The Economy Now: “Green Shoots” Herald Disaster

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Giordano Bruno

Neithercorp Press

Summer has a tendency to bring optimism, sometimes naive optimism, and this summer has been no exception.  Talk of “V-Shaped Recovery” and “green shoots” abound as the DOW churns out an impressive recovery in record time.  But, very few people are asking what most of us are thinking; “Does the recent rise on Wall Street actually represent an improvement on Mainstreet?”  All signs so far say no………..      

There are a number of reasons to doubt the validity of the recent stock market rally, the first being that no part of the real economy has substantially improved.  The Market is a psychological animal, and it is driven in large part by the high or low spirits of its investors.  What people “think” is happening in the economy becomes their illusory reality, at least until that reality is shattered by cold hard data.  So, let’s take a look at the data:

 

The Dollar

The Dollar has been crumbling since the 1970′s but the threat of inflationary collapse has never been greater than it is today.  Talking-head economists like to cite the “Trade Weighted” value of the dollar, which measures the value of our currency in international trade, and the fact that it rose at the beginning of this year.  What they neglect to mention is that this has nothing to do with the dollar being strong, and everything to do with other country’s currencies being just as weak as our own.  The tradition during recessions has always been to invest in the U.S. Dollar.  Old habits die hard, but it would seem now that investors across the world are realizing that the dollar is not safe.  In fact, the U.S. dollar is staring down the barrel at disaster, which is why the Trade Weighted Value of the greenback has once again resumed its downward spiral.  You can see this trend in the graph below:

In this graph, you can see the destruction of our currency over the past fifty years:

Adding to the problem, as recently reported by Bloomberg, the Federal Reserve has created $24 Trillion in the past 12 months alone!  This is more than double the amount of our national debt, which as of August, 2009, stands at $11 Trillion.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM

To this day, we have yet to learn where exactly all that money went, as the Fed continues to refuse disclosure of any recipients of OUR taxpayer funds.  In response, Ron Paul has put forward the Federal Reserve Transparency Act:  H.R. 1207, which will place the Fed under a full audit; something which has never occurred in the Fed’s history. 

http://www.govtrack.us/congress/bill.xpd?bill=h111-1207

H.R. 1207 has so far received incredible support from the House of Representatives with 282 co-sponsors and growing.

Currently, the legal cap on the amount of money the Government is allowed to borrow from the public and from foreign creditors remains at $12.1 Trillion.  This limit is quickly approaching if not already surpassed, which means the Treasury will once again attempt to raise the cap, making countries heavily invested in the dollar ever more nervous:

http://voices.washingtonpost.com/capitol-briefing/2009/08/national_debt_cap_will_need_to.html?wprss=capitol-briefing

And last but not least, Gold has become a force of reckoning in the market, now holding at around $950 an ounce!  Gold’s strength is directly related to the Dollar’s weakness.  Even though the COMEX is often manipulated by companies that issue Gold and Silver Bonds for supplies they don’t actually have, this no longer seems to be having the effect on gold value that it once did.  Less than a year ago at the end of 2008, mainstream market jockeys decreed the “end of the gold run” when the value dropped for a short period towards $700 an ounce, and pleaded with investors to get out of gold as fast as possible.  They didn’t take into account the panic and fluctuations involved when people finally realize they are in a recession.  Gold’s latest resurgence has all the characteristics not of a top, but a continuous steady climb, perhaps to $2000 an ounce or more.          

Any “expert” that has witnessed these trends and still shrugs off the possible threat of Hyperinflation is not to be taken seriously.  The days of blind faith in the invincibility of the U.S. Dollar are numbered, although it appears that many mainstream economists will hold on to the bitter end while the house of cards disintegrates.  Think back over the past two years or so and remember what you were told by the so called experts on the economy.  Can you think of a single instance so far in which they were right?  I certainly can’t………..

BRIC And The “New World Currency”    

Another very important development in the past six months has been the statements made by BRIC, an economic coalition between Brazil, Russia, India, and China.  BRIC has made it quite clear on several occasions that the U.S. Dollar is soon to be out of the picture, as China calls for a new world reserve currency:

http://www.presstv.ir/detail.aspx?id=99154&sectionid=3510213

http://www.bloomberg.com/apps/news?pid=20601087&sid=aQ.zWVPnOYYg

It is anticipated by some economists that the BRIC nations will make this demand much more concrete at the next G20 meeting in Pittsburgh, PA on Sept. 24^th and 25^th.

And what will the U.S. Dollar be replaced with for international trade?  The IMF already has a new currency ready, called “Special Drawing Rights” or SDR’s.  SDR’s have been around since the 1970’s and were used by the IMF to manipulate countries, including the U.S., to stop using physical Gold as the standard trade mechanism.  Now, the IMF has just announced that they will be printing SDR’s without a cap for the first time in the currency’s history.  Meaning, they are creating SDR’s en masse to replace international reserves of the U.S. Dollar:

http://www.bloomberg.com/apps/news?pid=20601087&sid=ankFTAhAUk68

When foreign countries begin liquidating their Dollar reserves, all of that once pent up currency will rush back into the U.S. economic system.  The compounded inflation created by this move would be a disaster, much like giving a heroin addict an overdose.  Not to mention the dollar’s reputation across the world will be annihilated.

 

The Real Story Behind The DOW

Investors are ecstatic over the recent rise of the DOW, but not all are apparently convinced.  Interestingly, Corporate Executives and Company Insiders across the nation, people with an intimate knowledge of the true state of the economy, have recently begun DUMPING their stock portfolios and begun exiting the market:

http://www.reuters.com/article/ousiv/idUSTRE57D49S20090814

Now, why would company insiders begin dumping their stocks in the midst of all these “green shoots”?  Do they know something average investors don’t?  Like the fact that the Baltic Dry Index has once again turned downwards, indicating another large drop in the Stock Market in the near future?

Every increase in the DOW so far has been in response to very minor economic data (such as Goldman Sach’s sudden announcement of a profit, not having anything to do with receiving billions of dollars in TARP funds which they then used to make market bets instead of taking care of their toxic assets I’m sure).

I find it interesting how quick the main stream is to jump on shreds of news like this (or the 247,000 jobs lost in July instead of 347,000), and declare we are turning the corner, even though there is no historical precedence to support such a claim.  This data has been blown way out of proportion by a media scrambling to placate the increasingly angry masses.  It creates an “enthusiasm bubble”, and like any other bubble, eventually, it will burst.  The same thing happened after the great crash of 1929.  They called it the “Suckers Rally” of 1930, and millions of people lost their savings then because of an unfounded belief in the stock market’s ability to rebound, or to even reflect the real economy.

It makes us feel good to believe that the catastrophe in our midst will spontaneously right itself.  Irrelevant spoonfed news tidbits are comforting.  Corporate news seduces us with normalcy.  Everything will stay as it always was, right?  For how could things possibly ever change?  Such a collective mindset has developed time and again, in nations and empires and cultures throughout history, always leading to the same result; mind boggling calamity.

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