U.S. Extend-And-Pretend: The Zombie Lives!
Most readers are familiar with the market vernacular “extend and pretend.” It’s origins are the U.S. commercial debt market. This is yet another U.S. Ponzi-scheme and debt-bubble being kept alive solely through pretending that most/all of the massive amounts of bad-debt in this market is still viable.
It’s a game (and a massive fraud/sham) because if these corporate Deadbeat Debtors ever had their debts closely/rationally scrutinized; their debts would not simply be rolled-over (i.e. “extended”) at artificially low rates of interest. Instead, the debt would be assessed much higher rates of interest – to reflect the serious risk of non-repayment (i.e. default).
The moment these Deadbeats were faced with legitimate interest rates on their debts; they would default like the row of Ponzi-scheme dominoes that they represent. These zombie corporations are hooked-up to the equivalent of a bond-market “respirator”: kept alive only through the totally artificial means of “extend and pretend.”
But in fact, it’s a game which has been (greatly) expanded to encompass the entire U.S. economy in a bubble of denial, and it is a multi-faceted game, at that. One facet of the national game of extend-and-pretend is very similar to the massive sham/fraud in the U.S. commercial debt market – except an order of magnitude more fraudulent.
The U.S. Treasuries market is another U.S. extend-and-pretend Ponzi-scheme, in two respects – three, if we include the fact that the U.S. economy is hopelessly insolvent, making these Treasuries near-worthless.
First there is the fact that the Federal Reserve is now effectively the only buyer of U.S. debt, and at one point earlier this year was officially buying-up Treasuries faster than the U.S. government was issuing new debt. But that only equates to “monetizing debt” (i.e. a cheque-kiting economy).
What makes this a Ponzi-scheme is that all these Treasuries are being purchased with paper simply/literally conjured out of thin air – and not even borrowed into existence, like all the previous $trillions of money-printing.
Why is this so significant? When the U.S. dollar went off the “gold standard” (i.e. it was no longer backed by anything), it ceased to be a “unit of value.” Instead, with every new USD being borrowed into existence; the U.S. dollar became a “unit of obligation” (i.e. an IOU). Clearly a unit of obligation is inferior to a unit a value, but at least (as an IOU) it can claim some intrinsic value.
But that is not the case with all these “QE” dollars being conjured into existence in the U.S. and Europe. What gives this paper value? Nothing at all. These scraps of paper have gone from being an “I-owe-you” to an “I-owe-nothing”. They are neither units of value or obligation – simply “units”. No different than Monopoly Money.
One “unit” comes off a printing press owned by Hasbro. One “unit” comes off of a printing press owned by the Federal Reserve. Both are private corporations. Neither forms of paper have any, possible intrinsic value. The (near-worthless) U.S. Treasuries market is now being totally propped-up with totally worthless paper.
But that’s only one aspect of the Treasuries market Ponzi-scheme. The other half of this fraud are the artificial interest rates, where the Fed is buying all this worthless paper at the highest prices in history. Why make the Ponzi-scheme so obvious?
Because as B.S. Bernanke himself has now publicly acknowledged; the U.S. economy (and U.S. government itself) cannot afford to pay “market rates” (i.e. legitimate rates) of interest on all this bad debt. Put another way; if the U.S. economy was forced to pay the same rates of interest as Greece (before it defaulted), interest payments alone on the U.S. national debt would consume more than 100% of revenues. The U.S. would be instantly bankrupted – like Greece.
Thus the U.S. extend-and-pretend economy itself is now totally dependent on the Federal Reserve “QE” respirator, to not only provide most/all buyers for this fraudulent debt, but also as the only means to fraudulently manipulate U.S. interest rates to these artificial levels. QE-or-die.
But even this is only part of the Game being played to attempt to cloak the U.S. extend-and-pretend economy in a façade of “strength”. The other half of the game are the endless excuses; “explaining” to market Chumps how/why B.S. Bernanke isn’t quite ready to (supposedly) wean the mighty U.S. economy off of the Fed’s (0%, QE) teat.
The U.S. government’s accomplice in this Game is the Corporate Media, in yet another clumsy, two-step. Bad economic data (i.e. the majority of data) is explained-away with flimsy excuses and immediately forgotten. Meanwhile the only “good” economic data released is trumpeted at maximum decibels, despite being either the result of statistical fraud, or money-printing manipulation.
All U.S. employment reports are total fabrications. Less and less Americans are working every day/every month/every year (all through this so-called “recovery”), and the Federal Reserve’s own chart on total U.S. employment proves this. Then there is the Inflation Lie.
How much does the U.S. government lie about inflation? In the same month last year where the World Bank was reporting that global “food inflation” was increasing at an annualized rate of 120%; the U.S. government’s “broadest measurement” of inflation was 0%. Assuming that large-bellied Americans still eat food; the U.S. government’s inflation number is a gigantic lie.
All GDP calculations are derived directly from inflation statistics, meaning that all GDP estimates must be fully-discounted for prevailing inflation, or they become meaningless. The more one understates inflation, the more that GDP estimates are exaggerated to the high side.
One hundred-twenty percent global food inflation; zero percent “U.S. inflation”. That’s a lot of U.S. exaggerating – enough to transform a Depression into a “recovery”. It’s not just U.S. debt markets which are extend-and-pretend shams, it’s the entire U.S. economy.
To take this Game of smoke-and-mirrors to its ultimate degree; we then have Corporate Media broadcasting an endless list of excuses, or simply staged events to distract people from this Zombie Economy. Thus whenever bad U.S. news leaks through the media’s filter, it’s always blamed on “weakness in Europe”, or “weakness in China”, or “weakness in Emerging Markets”.
When other economic regions report disappointing data; (according to the U.S. propaganda machine) their weakness is all of their own making. It is only with the U.S.’s extend-and-pretend economy that economic weakness is always the fault of others.
And when the Corporate Media senses it has been over-relying upon its Foreign Scapegoats, we get staged crises. The favorite of these totally artificial staged events is also the current one: the Debt-Limit Crisis.
How phony is it for the world’s biggest Debtor (biggest debt addict), with the world’s biggest deficits to even have a “debt ceiling”? It’s like the world’s most-notorious alcoholic having a “booze ceiling”. What happens when the alcoholic hits his booze-ceiling? The ceiling gets raised. Again and again. Surprise, surprise.
How phony is it for the world’s biggest Deadbeat Debtor to only raise the “ceiling” enough to guarantee a new “crisis” every year or so? Presumably the only reason the “debt ceiling” isn’t raised by even smaller increments (creating even more “crises”) is because it takes U.S. Congressional wind-bags this long to catch their breath after the previous Debt-Ceiling Circus.
Yet despite the pathetic transparency of yet another U.S. extend-and-pretend façade; we still have the Corporate Media blaming recent bad economic numbers on “uncertainty over the debt-ceiling.” Yes, the U.S. government might “shut down” on Tuesday. As part of the theater; Congressional Brats may throw a temper-tantrum – and “hold their breath” like spoiled children.
And then what? They stop holding their breath. Surprise, surprise. The “debt-ceiling” is raised (one more time), and the Circus leaves town…until next year. Yet we’re supposed to believe that “uncertainty” over the debt-ceiling is the new scapegoat for U.S. bad news.
What will be the excuse used to hide this extend-and-pretend Zombie Economy next month? How about Bernanke musing – yet again – about another “exit strategy”? That always works. And by next month the Corporate Media will have already completely “forgotten” Bernanke’s admission that the U.S. can never afford to raise interest rates.
Like a low-budget “zombie” movie; no minor details (like the complete absence of a heart-rate and brainwave activity) can stop the U.S. economy from feigning signs of life. And like a low-budget zombie movie; the plot-line explaining how this Zombie Economy remains animated cannot withstand any rational scrutiny.
Jeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is www.bullionbullscanada.com.