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Saturday, February 9, 2013

The New US Economic unReality

Many may pontificate about the market direction, hard resource valuations, the effect of debt, health of nations, or any aspect of the financial reality since 2008 crash.

There are many things that make a marked difference between 1980's until March 2009 and from March 2009 to today.

First, the accounting system using fair market valuations was dismantled in 2009.  The REALITY is the measuring stick between 1980's until 2009 is not the same as we use today. Therefore if Mark to Market accounting has been suspended, we are valuing financial institutions on what those institutions say assets are worth - not what they are worth if they where sold.  This alone distorts the reality of corporate health, and there is no hard-date to ever return to the gold standard of accounting - recording asset values for what people would pay for them if sold.

Add to this, that US Government statistics are being distorted, the very basis for many financial decisions and financial guidelines.  For example, official inflation alters the income of disability, and social security payments. (and many other social programs).    I already covered how inflation is being routinely changed, in effect changing the measuring stick.  Also, it is widely covered how unemployment numbers are continually being adjusted, distorting any reality of the unemployment rate.

Throw on top of all this the recent scandals of the global interest rate (LIBOR) used to determine most loans has been discovered to have been gamed for years.  This affected literally trillions of dollars of credit.

Throw on top of that the Federal Reserve Bank is making routine purchases of debt, and lending (giving) money to foreign banks to the tune over 230 Billion dollars in the last four weeks alone.

Looking into the private sector, we have Nobel Laureates such as Paul Krugman who have only one drum beat, ignore today for a better tomorrow.  I hope the most ardent fans of such approach are starting to question the one-way mantra for decades.

Throw on top of that nations like Japan having their government directly taking over direction of central banks to promote monetary policy for the government direct benefit, is an outright attempt to shape their own reality.

All of this speaks to how we are in a new reality, the unreality from my life experience.  Under such a new reality, any market musings are futile.  The sticks to measure at every fundamental level are not reliable.  The will of the private and government sector is to promote distortion.  The one reality that does exist, is we are divorced from reasonable capitalistic controls.

May this bring a bright future, well, atleast for the people who this new reality is their reality.  For those who resist believing and take the red pill, I continue to be concerned.
The one item that cannot be forever manipulated is resources.  An example of how governments cannot control those valuations is seen repeatedly in history.  Every government that has tried, has failed.  That is an impressive failure rate.  For the latest attempt, one has to watch as Argentina implodes in 2013.  My only glimmer of hope is a privatization of money, which should bring on a new prosperity  for the next millenia.

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