The US Federal Reserve, which has been the life-support for the U.S. economy (for better or for worse), is finally discovering that its policies and theories don’t actually apply [in] the real world….This means that the primary prop underneath the U.S. stock market and financial system (namely Fed intervention) is slowly being removed. What follows will not be pretty and smart investors should be taking steps now to prepare in advance. Words: 350
So says Graham Summers (www.gainspainscapital.com) in edited excerpts from his original article*.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Summers goes on to say, in part:
The U.S. economy is showing major signs of deterioration:
- The jobs data, even after the BLS massages it, is awful,
- 1Qtr 2012 GDP estimates have been revised lower,
- two consecutive Philly Fed surveys have been bad,
- the average workweek has shortened for two months now,
- there has been a drop in the Empire Manufacturing index and
- many major companies have cut their forecasts for 2012.
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In simple terms, we’re getting many signals that the U.S. economy may in fact be slipping into a second recession in the context of a greater DE-pression and once it’s confirmed…(we already are, but it won’t be confirmed by Government officials until after the US Presidential election) then this will mark:
- The first time in the post-war period that the US has entered a recession in which industrial production failed to exceed its previous peak:
- The first time the U.S. entered a recession when average unemployment duration was already at record highs:
- A time where the civilian employment-population ratio is at levels not seen since the ’70-’80 (meaning that fewer and fewer Americans are in the workforce).
- A recession in which food stamp usage is already near record highs:
To make matters worse, as the Wall Street Journal reports, “Fed officials have been frustrated in the past year that low interest rate policies haven’t reached enough Americans to spur stronger growth, the way economics textbooks say low rates should. By reducing interest rates–the cost of credit–the Fed encourages household spending, business investment and hiring, in addition to reducing the burden of past debts but the economy hasn’t been working according to script.”
*http://gainspainscapital.com/?p=1873 (To access the above article please copy the URL and paste it into your browser.)
Editor’s Note: The above article may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
Econintersect has been playing with an economic index based on the world as seen by Joe Sixpack. For lack of a final name, we have used a development tag of “Joe’s Index” which is based on Joe’s real income and the change in his home value, which, to various degrees, Joe sees as income (and/or wealth) gain or loss. Joe’s Index is indicating Joe Sixpack is coming back to the consumption trough. [Let us explain why we have come to that conclusion.] Words: 380
The permabears are coming out the woodwork. Bad, scary articles and news seem to attract more attention and eyeballs than good news articles or those that offer a counterbalanced view. Whenever someone gets interviewed on US TV, it’s for someone proclaiming the end of the expansion – you never see them interviewing someone offering a counter view of a more positive nature. This article gives you a balanced, opposing view to the tiresome popular perma-bear consensus so that you can make your own balanced decision. [As for our own conclusion, we don’t see imminent recession. Here’s why.] Words: 1315
Why read: It is foolish not to consider the possibility of depression, particularly in the face of the preponderance of commentary over the past many months that rampant inflation is on the horizon. [Here I review, analyze and comment on one such article on that possibility.] Words: 697
This past week we received the latest PMI readings for the world as a whole (48.9), the eurozone (46.4), and for 30+ individual countries [Read: Telling It Like It Is: Latest PMIs Reveal Truth About the Global Economy]…and the latest numbers signal contraction and even more so when adjusted to reflect the concentration of GDP by countries/region. [Let me explain.] Words: 600
I am amused by the Shadow Weekly Leading Index Project which claims the probability of recession is 31%. I think it is much higher….Let’s take a look at why. Words: 530
“The most important issue in this year’s election is the economy. Unfortunately, this topic has now been “politicized,” which means that you can’t talk about it without being instantly cheered or jeered by fans of each respective political team…[the truth of the matter, however, is that] the economy is much more important than this year’s election or either political team….The first step is getting past the political blame-game and understanding what’s wrong…. Let’s go to the charts.”
The U.S. economic recovery has been weak and the looming fiscal cliff threatens to act as a further drag on the economy. Europe is imploding with the chances of a ‘Grexit’ increasing, and Spain’s economy deteriorating and risking contagion. David Rosenberg looks at the state of the U.S. and global economy via 51 depressing charts.
The deficits aren’t going to stop anytime soon. The debt mountain will keep growing…Obviously, the debt can’t keep growing faster than the economy forever, but the people in charge do seem determined to find out just how far they can push things….The only way for the politicians to buy time will be through price inflation, to reduce the real burden of the debt, and whether they admit it or not, inflation is what they will be praying for….[and] the Federal Reserve will hear their prayer. When will the economy reach the wall toward which it is headed? Not soon, I believe, but in the meantime there will be plenty of excitement. [Let me explain what I expect to unfold.] Words: 1833