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http://www.zerohedge.com/news/2013-07-01/36-tough-questions-about-us-economy-everyone-should-be-asking 36 Tough Questions About The U.S. Economy That Everyone Should Be Asking Submitted by Tyler Durden on 07/01/2013 18:34 -0400 Submitted by Michael Snyder of The Economic Collapse blog, If the economy is improving, then why aren't things getting better for most average Americans? They tell us that the unemployment rate is going down, but the percentage of Americans that are actually working is exactly the same it was three years ago. They tell us that American families are in better financial shape now, but real disposable income is falling rapidly. They tell us that inflation is low, but every time we go shopping at the grocery store the prices just seem to keep going up. They tell us that the economic crisis is over, and yet poverty and government dependence continue to explode to unprecedented heights. There seems to be a disconnect between what the government and the media are telling us and what is actually true. With each passing day the debt of the federal government grows larger, the financial world become even more unstable and more American families fall out of the middle class. The same long-term economic trends that have been eating away at our economy like cancer for decades continue to ruthlessly attack the foundations of our economic system. We are rapidly speeding toward an economic cataclysm, and yet the government and most of the media make it sound like happy days are here again. The American people deserve better than this. The American people deserve the truth. The following are 36 hard questions about the U.S. economy that the mainstream media should be asking... #1 If the percentage of working age Americans that have a job is exactly the same as it was three years ago, then why is the government telling us that the "unemployment rate" has gone down significantly during that time? #2 Why are some U.S. companies allowed to exploit disabled workers by paying them as little as 22 cents an hour? #3 Why are some private prisons allowed to pay their prisoners just a dollar a day to do jobs that other Americans could be doing? #4 Why is real disposable income in the United States falling at the fastest rate that we have seen since 2008? #5 Why do 53 percent of all American workers make less than $30,000 a year? #6 Why are wages as a percentage of GDP at an all-time low? #7 Why are 76 percent of all Americans living paycheck to paycheck? #8 Why are so many large corporations issuing negative earnings guidance for this quarter? Does this indicate that the economy is about to experience a significant downturn? #9 Why is job growth at small businesses at about half the level it was at when the year started? #10 Why are central banks selling off record amounts of U.S. debt right now? #11 Why did U.S. mortgage bonds just suffer their biggest quarterly decline in nearly 20 years? #12 Why did we just witness the largest weekly increase in mortgage rates in 26 years? #13 Why has the number of mortgage applications fallen by 29 percent over the last eight weeks? #14 Why has the number of mortgage applications fallen to the lowest level in 19 months? #15 If the U.S. economy is recovering, why is the mortgage delinquency rate in the United States still nearly 10 percent? #16 Why did the student loan delinquency rate in the United States just hit a brand new all-time high? #17 Why is the sale of hundreds of millions of dollars of municipal bonds being postponed? #18 What are the central banks of the world going to do when the 441 trillion dollar interest rate derivatives bubble starts to burst? #19 Why is Barack Obama secretly negotiating a new international free trade agreement that will impose very strict Internet copyright rules on all of us, ban all "Buy American" laws, give Wall Street banks much more freedom to trade risky derivatives and force even more domestic manufacturing offshore? #20 Why don't our politicians seem to care that the United States has run a trade deficit of more than 8 trillion dollars with the rest of the world since 1975? #21 Why doesn't the mainstream media talk about how rapidly the U.S. economy is declining relative to the rest of the planet? According to the World Bank, U.S. GDP accounted for 31.8 percent of all global economic activity in 2001. That number dropped to 21.6 percent in 2011. #22 Why is the percentage of self-employed Americans at a record low? #23 What are we going to do if dust bowl conditions continue to return to the western half of the United States? If the drought continues to get even worse, what will that do to our agriculture? #24 Why is the IRS spending thousands of taxpayer dollars on kazoos, stove top hats, bathtub toy boats and plush animals? #25 Why did the NIH spend $253,800 "to study ways to educate Boston’s male prostitutes on safe-sex practices"? #26 Why do some of the largest charities in America spend less than 5 percent of the money that they bring in on actual charitable work? #27 Now that EU finance ministers have approved a plan that will allow Cyprus-style wealth confiscation as part of all future bank bailouts in Europe, is it only a matter of time before we see something similar in the United States? #28 Why does approximately one out of every three children in the United States live in a home without a father? #29 Why are more than a million public school students in the United States homeless? #30 Why are so many cities all over the United States passing laws that make it illegal to feed the homeless? #31 Why is government dependence in the U.S. at an all-time high if the economy is getting better? Back in 1960, the ratio of social welfare benefits to salaries and wages was approximately 10 percent. In the year 2000, the ratio of social welfare benefits to salaries and wages was approximately 21 percent. Today, the ratio of social welfare benefits to salaries and wages is approximately 35 percent. #32 Why does the number of Americans on food stamps exceed the entire population of the nation of Spain? #33 The number of Americans on food stamps has grown from 32 million to 47 million while Barack Obama has been occupying the White House. So why is Obama paying recruiters to go out and get even more Americans to join the program? #34 Today, there are 56 million Americans collecting Social Security benefits. In 2035, there will be 91 million Americans collecting Social Security benefits. Where in the world will we get the money for that? #35 Why has the value of the U.S. dollar fallen by over 95 percent since the Federal Reserve was created back in 1913? #36 Why has the size of the U.S. national debt gotten more than 5000 times larger since the Federal Reserve was created back in 1913?

http://www.zerohedge.com/news/2013-06-10/guest-post-smoke-and-mirrors-running-out Guest Post: The Smoke And Mirrors Are Running Out Submitted by Tyler Durden on 06/10/2013 13:17 -0400 Originally posted at Monty Pelerin's World blog, Those who believe the economy is recovering are ignorant of the facts. Other than the Great Depression no US recovery (and I don’t believe we are in a recovery) taken longer. Eventually it may take more than a decade like the 1930s. Or perhaps it will be like Japan which is in its third decade of “recovery.” Politics and Economics The truth is that our economy is spent, exhausted and filled with misallocations and distortions made much worse by government interventions. There is no recovery, nor will there be one until a massive purge (usually referred to as a depression) occurs. This event will result in bankruptcies that release scarce, misallocated physical capital from unproductive and unwanted areas to places where it is needed and can be utilized efficiently. Rather than allow this pre-condition to an economic recovery and a growing, efficient economy, politicians want to prevent it. They use smoke, mirrors and propaganda (lies) to hide the reality of our sick economy. Their obfuscations continue, but the effective life is limited. What politicians do to the country beyond their term in office means nothing to them. Their concern is only for themselves and the short-term that exists between elections. As a result they rob from the future to hide the true conditions of the present. Those still unborn will be paying for their criminal economic charade. Economic Conditions So how bad is the economy? Michael Shedlock, “Mish” is among the more prolific as well as more incisive financial analysts on the web. His site is always worth reading, but a recent post is essential. To impress upon you the seriousness of the situation and to encourage you to read his post, I quote some of his points (anything in red is my emphasis): … we’re doing the same thing that led to the 2008 blowup — we’ve learned exactly nothing. In real terms our GDP is in fact contracting by about $500 billion a quarter, after adjusting for debt expansion — that’s $2 trillion a year, more or less. In terms of debt and inflation, Mish determined that: … we’re contracting in purchasing power adjusted for new debt at more than 10% over the last four quarters. The debt to GDP ratio reached the highest in history just before the 2008 collapse. It remains in this record territory and is just as unsustainable now as it was in 2008: … the absolute level of debt to GDP, however, refuses to go under 350%; it has now started rising again but is entirely coming from two sectors — business credit and the Federal Government. Consumers reduced their debt levels, although probably not enough. They are still strapped with more debt than many can properly service. Consumption, as a result, has dampened as more income goes to debt service and less debt is added. That appears to be a condition that should prevail for several more years. Remember, the announced reason for the loose Fed policy was to drive consumption. As Mish observed: … this so-called “expansion” driven by ZIRP and deficits has a use-by date that has expired and we are now trying to evade the fact that the fish is well into the “stinks up the joint” stage. Obviously, it has not worked. Read Mish’s article to view most of his observations in chart format. Desperate Government Although Mish does not make this point, I believe it is a relevant one. Government continues to borrow and spend in an effort to hide the truly rotten condition of the economy. This action was begun under the guise of stimulating a recovery. It is obvious that it has not worked. It was obvious to some that it could never work. Despite its obvious failure, theft from future generations continues. There are two main reasons for this, in my opinion: To hide from the people how desperate the economic situation truly is. To enable government to continue its current level of spending which cannot be funded via tax revenues or real market Treasury sales (certainly not at current interest rates; perhaps at no reasonable interest rate). Government has exhausted its faux solutions. Nothing they do, except reduce spending, can help the economy. Reducing spending means another Great Depression and the exposure of the economic scam they have been running. Thus, spending will likely continue as will the Federal Reserve enabling, euphemistically called quantitative easing. A Fly In The Ointment There is a limit on how long the fraud continues. The government is in what is known as a debt death spiral. They must borrow money to repay prior debts. It is as if they are using their Visa Card to make an American Express payment. The rate of new debt additions dwarf any rate of growth the economy can possibly achieve. The end is certain, only its timing is unknown. Once interest rates begin to rise, and they will, it is game over. Short-term Treasury interest rates are normally 3% with no inflation. In an inflationary environment, a premium for expected inflation is tacked on to that 3%. Under today’s conditions, ST Treasuries could easily rise to 6 – 9%. The low end of the range represents a rise in rates of more than 5.5%. If the debt outstanding, most of which is short-term, is $17 Trillion, that would been a rise in interest expense of close to a Trillion dollars annually. That would be added to deficits which are expected to be around a Trillion dollars per year. The high end of the range would produce a deficit in excess of $2.5 Trillion per year. At the low end of the interest rate range, deficits would exceed more than 10% of GDP, putting us right up there with the sick European countries. At the high end, we would be like Greece without its glorious history and climate. It gets worse than the above numbers convey. When interest rates rise, the economy will contract and probably severely. Then cries for more stimulus would be heard. An additional Trillion dollars or so would likely be added to the deficit, although many would want multiples of that. In either case, we become Greece on steroids. Another Fly In The Ointment There are those who say the US government cannot go broke because it has a printing press. They argue that the level of deficits don’t matter because the US can just print more money. Monetary fraud, which this is, also has a limit. Only paper and ink limit the amount of currency the government can print. However, government does not control the value of the money which is determined by the public. Printing money depreciates the value of money (otherwise known as inflation). Market forces (economic actors) determine what this value is via supply and demand interaction. When money is expected to buy less tomorrow than it does today, people will spend it sooner. This drives inflation even higher. Ludwig von Mises described this end phase as a crack-up boom: Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump. The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. Mises spent much of his life studying money, the business cycle and inflation. He correctly identified the choice that now stands before our political class (my emboldening added): There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved. In the event of the total catastrophe, savings and fixed income become worthless. The middle class of a country is wiped out in terms of wealth. Poverty abounds except at the top where those with large wealth and insider information are able to protect themselves and enhance their real wealth. Inflation does not destroy wealth; it merely redistributes it. How Does It End? Neither ending is attractive, but opportunities for one or the other have been squandered. Sadly, the decision as to which route is taken is in the hands of our criminal political class. Their behavior suggests that they will do whatever it takes to continue the charade. They want to maintain their scam for as long as they can.. If they are successful, a crack-up boom is coming. History shows this ending in most all countries in our condition.

Copper, the Nikkei, the Yen in reverse, silver... AFTER Alan Greenspan gave them the playbook (Credit & Debt Manipulation 101), now Ben Bernanke and global inflators everywhere have taken the ball and run with it in new, innovative and levered up ways, writes Gary Tanashian in his Notes from the Rabbit Hole. Actually it's a game of Whack-a-Mole and they play it well, these inflating moles. The minute you think you're going to drop the hammer on one of their heads, he's gone and another one pops up elsewhere. So how can we follow all the data points that hands-on, manipulative policy has introduced and forecast conclusions with accuracy? The answer is that it is difficult in the short-term, but in the long-term we are all dead anyway, so we might as well use some inflationary bubbles of the past as a road map to what may be ahead. There are currently several bubbles (and one anti-bubble: gold) in play over varying time frames. These bubbles are the direct result of policy actions. Last weekend we reviewed the bubble in Japan's Nikkei in relation to its policy-induced crashing of the Yen and then last week wouldn't you know that the Yen caught a bid and the Nikkei suffered an incredibly bearish day? That was the first impulsive hit. The Nikkei could well go back up to test the highs, but something seemed to kick off over there in the Land of the Rising Sun. Don't fall for calming talk across global markets. It appears the first big moneyed interests got the hell out of the Yen bear trade and the Nikkei bubble trade last week. The Nikkei is copper 2006, crude oil 2008, silver 2011, etc. These markets were hockey sticks with the blade pointing up... They reflected hot money that has been given permission to speculate and drive up prices. But this hot money, newly created and pumped into the financial system does little for the real economy. It transforms debt into vehicles for speculation within the financial sphere, with the first users being the most privileged with respect to coming policy. In other words, the financial entities that put the money to work first and most profitably have been given the playbook ahead of time. Let's be realistic about this. That right there disqualifies Bernanke and Co. from any respect in my book. The system is stacked and speaking as an American, is bad for most of America. You may have similar or contrary feelings about the policy of your country or union, depending on where you live. Never before have the few rich been so targeted for further enrichment and the many of modest or little means targeted for further degradation. Meanwhile the hype is that we have a Socialist in the White House. Well, why do you think he is there and why do you think his agenda is so popular? I guess this is how a screwed up society redistributes some of what its corrupted components have horded The entire post-2000 play has been to financialize the economy to keep it going. To financialize something, you need money. To print money you need to put up more credit and so on and so forth. We know that under Greenspan the US had a convenient partner in China, as the US printed up a bubble in commercial credit and sent the consumer out there, credit card in hand to buy up all sorts of cheaply made goods. This helped build China's infrastructure and pump commodities. That was the play; as inflation 'got out there' it took advantage of the 'China build out' hype and pumped strategic commodities. This time around, a different mole has popped up and it is not one that the commodity gurus and gold bugs favor as it leverages the deflationary pressures in many parts of the world, and contains commodity prices. But the money has to go somewhere and a stock market with a Goldilocks story of 'just right' economic and policy conditions carries the day. So in our twisted macro scenario, good is bad. Mediocre is good and bad will still be bad after the current phase passes. Last week the economic numbers were biased positive and the Fed was on full Jawbone with Huey, Dooey and Louie speaking and the last FOMC minutes were released to boot. An over bought market running with the cult of easy money had a little case of the jitters. That is because the financialized markets do not give a damn about what is good for their host countries or the average person. They are fixated on big mouth bankers in high places who feel they have the right to use monetary magic tricks to direct how the rest of us proceed with our financial affairs. They have withdrawn our free market in favor of something they manage as if it were just another government agency overseeing a given area for the public good. It is FrankenMarket and it does not want what is good for America; it wants what is good for it. At the end of last week some inconveniently strong economic data came in on the heels of the jawboning Fed. Weekly jobless claims were down, home prices were up strongly with sales, and durable goods order reversed a big chunk of the previous month's drop. This all paints a picture that puts the Fed in a position to have to answer the question "why are you taking yield from fixed income investors to reward risk takers if with the Dow above 15,000 and the economy strengthening?" The answer is that something of mocked up origins must be defended to the hilt because it was not born of natural means and its Achilles Heel lurks somewhere within the layers of leverage that has brought us to this point in a confusing macro backdrop. US manufacturing activity for instance is just right. It is going nowhere but is not declining impulsively. A question we might want to ask right here and now is how long will it keep up its lame growth if the Dollar keeps appreciating? A hard rise in the US Dollar would croak the manufacturing sector. What happens then, a return to the China labor outsource arbitrage gimmick? That is waning as China's underpaid workers are slowly being converted to consumers with financial means. Here are our hockey stick bubbles du jour... Japan's Nikkei is a hockey stick. Japan's Yen is a hockey stick flipped over. Copper was once a hockey stick and has gone nowhere – subject to massive ups and downs, compliments of the financialized economy – since. Crude oil was a hockey stick that got members of congress squabbling and hand wringing about how to control the evil speculators that drove the price up to such debilitating highs. Remember? The bubble was actually compliments of Alan Greenspan's out of control credit policies, which I'll bet not one of those bozos sought to blame back then. And finally, we have the silver hockey stick, which formed a huge blade right into the conclusion of the last inflationary phase and commodity blowout. Bottom line on the games of whack-a-mole and bubble hockey? With the modern way of doing things, money is created and set free to go where it will go within the structure of the global economy. Sometimes its inflationary effects will pop up here and sometimes there. Early last decade it was freed up to create a commodity bubble that attached itself to the 'China Story', which was itself a manifestation of the US-China cooperative experiment in credit creation and consumer spending. There is Paul Krugman; he of the respectable platforms at the New York Times and Princeton and there has been Larry Summers; he of the respectable platforms at the US Treasury and Harvard. There have been a thousand others throwing their hats into the ring, speaking intelligently as if they are anything but promoters of an unproductive system that issues credit and creates new money out of nowhere toward its ends. It is not a natural economic path. There will be resolution to the hockey stick forming in the Nikkei. The US and other global markets that have launched rallies through inflationary monetary policy along with the Yen's fall should be affected as well. As we have shown each week, there has been a great wall of sentiment-fueled rationalization erected as to why the new bull atmosphere is real and sustainable. Did the first brick pop out of that wall last week with the Nikkei's 7%-plus decline in a day? The "anti-bubble" is the hockey stick pointing downward toward hell that is the current view of most market participants toward an anchor to honest monetary systems. Namely gold. Think about this for a moment; creators of paper and digital money (i.e. credit) have got the global investment community eating out of their hands in service to asset speculation (in this case, equities) and in utter revulsion toward the anti-market to all of this chicanery, gold.