Thursday, July 14, 2011

Wealth Gap Thursday- Discrepancy in Wealth Signals Collapse Imminent; Retail Sales Disappoint "Experts," Validate Our Research; Four Indicators For You; Weekly Unemployment Benefits Show Weakened Economy, Clown Award Goes To...; Moody's and Dagong May Downgrade U.S., Says "Borrowing to Pay Off Loans Won't Work."; Greek FM Fails; Monster Typhoon to Hit Fukushima; Ron Paul Says U.S. is Insolvent; Much More

Update 1: Act surprised - Rasmussen Consumer Confidence Index lowest in 2 years. We thought by now the all of the "green shoots" would have turned into giant sequoias. We speculate Dr. Deficit needed them to print more fiat.

Update 2: Hundreds scramble for Dallas rental vouchers (aka section 8). Is there such a thing as a "4th world nation"?

Main Article
Anyone who wishes to see what occurs on a fundamental level during an empire's decline, should take a day trip around New Jersey or New York.

You should begin your journey in the capitol of New Jersey, Trenton (or Washington D.C.). We suggest you spend a few minutes in this cesspool of extreme poverty and desolation observing the architecture and surroundings. Then, without delay take a drive 40 miles to the northeast to a town called Short Hills. There you will find great wealth and a mansion housing boom that would one expect to see during great economic prosperity. Drive another 40 miles to the northeast and you'll stumble upon a town called Alpine. Here you will find wealth beyond imagination and a mega-mansion housing boom that rivals the fastest growth in history.

Yes, the great wealth gap - a clear indicator of a nation in decline. As the middle class is decimated, the wealthy take all the chips. Marc Faber recently made the observation while attending a convention in Los Angelos, that he has never seen more Ferraris, Aston Martins, Lamborghinis and Porsches in one place at any time in recent memory. He went on to say roughly, this wealth discrepancy is always an indication a financial collapse is imminent. He is correct.

Ready? Today's retail sales and food sales data shows a 0.1% (+/- 0.5% margin of error) monthly increase and an 8.1% yearly increase. Sounds good on the surface, no? It's another reason to rally "the markets," and increase those ludicrous 2H11 GDP estimates even more, right? Green shoots abound!

Allow us to remove the smoke from the burning fiat - those "green shoots" have been chopped down and turned into paper pulp for the endless fiat. You see, retail sales are, as you already know, calculated in dollar terms, not unit sales. This means during times of inflation (we have 9%-11% in the U.S.) retail sales should always be up. They should also always be up when the M1 money supply is up 12% year-over-year(!) The Fed is giving the "economy" full gas pedal to the metal, and yet the car is slowing to a halt. Oops.

Further, this data also includes gasoline sales which were up (again, in cash terms) 24% YoY. Considering gas prices were up almost 91% YoY, there's a big gap to fill. You do the math. It goes without saying what would explain that discrepancy. Dr. Deficit, you didn't expect the millions of unemployed Americans to go out and start driving around for pleasure in their big SUV's, did you?

Notice the direct correlation to the other metrics:

- Food stamp recipients are at all time high and the numbers continue to skyrocket(!)
- Real time unemployment (read: the U6 + the officially unaccounted) is pushing 24%(!)
- Duration of unemployment is at an all time high of 40 weeks(!)
Labor force participation rates are at a 30 year low and declining rapidly(!)

And the list goes on and on. What does this tell you?

We can literally go on for hours about the failed economic policy in this country and around the world (and hope someday, someone invites us to speak on this topic). We have been constantly highlighting the fact that stocks are based on whether or not Dr. Deficit will print more fiat. That's all. Fundamentals mean nothing. There is no such thing as "organic" company growth. The only "growth" comes from the inflationary pressure of the money supply and the amount of hype Goldman is willing to put into the selling of an IPO (read: LNKD with an absurd P/E ratio of 1200x. They just have not found enough suckers willing to bite this sour bait) How long can this last? Not much longer, as the death spiral accelerates exponentially near the end. Always has, always will.

We do have to give credit to the spin clowns masters who like to turn anything negative into bull...ish news. Today's clown award goes to Associated Press writer Christopher Rugaber who wrote, "fewer people sought unemployment benefits last week, an encouraging sign the job market may be slowly improving."  Good try Chris, but a total failure. Call me when that number drops below the population growth. Obviously, this was your first day on the job. Now, where do we begin? Let's see - 405,000 (an abysmal number, let alone an encouraging number) people applied for unemployment, and only 18k hamburger flipping jobs were added in June. Now, if 250k jobs are needed to be created each and every month for the next 6 years to return to pre-depression pre-recession levels, how many people including the population growth birth/death farce model should apply for unemployment benefits in a given week? [insert Goofy voice] Well, gee golly Micky. I don't think I have enough toes to count.

We find it more than ironic that Moody's has place the U.S. on death watch downgrade review since the U.S. should have been downgraded in 2008. The Chinese ratings agency Dagong, has said they will downgrade the U.S. even if the debt ceiling is raised and placed the U.S. on negative outlook. Why, you ask? They make this pure genius (Einstein level of genius) conclusion - "borrowing to pay off loans won't work." [insert Goofy voice] Well, shucks Mickey! By golly! You don't say!

Of course, they already downgraded the U.S. last November because of QE2, so they have finally begun to see the light that the whole world is insolvent fiat is a scam and the EU is about to implode. We're just surprised they didn't downgrade the U.S. to junk status like Moody's did to Ireland yesterday, in an after-the-fact cowardly move. A little late, guys.

The freak show circus continues. The head clown, Dr. Deficit, said yesterday that "gold is not money." Since that is another Dr. Deficit one liner that will go down in the history books and talked about for years to come, we won't say anything else... but, judging by the recent moves in this shiny stuff, we'd have to say a lot of people don't agree with the good Doctor - or at least they speculate gold will be a type of money in the near future. Say, did he just say 6000 years of gold as money "tradition" can be broken with a piece of toilet paper fiat? Yes he did. duh! #winning!

In other news, Greece's FM just said there is no "danger of default." Our readers, who we have trained to read between the lines and sniff out steamy bull droppings know that this means Greece is moving one step closer to defaulting. Along with the entire EU.

Then again, once this monster Typhoon levels Fukushima reactor 4 SFP, will a default really matter? Ron Paul doesn't seem to think so.


  1. this is doomtastic!!! man i cant wait for august 3rd!!

    my neighbors tried to sell their house last year for a cool 1.5 mill. its a beautiful house. worth the price. and now they are asking 550 grand and still no takers!!! gulp!!!

  2. I get a kick every time out of your #winning hashtag. Very fond of bull...ish too :-)

  3. @Anon- Thank you. I try to keep this doom free but it always sneaks in there. Nearly the same experience has been going on in my affluent area and not a home was sold in the last 30 days.

    @Pecos Bill- Thank you. It has become a classic joke and I'm trying to make Dr. Deficit and bull...ish go viral. You can help ;)

  4. As a financial newbie I have learned a lot from this blog and I am now somewhat able to follow the financial news and understand what is going on. I'm curious as to what you think the solution is at this point. IS there a solution? It seems like we are so far gone with no end in sight. Where does this end? Thanks, as always. :)

  5. This comment has been removed by the author.

  6. Removed to re-post with a question I had for the Author.

    Original Post: Keep doing what you're doing. I've been a big fan for a few weeks. The humor is great and the info is spot on. I've already moved your blog up to one of my two daily must-reads

    My question pertains to the basic idea of fiat. Have you seen the movie, "The Secret of Oz?" I believe that movie makes a spot on point about the negatives of a gold standard and the simple idea that the supply is easily controlled by controlling the mining corporations. I would love to talk about it further.

  7. Another point, what about local fiat currencies among communities? It has been done for thousands of years.

  8. FWIW it was Faber (not Roubini) commentating on those fancy cars the other day.

  9. @Robyn- Thank you. I'm a bit rushed today so my quick response for now is yes there are solutions.

    @Freedomasone- Thank you very much. You can help by recommending this site to everyone you know. Again, for the sake of time my response to you is very short. I've not seen the movie. Yes there are downfalls to a gold standard but the benefits outweigh the negatives. I would love to discuss further perhaps over the weekend. Be well.

    @Anon- Correct and thank you for spoting that. I was writing off the top of my head and could not locate the article. Besides, Roubini and Faber are almost interchangeable on one cup of coffee the mistake is too easy. ;)

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