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THE INTERNATIONAL FORECASTER

SATURDAY, September 22, 2012

09/15/12 #4

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 RADIO SHOWS

James Corbett with Dr. Stan “Economic Stimulus? Just More Talk”

http://mediaarchives.gsradio.net/radioliberty/091712b.mp3
James is on with Dr. Stan every Monday at 7pm EST
WORLD MARKETS
Crime Pays

by James Corbett

September 22, 2012
“The weed of crime bears bitter fruit. Crime does not pay.”

So warned Lamont Cranston, the hero of the 1930s crime fighting radio drama “The Shadow,” at the end of each episode, shortly after using his powers of invisibility to solve the week's mystery and bring the criminals to justice. The premise was simple and effective: criminals may garner momentary reward from their activities, but in the end the long arm of the law will find them and bring them to justice. Crime is a chump's game. After all, The Shadow knows!

If only life were like an old-time radio drama. Unfortunately in this age of liar's loans and mortgagegate, robo-signing and QE Infinity, too big to fail and too big to jail, any pretense that the globalist financial system is based on the rule of law has long since been jettisoned. In the current environment, crime not only pays, it pays handsomely. And just as Adolf Hitler outlined the old principle of propaganda that 'the bigger the lie, the more likely people are to believe it,' the banksters of our age seem to have discovered a corresponding principle in the financial realm: the bigger the fraud, the more likely they are to get away with it.

Take the SEC/Goldman Sachs debacle from earlier this year. Back in February, Goldman received a Wells Notice. For those not in the know, a Wells Notice is a type of courtesy card from the SEC letting an institution know they may or may not be facing enforcement action for their alleged crimes. The charge in this case? Goldman's role in the mortgage backed security scam in the subprime mortgage crisis that led to the housing collapse of 2007 and the near total destruction of the global economic system. You know, that little problem? Goldman's role in this debacle was not a matter of conjecture. A Senate inquiry into the MBS scam laid it bare. As Senate Permanent Subcommittee on Investigations Carl Levin put it in a statement from the inquiry:

“Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.”

Those are some pretty heavy accusations. So what proof did the Senate have to back up those claims? Goldman's own words. “Sounds like we will make some serious money,” one senior Goldman manager emailed his colleague at the start of the crisis. “Yes we are well positioned,” his colleague responded, referring to Goldman's strategy to sell the AAA-certified toxic garbage subprime MBS to customers and cover their posteriors by betting against those very securities in the derivatives market.

Open and shut case, right? Surely this type of behaviour has to be made an example of. Surely the agency in charge of regulating the institutions at the core of the global financial system would not let this type of conduct go unpunished? Surely, even if the investigation was not to end up in the trial of the century it would, at the very least, result in hefty fines and crippling sanctions against the institutions that helped to bring about the mess. Surely, at the very very least, there would be an obligatory slap on the wrist after a lengthy, headline-grabbing show trial?

Surely not. Last month the SEC announced there would be no criminal charges at all against Goldman. The vampire squid was free to go about its business, sucking the blood from the real economy, wrapping its tentacles around the levers of finance and releasing its inky smoke trail to deflect any would-be prosecutors.

So what is a rational response to this irrational decision?

“On the sixth month anniversary of the announcement of the so-called financial crisis task force, the twin announcements yesterday that Goldman Sachs and its executives will not be charged by either the SEC or DOJ for conduct directly related to the toxic assets at the heart of the crisis is a stark reminder that no individual or institution has been held meaningfully accountable for their role in the financial crisis. And without such accountability, the unending parade of megabanks scandals will inevitably continue.”

That's Neil Barofsky, aka the Voice of Reason. He's an NYU Law Professor, a former TARP Special Inspector, and the author of Bailout: An Insider Account of How Washington Abandoned Main Street While Rescusing Wall Street. Needless to say, he is not the head of the SEC, or the DOJ, or anywhere near any of the so-called government “regulators” who are supposed to stop this rampant criminality from happening in the first place...or at least prosecute it when it does take place.

And that's precisely the problem. The people in positions of power are naturally not going to press charges against anyone. That's how they get into the positions of power. Case in point: The top political donor to Chuck Schumer over the past 23 years? Goldman Sachs. Obama's largest contributor in his 2008 campaign? Goldman Sachs. Don't worry, though, if you're ready for change (and who isn't at this point?), you might be ready to vote Romney 2012. So is Goldman Sachs, who are now Romney's largest contributor. In fact, Goldman contributions to political candidates are double that of all contributions from the PACs.

But wait, here's the best part. After Goldman sells their MBS crud to their poor suckers clients, and after they then bet against those positions in the derivatives market, and after they earn back more money than they lost in the subprime collapse by shorting their own instruments, and after they and their bankster buddies bring the global economy to its knees, prompting trillions of dollars in bailouts from the Federal Reserve (backed up by the taxpayer), and after the world hovers on the brink of total collapse for year after year, what does Fed Chairman Ben Bernanke decide to do in order to 'boost the employment rate' (or so we're told)? He commits the Fed to turning on the printing press in order to buy $40 billion of mortgage-backed securities every month from the very types of institutions that created the entire mess in the first place. That's right, not content to let the banks literally get away scott free with the biggest financial fraud in the history of the world (well, until Libor, anyway), the non-Federal un-Reserve then promises to buy as much of that MBS garbage from those very same banksters as they can print, every month, for the rest of eternity (or until employment picks up, whichever comes first).

What other conclusion is possible? The system is bought and paid for. The candidates are controlled. The regulators are owned. The criminals are in bed with the investigators. The system is corrupt from top to bottom. But this is nothing that you don't already know.

Most people think that criminals are irrational. Mentally unhinged. Bumbling deviants whose actions are, for the most part, inexplicable. On the contrary. If anything, they are ultra-rational. After all, the most rational response to an irrational system may itself look fairly irrational, and if the so-called “regulators” have made it explicitly clear time and again that the only risk that the criminals will face for defrauding the public is a complete bailout, record bonuses, and entire programs designed to prop up the very system that was at the root of their crime, what else would a rational criminal do but commit ever more brazen crimes? In a system that has divorced itself from the rule of law, what separates the criminals from the law-abiding is not rationality, merely morality. And there is very little of that to be found in Washington or Wall Street when cold hard cash is so much easier to come by.

The principles are the same in all of the great financial heists of recent times. Take foreclosuregate. The list of crimes potentially committed by the banks is as lengthy as it is damning: accounting fraud, loan origination fraud, robo-signing, forgery, tax avoidance, perjury. No one knows how much money was made from the scams, because no one even knows (or will ever be able to trace) who owes what, or even who owns what. Rather than bring the perpetrators to justice for their blatantly, openly illegal actions, the Obama administration persuaded key state AGs to go along with a $25 billion settlement deal. Well, not really $25 billion. After credits for principal modifications (which come from the mortgages owned by investors) and refinancing money, only $5 billion will actually be paid out. But the banks agreed not to break the law again, right? So all's well that ends well. Unless you're one of the homeowners who had their contract rights flushed down the toilet in the process, in which case you may be entitled to receive a whopping $1500 to $2000 for the minor nuisance of having your home illegally foreclosed on, your good name and your credit rating tarnished forever, and your dignity discarded in the gutter. Nothing that a couple thousand dollars won't smooth over, surely.

Or take the Libor scandal, a.k.a. the largest financial fraud in history. It's so large that no one knows exactly how large it is. Estimates of the value of the instruments that are based on Libor rates (and thus affected by the rigging that has gone on in those rates for years) run into the hundreds of trillions. It all gets a bit hazy after that. And of course there's the question of exactly how much the rates were manipulated by, and on what days, multiplied by the millions of individual instruments affected by those rates. Given the variables involved, the problem of calculating how much money was swindled from lenders or borrowers on any given day (let alone over the life of the scandal) becomes literally insoluble. Sounds like the type of scandal that would lead to the trial of the century, right? The kind of event that would be reported on diligently by hard-hitting journalists and watched over closely by a concerned public. The kind of scandal upon which political dynasties would rise and fall, the details of which would be hotly debated across the land.

Fat chance. Barely a few months old, the scandal is already retreating into the back pages of the financial rags, and has all but disappeared from public view. Now it's emerging that the banksters have a plan for beating the rap on this investigation: waiting until it goes away. The idea is not as absurd as it sounds. Given statute of limitations clauses, all the Wall Street bigwigs have to do is put off the investigators until the clock runs out and they'll be off scott free, just like the Goldman gang with their MBS crud. In an attempt to head this off at the pass, the Justice Department is asking the banks to sign so-called “tolling” agreements to allow the DOJ to press charges after the statute of limitations runs out. One can imagine a similar scene in the prohibition era Chicago: “Oh, pretty please, Mr. Capone, won't you agree to let us prosecute you?” It would be funny if it wasn't so pathetic.

All of this raises the question of why regulators are focusing their investigations on individual traders, anyway, rather than the institutions and executives who necessarily knew about the scandal and (at the very least) let it proceed? And are the so-called regulators really just gearing up to offer another “no admission of guilt, slap-on-the-wrist fine” sweetheart settlement to the banksters who are funding their bosses' political campaigns? One might as well ask a bear if he is planning to defecate in the woods. Sadly, the ending to this saga is a foregone conclusion. Some will lose their jobs. Some will pay fines. Some will grandstand and make political hay out of their supposed role in supposedly sticking it to the bad guys. But in the end, no one will go to jail.

The worst part of all of this is not that the criminals are committing their crimes. It's not that the politicians and regulators are in the criminals' back pocket and justice is nowhere in sight. It's that after each and every scandal the criminals and their cronies are able to make the case to the public that it all happened because the regulators just didn't have enough power. If we could just give more power to the regulators, if we could just get the right guys into political office, if we could just get the criminals to cooperate, then everything would be better. Sadly, so much of the public believes this, and are willing to go along with “reform” after “reform,” each one strangely failing to keep the banksters/criminals in check, and each one proceeded by bigger and yet bigger financial crimes.

Oh, crime pays alright. It might cost a bit to buy out the regulators and smooth the gears of justice, but in the end the criminals come out ahead. And that (combined with a complete lack of morality) is why they do it, again and again and again, and it's precisely why they will continue to do it until the public finally realizes that there is no regulator or politician going to come from the heavens to save the day and put everything back it its place. Maybe then they will finally, fully withdraw all of their business and support from the Big Banks and their cronies.

Still, it's a long way from here to there and there are too many people who are happy to go along with the system as it is because it's the only one they've ever known. It's enough to make you wonder: Where's The Shadow when you need him?

The Following is by Matt Gillotti

The US and Eurozone economies will continue to decline over time. As we saw the global communities come together to announce indefinite QE we should expect to see that over time both the US and Eurozone economies will continue to decline with sporadic positive looking movements as it correctly declines until it reaches the endpoint in which the final fall will be deep and fast, maybe taking only two to six weeks. The current Eurozone form of QE with limits and the US Feds infinite QE with additional bonus support when needed should do nothing more than keep the big banks pouring the champagne while the supported markets ride higher on the false hopes and backing of the Fed. As we are clearing heading in the wrong direction for prosperity we should continue to protect our future wealth through gold and silver as we remember not to fall prey to a fictitiously sound economy and market. Gold is still at an affordable purchase price but may not be for much longer. As gold hits higher levels we should see those that can no longer afford to purchase it to start pounding the much cheaper silver as a store of wealth.

Even with the recent Eurozone adopted QE with limits the European economies continue to struggle. With Spain’s consistent reluctance to ask for a bailout we should see the Eurozone continue to falter. As Spain has balked at the pleas from others to seek assistance they are holding out in part due to the lack of support from the citizens and the included strings attached to a bailout. As we all know, as do they, the citizens of Spain are more than willing to take the route of public rioting to make their point and have their voices heard. As Spain slowly moves toward a bailout upcoming regional elections due to take place October 21^st could be seen as a political roadblock and factor into when Spain would be willing to request a bailout. In the meantime, we should expect that Spain with an already rapidly declining economy, and an unemployment rate over 23% to continue its rapid downward decent as it continues to feed fear into the Eurozone markets. With the Eurozone already in recession we must remember that any and all future Eurozone negativity could have extreme affects on the Eurozone as a whole. If for any reason any of the four, Germany, France, Italy, or Spain were to reach the point of full economic collapse the Eurozone as a whole will be dragged to a rapid death.

As we have seen the US dollar slowly losing its reserve currency status throughout the past year with trade deals that bypass the US dollar completely between China, Russia, and Japan just to name a few, we now see that Brazil’s finance minister Guido Mantega has warned that the Feds most recent bout of QE will reignite currency wars that will have global impact. Brazil being one of the fastest growing economies in the worlds right now and a large trading partner of the US has begun to form trading alliances with China and Russia in which they will conduct such trades in their respective currencies completely bypassing the US dollar. As the US dollar is dealt another blow to its world reserve currency status we can be assured that as one blow comes and goes another is surely in the works. The US dollar’s world reserve currency status along with its run as a fiat currency is rapidly declining.

Jim’s Opinion

Everyone has an opinion of QE3. Almost all are wrong.

 

What has taken place here in its size, and in an almost simultaneous international unified approach has no precedent in economic history.

 

QE1 and QE2 were not failures. Do you have any idea what the world would have looked like if every major bank in the Western financial world broke?

 

It is easy to be a naysayer and say let the banks go broke, but you have no idea how hard it would have hit you and yours and maybe gold and silver. This is not to say that Debt Monetization, which QE represents, is correct, but it was the only tool available to central banks that would create infinite cash for the Fed and Treasury to use in a totally discretionary manner. Governments, because of the size of their debt, were incapable of applying the better tool for reviving economic activity, which is fiscal stimulation. One thing for certain is the infrastructure of the USA is collapsing in front of your eyes. Dar es Salaam airport looks better on approach than JFK. Dubai is beyond description. Roads from the Beijing airport are brand new. The USA infrastructure is disgraceful for a major power. New York City roads look like "Mad Max and the Day After." However when you are the major debtor nation fiscal stimulation is simply not possible. It will not happen because it cannot happen.

 

Please stop listening to those that tell you QE will have no effect. They are "Ignorant to Infinity." QE3 is going to have an unprecedented effect, as it is now simultaneous and global in scope.

 

Please make note of all the governments that screamed at the Fed for the use of QE1 and QE2 that are now applying QE to infinity.

 

There will be no QE4 because QE3 is going to go on continually with a month or two off now and then. Please recognize that it is hard for markets to discount what they do not believe in and therefore by definition do not anticipate.

 

Know within 90 days the economic effects of QE3 will be entering markets for money and therefore the markets for gold, silver, and most certainly the dollar.

 

Gold is going to at least $3500. Silver will certainly perform well also. The real support for the US dollar is .7200 on the USDX and it will trade there. The euro will trade at $1.35 and $1.40.

 

Ron McEwen of MUX fame said it correctly: "Patience is bitter; but the fruit is sweet!"

 

Respectfully,
Jim

 

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 US MARKETS
When the "Cops" are in on it
by Bob Rinear

Over the years there's been a handful of like minded folks who have tried to show the world that the precious metals market is manipulated on a daily basis. People like our dear Bob Chapman, myself, Butler, Weir, etc. have written the articles, presented the numbers and asked the serious questions. Yet despite a lot of nodding their heads and making believe they're "on the job", the fact is the regulators just recently told us that their 4 year investigation into silver manipulation is going to end because they simply don't see enough evidence of it.  I'm not shocked.

Just this week we found out that Eric Holder was innocent of involvement with "fast and furious". Does anyone with a functioning brain cell believe that the "boss" wasn't up to his ears in this? Of course not, but because the big dogs always go free (think Corzine of MF Global) other folks are taking one for the team. Well, if no one could place Holder in the loop of a criminal gun running operation, it shouldn't surprise us that the CFTC and the watchdog regulators can't find the silver manipulation.

Let's just consider this for a minute. The commodities markets have "limits" on positions so that no one entity can "corner" a market. The whole idea of a free market is that they don't let someone with tens of billions of dollars literally “have their way” with the price of any one material. Yet somehow, despite the holdings being posted in various ways such as the COT (commitment of traders) report, etc, the regulators just cannot seem to find any collusion. Maybe we should help them out a bit.

As of Friday, the Commercial net short position in silver increased by another 2,352 contracts, or 11.8 million ounces. The Commercial net short position now stands at 236.4 million ounces of silver. Now, we like to look at them ranked by their particular "size" starting with the big 4 major institutions, then the 5 -8 smaller players and the balance which includes such things as hedge funds.

It seems that JPM the biggest of the "big 4" went short another 1000 contracts, while the others added about 400+ to that. The 5-8 junior players increased their short position by about 700 contracts. This was just the recent COT report folks, so you have to put this into context. While we can talk about futures contracts, most people function more along the lines of "ounces of metal". So how’s that work out?

With JP Morgan's increased position, they are short a whopping 27,000 Comex silver contracts. What's that mean? It means they are short over 135,000,000 ounces of silver. That's about 28% of the entire Silver futures market on the Comex. That's just ONE player.  But JPM doesn't act alone in this cabal, so we have to look into the other players. Going into last weeks cut off on Tuesday, the top eight players via size are short 262,100,000 ounces of silver.

Now although that number is completely outstanding on its own, many may wonder just how significant it is. I mean...if the entire market is five hundred billion ounces, then these 8 players shorting 260 million is not terribly egregious. Well, sorry. As a percentage of the entire Comex futures market in silver, the four majors are short 44% of the entire market. Add the 4 smaller firms and we add another 9% to the equation. Added up, just 8 firms are short a colossal 53% of the entire Comex silver market. Of that, JPM by itself holds half the position.

The regulators don't seem to think that this is any indication that they're influencing the pricing of silver. In what can only be described as the fox guarding the hen house, they apparently don't see any trouble despite just 4 players being short almost one half of the entire market. According to them, there's no collusion between them, no "ganging up", no backdoor deals. Yeah right. You bet.

Granted I'm harping on silver here, since I believe it has been manipulated more than any other metal ( or commodity at all for that matter) but lets not forget gold. In percentage terms on a 'net' basis, the top 4 firms are short 29.4% of the entire Comex futures market in gold...and the '5 through 8' players are short an additional 12.7 percentage points. So if we total this up, what do we find? In a market as large and global as gold, just 8 firms are short 42% of the entire Comex gold futures market.  Again the regulators wave us by, "nothing to see here folks keep on going".

Do you all get it? One would think that when you call your metals dealer and he charges you 30 dollars for your ounce of silver, that's the price that was discovered by untold millions of investors buying and selling in the open market. Nothing could be further from the truth. The price is set by the paper market, between the long futures and the shorts, and over and over we can prove conclusively that the shorts are only there to keep the prices down. Who knows where the true price of silver would be if these shorts were removed? 200? 500?

One may wonder why they got so aggressive this past week. The answer is pretty simple. While they’re always beating silver and gold, suppressing the price, this week they had to really try and put the brakes on it. Why? Because Helicopter Ben Bernanke just told us he’s printing an extra 40 billion a month for “ever”, and that means the dollar gets weak and the metals roar higher. They had to try their best to stop gold from entering hyperdrive and silver from breaking to new highs. Nothing bugs central bankers more than seeing “true money” in the form of gold and silver soar higher because of their ignorant monetary policy. Yes, they picked up the pace for this occasion folks. They didn’t want more and more people selling dollars and buying gold.

I've been asked many times "why would they do all that shorting and suppressing in the first place?" That's a big question. On the surface you'd have to think they make billions and billions doing this and that's the reason. But, they'd make billions letting it run and just going long, so that's obviously not it. My feeling is that the reason they do it and the reason they will not be stopped by regulators is because "they" aren't doing it. I believe they are just the trading desks doing the mechanical trades for the real client. And who'd that client you ask? Uncle Sam.

Each and every day the Governments of the world position themselves against each other in the currency markets, the swaps markets, etc. It's my opinion that the Government keeps silver under control as a hedge position against currency/swaps and other global banking markets. In a lot of ways, if silver and gold are allowed to run as they should, the dollar would indeed have to "crash".

I'm also asked if I think silver will ever get its chance to truly run. My answer is yes. The days of the dollar are numbered. At some point we're looking at a global "reset" and all currencies are going to be revalued. It's at that point that I believe silver and gold will attain their true value, where ever that might be. I'm thinking that places silver at 70 to 100 "dollars" the ounce, and one of the reasons we continue to buy the physical metal.

I have a pretty warped way of thinking, I'm comfy with that. But when someone as powerful as the government wants silver down....when top institutions like JPM beat it mercilessly... I think I want some. Anything they hate that much "must" be worth a whole lot. That's my guess.

www.investyourself.com

More than 1,000 American soldiers have lost their lives in Afghanistan in the last 27 months. This is more than the combined total of the nine years before. Thirty have died in August. The commander in chief is AWOL. Not a peep, although he ordered the White House flag flown at half mast for the Sihks that were killed. There is a deep disgust, a fury, growing in the ranks of the military against the indifferent incompetence of this president. It has taken on a dangerous tone. No one knows what to do about him, but the anger runs deep as the deaths continue with no strategic end in sight to the idiocy of this war. Obama has had 4 years to end this futile insanity, during which time he has vacationed, golfed, campaigned, and generally ignored the plight of our men and women in uniform. But, there is now a movement afoot in the armed services to launch a massive get out the vote drive against this president. Not just current active duty types, but the National Guard, Reserves, the retired, and all other prior service members. This is no small special interest group, but many millions of veterans who can have an enormous impact on the outcome of the November election if they all respond. The million military retirees in Florida alone could mean an overwhelming victory in that state if they all show up at the polls. It might not keep another one hundred U.S. troops from dying between now and November, but a turn out to vote by the military against this heart breaking lack of leadership can make a powerful statement that hastens a change to the indifference of this shallow little man who just lets our soldiers die.

FBI COMPUTER VIRUS SWEEPING ACROSS NATION

There’s a nasty computer virus going around that shocks users by putting on the screen a claim that the FBI and the federal government has taken control of the computer because it has been linked to illegal activity.

Further, it controls the computer’s Web camera and makes it look like an image of the user is being streamed to the government.

http://www.wnd.com/2012/09/fbi-computer-virus-sweeping-across-nation/

Out of the Pews and Into the Streets

Just 17 days before Election Day, American voters of all faiths will take to the streets in the name of religious freedom and in protest of the Obamacare contraception mandate  – with one of the major protests unfolding on President Obama’s doorstep.

On Oct. 20 at 12 noon, more than 100 “Stand Up for Religious Freedom” rallies sponsored by the Stand Up for Religious Freedom Coalition will take place in cities coast to coast, including Boston, Chicago, Detroit, Honolulu, Los Angeles, Las Vegas, Minneapolis, and others.

http://www.wnd.com/2012/09/out-of-the-pews-and-into-the-streets/
U.S. Jobless Claims Drop Slightly to 382,000

The number of U.S. workers filing applications for jobless benefits remained elevated last week, showing that the labor market is still struggling to sustain improvements.

Initial jobless claims, a measure of layoffs, were down by 3,000 to a seasonally adjusted 382,000 in the week ended Sept. 15, the Labor Department said Thursday. But claims for the week ended Sept. 8, which were revised up to 385,000 from an initially reported 382,000, were elevated due to business closures after Hurricane Isaac, the Labor Department said.

Last week's figure is above expectations. Economists surveyed by Dow Jones Newswires forecast 373,000 new applications for jobless benefits last week.

The four-week moving average of claims--which smoothes out weekly data--increased by 2,000 to 377,750. That is the highest level since the week ended June 30.

A Labor economist said Thursday that there was nothing unusual about the most recent week's data. In the prior week, about 9,000 additional claims were due to the storm that hit several Gulf Coast states and Puerto Rico in late August, he said.

Layoffs trending higher is likely a concern to Washington policy makers.

Federal Reserve officials continue to closely monitor the employment data and said last week the central bank would start buying $40 billion of mortgage-backed securities--with the goal of lowering interest rates--every month until the job market improves.

"The idea is to quicken the recovery to help the economy begin to grow quickly enough to generate new jobs and reduce the unemployment rate," Fed Chairman Ben Bernanke had said at a news conference.

The claims report Thursday showed the number of continuing unemployment benefit claims--those drawn by workers for more than a week--dropped by 32,000 to 3,272,000 in the week ended Sept. 8. Continuing claims are reported with a one-week lag.

The number of workers requesting unemployment insurance was equivalent to 2.6% of employed workers paying into the system in the week ended Sept. 8. The rate has remained constant since mid-March.
Markit Flash PMI in September at 51.5, Unchanged From August

U.S factory sector is expanding modestly this month as output slows to the lowest in three years, according to an early reading of September activity released Thursday.

The flash purchasing managers' index compiled by data provider Markit for this month was unchanged from the final reading of 51.5 in August, first reported as 51.9. A reading above 50 means expansion.

The report characterized the sector as showing "modest improvement."

The Markit report follows a very negative factory survey put out Monday by the Federal Reserve Bank of New York. Later Thursday, the Philadelphia Fed will release its results on its regional manufacturing. Economists expect the report to show activity still contracting in September.

In September, the Markit flash readings of the subindexes were mixed. The new orders index improved to 52.4 from 51.9, but the exports index remains in contraction, slipping to 47.9 from 48.8.

Factories are responding by holding down production. The output index fell to 51.2 from 51.9 in August. Markit said the reading was the lowest in three years.

The employment index in September edged up to 52.7 in September from 52.4 last month.

Price pressures are picking up this month. The input price index increased to 53.6 from 50.2 in August. The output price index also rose, to 51.8 from 48.9.

Markit began its U.S. PMIs in May. The report said the U.S. flash index had about 85% of the full survey panel of more than 600 companies.

Aug U.S. Leading Index Falls 0.1%, Below Expectations

The index of leading economic indicators fell in August, suggesting little momentum about the U.S. economy, according to data released Thursday.

The Conference Board said its leading index dropped 0.1% last month after a revised 0.5% gain first reported as 0.4%.

The index has fallen in three of the last six months, as the recovery sturggles for traction.

Economists surveyed by Dow Jones Newswires had expected the index to be unchanged.

"Weak domestic demand continues to be a major drag on the economy," said Ken Goldstein, economist at the board.

In August, only four of the 10 leading indicators increased. The most positive indicators were the interest rates spread and stock prices. For the second month in a row, the biggest negative was the new orders index compiled by the Institute for Supply Management.

The board also reported its coincident index increased 0.1% in August after an unrevised 0.3% gain in July.

The lagging index increased 0.2% after a revised 0.3% advance, first reported as 0.4%.
U.S. Current Account Gap Narrows In 2Q

The U.S. current account deficit narrowed in last quarter, as the trade gap shrank and the surplus on income rose.

The broad measure of U.S. international transactions registered a shortfall of $117.41 billion during the April through June period, or 3.0% of gross domestic product, the Commerce Department said Tuesday.

Economists surveyed by Dow Jones Newswires had forecast a deficit of $125.0 billion in the second quarter.

The contraction in the current account gap--which measures mostly trade in goods and services but also includes transfer payments and investment income--followed an increase in the previous quarter. The first quarter deficit was revised down to $133.62 billion, or 3.5% of GDP, from an initial estimate of $137.31 billion.

The trade gap decreased to $139.32 billion last quarter from $148.36 billion in the first quarter. The gap narrowed as exports hit record levels in June and falling oil prices helped push down imports.

However, a slowing global economy threatens exports and oil prices have risen since the end of June.

The large trade deficit requires the U.S. to attract large amounts of financing from abroad, including from China, or the dollar will lose its value.

U.S. dealings with China have been a hot-button issue in the presidential election. The administration filed a complaint Monday with the World Trade Organization over China auto subsidies. The move comes as Republican challenger Mitt Romney has blasted President Barack Obama for not being tougher on China and vowed to name the No. 2 trading partner a currency manipulator.

Some observers say the nation's reliance on China for financing made the current and previous administrations reluctant to take a stronger stance.

The Commerce report showed net financial inflows to the U.S. were lower in the second quarter, decreasing to $88.5 billion from $164.7 billion in the prior period.

Foreigners bought a net $7.4 billion of U.S. Treasury securities last quarter, after buying a net $43.8 billion in the previous quarter.

Net sales of U.S. stock by foreigners were $8.6 billion last quarter, shifting from net purchases of $18.9 billion in the first quarter.

Foreigners sold a net $33.3 billion of U.S. corporate bonds last quarter, compared with sales of $14.8 billion the first quarter. Foreigners sold a net $1.3 billion of federal agency bonds, after selling $400 million in the first quarter.

Foreign direct investment in the U.S. was $33.5 billion, up from $22.2 billion in the previous period.

Surplus on income increased last quarter to $55.5 billion from $47.4 billion.

Unilateral current transfers, which includes foreign aid from the U.S. to other countries and money from foreign workers to families living abroad, increased to $33.6 billion from $32.7 billion.
China Net Buyer of U.S. Treasurys in July, Remains Top Holder

China remained the largest foreign holder of U.S. Treasurys in July, but Japan continued to threaten taking over the no. 1 position as a net buyer with another month of record holdings, the Treasury Department said Tuesday.

Overall, foreigners were net buyers of long-term U.S. financial assets in July, according to the monthly Treasury International Capital report, known as TIC. Buying of Treasury bonds and notes--seen as a safe haven amid ongoing turmoil in the euro zone--was the strongest it's been since January.

China's holdings rose marginally by $2.6 billion to $1.150 trillion, following net selling of $17 billion in June.

Meanwhile, Japan remained the second-largest holder of Treasurys, lifting its holdings to $1.117 trillion from $1.110 trillion in June. While China's purchases have fallen by around $165 billion in the past 12 months, Japan has boosted its portfolio by roughly $232 billion in the same period. The dollar-buying has come as Japan defends the yen against appreciation that could damage its economy and as China has appreciated its currency. Japan has indicated it may intervene again after the U.S. Federal Reserve's decision earlier this month for further monetary policy easing put pressure on the yen.

Among all foreign investors, net purchases of U.S. Treasury notes and bonds totaled $50.0 billion, compared with net buying of $32.4 billion in June. Private foreign investors bought a net in $23.2 billion Treasury notes and bonds, after buying a net of $11.6 billion the previous month.

The closely watched figure of net long-term securities transactions showed total buying of $67.0 billion in long-term U.S. securities in July, after purchases of $9.3 billion the month before.

More broadly, net purchases of long-term U.S. securities, including transactions that don't occur on the open market, totaled $51.1 billion following net selling of $6.0 billion the month before.

The monthly Treasury report highlights cross-border acquisitions of securities with maturities of more than one year including non-market transactions such as stock swaps and principal repayment on asset-backed securities.

The report's most comprehensive category, "monthly net TIC flows," includes non-market flows, short-term securities and changes in banks' dollar holdings. This measure of net foreign capital inflow was $73.7 billion, compared with an inflow of $15.1 billion in June. Financial market analysts consider the monthly data from the Treasury Department to be a significant but imprecise gauge of how easily the U.S. can finance its trade deficit.

Gasoline pushes up inflation, could dent growth

A jump in the cost of gasoline pushed U.S. consumer prices up in August at the fastest pace in more than three years and squeezed spending on other items, threatening to further slow the already sluggish economy.

At the same time, production at the nation's factories, mines and utilities dropped by 1.2 percent, the biggest decline since March 2009, other data on Friday showed.

The sour mix of numbers was tempered by an unexpected increase in consumer sentiment in early September and signs underlying inflation pressures remained contained.

Economists said the reports helped justify the Federal Reserve's decision on Thursday to launch a third round of bond purchases to try to lower borrowing costs and spur growth.

"It's very clear the economy is soft and it doesn't look like there is any real underlying inflation pressures the Fed needs to worry about, so they are going to keep their foot on the gas for a long time," said Jeremy Lawson, a senior economist at BNP Paribas in New York.

The Consumer Price Index increased 0.6 percent last month, the first increase in five months and the biggest gain since June 2009, the Labor Department said.

Gasoline prices, which also recorded their largest increase since June 2009, accounted for about 80 percent of the rise.

http://www.reuters.com/article/2012/09/14/us-usa-economy-prices-idUSBRE88B1JM20120914?
Industrial output drops most in three years on factories, storm

Industrial output fell in August by the most in over three years as production slowed in factories and a hurricane temporarily shut down oil and natural gas rigs in the Gulf of Mexico.

Industrial production fell 1.2 percent, the Federal Reserve said on Friday. That was the steepest decline since March 2009. Analysts polled by Reuters had expected industrial output to be flat last month.

In March 2009, when the U.S. economy was still languishing in recession, industrial output declined by 1.7 percent.

The decline was driven by a 0.7 percent drop in factory output, a sign that the cooling global economy appears to be holding back growth in America's manufacturing sector.

The Fed estimated that Hurricane Isaac, which hit the Gulf Coast last month, contributed about 0.3 percentage point to the overall fall in output.

The storm dragged on mining output, which declined by 1.8 percent in August.

Industrial production encompasses output from factories, utilities and mining operations, including oil and natural gas production.

Utilities output declined 3.6 percent in August.

Capacity utilization, a measure of how fully firms are using their resources, was at 78.2 percent in August, below forecasts and declining from 79.2 percent in July.

MARC FABER: FED POLICY WILL 'DESTROY THE WORLD'

“It is difficult to tell what will happen. I happen to believe that eventually we will have a systemic crisis and everything will collapse. But the question is really between here and then. Will everything collapse with Dow Jones 20,000 or 50,000 or 10 million? Mr. Bernanke is a money printer and, believe me, if Mr. Romney wins the election the next Fed chairman will also be a money printer. And so it will go on. The Europeans will print money. The Chinese will print money. Everybody will print money and the purchasing power of paper money will go down. And I don't like bonds. I don't particularly like equities, but I think equities are a better space to be in than bonds.”