Dan Norcini Gold commentary - 24 June

I have to echo what Dan Norcini says, this isn't the same gold market as the one before the crash.  Monday's horrible candle would have initiated a waterfall and crashed the market.  Not so anymore apparently.  Gold is responding as the true and trusted currency of last resort that it has always been.  It is not, I repeat not responding to inflation like the perma-bears would like you to think.  They want you to swallow that concept so they can prop up a straw man and then kick it over.  It is clearer each day that debt default and payoffs are outpacing new money and credit creation, leading to deflation.  No, gold is being acquired because of the notion that all governments are laden with more debt than can ever be payed off, with debt default or explosive monetization the only available options ahead.

Hourly Action In Gold From Trader Dan

by Dan Norcini

Dear CIGAs,
Click chart to enlarge today’s hourly action in Gold in PDF format with commentary from Trader Dan Norcini

Graham Summers - Will Gold Miners Act Like Stocks or Gold During the Crash?

by noreply@blogger.com (Nathan A. Martin)

Graham writes newsletters for his company, Phoenix Capital Research. I have followed Graham’s writing for quite some time and have found his knowledge to be both deep and consistent. He is not a “willow in the wind” when it comes to understanding the predicament of our economy and of our debt based monetary system.

He writes a daily newsletter that he provides for free, called Gains Pains & Capital, you can sign up at his site here, there is a sign up block in the upper left hand corner: Gains Pains & Capital. Of course he does offer paid for services of which I have no personal experience and receive no compensation or any other consideration for sharing Graham’s work. I always recommend caution in paying for and following the investment advice of others.

For educational purposes, I have agreed to occasionally reprint some of his articles, I think you’ll find them insightful and you will surely pick up a nugget or two with every installment. In the following piece, Graham performed a small study of the relationship in performance between gold stocks and gold miners, especially during times of equity stress – I think you may find it interesting.

Will Gold Miners Act Like Stocks or Gold During the Crash?
With stocks collapsing and Gold rallying to new all-time highs in both US Dollars and the Euro, the key question for precious metals investors is:

Will gold miners act like stocks or Gold during the Crash?

Unfortunately, there is no simple answer; it all depends on how you look at it. Historically, when the going is good, miners act like Gold. However, when things get ugly, they tend to act like stocks.

Let me explain…

As you know, over the last ten years Gold has rallied roughly 340% from $250 to its all-time high of $1,242 yesterday. Over the same time period stocks, as measured by the S&P 500, have actually fallen some 27% in value. That’s a heck of a difference in performance.



When you add Gold miners to this mix (as measured by the HUI Gold Bugs index), you find that in the long-term, miners have not only acted like Gold, they’ve acted like Gold on steroids: since 2000, the HUI Index has rallied more than 500% compared to 340% for Gold bullion over the same time period.



So over a ten-year horizon, the answer is quite simple: miners follow Gold more than stocks. A chart plotting the three assets makes this clear:



However, very few investors only look at their portfolios every ten years. Most of us tend to look every week, if not every day. Which is why it’s important to note that anyone who invests in Gold mining companies expecting to mirror Gold’s performance needs to have an unbelievably strong stomach. Because when the going gets bad, miners have a tendency to mimic stocks.



The above chart (weekly) shows the performance of Gold vs. the S&P 500 vs. the HUI index during the 2008 Crash. As you can see, miners took it on the chin nearly as much as stocks during the collapse. In 2008, stocks fell 37%, Gold miners fell 30%, and Gold actually ROSE 5% (despite an extremely volatile year).

So the last time things got really ugly, Gold mining stocks acted more like stocks than Gold. However, if you could hold on through the gut-wrenching drops, mining stocks rebounded much more quickly than stocks (though not as quickly as Gold).
Personally, I doubt anyone has a pain threshold high enough to sit through a drop like that of Autumn 2008 without panicking and selling. However, those who did stomach the drop quickly saw their mining shares rise along with Gold, and start outperforming stocks handily.

Which brings us back to my original statement: historically, when the going is good, miners act like Gold. However, when things get ugly, they tend to act like stocks.

That is until today.

During this latest market rout started at the end of April 2010, the HUI index and Gold initially fell along with stocks. But then something odd happened: the HUI and Gold both stopped collapsing and actually began to rally while the S&P 500 continued to collapse:



Miners now appear at a crossroads. They have not yet totally decoupled from stocks, but are showing much greater relative strength compared to the S&P 500. In plain terms, we appear to be nearing a time in which mining stocks will trade almost entirely along with Gold rather than stocks. We’re not quite there yet, but it is approaching.

What does this mean? If a Crash were to hit right tomorrow, mining stocks would likely fall along with the S&P 500. However, they would fall less, rebound more quickly, and outperform the general market.

Will this always be the case? I cannot say. But if miners ever DO become totally decoupled from stocks, they’ll be a phenomenal investment. Remember, Gold only fell a mere 5% during this latest market rout. And it reclaimed ALL of its losses in roughly two weeks.

Meanwhile, stocks continue to dive.

Which asset do you want to own?

Good Investing!

Graham Summers

Albert Edwards Goes All Out: Sees New Recession By End Of Year, Market Collapsing "Like Pack Of Cards"

by Tyler Durden

2 people liked this

Albert Edwards, one of the most prominent uber-bears just got even more bearish: "Our view that this economic and market recovery will collapse like a pack of cards as soon as the steroid-like stimulus is reduced is gaining ground. Most forward-looking leading indicators now signal some sort of second-half slowdown. The only area of debate now seems to be in its magnitude. By the end of this year, I believe we will be back in recession." Albert's vision of a deflationary collapse, following by a reactionary episode in which the Fed (in typical reactive fashion) ends up printing tens trillions in one last attempt to restimulate the economy, resulting in hyperinflation, is well-known, and conforms with our view. As for the turning point, it is still anyone's guess: as today's Freddie record low mortgage rates demonstrates, deflation has now firmly gotten the upper hand. The Fed has can not afford to wait and see how this plays out. Obviously, with ZIRP here at least through 2013, if not much longer, the only true recourse is another failed monetary stimulus. However, with the president's rating in shambles, and any form if stimulus, monterey or fiscal, likely guaranteed to bite another 10% at least from his plunging popularity rating (see latest Gallup numbers here), Bernanke likely has his hands tied at least until 2011. Which is why deflationists are likely safe for at least 6 months, assuming of course the forward looking credit market (not stocks, stocks no longer reflect anything except for the latest latency arbitrage available to those rich enough to afford the latest and greatest Routers) does not begin to price in the hyperinflationary episode sooner. With 30 Day Bills near zero, there is little to worry about... for now.
Edwards agrees with this:

Although our deflationary arguments are gaining some traction in the bond market, investors have yet to fully acknowledge we are now walking on the deflationary quicksand that will inevitably suck us towards total fiscal and financial ruin - you ain?t seen nothing yet. With core inflation rates now sub-1% in the eurozone and the US, we are only one recession away from Japanese-style deflation. Recent fiscal tightening will hasten the speed of our descent into this quagmire. The market reaction to the acknowledgement of that fact is likely to be unprecedented in its savagery. The response to the coming deflationary maelstrom will be additional money printing that will make the recent QE seem insignificant. The super-inflationary end result will become obvious to all.

As the SocGen strategist further observes, is that while financials have rished to deleverage (not surprising, considering if they were to mark their assets to market even after the last year of debt to equity conversion, all banks would still be undercapitalized by trillions), a glimpse at the economy which excludes financials indicates that there has been no economic deleveraging yet.

Edwards goes on to demonstrate the painfully obvious double dip in housing, whose collapse was only prevented by ongoing stimulus. Sure enough, he completely agrees with Meredith Whitney that housing is in a double dip, and is yet another argument for the Fed's imminent reinvolvement.
And another critical note regarding the "massive" build up in cash by the corporate sector- it turns out the bulk of the cash retention was purely a function of inventory liquidation as presented by the most recent Z.1. Further, as we pointed out previously, the only differential from the cash and cash equivalents trendline is due to an identical and opposite contraction in corporate taxes. Now that the administration will have no choice but to extract as much cash as possible, especially through repatriation of money held by offshore subs of corporations, and much increased corporate tax rates, we anticipate this last bastion of the "money on the sidelines" brigade to promptly be gone with the double dip wind.
Edwards notes:

Many see USA Inc generating huge surplus cash which they conjecture can be spent either to boost capital investment directly, or alternatively to buy other companies? productive capacity via mergers and acquisitions. We looked at this back in January and offered a word of caution. The newly released Federal Reserve Flow of Funds data suggest that on their version of this important measure, no such surplus now exists and to the extent there was one recently, it was due to the inventory liquidation that has now ended (see chart below). We acknowledge that we are indeed far better placed than when we saw 3%+ deficits, but on the Fed?s measure there is no compelling evidence that an investment/M&A boom is imminent.

Little by little every arrow in the bullish quiver is taken away. The only thing remaining, is the last recourse of the Keynesian radioactive fall out: more money borrowed from the future. Alas, as John Taylor pointed out earlier, there is no growth. The global death spiral is complete. We disagree with Edwards - the next recession is not coming by the end of 2010 - we never left it in the first place. We would agree with Rosenberg, however, that the second coming of the Second Great Depression is now upon us, after the brief Fed-moderated extension, which merely allowed Wall Street to extract yet another record round of bonuses on the backs of the middle class.

Damon Vrabel – McChrystal vs. Obama

by noreply@blogger.com (Nathan A. Martin)

Damon talks a lot about the CFR (Council on Foreign Relations). That’s because the power players behind the political and money scenes comprise the management of the CFR. They use it to advance their agenda under the cloak of promoting global cooperation. However, their idea of cooperation is massive debt for everyone, issued, controlled, and profited upon by them! Since they profit from interest, they are motivated to produce more interest and conveniently it compounds upon itself to create a never ending paradigm that feeds up the pyramid as Damon puts it.

To counter the CFR, Damon is forming CSPER or the Council on Renewal. He is starting a blog and will be promoting the Council. He is currently setting up methods for membership, I encourage everyone to bookmark Damon’s site and to register to his site in order to receive updates from him. Also note that I have included his blog in my blogroll in the lower right hand column of this blog. Here’s Damon’s statement about the opening of his blog:

I decided to launch a blog so the Council on Renewal could quickly respond to important news that gets funneled to us in the fake left vs. right stage show called the mass media. The corporate/state controlled media industry is designed to hide the truth and keep us fighting each other in Dem vs. Repub cheerleading groups--just like the Celtics vs. the Lakers, or Apple vs. Microsoft. We need to remember that just like the Celtics and Lakers or Apple and Microsoft, the Dems and Repubs are controlled by money powers and compete in a corporate-controlled arena. My goal with this blog is to expose that and discuss the news from the perspective of the corporatocracy that controls everything mainly through their policy group and networking clique called the Council on Foreign Relations (CFR).

Writing articles for my Canada Free Press column allows me to flesh out the big issues, but it’s not appropriate for daily “quick hits.” This blog site will be the quick hits.

Damon has a gift of creating a clear and concise message. We need efforts like his to counter the BS and to bring light into the motives of those in power. I agree that there’s more to this McChrystal/ Petraeus move than meets the eye, please be sure to view it within the context of other moves now occurring in the Middle East as well as in the political arena. I also would like to note that our own media is now working very hard to discredit McChrystal…

McChrystal vs. Obama

By Damon Vrabel

The mass media stageshow is a hoot. Remember that all of this is controlled by the top folks in CFR (the inner financiers behind the Wall St cartel). Just like Tom Cruise in The Firm, those top folks use CFR membership to control/influence/co-opt the rest of the people in the group. Who are some of those people? McChrystal is CFR. Petraeus is CFR. James Jones is CFR. Gates is CFR. Eikenberry is CFR. In fact, Obama’s entire team is CFR, just like Bush’s was. Much of the media is also CFR.

The motive of the top controllers in this McChrystal vs. Obama episode could be any one of many possibilities…

- CFR wanted to stoke an Obama vs. military fight to rally the “raging war machine right” for the 2010 elections against Obama rather than leaving room for 3rd party and other efforts to save the US from Wall Street.

- CFR simply wanted to put Petraeus back on the front page as they groom him for the 2012 presidential campaign. He has been a good yes-man for his Wall Street CFR controllers. They like careerist generals like Petraeus and Richard Myers who are subservient yes-men doing whatever they’re told to feel the affirmation of pleasing their bosses and getting more medals. They also like ruthless frigid generals like Barry McCaffrey (or lower ranks like Oliver North) who massacred thousands on orders even though they were retreating, which violated every sense of morality and international law, but that’s not Petraeus.

- CFR needed to replace McChrystal because he started seeing the truth, feeling his conscience, and siding with his soldiers vs. his controllers back in NY. CFR would’ve had insiders close to McChrystal to know his general mindset and even overhear his private conversations to detect if he was straying from their desired goal to maintain their presence in Afghanistan perpetually to control all the natural gas, mineral deposits, opium, and otherwise keep the process on track of managing young Americans to their deaths in order to convert Afghanistan into a satellite state of our banking/corporate empire. By the way, this doesn’t mean they’re necessarily using secret people. They simply surround executives (from the President all the way down through civilian and military chains of command) with big staffs, and those staffs report up their own chains of command where they all eventually reach the top of the Pentagon, State, etc where inner CFR members typically rule. But it could be secret people as well. The CIA uses assets inside all sorts of organizations–foreign governments, corporations, military units, state governments, etc–to ensure they’re secretly staying on top of things. And CIA serves CFR/Wall St.

Overall this media stageshow is probably a strategic chess move to accomplish a combination of all 3 of these things and then some. Just don’t let yourself be caught in their manipulations. And help explain this to your friends, family, neighbors. The media is used to accomplish strategic objectives, NOT to report news.

What will they do?

How The Middle Class, Or The New Rentiers, Is Stuck Between Deflation And Hyperinflation

by Tyler Durden

Rentiers Are Headed for Trouble, but Who Are They?
June 24, 2010
By John R. Taylor, Jr.
Chief Investment Officer, FX Concepts

The world is currently overwhelmed with debt, but underwhelmed with growth. Everyone is trying to
export, but no country has embraced the concept of expanding domestic consumption. Although I
personally like consumption, I am an American and therefore over-borrowed and unable to service the
debt loads of my city, my state, and my country, not to mention my own personal debt load. With the
Americans no longer available as consumer of the last resort, and no one else stepping up, global final
sales will stagnate in the years ahead. As a result, global debt loads will become relatively larger. If the
world economic pie can not grow strongly, thereby lessening the relative size of global debts, the magic
of compound interest will certainly bankrupt many governments and commercial entities. Currently
there is a growing solvency crisis impacting many Eurozone sovereigns and another one that is
occurring within many states and jurisdictions in the United States. It seems quite obvious that many of
these problems will lead to default and the loss of principal on a grand scale. In the next few years, a
greatly increased percentage of all outstanding investment grade global debt will default.

Historically, whenever debt levels have become overwhelming, countries defaulted on their debt, often
by killing the bankers or by changing the terms of the debt. Kings came up with many nefarious
schemes to escape the burden of repaying the debt they owed, but they had an advantage that modern
governments do not have. The people that owned the debt in the old days were identifiable; Karl Marx
referred to them as the rentiers. They were the ones who lived by clipping coupons, doing no work;
they were the leeches that lived off the work of others. The rentiers were not only the ‘sometimes’
enemies of the king and his court, but they also were the ‘constant’ enemy of the working masses and
the middle class. As such they could be singled out by the authorities and persecuted or robbed
without much fear. Some European monarchs like Philip IV defaulted many times, but continued their
aggressive (military) spending policies. Modern democratic governments bound by the rule of law
might find it hard to be so creative, but that is not the biggest restriction indebted governments face.
They can’t identify the bad guys, Keynes’ “functionless investors.” Who are those who benefit from this
passive income, today’s rentiers? They are not the owners of the banks like the ultra-wealthy JP
Morgan or John D. Rockefeller owner of Standard Oil, as people of this type now hold only a tiny
percentage of the outstanding debt. The owners of the debt are us, the vast middle class. We public
and private pensioners and life insurance holders are the ones who are the rentiers. About 30% of US
GDP can be classified as passive. European numbers are similar. And, now that more and more of us
are at retirement age, we are expecting to live on our savings. Our retirement income might look like
an entitlement to some, but to us it is our right. What happens next?

In 2010, the authorities seem to have only two choices: allow defaults, which lead to deflation and
tremendous stress to the political system and public order; or inflate so that debts lose their
significance, which eventually leads to hyper-inflation and tremendous stress to the political system and
public order. Growth is a theoretical way out of this dilemma, but with shrinking populations and
increased regulation, Europe cannot manage this option. The US might, but the way will be difficult.
Cascading defaults will strip away many entitlements upsetting the rentiers and those who had planned
to become rentiers in the future. Countries that choose to allow defaults will see their currencies rally
as there will be a shrinkage of currency outstanding increasing the value of the rest, but collapsing
equity markets will test their resolve at every turn. We rentiers will be lucky if we can enjoy our dotage


h/t Teddy KGB

Krugman Suffers Foot-In-Mouth Disease; Lessons on Price Stability

by noreply@blogger.com (Michael Shedlock)

Paul Krugman has been on a nonstop rant in favor of fiscal insanity in the past few weeks. Thankfully, Europe is listening and doing the opposite of what Krugman suggests.

Please consider the Wall Street Journal article Krugman Criticism Bolsters Weber in Germany

Princeton University Prof. Krugman caused a stir in Germany this week with a stinging critique of Bundesbank President Axel Weber, who is considered a frontrunner to succeed Jean-Claude Trichet as head of the European Central Bank when Trichet’s term expires in October 2011.

“If you are looking for someone who is aiming for zero inflation while unemployment is rising to 13%, then Weber is definitely the right guy,” Krugman said in an interview published in German with the business daily Handelsblatt.

“Weber is concerned about inflation, when there is no inflation. I would rather see an ECB President who gives more weight to deflation risks and the risk of a protracted stagnation,” Krugman said, adding that he doesn’t know Weber personally. Before joining the Bundesbank Weber was an economics professor in Germany and fairly well known in U.S. academic circles.

Krugman didn’t stop with Weber. He has taken on Germany’s plans to rein in its budget deficit, which is already considerably smaller than the U.S.’s as a share of GDP. “German austerity will worsen the crisis in the euro area, making it that much harder for Spain and other troubled economies to recover,” he wrote in his New York Times column.

Wolfgang Franz, who heads the German government’s economic advisory panel known as the Wise Men, tore into Krugman — and the US — in an op-ed in the German business daily Wednesday, titled “How about some facts, Mr. Krugman?”

“Where did the financial crisis begin? Which central bank conducted monetary policy that was too loose? Which country went down the wrong path of social policy by encouraging low income households to take on mortgage loans that they can never pay back? Who in the year 2000 weakened regulations limiting investment bank leverage ratios, let Lehman Brothers collapse in 2008 and thereby tipped world financial markets into chaos?” he wrote.

So if Krugman really wants to keep Weber from the ECB presidency, or at least cool some of his support in Germany, he might want to consider damning the Bundesbank chief with praise instead.

Ridiculed Everywhere, Krugman Gives Unsolicited Advice To Germany

ZeroHedge had a humorous set of comments regarding Krugman in his post Ridiculed By Americans Everywhere, Krugman Now Threatens, Gives Unsolicited Advice To Germany, Pisses Entire Nation Off

Here are a few choice comments.

These days it's hard being a religious fanatic, also known as a Keynesian. It is even harder when you are Paul Krugman and everyone in your own country is already sick and tired of, and openly ignores your constant appeals to drown the world in new and record amounts of debt, thus ignoring your appeals with impunity.

When unsolicited advice is rightfully ignored, what next but to jump the shark and threaten your way in having someone to listen to your blabbering.

Something tells us the Germans are done with P.K. And since we, unfortunately, are not, perhaps he should adopt the same reverse psychology in the US - just like a Goldman downgrade of something means buy buy buy, should Krugman become rational for a change and espouse a prudent approach of deficit cuts, every normal thinker in the US will be immediately forced to burn their copy of The Road To Serfdom.

Krugman Irony

Krugman mockingly says “If you are looking for someone who is aiming for zero inflation while unemployment is rising to 13%, then Weber is definitely the right guy.”

Ironically, while Krugman mocks Weber over zero inflation, the only sane economic policy over the long haul is zero percent inflation.

The best way to achieve zero percent inflation is to get rid of central bankers, opt for nationwide balanced budgets, and ideally return to a gold standard.

A Little Deflation Is Recipe for Price Stability

Bloomberg columnist Caroline Baum rightfully points out A Little Deflation Is Recipe for Price Stability

What’s so bad about a little deflation?

If the Fed wants to make good on its pledge of price stability, one of its dual mandates, it will have to do better than its 1.5 percent to 2 percent unofficial target. A 2 percent annual rate of inflation equates to a 48.6 percent increase in the price level over 20 years.

In 35 years, the price level would double. ... The bad news is that a 1967 dollar buys 15 cents today.

Simple Math Lesson

Doubling or tripling of prices in 20 years (as Bernanke wants) is precisely the problem. In a world of global wage arbitrage, wages cannot possibly keep up. As a result, people could (and did) partake in insane amounts of borrowing to keep their standard of living at unsustainable levels.

Bernanke is so dense he could not see the approaching debt tsunami two feet from the shore.

He did not see a housing bubble, he did not see a recession, he did not see unemployment at 10% and he cannot find his ass with both hands and a roadmap. Nor can Krugman.

Amazingly, Bernanke has been praised for his handling of the recession. Yet, all he did was throw money at various problems, and that is exactly what Greenspan did in 2000-2001 fueling the housing bubble.

Bernanke will not be as "lucky" as Greenspan. There is no dot-com bubble waiting in the wings nor is there another housing bubble around the corner.

The best course of action now is the same as it was in 2000: Take the short-term punishment regardless of political cost and out the country back on a fiscally sane tract.

Keynesian clowns want to spend our way out of the problem when the problem is debt. Mathematically it cannot and will not work.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

We Cannot Afford to Double Dip

Posted By Gold Prices On June 24, 2010 @ 1:54 am In Other | No Comments

By Alex Daley, Senior Editor, [1] Casey Research

Talk of a double-dip recession is seemingly increasing these days. Home sales have dropped like a brick since the end of the special tax breaks for buyers. Weekly job reports are showing much larger rises in unemployment claims than previously expected by whoever it is that decides what exactly is expected – 427,000 new filings in just the last weekly report.

The problem this time around, however, is not just the economy itself. The problem is that our supposed saviors are all out of tools to help the economy climb out of the deep, dark hole we now find it in. The tool belt of any monetary regime is limited to begin with. Nothing more than loosening up the debt purse strings with unrestrained interest rate policy and some additional lending from the central coffers to add to liquidity. These tools are the economic equivalent of performing reconstructive dentistry with a sledgehammer and monkey wrench, effective but not exactly precise.
And as Goldman Sachs recently pointed out to a number of its clients, the world’s leading developed nations have all but exhausted the few tools available to them:

Interest rates in the top 10 economic nations are hovering just above zero, and it’s not like they can go any lower than that, as much as banks would welcome having to pay back less than they borrow.  
And government net lending has increased so dramatically that government debt is spiraling from out-of-control to just plain ridiculous. All at a time when revenues are dropping from the slowdown and creditors, having been burned a little by Greece and afraid of what’s to come with Spain, Italy, Ireland, California, New York, and others, are starting to raise red flags to the borrow-and-spend policies of our collective governing bodies.

For the first time in a long time, developed governments in Europe and the U.S. face the specter of sub-AAA credit ratings and rapidly rising costs of borrowing more (ratings that, frankly, had they been put in place by the inept agencies years ago when they were initially deserved may have had repercussions that would have helped us avoid many of today’s problems). Between rising borrowing costs, the already hefty budgetary burden of paying prior debt interest, and the ever-expanding rolls of government employees, legislators can hardly keep up on the bills these days, let alone inject any more into the economy.

The irony, of course, is that by unloading a full clip from the assault rifle when trying to “save” the economy, the governments of the OECD nations have actually created a catch-22 situation. One wherein they not only have no tools left to manipulate the markets against a further slowdown, but also where they have created monetary policy so extreme that undoing it would be more disastrous than the fallout would have been had they not stepped in in the first place.

Austerity budgets from Greece and Spain have included massive layoffs of government rank and file, severe wage cuts, or both, potentially reducing tax revenues and consumer spending. California is following suit with its proposed 23,000 teacher layoffs, which are arriving on the back of 30,000 previous layoffs just last year. New Jersey is furloughing tens of thousands of state workers and capping raises. NY is furloughing 100,000 more and needs to cut $9.2 billion from the budget still.
As the walking bankrupt states and cities continue their budget slashing – down from criminally high levels such as Miami, where the average city worker nets $76,000/year compared to the $29,000 average for private citizens of the metropolis – it will only exacerbate the returning slowdown. Fewer households with cash to spend in the private sector. Rising mortgage defaults and foreclosures as the workers face the grim reality that a state paycheck doesn’t come with a 30-year guarantee these days. Declining tax revenues at all levels. And more people on the already busting-at-the-seams federal unemployment files, which remain at all-time highs.

Speaking of the U.S. federal government, their guaranties of Fannie and Freddie Mac loans are now estimated to cost anywhere from $250 billion to $1 trillion to taxpayers in the end, far above the net cost of any of the other bailout measures and potentially more than is possible to pay. The price tag is so steep, many conservatives are starting to call for repealing the institutions’ charters altogether and letting the private market have at them. The U.S. federal government is simply buried over its head in obligations.

The government is all tapped out. And yet the economy continues to slow.
If you are among the camp who wished the government would have never stepped in to begin with and called out the seemingly obvious truth that they could only worsen the situation by flailing so wildly to contain it – the double dip is coming, and you are about to be proven right and get your wish at the same time.

It’s the price we are all about to pay for letting our politicians get away with budgetary murder year after year, including letting them try to “save” us the last time around.