Follow the book's advice. Here's's a PDF online.
5. Never buy prepared foods at a grocery. Total junk, and a huge ripoff. Cook meals at home.
6. Have a garden. Even a 6x6 garden can produce a significant amount of produce.
7. Never stop learning. Knowledge is power.
8. Spend money like you don't have much. Always ask for a discount or deal.
9. Never, ever hire an investment advisor. If you think you don't know enough about investing, see #7 and educate yourself. The fact that you are reading this post makes you a candidate for being your own investment advisor and money manager.
10. Be a Boy Scout. Their motto is "Be Prepared."
11. Never panic, in either buying or selling situations. Trust your gut.

There are many more...

As far as the markets are concerned, Thursday was a repeat performance (by agents of central bankers) of Wednesday, with early losses rapidly erased and the major averages making a diagonal line from lower left to upper right on the charts.

Truly disturbing behavior from some exceptionally disturbed people.

Viola!
S&P 500: 2,105.26, +5.93 (0.28%)
Dow: 17,838.56, +48.89 (0.27%)
NASDAQ: 4,971.36, +19.11 (0.39%)

Crude Oil 49.15 -0.04% Gold 1,213.10 +0.04% EUR/USD 1.1149 -0.04% 10-Yr Bond 1.81 -1.90% Corn 414.75 -0.12% Copper 2.07 +0.17% Silver 16.00 -0.16% Natural Gas 2.78 0.00% Russell 2000 1,170.58 +0.65% VIX 13.63 -4.01% BATS 1000 20,677.17 0.00% GBP/USD 1.4405 -0.10% USD/JPY 108.9500 +0.08%

Deflation, Followed by More Deflation

In its simplest terms, deflation is defined as a decline in the money supply, but, because of central bank meddling such as QE and ZIRP (Zero Interest Rate Policy), money supply isn't really an issue, but, where the money is going turns out to be the bogey.

For all the pumping the Fed and other central banks have done since the Lehman crash in 2008, inflation and growth have failed to materialize because the money is stuck in transmission lines between the central banks and the TBTF banks, who don't want to take the risk of loaning money to real people, preferring instead to speculate in stocks and reward their cronies with fat bounties, otherwise known as bonuses.

The three trillion dollars by which the Fed has expanded its balance sheet since 2008 hasn't found its way into the real economy. Meanwhile, governments, from municipalities on up to the federal level, have done their best to over-regulate and over-tax working people, causing further strain on the bulk of consumers. So, if money, on one hand, is stuck in transmission, and taxes and fees are going up on the other hand, with incomes stagnant or falling, people have less to spend, and make their spending choices with just a little bit more prudence.

Depending on your age and circumstances, you may or may not be experiencing a bout of deflation this winter.

It really depends on what you spend your money on, where you live, where you shop, and what you do for a living.

Obviously, despite the best efforts of oil price manipulators to keep prices above $50 per barrel, the price of a gallon of gas has fallen precipitously over the past six months. That's a plus, as is the low price of natural gas. Consumers in the Northeast, experiencing one of the coldest winters in history, haven't had it too bad, because the cost of heating a home has dropped like a rock. It would be even better if Al Gore had actually been right about Global Warming. (Well, he did invent the internet, so you can't expect him to be perfect.)

Food prices have moderated, and, because fewer and fewer consumers are dining out, restaurants have been offering more specials. Food is one of those things that you really can't manipulate much, as it does have limited fresh shelf life. A decent summer growing season has kept a lid on food prices.

However, if you've got kids at all, and especially kids in college, you're likely feeling the pinch of higher tuitions and cost for college text books. Health care costs haven't moderated as much as the government would like you to think, either, so, if you have health insurance (Doesn't everybody? It's the LAW!), you're paying more.

Housing prices have moderated a bit, and bargains ca be found, especially in the Northeast and in rural areas. Farmland prices are coming down dramatically.

Behind all of this is the strong dollar, helped by the rest of the world, which is cutting interest rates and debasing currencies at a furious pace.

Thanks to Zero Hegde for the complete list of 21 central bank rate cuts so far in 2015:

1. Jan. 1 UZBEKISTAN
Uzbekistan's central bank cuts refi rate to 9% from 10%.

2. Jan. 7/Feb. 4 ROMANIA
Romania's central bank cuts its key interest rate by a total of 50 basis points, taking it to a new record low of 2.25%.

3. Jan. 15 SWITZERLAND
The Swiss National Bank stuns markets by discarding the franc's exchange rate cap to the euro. The tightening, however, is in part offset by a cut in the interest rate on certain deposit account balances by 0.5 percentage points to -0.75 percent.

4. Jan. 15 EGYPT
Egypt's central bank makes a surprise 50 basis point cut in its main interest rates, reducing the overnight deposit and lending rates to 8.75 and 9.75 percent, respectively.

5. Jan. 16 PERU
Peru's central bank surprises the market with a cut in its benchmark interest rate to 3.25 percent from 3.5 percent after the country posts its worst monthly economic expansion since 2009.

6. Jan. 20 TURKEY
Turkey's central bank lowers its main interest rate, but draws heavy criticism from government ministers who say the 50 basis point cut, five months before a parliamentary election, is not enough to support growth.

7. Jan. 21 CANADA
The Bank of Canada shocks markets by cutting interest rates to 0.75 percent from 1 percent, where it had been since September 2010, ending the longest period of unchanged rates in Canada since 1950.

8. Jan. 22 EUROPEAN CENTRAL BANK
The ECB launches a government bond-buying programme which will pump over a trillion euros into a sagging economy starting in March and running through to September, 2016, and perhaps beyond.

9. Jan. 24 PAKISTAN
Pakistan's central bank cuts its key discount rate to 8.5 percent from 9.5 percent, citing lower inflationary pressure due to falling global oil prices.

10. Jan. 28 SINGAPORE
The Monetary Authority of Singapore unexpectedly eases policy because the inflation outlook has "shifted significantly" since its last review in October 2014.

11. Jan. 28 ALBANIA
Albania's central bank cuts its benchmark interest rate to a record low 2%. This follows three rate cuts last year, the most recent in November.

12. Jan. 30 RUSSIA
Russia's central bank cuts its one-week minimum auction repo rate by two percentage points to 15 percent, a little over a month after raising it by 6.5 points to 17 percent, as fears of recession mount.

13. Feb. 3 AUSTRALIA
The Reserve Bank of Australia cuts its cash rate to an all-time low of 2.25%, seeking to spur a sluggish economy while keeping downward pressure on the local dollar.

14. Feb. 4/28 CHINA
China's central bank makes a system-wide cut to bank reserve requirements -- its first in more than two years -- to unleash a flood of liquidity to fight off economic slowdown and looming deflation. On Feb. 28, the People's Bank of China cut its interest rate by 25 bps, when it lowered its one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

15. Jan. 19/22/29/Feb. 5 DENMARK
Incredibly, the Danish central bank cuts interest rates four times in less than three weeks, and intervenes regularly in the currency market to keep the crown within the narrow range of its peg to the euro. (The won't last. See Switzerland.)

16. Feb. 13 SWEDEN
Sweden's central bank cut its key repo rate to -0.1 percent from zero where it had been since October, and said it would buy 10 billion Swedish crowns worth of bonds.

17. February 17, INDONESIA
Indonesia’s central bank unexpectedly cut its main interest rate for the first time in three years.

18. February 18, BOTSWANA
The Bank of Botswana reduced its benchmark interest rate for the first time in more than a year to help support the economy as inflation pressures ease. The rate was cut by 1 percentage point to 6.5%, the first change since Oct. 2013.

19. February 23, ISRAEL
The Bank of Israel reduced its interest rate by 0.15%, to 0.10% in order to stimulate a return of the inflation rate to within the price stability target of 1–3% a year over the next twelve months, and to support growth while maintaining financial stability.

20. Jan. 15, March 3, INDIA
The Reserve Bank of India surprises markets with a 25 basis point cut in rates to 7.75% and signals it could lower them further (they did, yesterday, to 7.50%), amid signs of cooling inflation and growth struggling to recover from its weakest levels since the 1980s.

21. Mar. 4, POLAND
The Monetary Policy Council lowered its benchmark seven-day reference rate by 50 basis points to 1.5%.

There will be more rate cuts and currency debasement, especially once the ECB gets its own QE program going. Note that all of these countries want to reflate, inflate or otherwise spur demand. The problem, as discussed above, is that people just aren't buying it, and they aren't buying. People have been paying down debt and saving, because, in an era of unprecedented central bank intervention and government regulation, the average Joe and Jane is uncertain about the future. It's a social phenomenon the economists can't compute.

Perhaps, in a free market without central bank meddling and government intervention into every aspect of one's life, capitalist economies might just have a chance.

Who knew?

Bottom line, central banks hate deflation, because it causes debt-driven economies to seize up and die, which is exactly why consumers should appreciate it.

Dow 18,096.90, -106.47 (-0.58%)
S&P 500 2,098.53, -9.25 (-0.44%)
Nasdaq 4,967.14, -12.76 (-0.26%)

Major Payroll Miss Slows Rally

Truly, the headline should have been worse, but the efforts of our beloved Federal Reserve, relentlessly supplying free cash flow to the entire banking and finance system through QE2, turned what, in ordinary times, should have been a major drop in the indices into a small gain. Obviously, these are not ordinary times, as the Fed's policies and government inabilities have completely distorted equity and bond markets, though, bonds, admittedly, are a little less affected.

The culprit in this case was a woeful reading from the BLS on November non-farm payrolls. Expected to come in at 150,000 new jobs, the miss was massive, registering at only a gain of 39,000 for the month. The unemployment rate was also hiked to 9.8%. A miss of this magnitude should have caused a major sell-off of something along the lines of 200 points on the Dow, but the smiley-face, feel-good "recovery" posture foisted upon an unsuspecting public by the charlatans who call themselves the "financial media" on CNBC and elsewhere, in perfect Orwellian doublespeak, turned this negative into a positive, suggesting that the lack of jobs in America is a good sign that the Bush tax cuts, QE2 and unemployment insurance will be extended.

Suddenly, like magic, the fact that there's only one job for every five applicants in America - during the height of the holiday season, no less - is a very good thing indeed! On the other side of the coin, since most everything emanating from our nation's capitol and Wall Street are complete fabrications and half-truths, at best, perhaps the doltish politicians running the circus thought a little depression might be good for what ails us.

Washington is so completely corrupt and bankrupt it's appalling, even to below-average fifth graders, who are likely to be able to see right through the politics of fraud. Nothing matters to these people except stock prices and elections. Half of the Southern states are starved for funds, as are most of the Northeastern ones along with California, but that's not anything that concerns them. They'll mindlessly dawdle over minutia like 3% tax cuts instead of actually handling matters of national importance. Thank goodness for Wikileaks and the internet, for displaying the true level of corruption and ineptitude that has brought the country to its knees.

Dow 11,382.09, +19.68 (0.17%)
NASDAQ 2,591.46, +12.11 (0.47%)
S&P 500 1,224.71, +3.18 (0.26%)
NYSE Composite 7,751.58, +39.33 (0.51%)

Amazingly, advancing issues outnumbered decliners by a substantial margin, 4029-2364. New highs again beat back new lows, 497-39, entirely similar to the past two days. Yes, siree! The same stocks, being endlessly pumped to infinity. The best news is that volume was down, meaning Goldman Sachs probably turned off one of its Cray XE6's for the weekend.

NASDAQ Volume 1,836,885,000
NYSE Volume 4,307,858,000

Oil futures reached a 2010 high, up $1.19, to $89.19. Precious metals and grains were also sharply higher. Gold ramped up $16.90, to $1,406.20; silver gained 70 cents, to $29.27. The silver and gold bugs would like to applaud Fed Chairman Bernanke for making them rich beyond their wildest dreams. The best part is that his failed policies will continue for many more months and be copied by our counterparts in the Eurozone, meaning the prices today will look like chickenfeed in a few years.

Of course, along with the precious metals go other commodities, like food and oil, so while the hoarders of gold and silver will be wealthy, they'll eventually have to hock that shiny stuff for gasoline, a loaf of bread and cans of tuna. At least they'll be able to get around and eat. The remainder of the immobilized masses will be starving to death.

We are deserving of all this, however, for electing spineless politicians and allowing the corruption and wantonness to go unchecked for so long. In another time, the wall of congress would be ringing with gunfire and bankers hung from the nearest lampposts, but the American public has been dumbed-down, satiated and nourished with the fruits of food stamps disguised as debit cards.

There will be no revolution, no wide public outcry. We will suffer quietly until the best of us all are gone and our children reduced to slaves. Bread and circuses is what we want and exactly what we will get.

Ponder these words, lest you fall into the trap of the status quo:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

-- Thomas Jefferson

Stocks Surge on Slim News

Despite indications that Friday's non-farm payroll data is going to disappoint - or maybe because of that - stocks continued to trundle forward and have now put together the makings of a fairly nice week of gains.

All of the major indices are poised to post their third weekly gain in the last four and, as of today's close, all but the NYSE Composite are positive for the year.

Data which has been released this week has been mixed, though slightly positive overall. Initial unemployment claims dropped off by 29,000 in the most recent week, but are still stubbornly high at 469,000. A number closer to 300,000 would be indicative that layoffs have stopped and that re-hiring was about to resume, though market participants aren't holding their collective breaths in anticipation of that number. Factory orders showed an impressive 1.7% gain in January, following a solid 1.5% advance in December.

The canary in the coal mine, however, continued to be housing. Pending home sales fell 7.6% in January according to the National Association of Realtors (NAR), which, to almost nobody's surprise, was blamed on the weather, even though the worst storms of the season came in February, not January. Thus, any attempts to paint lipstick on the pig that is residential housing are likely to induce ridicule and groaning.

With the nation almost completely mortgaged to the government due to guarantees by Fannie Mae, Freddie Mac and the other alphabet soup names of agencies sopping up the upside-down mortgage market, there is little hope that the heartland of America's middle class is going to rebound any time soon. Jobs and housing continue to haunt the best efforts of government and financiers, like Freddie Kruger, who just seems to never go away for good.

While Wall Street can whoop it up over earnings and percentages, most of America is suffering, especially state governments. Roughly 4 out of 5 are going to need further assistance from the feds in closing gaping budget shortfalls this year, after being bailed out in 2009. Turning the sublime into the ridiculous, the federal government is about as bankrupt as most of Bernie Madoff's investors, so that, in effect, the states are borrowing borrowed money.

We have come to the point in our history that the obvious cannot be overlooked, though the media and government officials try their best to obfuscate the truth in hopes of retaining or gaining office. Adding together all of the debt - most of it piled on in recent years - and including the unfunded and underfunded mandates such as Medicare and Social Security, every American living today is in hock to the tune of about $430,000.

Any economist who tells you that the money will be paid back is simply a jack-ass lacking common sense. The incredible tax burden needed to hoist such a huge burden off the backs of American citizens would relegate today's and future wage-earners to a level usually reserved for indentured servants. Some make the case that due to the high tax burden already imposed, most Americans are nothing more than wage slaves already, a point that cannot be made too finely nor too bluntly.

While the mechanics of the economy whirr ever onward, the plight of the individual continues to deteriorate. Pay raises, once a commonplace theme in most business environments, have been all but obliterated since the late 1990s, except, of course, in government positions, where financial discipline has been abrogated and handed over to the debt-runners in congress and the presidency. The lower classes get welfare checks and other comforts from the largess of the Treasury; the upper class needs no such relief, having written all they need into the tax codes, leaving the vast middle class in a squeezed situation such as today's, where wages hardly cover the costs associated with common living.

Saving, that relic from the past that our parents and grandparents tried to imbue into us, has been replaced by debt, and that debt has exploded to unreasonable levels in just the past twenty years, threatening to destroy the entire fabric the social compact upon which our country was founded and currently operates.

Retirement, the biggest sham ever invented, is going to be thrust from the American lexicon within the next decade as baby-boom generation workers begin to add to the debt burden in increasing numbers. Taking away benefits from earners is still taboo in Washington, DC, though the decision to either cut benefits or raise taxes will soon be an unavoidable choice, probably within five to six years, if the union lasts that long.

The final insult to the idealist "peace and love" crowd from the 60s will be termination of Social Security for all intents and purposes. Benefits will still be doled out in some form or another, though the level of payments will be ludicrously low in comparison to what previous generations took out. Like all other social entitlement programs, Social Security and Medicare in particular are nothing more than vast Ponzi schemes, using current revenue to pay current beneficiaries. Within years, even possibly months, the balance will tip toward the recipients outnumbering the payers, sending the entire system further into default (It's already over the brink, though nobody will admit it).

What happens when the economy of a nation, brought down by debt burdens too weighty to maintain, implodes, is not a secret. The obvious first victims will be the lame and indigent, as government stipends are reduced or completely shut off. Next would be the chronically poor and illiterate, who do not possess enough brain power or initiative to fend for themselves.

The upper class will feel only slight pain, most of the anguish being sustained by the 60-70% of the population in the middle. Good jobs will be hard to come by, families will be forced to live together as in the Great Depression of the 1930s, and, though prices for everything from food to fuel will be forced lower (though that's arguable in the case of utilities and health care, which will raise prices on fewer customers to meet costs), few will be able to afford much more than basic necessities.

All of this is why it's important to know what your money is doing and where you are putting it to work. As explained recently, the only viable investments for the average middle class American today are cash, capital goods, and capital-producing goods such as food, fuel, seeds and tools of trade. All else is speculative and more than likely doomed. There are those who preach that gold will be the savior of assets and wealth, and that may be true, though most middle class people would more than likely have to sell any gold assets in order to meet day-to-day expenses in a post-crash economy.

In any case, there are trillions of dollars being fed into and out of the Wall Street stock machinery and today was a good day for them. Few of those who toil in the financial services industry have any idea of the train wreck that is just ahead, so, let their folly be your entertainment.

Dow 10,444.14, +47.38 (0.46%)
NASDAQ 2,292.31, +11.63 (0.51%)
S&P 500 1,122.97, +4.18 (0.37%)
NYSE Composite 7,173.07, +8.41 (0.12%)

Gainers outnumbered losers on the day, 3651-2790. There were 427 new highs to a paltry 27 new lows, as we approach the anniversary of the market bottom - March 9, 2009 - now just three trading days away.

NYSE Volume 4,448,901,500
NASDAQ Volume 2,062,605,875

Commodities took a bit of a breather. Oil was actually down 25 cents, to $80.62. Gold slipped $9.60, to $1,133.70, while silver fell 10 cents, to $17.23.

Tomorrow's release of non-farm payroll data for February probably won't cause much of a ruffle since expectations have been sufficiently dampened all week. It's a near certainty that the numbers will be worse than last month, and consequently blamed on the weather.

Markets and what passes for economic understanding have reached a new low, now that we can blame Mother Nature for our economic shortcomings.

Panic Buying on Rumored Greece Debt Solution

Now that there's a rumor that Germany will bail out Greece from its long-term debt problems, it must be not only safe, but profitable, to invest in equities.

This is what substitutes for logic on Wall Street. A country of roughly 11 million, the government of Greece is having serious difficulties financing its debt burden, a fact that has not been lost on EU officials, the European Central Bank, or, your friendly, neighborhood shysters and hooligans in the investment business.

Normally, credit default of an entire nation is serious business. These days, rumors that somebody will issue more debt to "keep them afloat" is supposed to signal that better days lie ahead, not only for the beleaguered nation, but for the entire planet.

Nothing could be further from the truth and those who bought into today's rally were probably well aware of the risks involved with investing in anything at such a precarious economic juncture. Either that, or most investors are really just sheep being led to slaughter.

There's almost no way to put a positive spin on debt restructuring of a country roughly the size and population of New York; its yet another sad chapter in the all-pervasive world-wide debt bomb. Just as they have for the past year, cheery optimists claim that economies will rebound soon and all will be well. Global demand will improve with better economic conditions prevailing globally. Sadly, these prognostications of some recovery, rebound or reflation are little more then idle pipe dreams of crack-smoking Keynesian economists. More sober heads are pointing to Portugal, Italy, Greece and Spain (the PIGS as they are known) as the beginning of the end of not only the Euro as a viable currency, but for a continuation of the debt-leveraging that has led the global economy down the abyss.

Eventually, there must be losses in order to purge all the mal-investments made over the last 10-20 years - though mostly in the last 6 to 8 - and restore correct economic balance to the entire global system. These losses include everything from credit card defaults to mortgage write-downs to underfunded pension funds to failed governments. Everyone, from individuals to banks to governments and their currencies is going to take a hit, some ore severe than others. It's not very easy to do, certainly isn't pretty, but debt default will eventually restore - and much quicker, by the way - economies to reasonable levels of functionality. Until the debts are expunged, paid off, paid down, or otherwise disposed of, there can be no hope for any kind of lasting recovery and economic stability.

That's the part most "modern" economists just don't seem to get. Either that, or they know it and are just lining their cards up properly. My best guess is that the global economy is about 1/3 of the way through a process that began in August of 2007. Although it took awhile (a little over a year) before most people took notice, the de-levering had begun when real estate values began to slip. Then, by 2008, stocks took their hit (and subsequently recovered, but understand that this cyclical rally within a secular bear market has great downside risk later on), and the banks cried and wailed though gobs of taxpayer money, most of which is still owed.

By August of 2010, the world will be 3 years into the abyss and nowhere near the bottom, such bottom being measured as widespread unemployment which will dwarf what is prevalent today, homelessness, fear and, for some, starvation and death. That doomsday scenario is probably another 2-3 years away, possibly longer, depending on how long governments can hold onto whatever small shards of credibility they have before bombing and attacking each other.

Wars are the usual method by which the great powers sort out their financial differences, though these days, cyber-warfare is already well-underway as is various forms of economic ju-jitsu. You think Greece owing debt to Germany is such a good idea? Read up on some financial history prior to great wars and you'll get a little education. The aftermath of wars isn't such a rosy picture either, but we'll be getting to that - if still alive - upon the events.

For now, the best "investments" would be cash, clothing, transportation devices, canned food, arable land and tools of trades. All can be procured relatively cheaply and will serve one well in crisis conditions, for which, I believe, we are headed.

For today, investors thought stocks were hot and Greece wasn't much of a big deal. A few months and years from now, that thinking is likely to be looked back upon as foolish, unfounded optimism.

Dow 10,058.64, +150.25 (1.52%)
NASDAQ 2,150.87, +24.82 (1.17%)
S&P 500 1,070.52, +13.78 (1.30%)
NYSE Composite 6,835.16, +121.29 (1.81%)

Advancing issues finally had a day in which they exceeded decliners by a large margin, 4864-1651. There were 114 new highs as compared to 79 new lows. The divergence is still not great enough - and only one day's data - to conclude anything other than the negative bias remains in place. Volume was approaching the higher range, though despite the overall price gains, not equal to the volume on recent down days. We're likely to trend sideways to lower until a suitable catalyst provokes a movement in another direction. This market condition could persist for quite a long time as governments and media efforts seek to keep panic from occurring though future events may preclude them from doing so.

NYSE Volume 6,145,856,000
NASDAQ Volume 2,242,082,250

Oil, gold, silver and most other commodities improved. Despite today's moves, the overwhelming evidence of a widespread, nearly global deflationary environment continues to spread.

Governments and financial institutions have been proceeding at a snail's pace, putting profits before repair and political careers ahead of practical concerns. The recession isn't over, though some of the worst of it is. This second phase may last 2-4 years from here before true structural reforms - not yet even begun - start to have any affect on economies.

To get an idea of just how hard government and financial institutions and regulators are sitting on their collective hands, here's Larry Summers, White House Director of the National Economic Council and architect of the financial collapse, prattling on for 10 minutes on CNBC this morning, essentially saying nothing. Notice how his lips move but no meaningful words come out.

Wall Street Still Waiting on Washington

Markets were mildly optimistic on Wednesday, awaiting word from Washington on the proposed $800 billion stimulus bill in Senate-House negotiations, which appeared close to a deal.

Having investors focus on anything other than issues regarding US banking interests was likely preferable, following yesterday's massive sell-off on the heels of Treasury Secretary Timothy Geithner's sketchy bank plan announcement.

Following the initial shock, players in the financial field are beginning to flesh out possible scenarios, each of them fraught with peril as economists delve into the unknown. Preeminent are the individual balance sheets and books of the banks in question, primarily bank of America and Citigroup, the two which seem to be most at risk, though the books of Wells Fargo, JP Morgan Chase and others will surely require the close scrutiny of government fixers before any steps toward a working solution are attempted.

Like an alcoholic with serious addiction issues the major money center banks have not yet taken the serious step of actually disclosing the size of their losses and may never do so, publicly, as the sheer size of the numbers would panic most ordinary people. It's essential to any kind of recovery that the banks confess their shortfalls to the government, so that an appropriate solution can be delivered.

As for the bank plan being devised at Treasury and the Fed, there is some agreement, that, considering the broad outlines, banks will be merged and/or downsized in coming months.

Trading in very narrow ranges, all of the major indices finished on the upside, though only marginally. Much of the trade was tied to hope for quick passage of the stimulus bill or recovery from yesterday's drama. As for a dead cat bounce, today's action barely merited notice, though most traders seemed relieved that the markets didn't devolve into indiscriminate selling.

Dow 7,939.53, +50.65 (0.64%)
NASDAQ 1,530.50, +5.77 (0.38%)
S&P 500 833.74, +6.58 (0.80%)
NYSE Composite 5,252.65, +37.94 (0.73%)

Much of the bounce-back on the Dow was due to the financials, as Citigroup (C) and Bank of America (BAC) each rose by more than 7%, and JP Morgan, another Dow component, lifted to a 4% higher close.

Internally, the market sent a mixed message, one to which traders have become accustomed over the past 18 months. Advancing issues outnumbered decliners, 3669-2769, though new lows sailed past new lows, 232-14, increasing by both raw number and the overall divergence.

NYSE Volume 5,977,889,500
NASDAQ Volume 2,206,760,750

Crude futures took a severe hit after US inventories were reported to be close to 16-year highs. Oil for March delivery fell $1.61, to $35.94.

Gold finished with strong gains for the second straight day, as the flight to safety continues. Gold was up $30.50, to $944.50, with the magic $1000 mark clearly in sight. Silver also showed strong gains, picking up 39 cents to finish at $13.52 in New York.

In yet more good news for consumers, natural gas lost a penny and all food stock futures were lower. After Citigroup analysts downgraded supermarket chain operators Safeway (SWY) and Kroger (KR) on Tuesday, warning of a protracted "price war," shoppers should expect stable to lower prices on grocers' shelves over the near term.

Considering the dark cloud over the stock markets and the number of layoffs occurring in the past few months, cheaper food and fuel are providing the silver lining.

Thanks, Mr. Greenspan!

The markets responded both in China and the US today after former Fed Chairman Alan Greenspan issued a general warning about the overvaluation of stocks on China's exchanges on Wednesday. As expected, the fallout was felt on the Shanghai B-index of stocks demoninated in foreign currencies, which fell 8%, in Europe and on US exchanges.

Greenspan's comments coincided with a warning from Chinese government officials about the risks of investing in equities. As usual, investors were spooked by people who should have nothing to say and no influence over markets. Sadly, loudmouth outdated louts and know-nothing government squawkers are part and parcel of the risks of investing. They've been intruding and manipulating in open markets for centuries and their influence seems only to be growing.

Dow 13,441.13 -84.52; NASDAQ 2,537.92 -39.13; S&P 500 1,507.51 -14.77; NYSE Composite 9,812.51 -101.15

Other news included a 16% jump in new home sales for April along with an 11% drop in median prices from March to April. The year-over-year decline in median price of 10.9% was the biggest such decline in 37 years. The housing market is deflating - and quickly - while screaming "buyer's market" to potential home owners and speculators.

Sporadic reports also surfaced in newspapers and on the web pointing out what most Americans already know. Food prices are running very high, especially for quality meat, fruit and vegetables.

Besides food, high gas prices continue to eat away at Americans' wallets, though oil for July delivery fell $1.59 to $64.18. That price is still $4 to $5 higher than it can be before drivers can hope to see any noticeable impact at the gas pump.

Declining issues overwhelmed advancers by a 7-2 margin and the number of new highs was 222 - the lowest number in more than a month. 105 issues recorded new lows.

The metals took another dive on Thursday. Gold was down $9.30 to $653.30 while silver lost 19 cents to close at $12.92.

Stock prices are influenced by all kinds of data, noise, news and reportage. The mouthings of unofficial spokesmen, such as Alan Greenspan, should fall under the noise category. He has no more clue about the direction of markets, or, more pointedly, their valuation, than any b-grade stock broker. His irregular incantations and bemoanings ought to be ignored.