Daily Digest

Daily Digest - June 18

Thursday, June 18, 2009, 10:15 AM
  • Introduction to “Broke: The New American Film" (Video, Repost)
  • Greater Depression Coming: Doug Casey
  • Peter Schiff on the Rule of Law...
  • Japanese and Russians Playing Games with Bonds and Reserve Currencies
  • Mall Space
  • Is 2009 tracking a 1930 Great Depression scenario?
  • De-Dollarization - Dismantling America’s Financial-Military Empire - Michael Hudson - financial economist and historian (H/T Fujisan)
  • Lloyds Bank hit by Obama tax purge
  • One by one, cities collapsing (Video)
  • Dealers facing tight supply of SUVs, trucks


 Introduction to “Broke: The New American Film" (Video, Repost)

 Greater Depression Coming: Doug Casey

Doug Casey: The ultimate cause of our problems is the inflation of the currency caused by central banks. Unfortunately, it is the investment bankers and the brokers that are going to be blamed for it, but they are just the immediate cause, not the ultimate cause. Everything they have done, which was incredibly stupid, has only been possible because of the structure of our current system. Normal humans are to blame for doing natural things. The problem lies in the government and how it has structured the system.

Peter Schiff on the Rule of Law...

I have been harping on the importance of the rule of law and this weekend Peter Schiff wrote a good piece on it. Clear and easy to understand, this is a concept that seems completely lost on the current Administration. Note that it is their ACTIONS that matter, not their talk… (ht JQ Adams)

Property Rights Take a Hit - June 12, 2009

“Crony capitalism” is a term often applied to foreign nations where government interference circumvents market forces. The practice is widely associated with tin-pot dictators and second-rate economies. In such a system, support for the ruling regime is the best and only path to economic success. Who you know supersedes what you know, and favoritism trumps the rule of law. Unfortunately, this week’s events demonstrate that the phrase now more aptly describes our own country.

On Monday, the Supreme Court refused to hear an appeal from Chrysler’s secured creditors based on the government’s argument that the needs of other stakeholders outweighed those of a few creditors. In this case, the Administration concluded the interests of the United Auto Workers outweighed the interests of the Indiana teachers and firemen whose pension fund sued to block the restructuring. Given the enormous financial support that the UAW poured into the Obama campaign, such partiality is hardly surprising.

Japanese and Russians Playing Games with Bonds and Reserve Currencies

Now, if you held a bunch of our debt, what would you say if you saw a bond market CRASH in progress?

Uh, HUH… that’s what I thought.

Let me decode what the Japanese are saying for you… “Oh S$#@!! We must get rid of some of our dollar denominated debt PRONTO! Quick, let’s stuff those secret bearer bonds in a briefcase and ship them around the world to be sold in pieces. While we do that we’ll put out a press release stating we have “unwavering” confidence in the dollar so that maybe some poor idiot sap will buy them from us!”

See, and I’ll bet you didn’t think I could translate Japanese!

Guess what, I can also translate Russian! “Now that the world knows that we own more Euros than Dollars and we are calling for a new reserve currency, the bond market is crashing, the dollar is losing value and so are our remaining dollar denominated assets! We’ll keep selling the dollar, but tell the world we have “complete confidence in the Dollar” so that we may sell our remaining dollar assets to the poor suckers who are stupid enough to believe a word we say!”

And thus the dollar rises slightly, bonds rise slightly, but equities are down in overnight futures trading.

These comments are nothing but DESPERATE GAME PLAYING and MANIPULATION by governments. This type of activity has always been around, but it never succeeds. I have never seen so much BULL flying in such a short time period. This tells me that the bull excrement is already hitting the fan. In short, the markets have got them under pressure…

Mall Space

A recent book, “Retrofitting Suburbia,” by Ellen Dunham-Jones and June Williamson, notes that in 1986, the United States had about 15 square feet of retail space per person in shopping centers. That was already a world-leading figure, but by 2003 it had increased by a third, to 20 square feet. The next countries on the list are Canada (13 square feet per person) and Australia (6.5 square feet); the highest figure in Europe is in Sweden, with 3 square feet per person.

Is 2009 tracking a 1930 Great Depression scenario?

There is a darker scenario which threatens recovery. Many of you see this according to preliminary results from a recent poll I conducted. Nevertheless, let me use this post as a reminder of that downside scenario with some commentary from economists. David Rosenberg is not the only major bearish economist that sees a very troubling economic outlook.

First, a post by Wolfgang Munchau in the FT reveals that much of the economic data of late has actually been disappointing despite the rally in shares and corporate bonds.

Last week, the green shoots shrivelled. In South Korea, China and Germany, exports were declining once again. In the US, the Federal Reserve’s Beige Book said “economic conditions remained weak or deteriorated further during the period from mid-April through May”.

The March signs of revival turned out to be little more than a technical inventory correction, with no change in the underlying trend. The world economy is still contracting, though perhaps not quite as fast as at the start of the year.

As an analysis by economists Barry Eichengreen and Kevin O’Rourke* shows, global industrial output is still on the same trajectory as it was during 1930. The only question is whether we can avoid 1931 and 1932.

Munchau argues we can avoid a 1931 and 1932 scenario only if we see a marked change in the present policy response in major economies. But, Munchau’s analysis begs the question as to why he finds the situation so dire for the global economy. Why does Wolfgang Munchau think 2009 is tracking 1930? The answer comes in the Eichengreen – O’Rourke data he references. It is truly stunning: when one looks at statistics like industrial production, this downturn is looking as bad as the Great Depression. Here is how it is summarized at the economic site Vox.

The 6 April 2009 Vox column by Barry Eichengreen and Kevin O’Rourke shattered all Vox readership records, with 30,000 views in less than 48 hours and over 100,000 within the week. The authors will update the charts as new data emerges; this updated column is the first, presenting monthly data up to April 2009. (The updates and much more will eventually appear in a paper the authors are writing a paper for Economic Policy.)


De-Dollarization - Dismantling America’s Financial-Military Empire - Michael Hudson - financial economist and historian (H/T Fujisan) 

Challenging America will be the prime focus of extended meetings in Yekaterinburg, Russia (formerly Sverdlovsk) today and tomorrow (June 15-16) for Chinese President Hu Jintao, Russian President Dmitry Medvedev and other top officials of the six-nation Shanghai Cooperation Organization (SCO). The alliance is comprised of Russia, China, Kazakhstan, Tajikistan, Kyrghyzstan and Uzbekistan, with observer status for Iran, India, Pakistan and Mongolia. It will be joined on Tuesday by Brazil for trade discussions among the BRIC nations (Brazil, Russia, India and China).

The attendees have assured American diplomats that dismantling the US financial and military empire is not their aim. They simply want to discuss mutual aid – but in a way that has no role for the United States, NATO or the US dollar as a vehicle for trade. US diplomats may well ask what this really means, if not a move to make US hegemony obsolete. That is what a multipolar world means, after all. For starters, in 2005 the SCO asked Washington to set a timeline to withdraw from its military bases in Central Asia. Two years later the SCO countries formally aligned themselves with the former CIS republics belonging to the Collective Security Treaty Organization (CSTO), established in 2002 as a counterweight to NATO.

Yet the meeting has elicited only a collective yawn from the US and even European press despite its agenda is to replace the global dollar standard with a new financial and military defense system.

 Lloyds Bank hit by Obama tax purge

Lloyds Banking Group is ditching American customers based in Britain pending a crackdown on international tax evasion planned by President Barack Obama.

This week American private client account-holders at Lloyds's received letters informing them of an "important change in policy regarding clients who are resident, domiciled or linked to the United States by property or asset holdings". They were told the bank had "no choice" but to "cease acting as your investment manager.&quot

 One by one, cities collapsing (Video)

 Dealers facing tight supply of SUVs, trucks 

Now, a year after $4-a-gallon gas nearly killed SUVs, some dealers in this market are selling them for window-sticker prices.


Ragnar_Danneskjold's picture
Status: Silver Member (Offline)
Joined: Feb 23 2009
Posts: 100
Re: Daily Digest - June 18


FYI... you frequently refer to info on thecomingdepression.blogspot.com, but that site has some hinky code running that always ties up my browser (and probably others).  Moreover, almost nothing on that site is original, and most all of it is unattributed.  I'd rather get info from the source, especially when someone is cutting 3/4s of the article.


Davos's picture
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Posts: 3620
Re: Daily Digest - June 18

 Hello Ragnar:


It is probably his/her debt calculator. I like this site since he/she has a nose for what stinks the most and it is condensed, thanks for the link to the full source take care

jpitre's picture
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Posts: 366
Re: Daily Digest - June 18

 The "Broke" film thing keeps coming up - I've tried to buy it and the only thing I'm able to find is a $1299 course in trading/trends or something. I personally wouldn't buy a stock under almost any condition, so that is of no interest, however Michael is a bright fellow and I'd like to hear more about what he has to say about "Broke"

What am I missing?



alcatwize's picture
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Joined: Dec 24 2008
Posts: 78
Inflation vs deflation

 This debate seems to be at the very top of most people's list these days and after thinking about it and reading tons of info, I have to say I don't see the inflation side of it getting a hold any time soon.  Like Chris said, all money is loaned into existence.  Likewise, when loans are repaid or defaulted on, then money is destroyed. Right now more money is being destroyed then created so I believe deflation is still king.  Actually someone posted that stagflation is more likely a senario where food and energy prices go up as the money supply and wages decrease.  I would say this calls for daily monitoring to see when or if there is a change that would swing the money supply to the other side.   Keep the information and the debates coming.  In this case, knowledge is power.

idoctor's picture
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Posts: 1731
Re: Daily Digest - June 18

I have to say I don't see the inflation side of it getting a hold any time soon.  

2nd that!

gregroberts's picture
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Posts: 1024
Re: Daily Digest - June 18

I signed the petition because I agreed with what was written in the letter.


Davos's picture
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Posts: 3620
Re: Daily Digest - June 18

The Covel DVD will be out late June, he just got it according to a post on his site. I read his book(s) and, for me, his method is like a security blanket. These guys ride the waves, down and up. His merits are no matter how fundamentally smart you are there is always a gotcha lurking. After watching the naked short selling videos and a few other things popping in and out of the shadows out there I can't argue the gotcha's.

On inflation deflation: I wouldn't take my eye off the dollar depreciation scenario. Next week is going to be "interesting" to say the least.

Here is another view on this. Nate, IMHO is a really smart guy, I'm not discounting this, and this is the biggest question I ask myself these days. Where will the money go (this time around)? I honestly feel it is going to be the timing. If the bonds go and then the market goes I see the dollars flowing into the emerging IC of the BRIC and PMs. If the market goes first I dunno. I mean I really dunno. People may say I'm parking it in bonds/cash or they may say wow this is a depression. And the former Soviet Bloc could set off a currency shock.

Thus Bernanke has a problem. When, not if, equities tank again, you will not (I believe) see interest rates get all the way back down to where they were. That’s why I believe that instead of seeing equities go down hard with money flowing into bonds, the next round may see equities go down, bonds stay in a range, and money flee the United States sending the dollar lower or keeping it in a range instead of strengthening as much as the last bout of deleveraging. We’ll see, but that would be my guess, it won’t be pretty regardless.


SagerXX's picture
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Posts: 2252
Re: Daily Digest - June 18

 Davos --

Today's DD was especially piquant.  Keep up the excellent work, man!

Viva -- Sager

LogansRun's picture
Status: Diamond Member (Offline)
Joined: Mar 18 2009
Posts: 1444
Re: Daily Digest - June 18
gregroberts wrote:

I signed the petition because I agreed with what was written in the letter.



As I've started a thread on taking action.  This is one way to start.  We must take action now to stop this nonsense!  Start by waking up your neighborhood.  Then go from there.

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