Something doesn't smell right about this recovery

68
Tue, Jul 22, 2014 - 7:22am

I had a long chat with an old friend the other night. Our daughters were close friends at age 4 through 8 before we chased a career into another state. My daughter’s best childhood friend is getting married and she and I drove from AZ to Memphis TN for the wedding. She is 20 and I don’t expect I will get to talk with her this much again. For me, the road trip has been enjoyable, and I think it has for her as well.

So my old friend, the father of the bride, and I started talking about the economy. He and I have a common concern in that our kids are striking out on their own, looking for careers. As we chatted for several hours, I did my best to try to explain economic issues as I saw them, but several constraints were in my mind, filtering what I said

  • I really ought to listen as much as I talk.
  • I don’t want to come off as an alarmist
  • It’s not advisable to continually say, “No, you are wrong.”
  • He does not understand economics, and our time is too precious for a series of lengthy lectures.
  • We had many daughter-raising issues to discuss.

I desire to appear to him as the rational, educated, concerned person that I am who has decided to take action to protect our financial future, rather than trusting in the system that has failed. I am hoping he will think, “Hmmm, Jerome seems like he has this all figured out. Maybe I’ll follow his lead and buy gold.” But as he sat there listening and smiling, he may have thought,” Oh my God. What happened to my dear friend. He is off the deep end.” He tactfully asked me twice, “Don’t you think the recession natural, that we should expect this now and then?”

He believes that we are recovering but I suspect that he knows in his heart that we are not. He asked me the question, instead of making an assertion, because his mind knows that he does not have the evidence to back an assertion. People like my friend suspect that this recovery we keep hearing about is more mist than substance. He may not be ready to admit it yet, but he did listen to me for a long time the other night.

People are still out of work. My 23 year old son has not been offered any high paying jobs that would tempt him out of college the way I was seduced away from college when I was 19. Our kids are working at fast food joints and still living at home when they should be getting their own places and finding roomates. Even young couples are renting homes rooming with other young couples (according to my property manager), not to save money, but to make it on their own at all. A large landlord friend of mine reports more and more families shacking up with extended family to make it. That is how they’ve made it in Mexico for several decades now.

Last night our member silverismoney disclosed to us that he had friends in finance that are waking up and interested in PMs. He asked them, Why are you guys looking into it?" and they replied, "It's becoming obvious to a lot of us that something is NOT RIGHT with the paper markets so we have decided to move some of our paper into physical and do not know where to begin."

My wife and I watched Margin Call the other night. As the film wound down to a close, Jeremy Iron’s character (not sure if he was Blankfein or Dimon) explained to Sam, who thought it was wrong of them to sell the toxic mortgages to their clients, that crises like this were normal—what they did in dumping the bad MBS securities on their clients was justified. Iron’s character recounted a lengthy list of crises dating back into the 19th century, as though 2008 was simply another. That particular scene has led me to conclude that the movie was allowed to be made to explain to all the sheep that 2008 was normal and we will recover—just another crisis like the ones we have always weathered. Is that our take-away from a good movie—that financial crises are normal and we should expect them? That we will always recover? What Hollywood failed to mention in Margin Call was that the FEDs actions after the crisis may have saved your IRA, but it didn’t stimulate a recovery this time.

This was not just another crises and the FED has tried everything to “fix” the economy. While they may have staved off a collapse, nothing is better and people are beginning to figure it out

The all-wise FED governors, lowered interest rates to ZERO and didn’t stimulate a thing. Enter QE as the FEDs next trick. But QE1 & 2 failed to reignite the economy.

Third time is the charm. The FED unveils Operation Twist. I view that effort NOT as an attempt to help the economy, but as the FEDs desperate action to keep interest rates from rising , to get all those high-interest bearing T-bills out of the market elbowing retirees like my Dad out. They took the safest option off the table for investors, forcing them to turn to stocks to chase some kind of yield. But the economy did not get better.

Ask Bunker Bear: Operation Twist or Twits?

So in desperation the FED began QE3 (infinity) to keep the stock markets moving higher. But people are catching on… they suspect something is wrong, pressuring the FED into tapering QE to convince people that we are recovering... because recoveries do not continue the emergency measures for 5 years. So as QE has been tapered, some Belgian investor has been picking up the slack, buying up all the excess T-bills so our government can keep deficit spending.

Interest rates must not rise! When you are a 17 trillion debtor, who borrows money to make the payments on your loan, rising interest rates mean you have to borrow even more from a world that does not have it to loan.—except for that Belgian investor who is happy to keep loaning to this US debt-addict. I wonder who it is? This economy has been ruined and people are beginning to wake up.

I wonder what the FED will try next. No doubt the plan will have a highly technical economic title—like “Monetary Collateral Amplification”—so they can fool people into thinking the FED knows what they are doing. or maybe they do what the SEC was doing at their computers all day, frustrated that they can actually do nothing.

I hate it when a mechanic replaces a part and it still doesn’t fix the car. After the 4th or 5th attempt, I start to get really pissed about him running up the bill and having no clue as to what is wrong or what to do about it.

And why else are people not quite sure about the “recovery?” On one hand, they do not see it. Even those with jobs recognize their employer’s challenges. But our media continues to parrot “Recovery! Recovery!” every chance they get to keep the general population from panicking or protesting, and to keep them spending. While one factory may be ramping up in North Carolina, another three have close in Ohio. But we only hear about the one these days. People are in cognitive dissonance about it, wanting to believe the lie, but intuitively concluding that the economy is still very weak.

There is too much debt personally and at every level of government. And there is not enough collateral to cover that debt if the crisis re-asserts itself. The good full-time jobs are evaporating as our leaders point at the job numbers (inflated with part-time positions) and brag.

Don't Buy Stuff You Cannot Afford - a 1 page book!

The FED is the major buyer of stocks, followed by corporations buying their own stock to keep the values high. Market volume is declining.

The only assets that can survive the debt fueled inflation that is fast approaching are tangible goods. Gold holds the most value in the least physical space and has great potential to increase your value. Food will be essential—especially IF another crisis strikes. Any other tangible goods that we need for life is a great place to store what value you have.

I do not consider real estate safe—it is better than paper, but Detroit gives us all reason to question how valuable a home really is. Looks like Flint is next. And I know from personal experience that homes throughout the American Midwest are still selling at only half their value of 2008—cheaper than you can build one.

Paper securities can go to zero faster than you can log in to your online broker and sell out, faster than you can call your busy broker on “stock crash morning” and get her on the phone. Even the dollar is not exempt from an instant devaluation. Store your treasure in heaven and keep your money in gold, grain & goats.

You all remember Maslow’s pyramid from your Psych and Soc 101 classes. Humans strive to achieve success at each level, moving up the pyramid as they are able. Well, I predict we will all abandon our efforts at achieving self-actualization soon and be working real hard to maintain our position on those lower levels.

But I am preaching to the choir here. And if all this is new to you, maybe now you are part of the choir.

We all still have a burden to do everything we can to wake up our friends and relatives who are weary of us crying wolf. If we calm down and point out a few things that get people to thinking, we’ll have a better chance to get them to listen and take some reasonable actions.The first step in convincing people to take action is to convince them that action is needed.

They know something is wrong. Start there. If you can confirm their suspicions, it naturally and logically leads to very important questions, “What can I do about it? How can I protect myself?” And I think you have some ideas about what to do...

About the Author

  68 Comments

lnardozi
Jul 22, 2014 - 7:27am

First?

Guess so.

DeaconBenjamin
Jul 22, 2014 - 7:38am

Good article

I agree, the first step is to convince them that there is something wrong. Then they can start to look for answers.

erewenguy
Jul 22, 2014 - 7:48am

I read on another site this

I read on another site this morning that Chipotle Mexican Grill (pre-market $653/share) has 1500 restaurants has a market cap of $18 BILLION, with a 55 P/E.

Jose at our local Mexican restaurant serves seriously great food. I'm sure he would be more than happy to sell his business for under $12 million.

I've been amazed at the swindle people have come to accept even in their food - That Red Lobster is great seafood, that Olive Garden is great Italian, and now Chipotle is great Mexican.

Seriously. The only bad thing about the effects of this red pill is that it never wears off.

atarangi
Jul 22, 2014 - 8:19am

Guess who?

If a kingdom is ruled by a king, an empire is ruled by an emperor and a dictatorship is ruled by a dictator, who rules a country?

crylandjr
Jul 22, 2014 - 8:39am

Guess

A Count?

Safety Dan
Jul 22, 2014 - 8:41am

Bank Of England Leads Push

Bank Of England Leads Push For Deposit Confiscation - Japan, China, Russia Against Bail-Ins

Check this out for more information; For a hint of how the next

Great thoughts Dr. J. We know the numbers and such are not correct. Who wants their all/portion of savings taken in one time tax or bail in? How I wish others were open for knowledge as to what to look for as the cookie crumbles. Knowledge and action will help reduce the impact of the reset.

Btw, what do you think will happen to the price of Au & Ag once a bail in or one time tax happens in a G20 country?

More stuff not right-

Government Agents "Directly involved" in Most High-Profile US Terror Plots

Nearly all of the highest-profile domestic terrorism plots in the United States since 9/11 featured the "direct involvement" of government agents or informants, a new report says.

Serious Fraud Office to Launch Criminal Probe into Forex Rigging

The Serious Fraud Office is poised to launch the first criminal investigation into alleged rigging of the £3 trillion-a-day foreign exchange markets at leading City banks.

erewenguy
Jul 22, 2014 - 8:45am

What the ????Just happened

What the ????

Just happened with gold and silver?

edit: CPI numbers out. Wow. Got a spike in response to persistent inflation. Imagine that. Carry on, stackers.

Barfly
Jul 22, 2014 - 9:35am

Margin Call out-takes

I have yet to see this movie, but I took the time to watch the choice cuts on youtube. Links below....

Video unavailable
Video unavailable
Video unavailable

In commerce, there are some situations where it comes down to "us or them." Clearly the people portrayed in this film ***were*** ethical at one point. But, it came time to make a choice. They chose themselves over their clients and their partners and threw ethics out the window.

cashonly
Jul 22, 2014 - 10:17am

reality is only a perception to some

I just had a conversation with my neighbor who is in his mid 40's and he and his wife both are teachers. He stated that they just received some pretty good raises this year and things really couldn't be better for them (new house, new in-ground pool). I couldn't help but think how many folks don't analyze their situation, especially those who derive their incomes from the public. I thought how disconnected he was from someone who is running a business and can feel the pulse of the economy real time. My neighbor's mentality may also be "I'll worry about it when the time comes", as many do. During this conversation I discussed how the stock market had become so disconnected from representing economic health and is dependent on the FED printing money out of thin air to grow. I told him I didn't feel comfortable plowing 15% of my weekly earnings into something I really didn't trust. Then he gave me a clue as to how maybe some of these folks think as to what is going on and where the future is headed. I stated China was hoarding gold and so were other nations and this is very inconsistent with recent history. I explained that Germany wanted its gold back that was stored at the FED. I said to him if you interpret the interest that there is in gold by Nations then one could surmise the dollar as that world's reserve currency may be coming to and end, and if that happens then there would be global turmoil during the transition. He stated he didn't see a global collapse coming because he BELIEVES China wouldn't want that as they are growing economically. He THINKS China will not do anything to harm the dollar (status quo) as they would be the one most hurt by it. Therefore he ASSUMES that things, although shaky, will get better - AS THEY HAVE ALREADY!!

I am just amazed by the simple fact that after 6 years of "education" there is no critical thought process what so ever taking place in this man's head. Maybe he just doesn't want to realize the fact that his lifestyle of extremely high pay, an amazing pension and benefits all while enjoying summers off may be in jeopardy. We live in a state that carries the third largest debt load in the U.S. that has watched an incredible amount of middle class jobs evaporate. Middle class jobs do provide a tax base? if they leave? tax base provides the pay to public workers? Believing, thinking, and assuming is exactly what I run into with most "positive thinkers" who would categorize me into the "DOOMER" category. I remember George Carlin, a great observer of life, stated something to the effect of "they don't want educated Americans, they want you smart enough just to do your job and that's it. They DON'T WANT CRITICAL THINKERS!"

I have met many intellegent folks out there. But unfortunately those smarts and intellegence seem to be "pinpoint focused" in just their area of expertise and they never venture out of their comfort zone. Dr. Jerome once stated if you tried to discuss the FED, GOLD, the DOLLAR to him prior to 2008 he would have dismissed it. But Dr. Jerome is proof that education alone does not make you a "critical thinker". I'm glad he is here!!!!

4 oz
Jul 22, 2014 - 10:23am

Russia Adds 500,000 Ounces Of Gold~~~

Russia Adds 500,000 Ounces Of Gold

Reserves In June 2014

According to the report--

-Based on the latest update of the Russian central bank, it appears that Russia has added another 500,000 ounces of physical gold to their reserves. Total Russian gold reserves now stand at 35,200,000 ounces, which equals 921.35 tonnes.-

Quick hit of the calculator shows 500,000 oz of REAL PHYZZ GOLD @ say $1300 an oz is $650 Million USD worth of gold coming off the market...with next to no change in spot price.... from only just that one source buying alone.....hmmmm.

(Not even asking 'Where was that Gold vaulted in say, May? Hmmmm.)

"It's becoming obvious to a lot of us that something is NOT RIGHT with the paper markets...."

Might actually be an perception some NYC financial peeps might be able to make, not just us stoopid stackers out here among the muppets ....

Key Economic Events Week of 12/2

12/2 9:45 ET Markit Manu PMI
12/2 10:00 ET ISM Manu PMI
12/2 10:00 ET Construction Spending
12/4 9:45 ET Markit Services PMI
12/4 10:00 ET ISM Services PMI
12/5 8:30 ET Trade Deficit
12/5 10:00 ET Factory Orders
12/6 8:30 ET BLSBS
12/6 10:00 ET Wholesale Inventories

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Key Economic Events Week of 12/2

12/2 9:45 ET Markit Manu PMI
12/2 10:00 ET ISM Manu PMI
12/2 10:00 ET Construction Spending
12/4 9:45 ET Markit Services PMI
12/4 10:00 ET ISM Services PMI
12/5 8:30 ET Trade Deficit
12/5 10:00 ET Factory Orders
12/6 8:30 ET BLSBS
12/6 10:00 ET Wholesale Inventories

Key Economic Events Week of 11/25

11/25 8:30 ET Chicago Fed Nat'l Idx
11/25 7:00 pm ET CGP speech
11/26 8:30 ET Advance Trade
11/26 9:00 ET Case-Shiller home prices
11/26 10:00 ET New home sales
11/26 10:00 ET Consumer Confidence
11/27 8:30 ET Q3 GDP 2nd guess
11/27 8:30 ET Durable Goods
11/27 9:45 ET Chicago PMI
11/27 10:00 ET Pers Inc & Cons Spndg
11/27 10:00 ET Core inflation
11/27 2:00 pm ET Beige Book

Key Economic Events Week of 11/18

11/19 8:30 ET Housing Starts & Bldg Perms
11/20 2:00 ET October FOMC minutes
11/21 8:30 ET Philly Fed
11/21 10:00 ET Existing Home Sales
11/22 9:45 ET Markit November Flash PMIs

Key Economic Events Week of 11/11

11/12 Three Fed Goon speeches
11/13 8:30 ET CPI
11/13 11:00 ET CGP on Capitol Hill
11/14 8:30 ET PPI
11/14 Four Fed Goon speeches
11/14 10:00 ET CGP on Capitol Hill
11/15 8:30 ET Retail Sales
11/15 8:30 ET Empire State Manu Index
11/15 9:15 ET Cap Ute and Ind Prod
11/15 10:00 ET Business Inventories

Key Economic Events Week of 11/4

11/4 10:00 ET Factory Orders
11/5 9:45 ET Markit Services PMI
11/5 10:00 ET ISM Services PMI
11/6 8:30 ET Productivity & Labor Costs
11/6 Speeches by Goons Williams, Harker and Evans
11/8 10:00 ET Consumer Sentiment
11/8 10:00 ET Wholesale Inventories

Key Economic Events Week of 10/28

10/30 8:30 ET Q3 GDP first guess
10/30 2:00 ET FOMC fedlines
10/30 2:30 ET CGP presser
10/31 8:30 ET Personal Income & Spending
10/31 8:30 ET Core Inflation
10/31 9:45 ET Chicago PMI
11/1 8:30 ET BLSBS
11/1 9:45 ET Markit Manu PMI
1/1 10:00 ET ISM Manu PMI

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

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