Economic Stories of Relevance in Today's World -- January 22, 2012

Bob Chapman - The International Forecaster - January 21, 2012 - If the entire financial system does not come down upon our heads and if we do not have another war, global growth is going nowhere in the year’s ahead. We had a mini-recovery, but it cost $1.8 trillion. We had a second recovery and that cost $1.5 trillion. We are entering a third of what is becoming yearly recoveries that will probably cost $1.3 trillion. In other worlds without these massive injections of money and credit we would probably be in a deflationary depression.          As a result of overspending and poor financial choices state, county and local governments continue layoffs, increase taxes, cut services and attempt to pay back unemployment loans from the Federal government by creating more debt, by floating additional bond issues. The people who run these governments just do not get it. They expect the next bull market is just around the corner and it isn’t. In 2014-2015 we can expect a housing inventory at banks of 9.8 million homes, all for sale. That guarantees no housing recovery for years to come.                    The massive exodus of good paying jobs, one million a year, due to free trade, globalization, offshoring and outsourcing and the loss of 450,000 manufactures will soon end, as a number of countries debate trade barriers. Such protectionism will initially cut back on world demand and the expansion of world debt. Austerity is already a by ward and means restrained spending as well. Governments will become more onerous with additional regulation and taxes, because they have no intention of really cutting spending. We have been waiting for more than three years for debt reduction and saving and it has not as yet really materialized on an ongoing basis. We ask, are American consumers capable of reducing debt and savings? If they do will personal consumption of GDP fall from 70% to lower levels? The answer is of course it will...                   House prices will fall 20% over the next three years and foreclosed inventory could reach close to 10 million homes. Even though your rent is rising, stay where you are for a few more years. If that in fact is the bottom how many years will house prices bump along the bottom? Will it be 8 years or 30 years? We don’t know, but a home is not a good investment at this time...                  As consumers eliminate debt and cut back on credit card usage, retail sales will fall. This tact could be a long-term phenomenon, as spenders use cash and debt cards, because they cannot control their spending otherwise. Even the lay-a-way plan is making a comeback, something we haven’t seen since the 1960s.


HOW DID WELLS FARGO INCREASE EARNINGS 20% IF REVENUE FELL 4%? - The Burning Platform - January 17, 2012 - How many companies do you know that can increase profits by 20% when their revenue falls 4%? It must be amazing productivity. Right?              Nope. Wells Fargo created $600 million of income out of thin air with a journal entry saying their losses will be lower in the future. Sounds familiar.                If you remove this fake income, it seems Wells Fargo’s income went up 3%.


John Williams: No Way Out–Hyperinflation by 2014 - Financial Sense - January 20, 2012 - (Youtube) - http://www.youtube.com/watch?v=TzKPvLDDz4g - Shadowstats.com


The Global Elite Are Hiding 18 Trillion Dollars In Offshore Banks - TheEconomicCollapse.com - In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world. But when it comes to offshore banking, what Mitt Romney is doing is small potatoes. The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks. According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks. And that figure does not even count any money being held in Switzerland. That is a staggering amount of money. Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars. So why do the global elite go to such trouble to hide their money in offshore banks? Well, there are two main reasons. One is privacy and the other is low taxation. Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes. Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes. You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes. Unfortunately, the vast majority of the rest of us don't have the resources or the knowledge to play these games, so we get taxed into oblivion.


IRS data shows recession took heavy toll on sole proprietors (In North Carolina) - The Business Journal by Chris Bagley, Triangle Business Journal - January 20, 2012 - Sole proprietors in North Carolina saw their incomes shrink more dramatically and much earlier during the Great Recession than most other taxpayers, according to data recently released by the IRS. Analysts say the data reflect a sharp decline in consumer spending and businesses’ general difficulties in adjusting their own spending, particularly on labor. While business income began to decline in 2007, most of the resulting layoffs and wage freezes didn’t follow until 2009, these analysts say.


Gaston Co. schools to decide on proposed closing of 3 schools - WSOC-TV - January 17, 2012 - GASTON COUNTY, N.C. -- On Tuesday, Gaston County school officials will decide whether to shut down three schools. Parents have been fighting to keep Rhyne Elementary, York Chester Middle and McAdenville Elementary schools open. The district said closing the schools will save $27 million over five years. The school board is set to vote on the closures Tuesday night.


Insight: Recovery at risk as Americans raid savings - Reuters - By Jilian Mincer and Jonathan Spicer - January 17, 2012 - In an ominous sign for America's economic growth prospects, workers are paring back contributions to college funds and growing numbers are borrowing from their retirement accounts.           Some policymakers worry that a recent spike in credit card usage could mean that people, many of whom are struggling on incomes that have lagged inflation, are taking out new debt just to meet the costs of day-to-day living.            American households "have been spending recently in a way that did not seem in line with income growth. So somehow they've been doing that through perhaps additional credit card usage," Chicago Federal Reserve President Charles Evans said on Friday. "If they saw future income and employment increasing strongly then that would be reasonable. But I don't see that. So I've been puzzled by this," he said.          After a few years of relative frugality, the amount of money that Americans are saving has fallen back to its lowest level since December 2007 when the recession began. The personal saving rate dipped in November to 3.5 percent, down from 5.1 percent a year earlier, according to the U.S. Commerce Department. (The Hound: Why save money when the government is working hard to devalue the currency and the banks low-risk investments pay next to nothing. Why save for a child's education or retirement, when there is no assurance that the Investment Banks aren't going to steal it from you. That is the mindset!)


Treasury dips into pension funds to avoid debt - Reuters - Reporting By Rachelle Younglai; Editing by Chizu Nomiyama and James Dalgleish - January 17, 2012 - The Treasury on Tuesday started dipping into federal pension funds in order to give the Obama administration more credit to pay government bills. Geithner said Treasury started suspending reinvestments in a federal pension fund known as the G-Fund -- a tool Treasury has had to employ six times over the past 20 years in order to keep the country below the statutory debt limit. The Treasury Department has already tapped another seldom-used fund in order to allow the government to continue borrowing without running afoul of the country's laws.


Insight: Top Justice officials connected to mortgage banks - Reuters - Scot J. Paltrow - January 20, 2012 - U.S. Attorney General Eric Holder and Lanny Breuer, head of the Justice Department's criminal division, were partners for years at a Washington law firm that represented a Who's Who of big banks and other companies at the center of alleged foreclosure fraud, a Reuters inquiry shows.             The firm, Covington & Burling, is one of Washington's biggest white shoe law firms. Law professors and other federal ethics experts said that federal conflict of interest rules required Holder and Breuer to recuse themselves from any Justice Department decisions relating to law firm clients they personally had done work for.               Both the Justice Department and Covington declined to say if either official had personally worked on matters for the big mortgage industry clients. Justice Department spokeswoman Tracy Schmaler said Holder and Breuer had complied fully with conflict of interest regulations, but she declined to say if they had recused themselves from any matters related to the former clients.             Reuters reported in December that under Holder and Breuer, the Justice Department hasn't brought any criminal cases against big banks or other companies involved in mortgage servicing, even though copious evidence has surfaced of apparent criminal violations in foreclosure cases.            The evidence, including records from federal and state courts and local clerks' offices around the country, shows widespread forgery, perjury, obstruction of justice, and illegal foreclosures on the homes of thousands of active-duty military personnel.            In recent weeks the Justice Department has come under renewed pressure from members of Congress, state and local officials and homeowners' lawyers to open a wide-ranging criminal investigation of mortgage servicers, the biggest of which have been Covington clients. So far Justice officials haven't responded publicly to any of the requests.


Warren Pollock on Max Keiser Regarding Bank Holidays