The Godfather of newsletter writers, Richard Russell, is warning that what is left of the middle class in America is imploding as the world remains mired in a depression and the US government continues to lie to its people. He also warned that the once massive U.S. gold hoard is now gone.
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February 13, 2014
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Archivesshapeimage_28_link_0shapeimage_28_link_1 Is there any way of discerning the truth about the US economy? Famed John Williams of Shadow Government Statistics makes a living by dissecting government statistics and providing us with the truth. The following is from his most recent report:
If the economy will not grow, just redefine it. The US economy continues to stagnate and turn down anew, as part of the deepest and longest economic downturn seen since the Great Depression. With actual business activity moribund, the US government once again has turned to redefining a major economic series, so as to boost a reported activity.
This agrees with my previous observation that the US economy is sinking, regardless of stock market-top fluctuations. How long, I wonder, before the real truth decorates newspaper headlines? Frankly, I’ve never seen a stock market so obsessed with current news. I grew up thinking that the stock market discounts conditions as they will materialize months in the future. Americans must be confused as they note the harsh conditions of their current life when compared to what the Federal Reserve and the government tell us. Ultimately the truth will come out. And I believe that John Williams is telling us the truth. This is indeed the longest economic downturn seen since the Great Depression.
I note that Walmart, with its slipping sales, is now being called “too expensive for the middle class.” This tells us something about the struggles of the middle class, which are now exiting Walmart, in favor of ... well, staying home. For the middle class, these appear to be hard times. Interestingly, the last two generations are the first two generations in America history that have never seen hard times -- that is, unless they've heard descriptions of hard times from their parents, who braved the Great Depression. Now we hear more and more of children moving back in with their parents, or parents moving in with their older children. I'm thinking that we will see a good deal of novel living situations as the months go by.
I hesitate to say this because it's so extreme, but I believe the world is in a depression. We're being lied to by a frightened and desperate government and Federal Reserve. Sooner or later the US public is going to realize that we're in a depression. The government and the Fed will fight the gathering depression with lies and propaganda. To fight the depression, the Fed will open the money spigots wide, creating new trillions of “dollars.” Some wise investors are aware of all this, which is why gold continues to push higher (over $1300 an ounce today).
IF we had the actual gold, I feel that the US would unilaterally raise the price of gold to $5,000 or $10,000 an ounce. The government is not doing this because we don't have the gold. Once the news of the US gold reserves being depleted is out, this will result in an unbelievable scandal. Once the dollar index closes below 80, the fireworks should start. How many items can the Fed manipulate? Sooner or later the Fed will lose its grip on bonds, the dollar, stocks or gold. I think gold over 1300 suggests that the Fed is losing its grip.
Actual physical gold is becoming scarce. With gold climbing over $1300 today, we've seen the end of bargain-priced gold. I continue to like CEF, which is gold and silver in Canada. Below GDXJ turning bullish and breaking out of a huge base. The P&F projection or target is 57, I think this is a really interesting spec.
China's Xi Jinping has cast the die. After weighing up the unappetising choice before him for a year, he has picked the lesser of two poisons.
The balance of evidence is that most powerful Chinese leader since Mao Zedong aims to #$%$ China's $24 trillion credit bubble early in his 10-year term, rather than putting off the day of reckoning for yet another cycle.
This may be well-advised for China, but the rest of the world seems remarkably nonchalant over the implications. Brazil, Russia, South Africa, and the commodity bloc are already in the cross-hairs.
"China is getting serious about de-leveraging," says Patrick Legland and Wei Yao from Société Générale. "It is difficult to gently deflate a bubble. There is a very real possibility that this slow deflation may get out of control and lead to a hard landing."
Europe Considers Wholesale Savings Confiscation, Enforced Redistribution
At first we thought Reuters had been punk'd in its article titled "E.U. executive sees personal savings used to plug long-term financing gap" which disclosed the latest leaked proposal by the European Commission, but after several hours without a retraction, we realized that the story is sadly true. Sadly, because everything that we warned about in "There May Be Only Painful Ways Out Of The Crisis" back in September of 2011, and everything that the depositors and citizens of Cyprus had to live through, seems on the verge of going continental.
In a nutshell, and in Reuters' own words, "the savings of the European Union's 500 million citizens could be used to fund long-term investments to boost the economy and help plug the gap left by banks since the financial crisis, an EU document says." What is left unsaid is that the "usage" will be on a purely involuntary basis, at the discretion of the "union", and can thus best be described as confiscation.
Well, it hasn't happened yet---and it's a long way down the road. We'll see how far it gets before the Europeans see the writing on the wall.