Better Than the Black American Express Card

Over $5 trillion of US Debt growth in less than 4 years, not bad. Not bad at all.

It took about 13 years to go from $5 trillion to $10 trillion.

I wonder how long it will take to add another $5 trillion...

- August 31, 2012: $16 trillion.
- January 20, 2009: $10.6 trillion.
- 1996: $5.2 trillion.

Congratulations to our children and their children. You now owe the world and your parents/grandparents over $16 trillion.

Source: http://en.wikipedia.org/wiki/Centurion_Card
Source: http://www.zerohedge.com/news/its-official-1601576978821580

Source: http://www.foxnews.com/politics/2012/09/04/who-do-owe-most-that-16-trillion-to-hint-it-isnt-china/

Source: http://en.wikipedia.org/wiki/File:USDebt.png

What to do With All That Free Time, and No Money, and No Hope...

Zerohedge: Euro-Zone youth unemployment hs now ticked back up to its euro-era record-high of 22.6% (18-year highs).

The history of Europe over the last 100 years shows that austerity can have severe consequences and outcomes and perhaps most notably, the independent variable that did result in more unrest: higher levels of government debt in the first place.

Source: http://www.zerohedge.com/news/europes-scariest-chart-got-scarier
Source: http://www.zerohedge.com/news/austerity-unrest-and-quantifying-chaos

Got Iron?

Don't worry, China will have a soft landing and its domestic demand will replace its export declines, right?

Source: http://brazilianbubble.com/chart-the-four-biggest-bubbles-of-the-last-40-years/

Full Faith and Credit of the US Government

The chart below shows the extent of debasement of the value of U.S. money since 1913 when the Fed was established. To summarize in simple terms, a child with 4 cents in his pocket could buy the same amount of candy in 1913 as his descendant could with $1 in 2012. Today, it takes a quarter to buy what a penny did in 1913. The dollar has lost 96% of its purchasing power since 1913 (using CPI statistics). Once the dollar lost all linkage to gold, its value plummeted at an accelerated rate. Since 1971 when Bretton Woods was intentionally dismantled, the dollar has lost 82% of its purchasing power. 82%!

Alan Greenspan (Chairman of the Federal Reserve from 1987 to 2006), 1966: "Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit.
...
In the absence of the gold standard there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [in 1933]. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Source: http://www.zerohedge.com/news/41-years-after-death-gold-standard-look-how-we-ended-economic-purgatory

10-Year Treasury Yields

What will happen in the next 10 years? Lower bond yields (higher bond prices)? Probably not.


- The US 10 year Treasury yields fell to a 220 year low of 1.45% in June 2012.
- US bonds have had the following distinct secular bull and bear markets:
- 1790-1902: erratic yield fluctuations and then a sustained decline in yields to below 3%.
- 1902-1920: the First Bear Bond Market, yields rise from 3% to 5-6%.
- 1920-1946: the Great Bull Bond Market, yields decline from 5-6% to below 2%.
- 1946-1981: the Second Bear Bond Market, yields soar from 2% to above 15% during 1981.
- 1981-today: the Greatest Bull Bond Market, as yields tumble from 15% to 1.5% today.

Source: Bank of America Merrill Lynch, June 2012.

Coming Soon to a City Near You

Recipe for municipal default:

Unrealistic benefits for public workers + housing crisis (lower property taxes) + economic crisis (lower income taxes) + years of wasteful spending + fraudulent accounting = Best of luck (especially you, Californians).


Cities on the brink:
Stockton, CA
Detroit, MI
Mammoth Lakes, CA
San Bernadino, CA
Compton, CA

Get ready for less police/fire, higher crime (unless you believe crime goes down in economic downturns with less police on patrol), more traffic tickets, less public services ...

Source: http://www.zerohedge.com/news/gathering-pace-muni-fails
Source: http://www.latimes.com/news/local/la-me-0719-compton-bankruptcy-20120719,0,7289469.story
Source: http://www.sfexaminer.com/opinion/editorials/2012/07/stockton-cautionary-tale-california
Source: http://latimesblogs.latimes.com/lanow/2012/07/mammoth-lakes-bankruptcy.html
Source: http://www.reuters.com/article/2012/07/03/us-stockton-bankruptcy-cause-idUSBRE8621DL20120703

China Panics, US "Recovers" and Germany Flinches

July 9:



Source: http://www.youtube.com/watch?feature=player_embedded&v=wJ-l1LIdWOU#!
Source: http://www.zerohedge.com/news/between-german-rock-and-global-hard-place