- Net of Involuntary Inventory Build-Up, GDP Growth Was 0.8% Instead of 2.8%
- Durable Goods Orders and New Home Sales Still Show Stagnation
- Fed’s New PCE Inflation Target Is Inconsistent with Plans for Ongoing Easing

Final revised GDP is 1.7%. Click here. Just a reminder than the US bank “stress tests” required at least 2%, which after final “revisions”, we haven’t seen.

Some good interviews over at KWN with Gerald Celente and Jim Rickards.

Burning talks about Neil Howe’s work on generational theory, mass propaganda and perception. It is a long post, but very interesting.

A snippet:

Neil Howe is an expert on interpreting how generations react to events. I expected him to be impressed by the courage and fortitude of the Millenials leading this protest against Wall Street gluttony and audacious criminality. This is the new GI Generation and I anticipated him perceiving these protests as a prelude to greater feats ahead by this generation. Instead he described them as naive adolescents being led down a phony path by anarchist Boomers. As an example he referenced the fact that many of the protestors were wearing Guy Fawkes masks, the most famous anarchist in history. He found this distasteful and dangerous. My interpretation of the Guy Fawkes masks was more in line with the movie V For Vendetta and the theme of a corrupt evil government keeping the public living in perpetual fear.

Neil Howe’s impression of the movie centered on the terroristic aspects of blowing up Parliament, not on the symbolism of citizens rising up and casting off the yoke of a malevolent oligarchy that has used propaganda, fear and intimidation to manipulate and control the population. Howe is a Baby Boomer and I’m Generation X. We are each viewing the Occupy Movement through the prism of our life experiences and perceptions about the intentions of these protestors. The existing social, economic, and political structure is dominated by Boomers. Neil Howe views the Occupy Movement as a threat to the system he believes in and supports. As a cynical Xer with no allegiance to a corrupt government, a crony capitalist economic system or a greedy self centered society, I see these young revolutionaries as our last great hope.

Lots of true stats and proof of the propaganda in Burning’s link. Excellent read!

Side musing: groovygirl found it odd that a sociologist and studier of history like Mr. Howe was so bias.

On another side note, gg finds it very interesting that Ron Paul is invisible again. Even after taking the majority of the independent vote and the under-30 vote in NH. This demographic represents the swing voter and will be the major influence in this election. Will split the vote or not vote at all if Paul is not on a ticket? I don’t think we have seen the real impact yet of Dr. Paul’s ideals, since the focus is on the Republican vote only at the moment.

Click here for Martin Armstrong’s latest thoughts on inflation, deflation, and gold, dated January 27, 2012. Martin lays out his computer daily gold model.

Click here for Jim Sinclair’s comments on Martin’s thoughts.

Groovygirl’s thoughts: whoever is trading gold and silver at this stage of the game doesn’t get it. Please leave that to the professionals. Groovygirl stopped trading gold at $1200. We are in a risk-on investment environment in every sense of the word (from the Fed’s actions to the European debt crisis to debasement of the dollar to the 100xs paper gold market to MF Global). Regardless of where the gold price goes next week, you trade at your own risk.

Buy as low as possible the hold physical gold and silver (but don’t freak if you didn’t buy the lowest low). Let physical gold and silver be at least 20% of your total wealth. Then relax, physical gold and silver are going higher long-term. There will be a time to sell, but we are far from that time.

Click here for summary.

According to LEAP/E2020, 2012 will in fact be the year of the world’s great geopolitical swing: a phenomenon which will without any doubt be the bearer of serious difficulties for most of the planet but which will also allow the emergence of geopolitical conditions favourable to an improvement of the situation in the years to come. Contrary to the previous years, 2012 will not be a “wasted” year, stuck in the “world before the crisis”, through lack of audacity, initiative and imagination on the part of the world’s leaders and because of people’s great passivity since the beginning of the crisis.

…..

The great swing of 2012 is also the accelerated collapse of the Western banks and financial institutions’ power which is a reality described in this issue, contrary to the current populist chatter which forgets that the starry sky that we look at is an image of a long-gone reality. The crisis is such a speeding-up of history that many have not yet understood that the power of the banks which they worry about is that which they had before 2008. It’s a subject with which we deal in detail in this issue. At the same time, one continues to see investors flee the stock markets and financial assets particularly in the USA (12).

A couple of notes from groovygirl on Martin’s use of the word inflation. Inflation can have a lot of definitions. One is the velocity of money, another is the debasement of a currency, another is the scarcity of a commodity or the demand of a commodity.

Inflation in consumables (especially oil) that are denominated in dollars will rise in price, because the Fed is debasing the dollar in relation to other fiat global currencies. Since inflation in assets and capital is NOT occurring, as Martin points out, because the extreme deflation in debt, wages are falling in relation to dollar debasement. This puts the squeeze on wage earners and their rising living expenses. Investors have a little more flexibility to invest in non-dollar currencies (including gold), stocks, or speculation to stay ahead of the dollar debasement, thus preserving the purchasing power of their capital.

In addition we have the next speculation bubble: raw materials and consumables. This will affect the wage earners as well. It will look and feel like inflation to them, even as debt continues to deflate.

John Williams states that hyperinflation in the US will happen when dollars held abroad come back to the US en mass, when the globe abandons the dollar and dollar-priced assets, such as oil. This move has little to do with banks lending money or not or their perceived or real debt level.

Please remember that Martin looks at the global impact and capital moves, not always from a national/local level.

That is just gg’s 2 cents.

Ann Barnhardt brought this new development to our attention. Thanks, Ann.

The CME is offering over-the-counter swaps for agricultural products next month. Click here. Groovygirl was rolling on the floor laughing when she read: “As part of our commitment to provide customers with flexible risk-management tools”. And that is just the first line!

This will not end well.

From Ann:

This arrived in my email box from CME Group this morning and it made my blood run cold.

OVER THE COUNTER agricultural products? No. No. No. No. No. No. No. No.

So help me, anyone in the ag sector that is stupid enough to trade this crap will deserve EVERYTHING that they get. If they are raping and pillaging without compunction in the old school contracts, what do you think they’re going to do OVER THE FLIPPING COUNTER?

Click here for her site.

This is so scary. Do not invest in these OTCs. And read the prospectus of every company-bank that you are investing in to discern if they are using these instruments of mass destruction. You will need to study the foot notes carefully and research the sources of income and losses in previous annual reports. OTCs are on the “off-balance sheets” of companies for a reason….to hide risk from investors.

OK, so much going on today, it will be a bullet-point post.

Summary of the following: we are still in a global debt collapse, nothing has changed except the frequency.

• Portugal’s 10-year bonds at 15%, quickly following in Greece’s footsteps to default. Click here.
• Gold and silver blew through a couple of resistance levels in the last 24 hours, currently trading at $1726 and $33.68. USDollar dropped. We will see how the week closes.
• Martin Armstrong’s comment on yesterday’s gold move. Click here. Currently still within normal trading channels. Jim Sinclair comments on Martin’s thoughts here.
• John Williams of shadowstats.com has come out with an updated 75-page Hyperinflation Report 2012. You pay for the detail, worth it! But here is his summary. 2014 is the outside date for the beginning of hyperinflation.
• Jim Sinclair on yesterday’s gold move, click here. Audio interview at KWN with Jim, click here.
• NPR Morning Edition did a story this morning on the hyperinflation going on in Iran right now. Read this, listen to the show. But replace Iran’s currency with the US dollar, and the USDollar with gold and silver. And you have what will happen in the US and possible moves by the US government-Fed during that period. The US will be last, but it will happen.

Click here.

Groovygirl often quotes Martin Armstrong’s real estate cycle that is in a 26-year decline that started in 2007. We may have a slight uptick between 2012-2015, but gg will contribute that to government and banking regulations that “hide” the real inventory of housing (i.e. foreclosures).

Although Ms. Smith makes great arguments for the continued fall in housing, she misses one of the main reasons that US housing is and will continue to fall. The US housing market system is built on bank lending. No mortgages, no buying and selling and building. (And the US government can step in with only so much lending power for real estate, they already have more than they can handle with the Housing Authority and Freddie-Fannie.)

If you haven’t received the memo, the US banking system has not fixed its debt problems. It is not lending money. Nor, will it lend money as it did before 2007 with 10% down and a 30-year fixed rate at 5%, even if the economy should turn around. Which it won’t.

When the banking industry does decide to lend money again for housing and they should find an employed person with no foreclosure history, they will demand 50% down and a fixed 15-year rate of 10% plus. Should Americans decide they want to own a house under those conditions, they will need several years to save the 50% down.

Thus, it will be 2032, according to Martin Armstrong until we hit a low in US housing.

Side musing: If you own an investment property and you sell at a loss, you may take the loss against your income tax. In some cases, over a period of years. But if the sell is your residence, sorry, no loss to carry through.

In addition, a short sale on a residence can mean extra taxes. Current tax and investment laws make real estate investing, not home ownership, the better option during a long term down-trend in housing. Before making an investment in anything, know the current long-term cycle you are in. This basic understanding is the difference between profit and loss.

If tax laws change, this conclusion could change.

Chart of the day illustrates the real decline in housing. Click here.

Comments from Jesse at Cafe American:

What seems fairly obvious is that the law calls for MF Global to file a Chapter 7 bankruptcy in which customers are given seniority to creditors, rather than a Chapter 11 non-broker bankruptcy in which the customer interests are not upheld.  The rationale for Chapter 11 has always seems to be contrived to favor a particular creditor bank.

Prior CFTC rulings and ‘Rule 190′ seems to have dealt with this in the past.  Statements by various CFTC commissioners of late also seem to suggest that customers absolutely have a senior claim to any assets.

Why then did the SEC, with Gary Gensler’s purported assent, seem to ignore the precedent and their own rules and cut a deal in a secret meeting to favor the Banks, specifically JP Morgan?

And from MGFacts.com:

In other words, when the SEC threw the liquidation process to SIPC under for a Chapter 11 securities liquidation, and with the CFTC’s immediate agreement (under the conflicted Chairman Gensler who had not yet to recuse himself  from MF Global issues), a framework of law was chosen where customers were — for the very first time ever — made creditors and their assets thrown into the entire MF Global estate.   Many say what!  And the industry is now asking how?

Yes, how? Now the industry is very interested. It is finally dawning on commodity investors (that are not a Big Five Bank) that they can be screwed out of their money at anytime in the future. This is a game-changer and a complete loss of confidence in the US trading financial system.

Unless the government and its regulars does something pretty quick to restore confidence, the next “MF Global” (which could be anytime as Greece officially defaults in March) will bring about a stampede of investors pulling their money from US brokerage firms. When there is a loss of confidence in the rule of law in the markets, investors do anything to protect their capital, even pull out of the market completely. Large amounts of money have already left US commodities houses. As this story finally gets some press (on the internet), more will follow.