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Great post K1, really appreciated http://www.sharescene.com/html/emoticons/graduated.gif


Completely agree on the bond market

In my view, we had the tech wreck, then the housing bubble & the next to come is the bond market


The scary thing is, how does the USA get out of this mess?




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QUOTE (328jet @ Monday 07/07/08 05:22pm)

328, K1. Know little about the bond market apart from what I read, and that is as you say an impending train wreck forecasted.


Ive had this USc1 chart for ever, havent looked at it for years, obviously its a US Treasury Bond contract, which one datewise, ie 1/3/10/30yr I know not.


BUT just have a look at what this contract did in 1998, 1999.


Are you both saying "History might repeat?"


Im B sure SOMETHING has to give, is this it--THE BOND MARKET????


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QUOTE (flower @ Monday 07/07/08 06:16pm)

Did anybody see Andrew Denton tonight? Reason I ask is the he was interviewing a very very senior member of the White House Press Corp.


Right now as we query how in the name of all that's holy did the US get into this financial mess the senior female reporter was discussing with Andrew as to how the US has got itself into its current moral mess.


She of course gave the correct reply "Because not enough of us asked any questions"


Those of us here who have queried the US financial policy over the last 20 years have always been met with with comments: Dont worry, Alan Greenspan and now Ben Bernanke are educated economic experts, they know far better than you, the world is in expert hands.


WE should have ALL asked far more questions in a far louder voice instead of accepting what now appear to be downright lies, especially those surrounding Iraq which probably encouraged the current financial quagmire into which we sink.

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In reply to: flower on Monday 07/07/08 09:39pm


Its interesting to google up Cheney, Deficits Dont Matter, a comment the VP made a few years ago. The search brings up some interesting articles from that time regarding the Bush admin policies and how they operate.

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Tra lah lah ....


New low ....


Interesting the US consumer is just like the rest of us ... addicted to oil. oil inventories fell much further than expected and yes the US consuming the black stuff at the same pace they were 6 months ago and 50% lower in price.


Lots of opinions out there .... my own as well.


Next 7 days key to the outcome and eventual low in this mess.


Tonight Bernanke talks ignore him ... full of hot air and he will make soothing noises and try and keep us rates as low as he can for as long as he can. Keeping rates low does not make some deadbeat borrower something other than they are ... a dead beat.


Friday numbers trade will be interested to see if its more of this lying out of the USA. The trade number if they are consuming as much oil and oil at US$50- higher than before should be a lot HIGHER ... a lot as 12 mmboe imports between oil and gas equiv .... what has amazed me is the lack of movement in their trade numbers to date. Of course they have lied and seasanlly adjusted to buggery.


Second number Friday Import price index. Now they keep adjusting price rises and turning them into falls which is absurd but one I will be looking at anyhow.


Then comes next week Tuesday Night PPI and Wednesday Night CPI.


Key to where this debacle ends and in fact key as to whether I am just mistaken and the US govt has seasoanlly adjusted between 5 different departments all the same way for the end result having one department adjust somthing up becasue its good on a seasanl basis and then another adjust the same number down on a seasonal basis because its bad in their sets of numbers is exactly what has been happening.


Maybe a perfect storm or some sort of mistake.


Litmus test are the 3 numbers ... trade .... PPI and CPI.


By June 2008 the pric eof oil was well up there and thats what these numbers are measuring and if the PPI remains at 4.1% as it was in December 2007 and doesn't move in a very substantiual way this number along with PPI when oil averaged $132- in June 2008 and consumer petrol paid is 52% higher than Dec 2007 and Deisel 63% higher than Dec 2007 .....


If these numbers both PPI and CPI are not explosivly bad and high ... sadly the USA has turned into Zimbabwae and as such ...


Be afraid .....


Its one thing to smooth a statistical blip ... its quite another to adopt an outright policy of lying.


Reporting CPI at 4% when its 7% is such a policy.


Saying a trade number in your estiamte is US$60- billion the saem as when we imported just as much oil at US$85- and its the same at US$130- for oil yet we imported the same 360 million barrels and somewhere ther eis a missing 16 billion NEGATIVE in trade ...


Key this next week.


USA is not fussed about it and believes it can continue to tell bulldust to the rest of the world but people are not totally stupid and not prepared to accept the numbers as presented for much longer.


If they choose and confirm this far fetched and never seen before policy of just lying .... the end for the US will be a total loss of confidence in everything.


Sadly Nixon was last one who played these sorts of games ... but as I am sure you know some of his devoted followers went to jail as a result. Sadly one of the aides to the followers who went to jail is now the secretary to treasury and if I had to choose thats where this policy has come from.


Like trying to bed some girl ... say anything is the policy ... doesn't matter if its true .... bigger the lie the better the conquest or so it seems.


They dont come true next 7 days ... no matter how painful ... the enventual outcome I believe will be far far far worse than even they anticipate. Being a bully with guns is one thing ... trying to be an economic bully whne your in fact a homeless person begging for coins is where USA actually is. No longer the largest creditor nation on the planet as it was in 1968 ... by 1998 it became the laregst debotr nation ...


In 1998 all debt in the USA was 250% of GDP ....


In 2007 all debt in the USA was 400% of GDP ....


So if it was the biggest debtor nation alread in 1998 ... what do we call it in 2008 with 150% more debt racked up or 22 trillion in 2008 dollars ?


A pig.


Doubt US comes clean and as such the 4,700 level on the ASX jsut a curiousity on its way to 4,100 ... and possibly lower.


When people deliberatly destroy the faith in things by lying its always amazing to watch them try and stuff the thing back in the box. Sadly Paulson the ehad of treasury from the Nixon era along with Bush and Bernanke the younger of the three are playing a game or science experiment which I expect to go nova given my lack of faith for them to actually report something factual via the official numbers.


been a trader for 25 years 6 months ....


For 24 years 6 months I never had reason ever to quaetion govrerment numbers ... sure one months had an adjustment in it for no reason reversed the next or the next ... but this is never seen before pie in the sky rubbish.


Trade numbers that dont move despite someone consuming oil at 50% higher prices ... no the bill has not moved. A CPI which hasn't moved for the last 50% petrol rise or 60% Deisel rise.


Be afraid for these fools for they know not what they do !!!


Next 7 days key

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Litmus test number one ....




Market sitting on the edge of its chair awaiting the trade number last Friday.


Economists actually expecting the number to rise a bit ... since they can actually see the price of oil has gone up and between the 9.6 million barrels a day of oil and 6 million barrels of gas equiv they import a day ... adjusting for the cheaper gas price and moves lets say 12.5 mmboe a day imported of oil .... just to make it simple or 380 million barrels per month ....


One might expect the price to move things a bit ? Back when oil was US$60- the US trade balance was MINUS $60- billion and even with the distorted and curiously lagging price of oil in these trade numbers mind you for MAY 2008 not June the average price of an imported barrel of oil rose a sharp 9.8% or $9.47, to a record high $106.28. Well according to these numbers.


Sounds right to me !!! NOT .... Anyhow on the face of it the change since August last year till May the growth somewhere in exports ... exports mind you which are only around the 150 billion mark per month have kept the trade deficit at the US$60- billion number despite the massive erosion in their terms of trade. Shocking implosion is another way I might describe it .... black hole another ....


When you have oil imports even with the lagging price they use move from US$60- per barrel to US$106- or a 46 per barrel number it equals a 17.48 billion MINUS per month each and every month .... that is not showing anywhere at all .... missing in action this sad number.


Sure some other things have gone up to compensate on the export side but a grain export side surplus of 2.5 billion moving to 3 billion doesn't do it ... eat up a minus this large.


Trade numbers seem to suggest there has been a massive trade explosion and I mean of the order of 25% in a mere 6 months.


Utter rubbish ....


BEA ... bureau of Economic analysis produces this pile of steaming rubbish.


Even stupid Americans must be able to add ? Maybe not or so it seems.


The numbers are becoming more and more preposterous ever release.


Not hard to see hey there might be quite a large impact due to a 100% increase in the price of oil ?


Anyhow to make matters worse and show how totally stupid they are .....


I mean STUPID ...


Same night out comes another set of numbers ..... Not from BEA but the BLS .... Bureau of Labor Statistics.


Import price index. Not closely watched except by egg heads like me worried about inflation or skeptical of the numbers being released by other US departments.


So what did BLS say ?


Did it contrast BEA which magically as the market was on its knees released a number that showed the USA had a trade balance narrowing.


BLS highlights .... on the import prices ....


Over the past 12 months, overall import prices have risen 20.5%, the largest 12 month increase since this data was first published in September 1982. US export prices rose 1.0% in June and 8.6% over the year, the largest yearly increase since 1988.


My point about the price difference alone if imports prices go up 20.5% and exports only go up 8.6% it equals a 11.9% difference and when Exports are 150 billion and imports are 200 billion if you apply it to the numbers how one department is arriving at one number and another presenting an unchanged trade balance .... there must have been some massive export explosion that every single other indicator from shipping to manufacturing to capacity utilization to inventories has missed.


Utter crap ....


BLS is just as bad mind you. It produces the PPI and CPI and adjusts these prices any way it likes and removes what it feels are seasonal things before they ever hit the inflation index's. However even with this the picture in regards to inflation is grim and even the removal a few months ago of a spike of 1.2% on the annual rate via apparel prices which was magically turned its a fall for the CPI .... the import prices tell a story so bad for the outlook of the USA its going to be a race as to which one causes the stupid Americans to wake up ....


Anyhow ... here are some of the lovely numbers for the June thing sand remember these even have been seasonally adjusted themselves ... all one way to try and remove as much of these price pressures ... so these are already adjusted and smoothed things trying to smooth down and hide inflation .... but shoot these things just get worse and worse each month.


Make your own mind up ......


BLS import prices actually contradict the BEA numbers on trade making them look silly ... but even worse for me I suppose is looking at the BLS who also produces the CPI and PPI if one looks at the price of imports and the price rises ... they contradict the bloody PPI and CPI produced by the same department ....


Thing is if you dont get to them quick ... they tend to wheel up the truck called seasonal adjustments as they did with imports from China when they rose 1.2% in a month a few months ago ... the following month it was adjusted out and it was called a seasonal adjustment for change of season in apparel ..... ladies apparel and a 1.2% rise turned into a 0.4% fall .... hilarious but this is what the whole US statistics side is doing and when one department contradicts another and even its own numbers it becomes somewhat a joke.


Since I know China has raised the value of the yuan 7% in 2008 alone suggesting as they seemed to do with one adjustment In Feb 2008 its just seasonal was and is utter rubbish.


Also since we all know the price of oil has gone to the moon the bottom line when you import 380 million barrels a month and its US$130- vs US$60- 12 months ago even for a country like USA there is no compensating offset .... NONE. Other than in the minds at the BEA.


Oh well here are the highlights from the import prices ....


Excluding oil, import costs rose 0.9% in June and 7.3% in the past year, the largest annual gain since June 1988.

Industrial supplies and materials also saw prices hikes, by 5.8% in June and 50.1% over the year, the largest yearly gain since this data was first reported in December 1984.

Import prices rose for products from all across the world. Even the normally lower-cost imports from China were showing signs of inflation with a 0.6% increase for June. That brought the annual increase of Chinese imports to 4.8%.




China side without the adjustments its running at 12% PA increases.


Market of course didn't react to this .... Import price index is ahead of the balance of payments and its talking about June impacts where the trade number is for May despite both being released in July. Trade numbers have been in the cook pot for longer.


I am not mad ... or stupid but ... when I can see the import prices being paid have gone up yet the CPI has Not risen from 4.1% in December to 4.2% in May the trade number is virtually identical to the one in December and even suggesting there has been some massive compensating offset when oil prices have risen 78% and every other import at twice the rate of the exports ..... expecting me to believe during the last 6 months the US export side went up 25% .... just addressing the trade balance ... net number went up 25% is just a load of rubbish yet stupid financial markets idiots swallowed this without a burp.


Amazing ... and to think I was one.


On the actual trade number eventually it will catch up and what we need is just what we are having a few months of stable prices and then not able to use on set of numbers for exports and another for imports. Using import prices that lag massive price increases by 2-3 months is how its done , notice the price of oil in the trade numbers the import price was US$106.28 this supposedly for May. Well yes I suppose the FOB took that long ... NOT. Certainly some oil imports took 6-8 weeks from the gulf but since most come from much closer the average and price as presented is interesting even for May giving the price in March. Does it take 6-8 weeks for oil to reach the USA from Mexico or Canada or Venezuela ? Neat trick guys. even better I loved the price used for Oil exports in the numbers oil imports at $106- exports at $126- for the same month ... oh you guys are good !!!


These guys at the BEA are that good they always keep their hands in their pockets and have holes cut in the bottom of their pockets for some reason :}


Sadly .... without an accurate read on where things are they have less hope than ever.


Deluding yourself the trade number has not gotten worse when the terms of trade clearly on price alone have imploded last 12 months and the market accepting like most things this little fairy tale is quite amazing.


I await the PPI Tuesday night and the CPI Wednesday night.


Sadly the trade number was a total fail on my litmus test and because the market was weak ... we must not present bad numbers into weak markets has been the rule number one of the last 12 months.


Kind of hoping I am wrong and the expected PPI and CPI come out and if anything worse given the clear and deteriorating numbers from the import price index. These clearly point to a HIGHER than expected PPI and CPI rather than the opposite.


Since PPI and CPI are for June and June saw yet another massive rise in the prices paid on the oil side and prices paid on the import side and prices paid on the food side I kind of expect the expected 1.3% PPI to be a little low and the 0.7% CPI also to be low ....


Either that of the numbers on imports last week are already in the adjustment machine and all is lost.


On top of this the seasonal adjustments especially to the CPI which saw a raw rise in petrol to the consumer of 50.2% seasonally adjusted down to a mere 10% rise ...has to be reversed. Will not be this month I suspect that any paying back of these absurd adjustments goes on ... why ? Well have a look at the index.


Sorry this all leaves me with a very bad taste in my mouth .....


They are not even good liars and the arrogance of these dead $@^*% ..... here are the numbers as we are prepared to release them and take them or leave them .


If Australia which imports about 150 mmboe a year did not have compensating credits I would be worried about our trade numbers having to pay US$65- more per barrel it would drill another large hole in our balance of payments. Since we export 120 million tons of coking coal and its US$200- higher in price its almost 3 times the oil negative let alone 100 mt of thermal coal at US$50- more and 300 mt iron ore at about the same.


USA its compensating adjustment ... it exports 23 million tons of grains .... at a positive 7 billion ... that vs a minus 292 billion the other side.


All a bloody joke and the thing ends badly.


You can try and hide things or pretend its all OK but when your terms of trade take a very sharp nosedive as the US has and they try and present they havn't changed I am left wondering who is this stupid ?


Thats trade ...


The inflation side is truly chilling ... and suggesting US CPI has not moved when the price of petrol to the US consumer went from US$2.67 ave in Dec 2007 to where it is now US$4.10 ... hmmm 53.55% ... Diesel for their SUV's up even higher at 60% ... but at the same time US CPI it was 4.1% In Dec and its now 4.2% For May ....


I dont care if I sound like a nutter or conspiracy theorist ...... if petrol or food or any in a long list of imports and prices were the same as they were 6 months ago I might shut up.


I did like the industrial supplies number in the last import price index. not only have they been hit with the rises in diesel but when industrial supplies like rise 50% in a year .... most the last 6 months ... the PPI has moved but not much .... given the complete explosion in prices.


Eventually it blows up in their faces these absurd numbers as presented.


US market has a minimum of 10% more to go down.


US CPI likely 7-8% vs the reported 4.2% right now.


US PPI likely 14% PLUS vs the 8.3% reported right now.


Consumers are paying for these price rises whether the govt chooses to report them or not. Business is having its extremities removed via blow torch with these cost pressures whether the US official numbers care to report it of not.


Eventually its comes out in the profit numbers ..... possibly it gets worse when US creditors seriously start to question the integrity of the numbers as presented.


I have but I am a no one ..... a no one who for 25 years never had reason to question the official numbers as presented. Sure the CPI now does not really show the cost of living and understates it by 1.5-2% ... this is quite different to the way they changed how it was measured over the last 15 years. this is the total removal of any negative via seasonal adjustment form the whole thing.


Absurd thing is on retail sales which involves the consumer the consumer and represented in the CPI supposedly is gasoline sales in the USA and when they are well over 10% of the retail sales numbers and the price quite clearly has risen by 50% to the consumer in the last 6 months its interesting to report ....


According to the BLS the CPI has moved a mere 0.1% ..... from 4.1% to 4.2% despite the fact the retail sales of petrol account for well over 10% of what the consumer spends their money on in the USA.


Maybe the eggheads are all riding bikes to work so it been removed for that reason.


sadly it goes far deeper than this and the presentation of number after number where one extreme is used to present the best possible picture despite the thing being contradicted by the next departments release is annoying the hell out of me.


Lets use oil at $106 for one side and US$20- higher for the other ....


Since I actually have a fair idea of the geographic breakdown on where US import sits oil from keeping the whole average to the slowest possible delivery ... OPEC is an absurdity ... unless its to your advantage to report the price of imported oil in May was a mere US$106 and just $97 - for April .... meanwhile back at the ranch after another set of adjustments on top of the already skewed Numbers the price of oil officially has fallen and is now sub US$85- for all US imports ....


Thats how bad things have become ......


I await PPI and CPI. Strong feeling they too are released on the rose colored side despite the fact they have to repay these absurd adjustments back in coming months and oil is not SUB US$100- as presented both in the US PPI and CPI and if the mere 9% used in the import price index were used it would make the PPI closer to 2% all up and CPI closer to 1% for a single month.


Chances of this ?


None since the market is on its knees .


Hide under a rock. IF USA fails litmus test number two and three I suspect something to break. This fudging and buggering of the numbers is not anyone else than the USA and the EU clearly shows despite a rising currency strongly rising currency a rise in inflation or 5 times that which USA has shown to date ... same story with out own ... Japan same.


US fails this test the mumblings last month and resulting lack of confidence in the fabric of the market which see's us at new lows could become quite something else. If the USA was to present numbers far better than expected both PPI and CPI contradicting both the spot prices for consumer petrol and oil and the bloody import prices released by the same department which were shocking and then to come out with some tame report or much better than expected report I sadly suspect will just be too tempting for these fools.



A rally due to any miracle story whether it be saving private Ryan or Fannie Mae or lower than expected CPI or PPI despite any dummy being able to see gee US$4.10 is higher than US$2.67 ? hey maybe we send the Pope over there to save the day ..... sadly he was arrested last night for bening annoying :}



Sorry .... gob smacked at the hubris of these turkeys.


Should be amusing at least the PPI and CPI. Not expecting anything factual mind you.


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In reply to: kahuna1 on Monday 14/07/08 09:21am

Hi K1,


Perhaps it is time they merged the BEA with the BLS? They could be known as the BS? That's what they do best.




But seriously, all of this deception is not going to end happily! The end result of inflating their debt away has to be a worthless currency? But what will be the result of long periods of negative real rates of return? Hard assets must continue to do well?





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In reply to: kahuna1 on Monday 14/07/08 09:21am

Hi K,


Excellent summary of the state of affairs in the USA and I to am cashed up waiting to enter when the tide turns, I have only one question.


Don't the USA export vast amounts of coal and raw materials and also have compensating credits apart from grains?





"If Australia which imports about 150 mmboe a year did not have compensating credits I would be worried about our trade numbers having to pay US$65- more per barrel it would drill another large hole in our balance of payments. Since we export 120 million tons of coking coal and its US$200- higher in price its almost 3 times the oil negative let alone 100 mt of thermal coal at US$50- more and 300 mt iron ore at about the same.


USA its compensating adjustment ... it exports 23 million tons of grains .... at a positive 7 billion ... that vs a minus 292 billion the other side."



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No Test overnight of the US govt ....


Market did something overnight I doubted they had the brains to do.


the response to the saving of Fannie Mae and the other clown was met with lukewarm at best market response.


If it was 1968 and the US was still the largest creditor nation on the planet or running the worlds largest trade surplus I might have given the proposed plan a chance, but the fact is its the opposite. Running the largest trade deficit .... the largest govt deficit and the largest net borrower and in debt to the rest of the world in 2008.


Where does this money come from in the end ? US govt going to write some more blank cheques ?


I suppose it can and will write some more duds .... and the fail of another regional bank over the weekend in the USA and some ugly noises about a few others is just adding to the mess.


This proposal to issue more treasuries to fund the Fannie Mae and other clown is not going to come cheap. If they have to step in and I presume they do since between the two in question they have 5.3 trillion securitized loans out with a mere 70 billion in reserves and there is shall we say questions over 500 billion of the stuff they sent out. So the US govt will be stomping up for 75 billion and maybe a whole lot more over time.


By trying to save it and using US treasuries to back this is .... well ... not doing the US treasuries side any good. Saving these regional banks ... same thing ... the credit worthiness of US treasuries is being dragged down a bit by this ..... personally thought even before this US treasuries did not deserve the status they held and the low yield they got. Who the hell buys a 10 year bond for 4% when CPI ... official CPI is 4.2% and likely since they havn't reported any increase in CPI since Dec 2007 when oil was US$85- its more like a CPI of 7% if not 8% . Only an idiot buys at 4% when inflation is 8%.


So post this plan, adding to more and more treasuries floating around, less and less credit worthy, what did the USA do with bonds ? Of course they rallied. Took the yields lower . At some stage one day someone has to wake up .... or so i might have thought.


Litmus test tonight and tomorrow with PPI and CPI. Sadly ... and I say this sadly .... given the past tests on honesty .... USA has been been given with economic releases and where the market stands now, the chances of the numbers being bad are remote. Markets weak and at its lows and the usual rule is out comes a number ..SURPISE ..... a good one. Sadly with the BLS releasing the import price index last week and it showing some shocking increases in a lot of the PPI components not just oil but across the board with manufactured partially finished goods up 50% on the year the chances of a low PPI on the evidence is ZERO and one should be expecting more than the already high expected number. that of course is before we look at the market and see where it is ..... this trumps all else .... cant release any bad news when marekt is weak .... its good news only !!


I suppose we will see ... however I remain skeptical given what else is going on. When PPI is being adjusted if anything harder than the CPI with seasonal adjustments and the raw inputs like oil and diesel are up 100% from a year ago for oil and diesel up 65% yet after seasonal adjustments to date in 2008 most of its disappears ... same for manufactured goods up a whopping 50% in 12 months yet the PPI in 2008 last 6 months has moved up ... yes its moved up 1% ... yet the raw numbers in the components PRIOR to seasonal adjustment should have the PPI moving up over 10% just for energy ALONE.


All a bit of a joke.


CPI even sadder. Dec 2007 at 4.1% and most recent 4.2% .... when prices such as petrol are up 50% yet after some mighty seasonal adjustments its still under US$100- ....


I have seen a CPI index frozen in time before. One which they stopped reporting any and all increases in inflation. Problem for my dear friend Robert in Zimbabwe was that when you have one years inflation at 10,000 % and the next at 100,000% and then continue it for a few years ... if your base year was 100 year 2 its 10k ... year 3 its 10 mill and then its just gets too hard. So just like Zimbabwe the USA appears to have frozen CPI increases they choose to report.


Its quite absurd given the massive increases in food in 2008, petrol to the consumer up from US$2.67 to US$4.10 or 50% plus ..... yet frozen in time is the CPI at 4.1% !!!


If the truth is inconvenient ... just lie !!


I agree now with the title of the thread.


Were the US to even come close to telling the true PPI story tonight the world would have a cow. PPI as reported is 8.3% right now ... thats the reported number but since they have called the rise of oil in 2008 a seasonal thing and removed it the increases on the main the real PPI rate I suspect if allowed would be at least 15% if not higher. ITS MASSIVE. Thats how far prices have moved in 2008 unless you think oil at US$145- vs $64.50 ave in 2007 is a blip .... other energy forms from natural gas to coal all the same order of moves.


Scary stuff.


Oh well little choice for them I suppose.


Once you start telling a lie and then the thing you are lying about gets worse .... only choice you have is to keep telling it.


Barrings ... and Nic Leeson when he was making a 500 year old financial institution into nothing. Its started like that, the secret account and the loss was 100k then 500k then 10 mill then 100 mill and what was the end result ? 1 billion. Nothing in todays standards.


Sadly just like the US govt right now .... they are on a loosing lying side. Leeson was LONG the Nikkie back prior to it falling the whole way down to 10,000. He was long and going longer at 20,000 ish back then.


US govt on its reporting to the rest of the world chose not to report any increases in the price of oil above US$100- and removed them from PPI and CPI. For the GDP they stopped increasing the inflation side at US$60- for oil. As the price of oil and food and coal and everything else down the chain rises the lie has gone from a little white one to a bit of a Grey one to a bigger black one ... and right now its like that fool at Soc Gen who lost the idiot bank 9 billion recently.


Problem always with liars .... they have to have decent memories and if you tell a lie ... remember which version your told to whom. As I pointed out the liars between the various departments which report US stats has one department contradicting another which contradicts another . Since there are 7 or so of them it snot unusual to have one reporting one extreme say oil at US$145- for the export side of GDP and then on the other side for importing of oil the price to be US$100- after adjustment.


Other problem with lying in this case and in most cases, its at times best to tell a little white lie to protect someones feelings. Do I look fat in there pants ? Classic no win situation especially if your partner has a bum that looks like a pumpkin :} we are not talking about simple white stuff here, this is the real world and if you delude yourself the situation is somewhere that it isn't and you are happily selling a product for $1- but its actually costing you $1.50 to make one day .... you just go broke and if you are still of the belief that its only costing you 50 cents to sell the product at $1- you will be wondering the rest of your life what sent you broke.


On the US side outside what I expect tonight .... big long term picture.


CPI outside this issue in 2008 ... CPI vs the real cost of living increases over time has not been representative of the real cost of living expenses. Its understated the cost of living by 2% roughly and the removal of Housing from the CPI not just in the USA but UK and Australia was a mistake ... if your central bank does not monitor housing prices closely.

In the USA and here to remove something which 30% of income is spent on ... your house form the CPI and then in the USA to have prices double in 6 years from 1994 to 2000 ... then double again 2000- 2006 and then another 10% on top ... the removal of Housing from CPI when you spend 30% roughly of income on this .... was and is insane. If it went 12.5% roughly every year for the last 14 in the USA the housing CPI component alone was about DOUBLE the reported CPI of that period.


In other words the USA has due to a housing bubble fueled by a credit explosion which has seen all debt go from 250% of GDP to 400% of GDP from 1998 to 2008. SO if we used the real CPI adjusted for housing and re adjusted for growth of debt the USA in real terms went backwards each and every year in real terms for the last decade.


Kind of scary these things. Who are they kidding or who are we kidding if we understate the negatives of inflation and by doing this since inflation is taken out of the GDP and if we use 2% instead of 5% we overstate the real GDP by 3% and have done so for a long time.

More to the USA this problem .... sure we have it but the housing side and the housing bubble and debt bubble are more a resident of the USA in this case. If you have been merrily reporting a positive GDP of 2% for 10 years when in fact just on inflation its been minus 1% and then in the same period you have gone and raided the bank and borrowed a further 150% of GDP when in reality your incomes last 10 years ... have gone down 10% .... makes perfect sense to me.


Thats an out side the current problem. CPI in 2007 was not representative of the real cost of living .... same in 2006 and as such GDP overstated and real incomes overstated ect ect ....


What has happened in 2008 is not about how the CPI is measured in 2008 as opposed to what was included back in 1988 ... housing was in it back then. In 2008 its gone further and into something far far outside this. Not reporting inflation because it would be bad for the shaky market or US economy is different to slowly changing the methodology over 20 years. This is outright lying and theft and deception and delusion in the end on a grand scale. Having oil stuck at US$100- for PPI and CPI when its a little higher is a joke and NEVER seen before ... NEVER EVER seen before for a country outside some despot like my friend in Zimbabwe his sort of mucking of things.


Sudan a current member. Uganda and Cambodia past members, Burma a poster child.


Two different and distinct issue here. One was the long term change as to what CPI represents in 2008 as opposed to 1988.


The other is the apparent removal of anything which has risen in the PPI or CPI or Deflator over the last 12 months. Hidden behind massive increases of over 50% in the raw materials prices we have seasonal adjustments in both CPI and PPI roving a 50% price rise in the last 12 months in more .... in more than one category of goods.


As for the GDP deflator its managed to remove 100% of the oil increase since US$60- ....


Has the US government suddenly removed anything bad from its reporting of any and all economic numbers ?




How sadly true ....


If the truth is inconvenient ... just lie !!


Not holding my breath for tonight. Like Leesons loss for Barrings and like the fool at Soc Gen the scope of the loss ... or in this case the lie has become so large the USA cant afford to tell the truth ....


Me I suspect they cant afford NOT to come clean even with the market on its knees. They made a mistake removing the oil and food and all the other increases from PPI and CPI ... if they dont come true tonight and take the pain whatever it may be ..... the results will be returned with interest.


I do not mean to be overly dramatic or some fruitcake conspiracy theorist, however we all reach a crossroads on a decision making process. biggest mistake you ever made in your life or best decision ... if you go back and look at it these events are shaped by choices we make and point sin time.


Trade was test number one for me last Friday and the US failed totally to tell the truth the contrast to the import price index was absurd trade numbers fell the deficit when the price index said you paid 20% more for imports and only got 8% more for exports .


Tonight is test number 2 with PPI. Sadly I have no faith left.


Maybe I am surprised but when the economic side is being driven by Paulson who was a career investment banker expecting the truth is naive of me. Paulson started his career working for Nixon and working for one of the Watergate boys who actually went to jail.


Oh well ... we shall see. I do however believe we are yet again at a turning point and a line in the sand. sure they report a PPI of 2% for the Month it Will Be bad for the market but not reporting it longer term will be worse. These absurd seasonal adjustments have to be repaid or removed. oil did go up .... food prices did go up ... so did coal and transport costs and partially manufactured goods import prices did rise 50% this year .....


I rate the chances of the PPI being higher than the expected 1.3% and near the 2% just actually what it was last month ... not repaying any of the seasonal adjustments removed from prior months where the price of diesel went up 15% one month but after seasonal adjustment it fell ... fell 5% ...... repaying this mistake and other bizarre PPI adjustments is about 6% onto the headline rate.


Nope I am not a fool ... not going to expect a snake to tell the truth. Paulson is running the economic show over there and he is just creepy. Mind you Greenspan obviously was senile letting house prices do what they did and actually having rates at 1% for 18 months after they had already gone 125% in 7 years ? Berananke when asked about US govt taxes commented its not my area to comment on. When asked about threats of deflation he said it will not happen and he will just print money, hence the helicopter analogy. Berananke believes his only interest is the correct monetary policy for the USA. Well I suspect the USA next move is on this basis to lower rates not to ZERO but to minus 2% so if you hold US dollars you have to pay them 2% not them pay you for the 57 trillion in debt they have issued.


Strange world we live in.


Tonight test number two ... I suspect they fail before they even open their cake holes.

PPI expected at 1.3% for the month not a good number at all ... then again some of the price increases for the month were not good at all.


Odd's of it being more than 1.3% ? Despite the fact they owe 6% or more to seasonal adjustments last 6 months this side and have to repay them ... odds .... less than 10%


Of it being the expected 1.3% ... now that would be smart ..... but Paulson is not that smart .... about 10%


A surprise low number is needed ... the market is on its knees .... Hank Paulson the US secretary of treasury just called me ... he wants to know if it should be 0.9% or 0.8% for PPI ?


It should be higher ... strong evidence from 3 other departments suggest it should be higher than the 1.3% expected ... a lot higher ... the import price index was up 2.6% for the frigging month !!! 2.6% for a single month thats 31.2% for the year ... oh and if your wondering ... the previous month to last weeks release ... was also up 2.6% .... or 5.2% in two months and increases across the board. I didn't think they could remove all these last month from the PPI given the domestic price of fuel rose the most the previous month but they managed to remove it last month and report a mere 1.3% PPI ...... same trick again ?


Sorry ... rambling ....


A historic point in time right now ... litmus test number two.


Sadly I seem to have lost all faith after Hanks call ....


10.30 pm Tonight we shall see

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