Is a Crash Coming?

It’s rare – but occasionally you’ll see a mainstream media article that contains some truth.

This is one of those articles.

For the record – the Fed is not ‘nervous’ or ‘worried’ about these developments.  The Fed created these developments.

From the article – here’s the #1 reason things are heading south.  Remember – this is what happens when your money is created by debt.  Eventually – the math of exponential debt growth catches up to you – and runs you over.

“People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It's the debt, stupid. According to the Federal Reserve, total U.S. debt—even excluding the financial sector—is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion.”

If you think this is a mystery to the Federal Reserve, the Bank of England, the European Central Bank, the IMF, Bernanke, Greenspan, Obama, Geithner, etc., etc. – you’re living in a fantasy.

I have a feeling that the next couple of months – which have historically seen significant stock market volatility – will be rather exciting.

jg – August 13, 2010

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August 13, 2010

Is a Crash Coming? Ten Reasons to Be Cautious

Wall St. Journal

Could Wall Street be about to crash again?

This week's bone-rattlers may be making you wonder.

I don't make predictions. That's a sucker's game. And I'm certainly not doing so now.

But way too many people are way too complacent this summer. Here are 10 reasons to watch out.

1. The market is already expensive. Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That's well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors. If you're getting paid well to take risks, they may make sense. But what if you're not?

2. The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.

3. Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that's reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true.

Crowds panic on Wall Street on Oct. 24, 1929.

4. Deflation is already here. Consumer prices have fallen for three months in a row. And, most ominously, it's affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago. No wonder the Fed is worried. In deflation, wages, company revenues, and the value of your home and your investments may shrink in dollar terms. But your debts stay the same size. That makes deflation a vicious trap, especially if people owe way too much money.

5. People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It's the debt, stupid. According to the Federal Reserve, total U.S. debt—even excluding the financial sector—is basically twice what it was 10 years ago: $35 trillion compared to $18 trillion. Households have barely made a dent in their debt burden; it's fallen a mere 3% from last year's all-time peak, leaving it twice the level of a decade ago.

6. The jobs picture is much worse than they're telling you. Forget the "official" unemployment rate of 9.5%. Alternative measures? Try this: Just 61% of the adult population, age 20 or over, has any kind of job right now. That's the lowest since the early 1980s—when many women stayed at home through choice, driving the numbers down. Among men today, it's 66.9%. Back in the '50s, incidentally, that figure was around 85%, though allowances should be made for the higher number of elderly people alive today. And many of those still working right now can only find part-time work, so just 59% of men age 20 or over currently have a full-time job. This is bullish?

(Today's bonus question: If a laid-off contractor with two kids, a mortgage and a car loan is working three night shifts a week at his local gas station, how many iPads can he buy for Christmas?)

7. Housing remains a disaster. Foreclosures rose again last month. Banks took over another 93,000 homes in July, says foreclosure specialist RealtyTrac. That's a rise of 9% from June and just shy of May's record. We're heading for 1 million foreclosures this year, RealtyTrac says. And naturally the ripple effects hurt all those homeowners not in foreclosure, by driving down prices. See deflation (No. 4) above.

8. Labor Day is approaching. Ouch. It always seems to be in September-October when the wheels come off Wall Street. Think 2008. Think 1987. Think 1929. Statistically, there actually is a "September effect." The market, on average, has done worse in that month than any other. No one really knows why. Some have even blamed the psychological effect of shortening days. But it becomes self-reinforcing: People fear it, so they sell.

9. We're looking at gridlock in Washington. Election season has already begun. And the Democrats are expected to lose seats in both houses in November. (Betting at InTrade, a bookmaker in Dublin, Ireland, gives the GOP a 62% chance of taking control of the House.) As our political dialogue seems to have collapsed beyond all possible hope of repair, let's not hope for any "bipartisan" agreements on anything of substance. Do you think this is a good thing? As Davis Rosenberg at investment firm Gluskin Sheff pointed out this week, gridlock is only a good thing for investors "when nothing needs fixing." Today, he notes, we need strong leadership. Not gonna happen.

10. All sorts of other indicators are flashing amber. The Institute for Supply Management's manufacturing index, while still positive, weakened again in July. So did ISM's new-orders indicator. The trade deficit has widened, and second-quarter GDP growth was much lower than first thought. ECRI's Weekly Leading Index has been flashing warning lights for weeks. Europe's industrial production in June turned out considerably worse than expected. Even China's steamroller economy is slowing down. Tech bellwether Cisco Systems has signaled caution ahead. Individually, each of these might mean little. Collectively, they make me wonder. In this environment, I might be happy to buy shares if they were cheap. But not so much if they're expensive. See No. 1 above.

Write to Brett Arends at brett.arends@wsj.com

Economic Winds are Shifting (Maintream Media)

I wrote last week (A Perfect Storm) that despite all of the positive economic mainstream media articles in recent weeks – underlying economic fundamentals continue to deteriorate. As I read the Wall Street Journal this morning (August 31, 2009) – I noticed a couple of articles that speak to a few problems that could lead to some serious economic problems in the near future – problems that I (and others that are studying economic data themselves) have mentioned many times over the past few months.

This is unusual for mainstream media – we normally see articles speak to negatives – only after a negative economic event has occurred. We see very little economic analysis within mainstream media that addresses our true economic condition and then reports the potential for negative impacts to our economy, earnings, markets, etc. In recent months, we’ve been fed a steady diet of positive news (based on bad economic data and horrible analysis) with very little attention given to the severe problems lurking within real economic data.

It has all been positive spin.

So – when I see a few mainstream media articles that speak to a few of the economic issues I have been following closely – I take notice.

Here are a few articles from today from the Wall St. Journal:

Raft of Deals for Failed Banks Puts U.S. on Hook for Billions
• To encourage banks to pick through the wreckage of their collapsed competitors, the Federal Deposit Insurance Corp. has agreed to assume most of the risk on $80 billion in loans and other assets. The agency expects it will eventually have to cover $14 billion in future losses on deals cut so far. The initiative amounts to a subsidy for dozens of hand-picked banks.

Commercial Real Estate Lurks as Next Potential Mortgage Crisis
• Federal Reserve and Treasury officials are scrambling to prevent the commercial-real-estate sector from delivering a roundhouse punch to the U.S. economy just as it struggles to get up off the mat.

Can Rally Run Without Revenue?
• As stock investors turn their focus to earnings prospects for the second half and 2010, they are zeroing in on one of the market's biggest challenges: lackluster corporate revenue. The market barreled ahead this summer and is hovering near its high for the year, fueled in large part by stronger than-expected second-quarter earnings. But a significant driver of the good news was cost cutting. Many companies posted disappointing sales.

If you’ve read my previous posts – then you know that all three of these issues are going to have a severe negative impact on economic activity (and markets) in the near future. If we continue to see more articles like these – get ready.

Knowing how the global elite operate – it’s quite possible these types of articles are pre-empting some significant negative economic ‘events’. Since September and October have historically seen significant market volatility – I believe we’re in for a very rough ride.

Stay tuned.

Global Economy Gains Steam?

It appears that anxiety is rising over the stock market in recent days. Financial ‘experts’ are starting to focus on the underlying problems – sky high stock prices compared to plunging earnings, employment continues to deteriorate, September has historically been the worst month for stocks, etc. At the same time, we’ve seen a chorus of mainstream media articles trumpeting a global economic rebound. Headlines today (September 2, 2009) in the Atlanta Journal Constitution and Wall St. Journal (and many others) are touting recent ‘improvements’ in economic data.

I suppose this is why the IMF has revised its 2010 global economic growth forecast to 3% from July’s forecast of 2.5%. You might ask yourself - how can the IMF accurately ‘estimate’ global growth next year? What really caused their forecast to gain .5% over the past month? I have no idea – and I’m not sure anyone else does either. Most likely, someone at the IMF is taking an official dart and throwing it against an official wall labeled with various percentages. Who knows? Regardless, it seems like someone is trying to allay our fears by printing lots of positive economic news.

Let’s take a look at some of the information in the Wall St. Journal article below (front page headline article) and compare it to reality to determine if mainstream media is telling us the truth or ‘spinning’ misleading data.

The article begins:

“Manufacturing gains in the U.S., Europe and Asia added to evidence the global economy is improving at a faster pace than was widely anticipated a few months ago.”

The article is referencing the recent manufacturing activity index that reported a reading of 52.9. What does this really mean? Is manufacturing improving?

Let’s go to Nathan’s Economic Edge (http://www.economicedge.blogspot.com/) for the truth.
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Tuesday, September 1, 2009

Manufacturing ISM INDEX Shows Growth… or Does it?

The Manufacturing ISM index came in at 52.9 for the month of August, that is an increase from 48.9 the month prior, the headlines will shout that’s a 9% growth in manufacturing! LOL, NO, not even close.

Look, Manufacturing fell off a cliff after being in decline for years and years in this country. An index value of 50 indicates that the fall stopped, at least for now, and anything over 50 means that some growth is occurring over the last reporting period, and that’s what this report says. But it’s misleading for what it doesn’t say, and that’s that manufacturing is at such a low level that even cash for clunkers is enough to bump it up for a short time period. But cash for clunkers is now over. Is our manufacturing economy really now growing, and is a 50%+ market rally really pricing in reality?

Here’s Econoday:

Highlights


The ISM's manufacturing index burst over the dead-even 50 level for the first time since the beginning of the recession, at 52.9 in August vs. 48.9 in July. New orders led the advance, at 64.9 vs. August's 55.3 and pointing to rising business activity in the months ahead. Production was also very strong in August, at 61.9 for a 4 point gain and pointing to gains in durable goods shipments and total manufacturing sales. Backlogs also increased, at 52.5 vs. 50.0 in July. But manufacturers are not stocking up, instead they continue to draw down inventories where the index is a very weak 34.4 vs. 33.5 in July. Note that future gains in the inventories index, a seeming necessity given rising production needs, will help give the overall index a big boost. Respondents in fact think inventories at their customers' firms are too low, with the customer inventories down 3.5 points to 39.0. Deliveries slowed substantially, up more than 5 points to indicate that current production needs are stressing what has become a pared down supply chain. Production activity and the gain in orders has yet to boost employment where the index only inched forward to a still sub-50 level of 46.4.


All the strength here is flowing through to prices where the prices paid index jumped 10 points to 65.0, an indication that buyers are bidding up prices for raw materials. No doubt boosted by cash-for-clunkers and gains in transportation, the manufacturing recovery is on the way and together with the gain in the pending home sales index indicate that two key sectors are on the acceleration. Stocks jumped in immediate reaction to today's 10 o'clock data.

Wow, look at that chart! Heck, we’re right back where we were, right??? This is how misleading these indexes are… they do not reflect reality as they do not show you what is happening to the base.

Compare the chart above to this chart of manufacturing sector output which is also an index value, but one that’s tied to the manufacturing level in the year 1992:

Or to this chart showing manufacturing sector output expressed in yoy percent change:

You see, the charts above are indexed to a base year, but the ISM index number is based to nothing but the period preceding it. Now, which charts more closely show reality???

There is no doubt that the above charts of manufacturing output paint a far truer picture of what’s occurring because the index value has no connection to the base, it’s just plus or minus over time! So, for real meaningful growth to occur, the ISM must be above 50 and stay there for an extended time.

To confirm that hypothesis, one need only look at the shipping indexes which are simply still scary.

We can also look at the number of people employed in manufacturing durable goods, for example, and when we do we find that the United States currently employs about the same number of people for manufacturing as we did back in 1947! Now, you say that’s because we are way more efficient and productive? But remember that it requires people to earn money to buy things. It takes INCOME to service DEBT. The service sector has been growing while the manufacturing sector has been shrinking. Service sector jobs do not pay, on average, as much as manufacturing sector jobs. Yet DEBT had been skyrocketing until just recently. It takes INCOME to service DEBT.

We can also look at durable goods ORDERS and this is expressed in millions of dollars. Here you can see the cliff dive and the recent turn upwards:

So, you must ask yourself if the market is actually pricing in the future, 50%+ priced in already, or is it actually just disconnected from reality?
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Let’s look at a couple of other statements from the article below.

“Businesses and households have been regaining confidence, and economists have revised forecasts upward.”

I don’t know about you and what you’re experiencing – but I don’t see anything in the real economy that affects you and me (business sales/revenue, shipping/freight, employment, home prices, home sales, etc.) that would tell me anyone is ‘regaining confidence’. If you own or manage a business – chances are that sales are struggling and your access to credit is diminished – if not gone altogether. If you’ve lost your job – then you know how hard it is to find employment. If you’re selling your home – chances are that your home value has declined significantly and you’re having a tough time finding a buyer. Bottom line – there is nothing in the real economy that would cause me to ‘regain confidence’.

“U.S. auto sales were the best in over a year……”

Why were auto sales the best in over a year? I think it might have something to do with the ‘cash for clunkers’ program – which is now over. I wonder what auto sales are going to do over the next couple of months? It’s probably safe to say that auto sales are going to tank due to all of the sales pulled forward into August due to the program. I’ve also seen where supplies of new cars are very low due to production cuts and the ‘cash for clunkers’ program. Bottom line – we’re going to see a significant drop in auto sales for the remainder of this year.

Moving on……

“……. the National Association of Realtors index of pending home sales hit its highest level in over two years.”

Here’s a very good article from Chris Martenson that explores a problem with current housing information provided by the NAR.
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House Sales and Mortgage Applications - Something Doesn't Add Up.

Sunday, August 23, 2009, 7:15 pm, by cmartenson

I was not a good father today.

Instead, I engaged in laboriously hand-entering data to satisfy a question that has been bothering me for a while.

The issue that was worrying at me was the apparent discrepancy I'd mentally noted between the happy-happy increase in existing home sales, as reported by the NAR last week, and what I remembered from the MBS mortgage application releases.

But who could be sure?

Perceptions can be tricked and need to be tested and subjected to fact-based inquiry.

Confounding things, the Mortgage Banker Association (MBA) application reports are notorious for changing their reporting methodology, most recently (during the past 3 weeks) dispensing with reporting of an absolute number in favor of a simple percentage change. Where, for example, the number used to change from 1000 to 1100, it is now only reported as having changed +10%.

After a few weeks, who can remember what +10%, -4%, -3%, +12% is supposed to mean? I certainly can't.

At any rate, this shift to a percentage basis altered a convention that went back several years. Now we only get to read the weekly percentage and yearly changes, without the confusing benefit of an absolute number to guide our perceptions. So for those without the time or the inclination to dig through the data, it is what it is.

For me? The only way to resolve this was to obtain all the base data, hand-enter it into a spreadsheet, and see what was up.

Well, this is what's up:

Where the NAR recently reported a gain of +5% in existing home sales for July09/July08, the reconstructed MBA report shows a -22% decline in purchase applications over the same period (in stark contrast to their misleading recent release, which spoke of a yr/yr gain, but was actually referring to a blended gain that included the highly volatile refi apps):

Where the MBA most recently said that purchase applications have been "trending up," I am at a loss to see the period of time to which they are referring. I've boxed in 2009 for reference, but it is difficult to make a case for "trending up" unless one decides to begin randomly at some point after March.

Note that the data I have is all seasonally adjusted and straight from the MBA, so I doubt we are referring to different data.

At any rate, I am simply not in a position to believe that purchase applications are down 22% yr/yr while total sales are up 5%+. This would imply that nearly a third of all national sales are cash-on-the-barrel.

Sorry. No way. Somebody here is lying.

Somebody Not At all Reliable. However, I will retain my judgments - for now.
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The next couple of quotes in the article below are nothing short of ridiculous.

"We had been looking for improvement, but the speed at which it's come and the magnitude with which it has come is surprising," said J.P. Morgan economist Bruce Kasman. "We all went down hard and we're all going up pretty well."


President Barack Obama called the manufacturing data proof "the steps we've taken to bring our economy back from the brink are working."

Our politicians (Republican and Democrat alike) love to grab onto something that appears positive – and then hope that no one actually checks their statements to the truth.

Are we all coming up ‘pretty well’? No. Does the manufacturing data prove that the government’s stimulus packages are working? No. Are Bruce Kasman and President Obama misleading us? Yes.

Here’s probably the most important statement in the entire article:

“One of the largest unknowns is how well the world economy can fare when the huge fiscal and monetary stimulus supplied by many governments, from the U.S. to China, wears off.”

I can tell you now how the world economy is going to fare when the various stimulus plans end. Since these stimulus packages the world over are currently propping up the world’s debt based monetary system (since household/consumer credit is plunging) – we’re going to see some very serious economic declines that will eventually lead to the collapse of the global financial system.

There’s been a lot of talk about China pulling the world out of recession – but here’s the reason the Chinese economy has rebounded and why their stock market is up 30%+ this year.

“China has been pulling out of the global slump more decisively than any other major economy, thanks to an enormous stimulus program.”

China’s banking system has pumped billions of Yuan into their system. Again – this is debt – and will eventually crush their economy – just like ours.

So – the mainstream media spin machine continues on……
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SEPTEMBER 2, 2009

Global Economy Gains Steam

Jobs Still a Worry, but Factory Output Rises in U.S., China, France; Markets Falter

Wall St. Journal

By JUSTIN LAHART, ANDREW BATSON and MARCUS WALKER

Manufacturing gains in the U.S., Europe and Asia added to evidence the global economy is improving at a faster pace than was widely anticipated a few months ago.

For the first time since January 2008, an index based on a survey of U.S. manufacturing purchasing managers crossed a threshold indicating factory output grew. Manufacturing activity in China, France and Australia, among other countries, also expanded in August, separate surveys showed. The pace of contraction in Germany and some other nations slowed markedly.

Stocks pulled back Tuesday, but financial markets in much of the world have been rallying in recent months. Businesses and households have been regaining confidence, and economists have revised forecasts upward.

U.S. auto sales were the best in over a year, and the National Association of Realtors index of pending home sales hit its highest level in over two years.

"We had been looking for improvement, but the speed at which it's come and the magnitude with which it has come is surprising," said J.P. Morgan economist Bruce Kasman. "We all went down hard and we're all going up pretty well."

President Barack Obama called the manufacturing data proof "the steps we've taken to bring our economy back from the brink are working."

The global economy remains far from healthy, and not all signs are positive. New figures Tuesday showed the U.K.'s manufacturing sector contracted in August. Banking sectors in several nations continue to struggle with bad loans, the latest worries being commercial real estate loans made by U.S. banks. Financial stocks led a broad selloff Tuesday that sent the Dow Jones Industrial Average down 185.68 points, or nearly 2%, to 9310.60. Wednesday in Tokyo, the Nikkei was down was down 2.7% early.

The positive mood about the economy could dissipate with some disappointing data. Economists estimate a report on the U.S. labor market Friday will show a rise in the unemployment rate to 9.5% in August from July's 9.4%. Continued shedding of jobs acts as a drag on consumer spending, the largest factor in the U.S. economy and a major driver of global demand. Acknowledging the continuing high U.S. unemployment, President Obama promised not to "let up until those Americans who are looking for jobs can find them."

One of the largest unknowns is how well the world economy can fare when the huge fiscal and monetary stimulus supplied by many governments, from the U.S. to China, wears off.

Yet conditions are better than many had anticipated. At the end of July, forecasters polled by research firm Macroeconomic Advisers estimated that the value of goods and services produced by the U.S. economy would grow at a 1.6% annual rate in the current quarter, ending Sept. 30. By last week, that GDP estimate had nearly doubled to 2.9%.



A senior International Monetary Fund economist, Jörg Decressin, said Tuesday that the agency is revising its global growth forecast to just under 3% in 2010, higher than the IMF's July estimate of 2.5%. The new forecast will be released Oct. 1. J.P. Morgan economists expect the 16 nations that share the euro will grow at nearly a 3% annual rate in the second half of this year. In June, they were predicting just 0.5% growth.

In the U.S., the Institute for Supply Management's index of purchasing-manager sentiment rose to 52.9 in August from 48.9 in July, crossing the 50 mark that indicates the sector is expanding. A measure tracking new orders rose sharply, with textile mills, paper products, printing-related products and apparel showing particular strength.

Although the recently ended U.S. "cash for clunkers" program boosted auto sales, that wasn't the whole story. "There's obviously some impact from changes in the automotive industry," said Nobert Ore, who oversees the manufacturing survey. "I think probably the business cycle had as much to do with it."

New economic data show an economic recovery at a faster-than-expected rate. But will it last? WSJ's Economics Editor David Wessel reports.

International Rectifier Corp., which makes semiconductors, has seen improved demand across the industries that use its product, including computers, aviation and autos. Last week, the company reported that it turned a profit in the quarter ended June 28 after five quarterly losses. The company has noted "encouraging signs of stabilization" in North America and particularly strong demand in China and Taiwan.

At Ace Clearwater Enterprises, a Torrance, Calif., company that makes parts for the aerospace industry, orders are up 26% from the last year. The company employs about 245, almost 100 more than a year ago, and is still hiring. "We've been really fortunate," said Gary Johnson, the company's vice president. "And a lot of companies have gone out of business, frankly, that are our size."

China has been pulling out of the global slump more decisively than any other major economy, thanks to an enormous stimulus program. A survey of purchasing managers at Chinese companies, which signaled expansion beginning in March, moved up to 54 in August from 53.3 in July.

Chinese policy makers now face the challenge of sustaining an expansion after withdrawing government support. There are some signs Chinese corporate investment is picking up. BOE Technology Group Co. and a consortium of other Chinese state-owned enterprises said last week they will spend $4.1 billion to build a new liquid-crystal-display factory in Beijing.

Yet investments from nonstate companies have lagged in China, confidence remains fragile, and the initial euphoria over the stimulus has evaporated. The Shanghai stock market fell 23% in August as investors fretted over a slowdown in the pace of bank lending.

Employees work at a Baldor Electric Co. factory in St. Louis. Reports show an upturn manufacturing activity in the U.S. and in several other nations in August, a sign the global recession is winding down.

Although China's stimulus now seems to be more than strong enough to meet the official target of an 8% expansion for 2009, officials remain publicly cautious about the world economy, with China's exports still down 22% from last year.

Japan reported an upturn in industrial production earlier this week. It said industrial production in July rose 2.2% from June, the best monthly gain since the global recession hit.

The euro zone's purchasing managers' index rose to 14-month high of 48.2 in August, up from 46.3 in July, closing in on the 50 level that would indicate activity has stopped falling. The surveys showed manufacturing in France is growing again, and has nearly steadied in Germany. But in some countries, such as Italy, Spain and Ireland, manufacturing declines continued.

As in the U.S., European businesses have cut inventories so sharply that even a modest revival of demand is likely to lead to increases in production.

Skeptics point to three weakness in Europe's German-led recovery. Cash-for-clunkers schemes that have propped the auto sector are due to run out in Germany and elsewhere next year. Banks in the euro zone have done less than in the U.S. to write down their losses in the credit crisis, and are cutting back their lending to businesses to repair their capital ratios.

And third, unemployment in Germany, Italy and some other countries is expected to rise further this year and next. Government measures such as short-shift subsidies have delayed layoffs, but many companies are thought likely to cut jobs over the coming year. That in turn could dent consumer confidence and household spending.

In one respect, Europe is less at risk of a double dip than the U.S., say analysts. It has done less to stimulate growth through fiscal and monetary policy than the U.S., so that the withdrawal of stimulus measures will be a less-significant negative.

Britain could lag behind other regions in pulling out of the global recession, given the U.K.'s heavy debts and reliance on the financial-services industry. British consumers are among the most heavily indebted in the developed world, and their downsizing efforts may put a lid on consumer spending.

That has some U.K.-based companies concerned. Last month, drinks maker Diageo PLC, the maker of Johnnie Walker scotch and Guinness stout, said it doesn't expect a recovery in the alcoholic-beverages industry anytime soon. It issued a lackluster forecast for fiscal year 2010.

—Paul Glader, Neil Shah and Sara Murray contributed to this article.

Write to Justin Lahart at justin.lahart@wsj.com, Andrew Batson at andrew.batson@wsj.com and Marcus Walker at marcus.walker@wsj.com

Gold Bashing and Mainstream Media

If you’ve been paying attention – you’ve probably noticed that most mainstream media outlets love to belittle gold investors. I believe the main reason for this is that central banks would prefer that you remain confident in their fiat currency - which is intrinsically worthless. When the world’s investors drive the price of gold up and then drive the price of fiat currency down (A good example over the past year would be gold vs. the U.S. Dollar) – then investors are telling the world’s central bankers that they are losing confidence in their money.

Considering that our money is not backed by anything of value – it’s certainly a valid concern. The value of our money is based solely on people’s acceptance of it as money. No confidence in the dollar – and the dollar’s value will plummet.

I think it was Ron Paul who said it best. If you buried a $100 dollar bill and a $100 gold coin for a hundred years – which one is going to retain its value? Chances are – the $100 bill will be worthless and the gold coin will have increased in value.

This has held true throughout human history. Money that is based on gold/silver and is not debased has retained its value and purchasing power (see the Greek Empire). Money that is debased (reduction in gold/silver content) will always decline in value (see the fall of the Roman Empire). Greek coins continued to be used as currency throughout Asia long after the fall of the Greek Empire because they did not debase their currency (remained constant at 66 grams of gold per coin). When the Caesars of Rome began to debase their currency (reducing the amount of gold/silver in each coin) in order to coin more money to finance their increased spending – inflation sky-rocketed and the value of their currency plummeted.

If you were a Roman businessperson - would you want to receive a coin with 66 grams of gold or 30 grams of gold (regardless of a government decree)? People began to demand a higher number of coins (prices) to pay for the same products/services – so inflation increased significantly and the value of their currency plunged. Sound familiar?

We hear that gold is a good inflation hedge – but it’s really a hedge against the world’s fiat currency system. Gold has always been valuable (it’s rare) and is easily made into coins – so it’s a perfect form of money. On the other hand – current fiat currency is based on nothing of value – it’s either made out of paper, coined from abundant metals (zinc, copper, etc.) or in electronic form (your checking account). So – a fiat currency is only good – as long as people continue to have confidence in the system. No confidence = no fiat currency.

Here’s our problem – every nation throughout history with a monetary system based on a fiat currency that is not on a gold/silver standard - has always printed/coined its way to ruin. Every one. It may only take a few years (Zimbabwe) or it may take decades (us) – but the result has always been the same. Debase your currency and you will eventually destroy your economy over time.

In 1971, President Nixon removed the gold standard from our currency.

What happened? Should we be concerned? History tells us – yes.

From a government spending perspective – all restraints were removed. You’ll notice on the following chart showing the growth of our Federal debt – that we turned the corner soon after 1971.

No need to worry about having enough gold to back your currency (and hold your spending in check) – print all you want. Total money supply growth (M3) also turned the corner soon after 1971.

Same situation with the currency component of our money supply:

We would then expect inflation to ‘turn the corner’ around the same time – and that’s exactly what we see.

Most people believe that inflation is simply a rise in prices – but a rise in prices is a result of an increase in money supply and available credit. Inflation is strictly a monetary phenomenon. Increase the supply of fiat currency – and you are going to increase prices while devaluing your currency.

Definition of inflation from Webster’s Dictionary:

-a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services

From Wikipedia:

When the price level rises, each unit of currency buys fewer goods and services; consequently, inflation is also an erosion in the purchasing power of money – a loss of real value in the internal medium of exchange and unit of account in the economy.

This is a very important point – inflation erodes the purchasing power of your money. In a monetary system that requires exponential debt and money supply growth (that’s our system) - prices are always increasing and the purchasing power of your money is always eroding – not a good thing if you want a stable and sustainable economy.

What are the real world effects of this? As more and more money is added to the system - the general population will find it harder to get enough money to pay for the things it needs/wants (bills, consumer goods, etc).

Let’s look at what has happened to the purchasing power of the U.S. dollar since 1971.

Here we see the definition of inflation put into practice. As our currency in circulation has grown – the purchasing power of the dollar has declined significantly. As of 2009, the purchasing power of the dollar has declined over 90% since 1971. This is another deceptive slight of hand that the Federal Reserve will not discuss and does not want known.

The standard of living of Americans has steadily declined in recent decades due to our monetary system. Don’t believe me? We only need to look at the U.S. median income to see the devastating effects of inflation.

When it comes to income – we typically see charts like this:

                                (Source: Censusbureau.gov)

Based only on this chart – it would seem that everything is A-OK. Prices are going up – but our income is also going up – so what’s the problem?

It takes some additional digging to see what’s really happening to us.

Let’s look at our income adjusted for inflation:

                               (Source: Censusbureau.gov)

What does this show you? It shows you that our real income (adjusting for inflation) has barely moved at all since 1973. Now you know why so many households have dual incomes today. We need to make more money to try and keep pace with prices. Another ugly side effect of this is that we’ve taken on enormous debt over the past couple of decades to help make up for the income shortfall. This is why we see household debt charts like this.

Total U.S. household credit market debt is now approximately $15 trillion dollars. When did we turn the corner on this exponential curve? Again – around the same time that we removed the gold standard.

If you really want to see the truth regarding what is happening to our income – take a look at our income compared to gold.

                                (Source: Censusbureau.gov)

In 1970 – our median income would have purchased 240 ounces of gold. Remove the gold standard and introduce high inflation rates – and it’s easy to see the affect on our income during the 1970’s – leading to a significant drop in our income compared to gold (median income would have purchased 29 ounces of gold in 1980). You’ll also notice that today’s trend is not good – the value of the dollar is declining and the value of gold is increasing – so the amount of gold we can purchase today with our median income – is declining.

Also keep in mind that this system does not reward saving money. A constant inflation rate caused by the system – destroys the value of your money over time. Couple this with very low interest rates (dictated by the Federal Reserve) and you’ve got a system that in no way – rewards you for saving money.

We should expect the value of the U.S. dollar to continue declining due to our current fiscal condition (massive budget deficits, negative account balances, etc.) and we should expect to see the value of gold continue to rise over time as investors continue to hedge against a rapid decline of the world’s monetary system (fiat currencies).

The bottom line is that the people behind the world’s monetary system know how this ends and they are very aware that a high degree of confidence is required in their fiat currencies to keep the system running. Without confidence in the world’s fiat currencies – we all turn into Zimbabwe – looking for whatever we can find to use for money. This is why there are many people today telling you to buy physical gold that you can store in your home. This is also why we see so many mainstream media articles bashing gold investors (in order to pump up our fiat currency and slam gold).

Here’s the 1 year gold trend:

Silver is up even more (%) than gold since November:

…and the one year dollar index:

I will say that mainstream media does get it right sometimes. Here’s a quote from yesterday’s Wall St. Journal.

"That gold has broken through $1,000 shows people are still very concerned about paper currencies," said Howard Ward, chief investment officer for growth equities at Gamco Investors. "Those commodities denominated in dollars will go up as the dollar keeps going down."

I would say that people will be very concerned about paper currencies until the world’s economy collapses. Then it will be a brand new ball game.

I have attached a mainstream media article about gold investing (today’s paper) after Chris Martenson’s blog post.

jg – September 10, 2009
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Gold Bashing 101: A Mainstream Press Primer

Friday, September 4, 2009, 11:07 pm, by cmartenson

It is pretty clear that gold has its detractors in the mainstream press, and this next article is so over the top as to be a hilarious object lesson in the art of gold bashing.

It all starts with the title itself and gets funnier quickly.

US gold ends down $1, fails to break above $1,000

First of all, gold ended UP on the day by $2.80, not down. Second of all, you'd never see a similarly worded headline for, say, a favored stock which had just finished the week up 35 bucks. Can you imagine if Google went from $400 to $414 for the week reading the headline "Google fails to break above $415?" I can't either.

Here's the rest:

Opening paragraph (all emphasis mine):

NEW YORK, Sept 4 (Reuters) - New York gold futures ended $1 lower on Friday as strong investment demand failed to push prices over the psychological mark of $1,000 an ounce, and traders said the metal could be vulnerable to near-term profit-taking following a sudden rally.

As I already mentioned, gold ended the day up, not down. There's a difference. And then we might note that gold is characterized as "vulnerable," and that it failed to push over a psychologically important level. That's not news; that's barely even opinion.

* Concerns about equities market, as well as inflation worries after massive government spending to jolt the economy out of recession fueled a highly speculative gold rally - Bruce Dunn, vice president of trading at New Jersey-based Auramet Trading.

Highly speculative? Compared to, say, the 220,000,000 shares of FNM, a company with deeply negative equity (i.e. bankrupt), that traded today? You mean that kind of "high speculation," or is the purchase of gold worse somehow?

* Gold prices will correct eventually after the fast-paced rally - Dunn.

I guess we should get out now, while the getting is still good!

* Gold futures initially extended losses after the U.S. nonfarm payrolls data in August showed the smallest decline in a year, but unemployment rate jumped to a 26-year high of 9.7 percent.

"Initially extended losses" is just a fantastic use of spin. Unbeatable! Right there in three simple words, we find out that gold had already been on a losing streak and that it extended those losses. And the use of the word "initially" smoothly hides the fact that it quickly recovered those loses. The casual reader is left with the impression that gold was under the gun and in retreat all day. Who would want to buy a ruinous asset like that?

* Demand from jittery investors to diversify assets into gold amid shaky equities markets propelled gold's sudden rally this week - analysts.

Note that what finally propelled gold today was "jittery investors." If you bought gold today, you are the jittery sort, prone to turning tail amid shaky markets and running for safety. Clearly, when you hate gold as much as Reuters, there can be no room for the possibility that strong investors might be in the game. Who wants to be in the jittery camp? Not me! This paragraph also featured one of my favorites - unnamed analysts.

All of this is to point out (again) that a good chunk of the mainstream press has an agenda when it comes to gold, but fortunately they are quite heavy-handed, and their clumsy efforts are easily spotted.

I merely raise this to point out that it is really best not to let one's impressions of markets be shaped by the mainstream media. If the journalists were any good at finance, they wouldn't be writing for a living.

I often wonder about such articles…do they spring from a legitimate disgust with gold that developed previously for the writers, or are they merely attempting to shape opinion for some other set of reasons (perhaps the publisher's parent company has a relationship with a trading company that just happens to be short a few tons of gold and supplies some nice quotes)? Who knows?

All I know is that I am very glad I've not heeded the advice of the mainstream media on gold and silver over the years.
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SEPTEMBER 10, 2009

Golden Eggs: Danger in the Yellow-Metal Stocks

Wall St. Journal

By DONNA KARDOS YESALAVICH and GEOFFREY ROGOW

NEW YORK -- The recent surge in gold futures has been a boon for gold stocks, but all that is gold doesn't glitter, and a correction is likely near.

Tuesday, a number of gold stocks hit new 52-week highs as gold futures jumped above $1,000 an ounce. The excitement spread quickly, as the psychologically important $1,000 mark hadn't been hit since February. Gold fell slightly Wednesday, though it remained near that level.

However, now is not the time to jump on the gold bandwagon. A technical analysis of gold stocks, which are up some 12% this month alone, shows that although they are exhibiting positive momentum, they are likely due for a pullback.

"I probably wouldn't be a buyer at these levels," said Cleve Rueckert, a research analyst with Birinyi Associates. "It's gotten very overbought very quickly, and sometimes these things have a tendency to come back down just as fast."

Gold's ascent has two primary drivers. On one hand, those figuring the dollar is due for even more of a pullback are wise to place cash in gold. At the same time, gold benefits from global growth and consumption trends.

The climb this week has largely been because of concerns about the dollar, which helped gold stocks push the trend on their 50-day and 200-day averages higher. That is a sign of positive momentum, something that would make gold stocks attractive once again if they correct from their overbought levels.

Measuring gold miners, the Market Vectors Gold Miners ETF closed Wednesday at 44.12, and hit a 52-week high during Tuesday's session at 47.45. Mr. Rueckert expects the ETF to come back down to "at least 42," which he sees as a more reasonable place to enter.

The ETF wouldn't be considered oversold until it got down around 37, but Mr. Rueckert warned that pullbacks don't always go all the way to their oversold level. "If you wait for it to get oversold, you may miss an opportunity," he said.

One of the more prominent names in the gold sector is Newmont Mining. The stock closed Wednesday at $44.88, up 12% on the month.

"Newmont had been a laggard, but people look to it first when they want gold exposure in stocks. This is typical," said Howard Ward, chief investment officer for growth equities at Gamco Investors.

But Mr. Rueckert said Newmont doesn't exhibit the same kind of positive momentum that some other gold stocks and the Gold Miners ETF do, and has been volatile between $37.50 and $50.

Freeport-McMoRan Copper & Gold, on the other hand, looks better to Mr. Rueckert as a gold play, although it is traditionally thought of as a copper company. The stock's up trend has been more defined and fairly consistent since the beginning of the year. Mr. Rueckert recommends trying to get in around $65, a bit below its Wednesday close of $67.68, and believes it could run up to $82.80.

Economic Recovery or Continued Decline?

We continue to see many positive economic articles by mainstream media outlets. It seems that many of the pundits on CNBC, CNN, Fox News, etc. – see our economy on the road to recovery and continue to talk about economic ‘green shoots’. I have listed below some headlines from recent mainstream media articles.

When things really begin to collapse – remember all of these positive articles and all of the positive comments by our political and financial leaders and ask yourself – were they really this blind or was there another agenda at work?

I have added a blog post by Jeff Nielson at the end of this post. Jeff tells us the true state of our economy and where we’re heading.

jg – October 22, 2009
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Transport Stocks Blaze Recovery Path
WSJ - October 22, 2009

China Gains Confidence in Recovery
WSJ - October 22, 2009

[Federal Reserve] Beige Book Sees Stabilization Signals
WSJ - October 22, 2009

Business Spending Looks Up
WSJ - October 21, 2009

Commercial Market Gains Footing
WSJ - October 21, 2009

Construction Industry Forecast to Rebound in 2010
WSJ - October 16, 2009

Dow at 10000 as Crisis Ebbs
WSJ - October 15, 2009

Wall Street On Track To Award Record Pay
WSJ - October 14, 2009

Trade Upturn Hints at a Recovery
WSJ - October 12, 2009

Recovery Hopes Stir Markets
WSJ - October 7, 2009

BHP points to signs of broad global recovery
CNN – October 21, 2009

Google: Worst is behind us
CNN – October 21, 2009
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Greater Depression for U.S. Rebuts 'Recovery' Talk

By Jeff Nielson

http://seekingalpha.com/article/167538-greater-depression-for-u-s-rebuts-recovery-talk?source=feed

It has gone from irritating to nauseating listening to media market-pumpers talking about an “U.S. economic recovery” which has supposedly already begun. Indeed, the hype has gone from a debate about whether the “recession” is over, to an inane debate about whether the U.S. is experiencing a “V-shaped recovery” or may suffer a “double-dip recession” or W-shaped “recovery”.

In the real world, however, all that has occurred is that an U.S. economic collapse, which was in a near-vertical drop, has eased to a more moderate rate of decline. The “double-dip” talked about by some semi-realistic analysts is in fact nothing more than the ongoing collapse regaining downward momentum. There is no “debate” here. It is a matter of simple arithmetic that the U.S. economy cannot recover.

First of all, in the “big picture”, the U.S.'s $11-trillion economy (all that remains once statistical “padding” is removed) is much too small to service the more than $57 trillion in existing public and private debt. Even if we pretend the U.S. still has a $14 trillion economy (despite the government's own numbers that this economy has shrunk by more than 10%), it is still much too small to service its debts. Meanwhile, lurking in the near future are roughly $70 trillion in additional “unfunded liabilities”.

As I have pointed out on a number of occasions, the U.S. can never afford to raise interest rates again (at least not until after the inevitable national default on its massive debts). Every 1% rise in U.S. interest rates drains over $500 billion per year from the U.S. economy, equivalent to roughly a 5% drop in GDP for every 1% rise in interest rates. It is also inevitable that the bond market will impose much higher interest rates on the U.S. economy – as deficits get more out-of-control (and myopic U.S. creditors finally see the total insolvency of the U.S. economy). Thus, the U.S. is guaranteed to go bankrupt – the only issue is when.

The Obama stimulus package is far too small to stop the current collapse in the U.S. economy. Keep in mind that the same propagandists who claim that Obama's stimulus package would “save” the U.S. economy were saying the same things about the much smaller Bush “stimulus package” - little more than a year ago.

The fact is that the U.S. consumer economy has lost somewhere in the neighborhood of $2 trillion per year in spending power. At the peak of the U.S. housing bubble, home-equity financings injected $840 billion into the economy in one year. Not only has such cash-flow into the U.S. economy completely evaporated, but now the debtors have to pay back the trillions in debt which they squandered.

Contrary to the absurd jobs propaganda, the U.S. economy has already lost somewhere in excess of 15 million jobs already – subtracting at least $1 trillion per year in spending from the economy once the “multiplier effect” is factored in. This disconnect from the real world reached its peak this summer, symbolized by a Reuters article that actually stated that while U.S. unemployment was “improving at the national level” it was getting worse on a state-by-state basis (see “BLS jobs numbers contradict BLS jobs numbers”).

Obviously the U.S. economy is represented by the collective economic performance of its 50 states. Yet in the fantasy-world of U.S. economic propaganda, we are supposed to believe that nationally the U.S. economy can be improving, while state-by-state the economy continues plummeting downward. The only difference between the U.S.'s “national economy” and the “state-by-state economy” is that the federal government has incorporated far more statistical contrivances to distort the numbers.

If the real condition of the U.S. economy is not already evident to people from the information above, certainly the following graphs and data on state tax revenues make things crystal-clear. The Rockefeller Institute (.pdf) recently went back as far as data was available (nearly 50 years) and discovered that the current collapse in state revenues is unprecedented – evidenced by the sickening plunge in these charts.

Again, it is a matter of elementary arithmetic that with U.S. states suffering the worst collapse in revenues on record (and with most states already maximizing their annual borrowing) that only two things can happen. Either U.S. states will have to engage in the most-punishing combination of tax-increases and spending cuts (i.e. lay-offs) on record or the Obama regime will have to dramatically increase federal hand-outs to the individual states.

Currently, in the most-recent fiscal year (ending in June of this year), declines in U.S. state revenues were more than double the amount of “stimulus” they received from the Obama regime. What makes this situation worse, most of this so-called “stimulus” involved either increasing the duration of unemployment insurance in the most-devastated regions and/or providing funds to states whose unemployment benefits were completely spent. There was virtually no money spent on creating jobs (contrary to the promises and claims of the Obama regime).

Given that shortfalls in unemployment insurance funding will be much worse in the current fiscal year, the Obama regime could double “stimulus” hand-outs to the states and still create zero jobs – doing nothing but keeping unemployment insurance payments flowing to the jobless.

This still leaves U.S. states with somewhere around $100 billion in increased deficits which will need to be covered in the current fiscal year (above and beyond their pre-existing structural deficits). Keep in mind that the entire amount of “stimulus” reaching the economy from the Obama “stimulus package” was only about $250 billion this year (using the government's own numbers). Overall, this replaces little more than 10% of the lost spending power from this economy.

The numbers are unequivocal. There is no “economic recovery” taking place in the U.S. This year is much worse than last year – and 2010 will be much worse still. The only thing currently preventing the debt-implosion of the U.S. economy is the Bernanke printing press, and continued, excessive “monetization” of debt is a guarantee of hyperinflation. All claims to the contrary represent wishful thinking or deliberate deceit.

The Media Propaganda Machine Continues.......

What happens when debt is destroyed in a debt based monetary system? Money is destroyed – money that is required to keep the system running. We continue to see U.S. household debt decline (it would appear this is now happening mainly through defaults) – while our government and the Federal Reserve try to keep the ship afloat by running up massive Federal budget deficits. We’re on borrowed time.

I’m adding an excerpt from this article in the WSJ today – because mainstream media articles are now placing a positive ‘spin’ on economic news - that is bordering on lunacy.

What is the bold headline on the front page of the Wall Street Journal today?

“Americans Pare Down Debt”

This headline makes it sound like good news is coming our way.

What is the tag line underneath the headline?

“Massive Defaults Produce Rare Annual Drop in Obligations, Clear Ground for Growth“

What is the reason for the reduction in U.S. household debt? Massive Defaults.

This article makes it sound like this is great news – we’re all defaulting in record numbers – which will lead to a strong economic recovery. This – in and of itself – sounds ridiculous – and it is. It disregards what bankruptcy/defaulting does to our credit history and how this affects bank lending. We don’t default and then begin spending and borrowing immediately – the opposite is true.

As always – there’s even more to the story that we’re not being told.

What is the truth?

As we’ve learned – thanks to the Federal Reserve and its debt based monetary system where money is created by debt (and debt only) – U.S. debt reduction is now causing our money supply to contract.

(Source: Shadowstats.com)

Can we have economic recovery if our money supply is contracting? No – economic recovery in this system is impossible if our money supply continues to contract.

In recent weeks I’ve seen more and more mainstream media articles that are ‘spinning’ economic data in ways that are misleading and deceptive. Everything seems to have a positive spin – regardless of what the real data is telling us.

The article below actually appeared yesterday on the WSJ online website – before it was the headline in today’s print version. By yesterday evening – there were over 70 user comments attached to the story. I would say that over 90% of the comments were negative toward the article – comments from informed people who noted that the article was misleading and presented a positive spin on some very bad news.

Apparently, some people at the WSJ took notice and made some changes before today’s print edition. One of the writers of the story was removed – and pieces of the story were re-written. It was also interesting to note that all 70+ comments were removed from the story sometime yesterday evening.

I’ve added a few headlines below from around the nation that tell us the true story of our economy. Record numbers of Americans are now on food stamps, state and local governments are facing historic budget shortfalls as tax revenues plunge, sovereign debt around the world is reaching unmanageable levels, we continue to lose jobs each month, foreclosures and bank failures continue at historically high levels, wages and income continue to decline, etc.

I also noticed earlier this week that the Fed recently released data showing that U.S. net wealth actually increased during the 4th quarter. How – might you ask – is this possible in our current economic environment? I little bit of research shows that this gain in ‘wealth’ was entirely caused by recent stock market gains – a stock market that I firmly believe is being manipulated.

When the stock market goes – so goes a very large portion of our wealth.

The media deception continues.

jg – March 12, 2010
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MARCH 12, 2010

Americans Pare Down Debt

Massive Defaults Produce Rare Annual Drop in Obligations, Clear Ground for Growth

By MARK WHITEHOUSE

Wall St. Journal

U.S. consumers are shedding debt at the fastest rate in more than six decades, largely through a wave of defaults, in a trend that underscores the depth of their financial troubles but could also help clear the way for a stronger economic recovery.

Total U.S. household debt, including mortgages and credit-card balances, fell 1.7% in 2009 to $13.5 trillion, the Federal Reserve reported Thursday—the first annual drop since records began in 1945. The debt amounts to $43,874 per U.S. resident.

The drop reflects the extent to which job losses and a moribund housing market are forcing people to default on mortgages and other obligations, a painful process that has slammed millions of families and hit banks and investors with hundreds of billions of dollars in losses.

At the same time, the defaults are leaving many people with more cash to spend and save, jump-starting the financial rehabilitation, or "deleveraging," that economists see as a crucial prerequisite to robust growth.

"The speed of the adjustment is lightning fast because it's happening through debt destruction," said Joseph Carson, director of global economic research at AllianceBernstein in New York. "It puts us closer to the point where the consumer can start making a stronger contribution to recovery."
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Food-stamp recipients up to record 39 million

Bloomberg News

Updated: March 05, 2010, 6:37 am / 0 comments

Almost 39 million Americans received food stamps in December, the most ever, as the jobless rate hovered near a 26- year high, the government said.

Recipients of the subsidies for food purchases climbed 23 percent from a year earlier and rose 2.1 percent from November, the U. S. Department of Agriculture said Thursday in a statement on its Web site. The number receiving the benefit has set records for 13 straight months.
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Analysis: Greece's crisis could presage America's

WASHINGTON – Greece is a financial basket case, begging for international help. Is America heading down that same road?

Many of the same risky financial practices that now imperil the Greeks were at the center of the all-too-recent U.S. meltdown.

As with Greece, America's national debt has been growing by leaps and bounds over the past decade, to the point where it threatens to swamp overall economic output. And in the U.S., as in Greece, a large portion of that debt is owed to foreign investors.

Not good, if these debt holders begin to wonder if they'll be paid back. A foreign flight from U.S. Treasury securities could sow financial chaos in the United States, as happened when many investors lost faith in Greek bonds.
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2,600 people show up for 100 railroad jobs

A massive crowd of job seekers showed up at the RJ Corman Railroad yards in Lexington, KY hoping to land a high-paying job.

They started waiting in line as early as Friday afternoon. In all, some 2,600 job seekers applied for work with the RJ Corman Railroad Company.

In all, about 100 jobs will be filled for about 12 to 18 months. Those hired will work on repairing and renovating five different railroad lines in the states of Kentucky, Tennessee, and West Virginia. The jobs pay between $25 and $35 per hour with benefits.
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Consumers not making dent in debt

Bulk of $93.2 billion drop in card balances due to write-offs

By Candice Choi

updated 7:10 p.m. ET, Wed., March. 10, 2010

NEW YORK - With unemployment high and personal wealth diminished, how was it that strapped consumers were paying down their credit card debt last year? It turns out they probably weren't.

The bulk of 2009's drop in credit card debt instead came because banks were forced to write off loans consumers failed to pay, according to an analysis of Federal Reserve data.

Loans are typically charged off by banks once they're 180 days past due, under the assumption that the debt won't be repaid.
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The Myth of the Recovery

The White House claims the economy is on the mend. That’s a fantasy.

Anthony Randazzo from the April 2010 issue

The economic headlines sure look better than they did a year ago. Gross domestic product (GDP) is finally growing again, rising by 2.2 percent in the third quarter of 2009, with an early estimate of 5.7 percent for the fourth. The fourth quarter number will probably be revised down, but it will still likely mark the fastest growth since 2003. The unemployment rate, after a nosedive, leveled off in the last few months of the year, and the stock market has regained 40 percent of its value after a March 2009 low. Four of the five largest bailed-out banks have either repaid the government or received permission from the Treasury Department to do so in the near future. Inflation slowed to a standstill in November after 10 months of increasing consumer prices. Construction of new homes and apartments increased in 2009 from 2008 levels, the first annual growth in housing starts since 2005.

“The Recovery Act has created jobs and spurred growth,” President Barack Obama said in a December speech trumpeting the success of his economic policies. “We are in a very different place today than we were a year ago.” Lawrence Summers, director of the White House National Economic Council, concurs. “Everybody agrees that the recession is over,” Summers said that same month on ABC’s This Week.

But a closer look reveals those appealing numbers sit on a dangerously shaky foundation. Economic growth in 2009 was largely dependent on a historic level of government spending that even the president acknowledges is unsustainable in the long term. The root problem of mortgage delinquencies has yet to be worked out. Bank lending is sparse amid ongoing uncertainties surrounding regulatory reform. As a result, manufacturers and small businesses continue to struggle with limited credit. All that translates into historic job losses and a bleak outlook for meaningful growth in 2010 and 2011.

Worst of all, many of the core problems in the housing, banking, manufacturing, and service sectors are being perpetuated and exacerbated by the very federal programs the president credits with jump-starting economic growth. Instead of confronting the roots of the crisis head on, as Obama has repeatedly boasted of doing, his administration and the Democratic Congress have kicked the can down the road, postponing the day of reckoning for real estate, the auto industry, and the toxic mortgage-backed securities that were at the heart of the economic meltdown. These unsolved problems will keep looming over the economy until they’re finally addressed.
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Judge denies payment to Prichard pensioners; 'People are not going to like it,' lawyer for city says

By David Ferrara

March 09, 2010, 12:26PM

MOBILE, Ala. -- A bankruptcy court judge this morning denied a motion to force the city of Prichard to pay pensioners, saying they were not a part of the administrative claims -- or day-to-day obligations -- of the city.

A group of pensioners, who have a civil lawsuit pending against Prichard, asked U.S. Bankruptcy Court Judge William Shulman to include the pensioners, who have not been paid in 6 months, in the city's regular expenses.

"Without some relief, each month goes by they are unable to pay for their basic life essentials," Alexandra Garrett, a lawyer for the pensioners argued.

But the city pays bills and current employees in order to continue to function, the judge said.

"I know you want to shoehorn this in and try to make it fit, but it doesn't seem to fit," Shulman said.

In a Chapter 9 bankruptcy, the court is limited in its authority to order municipalities to pay creditors.
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Bowles Says Deficits Will Make U.S. ‘Second-Rate’

By David Mildenberg

March 9 (Bloomberg) -- Erskine Bowles, co-chairman of the commission on U.S. deficit reduction, said entitlement programs such as Social Security will turn the nation into a “second- rate power” if their costs aren’t reduced.

“We’re going to mess with Medicare, Medicaid and Social Security because if you take those off the table, you can’t get there,” Bowles said today in a speech to North Carolina bankers in Greensboro. “If we don’t make those choices, America is going to be a second-rate power and I don’t mean in 50 years. I mean in my lifetime.”
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Treasuries, sovereign debt "dangerous": Fuss

(Reuters) - Investors should avoid government securities, including U.S. Treasuries and the debt of other nations, because of the risks associated with excessive borrowing, a leading U.S. fund manager said on Tuesday.

"The most dangerous market there is national government debt because the borrowing doesn't seem to be ending soon -- and it's not just a U.S. phenomenon," Dan Fuss, vice chairman of investment manager Loomis Sayles, told Reuters.

"I call it the new 'large-cap market' for its burgeoning size," he said.
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Astorino spending cuts: Lay off up to 1,600, close Croton pool, cut NYC buses, delay Playland opening

WHITE PLAINS, NY — Westchester County Executive Rob Astorino said today that a "staggering" fiscal crisis will force the county to shutter the Croton Point Park pool, delay the daily opening of the Rye Playland amusement park and end bus service to New York City.

The measures are part of a plan for drastic cuts in government spending, which could also mean "likely" layoffs for as many as 1,600 county workers if spending can't be cut in other ways.

Astorino said the cuts are necessary due to a projected $166 million budget gap next year, far above the $60 million deficit he was told he inherited when he took office in January.

He called the actual deficit "staggering," and called it the result of "unrestrained spending for many years" in the county.

And he said he was committed to presenting a 2011 budget in November that would not call for an increase in property taxes.

But he said that would take shared sacrifice and hard choices. Astorino said the first phase of the cuts is to eliminate $16 million in spending this year. Among the short-term measures are:

• Cut $5.8 million from the Department of Social Services by better management of foster care and other measures.

• Cut $1.37 million from the Department of Transportation by eliminating bus service to New York City and other steps.

• Cut $1.6 million from the parks department by leaving 20 positions vacant, closing the pool at Croton Point Park and having a delayed opening at the Rye Playland amusement park.

• Cut $905,000 from public safety by not filling vacancies and redeploying officers to reduce overtime costs in the department.
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Michigan Lost 80,000 Manufacturing Jobs Over Past Year

EVANSTON, Ill., March 9 /PRNewswire/ -- Industrial employment in Michigan fell 10.9% over the past twelve months according to the 2010 Michigan Manufacturers Directory, an industrial directory published annually by Manufacturers' News, Inc. (MNI) Evanston, IL. MNI reports Michigan lost 80,101 industrial jobs and 913 manufacturers between January 2009 and January 2010, the sharpest decline MNI has ever reported for the state. Coupled with the 42,874 jobs lost between 2008 and 2009, industrial employment in Michigan has declined by 122,975 jobs or nearly 16% since the start of the recession, according to MNI.

Manufacturers' News reports Michigan is now home to 14,619 manufacturers employing 657,787 workers.

"It's a perfect storm of negative conditions," says Tom Dubin, President of Manufacturers' News. "The country has suffered deep losses in manufacturing employment due to automation and technology, outsourcing and the recession."

According to MNI, the transportation sector saw the worst decline in employment, down 18.4%, or nearly 30,000 jobs following layoffs and closures at the Big Three automakers, as well as their suppliers such as Visteon Corp. and American Axle. Transportation equipment manufacturing remains the state's largest industrial sector by employment with 130,003 jobs. Industrial machinery and equipment ranks second with 122,590 jobs, down 9.1%. Third-ranked fabricated metals accounts for 83,206 jobs, down 14.3% over the past twelve months.

MNI reports other sectors losing jobs over the past twelve months included lumber/wood down 12.5%, due partially to the closure of cabinet manufacturer Merillat Industries. Employment in textiles/apparel declined 11.6%; primary metals fell 9.5%; stone/clay/glass was down 9.5%; rubber/plastics down 8.5%; paper products down 8.5%; printing/publishing down 8.3%; furniture/fixtures down 7.8%; electronics down 7.5% and food products down 2.9%.
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Sen. Joan Bray on budget: “We’re in a very deep hole”

By Virginia Young

Post-Dispatch Jefferson City Bureau

JEFFERSON CITY, MO — Sen. Joan Bray and two education representatives held a conference call with reporters today to underscore the state’s dire need for more federal stimulus money.

“The economy in Missouri is not improving at this point, and we’re looking not just months out but years out for it to come around,” said Bray, D-University City. “We are in a very deep hole at this point.”

The targeted audience for the message, she said, was Congress, which is balking at a six-month extension of the budget stabilization funds that have kept states’ budgets afloat.

Without the money, “you’re going to see cutbacks, you’re going to see retrenchment, you’re going to see services disappear,” said Bray, a member of the Senate Appropriations Committee. “We don’t think we can do anything other than keep saying it.”
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NY state debt in red zone, should cut $20 billion: study

Joan Gralla

NEW YORK

Tue Mar 9, 2010 8:44pm EST

(Reuters) - The $120 billion that New York state owes in debt, health and pension benefits for public workers puts it in the danger zone, and getting down to the safety zone requires a $20 billion cut, a study said Tuesday.

By this measure, California has more outstanding long-term obligations -- over $159 billion -- but can better afford them than New York, according to the analysis by the Citizens Budget Commission.

New York's ability to pay its bills was estimated at a ratio of 1.099, meaning that for every dollar of resources it has, there are $1.099 worth of obligations.

Although California has some of the nation's worst budget problems, its ratio works out to a more affordable 0.599, according to the study by the nonpartisan research group.

Only three other states have higher debt burdens than New York: New Jersey, whose ratio is the highest at 1.473; Hawaii, at 1.472; and West Virginia, at 1.127.