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"And I beheld, and heard the voice of one eagle flying through the midst of heaven,
saying with a loud voice: Woe, woe, woe to the inhabitants of the earth....
[Apocalypse (Revelation) 8:13]

Wednesday, April 26, 2017

Economic Crisis: The Clock Is Ticking on America’s Debt Bomb and It’s About to Speed Up

The Clock Is Ticking on America’s Debt Bomb and It’s About to Speed Up 
The Federal Reserve is getting ready to raise its target interest rate after allowing it to sit at historically low levels for years.

With $20 trillion in national debt, this could be an expensive proposition for Washington and taxpayers.

Justin Bogie, a senior policy analyst at the Heritage Foundation, says interest on this debt could eventually cost the United States more than it spends on things like national defense.
 
"Right now, we're just a couple percentage of the budget," he told CBN News. "But by the end of 10 years, it's going to be over 6 or 7 percent of the budget, almost $770 billion a year, more than national defense."
Bogie noted that government estimates show the national debt could nearly double by 2046.
He says there is plenty of blame to go around, beginning with lawmakers on Capitol Hill who have promised to scale back spending but failed to make it happen.

Some financial experts also blame former President Barack Obama. The national debt roughly doubled during his administration and with the Federal Reserve's record low interest rates, it was easy to keep kicking the can down the road.
Now, the buck's been passed to President Donald Trump.

Bogie says the time to cut spending and start dealing with the exploding debt is now.

"You know, at some point, something's got to give and the options are really to either cut programs in a big way or to increase taxes in a big way," he told CBN News.
Bogie doesn't think raising taxes is the answer, but if Washington fails to alter its spending habits, it could happen.
"The longer we put off changes, the longer we delay entitlement reform and spending reform and all of these things, then the higher the likelihood that there will be a tax increase," he warned.

And given the turmoil around the world, there are too many other big fish to fry for the U.S. to be swimming in its own debt.

I have a LOT to say this morning – all if it, extremely important.  But first, let’s start, mere hours before the third Miles Franklin Silver All-Star Panel Webinar – which will be posted at milesfranklin.com later today; with this article from one of our distinguished panelists, Steve St. Angelo of the SRS Rocco Report.  In which, it details how Peruvian gold and silver production, in the year’s first two months, are down, unexpectedly, by 11% and 12%, respectively, from a year ago.  Which is quite the big deal, as Peru is the world’s sixth largest gold producer – and second largest silver producer, right behind Mexico.  Which, I might add, is expected by the Silver Institute, when its final figures are published, to have experienced a roughly 3% production decline in 2016 – with no expectations for 2017 as yet published (which I’m guessing, Steve, David Morgan, and Craig Hemke will have an idea about on today’s call).
What we predicted in the first two Silver All-Star Panels; the first in October 2014; and the second, in January 2016; is coming to fruition; i.e., the production of silver – unlike nearly all other commodities – is in terminal decline.  In gold, even mainstream analysts are finally starting to get it – like Standard & Poor’s, as highlighted in December’s “most important, and gold bullish chart you’ll ever see.”  However, in the more opaque silver market, information is far less available – given that not only is it a far smaller market than gold (and thus, not as “interesting” to Wall Street); but because roughly two-thirds of global silver production is the byproduct of gold, copper, and lead/zinc mines.  Which is why today’s call will be so informative – as unquestionably, it features some of the world’s top analysts in the global silver industry.
Next up, let’s address the wars going on in unprecedentedly rigged financial markets – as the trapped rats I refer to as “the powers that be,” to use a Star Wars metaphor, are “concentrating all firepower” on supporting “desirable” markets like the “Dow Jones Propaganda Average”; and conversely, suppressing “systemic threats” like Precious Metals.  To wit, the “200 week moving average war” I have for weeks spoken of – including last month, when it was clear said powers that be had taken it nuclear.
It’s been four years since the Cartel pushed gold and silver prices below those  key technical levels; “coincidentally,” the day after the unprecedented “closed door meeting” between Obama and the top “too big to fail” bank CEOs on April 11th, 2013; which just happened to coincide with Goldman Sachs’ April 10th “short gold” recommendation; one day before the April 12th “alternative currencies destruction” paper raids were perpetrated.
It was just two weeks ago – four years after said paper raids – when these all-important technical resistance levels were re-breached to the upside; in gold’s case, at $1,246/oz, suggesting this war has been decidedly won; and in silver’s, $18.14/oz. – depicting a war that continues to rage – given that after the past two days’ vicious Cartel raids, this is exactly where silver is trading.
Two days ago, I expanded on said “200 week moving average war” in this week’s Audioblog – when I discussed the equally important “downtrend line war”; i.e., gold’s potentially near-term breakout (at roughly $1,285-$1,290/oz) above the downtrend line created by 5½ years of post “point of no return” Cartel manipulation – going all the way back to September 2011’s “Operation PM Annihilation I” attack on Labor Day Eve, as “dollar-priced gold” hit its all-time high of $1,920/oz.  This, mere hours after one of the most violently gold-bullish events imaginable; i.e., the Swiss National Bank instituting its ill-fated peg of the Franc to the dying Euro.  Since then, the Cartel has had to defend said “line in the sand” during the 2012 European banking crisis – when Mario Draghi was forced to proclaim he’d do “whatever it takes” to “save” the Euro; followed by the aftermath of last year’s BrExit; and finally, Donald Trump’s “surprise” election victory.  And now, despite no specific political or economic crisis occurring (albeit, with many potential crisis on the verge of arriving), they are being forced to defend it again – per the title of an article l wrote last month, “to the death…theirs.”
Which couldn’t be more apparent the past two days – when, amidst an environment of interest rates and the dollar itself plunging to post-Election lows; as the fraudulent “Trump-flation” propaganda meme continued to experience a death by a thousand cuts; the Cartel had the gall to not only use its time-tested blitzkrieg paper gold dumping strategy on the COMEX – as always, just before the London “fix” at 10 AM EST; but two days in a row!
Yes, following Monday’s egregious 2:00 PM “crybaby attack” – when gold, in the wake of the three-day weekend’s horrifying retail sales report and escalating North Korean tensions, was attacked using cover from a meaningless, but blatantly orchestrated Steve Mnuchin speech; the Cartel’s “commercial” partners-in-crime not only dumped $3 billion worth of gold Tuesday morning; but again, with no other markets materially budging, on Wednesday morning – in both cases, as gold was attempting to take out said “downtrend line” at roughly $1,285-$1,290/oz; with the added “bonus” of pushing silver back down to its 200 week moving average, where the aforementioned “war” continues to rage on this morning.

Throw in today’s 821st “2:15 AM” attack of the past 939 trading days; this, as the dollar was hitting a new low for the year at 99.49; and you can see just how desperate the Cartel has become – as evidenced, in spades, by holding their largest-ever paper silver short position, despite, as noted above, no visible financial crisis.  TRUST ME, this is why they are acting so desperate; as TRUST ME, what happened in the spring of 2011 – when silver rocketed from $20/oz to $50/oz – can, and will inevitably happen again.  Only this time, the resulting, potentially historic silver shortages will not be as easy to reverse as in May 2011, when the once-in-a-lifetime “Sunday Night Paper Silver Massacre” was perpetrated.

Before I get to today’s principal topic, a quick note about yesterday’s massive, seemingly unprovoked crude oil plunge – by nearly $2/barrel late in the afternoon, nearly taking the world’s most oversupplied commodity back below the $50/bbl “line in the sand” the U.S. government-led “oil PPT” has been defending, to their death, for the past year.  Record gasoline inventories, surging shale production, and uncertainty regarding whether OPEC’s fraudulent “production cut” agreement will be renewed next month were cited as the “reasons”; but in my view, it all comes back to “Economic Mother Nature” exerting her will, on a market destined to fall much lower; potentially, for many years to come.  In response, OPEC ministers performed their usual jawboning this morning, to prevent said decline from turning into a well-deserved avalanche; but in the big picture, crude oil, like nearly all oversupplied commodities, is destined to violently plunge – taking with it, the hundreds of billions of debts attached to the energy industry; including that of dozens of commodity-dependent nations.
Which leads me to todays’ principal topic – which, unless you are willfully ignorant, it is impossible to not see.  Which is, said “powers that be” screaming for QE and NIRP “to infinity”; which I assure you, they’ll get – starting with Donald Trump, who not only claims, as often as possible, that the “too strong” dollar is “killing” us, but recently, that he “likes a low interest rate policy.”  Throw in Tuesday’s statements from ECB and BOJ Governors Draghi and Kuroda, respectively, of how their unprecedented NIRP and QE programs will be continued ad infinitum – in both cases, because “inflation” is too low for their liking – and it couldn’t be clearer what is about to happen to the purchasing power of your dollars, Euros (if they survive this year’s potentially European-Union-destroying elections), and Yen.
Starting with none other than Larry Fink of Blackrock – the powers’ that be’s’ “warnings” of what’s to come couldn’t be starker, or more obvious.  Fink, a card-carrying Bilderberg member, couldn’t be more forthright in his warning that “there are some warning signs that are getting darker.”  Then again, the comments from official entities – “coincidentally,” occurring simultaneously – were even more ominous, such as Bundesbank executive board member Andreas Dombret warning that Europe’s banking system could be wiped out, if the ECB continues to hyper-inflate the Euro; or a new IMF report, claiming 20% of U.S. corporations will go bankrupt if interest rates significantly rise, based on cumulative interest rate coverage that has sunk to levels nearly on a par with the height of the 2008-09 financial crisis.  And for good measure, the most shocking statements of all – from a speech given yesterday by Boston Federal Reserve President Eric Rosengren, titled “the Federal Reserve Balance Sheet and Monetary Policy.”
In it, he stated that structural changes in the macroeconomy “may necessitate more frequent use of large-scale asset purchases during recessions”; and, it is “quite likely” that the “use of central bank balance sheets will be necessary in future economic downturns, due to the combination of “low inflation, low rates of productivity growth, and slow population growth”; which cumulatively, imply an economy “where equilibrium short-term interest rates will remain relatively low” by historical standards.   Consequently, “reductions in short-term rates to combat recessions will encounter the zero boundary”; and thus, “will not be sufficient.”   As a result, “it is likely to be more common for Central banks to engage in asset purchases to stimulate the economy by reducing longer-term rates.  Thus, balance-sheet expansions – and exits – are likely to become more standard monetary policy tools around the world.”
Wow, that’s quite a mouthful of uber-dovishness – particularly, his expectation of increasing the Fed’s balance sheet (LOL, whilst we’re told the Fed is considering “unwinding” it later this year) during “future economic downturns.”  This, as the, double LOL, third longest “expansion” in U.S. history is on the verge, per the Fed’s own “GDP now” calculations,” of ending.  Not to mention, the fraudulent “Trump-flation” meme that was supposed to prolong it.  In other words, a blaring red siren signaling the Fed’s true intentions – as if they were ever in doubt.  And with it, and even more blaring siren of what’s about to occur in the “anti-Fed” Precious Metal markets – starting with their upcoming, spectacular victories in the “200 week moving average” and “5½ year downtrend line” wars!

S&P: These Ten Retailers Will File For Bankruptcy Next

Three weeks ago, we reported that Fitch had put together a list of 8 retailers who were likely next in line to file for bankruptcy. The rating agency speculated that distressed legacy "bricks and mortar" outlets such as 99 Cents Only, rue 21, Gymboree and True Religion would follow what has already been a historic surge in retailers filing for Chapter 11 protection and/or shuttering stores. The Fitch list is below:
  • Sears Holdings Corp (roughly $2.5 billion);
  • 99 Cents Only Stores LLC;
  • Charming Charlie LLC;
  • Gymboree Corp.;
  • Nine West Holdings Inc.;
  • NYDJ Apparel LLC;
  • rue21, Inc.; and
  • True Religion Apparel Inc.
Putting this list in context, over the weekend we presented a chart from Credit Suisse showing that on an annualized basis, some 8,640 - or more - stores would be closed in 2017, the highest number on record.

As we further showed, the number of announced store closures so far in 2017 - whether in bankruptcy or otherwise - is already staggering:

Additionally, as the WSJ previously observed, the number of bankruptcies so far this year has already come close to the total in 2016, with 14 retailers filing compared with 18 last year.
And it's only just beginning.
Taking a cue from their peers at Fitch, analysts at S&P Global Market Intelligence likewise released a list of 10 publicly traded retailers they consider most at risk of default within the next 12 months. As the WSJ notes, the firm’s analysis is based on industry factors, such as intensity of competition and barriers to entry, as well as company-specific metrics.
“The shift to online shopping has left a lot of financial distress in its wake,” Jim Elder, director of risk services at S&P, wrote in a research note. “The results from the first quarter do not suggest that a quick recovery is on the horizon.” As expected, some (surprisingly not all) retailers disputed S&P’s analysis; the rest pointed to previous statements or didn’t respond to requests for comment.
Also notable: while there were some similarities between the Fitch and S&P lists, namely Sears, most of the names in the two lists diverged, suggesting that between Fitch and S&P up to 17 retailers may be going under soon.
Here’s S&P’s ranking, courtesy of the WSJ:
1. Sears Holdings Corp.
Sears has been buying time by making cost-saving maneuvers that include the sale of its Craftsman brand and the closure of 150 stores. On Friday, the retailer said it would shutter 92 Kmart pharmacies and 50 Sears Auto locations this year. Sears “is determined to remain a viable competitor in retail and we are taking all necessary actions to improve our performance,” said a spokesman for the company.
2. DGSE Companies Inc.
The Dallas-based seller of precious metals and jewelry has been struggling with declining sales. It has a market value of about $43 million. Following a leadership change in December, the company said it “eschewed the unsuccessful strategies of recent years” and expects to post a profit in the first quarter for the first time in four years.
3. Appliance Recycling Center of America Inc.
The recycler and seller of household appliances, with about 18 retail locations under the ApplianceSmart banner, has a market value of less than $10 million.
4. The Bon-Ton Stores Inc.
The department store chain, with dual headquarters in Milwaukee, Wis., and York, Pa., reported a $63 million loss in 2016 and expects comparable sales to decline in 2017. It operates about 263 stores. Although it had more than $2.5 billion of revenue last fiscal year, it has a $13 million market value.
5. Bebe Stores Inc.
The mall-based women’s apparel chain, which was popular for its fitted clothing in the early 2000s, has suffered from declining foot traffic and a consumer shift toward more subtle styles. Last week, the company said it would close its remaining 168 locations and only sell online.
6. Destination XL Group Inc.
The chain sells men’s big and tall apparel in about 344 stores. The company said in March it would slow store expansion, increase marketing spending and improve its digital operations. It projected a net loss for 2017 on about $470 million to $480 million in revenue. “We strongly believe the analysis by S&P Global Research is misguided and does not in any way, shape, or form fairly represent our company’s current financial position,” said David Levin, CEO of Destination XL. “Our financial condition is extremely healthy.”
7. Perfumania Holdings Inc.
The specialty retailer, which sells perfumes and fragrances, has been facing dwindling foot traffic to its stores in malls and tourist-dependent areas. The company has a market cap of about $14 million.
8. Fenix Parts Inc.
A small reseller of automotive parts reclaimed from damaged vehicles. It has a market value of less than $25 million.
9. Tailored Brands Inc.
Tailored Brands, which primarily sells men’s apparel, has been struggling amid increased competition from several e-commerce players. Comparable sales at Men’s Wearhouse, the company’s largest brand, fell 2.2% in the fourth quarter and are expected to decline in fiscal 2017. Shares are down nearly 50% this year. The S&P’s analysis is “extremely misleading” because it “does not take into account debt maturities and our first debt maturity is not until 2021,” a company spokeswoman said.
10. Sears Hometown and Outlet Stores Inc.
The retailer, which was spun off from Sears Holdings in 2012, closed 160 stores in fiscal 2016 as part of an effort to cut costs. As of Jan. 28, the company or its independent dealers and franchisees operated a total of 1,020 stores. It had $2 billion in revenue last fiscal year, but has lost money for three straight years.

 

Mulvaney On Latest Government Shutdown Status: "I'm Not Sure What's Happening"

 

Earlier this week, courtesy of Trump's latest flip-flop on the border wall, it looked as though a path had been cleared for a bi-partisan funding bill to be passed that would avert a government shutdown starting Friday night.
That said, it seems that Democrats may actually be eager to force a government shutdown after all.  As budget director Mick Mulvaney explained to CNN last night, after giving in on border wall funding, something Dems defined as a critical issue to avert a shutdown, Democrats have apparently gone radio silent.
Tapper:  "And there will be an agreement, you think?"

Mulvaney:  "I hope so.  Here's what concerns me.  We informed the democrats yesterday that we were not going to insist, for now, on bricks and mortar [for the border wall].  We're going to move that discussion to September of this year for fiscal year 18.  And we thought that was going to get a deal done. And we've not heard anything from them today.  So, now i'm not so sure what is happening.  I'd be curious to ask the democrats where they stand on a shutdown right now because we thought we had a deal as of yesterday."

As Reuters points out, now that funding for the border wall is off the table, democrats are suddenly far more interested in securing funding for healthcare subsidies and Puerto Rico's Medicaid program.
The most powerful Democrat in the Senate, Chuck Schumer, said on Tuesday his party is concerned about the ratio of increase in defense and non-defense spending. Democrats prefer a one-to-one ratio, and boosting both sides of the budget equally could become a sticking point in negotiations.

Democrats also want provisions for more healthcare coverage for coal miners and appropriations for healthcare subsidies. Health insurance would abruptly become unaffordable for 6 million Americans who rely on cost-sharing subsidies under the national health plan commonly called Obamacare.

Democrats have been seeking immediate assistance for a funding gap in Puerto Rico's Medicaid program, federal health insurance for the poor, saying it is in such bad shape that 1 million people are set to lose healthcare.
But, as Mulvaney noted above, Trump has vowed to cut off Obamacare subsidies, at least until this next flip, and Democrats seemingly raised the Puerto Rico issue out of no where. 
Mulvaney also said Trump would not agree to including Obamacare subsidies in a spending bill.

He told CNN that Democrats "raised Puerto Rico for the first time a couple of days ago," but did not give Trump's stance on the Medicaid assistance.
Of course, it's only logical that Democrats would secretly want a government shut down.  In the end, Republicans (i.e. the fiscally conservative party that is generally looking to reduce entitlements rather than increase them) typically tend to take the brunt of the public backlash for government shutdowns and all of the media coverage provides a very effective bully pulpit for liberals.  Well played, Chuck and Nancy.

Rob Kirby "Economic Endgame: Get Your House In Order"