by Brandon Smith from Alt-Market
Recently I was asked to give a presentation on the current state of
the global economy to a local group of concerned citizens here in
Northwest Montana. I was happy to oblige but when composing my bullet
points I realized that, in truth, there were no legitimate economic
numbers to examine anymore. You see, financial analysts have
traditionally used multiple indicators of employment, profit, savings,
credit, supply, and demand in their efforts to divine the often obscured
facts of our financial system.
The
problem is, nearly every index we used in the past, every measure of
capital flow and industry, is absolutely useless today.
We now live in an entirely fabricated fiscal environment. Every
aspect of it is filtered, muddled, molded, and manipulated before our
eyes ever get to study the stats. The metaphor may be overused, but our
economic system has become an absolute “matrix”. All that we see and
hear has been homogenized and all truth has been sterilized away. There
is nothing to investigate anymore. It is like awaking in the middle of
a vast and hallucinatory live action theater production, complete with
performers, props, and sound effects, all designed to confuse us and do
us harm. In the end, trying to make sense of the illusion is a waste of
time. All we can do is look for the exits…
There is some tangible reality out there, but it is difficult to
find, and there are few if any mainstream numbers to verify. One has to
remember always that the fundamental world of money and trade revolves
around real people and real circumstances. No matter how corrupt our
economic system is, as long as there are human beings, there will always
be supply and demand that cannot be hidden. We have to look past the
“official numbers” and look at the roots of trade. Where has demand
fallen? Where has supply diminished? Where are the tangible goods and
needs and how have they changed?
Let’s first start with the mainstream version of our system, looking
at each aspect of the economy that no longer represents the truth of our
situation…
Employment, Savings, And Debt
Much of this information is old news to those of us in the Liberty
Movement, who tracked the progress of the global collapse long before
the general public even knew of its existence. However, it is useful to
take a step back and look at the basic picture every once in a while.
According to numbers issued by the Department of Labor, weekly
unemployment reports have dropped to a five year low, and the overall
employment rate is holding at 7.9%. This would seem to be a vast
improvement over the dreadful bloodletting in the system only a few
years ago. Has the private Federal Reserve and the Obama Administration
really done it? Have they turned back the tide on the greatest fiscal
crisis the U.S. has seen since the Depression?
No. They haven’t.
They have only changed how the data is disseminated to the public. In
order to understand how the employment statistics con is being
engineered, it is important to understand the difference between
“Adjusted” and “Unadjusted” numbers.
Labor Department data is “seasonally adjusted”, using a series of
statistical assumptions including something called “Trend Cycle
Analysis”. Trend Cycle Analysis is, basically, a sham, but a sham put
together in a very complex and confusing manner. If you ask a
mainstream economist what it is, you’ll likely get a three hour long
dissertation filled with financial babble and very little concrete
explanation. So let me break it down as simply as I can…
Imagine that you are going to estimate how much profit you plan to
make in a particular month, but you don’t just consider your current pay
rate and pop it into a calculator; you also throw in the possibility of
a few pay raises, an inheritance from a grandma who might kick the
bucket, and, your exaggerated expectations of the entire year’s profit
on top of that. You may also take into account future bad weather, a
mugging, a nuclear war….whatever. All hypothetical situations not based
in reality. Basically, you decide that a particular trend in your
income is inevitable, then, mold your statistical analysis around that
assumption.
When your real profit numbers come in (the unadjusted numbers) and
they do not meet your expectations, you simply change them according to
what you believe SHOULD have happened. If you insist that your profits
are going to go up for the year, and they go down for a couple months
instead, you change the variables you use to calculate the statistical
average so that the results match your expectations, assuming that it
will all balance out in the end.
Now, this sounds utterly insane for the common person out there
trying to make a living. If you ran your household this way, without
accepting the cold hard unadjusted numbers in front of you, you’d find
yourself broke and on the street in no time. Unfortunately this is
EXACTLY how our government handles most financial data; by coming to a
final conclusion before hand, and then forcing the numbers to fit that
conclusion.
This is why in February of 2013, “adjusted” first week unemployment
rate was reported at 366,000 – a 5000 person drop from the week before.
A seeming improvement in the trend. But, unadjusted numbers came in at
386,176 – a 16,000 person spike from the week before. When one
examines real unemployment numbers, he finds that the divergence between
the adjusted and unadjusted statistics is growing larger with each
passing quarter. That is to say, the contradiction is becoming so
blatant between the hard numbers and the Labor Department’s fantasy
numbers that one must question whether or not the government is lying to
us outright about the state of the economy (hint – they are lying).
These same methods are used by the government to calculate progress in the housing market, disposable income, etc.
The claim of “recovery” in the jobs market simply doesn’t jive with
other indicators, like 2012 Christmas retail, which had the worst
showing since the crash in 2008 (and these are still mainstream
numbers!):
http://www.foxnews.com/us/2012/12/26/us-holiday-retail-sales-growth-weak…
Average household savings continue to scrape the bottom of the
barrel, indicating that the public is not spending or withholding cash.
They are simply broke:
And the overall GDP of the U.S. contracted in the fourth quarter of
2012 for the first time in three years (again, according to official
numbers, meaning the reality is much worse):
http://money.cnn.com/2013/01/30/news/economy/gdp-report/index.html
The downturn in consumption and industry also seems to be supported
by the Baltic Dry Index, a measure of global shipping and rates. The
BDI has fallen to near historic lows THREE TIMES in the past year, which
to my knowledge, has never happened before. In the past, the BDI has
been a strong prophetic indicator of future market volatility. Usually,
around a year after a severe decline in the index, a dangerous economic
event takes place. The BDI made its first sharp drop to all time lows
at the end of January 2012, exactly a year ago.
U.S. household debt was recently reported to have fallen to a 29 year
low, but the ratio used by the Federal Reserve applies a statistic for
disposable income that is derived from the Trend Cycle boondoggle
method. While markets cheer, the truth is, the only reason household
debt obligations have fallen at all is because bank lending and credit
issuance remains frozen. Consumer debt falls when there is no money to
borrow. In fact, the Federal Reserve actually pays large banks NOT to
lend to the public; an activity which was exposed by Dennis Kucinich in
2009 on the House Committee on Oversight and Government Reform. An
activity that continued through 2012:
http://economix.blogs.nytimes.com/2012/07/31/the-fed-should-stop-paying-banks-not-to-lend/
Keep in mind, one of the primary arguments the Federal Reserve used
when promoting the bailout concept was that it would “free up credit
markets” so that lending could pick up again and fuel a recovery, and
yet, at the same time, they were paying banks to NOT lend.
Meanwhile, the supposed job recovery has produced an astonishing
increase in welfare recipients in the U.S., including a record 46
million Americans on foodstamps (approximately 15% of our population):
http://www.nbcnews.com/business/report-15-americans-food-stamps-980690
If we are to apply any “trend” to our calculations on overall
economic health, then we should include the extreme level of government
handouts, and poverty levels which are now at all time highs. The facts
are undeniable; the number of people who have much less than they did
in 2008 has grown. How then could the U.S. be considered “in recovery”?
National Debt And The Fiat Lie
With the Dow Index hovering near highs of 14,000 our system truly
looks to be on a rocket ship to pre-2008 money market bliss. In a mere
five years we have returned to equity spikes that stagger the mind and
the wallet. At least, that’s how it all appears…
What needs to be taken into account, though, is the amount of fiat
money being created by the Federal Reserve, and how much of that printed
pixie dust currency is fueling our magical flight to Neverland. Since
2008, our official national debt has increased from $10 trillion to
$16.4 trillion, and some estimate $17 trillion to $18 trillion by the
end of 2013 (unless, of course, a collapse occurs). Which means our
national debt, which took decades to reach the $10 trillion mark, will
have nearly doubled in only six years!
So, what has a doubling of our national debt in such a short span of
time bought us? Well, credit markets remain frozen, property markets
remain stagnant, poverty is at historic levels, welfare recipients are
at epic highs, and consumer activity and GDP is back at 2008 lows.
Where did all that printed money go? Where was it spent? To answer
that question, we only need to find what area of the economy has seen
the most positive (or fantastical) activity. What sector is seeing a
massive boost while the rest tumbles?
I suggest that a large portion of QE1 through QE3 has gone to prop up
the stock market, and nothing else. I suggest that American taxpayers
are fronting the bill for the equities bonanza we see today. I suggest
that the Dow is being used as a Red Herring to distract the populous for
as long as possible while real assets are being snapped up and hoarded
by international banks and foreign entities. I suggest that we are
being leached dry and that the parasites are almost ready to move on…
When will it all end? Perhaps sooner than many people think. The
decision by D.C. to delay talks on the so-called “Fiscal Cliff” until
March may not be coincidence. Extensive cuts in federal spending are
absolutely necessary and cannot be dismissed forever, but, because the
last vestiges of our system that still operate do so through government
money, such cuts will cause immediate damage to the economy, including
possible default and dollar devaluation. Refusal to make cuts will
result in credit downgrades, currency inflation, and a loss of the
greenback’s world reserve status. There is no “right” way out of this
quandary.
When this collapse is initiated, it would certainly behoove all
parties involved, including central banks, international banks, and
criminal politicians, to have a scapegoat handy for the citizenry to
direct their rage at.
Event Horizon Economics
An “Event Horizon” in physics is a moment or singularity in spacetime
at which a gravitational pull becomes so great that there is no way to
escape it. It is a point of no return. I believe America’s economy has
reached its own Event Horizon. Our system is now entirely fiat driven,
with very little or no true economy left. Without constant injections
from the Fed, and perpetually low interest rates, the country would
implode tomorrow. This is not recovery. Actually, I’m not sure what to
call it.
Today, independent economic analysts cannot look to the numbers to
determine future trends. Most are fake, and the rest are ugly, and I’m
not sure much else can be said in their regard. Instead, we must now
look to events, rather than statistics, because our country has been
maneuvered into a position of utmost frailty. Like an avalanche shelf
waiting for that perfectly timed disturbance to trigger its roaring
collapse. All that is needed is a macro-crisis, and it is no great feat
for such a thing to be created in our tension filled global
environment.
War in Syria and Iran leading to a tripling of energy prices.
Sanctions and strife with North Korea leading to Chinese economic
retribution. Conflict between China and Japan, again leading to Chinese
economic warfare and perhaps real warfare. An opportune “cyber attack”
which could be used as an excuse for a market crash and even an
internet shutdown. A “political impasse” between Reps and Dems which
leads to a default of U.S. credit. Any one of these catastrophes could
easily occur (with a little nudge from some well placed people) and feed
a wider global tragedy. The important thing to remember is that while
this event will be blamed for the breakdown, it was international banks,
the Federal Reserve, and elements of our own government that made the
domino effect possible. They put the pieces in place. The act that
knocks them over is secondary.
I have spent the past seven years writing about “potential” threats
to our overall system, but these dangers were always just beyond our
sight. Just around the corner. Today, it is as if the journey is over,
and all those threats have materialized right before my eyes as real,
and imminent. I am watching that which I warned of come to fruition,
and this is certainly not a pleasant thing. What is valuable, though,
is what we have all done in the Liberty Movement with the time that we
had. From when I began writing for the movement until now, I have seen
an overwhelming increase in public awareness. It may not be obvious to
newer activists, but it is there all the same. While we still face
disparaging odds, and millions upon millions of oblivious bystanders,
there is, amidst these darker moments, a steadfast community of free men
and women forming. I have full faith in the future. Much more so than
I ever did before. Our economy may be detached from reality, but our
endeavors as individuals will not be. Our resolve will be the great
game changer. Not fiscal calamity.