Showing posts with label Economy. Show all posts
Showing posts with label Economy. Show all posts
Sunday, July 17, 2016
Tuesday, July 8, 2014
The dislocation ahead
Its no secret that I believe that society is at risk of a dislocation. An economic global shock could change the world forever, nothing like 2008.
I ran across a video yet again from Mish's wine country fund raiser.
This is a good casual talk between Chris and Mish, and I agree longer term the world ends up in a good place. Between where we stand now and the passage through crisis is really the risk we will all face.
I ran across a video yet again from Mish's wine country fund raiser.
This is a good casual talk between Chris and Mish, and I agree longer term the world ends up in a good place. Between where we stand now and the passage through crisis is really the risk we will all face.
Sunday, November 3, 2013
Consolidation - Command and Control
The corporations created since the manufacturing era have been consolidating for last few decades. A nifty graphic from Reddit shows how so many consumer products are attributed to a few corporations.
My reaction just a few years back would have been one of aversion, I am for decentralization generally speaking. But in reflection, I think we are seeing a much broader change, one that is hard to grasp.
The millennial generation and beyond frankly, are not going to be as material as the baby boomers. They need very specific things, and must have it, but don't need as much of broader items. What we are seeing is, the end game for old business.
The new businesses some of them are here, many are technology based corporations. Some are starting, such as the maker movement, and home-DYI. Many of the manufacturing and food companies are going to face strong headwinds as the people attitudes change.
The complex manufactured foods are going to continue to decline, cheap plastic sold at high prices will go away as 3d printing comes to life. I am starting to realize the same goes for Media Consolidation, something I have been very concerned over. I don't watch ANY TV, and rarely any mainstream media. My media is purely Internet alternatives, blogs, YouTube, etc. Considering how old I am, pretty sure the younger people shun old media even more. Newspaper? Magazine? Fox news?
So I present to you this graphic, and link to article from Mish, and while it does smack of concern, put your thinking cap on. How important will these companies be to the general economic and growth of the world in the next 40 years? Most I think are past their peak. Many won't exist or be a small version of their former glory due to dropping demand.
Tuesday, October 29, 2013
Global Currency Shakedown, Round 4 about to begin
Back in 2006, with my help of friend John, realized that the US economic structure was based on financial fraud through mortgage securitization.
Bill Clinton signed into law the routing of the glass-stegall act, put into place to separate 'gambling' from bank deposits. George W routed the FBI department staffing down to a couple of people to investigate the trillion dollar mortgage industry. In the late years of George W administration the final bubble was being blown, resulting in 2008-2009 financial crash.
In August 2008 I started this blog as an outlet on my rantings to everyone I could meet on the pending economic impact. Little did I know how close it was.
In the turmoil of then, the natural outcome would have been a deflationary collapse that was stopped by a couple of drastic measures. First, the government went on a no-holds barred deficit spending campaign to soften the blow to the economy. Second, mark to market accounting in place since the Great Depression to valuate companies was suspended, as it is to this day.
Some purists would say both of these acts where not appropriate and that capitalist forces should have played out naturally. I am not one of those people. Yes, that is an option, and maybe it was the best one that should have been followed. But I can see why dramatic steps was taken to prevent a global economic collapse, as it was perceived at the time.
What I am against is all of the drastic steps WITHOUT meaningful reform. That is, 'fixing' of what was broke. We have chosen to take the worst path, appeasement without follow through on reform.
The market has hit an all time high today. Did you hear the bell? My friend John has said there is no bell that goes off warning everyone that the market has hit a multi-year high followed by a market collapse. Basically, there is no warning.
I am NOT predicting a market collapse per-say. I am predicting that we are into phase 4 of this mutli-year global economic refactoring.
Phase 1 was the incredible loose regulation and promotion of securitization of trillions of dollars providing the market collapse in 2008-2009. There are many other factors at work, such as derivatives in the 100's of trillions, but safe to say all the games in phase 1, lead to phase 2, 2008-2009 collapse.
This lead to phase 3, appeasement into 2013. I realized that appeasement was the route and not cleaning house in 2010, and changed my stance that the market may not collapse per-say, simply be dwarfed by lack of law and raw financial meddling.
We are soon to enter phase 4, appeasement failing. There is no amount of appeasement that can fix the system, without taking strong steps to fix the heart of the problems.
We have India's Rupee under duress, with India taking draconian steps to curb gold imports. Mish is calling for a possible Rupee collapse as food inflation hits 18% per year!
We have various countries in Europe, such as Italy, Spain, Greece simply upping the ante on financial gains, buying weeks, months, maybe years, but not decades as they exhaust every 'new legal' option.
We have countries like France, promoting job creation without even bothering to talk to the companies involved in so-called creation plans. And for what? a few double digit jobs? That is worth lying about?
Japan is leading the world on the demographic catastrophe that awaits us all in an economic system that at its core foundation is based on ever increasing demand.
We have China continuing to try to transform it's economy into a consumer-global based powerhouse to replace the USA. In the process, the information about the Chinese economy is safely in the unreliable fantasy zone. China has HUGE potential, but who can understand their true standings? At best, it is a hail mary hope that may come to save the world?
Back in march 2011, once I realized the world would NOT fix any core issues, but simply appease, the timeline for 'disaster' shifted from short term (2010-2012) to longer term (2013-2017).
Well, we are here, sad to say. I don't expect fireworks until 2014, but it could happen next week.
The world dances around the US dollar, and that dance is starting to show it's age. All is needed is enough people to lose faith in the dance to start the next phase of the crisis, global currency shakedown.
Best I can say is diversify, with a chunk in cash ready to move. The USD I CANNOT envision any sudden moves down in value for YEARS to come, so it is once again the safest play....until its not! :)
Bill Clinton signed into law the routing of the glass-stegall act, put into place to separate 'gambling' from bank deposits. George W routed the FBI department staffing down to a couple of people to investigate the trillion dollar mortgage industry. In the late years of George W administration the final bubble was being blown, resulting in 2008-2009 financial crash.
In August 2008 I started this blog as an outlet on my rantings to everyone I could meet on the pending economic impact. Little did I know how close it was.
In the turmoil of then, the natural outcome would have been a deflationary collapse that was stopped by a couple of drastic measures. First, the government went on a no-holds barred deficit spending campaign to soften the blow to the economy. Second, mark to market accounting in place since the Great Depression to valuate companies was suspended, as it is to this day.
Some purists would say both of these acts where not appropriate and that capitalist forces should have played out naturally. I am not one of those people. Yes, that is an option, and maybe it was the best one that should have been followed. But I can see why dramatic steps was taken to prevent a global economic collapse, as it was perceived at the time.
What I am against is all of the drastic steps WITHOUT meaningful reform. That is, 'fixing' of what was broke. We have chosen to take the worst path, appeasement without follow through on reform.
The market has hit an all time high today. Did you hear the bell? My friend John has said there is no bell that goes off warning everyone that the market has hit a multi-year high followed by a market collapse. Basically, there is no warning.
I am NOT predicting a market collapse per-say. I am predicting that we are into phase 4 of this mutli-year global economic refactoring.
Phase 1 was the incredible loose regulation and promotion of securitization of trillions of dollars providing the market collapse in 2008-2009. There are many other factors at work, such as derivatives in the 100's of trillions, but safe to say all the games in phase 1, lead to phase 2, 2008-2009 collapse.
This lead to phase 3, appeasement into 2013. I realized that appeasement was the route and not cleaning house in 2010, and changed my stance that the market may not collapse per-say, simply be dwarfed by lack of law and raw financial meddling.
We are soon to enter phase 4, appeasement failing. There is no amount of appeasement that can fix the system, without taking strong steps to fix the heart of the problems.
We have India's Rupee under duress, with India taking draconian steps to curb gold imports. Mish is calling for a possible Rupee collapse as food inflation hits 18% per year!
We have various countries in Europe, such as Italy, Spain, Greece simply upping the ante on financial gains, buying weeks, months, maybe years, but not decades as they exhaust every 'new legal' option.
We have countries like France, promoting job creation without even bothering to talk to the companies involved in so-called creation plans. And for what? a few double digit jobs? That is worth lying about?
Japan is leading the world on the demographic catastrophe that awaits us all in an economic system that at its core foundation is based on ever increasing demand.
We have China continuing to try to transform it's economy into a consumer-global based powerhouse to replace the USA. In the process, the information about the Chinese economy is safely in the unreliable fantasy zone. China has HUGE potential, but who can understand their true standings? At best, it is a hail mary hope that may come to save the world?
Back in march 2011, once I realized the world would NOT fix any core issues, but simply appease, the timeline for 'disaster' shifted from short term (2010-2012) to longer term (2013-2017).
Well, we are here, sad to say. I don't expect fireworks until 2014, but it could happen next week.
The world dances around the US dollar, and that dance is starting to show it's age. All is needed is enough people to lose faith in the dance to start the next phase of the crisis, global currency shakedown.
Best I can say is diversify, with a chunk in cash ready to move. The USD I CANNOT envision any sudden moves down in value for YEARS to come, so it is once again the safest play....until its not! :)
Thursday, August 23, 2012
Housing Bottom in sight?
Between baby boomers selling their houses (during retirement or death), the 20 year olds having 100K student loans and poor job options, I can't see a housing rally in the next 20 years.
But the doom and gloom death spiral started with subprime loans may have an end in sight.
Back in December 2008, I posted a graph pontificating the worst of the housing may end by 2012, in post titled "Mortgage Defaults just starting".
The graph showed all the mortgage resets occurring over the next 4 years (at that time).
Fast forward to today, and the various bubble loans should be passing.
Banks still have millions of homes in shadow inventory, with millions more of homes in default. So I wouldn't call a house rebound anytime soon. However, the massive housing mortgage reset backlog may be slowing down.
The New York Times posted article "Signs of Revival, Slight but Sure, for Home Sales".
Quote:
A number of factors have helped nudge prices higher, including shrinking inventory — particularly on the more affordable end of the market. There is about a six-month supply of homes, according to the Realtors’ group, down from more than nine months last summer.
So there ya have it. What NYT did not post is the graph I posted back in 2008 showing that the housing would hit bottom around 2012 for mortgage resets. NYT doesn't provide the depth in analysis to explain why housing is bottoming, just the surface of the here and now. I'll take any good news.
With housing bleeding slowing down, it will be interesting if the US economy can get a toe hold of recovery.
But the doom and gloom death spiral started with subprime loans may have an end in sight.
Back in December 2008, I posted a graph pontificating the worst of the housing may end by 2012, in post titled "Mortgage Defaults just starting".
The graph showed all the mortgage resets occurring over the next 4 years (at that time).
Fast forward to today, and the various bubble loans should be passing.
Banks still have millions of homes in shadow inventory, with millions more of homes in default. So I wouldn't call a house rebound anytime soon. However, the massive housing mortgage reset backlog may be slowing down.
The New York Times posted article "Signs of Revival, Slight but Sure, for Home Sales".
Quote:
A number of factors have helped nudge prices higher, including shrinking inventory — particularly on the more affordable end of the market. There is about a six-month supply of homes, according to the Realtors’ group, down from more than nine months last summer.
So there ya have it. What NYT did not post is the graph I posted back in 2008 showing that the housing would hit bottom around 2012 for mortgage resets. NYT doesn't provide the depth in analysis to explain why housing is bottoming, just the surface of the here and now. I'll take any good news.
With housing bleeding slowing down, it will be interesting if the US economy can get a toe hold of recovery.
Tuesday, July 31, 2012
Big Week Ahead in News
This week the Federal Reserve Board will announce policy changes (if any) in response to the US economic activity. Most believe they will not announce any major changes. The economy has not faltered enough to justify action. (intervention)
The European Union Central Bank announcing their own plans Thursday. There is where the action will likely be. It is widely recognized that the European union is having severe issues with certain members. The ECB has demonstrated the worst attributes of communal leadership, that is lack of ability to make decisive decisions. If history repeats lots of tough talk, zero actual material change in policy. However, anything is possible.
And on Friday is the US employment report. Historically this report can start a change in direction if the market is disappointed enough.
So there you have it. I am in Gold miners as per my post Friday, and I have added positions. But leaving room now to see what happens into next week.
The European Union Central Bank announcing their own plans Thursday. There is where the action will likely be. It is widely recognized that the European union is having severe issues with certain members. The ECB has demonstrated the worst attributes of communal leadership, that is lack of ability to make decisive decisions. If history repeats lots of tough talk, zero actual material change in policy. However, anything is possible.
And on Friday is the US employment report. Historically this report can start a change in direction if the market is disappointed enough.
So there you have it. I am in Gold miners as per my post Friday, and I have added positions. But leaving room now to see what happens into next week.
Sunday, July 22, 2012
Economics Degrading, what is up with Oil?
This post shows links to other blog posts news items as a basis for this view presented.
I encourage readers to click on links for detail on each macro item presented.
Trouble in the Eurozone as more countries come under citizen pressures.
I encourage readers to click on links for detail on each macro item presented.
Trouble in the Eurozone as more countries come under citizen pressures.
China unemployment higher than their government is reporting, china trade plunging.
Japans trade surplus drops a whopping sixty three percent.
Australia real estate market collapse has begun. Their collapse may be similar to US sub-prime repeat.
Euro-zone PMI steep rate of contraction, Germany signals steep slow down.
There are hints of a global collapse in auto-sales has begun.
The Germany is entering a legal gridlock in moving to a true fiat currency or participating in larger bail outs.
Twenty six states in US in severe drought, killing massive amount of food crops, a probable signal to higher prices. Farmers slaughter cows in droves to avoid food price increase.
Oil prices are going parabolic, increased input costs in a slowing economy does not bode well.
France has increased their top tax rate up to 75% federal tax rate, rich flee in droves. With the rich gone, finally France can prosper?
All of the above and more point to a global economic slow down and we are in a global recession.
I for one believe that we are. Food and Oil may continue to rally, but I wait to see what precious metals do.
In a deflationary collapse any rally could overnight turn into a full out collapse, so any longs are riskier than normal.
The main question is will global central banks plan a monetary assault in an attempt to stop the deflationary collapse. Even that is not a solution, for our debt based government system as a built in time bomb called bonds.
As for Oil, it is disturbing AS The economy slows down, the price is leaping higher. If it collapses shortly, then not a big deal, just a short term rally. If it is rising due to politics, or supply, we may have a real issue at hand.
For now, its wait and see.
Japans trade surplus drops a whopping sixty three percent.
Australia real estate market collapse has begun. Their collapse may be similar to US sub-prime repeat.
Euro-zone PMI steep rate of contraction, Germany signals steep slow down.
There are hints of a global collapse in auto-sales has begun.
The Germany is entering a legal gridlock in moving to a true fiat currency or participating in larger bail outs.
Twenty six states in US in severe drought, killing massive amount of food crops, a probable signal to higher prices. Farmers slaughter cows in droves to avoid food price increase.
Oil prices are going parabolic, increased input costs in a slowing economy does not bode well.
France has increased their top tax rate up to 75% federal tax rate, rich flee in droves. With the rich gone, finally France can prosper?
All of the above and more point to a global economic slow down and we are in a global recession.
I for one believe that we are. Food and Oil may continue to rally, but I wait to see what precious metals do.
In a deflationary collapse any rally could overnight turn into a full out collapse, so any longs are riskier than normal.
The main question is will global central banks plan a monetary assault in an attempt to stop the deflationary collapse. Even that is not a solution, for our debt based government system as a built in time bomb called bonds.
As for Oil, it is disturbing AS The economy slows down, the price is leaping higher. If it collapses shortly, then not a big deal, just a short term rally. If it is rising due to politics, or supply, we may have a real issue at hand.
For now, its wait and see.
Thursday, May 31, 2012
CNBC Rant by Rick Santelli
This is one aggressive rant from a major news source, CNBC by Rick Santelli.
But then again, who cares, summer is here, time to think happy things. For those who want to ignore the negative, click here for funny videos.
Skip to 3:30 into video.
But then again, who cares, summer is here, time to think happy things. For those who want to ignore the negative, click here for funny videos.
Skip to 3:30 into video.
Friday, April 2, 2010
Government controls significant amount of private economy
I do not know if what is quotes is accurate, nor do I agree with everything in the video.
However, the "fake" recovery I have been focused on is re-enforced with the thought that banks, health care, and private companies like GM, AIG, Fannie/freddie is owned by the government creating a false economy.
Sunday, March 21, 2010
George Soros comments on Obama and US Economy
I have blogged about George Soros before, click for Wikipedia summary on Mr. Soros.
In any event, interview on Mr. Soros thoughts on Obama and US economy.
In any event, interview on Mr. Soros thoughts on Obama and US economy.
Saturday, March 20, 2010
Former UnderSecretary of Treasury for Reagan
Charles Munger, Warren Buffet's business partner recent comments (click) triggered this interview with Paul Craig Roberts, former US Under-Secretary of Treasury to Ronald Reagan.
Decent quote here...
"The world has never seen a country say We can make very few rich by making the everyone else poor simply by moving lowest cost labor abroad."
Decent high level review of some basic economic issues.
Decent quote here...
"The world has never seen a country say We can make very few rich by making the everyone else poor simply by moving lowest cost labor abroad."
Decent high level review of some basic economic issues.
Wednesday, December 16, 2009
Misrepresenting Economic and Financial Data
I am happy to get back to my monetary post series starting with What is Money, Creating Money and Credit, Economic and Monetary Inflation and Deflation.
Next up is misrepresenting economic and financial data.
As described in the series, Money, in an ideal state would have the same worth for work today, for work tomorrow. But because of various monetary policies, the value of money may vary significantly over time. Most people believe that it is inherent in paper currencies that they devalue over time. For example, in 1939, a gallon of gas may have cost 10 cents, now it costs 4 bucks.
But currencies do NOT have to devalue over time. This is a result of the fiat currency, fractional reserve lending, and the Federal Reserve bank. All of which America did NOT have until 1913, when the Federal Reserve Bank was created. Before this event, a person could take a US dollar bill, bury it, and 100 years later it would have the same purchasing power. As a matter of fact, if you bury 100 dollars in 1800, in 1900 it would have MORE purchasing power! (Click here, try 100 bucks from 1800 to 1900, then try 1800 to 1922, and continue into the future)
The old monetary system also had issues, specifically it was linked to gold directly, which resulted in periods of uncontrollable deflation. But the net result over time was a stable currency value system across generations.
Think about that for a second, "A dollar saved is a dollar earned" actually would be true. Now flash forward to today. $100 us dollars in 1808 saved would have purchasing power of $157.39 in 1908, and purchasing power of $7.16 in 2008!!!
What people don't realize is this hidden inflation changes, or secretly alters, the view of all economics. When people look at stock charts for example, typically it is viewed from an absolute view, when in reality, all stock charts should be adjusted for inflation. This is why I quote the S&P 500 valued in terms of Gold, to help give a different perspective on US stock market valuation in more absolute terms. Gold is an object that has value across all world currencies and other physical assets in a more neutral view than US dollars. By no way is this the perfect way to compute value, but it is more accurate than US dollars over the last 10 years.
In summary, inflation allows to skew, or mis-represent data in terms of money over time.
Next is skewing economic data measurements.
After the last Great Depression, some of the reforms that came out of that period was to have the US government act as a neutral party to present data on the economy so all investors could make decisions on a more level playing field.
There are 100's of metrics that grew out of the government for measuring the economy including unemployment, monetary base, Gross Domestic Product (GDP), import/exports, inflation, etc.
All of these metrics where semi-straight forward when created. For example, if you where once employed, and you became unemployed, you where counted as....unemployed. But now there are dozens of sub-categorization of what is unemployed. For example, if you are unemployed for a long duration, you are re-categorized as no longer in the work force. If you are receiving unemployment checks beyond the normal duration, but are in the "emergency extended benefits" category, you are no longer considered receiving unemployment benefits.
I can go on and on. But there is something very nefarious about changing what it means to be unemployed. The history books showing the percent of Americans unemployed in 1982, or 1935, are NOT adjusted using the latest metrics. The result is you will have people look at the history of unemployment numbers and make statements like "US is at 10% unemployment, not seen since 1982".
When in reality, if in 1982 the same methodology used today was used in 1982, perhaps unemployment then would be 8%, not 10%, and therefore you may need to go back to 1930 with the adjusted methodology to find a time matching today's experiences.
Changing of metrics, without retro-changing the history of previously published data, is a severe distortion of reality. This is yet another way to mis-represent the reality of the economy to put the individual investor at a disadvantage.
This is an issue on all levels of critical metrics the US government publishes. One particularly disturbing skewing of reality is on measuring inflation. By mis-measuring inflation, all inflation adjusted metrics are also skewed, distorting even trying to determine what 1 US dollar is worth today as compared to 10 years ago. This has deep distortion effects across all measurements of value and wealth over time.
And when a metric cannot be skewed, or distorted, the solution has been to eliminate the measurement. For example, the Federal Reserve Bank on 10 November 2005 announced that as of 23 March 2006, it would cease publication of a money supply metric called M3. (ShadowStats continues to try to estimate M3) This was deemed as no longer needed metric. If you click on the shadow stats link, notice M3 exploded right after reporting it stopped. I am sure that is just a coincidence.
Bloggers have pieced together true inflation together with M3 from other data to yield reported inflation from true inflation. Currently as of 12/15/09, inflation reported is about 2%, when real inflation is about 7%. So if your savings is not yielding over 7%, your savings is in effect losing value in terms of US dollar. And this DOESN'T include the fact the US dollar plunged from 90 to 74 in 2009, a 17% drop in terms of world valuation. (US dollar currently rising, back to 77ish)
Inflation not being reflected in economic data, changing of economic metrics without retro changing past data, dropping reported data such as M3 monetary policy, currency devaluation, all have the effect of misrepresenting reality and putting the common investor at a disadvantage.
Please keep in mind, this was not a significant problem 40 years ago, all of this has been a continual morphing of the US government to skewing data to hide the reality of the economic data. In effect each political administration contributes to the distortion so on their watch, the claim can be made that the economy is better than the reality. I am not a conspiracy nut, there is no world order behind this distortion. What is at hand here is human nature, easier to "cheat" by changing the grade on a report card, than buckle down and study harder.
Unfortunately, the decades of accumulation of these changes has yielded much of the reported data so skewed, its hard to judge where the economy, and value of savings, stands.
In Summary
Next up is misrepresenting economic and financial data.
As described in the series, Money, in an ideal state would have the same worth for work today, for work tomorrow. But because of various monetary policies, the value of money may vary significantly over time. Most people believe that it is inherent in paper currencies that they devalue over time. For example, in 1939, a gallon of gas may have cost 10 cents, now it costs 4 bucks.
But currencies do NOT have to devalue over time. This is a result of the fiat currency, fractional reserve lending, and the Federal Reserve bank. All of which America did NOT have until 1913, when the Federal Reserve Bank was created. Before this event, a person could take a US dollar bill, bury it, and 100 years later it would have the same purchasing power. As a matter of fact, if you bury 100 dollars in 1800, in 1900 it would have MORE purchasing power! (Click here, try 100 bucks from 1800 to 1900, then try 1800 to 1922, and continue into the future)
The old monetary system also had issues, specifically it was linked to gold directly, which resulted in periods of uncontrollable deflation. But the net result over time was a stable currency value system across generations.
Think about that for a second, "A dollar saved is a dollar earned" actually would be true. Now flash forward to today. $100 us dollars in 1808 saved would have purchasing power of $157.39 in 1908, and purchasing power of $7.16 in 2008!!!
What people don't realize is this hidden inflation changes, or secretly alters, the view of all economics. When people look at stock charts for example, typically it is viewed from an absolute view, when in reality, all stock charts should be adjusted for inflation. This is why I quote the S&P 500 valued in terms of Gold, to help give a different perspective on US stock market valuation in more absolute terms. Gold is an object that has value across all world currencies and other physical assets in a more neutral view than US dollars. By no way is this the perfect way to compute value, but it is more accurate than US dollars over the last 10 years.
In summary, inflation allows to skew, or mis-represent data in terms of money over time.
Next is skewing economic data measurements.
After the last Great Depression, some of the reforms that came out of that period was to have the US government act as a neutral party to present data on the economy so all investors could make decisions on a more level playing field.
There are 100's of metrics that grew out of the government for measuring the economy including unemployment, monetary base, Gross Domestic Product (GDP), import/exports, inflation, etc.
All of these metrics where semi-straight forward when created. For example, if you where once employed, and you became unemployed, you where counted as....unemployed. But now there are dozens of sub-categorization of what is unemployed. For example, if you are unemployed for a long duration, you are re-categorized as no longer in the work force. If you are receiving unemployment checks beyond the normal duration, but are in the "emergency extended benefits" category, you are no longer considered receiving unemployment benefits.
I can go on and on. But there is something very nefarious about changing what it means to be unemployed. The history books showing the percent of Americans unemployed in 1982, or 1935, are NOT adjusted using the latest metrics. The result is you will have people look at the history of unemployment numbers and make statements like "US is at 10% unemployment, not seen since 1982".
When in reality, if in 1982 the same methodology used today was used in 1982, perhaps unemployment then would be 8%, not 10%, and therefore you may need to go back to 1930 with the adjusted methodology to find a time matching today's experiences.
Changing of metrics, without retro-changing the history of previously published data, is a severe distortion of reality. This is yet another way to mis-represent the reality of the economy to put the individual investor at a disadvantage.
This is an issue on all levels of critical metrics the US government publishes. One particularly disturbing skewing of reality is on measuring inflation. By mis-measuring inflation, all inflation adjusted metrics are also skewed, distorting even trying to determine what 1 US dollar is worth today as compared to 10 years ago. This has deep distortion effects across all measurements of value and wealth over time.
And when a metric cannot be skewed, or distorted, the solution has been to eliminate the measurement. For example, the Federal Reserve Bank on 10 November 2005 announced that as of 23 March 2006, it would cease publication of a money supply metric called M3. (ShadowStats continues to try to estimate M3) This was deemed as no longer needed metric. If you click on the shadow stats link, notice M3 exploded right after reporting it stopped. I am sure that is just a coincidence.
Bloggers have pieced together true inflation together with M3 from other data to yield reported inflation from true inflation. Currently as of 12/15/09, inflation reported is about 2%, when real inflation is about 7%. So if your savings is not yielding over 7%, your savings is in effect losing value in terms of US dollar. And this DOESN'T include the fact the US dollar plunged from 90 to 74 in 2009, a 17% drop in terms of world valuation. (US dollar currently rising, back to 77ish)
Inflation not being reflected in economic data, changing of economic metrics without retro changing past data, dropping reported data such as M3 monetary policy, currency devaluation, all have the effect of misrepresenting reality and putting the common investor at a disadvantage.
Please keep in mind, this was not a significant problem 40 years ago, all of this has been a continual morphing of the US government to skewing data to hide the reality of the economic data. In effect each political administration contributes to the distortion so on their watch, the claim can be made that the economy is better than the reality. I am not a conspiracy nut, there is no world order behind this distortion. What is at hand here is human nature, easier to "cheat" by changing the grade on a report card, than buckle down and study harder.
Unfortunately, the decades of accumulation of these changes has yielded much of the reported data so skewed, its hard to judge where the economy, and value of savings, stands.
In Summary
- Fiat Currencies as they change in value over time, are not reflected in most economic historical data, like stock charts. Not auto-adjusting all economic data based on inflation distorts economic information.
- Inflation itself is distorted, which in effect makes it even harder to actually compare financial and economic data over time in more absolute terms.
- All other metrics of economic data are also changed over time, without retro-changing past values to put proper perspective on data.
- All of these distortions create an environment where stored wealth is near impossible to assess if keeping up with devaluation over time, and a view of economic health to make informed decisions on money allocation.
- These distortions are not a reflection of a world conspiracy, but a reflection on human nature to change the test, rather than work harder to have a better grade.
Thursday, December 10, 2009
State of New Jersey is screwed
I remember in high school being told one of the better things about New Jersey is it's bonds where AAA, and debt low. New Jersey has a high per capita income on average compared to other states. Plenty of corporate headquarters are in New Jersey.
I knew New Jersey had strayed and was piling on the debt, but I didn't realize how much.
New Jersey has $36.5 billion of gross tax-supported debt.
New Jersey has a population of 8,682,661.
That is $4,203 for every person in New Jersey, employed or not.
Compared to California
California has $75.2 billion of gross tax-supported debt.
California has a population of 36,756,666.
That is $2,045 for every person in California, employed or not.
Considering that California's economy dwarfs NJ, this is a little disturbing. What really disturbs me is if this economic downturn lasts through 2012, as I expect, NJ's options will be limited due to the debt burden it has already created.
To read more, see Mish's Blog post "Coming Collapse of Municipal Bonds; States, Cities Dig Deeper Holes"
I knew New Jersey had strayed and was piling on the debt, but I didn't realize how much.
New Jersey has $36.5 billion of gross tax-supported debt.
New Jersey has a population of 8,682,661.
That is $4,203 for every person in New Jersey, employed or not.
Compared to California
California has $75.2 billion of gross tax-supported debt.
California has a population of 36,756,666.
That is $2,045 for every person in California, employed or not.
Considering that California's economy dwarfs NJ, this is a little disturbing. What really disturbs me is if this economic downturn lasts through 2012, as I expect, NJ's options will be limited due to the debt burden it has already created.
To read more, see Mish's Blog post "Coming Collapse of Municipal Bonds; States, Cities Dig Deeper Holes"
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