Here we sit in a seesaw battle between the international bankers and the governments of the world.

The bankers are destroying credit (money) in a move towards driving people and businesses into bankruptcy, in order to steal the underlying physical assets backing the loans.

The governments are undergoing an effort to create new debt (money) as fast as possible in order to equalize the credit destruction being caused by the banks.  They’re doing a really good job of it – at least for now.

Let’s look at a few charts that will hopefully demonstrate to you the charade that is being played out.

This chart shows the Federal government receipts over time:



Notice what has happened.  We have a historic event where receipts (money in the door from taxes and fees) are falling at a steep rate.  Why is this?  It’s because so many people have lost their jobs and no longer pay taxes.  It’s also because the social welfare in our nation has increased dramatically – and those people aren’t paying taxes either.

This next chart shows receipts – but this time from the perspective of the difference in dollars from one year to the next:



We see that Federal government tax receipts and fees are down by close to $400 billion dollars from one year ago.  That’s devastating.

OK, we’ve looked at how much the Federal government is taking in.  Let’s look at how much they’re sending out.



See the rocket shot in Federal government spending since the recession (actually the depression) began?   The Federal government is taking in a lot less dollars in taxes and fees, yet spending a whole lot more money in outlays.

Let’s look at the year-over-year chart for government outlays:



I’ve limited the years on this graph in order to not show WWI and WWII, where government outlays were enormous.  There are a few interesting points with this chart.  First off, it almost looks like the Federal government knew what was coming, since the spike in outlays began prior to the official recession.  Second, look at the slope of the line on the spike.  It was incredible prior to the official start of the recession – but it has gotten even steeper since then!

So let’s review the basics.  The Federal government only has three ways of getting money:

1) Taxes and fees.  We see from the above charts that this has quickly become a disaster.  It’s a major financial meltdown just waiting to happen.

2) Issuance of new Treasury securities.  The Federal government is selling new Treasury bills, notes, and bonds as fast as they can.  However, many of these sales are simply to roll over previous debt that has already been incurred.  The Federal government needs to reissue those securities PLUS sell more securities on top of those in order to create vast amounts of new debt.

3) Stealing from the “trust” funds.  Each year, the Federal government collects tax money for its various “trust” funds and pays out money from those “trust” funds to those that are currently set to receive it (retirees, etc.).  If the government collects more for a particular trust fund in a given year than it spends to recipients of those funds then the government steals what’s left over.  An IOU is left in its place – to supposedly be paid back at some future year by our taxes.

The Federal government has been able to steal vast amounts of money from the “trust” funds over the years (especially Social Security) and use that money for general government spending.  There’s currently a slight problem.  ALL of the Federal government “trust” funds are bone dry!  There’s no more money to steal.  In other words, the “trust” fund receipts each year are LESS than the “trust” fund outlays – for ALL of the funds.  The Federal government is having to take money from other areas just to pay their “trust” fund obligations.

It’s because of this that the government is seeking to pass the Health Care bill.  It has zero, nada, zilch to do with anybody’s health.  It is simply an effort to create the mother of all “trust” funds (17% of our nation’s GDP) so that the Federal government has a fresh batch of money to steal from.  Notice how the Health Care proposal doesn’t actually start for three years from the date of passage.  However, the taxes for the Health Care bill would start immediately.

Think about this.  The Federal government would have three years of deposits into the new Health Care “trust” fund, but absolutely no obligations for outlays.  They would be free to steal every dollar for three years, and use those dollars to combat the credit destruction that the international bankers are causing.  Now do you understand the “pressing need” in Washington?

The governments of the world are on borrowed time.  The bankers have them in a stranglehold, and the last gasp of breathe is exiting their nostrils now.

Watch for Federal government outlays to not only flatten out – but turn downwards at some point.  If we see that, then economic catastrophe follows.  The Health Care bill would be successful in kicking the economic can down the road for another little while – all at the expense of us debt slaves.

Fight against the passage of the Health Care bill like you’ve never fought against any other legislation in your life.  Your government is lying to you.

______________________________________________________

Watch for these indexes to drop:

Chinese Shanghai Composite Index: 3,087.84 (change of 5.48% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 12,588.26 (change of 5.93% from July 20, 2009 base value of 13,381.22)
________________________________________________________

Here are today’s numbers for the economic indicator:

1) Gold = $1,118.00
2) Silver = $16.46
3) Dollar Index = 80.72
4) Oil = $78.70
5) S&P 500 Index = 1,115.71
6) 3-month Treasury Bill yield = 0.12
7) 3-month OIS = 0.15

HEI = 35.97

(A value of under 100 indicates deflation, while over 100 indicates inflation – as referenced to Sept. 12, 2008…the day before Lehman Brothers collapsed)



__________________________________________________________

Here are the numbers for the day:

Dollar Index adjusted indexes:
Dow = (10,403.79) x (0.8072) = 8,397.94
S&P 500 = (1,115.71) x (0. 8072) = 900.60
Nasdaq = (2,273.57) x (0. 8072) = 1,835.23

3-month Treasury: 0.12

2-year Treasury: 0.80

10-year Treasury: 3.61

30-year Treasury: 4.56

2-yr vs. 10-yr Spread (Target > 273): 281 basis points – (Danger Zone)

2-yr vs. 30-yr Spread (Target > 369): 376 basis points – (Danger Zone)

3-month LIBOR: 0.25

3-month EURIBOR: 0.66

3-month OIS: 0.15

TED Spread: 13 basis points

LIBOR/OIS Spread: 10 basis points

Dollar Index: 80.72

Volatility Index: 19.26

JPY-EUR Exchange Rate (Target < 115): 120.9692

JPY-GBP Exchange Rate (Target < 145): 133.619– (Danger Zone)

JPY-USD Exchange Rate (Target < 90): 89.234 – (Danger Zone)

USD-EUR Exchange Rate (Target < 1.25): 1.3556

USD-CNY Exchange Rate (Target > 7.0): 6.8263

Warmly,

Brad

Comments or questions?  brhamill@hamill.com

If you are not currently on the Economic Update email list you can email me at: economics@datatogo.com to be added.