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Image | The Sound of One Hand Clapping – What Deflationists May Be Missing
The Sound of One Hand Clapping – What Deflationists May Be Missing
 PREVIEW
by Chris Martenson

This is a piece that I wrote in response to a request for a guest authorship over at ZeroHedge.  It builds on a point, made in yesterday’s piece, that Switters thought had not yet been fully addressed elsewhere in the great Inflation/Deflation debate.  

I am interested in your thoughts on this line of thinking.  I will send it over to ZeroHedge later on.

 

My central thesis to this crisis, developed a few years before it even hit, is that the economic troubles are the symptoms, while the money system itself is the cause.

My views on this are expressed in the opening of an article that I initially penned in 2006 but updated in 2008:

The Sound of One Hand Clapping – What Deflationists May Be Missing
 PREVIEW by Chris Martenson

This is a piece that I wrote in response to a request for a guest authorship over at ZeroHedge.  It builds on a point, made in yesterday’s piece, that Switters thought had not yet been fully addressed elsewhere in the great Inflation/Deflation debate.  

I am interested in your thoughts on this line of thinking.  I will send it over to ZeroHedge later on.

 

My central thesis to this crisis, developed a few years before it even hit, is that the economic troubles are the symptoms, while the money system itself is the cause.

My views on this are expressed in the opening of an article that I initially penned in 2006 but updated in 2008:

Image | It’s Time to Prepare – Follow-Up
It’s Time to Prepare – Follow-Up
 PREVIEW
by Chris Martenson

There were a number of excellent responses in the comments to the last Martenson Report.  Here I will address a few of them in a post, rather than sprinkle my responses throughout the thread, where some may miss them.

There were a lot of excellent responses, and I will try to get to them all here or in the next report.

I wish I could have gotten to these 24 hours ago, but I spent the last two days in Washington DC, on K Street, attending a conference on population and sustainability.  I gave a short presentation there, but my highlights were the opportunity to hear Richard Heinberg, William Catton (Overshoot – the 1980 classic), and Dennis Meadows (Limits to Growth), among other notables, give their presentations, and then interact with them during discussion sessions.

So here I am, back in the office and charged up from the new energy that is surging through the various communities of dedicated people addressing facets related to the three Es.
It’s Time to Prepare – Follow-Up
 PREVIEW by Chris Martenson

There were a number of excellent responses in the comments to the last Martenson Report.  Here I will address a few of them in a post, rather than sprinkle my responses throughout the thread, where some may miss them.

There were a lot of excellent responses, and I will try to get to them all here or in the next report.

I wish I could have gotten to these 24 hours ago, but I spent the last two days in Washington DC, on K Street, attending a conference on population and sustainability.  I gave a short presentation there, but my highlights were the opportunity to hear Richard Heinberg, William Catton (Overshoot – the 1980 classic), and Dennis Meadows (Limits to Growth), among other notables, give their presentations, and then interact with them during discussion sessions.

So here I am, back in the office and charged up from the new energy that is surging through the various communities of dedicated people addressing facets related to the three Es.
Image | It’s Time To Prepare
It’s Time To Prepare
 PREVIEW
by Chris Martenson
Tuesday, October 6, 2009

This week’s report is going to be largely free of data and news snippets and full of my opinions and broad strokes of logic.

As my long-time readers know, I consider my main occupations to be information scout, dot-connector, and analyst.  But as a side job, I also provide a decisive alternative to the mainstream economic propaganda machine, which is thoroughly dedicated to maintaining the status quo, regardless of cost.

I completely understand why our fiscal and monetary leaders would seek to hide the truth from us all.  We live in an economy that is based on growth and debt – which means it is a Ponzi scheme – and there’s nothing more important to such a system than faith and confidence.  So economic propaganda is not just a noxious by-product spewed from our economic tailpipe; it is viewed by those in power as a form of fuel, a necessity for our peculiar economic engine.  They may have a point.

For my new readers, I want to make it clear that I do not expect or wish you to believe me over anyone else.  Heck, trust neither me nor them, if that works for you; instead, trust yourself and your gut instinct about what is right.  I began trusting myself several years ago, and I am much better off as a consequence.

This week (ending 10/1/09), despite the massive run up in stock over the past few months, despite the outrageous amounts of bailout and stimulus money applied, despite every attempt to put a positive spin on things, jobs continued evaporating, auto sales slumped to multi-decade lows, bankruptcies soared 41% over the prior year, and tax receipts continued to slide.

States such as California are sliding into fiscal chaos, and some, like Michigan and Alabama, are already there.

We are about to enter another leg of the downturn, and this one will be even bumpier and more uncertain than the last. 

It’s Time To Prepare
 PREVIEW by Chris Martenson
Tuesday, October 6, 2009

This week’s report is going to be largely free of data and news snippets and full of my opinions and broad strokes of logic.

As my long-time readers know, I consider my main occupations to be information scout, dot-connector, and analyst.  But as a side job, I also provide a decisive alternative to the mainstream economic propaganda machine, which is thoroughly dedicated to maintaining the status quo, regardless of cost.

I completely understand why our fiscal and monetary leaders would seek to hide the truth from us all.  We live in an economy that is based on growth and debt – which means it is a Ponzi scheme – and there’s nothing more important to such a system than faith and confidence.  So economic propaganda is not just a noxious by-product spewed from our economic tailpipe; it is viewed by those in power as a form of fuel, a necessity for our peculiar economic engine.  They may have a point.

For my new readers, I want to make it clear that I do not expect or wish you to believe me over anyone else.  Heck, trust neither me nor them, if that works for you; instead, trust yourself and your gut instinct about what is right.  I began trusting myself several years ago, and I am much better off as a consequence.

This week (ending 10/1/09), despite the massive run up in stock over the past few months, despite the outrageous amounts of bailout and stimulus money applied, despite every attempt to put a positive spin on things, jobs continued evaporating, auto sales slumped to multi-decade lows, bankruptcies soared 41% over the prior year, and tax receipts continued to slide.

States such as California are sliding into fiscal chaos, and some, like Michigan and Alabama, are already there.

We are about to enter another leg of the downturn, and this one will be even bumpier and more uncertain than the last. 

Image | Jobs Overstated: The BLS Comes Clean
Jobs Overstated: The BLS Comes Clean
by Chris Martenson

After nearly two years of pointing out how the Birth-Death model by the Bureau of Labor Statistics (BLS) has been badly overstating job creation, I want to publicly recognize and commend the BLS for publishing the massive benchmark revision showing that more than 800,000 jobs that had been modeled into existence never really existed.

I’ll bet that revelation would have been swept under the rug in more than one country.

Over time, my main complaint about the model was that it didn’t make sense.  It added jobs when times were good and even more when times were bad.  It seemed completely disconnected from the world around it, and therefore the main source of my ire was that it simply didn’t make any sense.

In particular, I railed against continued increases in construction jobs being modeled in, even as retail construction investment was falling off a cliff.  I wondered at the continual creation of financial services jobs, even as mass layoffs were being announced across the industry.
Jobs Overstated: The BLS Comes Clean
 by Chris Martenson

After nearly two years of pointing out how the Birth-Death model by the Bureau of Labor Statistics (BLS) has been badly overstating job creation, I want to publicly recognize and commend the BLS for publishing the massive benchmark revision showing that more than 800,000 jobs that had been modeled into existence never really existed.

I’ll bet that revelation would have been swept under the rug in more than one country.

Over time, my main complaint about the model was that it didn’t make sense.  It added jobs when times were good and even more when times were bad.  It seemed completely disconnected from the world around it, and therefore the main source of my ire was that it simply didn’t make any sense.

In particular, I railed against continued increases in construction jobs being modeled in, even as retail construction investment was falling off a cliff.  I wondered at the continual creation of financial services jobs, even as mass layoffs were being announced across the industry.
Image | Sustaining the Unsustainable
Sustaining the Unsustainable
 PREVIEW
by Chris Martenson

Every so often I read an article that very nearly perfectly reflects my views on the bailout and stimulus packages.  This is one of them, at least from the perspective that we’ve really solved nothing but instead are actually deeper in debt than before.

How is it possible to solve a crisis rooted in debt by going deeper in debt?

That’s a good question, and more and more financial professionals are asking the same thing.  The following article is well worth reading in its entirety at the link below.  Be sure to pay attention to the last sentence, as we’ll be spending some time on that very topic over the next few weeks.

Sustaining the Unsustainable
 PREVIEW by Chris Martenson

Every so often I read an article that very nearly perfectly reflects my views on the bailout and stimulus packages.  This is one of them, at least from the perspective that we’ve really solved nothing but instead are actually deeper in debt than before.

How is it possible to solve a crisis rooted in debt by going deeper in debt?

That’s a good question, and more and more financial professionals are asking the same thing.  The following article is well worth reading in its entirety at the link below.  Be sure to pay attention to the last sentence, as we’ll be spending some time on that very topic over the next few weeks.

Image | Insatiable Demand For US Debt, or Something Else?
Insatiable Demand For US Debt, or Something Else?
by Chris Martenson

Recently the Fed reiterated that their $300 billion program of buying long-dated Treasury Bonds would end on schedule, meaning as soon as it hit $300 billion.  Well, that’s been achieved, so according to recent Fed statements, the program is over.

This is a critical development, because the ability of the US government to continue to fund its massive deficits (at favorable rates) requires that each Treasury Auction be “well bid.”  The Fed has been a major participant, and so we might reasonably wonder who will fill the Fed’s shoes.

This is critical, because the US government continues to float weekly auctions of Treasuries in quantities that just a few short years ago would have been unthinkable.

Exhibit A:  Next week’s schedule:
Insatiable Demand For US Debt, or Something Else?
 by Chris Martenson

Recently the Fed reiterated that their $300 billion program of buying long-dated Treasury Bonds would end on schedule, meaning as soon as it hit $300 billion.  Well, that’s been achieved, so according to recent Fed statements, the program is over.

This is a critical development, because the ability of the US government to continue to fund its massive deficits (at favorable rates) requires that each Treasury Auction be “well bid.”  The Fed has been a major participant, and so we might reasonably wonder who will fill the Fed’s shoes.

This is critical, because the US government continues to float weekly auctions of Treasuries in quantities that just a few short years ago would have been unthinkable.

Exhibit A:  Next week’s schedule:
Image | The Energy-Less Recovery
The Energy-Less Recovery
 PREVIEW
by Chris Martenson

There is such a tight correlation between energy use (specifically petroleum demand) and economic growth that it is almost unthinkable to suggest that one could actually have a recovery in the economy absent a recovery in petroleum demand.

But that’s what we are being asked to believe, if we put the results of two separate government reports together that both happened to come out today.  The first says that the US economy shrank by only 0.18% percent in the second quarter, or at an annualized rate of 0.7%.  The second says that oil demand in July retreated to a level last seen 13 years ago.

These do not make sense in the least, and one of them has it dead wrong.  You know where I am going with this already, don’t you?

Here’s the first:
The Energy-Less Recovery
 PREVIEW by Chris Martenson

There is such a tight correlation between energy use (specifically petroleum demand) and economic growth that it is almost unthinkable to suggest that one could actually have a recovery in the economy absent a recovery in petroleum demand.

But that’s what we are being asked to believe, if we put the results of two separate government reports together that both happened to come out today.  The first says that the US economy shrank by only 0.18% percent in the second quarter, or at an annualized rate of 0.7%.  The second says that oil demand in July retreated to a level last seen 13 years ago.

These do not make sense in the least, and one of them has it dead wrong.  You know where I am going with this already, don’t you?

Here’s the first:
Image | Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
by Chris Martenson

What follows is a snippet from the most recent Martenson Report (Housing and Wealth: Part II).

This is important information.  What I’ve found and present below is that the Federal Reserve is not just supporting the housing market, it is the housing market.

Just as important as a person’s desire to buy a home is their ability to gain access to mortgage funding.

The mortgage market is a gigantic beast with many moving parts, but it is pretty easy to understand from a high level.

The process works like this:  A homeowner secures a mortgage from a bank or mortgage company.  Then the mortgage is sold off to another company, with the cash generated by that sale now available to lend to other potential homeowners.  Ultimately the mortgage may pass through several sets of hands but ultimately it lands with a terminal holder.

In that chain, the mortgage might get sold off several times, or perhaps sliced and diced by Wall Street wizards, but all that matters is that some company (with cash) is there at the end to buy the mortgage to keep the whole chain moving along.

Lately, the “terminal buyers” in that chain have increasingly ended up being the federal government (through the GSEs) and the Federal Reserve.

And not just by a little bit, but by a lot.

Here are the numbers:

Federal Reserve Buys More Than 100% of Mortgages Issued in 2009
 by Chris Martenson

What follows is a snippet from the most recent Martenson Report (Housing and Wealth: Part II).

This is important information.  What I’ve found and present below is that the Federal Reserve is not just supporting the housing market, it is the housing market.

Just as important as a person’s desire to buy a home is their ability to gain access to mortgage funding.

The mortgage market is a gigantic beast with many moving parts, but it is pretty easy to understand from a high level.

The process works like this:  A homeowner secures a mortgage from a bank or mortgage company.  Then the mortgage is sold off to another company, with the cash generated by that sale now available to lend to other potential homeowners.  Ultimately the mortgage may pass through several sets of hands but ultimately it lands with a terminal holder.

In that chain, the mortgage might get sold off several times, or perhaps sliced and diced by Wall Street wizards, but all that matters is that some company (with cash) is there at the end to buy the mortgage to keep the whole chain moving along.

Lately, the “terminal buyers” in that chain have increasingly ended up being the federal government (through the GSEs) and the Federal Reserve.

And not just by a little bit, but by a lot.

Here are the numbers:

Image | Housing and Wealth – Part II (Demand and Liquidity)
Housing and Wealth – Part II (Demand and Liquidity)
 PREVIEW
by Chris Martenson
Monday, September 28, 2009

Executive Summary

  • In the prior report, we covered housing supply and prices; in this one, we cover demand and liquidity.
  • Housing demand is easy to measure, but hard to predict.  The prime determinant of housing demand is jobs.
  • We are not likely to recover from our current unemployment slump for 5-10 years.
  • The “housing ATM” is not only broken, but operating in reverse, putting additional pressure on potential housing consumers.
  • Artificially low interest rates give us some temporary stability in the housing market – in exchange for an increased risk of future losses.
  • The Federal Reserve and federal government are the housing market.
  • Our nation is suffering from “stimulus addiction,” and the path of least resistance is to continue feeding the habit.
  • For the housing market to recover, the job market has to recover first.
  • These are all indications that our debt-based money system is seriously flawed.

We are covering housing at this time because it is one of the key determinants of whether or not our economy will enjoy a decent bounce or merely a false statistical recovery here.  As goes housing, so goes the economy.

Here we will focus on the US (primarily because I have good data for it), but the lessons and implications are virtually identical for other areas of the world.  Ireland, Spain, the UK and a number of other spots are in far worse shape by this measure than the US.

In the prior report, we covered housing supply and prices.  Here we are going to cover demand and liquidity
Housing and Wealth – Part II (Demand and Liquidity)
 PREVIEW by Chris Martenson
Monday, September 28, 2009

Executive Summary

  • In the prior report, we covered housing supply and prices; in this one, we cover demand and liquidity.
  • Housing demand is easy to measure, but hard to predict.  The prime determinant of housing demand is jobs.
  • We are not likely to recover from our current unemployment slump for 5-10 years.
  • The “housing ATM” is not only broken, but operating in reverse, putting additional pressure on potential housing consumers.
  • Artificially low interest rates give us some temporary stability in the housing market – in exchange for an increased risk of future losses.
  • The Federal Reserve and federal government are the housing market.
  • Our nation is suffering from “stimulus addiction,” and the path of least resistance is to continue feeding the habit.
  • For the housing market to recover, the job market has to recover first.
  • These are all indications that our debt-based money system is seriously flawed.

We are covering housing at this time because it is one of the key determinants of whether or not our economy will enjoy a decent bounce or merely a false statistical recovery here.  As goes housing, so goes the economy.

Here we will focus on the US (primarily because I have good data for it), but the lessons and implications are virtually identical for other areas of the world.  Ireland, Spain, the UK and a number of other spots are in far worse shape by this measure than the US.

In the prior report, we covered housing supply and prices.  Here we are going to cover demand and liquidity
Image | Housing Market Update
Housing Market Update
 PREVIEW
by Chris Martenson

The prior Martenson report on housing covered inventory (supply) and prices.  Lots of news has recently come out that I want to add to the story.  The breaking news in this area is coming a furious pace these days.

This first is an estimate of shadow inventory, and it’s something of a shocker.  Where I had suspected that inventory was being understated “by a few million,” I did not think that it was as high as 7 million.
Housing Market Update
 PREVIEW by Chris Martenson

The prior Martenson report on housing covered inventory (supply) and prices.  Lots of news has recently come out that I want to add to the story.  The breaking news in this area is coming a furious pace these days.

This first is an estimate of shadow inventory, and it’s something of a shocker.  Where I had suspected that inventory was being understated “by a few million,” I did not think that it was as high as 7 million.
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