Michael Pento continues:

“The ISM survey came in at 49.6, which was the lowest level since July 2009, indicating the very industry that was once credited for engendering an economic recovery is now back in recession.  The employment component of the survey contained the lowest reading since November of 2009 and the new orders component dropped to 47.1, which was the third consecutive monthly decline. 

However and perhaps most importantly, the prices paid index jumped 14.5 percentage points to 54.  This survey clearly states that the U.S. is headed for a more severe slowdown than what Wall Street is anticipating....

Continue reading the Michael Pento piece below...


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“But it will also be accompanied by rising aggregate prices.

Also highlighting the faltering economy was last Friday’s unemployment report, which left little doubts that the chronically sub-par employment condition is getting even worse.  Not only were there only 96k net new jobs created but nearly one third of those jobs were in the food service sector. 

The all-important goods producing sector continues to operate on life support and actually managed to shed 16k jobs; despite the belief that we are in third year of recover.  But the most disturbing part of the report was that 368k Americans became so despondent looking for employment that they gave up and left the work force; sending the labor force participation rate to 63.5%, the lowest level since 1981.

The European recession, which continues to steepen, has already caused the ECB’s Mario Draghi to promise to purchase unlimited quantities of bonds with duration of 1-3 years on the secondary market.  Mr. Draghi plans to “sterilize” these purchases by auctioning one-week term deposits to banks.  But there are two problems with this form of sterilization.

The first is there is no guarantee that private banks will hand over their newly printed money back to the ECB, in such tremendous quantities, that will be necessary for the central bank to print in order to bring sovereign debt yields lower.  Instead, they may choose to make loans to the private sector and receive a higher return, causing a rapid increase in money supply growth. 

In fact, recent term deposits have yielded just 0.01%, so there just isn’t much incentive to park money at the ECB.  And the second problem is that offering a one-week term deposit only removes money from the private banking system for seven days.  It is not the same as selling a long-term bond to the bank.  Therefore, the sterilization done by the ECB will only be temporary at best.

The Federal Reserve under Ben Bernanke will make no such pretension towards sterilization.  He simply wants banks to lend and for the money supply to grow.  The Fed will most likely announce on September 13th a program to purchase a fixed dollar amount of Treasuries and Mortgage Backed Securities until the unemployment rate falls below 7%.

However, the only problem with ECB and Fed money printing is that it has been tried for the last five years and hasn’t worked.  The unemployment rate in the U.S. has been above 8% for 43 consecutive months and EU (17) unemployment, now reaching 11.2%, continues to set Euro-era records with each new release.

In truth, a central bank has only one tool; and that is to systematically erode the confidence of holding the currency by increasing its supply.  The ECB launched its plans for further money printing last Thursday and the Fed will officially announce their plans to launch QE III this coming Thursday.  But these are just counterfeiting cruises to nowhere.

Central bank interventions are the reason why the desperately needed deleveraging process was cut short.  They have acted as enablers for the state to run up massive debts. They have brought about these never-ending recessions.  They have caused energy and food prices to soar.  They have eroded the incentive to save and invest and caused productivity rates to crumble.  And they are the primary culprit for faltering global growth.

No central bank has ever been able to restore solvency or create prosperity for any country.  All they have ever accomplished is to wipe out currencies and the middle class.  These new central bank interventions are unprecedented and will have a dramatic affect on your investments.  This is the primary reason behind the recent breakout in precious metals.”

To learn more about Michael Pento’s financial management services CLICK HERE. 

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

KWN had an incorrect (old) link for the most recent Dr. Marc Faber interview. This was an incredibly powerful interview with one of the greats.  Dr. Marc Faber discusses everything from gold and silver, to investment allocations, confiscation fears, dangerous trends, protecting oneself, central planners, inflation and much more. The KWN audio with Dr. Marc Faber is available now and you can listen to it by CLICKING HERE.

The interviews with Gerald Celente, James Dines, Marc Faber, James Turk, Egon von Greyerz, Art Cashin (UBS $612 billion) are available now.  Also, be sure to listen to last week’s line-up of other KWN interviews which included Agnico CEO Sean Boyd, John Hathaway and Eric Sprottand Jean-Marie Eveillard by CLICKING HERE.

Eric King

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© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,

rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

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