Fw: [Medicalnewscommentaries] IMVA - Wind Shear Economics - October 4,2007

October 4, 2007

- Mark Sircus Ac., OMD

medicalnewscommentaries

Thursday, October 04, 2007 5:11 PM

[Medicalnewscommentaries] IMVA - Wind Shear Economics - October 4,2007

Wind Shear EconomicsInternational Medical Veritas Association

Like a plane flying into a turbulent storm, we are about to be lashed by updrafts, downdrafts, side drafts and everything else you can imagine when it comes to finance and economics. The impossible is not only going to happen it is already happening, one wing of our plane is catching a downdraft – deflation – and the other wing is caught in an updraft – inflation – and the wind shear will rip many lives apart.

Very few people understand what it is that threatens to fracture the U.S. (and hence, the world’s) monetary system. Since the Federal Reserve cut short-term interest rates by half a percentage point two weeks ago, the already softening dollar has steadily lost value against other major currencies. The morning of the rate cut, one euro bought $1.38. At day’s end early in the week one euro bought $1.42 — a level at which analysts believe it begins to compete with the dollar to be the world’s top currency of choice. Another rate cut in the United States could push the Euro toward the 1.5 mark, a very dangerous level for European export industries.

U.S. stock have risen back with a vengeance to averages around 14,000 though technically one would have to discount the value of stocks by the value lost by the falling dollar these past days to calculate their true value. The markets are actually eager for evidence of a rapidly slowing economy to support the case for further interest rate cuts so the market can fly even higher to new records. With each rate cut though comes further drops in the value of the dollar and thus in asset values denominated in dollars. It seems like the boys on Wall Street are blind to the massive and permanent damage to the U.S. and world economy a rapidly falling dollar will imply, especially at first for Americans.

Investors are a selfish crowd and today bad news for us is good news for them. A real recession that hurts millions of people is good news for investors because it threatens the Fed to drop interest rates further to support financial markets. It is becoming more apparent every day that traders of all different stripes are betting on more rate cuts by the Federal Reserve in the months ahead. Since mid-July, the odds of a US economic recession have been mounting, led by sliding home prices and the first loss of US jobs in four years in August. It’s the last thing anyone wants.

Recessions have been fought off successfully in recent years but with measures of unbelievable cost. The end game of capitalism has been on stage for the past 15 years but the show has been kept going with multiple trillions in debt creation that every level of American society has been only too happy to take on. Ultra low interest rates made it easy to create universes of debt whose numbers easily exceed all the stars in all the known galaxies in creation. It led directly to the super inflation of housing prices, artificially pumped up prices, an imaginary wealth build on debt that fed America’s last hurrah, gloating pathetically on a level of wealth that is not supportable in any sane sense. Economic sanity is caught in quicksand; the wind shear is going to get especially disturbing, the ride terribly rough.

Fed rate cuts are supposed to avoid a recession...so Americans don’t get poorer. But the lower dollar makes them poorer anyway.When the Fed cuts rates, it signals to lenders that inflation will increase. This pushes up rates on long-term loans – such as mortgages. Bill Bonner

“A weaker dollar risks pushing up interest rates because sooner or later global investors demand higher yields to offset the weak currency. Of late, long-term rates have only edged up, but they would be defying gravity to stay down if the dollar continued its decline,” prints the New York Times.[ii] An easier Fed policy can crush the US dollar and trigger higher inflation, especially in the global commodity markets.

What does this have to do with health and medicine? Everything! Not only are we not going to be able to afford our medical system or the medical insurance to pay for it, but many will be strained to even purchase basic medical supplies even when their lives depend on receiving necessary treatments. Everything costs money today and staying alive and healthy in an increasingly toxic world is a financial challenge that will be increasingly difficult to meet. It truly is pathetic what modern orthodox medicine has turned out to be and how much it costs. The costs are stratospheric yielding effects only terrorists would dream of.

For Christina and Randy Culver, the bad news kept coming: First, doctors told the Colorado Springs couple that the clusters of "full-body hiccups" afflicting their 10-month-old son were seizures. Specifically, Tyler had infantile spasms, a rare, potentially devastating brain disorder that can cause mental retardation. Within hours of diagnosis, Tyler was hospitalized in Denver and prescribed a drug that doctors said had the best chance of stopping the seizures. But, just as it started working and Tyler was ready to go home, the family got one more shocker: The price of the drug, called Acthar, or ACTH (adrenocorticotropic hormone), had just increased from $1,600 to $23,000 a vial — and the family's insurer would not pay for the two vials they needed.[iii]

A handful of rare disorders now come with six-figure yearly drug bills — for life. In the case of infantile spasms and ACTH, initial treatment lasts only a few weeks (though children often need more ACTH or other drugs later). Total cost for one treatment round: an average of $100,000 a child.

“We are witnessing a sea change, tectonic decoupling, a cataclysmic decline in the soundness of the international monetary system. The world’s payments system is in an advanced state of disintegration. It is the beginning of a world-wide economic depression, possibly much worse than that of the 1930’s. The falling T-bill rate must be seen as a sign of the government of the U.S. and the Federal Reserve losing their battle against deflation. We have reached a landmark: that of the breaking up of centralized and globalized credit, the close of the dollar system,” writes Antal E. Fekete.[iv]

The dollar is going down along with the value of almost all U.S.-centric, domestic, dollar-priced assets. Stocks. Bonds. Wages. Houses. That’s where the "de" in deflation comes from. Bill Bonner

Yes the Federal Reserve (Fed) (nothing Federal about it, it’s a private bank, and for the first time I saw a bold face lie about this in the mainstream press. Yes the Fed is losing the battle against deflation, not even Hercules can now hold up the value of houses and if you buy a house today it’s analogous to buying a ticket for the Titanic after it already hit the iceberg. Who in their right mind is going to buy a house as the price drops like a sinking stone. No one and nothing is going to change this most remarkable phenomena.

Housing prices, according to Case/Shiller, fell in America’s top 20 cities last month – 3.9%.

Former Fed chief “Easy” Al Greenspan said on Sept 16th, the he would not be surprised if US home prices fell by double-digits into 2008.

It’s an idea which has not breached the minds of everyone yet, there are fools who read and believe what they are told in the papers and TV. After all we did not even have any serious problems until a few months ago and now the stock market is setting new highs so really, what is there to be worried about?

Yes the prices will keep dropping month by month but perhaps “only” by a few percentage points per month - according to the official reports. But when the most dumped down and massively neurologically poisoned realize the insanity of buying something that is rapidly losing its value stop buying we will have an earthquake that will destroy the fabric of America.

We would just be scratching the surface of the truth in saying there is a real and growing desperation about housing prices and where they are heading and what that will mean for our collective financial future. US residential real estate has an aggregate value of about $21 trillion, and is the single biggest source of US household wealth. If home prices fall roughly 15%, it could wipe out $3 trillion of household wealth, and deal a huge blow to consumer spending.

Most of those subprime mortgages will be adjusted, not based on theFed funds rate, but on the London InterBank lending rate. And long-term mortgage rates are not the same as the short-term rates. When the Fed cuts rates, it signals to lenders that inflation will increase. Bill Bonner

"The July number was revised up a bit, to a decline of 10.7 percent, but this is still absolutely awful, confirming that the existing homes market is now in free fall," noted Ian Shepherdson, the chief economist at High Frequency Economics. "There is no sign that the bottom of the market is near. With price declines accelerating, real mortgage rates are very high; the downside from here is still substantial."[v] Sales of new single-family homes fell 8.3% in August to a 795,000 annual sales pace, to stand 21.3% lower from a year ago, and the glut of unsold existing US homes has swelled to the highest in 18-years.

You mean to tell me there are still almost 800,000 people dense enough to buy a house in a falling market?

Never before have so many Americans gone so deeply into debt so willingly.[vi]

Yes and this is where the wind shear begins. While the value of Americans’ number one asset is going down, their living expenses are going up. Above I just described a deflationary nightmare, worse then ever conceived by any of the banking officials who see deflation always as the worst case scenario for it leads to economic paralysis.

What economists call the FIRE sector is short for finance, insurance, and real estate. The main product of these industries is credit. The FIRE sector pumps credit into the economy even as it withdraws interest and other charges.

We have prices we pay for the basics of life heading up, and starting to do that almost as fast as the values of properties are heading down. As the dollar drops faster and harder prices for everything that matters will rise especially oil, gasoline, heating oil, food, transportation and shipping. A weaker US dollar is etching sharply higher food and energy prices into “core” inflation. Corn futures gained 9.7% last month, and soybean futures climbed 14% in September, up 79% in the past year, after US farmers cut acreage 15% to a 12-year low. Wheat futures were up 21% for September towards $10 /bushel, the sixth straight monthly gain. Milk futures are up 70% from a year ago.[vii]

The cost of shipping dry goods around the world is soaring to stratospheric heights. Gary Dorsch[viii]

And if that were not enough we have other factors pushing up costs of food: bees dying, orange tree devastation, drought and floods cutting quickly into food production and stocks. Soon all the money in the world will not change the fact that there will not be enough to go round - with shortfalls moving into the huge area and what is available obtainable only at unaffordable prices.

A report at USA Today tells us that this winter’s heating costs will probably average about 10% more than last year for the typical family.

The smart ones think that they will be able to pay their debts back more easily in an inflationary environment, and it’s the central bankers hope that they will do exactly this, continue to pay on their debts so the whole system does not collapse. But alas it’s a fools dream as delinquency rates skyrocket and houses are foreclosed on in record numbers. Does anyone hear the music playing from the band on the stern of the Titanic?

Depression follows deflation as night follows day. Antal E. Fekete

Financial analysis Bill Bonner says, “Now, it seems to be at the twilight of a magnificent – if preposterous – era...in which Americans could spend money they didn’t have on things they didn’t need and not have to worry about what happened next. But now we find out. And we find ourselves in the worst possible situation – squeezed between the two prefixes like a skinny word in a fat dictionary. Deflation is taking the oomph out of our economy and the value out of our assets. Inflation, meanwhile, is increasing the cost of everything we buy.”

Prices of millions of houses sold in the past few years are falling well below what homeowners owe, a state that economists call negative equity. Homeowners with negative equity are trapped. They can’t sell—the declining market price won’t cover what they owe the bank—but they still have to make those (often growing) monthly payments. Their only “choice” is to cut back spending in other areas or lose the house—and everything they paid for it—in foreclosure, which is exactly what is happening to increasing droves of families all over America.

The U.S. economy has been radically restructured from a focus on production, manufacturing and wages, to a focus on speculation, debt, and profits.

Americans who are still in the have care not for any of this, most Americans have been passing the homeless in the streets for years and are used to that. It’s acceptable but now we have huge waves of families losing their homes and the government is spending less (and getting less for its money as food prices soar) in its public food distribution to the poor programs. But again who cares, the stock market is doing well.

Mark Sircus Ac., OMDDirector International Medical Veritas Association http://www.imva.infohttp://www.magnesiumforlife.comSanctuary Cancer Clinic

Bill Bonner is the author, with Addison Wiggin, of Financial Reckoning Day: Surviving the Soft Depression of The 21st Century and Empire of Debt: The Rise Of An Epic Financial Crisis and the co-author with Lila Rajiva of Mobs, Messiahs and Markets (Wiley, 2007). http://www.lewrockwell.com/bonner/bonner337.html

[ii] http://www.nytimes.com/2007/10/02/opinion/02tue3.html?th & emc=th

[iii] http://www.usatoday.com/news/health/painter/2007-09-30-your-health_N.htm?csp=1

[iv] http://news.goldseek.com/GoldSeek/1190991990.php

[v] http://news./s/nm/20071002/bs_nm/usa_economy_dc;_ylt=AtGhZjC6K8KNuZxGkB7vVLms0NUE

[vi] http://www.itulip.com/forums/showthread.php?p=7343#post7343

[vii] http://www.financialsense.com/fsu/editorials/dorsch/2007/1003.html

[viii] http://www.sirchartsalot.com/