When measured on a per capita basis, cumulative GDP growth since the start of the recession in ’08 is extremely disappointing. Especially when you consider all the measures which were supposedly designed to boost growth.

QE1, QE2, TARP, ZIRP, stimulus (think Solyndra & Fisker, not roads & bridges). Failure & wealth transfer have resulted.

Perhaps the most economically impactful “stimulus” enacted so far is the payroll tax cut. Social Security payroll tax deductions were temporarily reduced from 6.2% to 4.2% in 2011. Although there will be bickering, for now it seems like the tax cut will be extended indefinitely (ignore the unsustainable long-term nature of it all, if you can).

Some economists venture to guess that the payroll tax cut (2% less taxes on all wages/salaries below a certain threshold) will contribute 1-1.5% to annual GDP as long as it remains in place.

So picture the chart to the left, without a big chunk of the recent upturn. Now picture it if properly adjusted for inflation. It’s not a pretty picture.

Conclusion: any economist that says we’re not currently in a recession/depression is trying to sell you something.

Chart via WSJ’s Jason Lahart.

h/t Silver Doctors

Charts courtesy of John Williams at Shadowstats.

The first chart shows US Housing Starts since the year 2000.

The second chart shows US Housing Starts since 1945.

it only gets dismaler

dollar in hospice

Eh, eh?

I know. I’ll try to come up with a better one. Feel free to throw your own out there.

Seriously though, I’m actually quite optimistic these days. At least these issues are getting more attention, which means a resolution is that much closer. Definitely not selling my PMs yet, not even close. But I’m starting to think about how long the printing is likely to go on (no, it won’t be Japan, IMO).

And I’m not extremely bearish on stocks, either. I have some shorts, but for the most part it’s just really hard with the Fed gone wild/FR. Simpler/safer options like buying gold, silver, foreign-bonds. All just my opinion, talk to a pro, all that stuff. But the dollar? Yeah, very bearish on that. How could you not be? Wish I could buy yuan easily.

Excerpt: “[fiat currencies] have no inherent value.”. Reminds me of Voltaire’s classic Paper money always returns to its intrinsic value — zero.

0811 the Greatest Trade of All Time-1

Via Zero Hedge and Sprott Management

Not to mention, cruel, in a way. Arguing with a believer comes down to this: If you succeed, you may ruin someone’s emotional support system. If you fail, you make a bad impression. It’s a lose-lose. This may sound obvious more religious folks, just realize that it’s not to everyone. Especially those of us who got a liberal arts degree.

Anyway, here’s some rabid atheist ranting against Ron Paul. While he sees some potential upside (less war), he thinks we need to “consider other things, too”. Uh-huh.

Found dude’s site http://thatfatatheist.com/ — he’s kinda funny. But I’ve met guys who seem similar. I once debated with one for 4-5 hours. That’s how long it took till I won, and he endorsed Austrian econ, RP.

So thanks to Dave Pinsen and the guys over there. My blogging productivity is at near-year lows, thanks to the new precious. And my 24 mo kid monopolizes it if I take it out around him. Two, and he plays Angry Birds. By himself. I’m glad I won this thing, because I probably wouldn’t have swallowed my anti-Apple pride and bought one.

The goal of the contest was to make a compelling short case, to be voted upon by their premium members. My pick, DEER, a Chinese consumer firm with (alleged) book issues fell from around $9 to $8 during the month ($6.69 today.)

They have some nice-looking tools for screening out short opportunities, and an App called Portfolio Armor that helps you find the cheapest puts to hedge long positions. Check it out.

Gold Daily and Silver Weekly Charts – and Le US Douleur – More Volatility Ahead for Silver

Silver was hit harder as the US equities fell, and gold maintained some resilience.

The intraday moves had the character of bear raids and sharp selling in size, rather than steady liquidation.

Notice that the dollar too was weaker today, although it remains in a short term uptrend.

The number of contracts standing for May delivery of silver ROSE today according to Harvey Organ. The Comex delivered no actual silver, but the trading desks offered plenty of paper, as overall open interest rose again.

Someone asked me what it might be like if the Comex was unable to meet its deliveries, and there was a  cascading effect to the metals encumbered by counterparty risk in the two big ETFs, if they were hit by a wave of redemptions as large shareholders sought to lock in supply.

I did not see their scenario of multiple days of up limits until the market clears, simply because it seems to be a few large members important to the exchange who seem to be ‘holding the bag’  in this case.  Market solutions are for the little people and relative outsiders like the Hunt Brothers.

Rather, I would anticipate a declaration of force majeure, and a forced settlement in cash and shares of SLV, which themselves are probably representations of bullion rather than the metal itself.   I do not know what the rationale for this might be, and it is not quite clear to me that they would even need one except for cosmetic purposes.

When you have power and have learned to use it with ruthless hypocrisy, the only thing you need to respond to is a greater force of power that calls you to accounts. This is one of the great lessons from the recent financial crisis.  When the government and the regulators do not uphold their responsibilities, fraud becomes fashionable.

The Comex has about 32 million ounces of deliverable silver on their books, and they are dragging out the delivery process each month, as virtually no new inventory becomes available to replenish their supply.

I was a little shocked that the parabolic rise in price and  the subsequent calculated smackdown in conjunction with the increased margin requirements shook no new significant inventory loose for the dealers, only more paper profits. Customer withdrawals continue as well, with almost 3.5 million ounces leaving this month.

However it transpires, if it does, it will be memorable.   I am looking at the supply and demand as the numbers are published, and not at anything esoteric or private.  So I would imagine that the CFTC and the least sophisticated traders in the market can see the same things unfolding.  I hear things from time to time about back room discussions about the resolution of all this, and have to work to separate them from the tide disinformation, of which there is quite a bit more than you might imagine.  People are very concerned about a potential shock to the credibility of the system.  Of course, they may be utterly out of touch with current reality.  Trust is in short supply, and the natives are growing restless.

Rumours, and disparaging talk, and theoretical discussions are well and good, but as they say, show me the money, or in this case, the bullion.

Where is it, how much of there is it, and what are they going to do when and if the supply of silver bullion drops below 30 million ounces deliverable, which is really a pittance given the size of the market? A silver futures contract on Comex is 5,000 ounces, and so that represents a mere 6,000 contracts.  There are a total of 123,000 contracts open today.  Last Friday the volume was an eye popping 126,000 contracts!  This at times seems less a market, and more a game of musical chairs, or a shell game.  And if the allegations are true about the LBMA,  and their leverage, then what we have here may be a recipe for a severe market dislocation.

And this is why I expect the silver market to remain highly volatile, with some amazing moves ahead, both up and down. And stretchers perhaps, to carry out some players from the pits, as they get caught offside in high frequency moves, and an increasingly disorderly trade. And this due to the failure to reform the financial system.

And for us, the smaller investors, caution is advised.

From Bloomberg:

The U.S. dollar is going to be a “total disaster” in the long term because of the country’s position as the world’s largest debtor and the policies being pursued by Federal Reserve Chairman Ben S. Bernanke, according to investor Jim Rogers.

The Chinese yuan is likely to be a “safe” currency, although it is difficult for investors to buy, Rogers, the chairman of Rogers Holdings, told a conference in Edinburgh.

“The situation is getting worse and I expect to see severe problems in the U.S.,” Rogers said today. “Dr Bernanke doesn’t understand economics, he doesn’t understand finance, he only understands printing money and we can’t quadruple the amount of money in the next slowdown.”

Jim Rogers is a real man’s Warren Buffett. Just saying…

Exhibit B: US dollar purchasing power chart 1971-2011:

I’ve been thinking a lot lately about how the dollar’s fall is likely to play out. The world is far bigger, richer, and healthier than it was during the last big currency shakeup. In the 1930′s, when the Pound Sterling lost its status as #1 reserve currency, the world had just 2 billion people with an avg life expectancy in the 40s (today it’s 69.2 – which is good in a societal sense, yet very bad in a govt-entitlement sense).

Its citizens are also saddled with many times higher debt-per-capita. Gold and silver-backed money has disappeared. Hence, the currency wars and economic turmoil we’re starting to see.

Importantly, the global financiers are (arguably) more thoroughly-entrenched in political/biz power structures than ever before. And they will have their way for now, like it or not.

Read Simon Johnson’s 2009 piece, The Quiet Coup, if you haven’t yet. Unfortunately, things have gotten worse since, during what will likely be seen in retrospect as the only real opportunity for financial reform this time around. Too late, Obama, if you care. So we are all-but guaranteed another, bigger crisis in the next few years. All anyone has done so far is kick the can down the road, in the direction of a muddy ditch.

EU v. Dollar, QE 2.80

The euro should provide quite an interesting challenge to the dollar over coming years, as the currencies vie for the title of “least-shitty” reserve option.

Germany has tough decisions to make, such as how best to slaughter the EU debt-beasts. Orchestrating a bond default of this magnitude, particularly the part where they try to convince Euro banks to eat losses, will not be pretty. But it’s going to happen (unless the populace as a whole agrees to be become debt serfs, and dedicate their entire lives to grinding away on 20% + debt.

No, that will not happen, which is why we’re seeing rising unrest. This transition can be orderly, or it can be ugly. But debt will, somehow, be restructured. If future programs look like that oh-so-horrible Irish package, with taxpayers and pensioners bearing the brunt for banks/financiers, we could see a revolution or two in the West. Those Greek riot pictures you’ve seen? Pretty bad.

But picture such an event in a large American city like Detroit, my dad’s hometown. Or any number of large struggling American cities. When food stamps, unemployment, and medicare stop providing the desired level of assistance, residents in these areas should expect things to get bad for a while.

In the US, the only decision I see Bernank and Co. making is how best to sell QEx to the public. As long as we have a dovish captured president, and Dudley, Geithner, Bernanke, Yellen, and other bank-loyal Bob Rubin types remain in power, that won’t change. Unrestrained, these folks’ proteges should be orchestrating round 28 of Quantitative Easing in 2025.

I suspect and hope that America’s crazy fiat experiment will be stopped before then. QE6 is where I think things will start to get really nasty (if we get there). By that time, the rampant, in-your-face, undeniable-despite-vigorous-CPI-massage-style-inflation will force even those such as Pulitzer-Prize winning economic doveologue David Leonhardt to question the Bernank’s wisdom (when he does, probably time to sell gold).

But for now, the Fed is determined in their mission to destroy the dollar and inflate. Pushed on by lazy politicians who don’t want to cut taxes or slash spending (numbskulls who voted recent leaders in, myself included, share the blame. Ron Paul 2012 ), and by banks who stand to reap enormous profits from their TBTF status.

Why will QE3, 4, and 5 appear?

Don’t worry, the Bernank assures us. More money-printing won’t be necessary*, (unless prices start to fall). Then, well… we’ll have to reevaluate. BTW, prices tend to fall when we stop printing money, and that inevitably leads us to print more money. It’s one of those vicious-cycle things, like Fat Bastard.

The QE brand will only last so long, so a new name and acronym seem inevitable. Maybe the powers that be could arrange a stock-split of sorts, 10:1. Make it a more publicly-digestible QE2.80?

QE 2.80 – or some acronym far more ridiculous and abstract – might fool a few hundred million people, and it would certainly look better for the Feds than a headline like this: US Central Bank Surprised For 27th time in a Row, As QE28 suddenly seen as necessary to prevent imminent and super scary deflation.

It’d be just like Citigroup’s reverse-split, but fwd (by the way, how is that $.01 per-share div a “dividend reinstatement” after a 1:10 reverse split, Vikram? Gotta love clumsy financial obfuscation..)

Whatever name QE3 takes, I think we should all agree ahead of time to call it that, regardless of the acronym spin.

Back to EUR/USD

My gut says that long-term, the Euro will stay stronger than the dollar (I don’t trade FX, and am but a lowly metal-owning sideline currency-heckler).

John Taylor said in January of this year that at some point in 2011, the USD and Euro should trade at parity (with the Euro even going lower). Of course, he’s right when he says that the market was/is overly optimistic on Europe. But it’s at least as bad in the US, long-term, and markets are starting to realize that. EUR is up 7% this year against USD.

Both economies have their strong and weak areas.

Germany – Europe’s largest economy by far – is quite healthy. California, New York? Not so much. Texas, PA, NJ? Pretty bad too. And the US Federal Govt? Likely worse off than Greece, long-term.

Almost all states in the US have big deficits, incredibly underfunded pensions, stagnant wages, rising prices, and very slow growth (likely negative in real terms). There are some bright spots, like Wyoming and North Dakota. But they make up a tiny portion of the total economy. The US manufacturing base has been exported, and will take time to rebuild.

Germany, meanwhile, is the EU’s top dog. And they have strong views on the necessity of controlling inflation.They also tend to focus on real economy and manufacturing, as opposed to America, where we have a big ol’ soft spot for finance/banking, expensive health care, and the military-industrial complex. Lots of good companies, but they are currently drowned out by TBTF crud. Financial-sector profits are back to 40% of ALL US profits, by the way…

Neither economy is perfect. But if I had to bet on a socialist-leaning economy with a strong manufacturing base and sound(er) monetary policy (GEUrmany), or the socialist-corporatist land of TBTF banks and reckless military spending (US), I pick the former.

Europe will inevitably get hit hard when Greece, Ireland, Portugal, and others go through their bond-default pain. But these things happen in economies, and economies rebound surprisingly fast from such trauma (see: Iceland, Russia, Asia). Europe’s future is cloudy, like America’s. But on a purely economic basis, I’d say the EU is likely to emerge from the mess before the US.

China will be tenting its fingers, a la Mr. Burns, in the corner, deciding how to play its increasingly sweet-looking hand; economically, politically, and militarily. There will be bumps along the road, like brewing housing-bubbles and inflation issues, but power is steadily shifting their way. They have over $3 trillion in foreign reserves, a growing domestic economy, and the luxury of letting their currency appreciate, if/when they want to.

China is an aspiring superpower snatching up resources across the globe. Notably, they’re doing it all in a very peaceful way. Sure, they have human rights issues at home, but thus far they haven’t even bombed a single country! Seems like a good sign for the world’s superpower heir-apparent.

The world has never seen such a currency war before, and it should provide observers  with entertainment for years to come. Hopefully not decades.

Chart via DollarDaze.org.
Updated/completely-revamped 5/14/2011 9:30pm.