As pressure mounts on hold-out states in the U.S. to ratify a shameful deal on Wall Street mortgage-fraud, the mainstream propaganda machine continues to circulate a Big Lie as justification for this despicable sham: that a deal would help to “fix” the U.S. housing market. Not only is this wrong, but it is entirely opposite to the truth.

What the media continues to deliberately obscure is what is actually being negotiated here. You can’t ‘negotiate away’ 10’s of millions of fraud-infected mortgage documents. All that is currently being done with this “deal” is to absolve the Wall Street fraud-factories of responsibility for the this massive, deliberate, systemic fraud – which will permanently cripple the U.S. housing market.

Once a deal is done, all of the fraud will still be sitting in those mortgage documents: 10’s of millions of infected land titles, which can only be purged of their fraud through being litigated one at a time, through a U.S. court system which is already hopelessly clogged with Wall Street fraud.

By simply “sweeping under the carpet” these countless millions of acts of systemic fraud, rather than helping to fix the U.S. housing market, it guarantees decades of massive uncertainty and insecurity regarding land titles in U.S. residential real estate. Put another way, it makes title security in the U.S. grossly inferior to any/every other reputable land title system on the planet.

Until these 10’s of millions of acts of fraud are (eventually) purged from the U.S. land title registry – one by one – U.S. real estate will trade at a permanent discount in relation to all of those other real estate markets. What person in their right mind would pay full price for a piece of real estate where there is always a lingering doubt about actual, legal ownership of that piece of land?

In fact, there has always been only one rational approach to the made-in-Wall Street mortgage fraud nightmare. First of all, all time/effort/expense that has been wasted (solely for the financial benefit of the Wall Street fraud-factories) in these negotiations should have been invested into a national audit of the entire U.S. land title system – to systematically (and efficiently) purge all of this fraud from the U.S. real estate market once and for all. Only after that had been done, and the actual damages were finally visible/apparent should there be any talk of “making a deal” with Wall Street.

Indeed, there is no more damning indictment of the illegitimacy of these current negotiations than the fact that the parties seeking to sign-away their rights to sue the Wall Street fraud-factories can only guess at the total amount of fraud involved. Understand that in the real world where an individual was in negotiations to “settle” some fraud which had been committed against them that no competent lawyer would ever allow his/her client to sign-away their right to compensation before the scope of the damages was clearly apparent.

Yet what do we see here? According to Bloomberg “more than 40 states” have already agreed to a deal. Are we to believe that more than 40 U.S. state governments were unable to find a competent lawyer to represent them? Or, are we to believe this is yet another corrupt betrayal of the American people, solely for the benefit of the Wall Street crime syndicate?

Not only does this deal permanently entrench 10’s of millions of acts of (systemic) Wall Street fraud in the U.S. land title registry (causing permanent damage to the U.S. housing market); not only does this sign away the legal rights of U.S. states for compensation at pennies on the dollar; but it doesn’t even rescue the Wall Street fraud-factories themselves. It is entirely an exercise in futility.

It does not address the endless/infinite lawsuits involving the banksters’ principal mechanism of mortgage fraud: MERS, and the fraud-filled database it concocted. Even the propagandists expect those lawsuits to total in the $billions. Much more importantly, it does nothing to negate the still-looming mountain of liability which these fraud-factories face from the swindled chumps who purchased their “mortgage-backed securities”. Liability there will almost certainly end up in the $trillions – particularly given the penchant in the U.S. civil system for large “punitive damage” awards.

More generally, the private, bankster casino known as “the derivatives market” continues to lurk in the shadows: a $1+ quadrillion collection of insanely leveraged bets. The only reason that this financial abomination has not already imploded (and vaporized most of the Western financial system) is because the corrupt operators of this rigged casino are now openly refusing to honour some of those bets – i.e. the binding, legal contracts known as credit default swaps.

The government of Greece has defaulted on its massive debts. All that remains to be decided is the degree of the default: whether it will result in 50%, 70%, or 100% write-offs. Credit default swaps are (supposedly) “insurance” which protects the holders of Greek debt (and that of other nations) from the risk of default. Yet here Greece has clearly defaulted, but the corrupt administrators of the credit default swap market have refused to honour those contracts.

Understand that the credit default swap Ponzi-scheme is so inherently unstable that even an implosion of a tiny debt market like that of Greece could cause the domino-like collapse of not only the entire credit default swap market, but the instant implosion of the entire derivatives market – along with the Wall Street fraud-factories who operate it.

Let me briefly reiterate how flawed this process is, to illustrate the magnitude of this folly. A deal does not fix the housing market; it only makes things worse by permanently entrenching all this systemic fraud into the U.S. legal system. It throws away the states’ right to compensation at a time when they still don’t have the slightest idea of the total extent of Wall Street fraud, and the total extent of the resultant damages. It doesn’t even save the fraud-factories themselves, since their reckless gambling and previous acts of fraud already guarantee their ultimate financial oblivion.

This entire exercise has been a colossal waste of time, in addition to being yet another complete betrayal of the American people by their so-called leaders. As usual, the media propaganda machine is especially worthy of condemnation for hiding the issues, coddling the criminals, and presenting the absurd overall fantasy that a deal here would somehow put an end to the nightmare of Wall Street mortgage fraud.

Only in Washington.

True to “sausage-factory” form, Congress and the Obama administration have figured out how to pay for an extension of the payroll tax cut: by a tack-on fee to Fannie and Freddie, amounting to an average of approximately $11 per month over the life of the typical loan.

Now, around here, we aren’t necessarily opposed to the idea of raising the fees on government-subsidized mortgages to better reflect the comprehensive costs of that subsidy (all-inclusive of heretofore “external” costs).

But this has nothing to do with pricing-in the subsidies for providing the underlying service: mortgage-holders (mostly the middle class) will be soaked in order to pay for a completely unreleated policy priority.

And so, for perhaps the first time ever, we find ourselves agreeing with the likes of the Mortgage Banker’s Association head (David Stevens) that this is a bad idea, if not unfair, and downright puzzling.

For the middle class, it is a circular transfer of wealth. They will now subsidize their own payroll tax cut (out of their soon-and-distant future mortgage payments). Of course, the payroll tax cut is disproportionately enjoyed by those even lower on the income spectrum — and they could certainly use the relief; no argument there. But it’s not as if the “middle class” is rolling in the dough either.

The other disturbing aspect of this deal is that it is merely a two-month stop-gap. So the GSEs get a permanent fee increase for two more months of stimulus sugar-high.

For that, as many industry commentators pointed out, we get a permanent reliance on Fannie and Freddie as yet another welfare till (one of many to be raided as public finances worsen). It’s a lot like taking the axe to your furniture to burn the wood for heat. It buys you a little time, but you’ve really worsened matters for yourself permanently (if you are too poor to buy firewood, you’re also too poor to buy furniture).

Recall that the GSEs are supposed to be “private”, and merely in “conservatorship” at the moment.

Well, if the illusions of that status were not already dashed by the open and unlimited cash-infusion lifeline from the Treasury (~$150 bln so far), this new role as stimulus piggybank seals the deal.

As a result, it will be that much more difficult to reform the GSEs into something with a separate, self-sustaining existence.

And as much as we at Implode hate all taxes, eliminating tax breaks on the super-rich would be preferable to coming up with the stimulus in this disgraceful fashion. As Fannie and Freddie are the housing market for the middle class, and are now all but officially nationalized, this is a middle class tax hike in all but name.

Count on Washington to always find a sleazy, back-door path to forge a reprehensible bi-partisan “deal” that actually screws the people rather than helps them.

As the collapse of the U.S. economy quickly evolved into the Crash of ‘08; politicians, “experts”, and mainstream media shills were unanimous: the U.S. economy would/could “never experience the Lost Decade” experienced by Japan’s economy after several, huge asset bubbles simultaneously burst.

At that same time I was equally adamant in my own writing: the U.S. would be extraordinarily lucky if its economic collapse was no worse than that of Japan. In fact my expectation was that the collapse of the U.S. economy would be many times worse than what has become a “Lost Generation” for the economy of Japan, resulting in my dubbing the collapse of the U.S. economy to be its “Greater Depression”.

As we near the end of 2011, we now see something which would have been unthinkable just three years earlier: a U.S. business icon (gently) warning the U.S. business and political communities of the many reasons to expect the U.S.’s economic collapse to exceed the severity of Japan’s own depression.

Today, Reuters published an opinion piece from Pimco’s #2 man, Mohamed El-Erian in which El-Erian now reluctantly concludes the U.S. will be lucky to escape its own Depression with no more economic damage than what has been experienced by Japan – and could easily suffer a worse fate. Several observations flow from El-Erian’s mild “mea culpa”.

To begin with, every single “weakness” in the U.S. economy to which El-Erian now refers was completely visible four years ago. However, virtually no one in the U.S. political community, business community, academic community, or media propaganda-machine was willing to take off their “rose-coloured glasses” and look at the real world.

Indeed, the propaganda-machine got great amusement from bringing in well-known contrarian Peter Schiff as a guest on their “economic panels”, and then having everyone present gang-up and ridicule Schiff for telling the truth about the U.S. economy. To this day, these dishonest shills will admit to no more than “surprise” over the collapse of the U.S. economy – despite the obvious economic parameters which made this collapse inevitable (not to mention Schiff’s warnings).

Despite the supposed “candor” from El-Erian, very little has changed. Evidence of this can be found (for starters) with the gigantic myth to which El-Erian and the rest of the mainstream community continues to cling: that the U.S. is a “post-bubble economy”.

U.S. interest rates are lower than during the supposed “bubble”. The number of “underwater mortgages” is much higher. Trillions in leveraged-losses for the Wall Street fraud-factories have not been purged from balance sheets – only hidden, and with much of that financial feces sitting on the balance sheet of the Federal Reserve itself.

The systemic fraud which saturates the U.S. mortgage market (and prevents any “bottom” from ever forming in this market) has not been eliminated. Rather, U.S. politicians and banksters are close to a deal to permanently sweep all this fraud “under the carpet”, where it will fester (and drive down home prices) for decades to come.

It is utterly absurd to refer to the U.S. as a “post-bubble economy” when U.S. politicians have spent all of their time and efforts doing anything and everything they can to re-inflate this bubble. No less than a dozen government band-aids have been hatched just to attempt to pump-up the housing-bubble alone.

The ultimate evidence that neither the U.S. nor the Euro-zone economies could possibly be described as “post-bubble” is the constant rhetoric emanating from the economic charlatans in charge of their central banks. Regardless of which side of the Atlantic we hear these talking-heads speak, the message is the same: the ultimate enemy is “deflation”.

You don’t have to be an economist, or even be good at arithmetic to see the absolute absurdity/hypocrisy which is inherent in this attitude (and policy) of these central bankers. All you need is a moderately competent understanding of the English language.

What happens when a bubble bursts? It deflates. Yet week after week, month after month, year after year; we listen to self-deluded “experts” like El-Erian spout drivel about “post-bubble economies” when it is the official, absolute economic policy of our central banks (and the servile politicians) to prevent deflation at literally any “cost”.

Across the Atlantic (and following 18 months of relentless economic terrorism from Wall Street), European hypocrisy in this regard is also fully on display. After many months of stalling and denying the inevitable, we see Greece’s bond-parasites having 50% haircuts imposed on them – an obvious default, and on its surface a partial “deflation” of Greece’s debt-bubble. However, simultaneously we see these idiot-leaders (at the urging of the bankers), printing hundreds of billions more euros to pump-up the debt bubbles of Europe’s Bank Oligarchs, as well as attempting to keep the other sovereign debt bubbles inflated.

When you see a boy with a bicycle pump attached to his bike tire, pumping furiously while telling you he is “deflating” his tire, you don’t need to perform a polygraph test to realize that the boy is lying.

Everything to this point has merely demonstrated why the U.S. (and most of the Western world) is guaranteed to repeat the failed economic policies of Japan, and for the same reasons – because their bankers and political leaders continued to do the exact opposite of what they claimed to be doing. In fact, there are a nearly endless list of reasons why the U.S.’s refusal to “deflate” its bubbles (i.e. the refusal of its Oligarchs to allow deflation) will result in a much worse economic catastrophe than what has been experienced in Japan.

The U.S. has a $trillion per year war machine bleeding its economy dry, Japan does not. The U.S. has had more than three decades of trade deficits, which are getting steadily larger. Japan has a trade surplus. The average American is so heavily indebted that an ever-growing percentage are literally unable to borrow a single dollar more. The Japanese people had an enormous pool of savings at the time their depression began.

The primary “drag” on the Japanese economy has been the massive losses which have been hidden rather than purged from the balance sheets of Japans banking Oligarchs. Not only are the Wall Street fraud-factories much more insolvent than the Japanese banks (in proportional terms), but the U.S. financial sector is more than twice as large as Japan’s financial sector in relation to the overall size of their respective economies.

This has resulted in the blood-sucking done by Wall Street being many times more extreme than what has taken place in Japan. We can see this reflected in the astronomical amounts of “bail-out” dollars being funneled into those vampire banks. Of the more than $15 trillion in direct hand-outs and “guarantees” printed into existence by the Federal Reserve and the U.S. government, well over 90% has been funneled directly into Wall Street.

An amount of liquidity equivalent to roughly ¼ of the entire global economy has been pumped into Wall Street to prevent the banksters’ fraud-saturated bubbles from deflating. To refer to this as a “post-bubble economy” is like referring to the nation of Japan as being “post-Fukushima” the day after the first meltdown. Obviously that event merely marked the beginning of Japan’s nightmare (and the suffering of its people).

What makes the choice by U.S. leaders to duplicate every mistake made by Japan (except to a much greater degree) even more reprehensible is that it is now apparent that there is “no escape” for Japan. Year after year of massive deficits to prevent the economic pain (and economic healing) which comes from a deflationary purge, has left Japan with a mountain of debt – and its biggest “bubble” yet. Debt-default for Japan is now merely a question of “when” rather than “if”.

What this means is that current U.S. economic policy is not the “reasoned gamble” it is portrayed to be by politicians, bankers, academics, and media parrots alike. Rather it is the deliberate, conscious election of economic suicide – to merely delay the inevitable “deflation” (and insolvency) which awaits its Banker Oligarchs, and now the entire economy.

Left, right, or center, most of the mainstream media has been utterly contemptuous of the nascent Occupy Wall Street (OWS) movement, as Jon Stewart has just illustrated adroitly with his signature wit. Of course the right-wing pundits cannot be beat for their overt contempt for the protests — it’s all just a bunch of statist, communist, anti-capitalist malcontents, don’t you know! Nothing good wholesome Americans should support, or even pay attention to.

Malcontents, yes, but is this so different than what has been going on with the Tea Party for two years now? Again (in the above show), Jon Stewart deftly illustrates this point by taking a Sean Hannity quote from 2009 out of context; viewers intrinsically understand it to be referring supportively to the OWSers; until Stewart reveals that it actually was said in reference to the Tea Party.   How very illuminating.

Hannity should look again. He could even get a nice Obama jab out of it, if he wasn’t so obtuse.

You see, in my estimation, Occupy Wall Street is the left/progressive-center reaction to the same factors that motivated the Tea Party and caused it to explode onto the scene as real force in politics (surprising the entire establishment).

When that happened, leftists took their turn deriding the popular movement, calling it not popular, funded by self-interested billionaire benefactors (of course that doesn’t happen on the left), or blaming it on “anti-Obama racism.”  Surely there is some of that (maybe a lot of it), especially in the late-comers to the modern movement (which actually began before Obama’s ascent, with Ron Paul), but what they missed in their knee-jerk reaction was that the core concerns of Tea Party were quite valid and rang true to many formerly apathetic Americans. They were not born Tea Partiers; they were only made so by the ills of our polity and most importantly economy, which they were acutely experiencing.

The Tea Partiers may have passed judgment on Obama hastily, but they were right: things have indeed not improved, if not worsened under him. Even those on the left side of the spectrum have long since figured out why: he is quintessentially of the establishment, meaning the big corporate and especially financial power, and does not go against that grain except meekly and utterly symbolically.

So what, then, of Occupy Wall Street? I see it as the left-of-center answer to the Tea Party — except motivated by virtually the exact same core concerns of economic and political rot . It’s effectively a Tea Party movement that all who view themselves as “somewhere else” on the political spectrum can embrace. A useful contrast is the ill-fated “Coffee Party” movement. That went nowhere fast — as I expected — probably because it defined itself as the “anti-Tea Party” rather than anything affirmative. Well, for a winning set of “affirmative” factors, one could always simply re-use the Tea Party’s own. And that’s exactly what Occupy Wall Street has done.

What Obama should take notice of (but probably won’t) is that, because OWS largely consists of people who are (or were) sympathetic to him, if not overt supporters (and I’m not saying all — just most, maybe), they wouldn’t even be out there unless he was a rank failure and a “sell out” to the very interests OWSers are decrying. In a sense, these people waited on Obama for almost three years, perhaps asking themselves “could the Tea Partiers have a point?” And then when Obama failed to rock the apple cart, the answer came in as a resounding “yes”, and they got off their couches (if their couches had not already been repossessed). But they wanted to do it in their own way.

As part of his pandering reflex, Obama will probably make some faux-angry mouth-movements towards Wall Street, maybe push for a symbolic tax increase on the rich (which, whether you support the notion or not, will do little to change our economic crisis), and then, largely, do nothing. I mean, why should he, right? In Obama-world, he already supported Dodd-Frank, which was his grand answer to the financial crisis, so what more could anyone want? If anyone criticizes Dodd-Frank for being ineffective, he can always say it was “watered down”.

That sort of excuse will likely ring hollow with OWSers (and Tea Partiers) who are still very, justifiably sore about “too big to fail”, a notion now formally enshrined in federal law.

So, all you youngsters out there, when you are unable to afford to live after paying towards your six-figure student loan debt (which isn’t dismissible in bankruptcy court, because that would upset JP Morgan Chase), you can rest assured that no mega-banks will be forced to go through the indignity of their owners losing THEIR assets through bankruptcy, or even their golden parachutes, or even their control of the companies they have run into the ground.

What I sincerely hope is that Occupy Wall Street and the Tea Party — which, if they are not best described as actually centrist, are motivated by fundamentally centrist concerns — learn to put their differences aside and work for solutions to the core problems they largely agree on. Roughly speaking, the top issues (as I see them) are :

• the sclerotic economy (read: depression)
• lack of opportunity or economic advancement, especially for young people
• cronyist bail-outs for big banks and corporations which are unacceptable
• undue influence of big banks and corporations on the government and its policies
• a broken monetary and banking system (with the Federal reserve at the center)
• inflation (a stealth tax on “the 99%”, especially young adults and retirees) and official insensitivity to it
• too much federal waste and power
• elective wars and too much military-industrial concentration in the economy
• outsourcing and “hollowing out” of our economy through monetary and trade policies; bad immigration policy
• domestic distractions like the war on drugs and the usual wedge issues

For my part, I think both of these movements could forge a common platform, with the emphasis on the following general remedies (in rough order of how soon they should, could be implemented):

1. End the bailouts (including the Fed’s current “zero interest rate” and “quantitative easing” policies, which are just bailouts by another name); force banks to recapitalize or be taken over if they are truly insolvent (probably most of the big banks and 1/3rd of the US banks total);
2. End the Fed itself (or at least nationalize it and making it totally transparent); I would also eliminate Fannie and Freddie (as these entities proved no better than corrupt banks and destroyed the housing sector even as they were supposed to “help” it);
3. Refocus the country on savings and capital development (starting with ending the Fed, or at least normalizing interest rate policy) — as opposed to the current focus on debt and credit (national development banks, or especially state banks, could be opened to kick things off if the private markets are still not functioning, but the above moves should unlock the private capital markets as well. Look towards Iceland);
4. Loosen regulations on small businesses and dramatically scale back (if not eliminate) taxes on them;
5. Cut back federal regulations dramatically and instead focus on actually enforcing a core set of must-have regulations;
6. Get the money out of politics and private influence out of regulation (this is tough to do but we could make meaningful steps forward with bans on “the revolving door”, strengthening and expanding whistleblower rights and awards, forcing all legislation to be transparently connected to those who wrote it or made any change to it, limitations or bans of corporate money in national politics — possibly moving to a public funding model which actually admits third parties).

   As an important sub-item to this one, I would recommend purging the top 2-3 levels of all of the federal enforcement bodies (including the SEC), and the Justice Department, and find a way to rout out corrupt federal judges;

7. End the elective wars and policing the world;
8. Move government to the most local level possible — where it is actually appropriate and can be both funded AND watched over by its true constituents. Shrink the federal government and return most taxes to the states and the people.

   It’s not about “big government” vs. “no government” — it’s about government functioning properly by being accessible to its own constituents (note that no other democracy exists comparable to our size or larger, except India, which is, tellingly much more local-based. We have the largest monolithic central government in the world for a democracy, and it doesn’t work!)

I was also going to add “balance the budget and stop continually selling Treasuries to foreigners” (as this is what fuels the outsourcing and trade deficit), but I think that would come naturally if we implemented the major steps in the above list.

I find it hard to believe that most Tea Partiers or most OWSers would not agree with most of this program, and I suspect most common-sense Americans would support these sorts of measures, whether or not they count themselves a part in either movement.

The establishment may laugh now, but I suspect most Americans, within or without either of the above movements, will catch on to the necessity of this agenda amidst our economic and political death spiral, and ultimately force such a restructuring so that our civilization can survive. It’s time for a little “regime change” at home!

I had two purposes in writing today’s commentary. The most obvious intent is to help people avoid committing financial suicide in our real estate markets. However, an equally important goal was to provide people with some sort of quasi-objective “measuring stick” to answer an important question: how high is “high”, when it comes to precious metals prices – and in particular the price of silver?

The first topic can be dealt with (in general terms) rather quickly. The criminal near-zero interest rates imposed on us by our banker-serving governments mean that any and every economy which allows such recklessness will always have a housing market in some stage of “bubble”.

Near-zero interest rates punish savers. When near-zero interest rates are combined with high inflation, this is nothing less than the economic rape of savers – the specialty of Western bankers. With savers forced to disgorge any/all savings (to avoid it being ‘stolen’ via banker-created inflation), the first place capital flows in such situations is into real estate markets.

There are two reasons why real estate will always represent the first/worst bubbles to afflict such markets. First of all real estate is the most obvious asset-class to turn to in such circumstances. Secondly, many/most Western economies provide some level of subsidization for home-ownership – further “juicing” these real estate bubbles. The fact that the U.S. subsidizes home-buying more than any other economy is one of the reasons the U.S. housing market continues to represent the world’s worst real estate bubble (with massive, systemic fraud being the other main driver).

In such circumstances, there is no such thing as “investing” in real estate – only in gambling on it. The exponential money-printing and near-zero interest rates have resulted in more capital sloshing around asset markets than at any other time in history – by a factor of ten. In such circumstances no one can attach a rational/objective assessment to home prices. With absolutely no way of determining how overvalued is any particular real estate market, then obviously any/every purchase is a gamble.

This means that any sane individual contemplating buying a home today would do only one thing: run! With no real estate market on the planet being a desirable place to invest our capital, the only sane strategy for future buyers is to delay buying a home – and instead to prepare to make that purchase under more optimal conditions.

While we wait for our interest rates (and eventually our housing markets) to return to sanity, the obvious step for future-buyers to take today is to buy silver – to reduce the price they ultimately pay for a house to a small fraction of current prices. The dynamics could not be simpler: house prices (in “real” dollars) will fall a long ways in most/all markets, while the price of silver is headed to many multiples of the current price. With both of these price-trends clearly telegraphed, there has rarely been such an obvious opportunity for a profitable arbitrage in all of history.

The best way I can attempt to describe/define this opportunity would be to provide an estimate of how much silver it will take to buy a secure, comfortable home: 500 ounces. This is a figure which I have seen quoted by more than one other writer, so I will presume they have looked at some historical data which suggests such a price-relationship.

I made no attempt to verify this, for two obvious reasons: real estate markets have never (collectively) been so over-supplied and over-priced in all of history. Conversely, in relative terms silver has not been this scarce in thousands of years. This means that as the “pendulum” swings back in these markets that at some point there will be an opportunity for people (in many parts of the world) to buy a house with less silver than at any other time in history. Thus, when I use an estimate of 500 ounces of silver to buy a home I’m not thinking of a “best-case scenario” (for silver-holders) but closer to a worst-case scenario.

In some of the worst bubble-plagued markets that ratio would/will go much lower. In the U.S., Americans have a very realistic probability of purchasing a respectable home (at some point) in the future with 100 – 200 ounces of silver.

I realize there will be many who view such figures skeptically. I have no space here to debate that point. I can only encourage such skeptics to look over the dozens of previous commentaries which I have written about the U.S. housing market, and/or the dozens of commentaries which I have written about the silver market.

The more general point which I do wish to argue here is the necessity to look for new ways to express prices which are not dependent on/connected to the worthless paper currencies of Western bankers. An ever more frequent question asked of precious metals commentators is “how high will gold and silver prices go?”

Expressed in banker-paper (i.e. our worthless “fiat currencies”), this is now a question which has essentially become meaningless. When the bull market began for gold, the veteran commentators in this sector were gravitating toward $2,000/oz as a “long-term price target” for gold.  As we see today, that number could easily be our “rearview mirrors” (permanently) by the start of 2012.

Were those original commentators too timid, or lacking in “foresight”? Not at all, rather our paper-pushing bankers have been diluting their fraudulent paper so rapidly that gold and silver are more undervalued today than they were a decade ago. Rather than moving “toward a peak” in precious metals prices, we are more distant from a top in these markets than ever before. And in the more extreme (but highly probable) outcome of hyperinflation, the “prices” for all goods (expressed in worthless paper) are near-infinity.

This means that the only, rational way in which we can “price” any/all hard assets – in meaningful terms – is to price these hard assets versus each other. I have already endeavoured to “price” silver in terms of real estate, and now I will seek to do so with two other, notable hard assets: gold and oil.

By necessity, these will be crude estimates. The same banker-insanity which has grossly distorted real estate prices all over the world also impacts the prices of gold, silver and oil. However, with the current gold, silver, and oil markets also being the three most heavily-manipulated, heavily-suppressed markets in the history of the global economy, assigning precise price levels/ratios is impossible.

Naturally, the price-ratio where we can come closest to a precise estimate is the gold/silver price ratio, since we have nearly 5,000 years of price data to guide us – during which time the average gold/silver price ratio has been 15:1. However, as previously noted, in relative terms (i.e. “relative” to gold) there has not been this little silver in the world in thousands of years. This ensures that at some point before any long-term equilibrium can be reached that the price-ratio must descend to well-below that 5,000-year equilibrium.

A very conservative estimate for that ratio would be 10:1. In terms of above-ground silver-to-gold, the figures I have heard as estimates range from a 6:1 ratio and lower. With industrial demand for silver “massive” and rising, we know this supply-ratio will continue to shrink (in silver’s favor), since so much of the “industrial” silver is not recycled, but essentially “consumed”.

With today’s price-ratio still being at an extreme level of more than 40:1, this explains why all informed commentators in the precious metals sector expect silver to significantly outperform gold in the future (while gold itself “outperforms” all other asset classes). Let me note that I am not advocating that bullion-holders start swapping their gold for silver.

While we know that the gold/silver price ratio is going to move drastically in silver’s favor, we cannot predict with certainty over what time-horizon this adjustment will take place. Given that we are acquiring our bullion as financial insurance, and given that we could need such “insurance” at literally any moment, all prudent investors will hold significant amounts of gold and silver. For those who consider themselves “gold heavy” today, such individuals should simply focus on silver with their future purchases of bullion.

The most-speculative of these price ratios is the silver-to-oil ratio. Oil is one of the few commodities on the planet whose own scarcity rivals (and perhaps exceeds?) that of silver. Combine that with massive market-manipulation, enormous geopolitical uncertainty, enormous economic uncertainty, and extremely dubious numbers on actual oil “reserves”, and here we can literally do little except make our “best guess”.

My best ‘guesstimate’ on a rough equilibrium between silver and oil prices is for a 2:1 silver-to-oil ratio (i.e. two ounces of silver = 1 barrel of oil). Readers will immediately note that I expect this price-ratio to remain much “flatter” than the other two price-comparisons I’ve made. While we cannot assign precise price-ratios, we can certainly rank these ratios with precision.

With housing markets grossly over-supplied, and (demand) in Western economies certain to remain weak for many years to come, the silver-to-housing price ratio is certain to plummet by the greatest amount. The supply in the (under-supplied) gold market will remain relatively flat. Mine supply raises the total, global stockpile of gold by merely 1% per year, since very little gold is ever consumed. Under these circumstances, obviously the gold/silver price ratio will not fall nearly as far as the silver/housing price ratio.

My estimate with respect to oil reflects two, mixed dynamics. On the one hand, in terms of inventories the supply of silver is even more restricted than that of oil, hence the expectation for the price ratio to move somewhat in silver’s favor. Conversely, there is every reason to believe that we still have access to more “new” silver (still in the Earth’s crust) than “new” oil (again in relative terms).

Those people who mistakenly believe that we have “lots of oil” because of what has been identified in shale deposits need to refer to the ground-breaking work which Chris Martenson did in this area. To my knowledge, Martenson was the first to point out the most important dynamic here: that given current technology, extracting any of this shale oil will consume nearly one full barrel of oil for each barrel produced – leaving zero (surplus) oil for anyone to actually use.

When the brain-dead U.S. government begins massive extraction of its shale-oil, it will make a lot of Oil Oligarchs fabulously wealthy. It will pollute/devastate much of the U.S. “environment”. However, it will not ever produce any extra oil for us to “fuel” the global economy.

Certainly the subject-matter of this commentary is something about which I could have written several chapters, rather than merely a few pages. However, with any analysis here unavoidably speculative, I concluded that it was a better use of time (for both myself and readers) to produce a concise but general “guide” rather than endeavour to produce an exact treatise on the subject – given that such precision here is impossible.

More selfishly, when readers ask me in the future “how high will the price of silver go?”, my answer will now be as follows:

1 barrel of oil = 2 ounces of silver

1 ounce of gold = 10 ounces of silver

1 house = 500 ounces of silver

The best “service” which I and other precious metals commentators can perform for our readers is to divorce their thinking on “prices” away from the ludicrous/meaningless nominal numbers attached to the banksters’ fraudulent paper currencies – and back toward “pricing” assets in some sort of rational manner to each other.

Pricing goods in terms of “dollars” today is every bit as ludicrous as when the Dutch priced all goods in their society in terms of tulips (four centuries earlier). Just as we laugh at the Dutch for foolishly assigning extreme “value” to common plants which could be produced in infinite quantities, so too will our distant descendants laugh at us for foolishly pricing our own valuable assets in terms of utterly worthless scraps of paper – which have already been produced in near-infinite quantities.

Before I conclude this piece, I want to refer one more time to the proposition I raised at the beginning of this commentary: the marvelous “arbitrage” opportunity involving silver and housing. Readers of “business news” have always been looking for guidance on successful strategies for investing their wealth.

Living in an age of near-zero interest rates and worthless paper currencies has transformed this desire into a desperate quest to find somewhere/some way in which they can protect their wealth from the monetary depravity of bankers. To these people, it will hopefully come as a relief that they can adopt a strategy which is as simple as it is secure.

Buy silver today.

Buy a house tomorrow.

Bloomberg and other U.S. propaganda outlets are trumpeting the news that Western bankers and (so-called) ‘regulators’ have reached a deal on new capital requirements for these fraud-factories. According to ECB-chief Jean Claude Trichet, lead banking-shill on the far side of the Atlantic, the new rules bring stability to the Western banking system and “address moral hazard”. Quite obviously these anemic new rules do neither.

First a look at the numbers. Some Western banks will be forced to raise their capital requirements by “up to 2.5%”. In fact, some of these banking oligopolies will only have to raise their capital by a mere 1%, while some of these fraud-factories won’t be required to raise any additional capital at all. To understand how recklessly inadequate these new rules actually are requires some context.

To begin with, the current capital requirement for these big-banks (who have placed bets totaling roughly $1.5 quadrillion in the derivatives market alone) is a microscopic 2% of “assets”. Let me repeat this: the same insanely reckless, pathologically greedy bankers who have placed bets amounting to 20 times the size of the entire global economy are currently able to “back” only 2% of those bets (and the actual value of that “2% in assets” is highly suspect).

Bankster apologists will argue that with increased capital requirements of “up to 2.5%”, that this would more than double capital levels for the (minority of) banks which have the maximum reserve-levels imposed upon them – and thus this “fixes” that problem. To rebut such nonsense requires some additional context. In that respect, China’s banking system is the perfect example.

First of all we should note that the tiny increase in Western capital requirements is to be phased in over seven years. There is zero probability of the Western banking system even surviving that long. However, for the sake of argument, let’s assume that the full increase in capital requirements was imposed tomorrow. And let’s assume that all of these fraud-factories have the highest capital levels imposed upon them – when in reality most of those banks will be able to lie, cheat and bully their way to much lower levels.

Even after these Western banks were “recapitalized”, at 4.5% total reserves Western banks would have less than ¼ of the capital reserves of China’s banks – and (unlike Western banks) Chinese banks have not placed more than $1 quadrillion in highly-leveraged bets in the banksters’ derivatives casino.

What does the Western media think of China’s bank reserve levels? Certainly if these propagandists believe that Western banks will (eventually) be “well-capitalized” with bank reserves at 4.5%, then these same pundits must believe that China’s banks are over-capitalized, given that their current capital requirements (at 21.5%) are more than 10 times higher than Western fraud-factories? Hardly.

In 2009, the Western propaganda-machine was telling us that China’s banking system was “an accident waiting to happen”: a “bubble” which was the result of “a massive lending spree” of approximately $1 trillion. Another way of describing this would be say that Chinese banks “expanded their balance sheets” by $1 trillion. In fact, in “QE1” alone, the Federal Reserve expanded its balance sheet by $1.25 trillion – while allowing the Wall Street fraud-factories to maintain 30:1 leverage on their own balance sheets. And China’s banks had already been forced to raise reserve requirements five times before the first of this “China bank bubble” nonsense was published. But the propaganda-machine was just getting warmed up.

All through 2010, the same propagandists were still telling us that China’s banks faced “a big bubble risk”. And once again, in 2011 we are being subjected to even more “China bank-bubble” nonsense. So, with U.S. banks having 1/10^th the capital reserves and roughly triple the leverage of China’s banks, what was the propaganda-machine saying about U.S. banks while it accused China’s banking system of being a “bubble” again and again and again?

In 2009, even before the totally farcical U.S. “bank stress tests”, the same propagandists told us that U.S. banks were “well-capitalized”. Naturally, after virtually all of the U.S. big-banks “passed” the test we were subjected to much more of this “well-capitalized” propaganda. And as recently as two weeks ago (but still before the new “Basel” banking rules were agreed upon), we have the U.S. propaganda-machine telling us again that U.S. banks were “well-capitalized”.

The ridiculous lies and hypocrisy from Western big-banks and the propaganda-machine doesn’t end with all of their “bubble” hyperbole. As I mentioned at the beginning of this piece, the bankers and propagandists are telling us that this new deal also “helps address” the moral hazard of allowing these Oligarchs to place bets amounting to more than 20 times the global economy – and then blackmail our governments for $trillions when they inevitably bankrupt themselves (as they did in 2008). In fact, this deal does absolutely nothing in that respect.

The key here is that nothing has been done to force the Wall Street fraud-factories (in particular) to reduce their self-destructive 30:1 leverage. Unless/until that insanity is permanently ended, Wall Street banks are nothing but “suicide bombers” with multi-trillion-dollar “vests” of financial explosives strapped to each one of them.

At 30:1 leverage, it only takes a fall in the prices of the assets underlying those bets by a mere 3% to bankrupt the entire U.S. banking sector. In fact, U.S. home prices (which remain the #1 asset upon which Wall Street’s bets are based) have already fallen that far just since the start of this year. This means that even if we adopt the highly dubious assumption that Wall Street banks were solvent on January 1^st, as a matter of simple arithmetic they must have bankrupted themselves since that time.  Of course, in the magical world of the U.S.’s “mark-to-fantasy” accounting system we are forced to speculate on such subjects, since the balance sheets of Wall Street banks don’t even qualify as plausible “fiction”.

Let’s put this another way. The “extra capital” which (some) U.S. banks will be forced to implement over a period of seven years under the new “Basel II” accord would all be 100% consumed (plus much more) if U.S. housing prices fall even 1% more. In other words, by the end of this summer all of the additional capital which U.S. banks will be required to raise over the next seven years will all be more-than-100% consumed.

Exactly how has “moral hazard” been eliminated from the U.S. banking system when these Oligarchs are (again) insolvent, and their new “capital cushion” will be gone in a matter of weeks? In fact, it is a matter of the most elementary logic that this “moral hazard” must continue as long as these bank-oligopolies are allowed to exist in their present size.

As I wrote in a previous commentary, “too big to fail” (by definition) means “too big to exist”. As long as individual banks are allowed to exist on a scale where they can (literally) blackmail entire governments for trillions of dollars, then “moral hazard” hasn’t been eliminated – it has been maximized. Obviously it is impossible to construct a hypothetical scenario which implies any more moral hazard than the current reality.

It has always been 100% obvious (and 100% necessary) that the only way to bring these greedy Oligarchs back under control was to smash all of their oligopolies into little pieces. This is entirely in accordance with the fundamental principles of capitalism. For 400 years we have known that the “ultimate evil” in any/every capitalist economy are monopolies and oligopolies. The choice of our cowardly/corrupt governments to ignore 400 years of capitalist theory and allow these bank-oligopolies grow to such an extreme size is the real-life validation of those 400 years of economic theory – and conclusive evidence that all of these banking oligopolies must be scoured from the face of the Earth.

As if all of these lies and hypocrisy from the bankers (and their propagandists) wasn’t odious enough already, it gets even worse. The same Wall Street banks which demanded a $15-trillion blackmail “bail-out” in 2008 because they deemed themselves “too big [i.e. too important] to fail” are  “vigorously lobbying” the spineless regulators to have themselves classified as not “systemically important” (the bankster euphemism for “too big to fail”).

We now arrive at Wall Street’s “Golden Rule”: when the world’s most-reckless gamblers bankrupt themselves, then they are all “too big fail” (and thus deserving of $trillions in banker-welfare). However when it comes to imposing regulations on these fraud-factories (i.e. responsibility, accountability, and sanity) then suddenly none of these Oligarchs are “too big to fail”.

This sort of “heads I win, tails you lose” hypocrisy which Wall Street bankers live and breath every day of their lives is, by itself, conclusive proof that these Oligarchs have been allowed to grow too large, too arrogant, and simply too dangerous to be allowed to exist. The “Basel II” rules have been a total failure in imposing even minimal levels of solvency and accountability on the worst fraud-factories to have ever preyed upon our species. Indeed, these farcical negotiations have only (and inadvertently) produced one tiny benefit for the citizens of Western nations: they have conclusively demonstrated that the entire Western financial system is both corrupt and bankrupt beyond any possible redemption (with the possible exception of Canada’s banks).

Once that reality is acknowledged, “bank policy” becomes much simpler to articulate and implement.

1)      Capital requirements for Western banks should be raised to a level similar to China’s banks, unless/until “systemic risk” has actually been reduced – rather than just pretending to do so. Obviously this necessarily requires the derivatives market to be wound-down, and eventually eradicated – since by itself the derivatives market represents over 90% of all “systemic risk”.

2)      Not one more bail-out/hand-out dollar goes to any Banker Oligarch, again. Ever.

Obviously such requirements would bankrupt each and every Wall Street bank, and most if not all of Europe’s banking oligopolies – in other words, “success” would be 100% certain.

Bankster apologists will naturally assume full “Chicken Little” mode at this point, and wail that “the sky will fall” if we allow all these banksters to drown in their own financial sewage. In fact, as I’ve written on several occasions, the $15 trillion in hand-outs, tax-breaks, and loan-guarantees bestowed upon Wall Street alone after they engineered the “Crash of ‘08” was at least three times what would have been necessary to create a brand-new, solvent (i.e. debt-free) U.S. banking system.

Better still, we have already seen that we can live without these banksters with no trouble at all. Wall Street has already been cutting its lending to U.S. businesses steadily and relentlessly since they accepted all that banker-welfare – despite promising to increase their borrowing. And with more than 90% of the U.S. mortgage market now directly guaranteed by the U.S. government, Wall Street’s only role in that market is a totally parasitic one: pocketing the profits on any/all mortgages where the borrowers are still making payments – while standing behind none of this debt.

The conclusion here is incontrovertible. We have a long list of reasons why it is imperative for all of the banking oligopolies to be smashed into little pieces. We have several years of empirical evidence that our economies can function without any of these Oligarchs. And we have not one, single (valid) argument for allowing these oligopolies to continue to exist.

The failure of Western governments to implement such obvious, essential policies would be nothing less than treason: sacrificing their own economies, and the prosperity of their own citizens solely to prop-up (and continue to enrich) the most vile financial predators to have ever been hatched on this planet.

As a natural “contrarian” I was forced to incorporate a “quirk” into my research going all the way back to my days in university. Not being able to find research materials which coincided with my own positions, I would read materials which supposedly supported an opposite point of view – and then explain how such research actually supported my own viewpoint.

I had another opportunity to resort to that technique this morning, as I scanned a rather absurd piece of Bloomberg propaganda. Bloomberg had managed to find an anecdotal account of a U.S. homeowner who had actually shortened the term of their mortgage. Bloomberg then proceeded to call this a “trend”, and kicked-out a laughable headline about “equity-building” by U.S. homeowners.

Meanwhile, back in the real world, nearly 30% of U.S. homeowners have “underwater mortgages” meaning that overall, U.S. homeowners have less equity in their homes than at any time in history. Bloomberg could have found a more credible topic if it had chosen to talk about “sunbathing in Antarctica”. However, as is often the case, in attempting to present a totally ridiculous scenario and market it as “fact”, it has instead disclosed one of the banksters’ “dirtiest little secrets”: the economic rape, or debt-slavery which these big-banks have created by extending the length of mortgages for countless millions of homeowners.

To illustrate this principle, I need only revert back to the anecdotal account supplied by Bloomberg. It noted that the U.S. couple which had cut in half the length of term of their mortgage from thirty years to fifteen years was only paying $250/month more on their mortgage but repaying principal twenty times as fast. This was accomplished largely due to the fact that by dramatically reducing the term of their mortgage, the couple qualified for an interest rate more than 30% lower than their previous interest rate (i.e. from 7% to 4.5%).

Now let’s once again return to the real world. In the real world, for every U.S. homeowner shortening the length of their mortgage there are ten other mortgage-holders (twenty? one hundred?) increasing the length of their mortgage. Indeed the favorite “mortgage modification” being offered by the banksters to homeowners on the verge of foreclosure is to dupe them into refinancing over a longer term.

Given that reality, let’s simply take the Bloomberg anecdote and reverse it. In going from a 15-year mortgage to a 30-year mortgage; in return for a modest savings of $250/month on the mortgage-payment, the mortgage-holder gets the “privilege” of spending an extra fifteen years doing nothing but paying interest to a banker. Again using the Bloomberg numbers, the homeowner going from the 15-year mortgage to the 30-year mortgage would only be paying 5% as much principle in the early years of that mortgage – and would likely be forced to pay an interest rate roughly 50% higher (using the Bloomberg numbers).

Given these parameters, it now becomes totally obvious that neither the banksters nor the Obama regime were ever interested in “helping homeowners” with the ongoing “mortgage-modification” farce. If there had ever been any good intentions here, the banksters would have never even offered these longer terms as supposed “help” for homeowners – since being raped economically is rarely “beneficial” to anyone. And if the banksters tried to simply stretch-out repayment terms (and call that modification “aid”) the Obama regime would have forbidden such deceptive, predatory tactics.

Along with demonstrating the “magical” benefits which occur when we reduce the compounding of interest (by reducing the term of a loan), the Bloomberg propaganda has also provided us (inadvertently) with what would have been a viable plan to “save” millions of U.S. homeowners – at little expense to either banks or government.

As the Bloomberg anecdote illustrates, once the term of a mortgage is greatly reduced it would have only required a tiny subsidy to “underwater” mortgage-holders to restore them to a solvent footing. That subsidy would be used to pay the small increase in monthly mortgage payments  for (for example) a two or three year period – enough to justify refinancing the mortgage for a shorter term (and much lower interest rate).

For those arguing that such a scheme would not (necessarily) be a “permanent fix” for these underwater mortgages, I should point out that with the current (fraudulent) “rescue plans” by the banksters and U.S. government that about 1/3 of these “fixed” mortgages are delinquent again within one year. Thus in comparison, my proposal is much, much closer to being a “permanent solution” than the made-to-fail schemes which have been hatched to date.

This argument also illustrates another consistent “principle” in the very limited “modifications” being offered to homeowners by the banksters: they rarely offer any “modification” which would actually improve (as opposed to worsen) the position of the homeowner. Indeed, for every anecdote Bloomberg could dredge up about “equity-building homeowners” I could come up with one hundred – from desperate U.S. homeowners complaining that the only “modification” offered by their bank is one that would make them less solvent rather than more so.

Because the banksters almost always refuse any “principal reduction” and are often trying to dupe homeowners into accepting longer terms for their mortgage (rather than shorter ones), it is beyond any doubt that the Wall Street banks never had any intention to help homeowners, but rather were trying to do the opposite: dupe desperate homeowners into accepting even more suicidal terms for their mortgages.

One of the wonderful advantages of using someone’s own words against them is that it is very difficult to rebut such criticism. Obviously Bloomberg can’t (out of one side of its mouth) gush about how wonderful the “math” becomes when a mortgage-holder reduces the length of a mortgage – and then deny (out of the other side of its mouth) that greatly increasing the length of a mortgage is anything other than “mortgage rape”.

Indeed, as a general principle it is a very effective strategy to deal with the relentless propaganda bombarding us by carefully noting all of the “arguments” used by these purveyors of deception – and then to simply say “gotcha” each and every time they inevitably contradict themselves.

A “short mortgage” is a “healthy mortgage”. And the corollary to that is that 30-year mortgages (or longer, as are being given in many mods) are nothing more than debt-slavery  and mortgage-rape.

Instead, Americans were subjected to “faux stimulus”, where the Obama regime sprayed $100’s of billions at the U.S. economy but where most of that money went into “food stamps”, unemployment benefits, or simply disappeared into the pockets of Wall Street bankers. There was virtually nothing done to directly “stimulate” employment growth – despite the worst unemployment problem in the U.S. since (at least) the Great Depression.

Now, as the U.S. economy is quite obviously turning lower again, Americans are finally shedding their “rose-coloured glasses” and beginning to view the U.S. economic nightmare for what it really is. That conclusion is strongly reinforced by a pair of statistics.

A CNN poll shows 48% of Americans predicting “another Great Depression in the next 12 months.” While that percentage might have been slightly worse during the worst of the 2008 crisis, this new (extremely pessimistic) number comes after more than two years of a supposed “economic recovery”. Obviously if there had been any real improvement in the economic fundamentals at the household level there couldn’t have possibly been such a serious erosion of public sentiment.

That first expression of despair is backed up a statistic at least as bleak, if not more so. A recent U.S. survey found that 85% of U.S. college graduates were forced to move back home to live with their parents. If there was one, single number which could shriek “no jobs” in the U.S. more clearly than any other, this is it.

At the other extreme in the realm of education, roughly ¼ of all young, adult Americans are high school drop-outs, with that number rising to about 50% in the under-funded school districts into which most of the U.S.’s ethnic minorities are funneled. Combining the two numbers, roughly half of all the young adults in the U.S. are unemployed college graduates forced to live at home, or high-school drop-outs whose best “hope” for the future would be some menial, minimum-wage job.

Those numbers don’t tell us that a U.S. Great Depression is “coming in the next 12 months”, but instead echo what I have been writing all along: the U.S. entered a “Greater Depression” in 2008 – from which it has never emerged.

This conclusion is easily reinforced once people understand how easy it is for governments to fake “economic growth”. All it takes is for governments to deliberately underestimate inflation – and then each percentage-point by which inflation is understated instantly becomes a percentage-point of “GDP growth”. As I have explained many times previously, all GDP estimates must be fully “deflated” by the prevailing rate of inflation, otherwise price increases are transformed into “economic growth”.

With real U.S. inflation being (deliberately) “underestimated” by at least 6%, while the latest number for “GDP growth” was an anemic 1.8%, you don’t require a degree in mathematics to figure out that not only is there no “growth” in the U.S. economy, but it is once again shrinking rapidly.

Obviously the “future” of any/every economy is its next generation, and here the U.S. simply has no hope, at all. Compounding the massive, structural unemployment of U.S. college graduates, soaring eduction costs and ever-less government “assistance” mean that U.S. college-grads are now far more indebted than any other graduates in the history of our species.

The average debt-load for a U.S. college graduate is now $50,000. Indeed, U.S. student loans have been exploding upward with such ferocity that total U.S. student loan debt has exceeded total U.S. credit-card debt for the first time in history. If you’re an unemployed U.S. college graduate, living with your parents, and staring at a $50,000 ‘mortgage’ on your future, it doesn’t require much imagination to predict a “Great Depression” in the next 12 months.

Paying interest on $1 trillion in credit card debt has been an utterly pointless drain (and drag) on the U.S. economy. Similarly, racking-up $1 trillion of student loan debt (and now paying interest on it) – only to end up unemployed and living with one’s parents is an equally pointless waste of economic resources. That $1 trillion (plus all the interest being accrued on it each day) could have produced enormous dividends had it instead been used as start-up capital for small businesses.

This is not to criticize all of those studious Americans who laboured to earn degrees. It was their own government which repeatedly told them (and lied to them) that “higher education” was the path to success. Thus the only “crime” which these heavily-indebted college grads are guilty of is trusting their own government. They have now squandered $1 trillion on that misplaced trust, and all that the U.S. government (and the bankers lurking behind it) have to say to these unemployed graduates is “pay up”.

More generally, the U.S. propaganda-machine reported that U.S. consumer confidence “unexpectedly declined” in May. Obviously the use of the word “unexpected” here is nothing short of absurd.

In addition to all of the extremely bleak factors listed above, Americans are being battered by the following:

1) The second “crash” of the U.S. housing sector is rapidly accelerating, with the number of “under-water mortgages” (i.e. future foreclosures) still setting new records each month.

2) The neglected/abandoned/foreclosed homes which pock-mark towns and cities all across the U.S. are not only a visual blight, but the crime and squatters associated with them are making neighbourhoods steadily less-safe and livable for the families who remain.

3) The cost of “necessities” (i.e. food and energy) are soaring at the fastest rate in decades, while the Federal Reserve lies to Americans, telling them that inflation is well “contained” (yes, “contained” in every new Bernanke-bill which “Helicopter Ben” cranks-out).

4) Despite the fact that the average American has been enduring falling (real) wages for 40 years, all they are hearing from Republican “leaders” (at both the state and federal level) is that U.S. families can look forward to nothing but “more cuts”: in unemployment insurance, in their pensions, in their health-care – and in their jobs, as any significant spending-cuts inevitably have a serious impact on employment.

Yet with all this transpiring in the U.S. economy, we still see these media-liars expressing “surprise” at the lack of confidence among Americans. Obviously the “surprise” is just as feigned as their belief that the U.S. economy is actually growing.

As I explained in a recent commentary, this pathetic charade around the issue of “confidence” is in fact one of the key elements in the entire propaganda-campaign of the U.S. government (and the Wall Street bankers pulling their strings). This is now nothing but a Ponzi-scheme economy, and like any/all scams it can only continue as long as the confidence of the “chumps” (i.e. the American people) can be maintained.

As the renewed deterioration of the U.S. economy now accelerates, maintaining this illusory confidence becomes increasingly impossible for the U.S. government – and thus the Ponzi-schemes teeter precariously.  Nothing is more “precarious” than the banksters’ $1.5 quadrillion “bubble” in the derivatives market (more than 20 times larger than the entire global economy), and a huge chunk of this bubble remains tied to the crumbling U.S. housing market.

Stacked-up along-side all of the “debt bubbles” in the U.S., we see an entire economy now ready for a sickening implosion which will not merely “echo” but will likely exceed the economic disintegration of the Soviet Union. Having squandered every policy tool (and “stimulus” dollar) at its disposal, the U.S. government is now utterly powerless to counteract the coming collapse. This leaves absolutely nothing standing in the way of a total collapse of the U.S. economy other than the printing press of the Federal Reserve,

Can you say “more quantitative easing” Ben Bernanke? I knew you could.

In many previous commentaries I have lamented the fact that the “statistics” produced by the U.S. Bureau of Labor Statistics are now so severely doctored as to have lost almost any relevance or analytical value. With mere “exaggerations” we can at least estimate points of reference and then proceed with analysis. However, the fabrications produced by the BLS have severed virtually any connection to the real world.

Where we can still find some small analytical value in these numbers is to compare the differences in the BLS’ (revised) aggregate numbers with the “headline” lies it has been dispensing each month. Unfortunately, the revised aggregate numbers only provide us with data up to the end of 2010, however we can still reach some interesting conclusions based upon the available numbers.

The U.S. propaganda-machine tells us that the “Great Recession” ended in March 2009, while the BLS has been reporting monthly “job gains” in nearly every report since that time. As a matter of simple arithmetic, if the U.S. economy began adding jobs in the Spring of 2009 (and the job losses had supposedly eased in the months immediately prior to that), then when we looked at the total number of employed workers in the U.S. (as calculated by the same BLS) we should have seen the year-over-year numbers turn positive no later than the end of 2009.

This is not what the BLS’ own data indicates. In its own “Comparison of All Employees” (seasonally adjusted) we see that December of 2009 marked the absolute bottom for total employment in the U.S. In other words, during the first eight months of “job creation” during this supposed “economic recovery” the U.S. economy lost more jobs on a net basis.

By the summer of 2010, the Obama regime was bragging that it had “created or saved” over 3 million jobs – based largely upon the fraudulent monthly “non-farm payrolls” reports of the BLS. Yet by the end of 2010 we see that total employment in the U.S. had inched upward by a mere 1 million jobs from the absolute low.

Note that this feeble level of “job creation” is less than half the amount of new jobs needed just to keep up with population growth. In other words, throughout this mythical “recovery” U.S. unemployment has worsened (proportionately) month-after-month. Keep in mind that by itself population growth will always generate more jobs. New additions to the population mean more “mouths” to feed, more people who need clothes, housing, and an endless assortment of consumer goods.

Obviously population growth alone could have accounted for that entire, paltry one million jobs. This means that despite the largest “stimulus package” in the history of the world, and more than $10 trillion in additional Fed “credit” and hand-outs to Wall Street that the U.S. economy has generated nothing in terms of jobs – and in fact has lost ground due to the population growth which has occurred over that period.

Of course the BLS isn’t the only propaganda-mouthpiece boasting about “job creation”. The Federal Reserve itself likes to make grandiose claims about fantasy-jobs which never existed. New Fed-head Janet Yellen claims that Fed money-printing (by itself) will have “created 3 million jobs” by the end of 2012. And critics of this piece will argue that (supposed) job-creation has been “even stronger” in 2011 than in 2010.

The reality here is that the “stronger growth” in jobs this year is 100% accounted for the bigger lies the BLS has been adding with its thoroughly discredited “birth/death model”. Who has “discredited” the birth/death model? The BLS itself.

Over the last few years, the BLS has added roughly 1 million “phantom jobs” per year via its birth/death calculation. And then after each of those years it “revises” its calculation (using real data) and then subtracts all of those jobs. It is the BLS itself which has calculated that none of these “birth/death” jobs ever existed.

This year, if we subtract the 600,000+ phantom-jobs added by the birth/death model since January, we see virtually all of the supposed “new jobs” vanish. And keep in mind that all of the numbers from this year will be “revised” again (lower), just as the BLS has been doing every year.

Thus, as we near the mid-point of 2011, here is the reality of the U.S. economy – minus the lies of the BLS. At best, since the U.S. “Great Recession” supposedly ended the U.S. economy has added roughly 1 million new jobs: less than one new job for every eight lost-jobs which have (officially) been recorded since the U.S. economy crashed. And those jobs were generated not by real “economic growth”, but simply due to a swelling population.

In terms of the “unemployment rate”, the numbers are unequivocal: the percentage of employable Americans who are without jobs continues to go up every month – due to the combined effect of the still extremely high weekly lay-offs, plus the fact that the number of “new jobs” doesn’t come close to even matching the growth in population.

We’ve already been through this charade in the U.S. housing market. Again we were told by countless media talking-heads and “experts” (on countless occasions) that the U.S. housing market had “bottomed” in 2009. These shills even had the audacity to claim there was a “recovery” taking place in the U.S. housing market – as opposed to merely a “dead-cat bounce” after the worst real estate crash in the history of the U.S. economy. Returning to the real world, we have now seen U.S. housing prices plunge through that supposed “bottom”, meaning that even the propagandists have been forced to abandon their lie about a “recovery” in this sector of the economy.

We are about to reach the same point with the U.S. jobs market. After two years of lying about “gains” of phantom-jobs, even the propagandists themselves are now talking about the “jobs market stalling”. The fraudulent BLS monthly report released today claimed that the U.S. economy added an anemic 54,000 jobs. Buried beneath the “headline”, the BLS quietly added over 200,000 mythical birth-death jobs. What this means is that even when we add in all of the other statistical deceptions which the BLS uses in falsifying these reports (such as bogus “seasonal adjustments”) that without the birth/death lie the U.S. economy would have lost 150,000 jobs in May.

Obviously there was never more than a tiny trickle of job-creation in the U.S. during this pretend-recovery. Obviously the U.S. economy is again losing jobs on a monthly basis. And we arrive at this conclusion just as the last of the Obama “stimulus” dollars are being spent and with the Federal Reserve again pretending that it is about to “end” its own gravy-train of $trillions in “free money” (for Wall Street).

Meanwhile, brain-dead Republicans in Washington are flexing their muscles and talking about “slashing spending”. One has to wonder whether any of these ‘Einsteins’ are familiar with the word “suicide”?

The situation is now very clear with the U.S. economy. If Washington politicians follow through on their promise/threat to subtract from current spending levels, the anemic U.S. economy will completely implode – and as revenues collapse even from today’s extremely depressed levels, the U.S. is facing a Soviet Union-style disintegration in less than two years. Given that the most extreme/reckless “stimulus” in the history of the world did nothing but allow the U.S. economy to “tread water”, removing all that stimulus from this still-crippled economy can only result in catastrophe.

The other scenario is equally bleak. With the U.S. economy even weaker than when it first crashed in 2007, and much more bloated with debt, it would require a significantly more extreme “stimulus” program just to allow the U.S. economy to avoid collapse. Actual “economic growth” is now a mathematical impossibility.

With the U.S dollar already teetering on an historic collapse when the market thought that the Fed would “end” its reckless money-printing, should it instead ramp-up this currency-dilution even faster, the only possible result is the collapse of the U.S. dollar (and the hyperinflation this directly implies).

The cheap parlor tricks of this “smoke and mirrors” economy have run their course. The 10’s of millions of Americans without jobs will soon become 10’s of millions without food, if state Republicans follow through on their plans to slash unemployment benefits, pension benefits, and health-care benefits.

If they don’t follow through on these misguided threats, and simply continue racking-up the same humungous deficits, hyperinflation looms directly ahead. The only thing we can say for sure is that regardless of which of these two economic catastrophes takes place there will be no jobs for Americans.

The American media has done a wonderful job of ignoring the growing urban blight of most big cities in the United States. In many of the larger urban populations, the “inner cities” are poverty-filled, crime-filled wastelands – nearly uninhabitable. These ghettos are used to warehouse vast numbers of the U.S.’s rapidly growing minority groups.

While the U.S. media brags about the “favorable demographics” of the U.S.’s growing population (compared to much of Europe and Japan), here is the reality: almost all of the “population growth” in the U.S. is occurring among these same “minorities”.

Not only does the vast majority of this ethnic population live near or below the poverty-line, but this segment of the population suffers from a 50% high school drop-out rate. And these “minority groups” are set to become the majority of the U.S. population some time over the next 20 to 30 years. This occurs at a time when all of the good “blue collar” jobs have disappeared in the U.S., meaning that much of if not most of this segment of the population has no realistic prospect of ever escaping the poverty-trap. Obviously, the U.S.’s inner-city ghettos can only continue to grow, and spread across its cities like a cancer.

Then there are the “ex-urbs”. During the made-in-Wall-Street housing bubble, clusters of “monster homes” mushroomed all around many U.S. urban centers. Too distant to be classified as “suburbs”, they were dubbed “exurbs”. These housing units were built based upon the premises of steadily rising wealth/income levels among middle-class Americans, and permanent, cheap gasoline – to fuel the 100+ mile round-trip daily commutes in their gas-guzzling vehicles.

In other words, these homes were obsolete before many of them were even built. Millions of these housing units will simply have to be bulldozed, to put a dent in the vast oversupply of housing in the U.S. Meanwhile, the infrastructure of American cities crumbles, while cash-strapped local governments would be hard-pressed to come up with 1% of the $100’s of billions urgently needed for repairs/renovations. And as homelessness soars across the U.S., we now see “the world’s only super-power” pock-marked with “tent cities”.

All of this is invisible to the U.S.’s myopic media. What is most peculiar, however, is that their visual deficiencies don’t prevent these same pundits from being able to spot “ghost cities” across the Pacific, in China.

An article which typifies such hypocrisy reported:

“These pop-up metropolises include looping miles of highways, vast apartment blocks, sprawling cultural plazas, commercial districts, and shopping centers that are bigger than downtown Reno, Nevada. The only thing missing is people.”

The same article claimed that there are an “estimated 64 million” empty apartments in China. While that number sounds like a bit of an exaggeration, lets accept it as true. Now let’s look at the facts.

The vast majority of China’s 1.2 billion inhabitants are still rural “peasants”. As China assumes the role of the world’s manufacturing hub, it is seeking to “urbanize” (eventually) somewhere around ¾ of a billion people. This would be nearly equivalent to building (and populating) new cities for the entire populations of Europe and North America, combined. It is nothing less than the largest planned migration in human history.

Obviously there are only two scenarios to such growth. You can bring the people (first) to the sites of these new cities, and then try to build the cities around them; or you can build the cities first – and then bring the migrants to live in them. As for the “64 million empty apartments”, that’s enough housing for no more than a quarter of these migrants.

What is also missing from the vacuous writing of the American media concerning these “ghost cities” is that everything is being scrupulously maintained – unlike the 20+ million empty homes in the U.S., where many if not most of these homes have been vandalized and stripped of anything of value.

Not only is the proportion of empty homes in the U.S. greater than that of China, but there will never be buyers for millions of these units. Apart from the fact that millions of “monster homes” in the exurbs are totally obsolete, the American middle-class has been completely impoverished, while retiring baby-boomers are set to dump $trillions in real estate over the course of the next 20 years. There is no one to buy all these homes, while an essentially infinite supply swamps this market.

Conversely, in China the current number of empty units is only a small portion of what is needed for this housing market over the next 20 years. Obviously with hundreds of millions of people migrating to urban centers, China needs a substantial number of vacant units to prevent housing “bottlenecks” from occurring.

The reply of the U.S. propagandists is that the Chinese people will (also) never be able to “afford” housing in China. The example given was:

“…the 50 percent down payment (on $350,000) required to own a few rooms in a ghost complex.”

Let’s examine all of the inherent dishonesty in that short statement. First of all, the example used was for a high-end luxury unit, as obviously $350,000 is nowhere near an “average price” for an apartment in a Chinese city. And unlike the average American worker (for those who still have jobs), the average Chinese worker is seeing their wages rise rapidly, while their innate thriftiness means most already have large pools of savings.

The Chinese population (and economy) will clearly be able to “grow into” these (well-maintained) vacant units, while the 20-million unit glut in the U.S. housing market can only grow larger over time, while vandalism and oversupply causes their property values to plummet ever lower.

There was another aspect to the dishonesty in the above quotation, however. Note the reference to the “50 percent down payment” in China’s housing market (indeed, many units are still purchased with 100% cash). And yet despite how well-capitalized the average Chinese property owner is (relative to a U.S. homeowner), we see the same U.S. media shills writing again and again about China’s “housing bubble”.

As I have explained in many previous commentaries, any/all asset bubbles require two ingredients: grossly excessive prices and too much leveraged debt. It is defaulting debt which always causes the subsequent “crash” associated with all bubbles (since well-capitalized asset holders can ‘weather’ any correction), thus where there is little/no leverage, it is impossible for a “bubble” to exist.

In the U.S., nearly 30% of all mortgages are “under-water” today – meaning that even after the (first) “crash” which took place in this bubble-market, the U.S. housing market remains the most over-leveraged housing market in the history of humanity. As I just wrote in my last commentary, it will require decades for this bubble-market to ever reach a (real) “bottom”.

What we have here is simply “A Tale of Two Countries”. On the one hand we have the U.S.: a banker-ravaged, hollowed-out economy. Its own “ghost cities” contain the largest housing glut (in proportionate terms) in the history of humanity. Vandalism and lack of maintenance is not only costing $billions per year in lost property values on these homes, but is dragging-down the property values of the (larger number of) homes surrounding them by $10’s of billions. Meanwhile, the neglected infrastructure of these bankrupt cities crumbles around these residents, and there is no prospect of these dynamics ever improving.

Then we have China: a prosperous, growing economy – with rapidly rising incomes and vast pools of savings. Its (gleaming) “ghost cities” are being immaculately maintained in anticipation of the 100’s of millions of (employed) migrants who will want (and need) to live in them.

Which “ghost cities” would you rather live in?