Addison Wiggin – July 8, 2011
- Ominous warning of “intensified social conflicts” — who’s saying it, why it matters and what you should do about it
- Fuel for conflict: Unemployment. Right on cue, Labor Department delivers horrible numbers far below the “expert” consensus
- Gold vs. 70 currencies… Check out our score card of the best and worst for the first half of 2011
- World’s thinnest loudspeaker highlights profit opportunity in “New Silicon”
- Copper thieves hit Facebook… Reader asks, “What about Switzerland?”… and a senator warns about the national credit card
“I don’t want to be a prophet of doom,” said Zbigniew Brzezinski — moments before launching into a prophecy of doom.
“I think we’re going to slide into intensified social conflicts, social hostility, some forms of radicalism — there is just going to be a sense that this is not a just society,” he said the other morning on MSNBC.
Hmmm… sounds curiously like the forecast we issued a week ago today. Too close.
Brzezinski occupies a lofty position in the fevered imaginations of people who suspect an elitist plot to impose a “New World Order.” Among the highlights of the octogenarian’s CV:
- Co-founder of the Trilateral Commission, with David Rockefeller
- Former board member of the Council on Foreign Relations
- Regular attendee at Bilderberg conferences.
For “NWO” conspiracy buffs, these are far more powerful positions than his gig as President Jimmy Carter’s national security adviser and a gray eminence on foreign policy in the Democratic Party.
So… when he’s forecasting “intensified social conflicts,” what does that mean? If you take the critics of “globalism” at face value, Brzezinski and his Courvoiser-sipping confreres are looking for an excuse to impose martial law… even global tyranny.
Or it could just mean Brzezinski’s connecting the dots and following the global trend — financial engineering and limitless emission of paper currencies — to its logical conclusion.
Either way, it doesn’t bode very well, does it?
Brzezinski’s remarks came in the middle of a discussion about the growing “wealth gap.” In 1980, the richest 1% of Americans captured 9% of national income. Now it’s 25%.
This wouldn’t be a problem if everyone’s incomes were growing. But the median family income, adjusted for inflation, has been stagnant the whole time.
“If America were really expanding economically,” said Brzezinski, “becoming wealthy or more productive, more innovative, that kind of disparity would be more or less palatable.
“But when you have stagnation, when you have a probably severe case of unemployment, the sense of social injustice can be terribly demoralizing and politically, in the long run, very dangerous.”
The Bureau of Labor Statistics (BLS) released June nonfarm payrolls this morning. It is, to borrow the term used by Bloomberg, “abysmal”:
- Total new jobs in June: 18,000. Just to keep pace with the natural growth in the labor force requires at least 100,000, if not 150,000
- Private employers added 57,000 jobs (the weakest showing in 13 months); state governments cut 24,000 jobs, Uncle Sam cut 15,000 more
- But wait! Let’s factor in the “birth-death model.” That’s the BLS’ statistical invention that guesses at the number of jobs created by brand-new businesses that fly under the statisticians’ radar. Back that out and the economy actually lost 113,000 jobs, instead of gaining a paltry 18,000.
Oh, and the job gains from the two previous months were revised downward.
Yecch. The bad news doesn’t stop there…
- The headline unemployment rate rose from 9.1% to 9.2%
- The more honest “U-6” number that, including part-timers who want to work full time and people who’ve given up looking for work, rose from 15.8% to 16.2%
- The most honest number also accounts for people who gave up looking for work longer than a year ago. This is how the number was counted back when Brzezinski was working in the White House. John Williams at ShadowStats.com still crunches the numbers this way. He comes up with a real-world unemployment rate of 22.7% — a postwar record.
Finally, there are the two numbers even the statisticians can’t game…
The blue line is the percentage of the working-age population in the labor force. It fell last month to 64.1% — lowest since March 1984. Likewise, the employment rate of the overall population, the black line, fell to 58.2% — another number last seen when we were climbing out of the early ’80s “double dip.”
“I don`t think we are yet at that point statistically” when unemployment turns to violence, Brzezinski went on to say.
When does he believe “that point” arrives?
“When the lower middle class begins to be more severely affected,” Brzezinski speculated “and really begins to join the ranks of the unemployed or the financially threatened.
“I think that’s a real risk in our society, especially since so many of those who have made so much money recently produce very little wealth for others. They essentially pocket the money. They are engaged in financial manipulations, but not in enhancing productivity and in increasing employment.”
“What’s happening is,” echoes our friend Doug Casey, “there’s a growing perception of ’us versus them’ between the diminishing middle class and the rich, and it is, indeed, very serious — because of the way in which many people are getting rich.
“People can see bankers being paid gigantic bonuses with government money, and it justifiably makes them angry. The pot of envy and jealousy is being stirred up big-time, and the implications for anyone with any amount of wealth are potentially dire.
“It doesn’t take much to turn widespread resentment into a wave of violence.”
By way of illustrating the ’us versus them’ perception, we’ll pause here to note the latest in the long line of federal favors to Goldman Sachs: In a final court-ordered revelation, the Federal Reserve disclosed Wednesday that Goldman took out a $15 billion loan from the Fed on Dec. 9, 2008. The interest rate was a, umm, very favorable 1.16%.
It was the largest loan from a program called “single-tranche open-market operations,” heretofore undisclosed.
By way of further illustration… and on the other hand… we’ll point out that Washington’s proposed “stealth default” on Social Security promises is quickly gathering support.
The president will meet again on Sunday with congressional leaders after a session yesterday that both sides described with words like “constructive.” It appears both sides are warming up to the notion of linking Social Security cost-of-living adjustments to a different measure of the consumer price index, something called “chained CPI.”
“Advocates say the government should switch to the chained index,” explains Bloomberg, “because its current measure of inflation overstates how quickly prices rise.”
Using today’s formula, CPI is clocking in at 3.6%. If the wonks at the BLS still used the methodology they used when Brzezinski was working at the White House, it would be 11.2%.
Even so, the current “official” figure isn’t low enough for office holders to both stiff SS recipients… and still get re-elected.
The move to “chained CPI” would mean an immediate benefit cut of 0.3%, according to Stephen Goss, the Social Security program’s chief actuary.
But the cuts would effectively compound.
“Additional annual COLAs thereafter,” he says, “would accumulate to larger total reductions in expected scheduled benefit levels of about 3.7%, 6.5% and 9.2% for retirees at ages 75, 85 and 95, respectively.”
No wonder AARP is screaming, despite its recent decision to make its peace with some sort of Social Security cut. “AARP will not accept any cuts to Social Security as part of a deal to pay the nation’s bills,” says AARP chief Barry Rand.
The most pitiful part of this charade is how little effect on the deficit this adjustment to Social Security would make. One figure cited by The Wall Street Journal is $300 billion… over 10 years.
That’s an average $30 billion a year… or about 1.8% of this year’s $1.65 trillion deficit.
“Because the underlying causes of the previous crises have not been addressed,” we say in our new forecast, “and because of the enormous amount of debt we’ve amassed as a result, I believe that sometime in the very near future, America’s credit card will be cut off.
“The crisis will mean the end of the big social programs, like Social Security and Medicare. No longer will you be able to count on retirement checks showing up like clockwork. Or for the government to pay for your blood pressure, diabetes or cholesterol medication.
“And when Americans are caught off guard by these things, they’ll get very, very angry. The transition from a normal society into one bereft of easy credit will lead to massive riots — like the ones we’re seeing in Greece, Egypt and Bahrain right now.”
In other words, “intensified social conflicts.”
Whether Brzezinski is clamoring for an intensified security apparatus or simply reading the writing on the wall, you’d do well to take note. And get ready. That’s the idea behind five special reports we released last week.
The advice therein “has nothing to do with preparing for the end of the world,” we explain. “And it’s not about moving your family into a gun- and gold-stocked bunker.” The steps you need to take aren’t nearly as drastic… but they are urgent. Here’s where you can get started.
The Street is throwing a tantrum after the jobs report. The 18,000 new jobs in June was a fraction of the consensus guess among 85 economists surveyed by Bloomberg. In fact, it was less than half of the most pessimistic of those 85 guesses.
Thus, as we write, the major indexes have given back all of yesterday’s gains, and then some. The S&P is down nearly 1%.
Gold is perking up today, the spot price shooting up $15 the moment the jobs report came out. Perhaps traders are anticipating an early arrival of QE3 to fight unemployment. Not that QE1 or QE2 did squat for unemployment, but that’s another story.
At last check, the spot price is $1,543. Silver is moving up even stronger — $36.87.
Measured against a basket of 70 currencies, gold is up 3.4% for the first half of 2011.
Bullion dealer and author Mike Maloney is out with his semiannual rundown of how gold performed against each of those 70 currencies. Outside of a few spots in eastern Europe, you were better off holding gold than paper currency:
Turning to the science-and-wealth beat, Korean researchers have built the world’s most lightweight loudspeaker. And it’s transparent. You could attach it to a window… or your computer screen.
The key is graphene — a high-tech version of graphite, consisting of a single layer of carbon atoms. The 2004 discovery by scientists at the University of Manchester earned the 2010 Nobel Prize in physics.
Now Dr. Jyongsik Jang and colleagues from Seoul National University have taken a thin layer of plastic called polyvinylidene fluoride, or PVDF… and used an inkjet printer to coat it with two layers of graphene.
This has a host of potential applications, but the first one the scientists hit on is a loudspeaker, because the graphene layers serve as electrodes…
Scientists are finding new uses for graphene every day. “It is not only the thinnest material in the world,” reports The New York Times, “but also the strongest: A sheet of it stretched over a coffee cup could support the weight of a truck bearing down on a pencil point.”
Graphene has the potential to increase a cell phone’s range… make any electronic device run with less power drain… create lighter plastics… and even stronger aircraft. But by far, the biggest potential lies as a replacement for silicon in the microprocessors that run nearly every electronic device today.
The simplest source of graphene is graphite — the same thing in the center of your No. 2 Dixon Ticonderoga pencil. And it’s in high demand. “Graphite prices have more than doubled in recent years,” comments our resource maven Byron King.
Plus, “China controls 80% of the global graphite market — just like they control 97% of the world supply of rare earths.” Byron is still hot on a tiny Canadian-traded company sitting on a huge graphite find in North America. You can pick up shares for less than $1 each. Byron tells you all about it in this presentation. You want to check it out soon, though… discounted memberships to his premium service, Energy & Scarcity Investor — are available only through next Monday.
“Having lived in Chicago and been a victim of the air conditioner theft,” writes a reader following up on yesterday’s issue, “what is not always reported are those electrocuted when they mess with the 220-volt lines feeding into these units. Also new construction job sites are at the mercy of these hoodlums who steal copper wiring off the job sites.”
The 5: Three times in June, thieves hit the construction site of Facebook’s new headquarters in Menlo Park, Calif. Total value of the copper wire stolen: $8,500.
“I am an avid reader of your very interesting publication,” writes another. “I wonder why you as good as never mention Switzerland, my motherland.
“Our government budget is positive — I mean we reduce the small amount of national debt we have, instead of adding to it. We export more than we import, though we have absolutely no commodities in our soil.
“Our unemployment rate is 2.4%, mainly thanks to asylum seekers, else it would be even lower. And we have one of the strongest currencies in the world. There might be a little to publish about this extraordinary story. But maybe we are too small a country. But size does not matter, the results do.”
The 5: We were in Zurich in April. In fact, we got a close-up look there at one of the best vehicles Americans can use to safeguard their wealth overseas. We discuss it in the current issue of Apogee Advisory. Access here.
“Just a quick note to pat you on the back,” writes our last reader today, “and tell you I really appreciate the timely info you manage to include in your e-newsletter every weekday. I especially read the medical and scientific info relating to technology stocks, including news on rare earth finds and investments.
“The oil and natural gas finds recently found off Israel’s coast in the Mediterranean have held special interest for me as well. Thanks for all the hard work and research going into these e-note issues!”
The 5: You’re welcome. As always, it wouldn’t be possible without you.
Have a good weekend,
Agora Financial’s 5 Min. Forecast
P.S. Hmmn… this has a familiar ring to it: “Cut up Washington’s Credit Card,” reads the subject line of an email from Sen. Rand Paul on behalf of Campaign for Liberty.
“Technically,” the senator goes on to say. “Congress has reached the debt limit. The credit card is maxed out. So now they’re back, demanding more spending. More debt. More damage to our already troubled economy.”
We’ll stick to our forecast that Congress will raise the debt ceiling, if not in time for Aug. 2, then shortly thereafter. No, if anyone is going to cut up Washington’s credit card, it will be Washington’s foreign creditors — China, Japan, the oil sheikdoms.
“When you can’t pay your bills, what happens?” is the question we pose in our newest forecast. “It’s only a matter of time before our credit card is finally shut off for good.” To prepare for the consequences, look here.