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By Admin, November 23, 2009 7:47 pm

Now and then//1929, 2009//the coming Depression. Part XTraditional economic theory tells us that the money supply may be used to stimulate an economy and obviously this Congress and Administration not only believes that but strongly support it to levels that they themselves would never agree to if the Conservatives were in power. I’m talking about this Administration pumping more than one Trillion dollars into the economy since taking office eleven months ago; this does not include the hundreds of Billions for bailouts and government takeover of the auto industry. As of lately Obama’s team has told us that these trillions have been a success, not so much evidenced by tangible results but rather by preventing matters to get worse; I guess we’ll never know if things would have been worse but what we do know  is that are no actual positive results from the government spending.  The federal balance sheet is about 137% over what it was at the end of 2008. Yes, Obama took the deficit from 928 billion to about two trillion in only eleven months. Economic common theory dictates that we should be approaching hyperinflation but that is not the case; in fact we have been deflationary since April of this year. I have stated various reasons for this throughout this series and will not repeat them here at this time. Suffice it to say at this time that wages and wage inflation are lower than should be expected if the economy was healing due to the stimulus trillions. The signs this administration points to as evidence that the economy is on a slow rebound and that the Recession is near its end are false and nothing in the economy with any substance supports the “end of the recession”. Any indication of earnings growth is due to expense reduction instead of sales growth. Prior to the financial meltdown job growth averaged about 1% over the last three years whereas now it’s falling by over 4%. At the time of this financial meltdown, Washington told us they had to do something or the “sky would fall”, it was the end of the world as we knew it and they had to do whatever it took to save capitalism; I have to ask in all honesty, who do you think is and has been in charge of solving this “global financial disaster”, the very people and institutions that got us into this mess. When government, business and Wall Street got in bed together last fall, it was the end of the “real economy” as we entered into a “government controlled” paper economy dominated by money that does exist as GDP. In all reality the economic “boom” (growth) of 2001-2007 was partially “paper economy”, it was false growth which infused itself into our GDP but it was “counterfeit”. It was based on debt spending and not on “real” purchasing power. As the “sub-prime” debt began to unravel our elected officials should have been able to see the real problem as debt, but instead of reigning in the debt Washington started spending and has not stopped for the last 18 months. The average high school dropout knows that you cannot spend yourself out of debt. I have been saying since May of this year that we are heading towards a “Depression” and I continue to stand behind those beliefs. All of the positive indicators concerning the economy are false (not lies, just false) because they are generated and driven by the paper economy and are not supported by jobs and GDP. Just today President Obama stated that the economy is starting to grow and the recession is just about over. Consider this: after nine months of a very positive DOW and Wall Street numbers, some positive comments from some businesses and a White House speaking positively of the economic health; people start to think that the recession is coming to an end, that very thought begins to renew confidence and some people start spending again which of course generates visible signs of recovery. The accepted understanding is that recessions last about two years, so it’s easy to accept that the recession is over and recovery is ahead. The only recovery at hand is in our heads, until the government gets out of the market place, the economy cannot and will not rebound. The beginning of the 20’s were recessionary/mild depression but only lasted about four years, there was no government intervention in the economy; interest rates were cut and the top tax rate of 70% was cut to 24% in three years which result in the “roaring twenties”. Those “roaring twenties” were very much like our economic boom of 2001-2007, extreme spending on debt; the result was the “Great Depression” which lasted over ten years. It lasted that long because of extreme government intervention in the economy and social fabric of society with its many entitlement programs. The recession may in fact be nearing its end but not to the tune of a recovery. I’ll say it again; there is nothing in the economy with any substance which would point to anything but a “depression” ahead.

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By Admin, November 9, 2009 7:07 pm

[«] Money and Markets 2009 Archive View This Issue On Our Website [»] Massive Revolutionary Changes by Martin D. Weiss, Ph.D. Dear Subscriber, I’ve just returned from Munich, Germany, where Claus Vogt and I addressed the 8th Annual Conference of Sicheres Geld subscribers. Here are the highlights of my side of the presentation. (Claus will give you his side in a future issue). Massive Revolutionary Changes A few years ago, when we first began this journey together, we warned that the U.S. government was leading us to a future banking panic. We warned about the housing bubble that was about to burst. We told you about the giant monster of derivatives that could someday explode. And we showed you how the U.S. real estate bust and the derivatives monster were likely to strike the largest financial institutions of Wall Street, threatening a meltdown in global financial markets. Then, three years ago, we described the coming crisis in greater detail, naming the large financial institutions we believed were most likely to fail: Bear Stearns and Lehman Brothers, two of America’s largest investment banks Countrywide Financial and Fannie Mae, America’s largest mortgage lenders Washington Mutual, America’s largest savings and loan corporation Citigroup, America’s largest consumer ban Virtually no one believed this was possible. When we gave the story of the Citigroup failure to a reporter of a major business magazine, the editor nixed the story. When we told other banking experts that Citigroup was on the brink of failure, they laughed. When we told government officials, the company executives simply told them we were crazy.   Internal Sponsorship Have you claimed your free membership? The Weiss Forecast Contest for 2010 will be ending soon, and we’d hate for you to miss out on your opportunity to get a free, no-strings-attached subscription to any one of the FIVE wealth-building newsletters we publish. So why not take a few seconds to tell us what you see ahead for key investments next year. Click here to learn more …   As it turned out, the crisis was not less severe than we expected. Nor was it as severe as expected. Rather, the crisis was actually more severe — for two reasons. First, in addition to the companies that we named as candidates for failure, several other giant companies that we had not named also went bankrupt or required a bailout. The failed Wall Street firms included not only Bear Stearns and Lehman Brothers, but also Merrill Lynch. The failed commercial banks included not only Citigroup, but also Bank of America. The bankrupt institutions were not only in the U.S., but also in the U.K., Germany, and even Switzerland — Royal Bank of Scotland; IKB and Hypo Real Estate in Germany; and UBS in Switzerland. They included not only banks and brokerage firms, but also the largest single insurance company in America, AIG. But whether we named them ahead of time or not, the salient fact is that, in nearly every major financial industry — commercial banking, investment banking, consumer banking, brokerage, mortgage lending, and insurance — the companies that failed, or almost failed, were not small- or medium-sized. They weren’t the third largest or fourth largest. They were the single largest in the world. Think about that: The world’s largest companies in every single sector of the financial industry. Failed. Bankrupt. Now, fast-forward to today, November 7, 2009. Suddenly and miraculously, the same economists who told you this crisis could never happen are now telling you that this crisis is “over.” And the same government officials who scoffed at the notion of giant financial failures are claiming they have the final solution to those failures. But the derivatives we warned you about are not gone. They are still there. Nor are the bad debts on the books of major banks. And most important, the government policies which created the crisis in the first place have not been modified or reduced. They have actually been accelerated, as we’ll demonstrate in a moment. And therein lies the second reason the crisis is actually worse than we expected. With its deliberate policies, the U.S. government, along with governments here in Europe, have now transformed the Wall Street debt crisis into the Washington debt crisis. They have transformed a crisis that was bankrupting individual institutions into a crisis that could threaten to bankrupt sovereign governments. Worst of all, they have converted a crisis of debt into a crisis of our currency. This chart shows the monetary base of the United States. It represents the most basic form of money supply — cash currency in the coffers of U.S. banks plus their total reserves. As long as this basic measure of money supply is growing at a moderate pace, you can generally expect stability in the U.S. dollar, gold, and other markets. There will be ups and downs, of course, and sometimes, due to other global events, those ups and downs could be sharp. But they will not turn the world upside down. Indeed, this had been the pattern since World War II: relatively moderate expansion. Up until September of last year, when Lehman Brothers failed, it took the U.S. Federal Reserve a total of 5,012 days to double this measure. But then, look what happened: Fed Chairman Ben Bernanke doubled the U.S. monetary base in 112 days. Not in 5,012 days as his predecessors had done — but in a meager 112 days! He accelerated the pace of bank reserve expansion by a factor of 45 to 1. Imagine a crowded highway with most cars traveling at an average speed of 100 km per hour. Then imagine a new driver appearing on the scene with a jet-powered engine that accelerates to a supersonic speed of 4,500 km per hour. That’s the same magnitude of change Fed Chairman Bernanke has presided over. Ladies and gentlemen, this is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy. Even in the most extreme circumstances of history, the Fed never pumped in this much money in such a short period of time. For example, before the turn of the millennium, the Fed was afraid of a computer catastrophe at the banks caused by the widely publicized Y2K bug. So it rushed to provide liquidity to U.S. banks and increased the monetary base by $73 billion in three months. At the time, that was considered huge. But this time, Mr. Bernanke has increased the monetary base by over $1 trillion, or 14 times more! Here’s another example: In the days following the terrorist attacks on September 11, 2001, the Federal Reserve rushed to flood the banks with liquid funds. That time, it added $40 billion in less than 14 days. However, Mr. Bernanke’s recent trillion-dollar deluge of money is twenty five times larger. Here’s the most astounding fact of all: After the Y2K and 9/11 crises had passed, the Fed promptly reversed its money infusions. It pulled out the extra liquidity from the banking system. But this time, Mr. Bernanke has done precisely the opposite. Since he doubled the currency and reserves at the nation’s banks with his 112-day money-printing frenzy in late 2008, he has thrown still more money into the pot. And late last month, the monetary base surged to new, all-time highs. Ladies and gentlemen, this is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy. This is the elephant in the room — the situation that everyone knows is there, but no one wants to admit. Now, let’s take a look at this same elephant from another perspective — the largest federal budget deficits in the history of mankind. If the U.S. federal deficit were growing by 20 percent, 30 percent, or even as much as 50 percent, the pundits could have argued that it was just the continuation of a long-term trend, that it was simply more of the same. But just in the last 12 months, the U.S. federal deficit has exploded from $454.8 billion in fiscal 2008 to $1.4 trillion in fiscal 2009. It has tripled in size in just one year’s time. I repeat: This is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy … and it’s totally unprecedented in history. Now let’s turn to the consequences of these events — first, the intended consequences and then some of the unintended consequences. Consequence #1 is a recovery in the U.S. economy. When the government creates that much monetary and fiscal stimulus, it naturally has some impact, of course. That’s why a recovery is now under way and why it is likely to continue for a few more quarters. Consequence #2 is the rally in the U.S. stock market. Again, when so much liquidity is pumped into the economy, it’s only natural that some of it would flow into equities. Consequence #3 is a recovery in emerging markets. Here, unlike the U.S. and other Western economies, not only are the economies benefiting from government stimulus, but they are also benefiting from strong domestic fundamental growth factors. Consequence #4 is the decline of the U.S. dollar. The greenback is falling against the euro and virtually every major currency on the planet, and it will probably continue to do so. The U.S. Dollar Index, which measures the dollar against a basket of six major currencies, is now nearing its lowest level in history. Once that level breaks, the pace of the dollar’s decline could accelerate sharply. Consequence #5 is the decline in the value of paper money as a whole, and the parallel rise in gold. Friday, gold pierced the $1,100 per-ounce level. Next, despite any intermediate setbacks, it could rise to $1,300. Consequence #6 is rising interest rates. Yes, the Federal Reserve can hold its official short-term interest rates near zero, and this is precisely what it’s doing. But the Fed does not exert the same control over long-term interest rates. Nor can it control foreign central banks, some of which are beginning to raise interest rates. And most important, the U.S. government cannot control foreign investors who now own over half of the publicly traded U.S. government securities. Meanwhile, the forces driving long-term interest rates higher are powerful and enormous — the same forces we told you about earlier: massive monetary inflation and equally massive federal deficits. Consequence #7 is an anemic U.S. economy overall, weighed down by high unemployment, low spending, and most important, the largest debts of all time. Don’t expect this recovery to last very long. A second recession could come quickly on its heels. I am often asked: Is the recession over? My answer is “yes.” But to the more important question — is America’s long-term depression over? — my answer is a firm “no.” In the years ahead, we’re likely to see a series of longer-than-usual recessions interrupted by shorter-than-normal recoveries, all adding up to a long depression. Such is the inevitable consequence of the massive, revolutionary changes that have already taken place … with more changes of similar magnitude still ahead. P.S. Our whitelisting instructions have changed! To ensure you don’t miss out on any breaking news or alerts, please take a moment to add the below addresses to your address book. Or click here to see step-by-step whitelisting instructions. issues@e.weissinc.com alerts@e.weissinc.com eletter@e.moneyandmarkets.com eletter@e.uncommonwisdom.com    About Money and Markets For more information and archived issues, visit http://www.moneyandmarkets.com Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig. Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph: This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com. From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions. View our Privacy Policy. Would you like to unsubscribe from our mailing list? 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By Admin, November 5, 2009 6:39 pm

Jury Duty Scam

      This has been verified by the FBI (their link is also included below).  Please pass this on to everyone in your email address book. It is spreading fast so be prepared should you get this call.. Most of us take those summonses for jury duty seriously, but enough people skip out on their civic duty, that a new and ominous kind of fraud has surfaced.

      The caller claims to be a jury coordinator. If you protest that you never received a summons for jury duty, the scammer asks you for your Social Security number and date of birth so he or she can verify the information and cancel the arrest warrant. Give out any of this information and bingo; your identity was just stolen.

      The fraud has been reported so far in 11 states, including Oklahoma, Illinois , and Colorado . This (swindle) is particularly insidious because they use intimidation over the phone to try to bully people into giving information by pretending they are with the court system. The FBI and the federal court system have issued nationwide alerts on their web sites, warning consumers about the fraud.

      Check it out here: http://www.fbi.gov/page2/june06/jury_scams060206.htm

      And here: http://www.snopes.com/crime/fraud/juryduty.asp

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By Admin, November 4, 2009 10:29 pm

God always win I stayed up until midnight last night watching the election returns for Governor of VA and New Jersey, as a conservative I was thrilled. For the Conservatives and the Republican Party, don’t be too quick in grapping the prize, it’s not yours yet. You know the Liberal Machine will come out with everything they have and then add lies to it. Let’s keep one thing in mind as we go forward towards the mid-term elections, don’t run against your opponent, run on your vision for the future of America, don’t run against your opponent, run against Obama and do not allow the liberal machine (particularly the left-wing main news media) to set the standard for conservatives-Republicans-faith based Christians by their accusations of bigotry and racism; set your own standard with substance and godliness and advise the secular progressives to “kiss your ass”. Why not? They lie about you, they follow a double standard and with a smile stab you in the back knowing you won’t complain because you are held to higher standard morally; surprise them.For the Democrats and Obama: I accept that most of you are secular and don’t believe that GOD is in command, but it really doesn’t matter what any of us believes. The end result is always what God has purposed for that precise moment. America, God turned his back on this administration last April when in less than two weeks our President proclaimed that we were not a Christian nation and bowed at the seat of Satan, yes Mecca is the seat of Satan. Some 3500 years ago in 1491 BC the most powerful empire with the most powerful military thought they were only dealing with a “nobody” group of Hebrews, Egypt lost, they were dealing with God. King David and King Solomon both had great passions when it came to women and David even sent his top general sent into the midst of battle to die so he (King David) could have the general’s wife; yet these two kings were loved of God and greatly rewarded. On the other hand King Saul only refused to take the head of the king of Amalek and for that he was disowned of God and the kingdom was taken away from him, Amalek was the perpetual enemy of God dating back to the Exodus and Saul had been told of God to spare no one. After the Roman Empire fell there was still some form of that empire around but it would have been recognized as West Rome and East Rome (east would have represented the Middle East). A new and very young ruler in West Rome set out to reunited the Roman Empire and actually doing well and there was not a military strong enough around to stop him. But God was not ready for the fourth beast. In 538 AD just as it appeared that the Roman Empire would be revived the Plague kills 100 million and over half of the population of Europe died, and so did Rome. Barack Obama, God turned his back on you last April and all of the baby killers, gay activists, Hollywood liberals, labor unions, earth people, “green” activists, conservative haters and your inner circle of “America” haters cannot save your presidency; only God can. For whatever its worth, everything you want will come to be, God just isn’t ready for it at this time. You can still do it, just not without God.

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By Admin, November 4, 2009 9:01 pm

OBAMA CAMPAIGNED FOR THE MIDDLE CLASSA few times since April I have written that the Democrats and Obama were the party of “Big Business” and the powerfully rich. When Obama/Pelosi/Reid goes after the rich for additional taxes, after big businesses, insurance companies and of course the “Republican Party”; they are only going after those that didn’t support them. “GE” is a big company, they are in bed with Obama and the Democratic Party, and so is “Big Drug Companies”, the powerful Labor Unions, GM and most of Wall Street. According to Federal Commission Records: the 2008 Obama Campaign received 12.6 Million Dollars from Wall Street firms, McCain only 7.9 Million; Goldman Sachs-Citigroup-JP Morgan employees gave to Obama-Biden-; employees of Lehman Brothers gave Obama $370,000 and only $117,000 to McCain; since 1998 the financial sector gave Obama 37.6 Million, 32.1 Million to McCain; but Obama received that amount over four years, McCain over ten years. When you hear Democrats accuse a Conservative of bigotry, been for the rich, for big Oil, of racism and of course hypocrite; consider the strong possibility of the liberals concealing their traits and actions. And of course we have to consider the favorite pastime of the liberal left: say something, anything (even lies and deceitful spin) loud enough and often enough and people will believe it. Don’t take my word/opinion on any of this, go on-line and gather some data going back to 1929 and you will find that it was a Democrat/Liberal that was responsible for entering America into War, 80% of most recessions, high inflation, high interest rates and of course the Great Depression. It has always been the Democrats (the extreme radical left-wing progressives) who have put Federal Judges on the bench who allow child molesters light sentences while eroding the rights of Christians, who with the help of the ACLU sue school districts for Nativity Scenes while protecting the “Freed of Speech” of Muslims to shout “death to the Jew and America”. Can you imagine a “Pentecostal” praying at the airport, Muslims not only can but the ACLU will protect their right to do so. Enough is Enough is Enough; it is time that we vote people into Congress (regardless of Party) that still believe in the Constitution and the “Freedom of Speech” for all Americans, not just the Activists and those whom the ACLU declares have rights. There are various sites on line where you will find information which reveals that the Democrats in Congress and Obama are rewarding those that either got us into this economic mess or never saw it coming when they should have. I will have some precise facts of this for you next week. I have been writing since January that this Administration and Democratic Controlled congress would do nothing for the “middle class” but higher taxes and I still support that statement and firmly stand behind it. Tell me hard working blue collar, tell me seniors, tell me Black Americans, tell me Hispanics, tell me 30 year olds, tell me Jewish community; have you seen “change we can believe in”, do you have a job, is your mortgage underwater or in foreclosure, does $50.00 still bring home five bags of groceries, did your 401K lose 40% of its value; I picked the above groups because they represent a strong segment of the Democratic Electorate and in the election of 2008 you folks put this man in office. I actually have NO problem with his inexperience and total lack of qualifications for the office, my problem is with his inability or refusal to surround himself with mature qualified advisors who don’t hate America.

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By Admin, November 2, 2009 9:18 pm

Rising “Gold” prices used to mean that “people” feared inflation. There are three things wrong in today’s picture: (1) there has been no inflation since February this year, inflation then was less than one per cent (.24%). March saw deflation of .38% or another way of looking at it, inflation of minus .38%; the deflationary rate continue to rise through July and went down slightly in August and September. Still, though, we have been in deflation since February to date; I have asked then why “Gold” has risen approximately 50% during this period with no inflation? What is driving Gold prices up when there is no inflation, also keep in mind that rising Gold prices (due to inflation) would normally mean rising interest rates and falling Treasury Bonds and at this time the exact opposite is happening to government debt. (2) Rising “Gold” prices used to mean falling numbers on Wall Street, yet, the Stock Market has risen (until three days ago) more than 11% since June. I now have to ask, what is driving the Market up? (3) Government intervention in the financial markets to almost 29% of GDP is beyond comprehension, (during the “Great Depression government intervention was a mere 3.2% of GDP) and has confused established factors which determine the outcome of results in the financial markets and Wall Street. Folks, something has got to give, this trend will not continue. It is foolish to think that the flooding of the financial markets with government money will cure this chaotic economic disaster we are in. I stand by what I have been saying since the beginning of these series and that is that we are now entering a severe “Depression”. I wrote a while back in one of these posts not to be deceived with the up swings in the market; the market will fall before next summer. There is absolutely nothing with substance going on to sustain the market. So what is driving gold prices up, stock market and Treasury Bonds; I don’t know but would make an educated guess that a lot of it is simply assumptions and the belief that this administration will continue to pump money into the financial markets. Wake up folks, Barack Obama is not at all concerned about the middle class, about jobs or about the economy. “Tarp” and “Stimulus” money thus far has gone to those “big businesses” that supported him, to any and all “labor unions” and to “States” that are “blue” or obey his every wish. Beware of an unusual rise in the strength of the dollar; too many other economics are just waiting to offload their dollars. They are no longer looking at just the strength of the dollar but at the following troubling facts: (1) unemployment-up 50% since November 08, (2) GDP-down 25% since November 08, (3) Housing starts-down 10% since November 08, (4) Food Stamps-up 15% since November 08,  (5) mortgages underwater-up 66% since November 08, and (very important) DEFICIT-up 300%-YES- THREE HUNDRED PER CENT. For decades we have believed that Wall Street (Financial Markets-Industry) gave us an indication of the heartbeat of the economy and/or the future of economic success; that is no longer true or even believable. Our markets, our industries, our healthcare, our freedoms and lately even our “freedom of speech” are been manipulated, coerced, controlled and hidden in lies and deceits by Washington. It is no longer a “Free Market”; it is Washington and Wall Street, it is Washington and GM, it is Washington and GE, it is Washington and SEIU and at its best this government intervention with the markets and industry has created market distortion and there we have the ONLY REASON the Stock Market has gained since last March. The fall is around the corner. We need to put a face on this illegal game which is been played with our economy, we need to put a face on the attempt to silence any that would disagree, we need to put a face on the “real brown shirts” and folks that face is NOT THE CONSERVATIVE MOVEMENT.

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By Admin, November 2, 2009 7:04 pm

MONEYANDMARKETS» Monday, November 2, 2009   [«] Money and Markets 2009 Archive View This Issue On Our Website [»] The Great Hoax of 2009-2010 by Martin D. Weiss, Ph.D. Dear Subscriber, Before he died, Dad warned me of false profits … and fake promises. “Beware,” he said, “of shaky gains hyped up by Wall Street. “Watch out,” he insisted, “for unsustainable economic recoveries trumpeted by Washington. “And no matter when or where you may be, don’t be fooled by illusions of wealth and prosperity. “If they’re built on a foundation of shaky debt, they’re suspect. If they’re driven by unbridled speculation, they’re pure fluff. And if they’re bought and paid for by Washington, they will certainly end in catastrophe.” Sure enough, in the years that followed, millions of Americans were fooled by illusions of wealth created by the Great Tech Bubble of 1998-1999. Millions more were fooled for a second time by illusions of prosperity in the Great Housing Bubble of 2005-2006. And now, despite these blatant lessons of history, they are being fooled again — this time, in … The Great Recovery Hoax of 2009-2010 There can be no debate that, in each of these episodes, things did go up: The Nasdaq soared before it crashed. The median price of U.S. homes skyrocketed before it collapsed. And now, the U.S. economy has reversed course — from four consecutive quarters of contraction to at least one quarter of expansion. There also can be no doubt that these trends do not end overnight. They can continue for months — often plowing over skeptics and even exceeding the expectations of believers. Most important, however, there can be no question that all three of these episodes have had one key element in common that ultimately self-destructs: Massive intervention, support, and free money from Washington. External Sponsorship YOU WORKED HARD FOR YOUR MONEY … ISN’T IT TIME YOUR MONEY WORKED HARD FOR YOU? Weiss Capital Management is pleased to offer you an investment strategy designed to provide … Higher current INCOME in a low-yield climate … A DIVERSE mix of securities to help reduce risk … GROWTH potential to help stay ahead of inflation! To Learn More, watch our exclusive Web video now: Earning Higher Income in a Low Yield Market   To get a solid sense of how that’s unfolding this time around, pay close attention to these three independent economists: Jim Grant, Founder and Editor, Grant’s Interest Rate Observer Jim Grant, originator of the “Current Yield” column in Barron’s and founder of Grant’s Interest Rate Observer, demonstrates not only that today’s recovery is bought and paid for by Washington … but also that the relative size of Washington’s intervention is even larger than you might think. In the ten prior U.S. postwar recessions, the government responded, on average, with fiscal stimulus of 2.6 percent of GDP plus monetary stimulus of another 0.3 percent of GDP. Combined stimulus: only 2.9 percent of GDP. In contrast, during the current recession, the government has counter-attacked with fiscal stimulus amounting to an estimated 18 percent of GDP … plus monetary stimulus of an estimated 11.9 percent of GDP. Combined stimulus: a whopping 29.9 percent of GDP. That’s an unprecedented — and unimaginable — ten times more than the average stimulus of prior recessions. Grant’s comparison of today’s government stimulus with that of the Great Depression is even more striking: He points out that, in the early 1930s, GDP fell 27 percent, while the government responded with monetary and fiscal stimulus adding up to 8.3 percent of GDP. Thus, using Grant’s numbers, I calculate that, for each percentage point our economy contracted, the U.S. government came forward with 0.31 percentage points of stimulus. In contrast, in the current recession, U.S. GDP contracted 1.8 percent (at the time of Grant’s study) … while, as we just noted, the government’s stimulus has amounted to 29.9 percent of GDP. Thus, for each percentage point that our economy contracted, the U.S. government has jumped in with 16.61 percentage points of stimulus. Conclusion: Relative to the disease, the government’s “cure” for the Great Recession today packs 54 times more firepower than the government’s response to the Great Depression of the early 1930s. And this does not even include trillions more in U.S. government guarantees to shore up the financial system. Proponents of the government’s intervention may try to convince you “this is what it takes to avoid another depression: We’ve got to attack the contagion with big guns!” However, Grant worries, rightfully so, that the cure may be far worse than the disease: “If it’s taking this much to revive today’s economy,” he asks, “what kind of jolt might be necessary to succor tomorrow’s? An even bigger shock, we surmise, if tomorrow’s economy is no less encumbered than today’s. But it’s almost certain to be more encumbered, since the active ingredient of the Bush-Obama palliative is credit formation, the very hair of the dog that bit us. Skipping down to the bottom line, we renew our doubts as to the staying power of the paper currencies and to the creditworthiness of the governments that print them.”1 John Williams, Founder and Editor, Shadow Government Statistics John Williams is the economist who has single-handedly and repeatedly poked big holes in the government’s data that tracks price inflation, unemployment, money supply and the economy as a whole. In his Shadow Government Statistics alert of October 29, he pokes an equally large hole in Washington’s pitch that the third-quarter rise in GDP announced last week is “sustainable.” His main points: All U.S. recessions in the last four decades have had at least one positive quarter-to-quarter GDP reading, followed by a renewed downturn. This one could turn out to be no different. The estimate of 3.5 percent annualized real growth for third-quarter GDP included a 1.7 percent gain from auto sales, a 0.6 percent gain from new residential construction, and a 0.9 percent gain from a largely-involuntary inventory buildup (caused by sales declines which are deeper than corporate planners expect). In sum, these one-time stimulus or inventory items represented 92 percent of the reported quarterly growth.2 Chris Edwards, Director of Tax Policy Studies Cato Institute Chris Edwards — formerly a senior economist on the congressional Joint Economic Committee examining tax issues and currently a Director at the Cato Institute — exposes another gaping hole in the 3.5 percent growth reported by the government last week: While the government’s share of the economy has grown steadily … the contribution from private investment has fallen through the floor. He writes: “The third quarter GDP numbers show that the economy is only starting to ‘recover’ because of growing government and expanding consumption, which has been artificially inflated by large government transfers. “Business investment continues to be in a deep recession. Companies are simply not building factories or buying new machines and equipment. “Why not? I suspect that many firms are scared to death of higher taxes, inflation, health care mandates, increased labor regulation, and other profit-killers coming down the road from Washington.”3 Edwards goes on to say that it’s too soon to speculate on underlying causes. But I would add that an equally bloody killer of private investment is the diversion of scarce credit from small and medium-sized businesses to wild-and-wooly Wall Street speculation, as Mike Larson has pointed out here week after week. It’s all part and parcel of the Great Recovery Hoax of 2009-2010. Like the great bubbles of recent memory, it could continue. But it will ultimately end in disaster. My Recommendations: First, don’t fall for the hoax. Instead follow independent thinkers like Grant, Williams and Edwards. You can Subscribe to Grant at www.grantspub.com/subscribe, Join Williams at www.shadowstats.com/subscriptions, and Sign up for the Cato Institute’s alerts at www.cato.org. Second, don’t expect Washington to back off immediately. In fact, right now, the Fed Chairman Bernanke is doing precisely the opposite. He’s buying even more mortgage-backed securities and boosting the monetary base (currency and reserves at the nation’s banks) to a record high, reached just last week. Third, don’t wait around for the next disaster before taking protective action. For several weeks now, we’ve been warning you of a sharp stock market correction, and with Friday’s 250-point plunge in the Dow, it’s clear that correction is here. Fortunately, Mike Larson, Claus Vogt and other Weiss Research editors recognized the “Dow 10,000″ euphoria this month as a signal to take some profits off the table for their subscribers — and even buy hedge positions for a decline. If you haven’t done so already, it’s probably not too late to follow their lead. Fourth, no matter what your trading approach may be, don’t forget the importance of cash. Even with a declining dollar and near-zero interest rates, it’s still prudent to keep a good chunk of your wealth out of the market entirely. Fifth, we will soon provide our forecasts for 2010. But in the interim, please let me know what you think the consequences of this great hoax will be. Just click here to go to my blog and post your comments there. Good luck and God bless! Martin 1 Grant’s Interest Rate Observer, Vol. 27, No. 7a, April 3, 2009. 2 John Williams’ Shadow Government Statistics, Commentary Number 254, October 29, 2009. 3 Cato@Liberty blog post by Chris Edwards, “The Death of Private Investment,” October 30, 2009.    About Money and Markets For more information and archived issues, visit http://www.moneyandmarkets.com Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig. Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph: This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. 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