WASHINGTON, January 26, 2013 ― Housing sales are up, unemployment is down, and except for Apple, the stock market is doing great. So what’s the problem? There are a lot of factors affecting these yardsticks of our economy that you most likely haven’t heard about.
As fragile as the nations economy is, many states are in even worse shape. Illinois was just downgraded by Standard & Poor’s to tie California for the worst credit rating in the country. Like California, Illinois is tightly controlled by democrats, taxed very heavily, and is now having trouble squeezing its businesses and citizens for the $96.8 billion it needs to pay the pensions of the government officials that drove it to its knees to begin with. Ingrates.
You are probably aware that by any normal standard, the credit rating of the US would be in junk-bond territory. Last year, within two weeks of Standard & Poor’s announcement of their downgrade of our insolvent nation from 100 percent risk free, to only 99 percent risk free, the SEC (Securities Exchange Commission) and the Justice Department announced that S&P was under investigation. While that has been enough to cow the other major ratings agencies into toeing the “yes, I can see the emperor’s clothes just fine” line, there was another, much more reputable agency that was actually telling the truth.
Egan-Jones downgraded the US credit rating three times in 18 months. This is primarily due to the lack of fiscal responsibility in Washington, which is incapable of reducing the annual deficit, let alone paying the debt. Without creating money ex nihilo, paying the debt is a mathematical impossibility anyhow, since the debt exceeds our entire money supply. If we paid every dollar in existence, we would still be short of covering the debt by a long shot, and paying the interest requires that we borrow more money into existence … plus interest of course. This looks like a ponzi scheme by another name.
Within two weeks of their second downgrade, the SEC went after Egan-Jones as well. That investigation has been concluded, and Egan-Jones has been banned from rating US government debt for the next 18 months.
The SEC’s decision to investigate firms that downgrade U.S. government debt carries with it the aroma of fraud and desperation.
Housing recovery data, like other economic data, have been ‘adjusted’ to smooth out volatility. December 2012 new home sales, seasonally adjusted annualized, had a few adjustments; from the 385,000 expected, up to 398,000, then back to 369,000, showing a still impressive gain. The actual number of homes sold in December was 26,000, up from 24,000 the previous December.
Of those 24,000 homes sold, two thousand were in the northeast, with over half of them being in the $750,000 and higher category. One of these was a $32.5 million mansion Goldman Sachs CEO Lloyd Blankfein purchased in the Hamptons, an area that had a record-breaking $771 million dollars in home purchases in the fourth quarter of 2012. That $85 billion a month the fed is printing has to go somewhere.
Thanks to the exemption from international money laundering regulations that the NAR (National association of Realtors) received from the Obama Administration, hundreds of billions of dollars from suspected Chinese mafia cartels are being used to snap up ultra-luxury homes as well.
The unemployment statistics look good, until you realize that the percentage of Americans who are working, or looking for work is at an all time low - unemployment is falling because people are abandoning the search for jobs. There nugget of good news hidden in there; unemployment will hit the rate of 0.0 percent, just as soon as we can squeeze the labor force participation rate down to 58.5 percent. Obama will be delighted to be the first modern president to achieve 0 percent unemployment.
In other news, Germany wants 300 tons of its gold back from the New York Fed and 374 tons back from Paris. Half of its gold reserves will remain in New York and London, while half will be stored in Germany. German concerns about auditing their gold holdings abroad are causing those who pay attention to this to buy gold. Those crazy conspiracy theorists who claim that we have no gold left in Fort Knox look a little less crazy these days.
The stock market is looking riskier than it did a week ago. You may have taken a huge hit from Apple’s nearly $100 price drop in two days. If you own a 401K or mutual funds, you almost certainly own some AAPL. Apple aside, the stock market appears to be very bullish (buy and hold), but there are some weird things going on here, too.
Billions of dollars are exiting domestic equities every week. The big banks are saving so much money not paying seniors interest on their savings, they are able to prop up the stock market just fine. So not only are they exiting equities, they are exiting bank accounts as well, to the tune of well over $100 billion in December of 2012 alone.
This may not sound like all that much, but given the nature of fractional reserve banking, it has a significant impact on the money supply. As most money that you think you have is nothing more than a blip on a screen, pulling out massive amounts of hard cash has the fed very worried. Perhaps the withdrawals are due to the reduction in the amount insured, from $250,000 down to $100,000 at the first of the year. Or perhaps it is because the only way the FDIC can come close to covering the trillions of dollars they insure is for the Fed to print it, seeing as how they only have about $500 billion available, using “extraordinary measures” to acquire it. They may have just used those measures to cover the debt ceiling and have absolutely nothing to cover any bank failures.
In a systemic bank run, they would gladly fulfill their obligation to get you your cash, but they of course cannot guarantee what that cash will be able to buy.
This article is the copyrighted property of the writer and Communities @ WashingtonTimes.com. Written permission must be obtained before reprint in online or print media. REPRINTING TWTC CONTENT WITHOUT PERMISSION AND/OR PAYMENT IS THEFT AND PUNISHABLE BY LAW.