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Monday, April 15, 2013

Economic Stories of Relevance in Today's World -- April 14, 2013

Assault On Gold Update — Paul Craig Roberts - April 13, 2013 - I was the first to point out that the Federal Reserve was rigging all markets, not merely bond prices and interest rates, and that the Fed is rigging the bullion market in order to protect the US dollar’s exchange value, which is threatened by the Fed’s quantitative easing. With the Fed adding to the supply of dollars faster than the demand for dollars is increasing, the price or exchange value of the dollar is set up to fall.                        A fall in the dollar’s exchange rate would push up import prices and, thereby, domestic inflation, and the Fed would lose control over interest rates. The bond market would collapse and with it the values of debt-related derivatives on the “banks too big too fail” balance sheets. The financial system would be in turmoil, and panic would reign.                                 Rapidly rising bullion prices were an indication of loss of confidence in the dollar and were signaling a drop in the dollar’s exchange rate. The Fed used naked shorts in the paper gold market to offset the price effect of a rising demand for bullion possession. Short sales that drive down the price trigger stop-loss orders that automatically lead to individual sales of bullion holdings once their loss limits are reached.                             According to Andrew Maguire, on Friday, April 12, the Fed’s agents hit the market with 500 tons of naked shorts. Normally, a short is when an investor thinks the price of a stock or commodity is going to fall. He wants to sell the item in advance of the fall, pocket the money, and then buy the item back after it falls in price, thus making money on the short sale. If he doesn’t have the item, he borrows it from someone who does, putting up cash collateral equal to the current market price. Then he sells the item, waits for it to fall in price, buys it back at the lower price and returns it to the owner who returns his collateral. If enough shorts are sold, the result can be to drive down the market price.                               A naked short is when the short seller does not have or borrow the item that he shorts, but sells shorts regardless. In the paper gold market, the participants are betting on gold prices and are content with the monetary payment. Therefore, generally, as participants are not interested in taking delivery of the gold, naked shorts do not need to be covered with the physical metal.                         In other words, with naked shorts, no physical metal is actually sold.

Why Are The Banksters Telling Us To Sell Our Gold When They Are Hoarding Gold Like Crazy? - The Economic Collapse Blog - Michael - April 10th, 2013 

100 Years Old And Still Killing Us: America Was Much Better Off Before The Income Tax - Michael - April 14th, 2013 -  Did you know that the greatest period of economic growth in American history was during a time when there was absolutely no federal income tax?  Between the end of the Civil War and 1913, there was an explosion of economic activity in the United States unlike anything ever seen before or since.  Unfortunately, a federal income tax was instituted in 1913, and this year it turned 100 years old.  But there was no fanfare, was there?  There was no celebration because the federal income tax is universally hated.  Sadly, most Americans just assume that there is no other option to an income tax.  Most Americans just assume that it has always been with us and that it will always be with us.  This year, the American people will shell out approximately $4.22 trillion in state and federal income taxes.  That amount is equivalent to approximately 29.4 percent of all income that Americans will bring in this year, and that does not even take into account the dozens of other taxes that Americans pay each year.  At this point, the U.S. tax code is about 13 miles long, and those that are honest and pay their taxes every year are being absolutely shredded by this system.  But wouldn't the federal government go broke if we didn't have a federal income tax?  No, actually the truth is that the federal government did just fine before there was an income tax.  In fact, the U.S. national debt has gotten more than 5000 times larger since the federal income tax and the Federal Reserve were created by Congress back in 1913.  As I have written about previously, the Federal Reserve system was actually designed to trap the United States in a debt spiral from which it could never possibly escape, and the federal income tax was needed to greatly expand the size of the federal government and to soak the American people of the funds necessary to service that debt.  But it doesn't have to be this way.  America was once much better off before the income tax and the Federal Reserve were created, and we could easily go to such a system again...

Fed doves play down threat of U.S. inflation - Reuters - Jonathan Spicer and Alister Bull - April 13, 2013 - Federal Reserve policymakers went out of their way on Saturday to play down the risk that aggressive measures to bolster the U.S. economy would lead to inflation in the future, in a clear signal of support for its ongoing actions to spur growth.                    The U.S. central bank last month maintained a controversial program of buying $85 billion of bonds a month, while pledging to keep interest rates near zero until unemployment hits at least 6.5 percent, so long as inflation stays under 2.5 percent.                          Two of the central bank's most dovish officials - Chicago Federal Reserve boss Charles Evans and Minneapolis Fed President Narayana Kocherlakota - pushed back against recent signals from Fed hawks who want to taper those bond purchases.                   "Without signs of actual inflation, many inflation-risk discussions ultimately raise this specter of ... unlocking the long-ago-vanquished inflation demons from the dungeon," said Evans, a voting member of the Fed's policy committee this year.

Producer prices post biggest drop in 10 months - Reuters - April 12, 2013 -  Producer prices recorded their biggest drop in 10 months in March as the cost of gasoline tumbled, according to a government report on Friday that supported the case for the Federal Reserve to maintain its very accommodative monetary policy.                             The Labor Department said its seasonally adjusted producer price index fell 0.6 percent last month, the largest drop since May, after increasing 0.7 percent in February.                             Economists polled by Reuters had expected prices received by the nation's farms, factories and refineries to fall only 0.2 percent.

US STOCKS-Wall St retreats from record on retail data, bank results - Reuters - April 12, 2013 -  U.S. stocks fell on Friday from the previous session's record levels after an unexpected drop in retail sales last month and lackluster results from two major banks.                             The rally that has taken the S&P 500 index more than 11 percent higher this year has made stocks vulnerable to a pullback...                           Data showed retail sales fell 0.4 percent in March, while February's strong gain was revised down slightly. Consumer spending plays a key role in the U.S. economy, accounting for two-thirds of activity.                           Another report showed consumer sentiment fell to a nine-month low in early April amid gloom about the long-term health prospects for the U.S. economy.                             Investors have been rattled by indications economic growth could be softening, particularly after last week's disappointing jobs number, though that has not derailed the market rally so far.                       The advance in equities in recent months was partly buoyed by the Federal Reserve's economic stimulus efforts, and analysts are viewing the first-quarter earnings season as a test for whether those gains are justified by corporate performance.

12 Banks Got the Fed Minutes a Day Early - CNBC - John Carney - April 10, 2013
- It wasn't just Capitol Hill staffers and trade groups that received the Federal Reserve minutes a day early. Many banks and other financial institutions also got an early look at the minutes.                         The U.S. Federal Reserve building is seen in Washington. A list of recipients obtained by CNBC reveals that at least 12 banks, a Wall Street law firm, a hedge fund, and a private equity fund were on the distribution list that got the minutes early.                         The banks included Fifth Third, Citigroup (NYSE:C), UBS, Barclays, U.S.Bank, Goldman Sachs (GS), Wells Fargo (WFC), HSBC, BNP Paribas, BB&T, JPMorgan Chase (JPM) and PNC.                    Sullivan & Cromwell, one of the most powerful Wall Street law firms, also got the email.

JC Penney: Can this company be saved? - AP through USA Today - Anne D'Innocenzio - April 9, 2013 - J.C. Penney late Monday brought back former CEO Mike Ullman after Ron Johnson's risky turnaround strategy backfired and led to massive losses and steep sales declines.                 But will Ullman try to save the struggling retailer or just keep the seat warm until the board hires a fireballing successor?                          Penney's board of directors ousted Johnson as CEO Monday after only 17 months on the job and rehired Ullman, 66, who was CEO of the department store chain for seven years until November 2011.                        The announcement came after a growing chorus of critics, including a former Penney CEO, Allen Questrom, called for Johnson's resignation as they lost faith in an aggressive overhaul that included getting rid of most discounts in favor of everyday low prices and bringing in new brands.                        The biggest blow came Friday from Ullman's strongest supporter, activist investor and board member Bill Ackman. Ackman had pushed the board in the summer of 2011 to hire Johnson to shake up the retailer's dowdy image. Ackman, whose Pershing Square Capital Management is Penney's biggest shareholder, reportedly told investors that Penney's execution "has been something very close to a disaster."

J.C. Penney can sell Martha Stewart goods
- AP through USA Today - April 12, 2013

Consumer Confidence Plummets To Nine Month Low, Biggest Miss To Consensus On Record - Tyler Durden - April 12, 2013 - Well if this doesn't send the market into all-time record high territory, nothing ever will: seconds ago the UMich Consumer Confidence plummeted from 78.6 to 72.3, on expectations of an unchanged 78.6 print. This was not only a 9 month low in the index, but more importantly the biggest miss to expectations in recorded history! Both conditions (84.8, Exp 89.5, Last 90.7) and expectations (64.2, Exp.70.0, Last 70.8), imploded, with the current conditions number the worst print since July and posting the biggest drop since August 2011. Surely if retail sales was not a sufficient Conviction Buy signal for the Fed, then Consumer Confidence should send Kevin Henry, who is now mainlining a trail mix cocktail of Redbull, Caffeine and Meth, into F5 overdrive. And if that doesn't do it, the final economic miss of the day, Business Inventories which also missed expectations of a 0.4% print, and dropped from 0.9% to 0.1%, the lowest since September 2011 and biggest miss since September 2012, should certainly cement today's 1600+ S&P close.

Clinic For Uninsured Shuts Down Updated - WLOS - Mario Boone - Asheville, NC - April 9, 2013  -  A healtOSh care center that serves uninsured people in Buncombe County is closing. Three Streams Family Health Center has been in operation for 12 years. The clinic's founder, Father Chris Newcomb, tells News 13 that dwindling donations, increasing deficits and ballooning costs forced the closure. Long time patients say they're saddened to see the clinic go. The clinic will remain open on limited hours for the next four weeks to help patients with medical records and prescriptions.

Word of the Day: Unemployment (U3 and U6)

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