|
Post by linsal on Aug 2, 2011 8:18:50 GMT -5
Ilargi: Even now the two Washington sides are close to inking a deal -though it could still fail, even be filibustered-, it won’t solve any real issues.
If and when the deal causes America to be perceived as stronger and less risky than Europe, that will merely lead to a higher dollar vs the euro, and that in turn will kill US exports, which will lead to lower employment, lower tax revenues, lower consumption rates, and all that stuff.
And even then: in what could be an ominous sign, the US dollar is losing against the Euro this morning, not gaining. Makes you wonder how long this round of debt -ceiling- relief will work. [Update: alright, now the dollar is rising, as European markets tank]
On the real issues, nothing has changed since at least the demise of Bear Stearns and Lehman, and arguably way before that. There is too much debt in the system, way too much, perhaps as much as 10, 100 or even 1000 times too much.
The rate of economic growth that would be required to flush out that debt is not only unrealistically high, it's downright physically impossible. And besides, Q1 US GDP was revised down to 0.4% last week, which takes it straight into the realm of mere marginal statistical errors. So the only ways to pay the debt is through budget cuts and tax increases. In the foreseeable future, we’ll see lots of the former and none of the latter.
So don't believe any of the talk about recovery; there isn't any today, there hasn't been any in the past 5 years, and there won't be none for a long time to come. A government spending itself into colossal new debt levels can perhaps create the illusion of recovery for a limited period of time (check), but it will all end up just making things worse down the line. For the people, that is. Not for the politicians and financiers who make the decisions.
And don’t believe that a last minute August 2 debt ceiling agreement solves anything either, since why should anyone on Main Street be happy just because their government has just allowed itself to get even deeper into debt?
The picture has just simply been wrong from the start: a ceiling is too positive of an image: we should perhaps do better to be talking about a debt dungeon.
That would convey the underlying reality much more accurately. Washington’s not raising a ceiling, it's digging an ever deeper, damp and darkened hole for US taxpayers and their children. Whatever comes out of the talks, and something will since no-one wants to take the blame of failure, will materialize as even more hardship for even more Americans.
Watch what will happen to Social Security. With Medicare. They're going to strip it to the bone, layer by layer. They'll do it slowly, so you won't even remember after a while what there used to be. Like many won't remember what is was like to own a home and be happy about it, what it was like to have a job that paid the bills and left some money on the side for fun things for the kids.
The present deal on the table skirts the entitlement conundrums almost entirely: the one thing that has been pushed through is that Medicare providers would be hit if the soon to be erected Super Congress (how’s that for democracy?), a bipartisan committee that will formulate the next rounds of cuts, can't agree on those next rounds. Here’s wondering why and how they would agree on anything, let alone anything that actually benefits their voters.
We're on a road to nowhere, mostly because there's nowhere to go that we would like to go to. We don't like the options available, but they are the only options we have, even if we insist on denying it. All the options we have will lead us down the slope; there's no way up anymore.
What we could and arguably should do is to try and find ways to soften the blow, to improve the way we travel on the way down. To achieve that, we need to get rid of the people who now make the decisions. And that will be very hard. There are only two political parties in America, and they might as well be one. None represent the interests of the people. Not that it’s any different in Europe, mind you.
Once a society or country allows money to enter its politics, the outcome is inevitable: the money interests will come to rule that country. This is evident all over the western world, whether you look at the Greek, Irish and other EU bail-outs, or at the debt dungeon debate the US is presently digging its way into ever deeper, with the respective bills handed to the people and their children.
As we speak, and as we watch the wall-sized media coverage of the debt dungeon chasm, municipalities and counties are on the cusp of bankruptcy. Services will be cut across the board. That is our future.
A future that won't involve growth, but which be all about austerity and cutting back and outright poverty for rapidly increasing numbers of people. Just not for the politicians and their puppeteers, not for those who get to decide who will hurt the most.
That is the main issue today. Who are you going to let decide how bad your future will be? If you opt for Washington, anyone in Washington, or Brussels if you're in Europe, your future will hurt something bad. When it comes to that future of yours and, of your offspring, the debt dungeon debate is the wrong focus. There's nothing beneficial for you in there.
|
|
|
Post by linsal on Aug 2, 2011 15:05:31 GMT -5
The former comptroller general---head of the federal Governent Accountability Office---says that the US is 3 years away from being Greece.... www.theblaze.com/stories/fmr-head-of-govt-accountability-office-u-s-less-than-3-years-away-from-being-greece/The former comptroller general — which heads the Government Accountability Office — had some unsettling words regarding U.S. debt and the recent debt debate. According to him, the U.S. is on its way to becoming like Greece, whose debt problems have plummeted that country into economic hell. “We are less than three years away from where Greece had its debt crisis as to where they were from debt to GDP,” David Walker told CNBC. “We are not exempt from a debt crisis,” he added. “We’re never going to default, because we can print money. At the same point in time, we have serious interest rate risk, we have serious currency risk, we have serious inflation risk over time. If it happens, it will be sudden and it will be very painful.” He also pointed out that credit agencies downgrading the U.S. are reactionary, meaning by the time one comes the damage may already be done. CNBC has more from the interview: As the ratio of its debt to gross national product eclipsed 100 percent and surged toward 150 percent, Greece has twice in the last two years nearly defaulted on its debt. Only successive bailout packages from the European Union and International Monetary Fund prevented catastrophe. When tolling up all the US debts, including huge unfunded liabilities to Social Security and Medicare, the US is on dangerous ground, Walker said in a CNBC interview. [...] The US is nearing the 100 percent threshold which historically shaves about one percentage point off GDP, which was just 1.3 percent for the second quarter and 0.4 percent for the first quarter. With the recent increase in the debt ceiling and continued higher budget deficits at the federal level, the US is on course for its own crisis, Walker said.
|
|
|
Post by Hobbyfarmer on Aug 2, 2011 15:13:20 GMT -5
NEWS FLASH: we are in crisis now! Just because the main stream media is not reporting it does NOT mean it is not happening.
|
|
|
Post by Hobbyfarmer on Aug 2, 2011 15:44:26 GMT -5
Dow: Eight days are weak Blue chips on longest losing streak in 34 months Stocks staggered again as investors fret about economic growth and mull passage of debt deal.
|
|
|
Post by Hobbyfarmer on Aug 2, 2011 15:56:25 GMT -5
Wall Street on Debt Deal: So What? AP Dow drops more than 250 points as stock markets show no relief from Obama's signing of a deal to raise the debt ceiling, with data released Tuesday painting a bleak picture of the U.S. economy.
|
|
|
Post by linsal on Aug 2, 2011 15:57:59 GMT -5
From The American Thinker www.americanthinker.com/2011/08/ceiling_our_fate.htmlJust either side of the contentious debt limit vote in the House on Friday, the United States Congress addressed among its most footling duties: naming and opening new post offices in Mississippi and New York. Were anyone in Washington to think on it, scheduling authorization for a bankrupt federal agency's new baubles even as 3,500 of its other offices are closed made perhaps not the best bookends for the intervening historic legislation. But circumstance being what they are, it does make a nice précis: government spending relentlessly and automatically continues, no matter what's going on. There is a nascent meme out there portraying Tea Partiers as raging infants (video) demanding ridiculous solutions. Conversely, the eminently respectable Rep. Paul Ryan and author Prof. Thomas Sowell make convincing points about grabbing success where it lies and fighting another day. The Tea Partiers, they say, can't change 80 years of inexorable spending in one Act of Congress alone. No doubt true. And Charles Krauthammer steps up to make a highly credible point about trying to rule, unconstitutionally, from one majority-held branch of our tripartite system. He asserts that Obama's massive "Keynesian gamble" has been a total failure (it has been); and he derides anyone who would mitigate that liability by refusing to raise the debt limit, thereby creating disasters for which Republicans would be blamed. Perhaps true. Certainly possible. My thinking is that any debate that drags the conversation closer to the conservative, Tea Party end is a good debate. And any tactic that does the same is worth trying. Need this mean that the debt limit should not be increased? Of course not. It only means that the conversation shifts rightward, even in the face of false "deadlines" established by the other side. Moody's, S&P, and other rating agencies have made clear that the issue is not the debt limit, but the debt itself -- and America's credibility in reducing it over the next ten years. Thus Senators Rand Paul's and Marco Rubio's substantive arguments that cutting and limiting spending is crucial, either directly or through a Balanced Budget Amendment (BBA). My thinking on all this has changed over the last few days, and I don't fancy what I've seen to see. Yes, a good fight is being fought in Congress, but will it be a fight that matters? I don't think so. As this graphic shows, America is in huge trouble. What is seriously misunderstood is that American financial collapse (read: the world's) is as likely as not in five years -- not 50 or 20 or even ten. Legislative projections currently assume an interest rate for federal borrowing of 3.7% right now, and around 5.2% later. Does that sound probable to you? Me neither. Unstoppable and harrowing, higher interest rates will unravel the whole game. Moody's announced yesterday that the pending legislation is not enough: our credit rating will be lowered in the future regardless of the outcome. Similar to inflation, interest rates eat up your cash in a thousand cuts. And ushering in inflation comes now QE3 (Quantitative Easing 3, i.e.: "printing money") is moving ahead under Secretary Geithner, unheralded but happening. This is essentially TARP III. Notably, there are federal legal restrictions against printing endless amounts of paper money. Not so for coins. It is not unthinkable for the Treasury to mint $1 trillion in coins, put them in a vault, and then take out loans against them. But I digress. Seemingly lunatic ravings about fiat dollars ("we declare that this paper is worth this") are no longer fringe. Teetering acceptance of fiat dollars will evaporate at some point as the dollar devalues. And it will happen quite suddenly. This may coalesce just about exactly the time Republicans, God willing, are majority-elected in 2012 -- for what it will be worth, "controlling" a disintegrating, worldwide economic landslide. Let's wait and see what happens these next few days. The House has passed the "compromise" bill touted by Obama, Boehner, Reid and McConnell, and voted for by Pelosi. As with the post offices above, spending is relentless. In Washington, increased revenue is always more money, but cuts aren't always cuts, courtesy "Baseline Budgeting." What's that? In short, it means that federal spending will increase automatically every year by about seven percent, no matter what. This has been the case since 1974. So "cuts" don't actually mean cuts in spending, but reduced increase from what otherwise may have been spent. And when the CBO scores a "cut" and says it will reduce spending by $2 billion, what it really means is that spending will increase by $7 billion, courtesy baseline budgeting, year in and year out. Instead, America needs to be actually cutting, closing up shop for the Department of Education and firing all the regulators and desk jockeys. Or the EPA. Yes, yes: that will increase unemployment and bump UI payments. But increased expenses for 99 weeks sounds like a deal instead of the current forever. Does the Boehner/Reid/Obama bill shut down any Federal Department or fire even one regulator? No. Instead, it offers a near-meaningless cut of $40 Billion in Year 1 and defers theoretical trillion-sized cuts to Years 7 through 10. Unfortunately for America, there isn't going to be a Year 7, 8, or 10. As the old saying goes, "If you owe the bank $5,000, the bank's got you. If you owe the bank $5 Billion, you've got the bank." Mark Steyn extended this idea saying, "If you owe the banks 15,000,000,000,000 dollars, the planet has a problem." All true. But I think the problem is even worse than that. Ask yourself, by dint of its enormous debt, does America "got" the bank? Maybe. But future debt is money not yet lent to us, and I increasingly suspect it never will be. There is a third party to the issue, neither Republican nor Democrat, about whom no one's talking even though they are key: the would-be institutional lenders who may some day decline our debt. America's short conversation circa 2014 with Ye Olde Moneybags Savings and Loan might be, "Lend you $30 Trillion for next year? In U.S. Dollars?!? ...I think not." And that will be that. The institutional interests holding America's current and foreseeable future debt aren't playing politics. They're playing for keeps. Nonetheless, even for the wealthy, investments must land somewhere. Will American debt be the best game in town? I'm not sure -- and don't know that anyone can be, with America ceding the Dollar's reserve status and gutting productivity. Grant Williams summarizes (pdf): "...In this kick-the-can culture we now live in since the events of 2008, it's never that difficult to figure out WHAT the powers-that-be will do (simple: whatever short-term fix involves the least short-term pain to banks and to their own chances of reelection), but it seems to be getting harder to ascertain WHEN they will do it. This is all well and good, except sooner or later they will wake up and find that the adults have decided enough is enough and they'll vote with their money... "[W]ould YOU lend money to a country with [America's] debt dynamics that is being run by a bunch of incompetent, bickering grandstanders if it DIDN'T possess the world's reserve currency? Me either." (sic) Many say we are "going" off a cliff; I say we've gone. The financial order of the last 40 years is radically changing. And there is nothing to replace it except widespread disorder, fractured markets, massive and long-term unemployment, and shriveling economic activity. Facing that cliff, and respected opinions notwithstanding, we shall find that politicians' moderation and even-handedness and reasonableness are not wings. They are the last words of unserious men in the last days of a world that Nancy Pelosi says only she is qualified to save. If only things were that unserious.
|
|
|
Post by Hobbyfarmer on Aug 2, 2011 16:45:13 GMT -5
I was doing OK reading that article until that last Nancy Piglosi thing in the next to last sentence. I feel nauseated.
|
|
|
Post by linsal on Aug 2, 2011 18:19:24 GMT -5
I stand here in abject stupefaction. The so-called "right" or "Tea Party" in this republic is being so thoroughly rolled and defeated that I am struggling to come up with an adequate violent submission metaphor that does not involve prison rape . . . and they honesty think that they're "winning." Really? You call this winning?
•- Obama gets over $2 Trillion to spend before the 2012 election •- There are no real spending cuts •- There is a massive tax increase effective January 1, 2013 Obama is going to be handed something in excess of $2 Trillion -- and he has made it perfectly clear that he will spend every penny of it before the November 2012 election. That's why he kept saying, " . . . so we don't have to do this again", meaning raise the debt ceiling again. The debt ceiling would only need to be raised if all of the money had been spent. Therefore, he has stated very clearly that he will spend every penny of any debt ceiling increase. He is going to burn through $2 Trillion-plus in the next sixteen months. This was the Obama regime's plan from day one. Geithner appeared before Congress in early May and told them this in no uncertain terms. This outcome has been a known quantity all along.
There are no spending cuts in this plan. It is all accounting fraud. Saying that you are not going to spend money in Afghanistan ten years from now is not spending cuts. Even if you accept the $1 Trillion in cuts over ten years propaganda, that is only $100 Billion per year, which is essentially meaningless relative to the size of the problem. Furthermore, even a miniscule uptick in interest rates, which given the massive debasement of our currency is now a mathematical certainty, will completely consume that $100 Billion per year. It's all a joke.
Back to the $2 Trillion that Obama is being handed. I honestly think that most people in this country have no understanding of simple counting numbers. Do you not understand how much a trillion is? Where do you think this money is going to come from -- who has two trillion dollars to loan us? China? Nope. Not even close. China's entire GDP is only $6 Trillion. Do you honestly think that China is going to loan us one third of their total annual economic production? China was a huge creditor to us back when $100 Billion was considered a staggeringly large amount of money - which was four years ago. Now $100 Billion is literally a rounding error. Do you realize that there are only a handful of nations of this planet that even have a GDP in excess of $2 Trillion? If these countries loaned us every penny of their GDP, it wouldn't even be $2 Trillion:
Canada ($1.57 T) India ($1.54 T) Russia ($1.46 T)
Are you starting to understand the scope of what we are talking about now? Obama is going to embezzle considerably more than the entire economic output of Canada, India or Russia to his cronies before the 2012 election -- and that is just counting this round of spending. This doesn't include the other $5 Trillion he has already burned through since 2009.
China is not going to lend us this money because they simply don't have anything close to that much money to lend. This $2 Trillion is going to come from the Federal Reserve. Where is the Federal Reserve going to get $2 Trillion? They are going to print it out of thin air. We are in the midst of the largest currency debasement ever seen in human history. There is only one result that can come of currency debasement: hyperinflation and total economic and societal collapse.
Have you also forgotten the so-called "Bush tax cuts"? Yeah. Those rates are going to expire on January 1, 2013. Obama will presumably still be occupying the Oval Office at that time assuming that he is not forcibly removed or that the Republic is still intact at that time. Taxes will increase significantly at that point, and the Congressional Budget Office has scored everything put before them given the fact of the massive tax increases on 1/1/2013. Do you understand that? When these Republicans and even these so-called "Tea Party Freshmen" tell you that there are no tax hikes in their "plan," they are consciously, willfully, knowingly lying to you through their teeth.
Finally, I do not understand how it can possibly be that conservative writers are still addressing Obama as if he is actually trying to help the economy, but his well-intentioned policies are failing.
Obama is the enemy. Obama is a Marxist-Communist usurper and puppet front for a cabal of Marxist-Communists who are actively trying to destroy the United States of America. Everything they have done, are doing, and will do has the single goal of collapsing and destroying the U.S. economy, military, constitutional government and culture. What part of "Marxist Revolution" do you not understand?
The Obama regime is not a failure. The Obama regime is not incompetent. The Obama regime has achieved more in two and a half years than anyone could have possibly foreseen. It has debased the currency by 50% of the GDP and guaranteed that our economy will collapse. It has looted the Treasury for more than the size of a top-ten economy and embezzled that wealth into the hands of their fellow Marxists in preparation for the final collapse of the United States. It has ground the economy of the United States to a screeching halt. It has destabilized the entire Muslim world and ensured that there will be a nuclear war centered around Israel within the decade.
The Obama regime has no interest whatsoever in "stimulus" or "getting folks back to work." How can you not understand this? How can we possibly win this war if we refuse to come to terms with the fact that we are in fact fighting a war.
God save the United States of America, because the people are far too stupid to do it themselves.
|
|
|
Post by linsal on Aug 3, 2011 4:48:16 GMT -5
Is the debt ceiling deal supposed to be some sort of a cruel joke? Is this what the American people have been waiting months and months for? The "debt ceiling deal from hell" is a complete and total fraud. Barack Obama will not need to worry about the debt ceiling again until after the 2012 election, and no "real" spending cuts will happen until after the 2012 election. The way the political game in Washington D.C. is played today, if you don't get something right now, you probably will never end up getting it. The Republicans have traded a massive debt ceiling increase right now for the possibility of very skimpy budget cuts in the future. Meanwhile, this deal establishes a new "Super Congress" that threatens to fundamentally alter our political system (and not in a good way). The funny thing is that everyone is running around proclaiming that the Tea Party won this battle. That is a complete and total lie.
So what about the $917 billion in "immediate" spending cuts that the Republicans are getting as part of this deal?
Well, they aren't really spending cuts at all. Rather, they are spending caps. Basically what is happening is that future spending increases are being cancelled and our politicians are selling that to us as "spending cuts".
What is even sadder is that the $917 billion is spread over ten years and the vast majority of the "cuts" are in the latter years.
For example, even if you consider these to be "spending cuts" (which they are not), the deal calls for only about $25 billion in "cuts" in 2012 and only about $47 billion in "cuts" in 2013.
25 billion dollars is far less than one percent of the federal budget, so needless to say these "cuts" are not very impressive at all.
Okay, so how about the second stage of the deal which will produce "spending cuts" of between 1.2 and 1.5 trillion dollars?
Well, yes, these would actually be spending cuts and they would be spread over 10 years.
Near the end of the year, the new "Super Congress" (more on that in a minute) will submit a proposal to Congress which could cut spending over the next 10 years by a total of up to 1.5 trillion dollars.
If the recommendations of the "Super Congress" are not implemented, than "automatic" spending cuts of $1.2 trillion will go into effect over the next 10 years.
However, there are some very important things to remember about these "spending cuts".
First of all, none of these "automatic" spending cuts would even go into effect until 2013. The face of American politics will be dramatically different by then, and there is absolutely nothing that makes these cuts binding on Congress.
As Gregg Easterbrook recently noted, Congress can cancel spending cuts at any time and for any reason....
By projecting the only tangible savings — which aren’t even specified, but are merely caps — into the future, the plan allows Congress to cancel them. In 2012 or any future year, Congress will say, “We can’t have caps this year because of the [INSERT ANY WORD CHOSEN AT RANDOM] crisis. We are postponing action till next year.” Rinse and repeat. As I have written about so many times before, the U.S. national debt is completely and totally out of control. This was supposed to be the moment when at least some members of Congress were finally going to get serious about our exploding debt. Unfortunately, our politicians have sold us down the river once again.
Even if the best case scenario happens (which it never does) and Congress sticks to this deal for the full ten years (which is about as likely as hell freezing over), the "savings" that this deal would produce are quite pathetic as Peter Schiff recently explained....
The Congressional Budget Office currently projects that $9.5 trillion in new debt will have to be issued over the next 10 years. Even if all of the reductions proposed in the deal were to come to pass, which is highly unlikely, that would still leave $7.1 trillion in new debt accumulation by 2021. Our problems have not been solved by a long shot. Keep in mind that Congress can change this deal whenever it wants.
So nobody should get excited about these "spending cuts". After all, when was the last time that "future spending cuts" actually materialized in Washington?
The reality is that neither political party seems to want to do much to cut government spending.
So the band will play on and the can will get kicked even farther down the road.
When Obama was inaugurated, the U.S. national debt was $10,626,877,048,913.08.
Today, it is $14,342,358,440,969.10.
But what this "debt ceiling deal" will do is it will give the congressional leadership of both parties much more power.
The new "Super Congress" that this deal establishes will be granted "extraordinary new powers" that regular members of Congress do not possess.
For example, The Huffington Post says that any new legislation produced by the "Super Congress" will not be able to be filibustered or amended....
Under the reported framework, legislation the new congressional committee writes would be fast-tracked through Congress and could not be filibustered or amended. So who will be a part of the "Super Congress"?
The members will be chosen by the leadership of both parties.
So anyone that is not part of the "establishment" is not likely to be included.
The following is what U.S. Representative Ron Paul had to say about this new "Super Congress"....
"Nothing more than a way to disenfranchise the majority of Congress by denying them the chance for meaningful participation in the crucial areas of entitlement and tax reform. It cedes power to draft legislation to a special commission, hand-picked by the House and Senate leadership." It is this new "Super Congress" that will decide what will be in the package of "spending cuts" that will be voted on by the end of the year.
Regular members of Congress will be frozen out of the process.
On December 23rd, Congress will be required to vote up or down on the spending cuts proposed by the "Super Congress". Regular members of Congress will not be allowed to amend the legislation in any way, and no filibusters will be permitted.
Does that sound very "American" to you?
The more that one examines this "debt ceiling deal", the worse it looks.
Meanwhile, many Democrats are running around and acting as if their lunch money was just stolen.
For example, the following is what Politico is reporting that U.S. Representative Mike Doyle said about this deal....
“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.” Democratic congressman Emanuel Cleaver was even more dramatic when he proclaimed that this deal "looks like a Satan sandwich".
Well, this deal is a total nightmare, but not for the reasons that Cleaver is suggesting.
This deal opens the door for more rampant deficit spending, and nearly all of the "spending cuts" are put off until after the 2012 election.
Basically, the Republicans got taken out behind the woodshed and beaten to a pulp on this one. Any Republican that is trying to proclaim that the debt ceiling deal is a "great victory" is a complete moron.
But in the end, it really does not matter which political party gets a "victory" out of all this. What matters is that our federal government is still steamrolling toward a date with financial oblivion.
If this is the best that our politicians can come up with, we are absolutely doomed.
|
|
|
Post by glowplug on Aug 3, 2011 7:10:29 GMT -5
Gold has been going up at a dollar per ounce per hour since Monday morning.
That says we're doomed. Glowplug
|
|
mfs
Hired Hand
Posts: 163
|
Post by mfs on Aug 3, 2011 22:46:15 GMT -5
Alan, I truly appreciate your passion for the arguement you make. This is more critical than most seemingly are aware.
|
|
|
Post by glowplug on Aug 3, 2011 22:56:31 GMT -5
The charts didn't copy but you can find the site using search if you wish to see the Doom formation. Glowplug
By: Patti Domm CNBC Executive News Editor The S&P 500 triggered a scary technical signal — a head and shoulders pattern in the chart — leaving investors to wonder if it's the sign of more selling to come — or just a head fake.
The so-called head and shoulders pattern is formed when the chart pattern shows three rallies, with the middle rally peaking higher than the first and second, thus creating a head. If the market breaks the "neckline," that is a trend reversal signal and can mean more selling ahead.
"What we're having is a classical technical breakdown. When the S&P broke down through the 1248 to 1250 region, it violated the neckline on a head and shoulders formation, " said Art Cashin, director of floor trading at UBS [UBS 15.76 0.05 (+0.32%) ].
"If it's a valid head and shoulders then you begin a countdown to where it occurred. I think it counts down to 1120," Cashin said. The market feels oversold and ready for a bounce, but the fact that the S&P is now negative for the year could weigh on sentiment, he added.
"You watch the rebounds. They should be restrained by the neckline at 1248 to 1252. A rally can only be a success if it punches above that," he said.
The pattern doesn't always trigger a break through the neckline and a selloff.
"There have been a few head fakes with this pattern since we came off the 2008 lows," said Scott Redler of T3Live.com. He said the S&P started forming the pattern several times, but it was never triggered. "That's why nobody trusts this pattern, but it feels different this time."
In the chart below, the market first rallied, forming the top of the left shoulder in late February. It then rallied to a higher level, forming a head in May. It then dipped down to a neckline before rallying to form a right shoulder in July. Typically, the neckline is formed at an area of prior support. That would be the 1249 to 1280 zone, according to Redler.
"Today's move down through 1249 was the bottom end of the neckline which traders have been watching," said Redler. "What a head and shoulders tries to do is it tries to measure the potential move of a correction and the way you do that is from the top of the head to the neckline. The high was 1370. The neckline would be an average of 1270. That gives you a measured move for technicians to pick an area to buy. That takes you down to a zone of 1150 to 1180," he said.
"That correlates to a pretty big support level from last year. That will be the level traders are watching," he said.
Redler said another reason he was expecting this formation to be triggered was by the action in the industrial sector ETF, Industrial Select Sector SPDR Fund and the SPDR S&P Homebuilders ETF. Both showed head and shoulder patterns.
Redler, who watches the market's short-term technicals, recommended raising macro cash in longer-term positions last Thursday when he saw the right shoulder start to get fully developed. It was also when the SPY, the ETF representing the S&P, broke its 50-day moving average at 1310.
|
|
|
Post by linsal on Aug 4, 2011 5:59:43 GMT -5
08/03/11 Paris, France – It doesn’t look good, dear reader.
The Dow lost 171 points yesterday. Oil slipped closer to $90. And what’s this…gold, up $22.
The debt deal is done. And the Great Correction intensifies…as expected.
“Another bear market has begun,” says our old friend Marc Faber.
“After debt deal: economy in deeper peril,” says MSNBC.
Why would the economy be in deeper peril? Actually, it’s in the same peril. But most people didn’t know what peril it was in. They had swallowed the “recession…recovery” story. They believed it was just a matter of time before the economy got back on its feet.
But it’s not a recession. And there will be no recovery. Never.
It’s a correction. And it has to do its work. It has to reduce debt levels. And that takes time…and pain. Here’s Bloomberg, on the case:
Consumer Spending in U.S. Unexpectedly Falls as Hiring Slumps
Aug. 2 (Bloomberg) — U.S. consumer spending unexpectedly dropped in June for the first time in almost two years and savings climbed, adding to evidence that the slump in hiring is hurting household confidence.
Purchases declined 0.2 percent after a 0.1 percent gain the prior month, Commerce Department figures showed today in Washington. The median estimate of 77 economists surveyed by Bloomberg News called for a 0.1 percent increase. Incomes grew at the slowest pace since November.
The lack of jobs combined with wage gains that have failed to keep pace with inflation raise the risk of further cuts in consumer spending, which accounts for 70 percent of the world’s largest economy. Companies like Newell Rubbermaid Inc. are among those cutting forecasts for the year.
“Wages are very stagnant and that’s affecting consumer spending and consumer confidence,” Fed Chairman Ben S. Bernanke said in semi-annual testimony to Congress on July 13. “There is also ongoing uncertainty about the durability of the recovery.”
Friday’s news on GDP shows the double dip has arrived — an expansion of only 1.3 percent and consumer spending up 0.1 percent in the second quarter. Astonishingly low by any account. The debt ceiling trouble and lack of a longer term resolution to the deficit will make it worse.
Yes, dear reader, so far, so good. Things are not looking up. They’re looking down. Which is fine with us. This correction needs to speed up…so we can get it over with.
Where are we so far? Houses in Florida, California, Nevada and Arizona are down about 50%. Banks have about 2 million foreclosed houses in stock…and about 11 million more are underwater. Prices will probably fall another 25% or so before bottoming out.
Unemployment, depending on how you measure it, is near depression levels. About 14 million people are jobless…with nearly half of them out of work for more than 6 months.
A quarter of the people asked by Gallup pollsters said they thought the economy really is in a depression.
Are we back in a recession? No! The correction never ended…and it has a lot further to go.
Before it is over, stock prices will be cut in half. Food stamp rolls will hit 50 million. Houses will have lost 60% of their value. And more than 20 million people will be out of a job.
Then, our problems will be over, right? Then, things can begin looking up, right? Then, the worst will be behind us, correct?
Wrong!
Then, the feds will really get to work. Private citizens can make mistakes. They can get themselves into deep trouble. But if you really want to make a mess of things, you need government support. Stay tuned.
Regards,
Bill Bonner
|
|
|
Post by thirsty on Aug 4, 2011 21:30:43 GMT -5
It was 2017. Clans were governing America. Clans organized around families and individuals who possessed stocks of food, bullion, guns and ammunition. The first clans organized around local police forces. The conservatives’ war on crime during the late 20th century and the Bush/Obama war on terror during the first decade of the 21st century had resulted in the police becoming militarized and unaccountable. As society broke down, the police became warlords. The state police broke apart, and the officers were subsumed into the local forces of their communities. The newly formed tribes expanded to encompass the relatives and friends of the police. The dollar had collapsed as world reserve currency in 2012 when the worsening economic depression made it clear to Washington’s creditors that the federal budget deficit was too large to be financed except by the printing of money. With the dollar’s demise, import prices skyrocketed. As Americans were unable to afford foreign-made goods, the transnational corporations that were producing offshore for US markets were bankrupted, further eroding the government’s revenue base. The government was forced to print money in order to pay its bills, causing domestic prices to rise rapidly. Faced with hyperinflation, Washington took recourse in terminating Social Security and Medicare and followed up by confiscating the remnants of private pensions. This provided a one-year respite, but with no more resources to confiscate, money creation and hyperinflation resumed. Organized food deliveries broke down when the government fought hyperinflation with fixed prices and the mandate that all purchases and sales had to be in US paper currency. Unwilling to trade appreciating goods for depreciating paper, goods disappeared from stores. Washington responded as Lenin had done during the “war communism” period of Soviet history. The government sent troops to confiscate goods for distribution in kind to the population. This was a temporary stop-gap until existing stocks were depleted, as future production was discouraged. Much of the confiscated stocks became the property of the troops who seized the goods. Goods reappeared in markets under the protection of local warlords. Transactions were conducted in barter and in gold, silver, and copper coins. Other clans organized around families and individuals who possessed stocks of food, bullion, guns and ammunition. Uneasy alliances formed to balance differences in clan strengths. Betrayals quickly made loyalty a necessary trait for survival. Large scale food and other production broke down as local militias taxed distribution as goods moved across local territories. Washington seized domestic oil production and refineries, but much of the government’s gasoline was paid for safe passage across clan territories. Most of the troops in Washington’s overseas bases were abandoned. As their resource stocks were drawn down, the abandoned soldiers were forced into alliances with those with whom they had been fighting. Washington found it increasingly difficult to maintain itself. As it lost control over the country, Washington was less able to secure supplies from abroad as tribute from those Washington threatened with nuclear attack. Gradually other nuclear powers realized that the only target in America was Washington. The more astute saw the writing on the wall and slipped away from the former capital city. When Rome began her empire, Rome’s currency consisted of gold and silver coinage. Rome was well organized with efficient institutions and the ability to supply troops in the field so that campaigns could continue indefinitely, a monopoly in the world of Rome’s time. When hubris sent America in pursuit of overseas empire, the venture coincided with the offshoring of American manufacturing, industrial, and professional service jobs and the corresponding erosion of the government’s tax base, with the advent of massive budget and trade deficits, with the erosion of the fiat paper currency’s value, and with America’s dependence on foreign creditors and puppet rulers. The Roman Empire lasted for centuries. The American one collapsed overnight. Rome’s corruption became the strength of her enemies, and the Western Empire was overrun. America’s collapse occurred when government ceased to represent the people and became the instrument of a private oligarchy. Decisions were made in behalf of short-term profits for the few at the expense of unmanageable liabilities for the many. Overwhelmed by liabilities, the government collapsed. Globalism had run its course. Life reformed on a local basis. I just don't see it, a bunch of 40K a year donut eaters having the balls, vision and organizational skills to run warlord game after a collapse? Ain't gonna happen, it's always been the military guys with all three that formed the aristocracy throughout history. Most cops I know couldn't spell Ghengis Khan and would have problems pointing out the year William the Conqueror turned England into his very own semen recepticle. They will make good thugs and hencmen though.
|
|
|
Post by sillinoisfarmer on Aug 4, 2011 21:59:50 GMT -5
May we all be honest with each other here? In all honesty who in their right mind thought that the economy had recovered? The Wall Street firms that orchestrated allowing investment firms to be merged with banking firms and pushing Glass-Steagall act to be abolished in the name of unlimited greed and profit are allowed to get off scott free and made whole by the taxpayers of this nation is going to end well, you must be joshing! Printing money by the FED will not devalue our dollar and return to us as inflation at some point in time will not hurt us? Our do little CONgress and Political leaders on both sides of the isle that say one thing and then vote for their own self interest rather than the good of our nation is going to help us in the long run? Our erosion of our manufacturing base, borrowing every more from our homes, as if they were an ATM machine, flipping houses as if there were no tomorrow, unemployment skyrocketing and there will never be a day of reckoning for all of this? Deep down I suspect that everyone on this board knows that we are all living in a house of cards and a strong wind is now blowing. Many of us have not been involved directly in all of this but we will now pay the price indirectly. I am afraid that the day of reckoning is very near and the games of pretend and extend are over.
|
|