Posts Categorized: USAWatchdog.com

Posted by & filed under USAWatchdog.com.

Dear CIGAs,

By Greg Hunter’s USAWatchdog.com

Barack Obama addressed the country for the third State of the Union address of his Presidency this week.  In broad terms, he talked mostly about innovation, education and jobs.  To be fair, he also briefly touched on the deficit, the two wars we are fighting and unity.  But because so much emphasis was put on education, it sounded more like an address to a local PTA and not an SOTU speech.  The financial problems the country is facing now are so enormous it was startling they were glossed over or not mentioned at all.

The country is deeply in debt, and it will sink deeper when Congress raises the debt ceiling in a few months.  Experts say it has to be expanded by a trillion dollars a year for the foreseeable future; otherwise, the U.S. will default on its commitments.  This is a minimum of $1,000 billion of new debt ($1 trillion) added on top of the record national debt of $14.3 trillion.  The American people deserve, at least, an explanation and a plan on reducing it.  By the way, the Congressional Budget Office (CBO) announced yesterday this year’s deficit will hit an eye popping $1.5 trillion (another record), which means we will borrow 40 cents of every dollar we spend. 

The CBO also announced this week that Social Security will slip into the red this year and pay out $45 billion more than it collects in payroll taxes.  The report claims Social Security will stay underwater and be flat broke by 2037.   I’m betting it will go under a lot sooner.  This, too, deserved a frank discussion.

I also cannot see why the President chose to ignore the ongoing foreclosure crisis in this country.  A record one million people were thrown out of their homes in 2010, and housing experts say a new record will be set again this year.  By 2013, six million homes will have been foreclosed on and this didn’t even rate a mention?

A record 43 million Americans are surviving on food stamps.   That’s nearly 20 million more people getting a government handout than in 2007.  By the way, JP Morgan runs the program for the government; and the more people go on food stamps, the more the bank makes.  I don’t know how bad this has to get to be mentioned in the State of the Union?

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Posted by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com

Dear CIGAs

In November 2010, the Federal Reserve announced a second round of economic stimulus commonly referred to as Quantitative Easing (QE2).  The reason, according to the Fed, was “progress toward its objectives has been disappointingly slow.”   So, to try and turn the economy around, the Fed said, “. . . the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter (June) of 2011, a pace of about $75 billion per month.”(Click here to read the complete announcement from the Fed.) QE means the Fed basically creates money out of thin air to buy debt.  The current money printing orgy is financing more than half of U.S. government right now.  The first round of QE bought toxic mortgage debt and bailed out the bankers.

What was not said in the press release was much more important and may go down as one of the biggest turning points in the history of America.  Bringing on QE2 meant QE1 ($1.75 trillion) failed to provide a sustained recovery.  It also exposed the $12.3 trillion total spent or loaned by the Fed since the meltdown of 2008 failed to give the economy a lasting boost.  The Fed did save some businesses and all the big Wall Street Banks from bankruptcy, but we now know nothing has really been fixed.

This brings me to one really important question.   I put this question to a group of well-known market experts, economists, investment bankers and big thinkers.  The five guys you are about to hear from have at least one major thing in common.  They all predicted tough times for America when most didn’t see it coming.  So, I asked them all last week to peer into the not-so-distant future for their take on “What happens when QE2 ends?”

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Posted by & filed under USAWatchdog.com.

By Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Housing starts are a tried and true barometer of business activity.  If there was a real economic recovery going on, housing starts would be, at the very least, edging up.  Please keep in mind the government is providing some of the lowest mortgage rates in a generation.  A 30-year mortgage is around 4.75%.  This week, the Commerce Department reported housing starts were down 4.3% last month. Here’s how this was couched in the opening line of a Bloomberg story:   “Builders began work on fewer homes than projected in December, a sign the industry that triggered the recession continued to struggle more than a year into the U.S. economic recovery.” (Click here to read the complete Bloomberg story.)

“More than a year into the U.S. economic recovery.” What recovery? I feel Bloomberg does a better job than most reporting the financial news, but I cannot figure out why nearly all reporters universally keep beating the “recovery”drum when there is no actual proof of a sustained recovery.   The same Bloomberg story quoted above backs up my contention.  It said, “Boston Fed President Eric Rosengren is among central bankers concerned growth won’t exceed 4 percent this year because the housing recovery is likely to be weaker than usual, given the tightening of lending standards and high vacancy rates. “If housing-related growth is not going to boost the recovery this time around, we may need policy — particularly monetary policy — to continue playing a stimulative role,” Rosengren said in a Jan. 14 speech.”

Why in the world would the Fed need “to continue playing a stimulative role” if there was, in fact, a sustained recovery?  The answer is simple—there is no recovery.  For example, just this week, American Express announced it is closing a call center in Greensboro, North Carolina.  It is one of four in the U.S.  1,900 high paying white-collar jobs will be gone by the end of the year.  Does this sound like a growing economy where credit is being extended?  This is not just the loss of those jobs, but it will cause a ripple effect.  For instance, Am Ex and its employees contributed $250,000 last year to the local United Way. (Click here ro read more on the Am Ex call center closing.)

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

For months now, the Federal Reserve has been worried about inflation being too low.  So low, that the Fed claims it is unhealthy to the U.S. economy.  When it announced its second wave of money printing (QE2) in early November 2010, the Fed said, “Longer-term inflation expectations have remained stable, but measures of underlying inflation have trended lower in recent quarters. . . . To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities.” (Click here to read the Complete Fed News release from November 2010.) That means the Fed started printing $75 billion a month, out of thin air, to finance more than half of the U.S. budget.  QE2 is scheduled to end in June, but many predict it will be immediately followed by some sort of QE3.

The mainstream media is spinning the latest consumer price numbers as good news, but inflation 2011 is here.  The Associated Press called inflation “tepid.” The story went onto say, “The Labor Department said Friday that consumer prices rose 0.5 percent last month, the largest increase since June 2009. Roughly 80 percent of the increase was due to higher gas prices. . . . Without food and energy costs, consumer prices only increased by 0.1 percent for the second straight month. This “core” inflation rate has gained 0.8 percent in the past year, evidence that prices are not rising too quickly.” (Click here to read the entire AP story.) It would be nice to live in a world where you don’t need food or energy, but that simply is not the case.

On the other hand, the Fed plan to stoke the fires of inflation is working nicely according to the latest report from economist John Williams at Shadowstats.com.  Williams strips away all the accounting gimmicks that make inflation look tamer than reality.  The Shadowstats.com report last Friday said, “There are numskulls in the financial media — toadies to the Federal Reserve — who would like to think that energy and food inflation do not count.  Simply put, the monthly December inflation releases for the CPI-U (annualized 6.2% inflation), CPI-W (annualized 7.8% inflation) and PPI (14.0% annualized inflation) were disasters . . .” The credit or the blame for the big spike in inflation is the direct fault of the Fed.  “The sharp increases in December energy and food prices were not due to normal price volatility in those areas, instead, they were created directly by Federal Reserve Chairman Bernanke’s ongoing push to debase the U.S. dollar — to destroy the purchasing value of the U.S. currency,” said Williams. (Click here to go to Shadowstats.com)

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

I was shocked to see this headline from an Associated Press story yesterday, “Economists project home sales, construction to rise sharply in 2011 from extreme lows of 2010.”   I was dumbfounded by the title of the article and even more taken back when I read the story which said, “The forecast delivered at the International Builders’ Show in Orlando sees U.S. economic growth sharply lifting home sales and residential construction over the next two years, but from near-historic lows posted last year. “  The chief economist for the National Association of Home Builders, David Crowe, said, “Single-family home construction, a bellwether for the housing market and the economy, will rise 21 percent to 575,000 this year and climb to 860,000 in 2012.” (Click here to read the full AP story.)

That is still about 75% less new construction from the peak of the housing boom a few years ago.  This forecast was made just prior to yesterday’s release of the “Year-End 2010 U.S. Foreclosure Market Report” from RealtyTrac.com.  Its headline read “Record 2.9 Million U.S. Properties Receive Foreclosure Filings in 2010 Despite 30-Month Low in December.”  The report went on to say, “Total properties receiving foreclosure filings would have easily  exceeded 3 million in 2010 had it not been for the fourth quarter drop in  foreclosure activity — triggered primarily by the continuing controversy  surrounding foreclosure documentation and procedures that prompted many major  lenders to temporarily halt some foreclosure proceedings,” said James J.  Saccacio, chief executive officer of RealtyTrac.  “Even so, 2010 foreclosure activity still hit a record high for our report, and many of the foreclosure proceedings that were stopped in late 2010 — which we estimate may be as high as a quarter million — will likely be re-started and add to the numbers in early 2011.”  (Click here to read the entire RealtyTrac report.)

So, a back log of foreclosures will increase by about 20% in 2011, which RealtyTrac is predicting to be another record year.  There have been 3 million repossessed homes since 2006, and RealtyTrac says there could be “3 million” more by 2013.  2010 was also a record year for repossessions with well over one million homes taken back by the banks.  Meanwhile, the National Association of Home Builders is expecting a 21% increase in new homes?    

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

The mainstream media was at it again last week–putting a positive spin on the awful real estate market.  The USA Today headline on top of the “Money” section last Thursday read “Optimism for home sales adds up.”   The story said, “The trend is starting to move in the right direction,” says Diane Swonk, chief economist at financial services firm Mesirow Financial.  A string of new housing data is building optimism. Existing home sales in November rose 5.6% from October to a seasonally adjusted annual rate of 4.68 million, the National Association of Realtors reported Wednesday. Demand has steadily improved since bottoming in July following the end of the buyers’ tax credit.” (Click here for the complete USA Today story.)

The headline and the beginning of the story would lead you to believe everything is turning around and the worst of the housing meltdown is behind us.  The article failed to include the true context of that whopping 5.6% rise in sales.  Here’s how Marketwatch.com reported the exact same story, “Sales of existing homes rose 5.6% to a seasonally-adjusted annualized rate of 4.68 million, the National Association of Realtors said Wednesday . . . Even so, sales were still 27.9% below prior-year levels and below the 5.26 million in June when a homebuyer tax credit existed.” (Click here to read the complete Marketwatch.com story.) Yes, the spin from USA Today left out the fact home sales were still nearly 28% below last year’s levels.

This is despite the homebuyer tax credit program that doled out up to $8,000 for buying a home.  USA Today buried the real headline and that was this little morsel, “Home prices, down almost 30% from their 2006 peak, will fall 5% to 7% more before potentially rebounding later in the year, says Patrick Newport, IHS Global Insight economist. Banks will repossess 1 million U.S. homes next year, on top of 1 million this year, says market researcher RealtyTrac.”  How are back to back years with millions of “home repossessions” and declining prices of another “5% to 7%” not the lead in a story?  What does “Optimism for home sales adds up,” mean?  Optimism adds up to another million foreclosures and another price decline?  This is just another attempt to put lipstick on a pig of a housing market.

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

Some people see the Internet as an electronic world of wires and computers run at speeds measured in nanoseconds.  I tend to see the Internet as an electronic extension of human biology.  Sample enough of the Internet in the right places and you can get a snapshot of what people are generally feeling. One of my own readers, Alyce, commented recently, “It’s easy for people to become lulled into a false sense of security. The term normalcy bias keeps popping up in articles I read lately. It is when people interpret warnings in the most optimistic way possible. Happens all the time…human nature to believe that since a disaster has never occurred in one’s lifetime, that it just never will. Trust your instincts.”  Bravo Alyce!  What are some of the headlines flashing warning signs?  Let’s start with one concerning the ongoing enormous problems with the banks.  The Phoenix Business Journal reports “Arizona, Nevada Sue Bank of America over home loans, modifications.” The story goes on to say, “Attorney General Catherine Cortez Masto filed in the Eighth Judicial District of Nevada . . . The Nevada complaint alleges the bank told consumers they would not be foreclosed on while requests for loan modifications were under way, not acting on the modifications within a specific time, making false promises to consumers and potentially selling their homes while they were waiting for decisions. “We are holding Bank of America accountable for misleading and deceiving consumers,” said Masto. “Nevadans who were trying desperately to save their homes were unable to get truthful information in order to make critical life decisions.” (Click here to read the complete story.) There have been dozens of lawsuits against banks alleging fraud and wrongdoing.  This marks a new twist in that, now, lawsuits are coming from state AG’s.

The FDIC shut down another 6 banks last week.  157 small banks have gone under this year alone.  Instead of sounding the alarm, this news is met with a yawn by the mainstream media.  This is a record for the new millennium and proof positive things are NOT getting better.   On the big bank front, many say they are hiding the fact they are insolvent!  The Market-ticker.org headline says it all “System Was Insolvent In 2008 (And Still Is)”. (Click here to read the complete story.) We are clearly facing a systemic solvency problem, but few people realize just how bad the economy really is.

Economist John Williams has been warning of an economic collapse for a few years.  In his latest Shadowstats.com report, he says, “. . . the U.S. remains the proverbial elephant in the bathtub in terms of pending effective sovereign bankruptcies.” Williams thinks it will all hit the fan within 6 months and is predicting a dollar catastrophe.  Europe is a sideshow to the coming main event.  Williams says, “The various European crises remain an intermittent foil for the U.S. dollar, pulling market attention away from the unfolding solvency crisis in the United States and a likely move to massive selling against the U.S. currency.  Accordingly, high risk of the early stages of a hyperinflation (see Hyperinflation Special Report) beginning to unfold by mid-2011 continues.”

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Posted by & filed under USAWatchdog.com.

Courtesy of Greg Hunter’s USAWatchdog.com

Dear CIGAs,

There are some big messages being put out by the government that appear to be for the sole purpose of reassuring the public that everything is under control.  Bernanke appeared on “60 Minutes” 10 days ago to tell the public that he is “100 percent” sure inflation is not going to be an issue, and that it’s a “myth” the Fed is “printing money.” I am not going to touch on the veracity of his statements.  I did that in a recent post called “CBS Allows Fed to Spread Disinformation Unchallenged.” I want to explore why the Fed Chief felt it necessary to go on nationwide television to, basically, tell America and the world that he’s on top of the economy?  He could have gone on Bloomberg, CNBC or held a press conference at the Fed and got coverage for his message.  Why didn’t Mr. Bernanke ask to be on “60 Minutes” when he announced an unprecedented second round of more than $600 billion of Quantitative Easing in early November?  That was a big announcement–what he did 10 days ago was not.

Fast forward to last Friday.  See Bill Clinton and Barack Obama on stage to announce a united front to push a new tax package that extends the Bush cuts to all.  Everyone in the mainstream media seems to describe this as “impromptu,” but I think it was staged to send the message that things are under control.  Bill Clinton enjoyed one of the best economies in U.S. history.  He is the face of prosperity and good times.  Long time ABC Correspondent  Ann Compton, during a radio interview this week, described the feeling in the room as “desperation.” The network coverage was just the opposite when it came to describing the “impromptu” press conference of Democratic Presidents.  Newsbusters.org highlighted the gushing network coverage Monday, “. . . Good Morning America’s Dan Harris raved, “That was an awesome bit of political theater. An amazing atmosphere in the room, I have to imagine.”  Reporter David Kerley saw Clinton’s Q&A as a return to the 1990s and “the form that he showed in that White House briefing room when he was President.” On NBC’s Today, Mark Halperin touted Clinton holding court with reporters for 20 minutes (after Obama exited) as “great political theater.” Finding lessons for the current president, he enthused, “Bill Clinton figured out how to compromise, but still show people he was true to his principles and fighting hard for the middle class.” (Click here to read the entire Newsbusters.org post.)

I have to admit, for a moment, I did get a warm fuzzy feeling that things were on the right track again.  Then, cold hard reality sank back in.  The Hill reported Monday, “The package could add $900 billion to the national debt, if it is made permanent, and this increases the chances the U.S. would one day default on its debt.  ”From a credit perspective, the negative effects on government finance are likely to outweigh the positive effects of higher economic growth. Unless there are offsetting measures, the package will be credit negative for the US and increase the likelihood of a negative outlook on the US government’s Aaa rating during the next two years,” Moody’s analyst Steven Hess writes.” (Click here fro the complete Hill post.)

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