The Economy Guy

All markets moved sideways today – nothing to move markets today….

In the news today……

Food Stamps – are being used by 40.8M Americans.  This number is projected to rise to 43.3M next year.  Now let’s think about this number for just a minute.  The number of people using food stamps is over 13% of all Americans, and it is rising.  What about the unemployment rate?  It sits at 9.7% and is flat.  That doesn’t seem right, does it?  You would think that unemployment and food stamp use would go up and down together – but it doesn’t.  What conclusions can we reach?

1. The use of Food Stamps is related to a defined income level, and the number of people using food stamps is going up as Unemployment is level.
2. Poverty must be creeping into American life FASTER than unemployment. (Food Stamp use is up while unemployment is level).
3. The Quality of Life is slipping away in America
4.  Government has failed us.

Jobless Claims – jumped 19,000 last week when all the pundits thought there would be a drop.  The experts continue to be too optimistic.  Greater joblessness will ultimately turn into greater unemployment – even with the numbers “manipulated” by the Commerce Department.

Mortgage Rates – hit recent low at 4.49% for a 30-year fixed mortgage and 3.95% for a 15-year fixed mortgage.  This is in line with a decreasing 10 Year Treasury interest rate.  In other words, the deflation in our economy is “showing” in the mortgage rates right now.  The last time mortgages rates were this low was in the 50’s when an average mortgage duration was 20 or 25 years.

The Derivative Markets – are pretty big.  Ever wonder how big they are?  Well, just the “interest rate derivatives market” which is the biggest derivates market, is $450 TRILLION.  Now, that’s big.  Should this scare you?  In a perfect marketplace – no.  But, we have demonstrated that we are not in a perfect marketplace.  If there was a major default in the derivatives market, it would make the last financial crisis seem like childs play.  That is worth knowing about.

Gold Related Stories – Professor Yu of the Chinese Social Sciences Academy (one of the government’s mouth pieces) said that US Treasuries were “risky” in the mid to long term, as was all Dollar denominated instruments.  This is another shot across the US bow that we are spending ourselves into oblivion with no plan to pay off our debts, so it must end badly for the Dollar – and all those (like the Chinese) who hold Dollars denominated instruments (stocks, bonds, etc.)  Also, Russia and China are both eagerly increasing their gold holdings each and every month.  They are totally aware that if the gold price starts to soar, then JPMorgan will be in the position where it must cover all its “shorts” in the gold and silver market – thereby pushing the gold and silver prices much higher.  Here is the question for the readers?  Are the Russians and Chinese seeing something in the US economy that most Americans don’t, or can’t see? 

But, you are probably saying that we are going into another deflationary period (as the Great Depression was deflationary), so it is worth asking what happened to gold prices, historically, during the Great Depression?  Here is the answer:

Here are the closing numbers for today:
Dow Jones 30 Industrial – 10,675 (down 5)
10 Year Treasury Bond – 2.92% (down 0.03%)
Euro – $1.3188
Gold – $1196 (up $2)
Oil – $82.02 (down $0.45)
Gasoline – $2.16  (down $0.01)