tsx, tsx-v, goldtsx, silver, junior resource

Auguries The Recovery Has Landed


February 1, 2013

gold, bankc, US economy

Impact: Don’t worry; it’s only “transitory.”

Gold was down (at press time) $3.40 (-0.2%) for the week to $1,664.10, and silver was down $0.24 (-0.8%) to $31.43. Gold fell $17.50 Thursday (-1%), a development Reuters attributed to “profit taking” and “bullion’s repeated failure to rise above major resistance at $1,700 in January, trigger[ing] technical selling.”

Could be, but technical resistance will always yield to force majeure. If gold is an alternative currency, then its future price will determined by the health of the world economy—in particular, the American economy.

In the latter regard, this interview of John Williams by Greg Hunter of USAWatchdog should prove interesting to readers. Williams’ argument is that “CPI, GDP and employment numbers” are subject to “biased and often-manipulated government reporting.” That’s one way to put it. Another would be that US Government economic reporting is now subject to Soviet-style levels of disinformation.

Williams begins with a real icebreaker—based on “generally accepted accounting procedures,” the real US deficit for FY2012 is not $1.3 trillion but $6.9 trillion. The US is effectively bankrupt, but because the stats are juked politicians can continue to play let’s pretend. Williams warns, “We haven’t had a recovery, and we’re not about to have one, and it’s getting worse.”

He explains:

Projections for the budgets going forward…as Congress supposedly works to balance the deficit over 10 years…are going to be based on assumptions of underlying economic activity. They’re going to be assuming 3%, 4% growth in the economy, which would tend to generate certain levels of revenues. That means the budget deficit’s going to be a lot worse than they’re projecting.

The Williams interview was published January 28, one week after President Obama declared, “An economic recovery has begun” and two days before official 4Q 2012 GDP growth was announced: -0.1%, down from +3.1% the previous quarter and a full percentage point lower than projected.

Back in June 2011, Charles Hugh Smith observed, “The Federal government borrowed and spent $6.1 trillion over the past four years to generate a cumulative $700-billion increase in the nation’s GDP. That means we’ve borrowed and spent $8.70 for every $1 of nominal ‘growth’ in GDP.” Now, trillions later, Washington can’t even claim that level of “performance.”

And never mind that this pitiful 4Q growth was achieved only with conjurers’ tricks, including the risible assumption that price inflation is running at 0.6%. As Mike Shedlock pointed out January 31, “Using CPI (the Consumer Price Index) as a deflator, GDP would have been -1.56%. Using ShadowStats CPI as a deflator, GDP would have been -4.3%.”

Greg Hunter told Williams, “Everybody has to know how bad the economy is.” Not a bit of it. That eternal Pollyanna the Wall Street Journal concluded January 30, “But the strength of consumer spending and business investment suggested that the economy will grow, albeit slowly, this year.” The green shoots have returned! And “research firm Capital Economics called the report ‘the best-looking contraction in US GDP you’ll ever see.’”

Don’t worry was the MSM response. It’s hardly a contraction at all; besides, we can blame the Republicans or the weather. In any event, Bernancus Magnus is riding to the rescue, and hey, how about that Dow? Hardly reassuring, for as Ted says in Barcelona, “‘Don’t worry’ is the most frightening phrase in the English language… It almost invariably means they’re not going to worry, but you better had.”

Williams certainly worries. He predicts that the US will reach “the end of the road in May” and that the failure by Congress to put America’s fiscal house in order will result in the collapse of the US dollar and hyperinflation. Shedlock remains a staunch deflationist and mocks Williams’ scenario, but at this point, it’s really a quarrel over whether the world will end in fire or in ice.

In related news, Mac Slavo writes at SHTF.com January 30, “A recent report from the Federal Reserve…indicates some $114 billion in cash was withdrawn from the nation’s largest banks in the last 30 days…. According to the [US M]int, investors purchased nearly half a billion dollars in gold and silver in the last 30 days. There was, in fact, so much money shifting into physical precious metals in January that the Mint was actually forced to cease operations because they couldn’t meet demand.”

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