Spain has recently announced their employment numbers which were horrific and paint a picture of a country in an economic depression. The overall unemployment in Spain is now more than 25% and over 50% for the youngest workers. Greece has similar if not worse employment statistics than Spain. So while the US has it’s elections, all current eyes are on Europe and their woes… for now. I might mention that according to John Williams at Shadowstats, if the unemployment rate was “counted” as it was back in the 1970’s, our unemployment rate would be a shocking 17%!
I bring this up because everything is about perception these days. The “spotlight” is again pointed back at Europe. Just as our election has become about voting because you are afraid of the other guy, finance has become about investing in the least bankrupt place. This is a pretty crappy way to go about investing but unfortunately this is the way it is, placing your trust in the least smelly cow pie! Or at least whatever happens to be the “perception of the week.”
Soon, after the US elections are over (if there are not re counts for the next 6 months), the US will again start to come front and center in the financial spotlight. The dreaded “fiscal cliff” (even though in reality we have already fallen off of it) is set to kick in on Jan 1 as tax rates rise. To be sure, lower spending, higher taxes or any combination of the two will torpedo the economy. Unfortunately, a lower deficit (a surplus) is exactly what is needed to lower the amount of debt in relation to GDP, however, the economy cannot stand on it’s own 2 feet without deficits. Were the 8-10% deficits not been spent, the so called 2% growth (recovery?) would be deeply negative. These recurring blowout deficits have done 2 things, the US Treasury has been bankrupted and the economy has been falsely (as in hidden) goosed to “show” growth. It has so far worked as very few understand that it is necessary to back out this government over spending from GDP numbers to get a correct picture (much the same as backing out the birth/death model’s bogus jobs additions each month to get a true employment figure).
The other side to the equation is “monetary policy” where The Fed has been buying more than half of the Treasury’s offered debt because there are no other buyers. Each and every new plan and “shot in the arm” of monetary stimulus has mustered less and less “growth” in the stock market as depicted below:
My apologies as I do not know who to credit for this chart.
The stock market has clearly had less and less of a bounce with each new “injection” of cash, unfortunately for those who frame perceptions, the stock market is THE only thing that they can point the spotlight at and say that “things are getting better.” One must now ask the question, what if The Fed does another round of QE (or expands the current open ended one) and the markets not only don’t respond but start to sell off? This is just one of many dangers but quite likely in my opinion.
But going back to the “spotlight,” I must wonder why it is that when Europe looks particularly bad, investors cannot make the leap and understand that an imploded Europe also means an imploded US and thus, rest of the world? It is as if those who are doing the steering and pointing the spotlight do not realize that WE ARE ALL IN THE SAME BOAT TOGETHER because the Dollar ties everything together whether you like it or not.
My point to this piece is to only remind you that though Europe is again currently in the news, it will soon be the US’s turn and that a Europe that gets torched and goes down will be followed immediately by the US because of cross loans, cross banking and cross derivatives and fake currencies. No one is immune and everyone smells bad to some extent. Funny how Gold has no smell, good or bad and left to it’s own (without being lent, swapped or rehypothecated) it is simply money in it’s purest form that cannot go bankrupt. Maybe this is why the people running the current Truman Show have tried so hard at keeping you in the dark when it comes to Gold and Silver.