Im Westen nichts neues - nur heisse Luft

verfasst von Tofir, 20.07.2001, 08:54

Current Economic Snapshot July 2001 - Circus Clowns!!!


This executive summary on the current state of the Economy is made for the 21st century manager, who needs hard data in a short and comprehensible format.
The author apologizes for the longer than usual format. Current developments warrant it.




General Commentary:


Mr. Greenspan spoke yesterday, so the markets listened.......He had an interesting report....


"As reported in the previous Monetary Policy Report, the FOMC also initiated a study to evaluate assets to hold on its balance sheet as alternatives to Treasury securities. That study identified several options for further consideration. In the near term, the Federal Reserve is considering purchasing and holding Ginnie Mae mortgage-backed securities, which are explicitly backed by the full faith and credit of the U.S. government, and engaging in repurchase operations against foreign sovereign debt. For possible implementation later, the Federal Reserve is studying whether to auction longer-term discount window credit, and it will over time take a closer look at a broader array of assets for repurchase and for holding outright, transactions that would require additional legal authority."


The previous paragraph comes from the recent monetary report to Congress.
It is very illustrative of the DESPERATE state of the economic situation, since the FED is considering creating additional money by conferring mortgage backed securities the same standing as Treasury debt.
While the implementation of this plan would only legitimize the current creation of money by the GSE's, it changes the nature of money in the US and exposes the currency to further Hyper-Inflation behavior, as the bull market of GSE's securities possibly could get out of hand rapidly, with money supply creation easily exceeding by more than an order of magnitude that of real economic growth. Japan's real estate bubble would be nothing in comparison.....the bubble Made In The USA would surely be much better!!!
Please note that the additional legal authority required for the"broader" asset has far reaching implications, such as changing the law of the land.
The nation is approaching dangerous territory and the loss of Freedom.


Another interesting paragraph:


"Nevertheless, through the first quarter, bank profits remained in the high range recorded for the past several years, and virtually all banks--98 percent by assets--were well capitalized. With banks' financial condition still quite sound, they remain well positioned to meet future increases in the demand for credit."


Could it be that the rate cut circus was designed to shore up a faltering banking system? We already know that the excessive rate cuts have been deleterious to the economy by the extraction of available funds and capital, that are being sent with final destination to short term treasuries.
It is good to know that thanks to the rate cuts 98% of banks are well capitalized, notwithstanding that the overall reserve ratio of the system is only 0.92% of Demand Money Supply (M1+Saving Deposits+Retail MMF's).
The author doesn't even want to ask what the reserves would be if the banks were not well capitalized and is very happy that at least almost 1 cent on the dollar is being kept away as reserve and that the health of the banking system will be assured by the continued rate cuts that the Fed Chairman has already forewarned us of.


Recently a professor at MIT, Mr. Rudiger Dornbusch expressed the ignorance of Latin American and global economics that hopefully he does not transmit to his students, by issuing an article in which he states that all is risk and there is no reward in Latin America.
The truth is that capital returns in Latin America are stronger by far than in the US for"working" capital. For"gambling or hot money" capital, the one that Mr. Dornbusch apparently confounds with good capital, of course times are bad, as the current dysfunctional wealth transfer from South to North via dollar and globalization continues marching on.
Argentina, Brazil, Turkey, Africa, etc., are just symptoms of the problem: lack of a monetary system based on money with real value and intrinsic wealth, not debt as currently is the case.
In effect, the US is being subsidized by the exporting nations.
Therefore, the lower deficit of May, which must have some people cheering in the US, represents in actuality a drop in the subsidy as the drop in imports was higher than the increase in the dollar index for May.
Therefore, this correction in the deficit is temporary and unsustainable, even if it would appear that it will improve GDP for Q2. It bought the US a bit more of time....


Meanwhile, the distortions and fluctuations in the energy market are being exacerbated once again and a cut in output by OPEC in September looms all the more certain.
This would be catastrophic as the winter comes in given the soaring money supply situation.


Like circus clowns that juggle balls in the air with miraculous and unbelievable precision, the interventionist organizations in the economy keep working full time to keep the mirage in good shape, but there comes a time when with the addition of just another single ball in the air, the whole lot comes crashing down to earth, no matter how good the jugglers are.


And the media? Well, thank you!!!! While they ignore GATA, the strong dollar, export of inflation and the Hyper-Inflationary Depression, they have moved from the O.J. saga, to the Clinton - Lewinsky scandal. Just as things started to cool off, they intervened in the US election and made a big story and mess of it and now, after this issue cooled off too, they are feeding us with the Levy story.
The more the media tries to distract public opinion from the true issues at hand, the more one learns about the true sorry human state of the persons that constitute high government in the US, and in many other countries for that matter.
The media should be ashamed of themselves, as they continue the longest and most successful soap opera in history with full speed ahead.




Money Supply for June 2001:


M3 up 77.4 billion for the month of June to 7,579.4 billion from 7,502 billion.
For the 6 month period of Jan-June M3 was up 6.73 % or a 13.47% yearly growth rate for 2001.


M3 monthly yearly growth rates:


January 15.77%
February 9.86%
March 9.53%
April 17.64%
May 13.46%
June 12.38%


M3 average yearly growth rate June 2000 - June 2001 INCREASED to 11.29% from previous month's 10.94% rate.


M1 is showing signs of breaking from the relative deflationary leash it has been subjected to. Yearly growth rate is currently at 6.49%. Apparently M2 creation is starting to spill over.


GDP:


Q2 GDP projection stands at 1.2% yearly growth rate.


Public Debt for End June 2001:


HIGHER debt from 5,656 billion to 5,727 billion. The debt was higher by 71 billion during the last month. The Treasury has apparently been servicing the growth of debt by about 55 billion during the month, therefore, apparently we are in debt expansion mode again.




Goods and Services Trade Deficit May 2001:


May's Goods and Services Trade Deficit came at $28.3 billion versus a $32 billion deficit in April.
April was revised downward by 0.2 billion.


The goods deficit with Canada INCREASED from $4.6 billion in April to $4.9 billion in May.
The goods deficit with Japan DECREASED from $6.4 billion in April to $4.8 billion in May.
The goods deficit with Mexico INCREASED from $2.2 billion in April to $2.7 billion in May.
The goods deficit with W. Europe DECREASED from $5.8 billion in April to $4.6 billion in May.
The goods deficit with China DECREASED from $6.3 billion in April to $6.1 billion in May.
The goods deficit with OPEC INCREASED from $3.7 billion in April to $4.1 billion in May.


2001 Yearly projected deficit stands at $373 billion, down 23 billion from last month's forecast, for a projected 0.87% increase from last year's deficit despite the current recession. What this indicator is telling us is that things will get much worse, before they get better.
The pundits forgot about the H2 recovery and are calling now for recovery early 2002.




Inflation:


The Crude Raw materials in the producing chain have DECREASED in price 2.23 % from June 2000 to June 2001. June saw a DECREASE of 7.2 %.
We are either getting a whiff of hedonics, international currency failure or better still economic instability and wild fluctuations due to a manipulated Hyper-Inflationary Depression.


Energy Crude materials have DECREASED in the same period 5.74 %.
June saw a DECREASE of 11.95 %.


All commodities inflation is running at 1.42 % from June 2000 to June 2001, despite the manipulation of the precious metals markets.


The PPI (Producer Price Index) for June 2001 yearly average stands at 2.42 %.
Core PPI stands at 1.60 % YTD.
June figure stands at -0.35 % rate increase.


The CPI (Consumer Price Index) for June 2001 yearly average stands at 3.79 %.
Core CPI stands at 3.08 % YTD.
June figure stands at 0.23 % rate increase.


Money Supply Inflation from June 2000 - June 2001 is running at 11.29% a year.


ECI Q1 (Employment Cost Indicator) came in at about 1.1 % or 4.5 % yearly rate.


The Future Inflation Gauge of the Economic Cycle Research Institute, an index that Mr. Alan Greenspan is known to monitor, started to slide again a bit more into the abyss, after apparently having established a bottom in May.


The FIG, which is an designed to anticipate cyclical turning points in inflation fell to 104.2 in June from 105.3 in May.
The smoothed annualized growth rate of the index increased to -16.1% in June from -16.5% the prior month.


It is interesting to note, that with the exception of the full PPI, all other measures such as Core PPI, CPI and Core CPI are higher for the 6 months of 2001 as compared to the same period of last year, notwithstanding the recessionary environment.


2000 6 months:
PPI 4.61% rate, Core PPI 1.10% rate, CPI 3.42% rate, Core CPI: 2.68% rate.
2001 6 months:
PPI 2.42% rate, Core PPI 1.60% rate, CPI 3.79% rate, Core CPI: 3.08% rate.




Total Debt and Derivatives:


Total debt for the 12 months from end May 2000 to May 2001 was up 4.72%, down from the previous month's 4.76% rate, from 17,725 billion to 18,561 billion. (Fed Statistics).
This puts the average debt per person at the amazing quantity of $66,800.


Per capita debt INCREASE of $200 this month.


The 2 fluctuations to the negative side in the last 6 months indicate instability in the system. In a debt based inflationary system, this 33% inefficiency is mortal of necessity.


Derivatives will perhaps keep growing like there was no tomorrow till December.
Let's see how a good dose of 15% gold backed Euro affects this market early next year.




Precious Metals:


Gold prices apparently continue to be flagrantly manipulated.
Where are the regulators and the Justice Department when they are really needed? Nowhere to be seen.
Since the Justice system of ANY nation, is as good as the character structure of their individual justice system officials, we are soon to see a test of utmost importance with the pending lawsuit in Boston.
For starters, the judge is taking some time to decide if he goes forward with the case. This can only mean that the GATA evidence is overwhelming and it is not easy to throw out the case.


The author finds it very curious indeed, that perhaps coincidentally, as Mexico embarks slowly but surely on a parallel system of Honest Money by putting more and more silver ounces in circulation, and at the same time there are discussions on the payment of the public debt with the reserves, the House of Mr. Guillermo Ortiz, Governor of the Banco de Mexico, was attacked by gunmen last night with the result of one bodyguard injured. We sincerely hope it is an unrelated and"lone" incident.


The Cabal is desperate. It wouldn't be surprising after all that the speculations regarding the non-existence of the Treasury's gold might have some truth in them.


Gold expressed in terms of demand money supply is about $16,000 per ounce. If indeed 1,700 tons are missing then this gold price figure goes up to $20,000.
If more gold is missing, such as deep storage meaning"not mined yet" well, you get the picture.....




Oil and Energy:


Iraq lifted the export EMBARGO and oil prices continued to slide.
If current behavior persists, OPEC could very possibly reduce production by 500,000 barrels per day in September. Let's see how Mr. Greenspan juggles this additional air-ball. He will have to ensure a warm winter, and things start to get complex. Monetary sins are payed in full on this earth.


Continued indications of a moderation in the increase of drilling activity are evident as this mini-98 scenario unfolds. A repeat of the 99 increase in price behavior is not out of the question despite the relative deflation environment.


For the first 193 days of 2001, compared to 2000, the US has imported 5.9% more petroleum products, for an average of 10.832 million barrels per day versus last year's 10.233 million barrels per day. Crisis, What Crisis?


The mild summer in the West is bolstering false sentiments that the specter of an energy crunch is rapidly receding. Even the California politicians seem to be subdued as of late.
Natural gas storage is 13.29% higher than last year or 239 billion cuFt higher.
Fact is that the situation is worse than before. The nation is more dependent on imports and more dependent on the strong dollar policy to subsidize those imports.
As economies all around the globe implode due to the increasingly taxing effect of the subsidy, the energy crisis will return eventually in a magnified scale.
As one of our favorite socialists would say:


You ain't seen nothing yet!!!


"Azteca de Oro"


Disclaimer:


The information presented by the author is not intended to be used for investment purposes, and it may contain errors.
It is intended only to give the reader an eagle's view of the state of the economy and/or energy markets, as perceived by the author.
It reflects the author's opinion and no representation as to the accuracy of this data and/or opinions is made, as it may reflect on the bias or interpretation of the author.
However, to the best knowledge of the author, the data presented is accurate.


Gruss

tofir

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gesamter Thread:

• Im Westen nichts neues - nur heisse Luft - Tofir, 20.07.2001, 08:54
  • Warum sollen Derivate ausgerechnet bis Dezember mengenmäßig zulegen? - El Sheik, 20.07.2001, 10:18