I am beginning to feel a bit like one of the French unfortunates stumbling through the fog in Ardennes, circa 1914. Except that, instead of Germans full of deadly intent coming at me in the gloomy forest, it is a flock of black swans.
As it was for the French in the Ardennes, the number of problems – then Germans, now black swans – is becoming overwhelming.
Consider just a little of what we as investors, and as individuals looking forward to retirement in accommodations more commodious than a shipping box, must contend with:
Regardless, with the crossroads for hard choices now behind us, the global economy finds itself at the top of a long hill… with no brakes.
From here on, it will increasingly be every nation for itself – meaning a return to competitive currency devaluations and, in time, exchange and even trade controls.
And we will see a return of the Fed to the markets. On that topic, I will once again trot out a chart from an article by Bud Conrad that ran in The Casey Report a couple of years back.
I do so because it shows what I think is a very strong corollary between what occurred in Japan after its financial bubble burst – and what is now going on here in the U.S. (and elsewhere). As you can see, as a direct result of the Japanese Central Bank engaging in quantitative easing, the Japanese stock market bounced back strongly. But then, when the quantitative easing stopped, the market quickly gave back all its gains.
(Click on image to enlarge)
If I had the time and the resources to whip up a chart overlaying the quantitative easing here in the U.S. of late versus the equity markets, I would. But I don’t, and so will delve into that fount of all information – the Internet – and grab a chart constructed by someone else (in this case, Doug Oest, managing partner of Marquette Associates – thanks, Doug!)
As one can readily see, the Japanese experience is indeed a corollary to what’s happened here, with QE pushing the stock market higher. Conversely, until the Fed comes back in, equities could be in for a rough ride. Likewise, when the Fed returns with the next round of QE, stocks could put in a very nice rally.
(Click on image to enlarge)
Simply put, too much of a good thing is too much of a good thing. And make no mistake, the decades of operating under a fiat monetary system have been a very good thing for the political classes and their pandering cronies.
Those good times are coming to an end.
This just in from our own Kevin Brekke, writing from the safety of his office in the strong currency bastion of Switzerland…
Well, the highly anticipated Employment Situation report for July from the BLS held few surprises. But then, the absence of any surprise is a surprise. In light of all the spending from the feds, we should expect to see some improvement. Yet the numbers look essentially unchanged when compared to July 2010.
In July 2010 there were 15,137,000 unemployed; in July 2011 there were 14,428,000.
The average duration of unemployment went from 32.6 weeks in July 2010 to 39 weeks in July 2011. The number of chronically unemployed continues to rise.
The percent distribution of the unemployed (less than 5 weeks; 5-14 weeks; 15-26 weeks; 27 weeks and over) also remained about unchanged year over year.
The “27 weeks and over” category represents 43.1% of the unemployed, or just over 6.2 million jobless. This segment of the unemployed has exhausted its 26 weeks of state benefits and is now in the federal emergency unemployment systems. That federal system is scheduled to stop accepting new entrants in early 2012, meaning that once state benefits are used that’s it: No more weekly checks. And absent an extension to the current 99-week limit on receiving unemployment benefits, hundreds of thousands will systematically see their $300/wk (national average) checks stop arriving over the next few months.
All told, nothing good to report about here. Other than a token drop in the official unemployment rate to 9.1%, joblessness will continue as a drag on the economy.
Earlier this week I showed up at a follow-up appointment with a doctor. As part of the checking-in process, the receptionist reviewed my files and asked, fingers poised expectantly over her keyboard, “And what was the highest educational level you have achieved?”
“I asked, what was the highest educational level you achieved?”
“That’s absolutely none of your business,” I responded. “Why would you ask such a question?”
“The government requires us to ask it; I don’t know why.”
“Well, it’s none of the government’s business either.”
“I’m sorry, sir; it’s just something we are told to ask.”
Now, I like to think of myself as a reasonably mellow person. But I don’t think I am alone in beginning to seriously resent the government’s intrusions in my personal business.
Hopefully an increasing number of people will begin to “just say no” when it comes to going along with this sort of nonsense.
During the budget debate NPR featured an op-ed from a recently retired TV reporter – a guy who gets paid for essentially the same reason Polly gets a cracker – commenting on those members of Congress who attempted to stop the government from raising the debt ceiling. In the view of this august personage, the Tea Party congressmen and others of their ilk were directly equivalent to the white racists who tried to block the repeal of Jim Crow laws back in the 1960s. He even went so far to mention them in the context of bus burnings and lynchings.
While his views might have been a tad on the extreme side – as in extremely ignorant and extremely leftist – I suspect that the majority of Americans agreed with him that the debt ceiling must be raised.
In the event that you know someone who is similarly ignorant of the basics of the debate just ended, here’s a very useful analogy from friend Jeff Berwick of the Dollar Vigilante blog:
Doctor: Uncle Sam, you’ve been drinking larger and larger amounts of alcohol every day since 1960. 1960 was the last year where you didn't drink. You are going to die if you keep this up.
Uncle Sam: I don’t want to die, Doc. Tell me what I need to do.
Doctor: Well, from 1960-1975 you weren’t too bad. You drank 3 or 4 beers per day but it was under control. You could have stopped if you wanted... you just didn’t. However, throughout the 80s it increased to about 5 or 6 per day and then by the 90s you were up to drinking 10 beers a day.
Uncle Sam: Yes, Doc, but remember 1999 and 2000? I slowed to only 5 or 6 beers per day again.
Doctor: Yes, but that was just for 2 years. Since then you’ve gotten completely out of control. You’ve increased every year since and then, since 2008 to now you’ve gone from 30 to 40 beers per day.
Uncle Sam: Ok Doc. It’s time to get serious. Here is what I’m going to do. I am now drinking 40 beers per day but in 2013 I will only drink 39.6. And in 2014 I will only drink 39.4 beers per day. By 2021 I will be down to 38 beers per day. Will that work?
Doctor: You’re in denial. And, you'll be lucky to make it to 2013 much less 2021.
Jeff’s right – the monetary system is coming unglued, and when it does there won’t be anything funny about it.
Which seems an appropriate time to drop in a plug for When Money Dies, our upcoming Casey Research Summit, being held in Phoenix, AZ Oct 1-3.
✓✓✓ Even though we have only mentioned it in passing so far, and we have been keeping the faculty under wraps, about half of the registrations are sold. There are some big developments in the works for this event (to be announced next week), and what looks to be one of our best faculties ever, so if you are interested in joining in I would sincerely suggest you sign up right away.
World Wow Web
As far along as the Internet has come, I suspect it will evolve and get more interesting with each passing day. SelfControlFreak is a pretty cool website. Click on any of the photos, and it will pull up another page with the same photo – then see what happens when you move your mouse over the photo, or click in it.
David Letterman’s Top Ten Reasons Why Golf Is Better Than Sex
#10... A below-par performance is considered damn good.
#9... You can stop in the middle and have a cheeseburger and a couple of beers.
#8... It’s much easier to find the sweet spot.
#7... Foursomes are encouraged.
#6... You can still make money doing it as a senior.
#5... Three times a day is possible.
#4... Your partner doesn’t hire a lawyer if you play with someone else.
#3... If you live in Florida, you can do it almost every day.
#2... You don’t have to cuddle with your partner when you’re finished.
And the NUMBER ONE reason why golf is better than sex:
When your equipment gets old you can replace it!
An old woman was sipping on a glass of wine while sitting on the patio with her husband when she said, “I love you so much, I don’t know how I could ever live without you.”
Somewhat taken aback, her husband asked, “Is that you or the wine talking?”
“It’s me, talking to the wine,” she replied.
An Idea for Debt Reduction!
Though I am including this in the Friday Funnies, I can assure you this is an actual story. Now, if the Demopublicans and Republicrats can’t (quickly) agree on this one-budget cutting initiative, then you know we are truly doomed.
Senators urge end to U.S. development aid to China
On Thursday August 4, 2011, 3:01 pm
WASHINGTON (AP) – A bipartisan group of senators is calling for an end to tens of millions of annual U.S. development aid to China, saying there are more needy countries than the world’s second-largest economy, which has trillions in foreign reserves.
The eight Democrats and four Republicans made their appeal Thursday to a Senate appropriations committee that must approve foreign aid funding for the fiscal year starting in October.
…They say since 2001, the U.S. has provided more than $275 million in direct assistance to China, such as for expanding Internet access and improving public transportation.
Moving right along…
The first of two items on the general topic of national defense, out of Bloomberg, is just another item for the evidence locker when the U.S. government goes on trial for squandering 200 years of accumulated wealth.
$35B Missile Defense Misses Bullet with Bullet
In tunnels under Fort Greely, Alaska, workers wearing hazmat suits and respirators are fighting to keep America safe from missile attack.
They are battling mold in corridors leading to six underground silos that house rockets for shooting down enemy warheads. The mold and leaking pipes mean the installation must be replaced this year as part of a $1.16 billion fix for the national missile defense shield, senior defense officials told Congress.
No one knows whether the $35 billion program would work. It has never been tested under conditions simulating a real attack by an intercontinental ballistic missile deploying sophisticated decoys and countermeasures. The system has flunked 7 of 15 more limited trials, yet remains exempted from normal Pentagon oversight and so far has been spared the cuts Congress is demanding in other areas of federal spending.
Okay, maybe I’m just getting overly cynical as I get older, but on reading this next headline I immediately decided I was going to stay at home on 9/11.
U.S. sees no credible threats before 9/11 anniversary
(Reuters) – There have been no credible or specific threats against the United States yet ahead of the tenth anniversary of the September 11 attacks, Homeland Security Secretary Janet Napolitano said Wednesday.
U.S. officials have been on high alert for possible plots to reprise in some form of the September 11, 2001 attacks in which al Qaeda operatives hijacked commercial airliners and crashed them into the World Trade Center and the Pentagon.
“We have no specific or credible threats involving the 9/11 anniversary to date,” she told reporters during a news conference on an unrelated subject.
Upcoming International Society for Individual Liberty (ISIL) Conference in Sicily
As many of you are aware, Casey Research has been involved with ISIL for some time – with Louis James on the ISIL board since 2002, and our organization sponsoring the CYCLE event (Casey Youth Conference for Liberty and Entrepreneurship) in Lithuania – the most recent of which had a record-breaking 200 students.
A number of dear readers have expressed interest in sending their own kids or grandkids to one of the ISIL events. You may be interested in ISIL’s next World Conference in Sicily, August 29-September 2. Check it out.
And with that, I will bid you farewell for the day, and the week by thanking you for reading, and for being a Casey Research subscriber.
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