This week proved many more "Unexpected Economic Results".
 
Unemployment "Unexpectantly" rose to 490,000 new claims.
Housing Starts "Unexpectantly" fell by 7.2% and was dramatically lower than predicted.
Consumer Confidence "Unexpectantly" fell to 10 month lows going back to April 2009.
Equipment Orders "Unexpectantly" fell to new lows.
Housing Sales fell by 11% "Unexpectantly".
GDP "Unexpectantly" being revised from 5.7% to 5.9%. Over 4% of the 5.9% number came from inventories rising which is due to manufacturers overshooting the mark and not having sales to keep their inventories in check. Thus the revised higher number that in the historic paper by Alan Blinder in 1980 stated rising inventories is a clear sign of recession coming and a dramatic contraction in manufacturing.

If you are wearing the rose colored glasses, all of these results would appear to be unexpected considering we are in a full blown recovery according to Ben Benanke and Wall Street.

If you are looking at the facts and realize we are heading into the double dip recession, these results are "EXPECTED", and you can take measures to protect yourself and your wealth.

You can lower your exposure to stocks and bonds. You can fix interest rates on adjustable loans or pay them down to protect from rapidly rising interest rates. You can purchase tangible investments which will both protect from inflation and losing purchasing power. You can shift cash equivalents into gold.

If Ben Bernanke truly believed we are in a recovery they would never increase the money supply by $90 Billion in the last two weeks, desparately trying to re-inflate our economy by printing money. See chart below of the recent activity of the Fed Printing Press, aka Monetary Base.

Happy talk is one thing, but ignoring the obvious, the governement potential defaults, the real economic activity going on will be perilous to your financial health.

That was the headline on February 19, and it was cheerfully stating that the world still loves our debt.
The only problem, the rest of the world does not love our debt anymore as evidenced by the net $54Billion selloff of US Treasury paper by the collective world's central banks.

Leading the selloff is the most frightening leader. China. They sold 4.7% or $34Billion.

Considering the US needs $1.6Billion this year to sustain our spending habits and lifestyles, who is going to fund this gapping hole. The Federal Reserve of course via the printing press.

Time to load up on those tangible goods. The world doesn't believe our lies anymore and they will balk at our debt. When this intesifies as I believe it will over the coming months, watch out dollar, it's a long fall down.....

With all the talk about the impending doom with Greece and how the European Union will fall apart, does one ever stop to think about a similar comparison across the pond.

Greece's GDP is $343 Billion. That is 2% of the $19Trillion E.U. Economy.
California's GDP is $1.8Trillion. That is 13% of the $14Trillion USA Economy.

Do you see the insanity here?

If puny Greece is able to knock the Euro down by 15%, why doesn't the 8th largest Economy on the planet, California, knock the US Dollar down about 50%. Seems like a reasonable assumption in a realistic world but there lies the problem.

Our current world is based on misdirection and misinformation, the look at Britany Spears syndrome and don't pay attention to the real issue.

Japan, UK, and the USA are the real issues when it comes to debt implosions and paying attention to the Britany show will lead you down the rabbit hole with everyone else not paying attention.

What they both have in common is around an 80% stock market crash which happend AFTER everyone thought the market was midway into a recovery.

Japan's Nikkei exchange in 1989 went from 39000 down to 24000 and then back up to 32000. Everyone thought they had survived the crash and were almost back to the top when the REAL crash took their market from 32000 down to 7000.  This was the drop that wiped most people out.

During the Great Depression, the Dow dropped from 398 to 191 and then rebounded 52.3% to 298. Just a mere 30% from the previous high and all the papers as well as Wall Street hypsters declared the end of the bad times and there would be nothing but big profits to be had.

Chase National Bank (aka JP Morgan Chase) - June 1930  Wall Street Journal
"We feel the current conditions of very easy credit and poor business have always been a buying opportunity in the past. We are absolutely confident that any list of good stocks will have good gains by the end of 1931 and probably show a profit by the end of 1930."

What happened from June 1930 to May of 1932 was an 86% bloodbath which truly was what wiped peoples accounts out. They were told by the hypsters that all was good and you better get back in or you will miss out. As the lie played itself out and people realized they were sold a bill of goods as to the state of the economy, that is when the real panic began and the markets fell from 298 down to 41. Yes 41.

If history is our guide, that would mean the Dow would fall somewhere in 2011 or 2012 to between 1500 and 3000.

You think it is impossible?
Did you believe we would drop from Dow 14126 to 6470 in a mere 17 months!

Unless your money manager has taken steps to protect you like being in gold, cash, or other defensive plays, time to fire them!

Greece is on everyone's mind. It is the supposed reason the Euro has fallen over 15% in the last four weeks. When thinking of the 16 countries which make up the European Union, yes, several of the countries are in financial trouble but many of them are not.

Does it seem strange our debt rating agencies take a harsh view on these countries and yet turn a blind eye to the fate of the US. Does the USA not also have many states, 50 in all, which are all virtually bankrupt. If Greece truly is responsible for the Euro's fall, why doesn't California, which has the 8th largest economy in the world, and does its business in US Dollars, make the dollar fall greatly.

As of this writing, Obama should be signing into law the increase of the debt ceiling to $14.29 Trillion. That extra $1.9T will give them about 11 months to work with until we breech that new level.

It took 194 years (1787 to 1981) for the US to reach $1 T in debt. Now we go through $1 Trillion in a mere 5 months.

POP QUIZ: What percentage of the total debt we accumulated to date came after 1971, the year we left the gold standard?
If you answered 97%, give yourself a cupcake.

POP QUIZ: Name the last year the US posted a surplus and paid down the actual debt owned?
If you said, 2000, you would be ........WRONG!

Though the government reported a surplus, the actual debt still grew by $18 Billion that year. The closest we've been to paying down debt in 40 years. The right answer would be 1960, the last year the US actually reduced it's debt. For the last 40 years, we've been rolling over our old debt and issuing new debt to replace it.

When JFK posted his first budget in 1961  for the USA , it was $98 Billion. That was enough to sustain government for 184 Million people.

Today the budget to rule 307 Million people, far less than double the amount of people in 1961,  is $3.8 Trillion.  The numbers alone reflect the lunacy of the size of our government.

Last Note:
2008 reported deficit was  $450 Billion. Each year the government puts out a GAAP report on the real deficit including the wars in Iraq, Afganistan, and the unfunded liabilities of Social Security, Medicare, so forth. The real deficit for 2008 was $5.1 Trillion.

Can you say Dollar Crisis Anyone!

February 16th, the 2009 GAAP report comes out. Considering the "Official" number was $1.3 Trillion, god only knows the REAL number will be.

Stay tuned......

  Not all economic downturns are triggered by liquidity crises, but all liquidity crises trigger or intensify economic downturns.  In modern economic reporting,year-to-year growth in inflation-adjusted money supply (M3) has turned negative only four times before November 2009 going back to 1959 record keeping, and each earlier occurrence signaled either the onset of a major recession or the sharp deterioration in a pre-existing downturn. 

The previous four times were 1969 (69’-70’ Recession), 1973 (73’-74’ recession), 1980 (81’-82’ recession) and finally 1991 (91’-92’ recession).

I've highlighted these negative leading indicators with circles below.

There is a simple economic formula:

G = M/P

Where G is GDP. M is the Money Supply and P is the inflation. Holding inflation steady, if M gets smaller, that leads to a fall in GDP.

As of November 2009, M went negative and history shows us what is next….