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Thursday, January 31, 2013

'If Black is White and Bad is Good. then Very Bad is Very Good?

Yesterday we wrote about the first contraction to the US economy in 3.5 years (-0.1% growth) and commented how passionately determined Wall Street and their corporate media whores were to treat this as a positive...

The logic you see was that this was a "one-off" or one time thing i.e. the Pentagon slashing its budget in a dramatic fashion.  The implication obviously being not to expect this to happen again..

Very nice...  Then we read this from Bloomberg:

"Just as the U.S. gross domestic product is taking a hit from lower defense budgets, federal spending cuts viewed as unthinkable a few months ago -- $1.2 trillion falling heavily on the Pentagon -- are seen as likely to happen starting March 1.

What’s known as budget sequestration, designed to be so draconian that it would push Democrats and Republicans to compromise on taxes and spending, has hardened the parties’ positions. If the cuts occur, they would require $600 billion in across-the-board military spending reductions over a decade that Defense Secretary Leon Panetta called “devastating.” "
Now if it possible that an additional $1.2 Trillion in cuts are going to come from the Pentagon, then how can anyone with a straight face say its an absolute certainty that the budgetary cuts from Oct - Dec, 2012 were a one-time thing?

Will this be averted?  Will both sides reach a consensus?

Who knows.. the only thing these two incompetent political parties do seem to know to agree on is can-kicking...

That and having the Federal Government pay for Secret Service protection of ex-Presidents for the rest of their lives at taxpayer expense (It had been 10 year limit since all Presidents {including Obama} are millionaires and can afford the protection themselves without stress or strain)..

That law passed unanimously

But we digress...
When 99.99999% of Americans do not pay any close attention to finance, markets and the continual games played upon them, then it allows Wall St to feel naturally brazen to keep lying.

Really-- why not?  What is there for them to gain by being honest?

And as we said yesterday, if the economy contracts for the Jan - Mar. 2013 quarter, meaning thus two quarters in a row, that is the "Official" textbook definition of recession.

Now here's the real 'Alice in Wonderland' like contradiction when it comes to optimism and hope in the US economy and recovery..  Follow as best you can..

Wall St and the media are jubilant over this 'amazing recovery', right...

But Fed Chair Bernanke is quite dour, saying the US economy” faces “downside risks” even after strains in global financial markets have eased" according to the latest Fed statement...

Now who's right?
If Wall St is right and can survive and thrive without that $85billion a month in bond purchases then why doesn't it try to 'swim' without the financial 'inflatables' wrapped around it figurative arms and waist?

Could it be because it knows it can't and knows everything it says to the American public about optimism and hope and economic growth is bullshit?

And Bernanke-- if he's right and the economy is so weak and unstable, why does he think he can do it alone?  More specifically, why does he allow the Lie to continue that only he i.e. the Fed can lower unemployment (which it can't) while the President and Congress play with their tallywackers?

And if the economy is strong and Wall St is right, then why does Bernanke have the guts or moral fortitude to turn off the financial spigots to his buddies?

Who's right?  Wall St or Bernanke?  Are we in recovery or recession-depression?  Is the stock market growing based on confidence in it, or a 'confidence game' of conveying all is well?

Most people really don't understand the Fed or what its doing.. This explanation may appear a little simplistic but its not and is in addition a good way to explain what is going on...

Picture the stock market as a casino..  OK, we're sure you've heard that before..  Now, picture a very nice elderly man with a beard named "Uncle Ben"-- he's wealthy.. more importantly, he is your personal benefactor.

And Benny says to you, "OK, John (or Jane or Jesse)... Here's the deal..  Every Tuesday at 12:01AM, $10,000 will be wired into your personal checking account by me to have fun in the casino...

'All bets you make... everything you win, you keep... don't have to pay back a penny, and I will still give you $10k/week...  And if you lose some or all on stupid or super-risky bets, do not worry..  just look at your online statement at 12:01 every Tuesday for your next $10k"

You are given this money for two reasons by good ole Uncle Ben...

1)  He sincerely wants and hopes that you get on a winning streak and recoup all the money you stupidly lost due to risky, thoughtless betting before he stepped in, and..

2) No one wants to 'gamble' in an empty 'casino' i.e. no one wants to invest in a stock market that has no life to it, so 'warm bodies' are needed to attract passersbyes.. you know... the common everyday folk
And so you have a stock market that rises and rises based on nothing real in the world...

We've explained this often but its too important a point to just assume you get it.

Life is not that complex folks... Same with employment/jobs...

First off, did you know 25% of all employed Americans (1 in 4) make $25,000 or less, have no benefits of any kind and no security?

Its true..

Now there are essentially two ways a 'job' is created:  By another or by oneself.  And for the sake of this mini-exercise, we won't focus on the self-entrepreneurs; the 'go-getters'.

Now, as to the job created by another, only two entities do it-- the private sector and the public sector.  The public sector does not care so much what the private sector does, but the private sector hates public sector employment.
Its hard to offer laborers $8-9/hr to do work if public employment is paying laborers $10-12/hr.  So in a perfect world for private sector employers, the public sector i.e. government jobs would be liquidated in masse with the now unemployed forced to accept pay concession or not work.

And to make this scenario more efficient, there has to be no government living subsidies like unemployment or food stamps.  This way $8/hr for a position you once were getting $11/hr is very attractive compared to $0/hr and eating dirt & bugs on the street.

Now if the private sector has no motivation to create good paying jobs because its making tidy profits through other means such as investing and purchasing/selling their own stocks, then there's a near Zero chance these jobs will be developed and implemented for the educated and skilled to possess.

And if there's no law by the President or Congress to expand hiring in the public sector, then you find continual stagnant to depressed wages, the expansion of temping where the worker has zero rights, and other forms of basic, unsecured labor available to a populace desperate to eek a living and 'make it'
So if you're unemployed and feel hopeful that your job prospects will improve because the Dow is flirting with 14,000 then sorry but you're in denial.

The economy Could improve.. Sincerely so..  In all phases..

If only those in power really wanted it to.