State of the Ponzi

Its Feb 2012 and per government statistics the economy is humming along. Unemployment has plunged from the high tens to as low as 8.3% as of last month! Incredible! In addition, the employment participation ratio continues to plunge as more people suddenly drop out of the labor force. The nonperson meme continues to barrel forward as Barry is dead set on getting re-elected. At times I wonder what rational being would want to govern this corrupted pile of stinking shit known as the US Government other than a full blown megalomaniac. Barry would fit that description. In addition, GDP continues to rise at a decent 2.6%. Just enough to muddle through. Right.

Other metrics show a much darker picture. For example, Gasoline usage continues to plunge and has actually made new lows just this past month. The Baltic Dry Index (shipping rates) had a record 30 day decline which at some point went negative (meaning that shippers had to PAY for their ships to be used) LOL.

If the economy is sooo good then why do federal deficits continue to miss to the downside? Just recently the CBO announced a 1.39 trillion dollar deficit for fiscal 2012 and $950 billion deficit for 2013. LOL @ at that sub 1 trillion number for decent headlines. With central planners now implementing GDP targeting (that's what central planners do with perpetual deficits financed by the printing press) it's much more difficult for us to gauge economic activity by way of GDP contraction as they are attempting to make this an impossibility. But still, despite 4 years of 10% of GDP deficits, they cannot get the economy to "grow" as they want it to. Private and corporate borrowers are the largest source for credit growth.

But ahh, then there is the youth! Lets lever the fuck out of their futures in order to keep the ponzi growing. I wouldn't be surprised that "education" is now policy to assist in economic growth. After all, students financed with student loans fund the University Industrial Complex, rents, books, auto purchases, entertainment, vacations, you name it. No wonder Obama requested a 2.5% increase in education spending. Per their spread sheets, all this spending (and borrowing) is GDP positive.

The Europonzi figured out a way to keep its hot potato game of sovereign default going with the ECB financed LTRO (long term refinancing operation) where the ECB ives 3 year ultra low rate loans to European banks (insolvent) to purchase Eurozone government debt (also insolvent) in order to keep country borrowing rates lower. Market participants expect the next LTRO to be somewhere in the 700 billion euro range. Wonderful economic fundamentals LOL.

Even the Chinese decided to put off their day of reckoning by ordering its largest commercial banks to "roll over" all the bad paper (backed by half built developments in third world provinces). Game theory is at full play here with no side giving up any territory. It's just amazing that it's come to rolling over debt with more debt as it cannot be repaid without adding more debt. Fan fucking tastic!

In the middle east, Iran and Saudi Arabia are ready to get at each others throats via proxy in Syria. All this talk from the Arab League is really Saudi Arabia trying to take down a key Iranian alley (Yes, CNN, we know you don't really care and would prefer to cover the Life of Whitney). The Israelis are dead set on striking Iran's facilities and I believe its only a matter of time until it goes down. Watch crude oil rocket to $150 plus sending US gasoline to $6.00 plus. Shouldn't that be GDP positive also more spending will increase LOL. Maybe Bernanke will simply print more to offset higher prices.

Yours truly,


Subprime