Credit & Collections: The 500 LB Gorilla in the Room

By: Alan Walsh, Owner, Huntington Consultancy

www.huntingtonconsultancy.com

info@huntingtonconsultancy.com

(714) 465-2749

 

A Topic That Makes People Uncomfortable

Credit & Collections is a topic that makes business people grit their teeth. By human nature, they instinctively shrink away from it.

Denying credit runs counter to our sales-oriented business mantra.. and few people like to make collection calls.

Sales forces resent the whole function as an intrusion on their selling activities and customer relations. They want no part of helping in the collections effort for fear of damaging their sensitive customer relations.. they want unlimited credit extended to everyone.. and they fear & resent the Credit Department contacting their customers.

Collections people tend to be shunned, and feel unappreciated. Senior managers are forever trying to find ways to blunt the Credit Department’s “teeth” for fear of damaging customer relations; and often intercede inappropriately in collection efforts.. short-circuiting the process and damaging the credibility of the Collection Representatives in the eyes of the customer. General Managers are usually sales-oriented, so they give a much more sympathetic ear to the Sales Staff than to the “evil” Credit Department.

Small businesses are especially sensitive to Credit & Collections.. because they covet every sale.. their credit review/assignment resources are usually slim to none.. and the owner is often the one who has to pick up the phone & ask for money because there’s no one else to do it. They find it awkward & painful to shift from selling-mode one minute –to- collection-mode the next. Many businesses have failed because the owner just couldn’t bring him/herself to make the hard calls. Turnaround experts make big fees taking control of businesses and doing hard collections the owner can’t emotionally deal with.

Yet Credit & Collections is necessary in every business. Even internet companies face the prospect of having customers challenge credit card transactions; and then having to justify getting paid to the credit card company.

 

Uncollected Receivables Raise Havoc to Company Financials

The damage done by an uncollected receivable is wide-spread. Not only does the company lose all the revenue to cover the money spent buying/producing the products & services and putting them in the customer’s hands.. but also the revenue that would cover the proportionate portion of overhead expenses, and the profit piece, are lost. Plus, most companies still pay the salesman a commission despite the fact that the sale was never collected.

 

Improving the Credit & Collection Function

No business can stand to have any significant losses due to uncollected receivables for long and hope to survive, and yet Credit & Collections is usually a less-then-optimum function in most companies; relegated to some corporate back-water. That having been said, this article presents some practical suggestions based upon experience by which companies can improve their Credit & Collections efforts.

  

The Corporate Culture Must Change

From the President/CEO on down to the people making the collection calls, an attitude and culture change is essential. This is done by recognizing what a sale really constitutes.

A sale is a mini-contract. You agree to deliver goods or services to the customer within a certain timeframe, at a certain price.. and the customer agrees to pay a certain amount to you within a certain timeframe. Failure to pay constitutes breach of contract –and- theft.

All communications with the customer regarding the unpaid receivable should be made in an unemotional, fact-based, even-handed manner; stressing the contractual business obligation. All communications with the customer should convey a consistent message; without short-circuiting interference being introduced at any level of the company. If the company decides for whatever reason to “eat” –or- forgive the debt, it should be done in a manner that doesn’t undercut the credibility of the Collections personnel in the customer’s eyes.

 

Get Sales Into the Picture

The organization that needs to make the biggest cultural change is Sales. They need to be made aware that they’re part of a bigger organization.. that uncollected receivables are hugely damaging.. and that they have a role to play.

 

The Expanded Role of Sales

Sales is the front-line of the company. They’re the company’s eyes and ears in customer relations. There’s much they can and should contribute to protecting the company.

• Sales physically visits customers, and is in a position to make observations that can be used in making credit extension decisions; such as the condition of the business.
• Sales can sniff out customers who look likely to default and/or disappear.
• They can advise Credit promptly when the customer actually closes their doors and/or vanishes.
• Sales can go out and pick up checks. It’s much harder for a customer to dodge unpaid debts when there’s someone standing at their desk.
• Sales can intercede when the customer isn’t answering collection calls.
• Sales can convey Credit messages from the company to customers in a close and personal manner.
• If a customer disappears, Sales can make local inquiries to get clues for tracking the customer down.
• Sales usually knows how to navigate the customer’s internal organization better than Credit.

In severe cases, company management should be prepared to make customer visits too.

 

Giving Sales Their Wake-Up Call

So, given the reality that Sales is the natural enemy of Credit & Collections, how does management elicit their cooperation?

A very direct and effective method is to pay their commissions based upon on collected sales. No Collection.. No Commission. Suddenly, collections become an important factor in their lives. They still won’t like it, but it will force a fundamental change to their mind-set. There’s nothing like hitting someone in the pocketbook to get their attention. Besides, why should they get paid for a sale that was never fully consummated?

It would also help for someone from Finance & Accounting to make a brief presentation to Sales showing the ways in which uncollected receivables damage the company. Most sales people are not very sophisticated in such matters, and need to understand it. They need to comprehend that their prospects are tied to the overall health of the company.

 

Management’s Wake-Up Call

Many companies pay bonuses to managers based upon company performance. But bad debts never seem to figure into the formula. Time for a change. There should also be some clear and coherent rules as to when managers can intercede in the credit & collection process; and how.

Credit & Collections is a Whole-Company Concern

At the very least, Credit and Sales should be meeting periodically to discuss customer statuses. Problem-accounts can be discussed and strategies for joint action devised. Sales should also have the opportunity to discuss the possible increase of Credit Terms for good customers who represent increased sales opportunities. I would expect the President/CEO would be paying attention to these discussions, if not actually participating.

Why do most companies restrict Credit Personnel to working from their desks? A surprise strategic visit to a past-due customer by a Credit Rep. can be very effective in shaking loose money and/or achieving a payment plan. Face-to-face contact is much harder to dodge than a phone call; and psychologically powerful. The Credit Rep. can also visit a new customer to gather information on determining appropriate Credit Limits; or reviewing the limits on an existing one. Besides, face-to-face contact establishes relationships.

In sticky “big-bucks” situations, perhaps the Sales Manager, and/or the President/CEO should be paying the customer a visit. Ratcheting up the attention in this way can be extremely effective.

Know Thy Customers

Of course you need to understand your customers and adjust accordingly. For instance, if you sell materials to a customer who does contract work, he’s not likely to get paid for his work until his contract is complete. When he gets paid, you get paid. Your payment terms will mature, and then he’ll start stalling you. Unfortunately, most aren’t sophisticated enough to bring this situation to your attention up-front, so bad relations ensue. This is an opportunity to become proactive and work out realistic terms that enable your companies to work together on a long-term basis; building loyal customers.

Turning the Tables.. Why Should Sales Have All the Fun?

Credit also needs to take the big-picture view and look for opportunities to promote the company with the resources they have at hand. For instance, years ago I developed an inventory-financing program that enabled new customers to acquire inventory, and existing customers to acquire inventory for expansion, on extended terms. The customer would be required to sign a lien against all their inventory until the debt was paid. The program was hugely successful and enabled us to increase our business by about 1/3 over two years. Only two customers defaulted, and we were able to recoup enough inventory to keep our bad debt losses to a pittance. Customers could use the inventory to open new stores, and have time to get them self-sufficient before the debt came due. It was a win-win for everyone, and of course made Sales very happy..  as well as building loyal customers.

Conclusion

There are other things that can be done, but this article should get the main point across and provide some food for thought. Credit & Collections should be made a whole-company concern, because the whole company is impacted.

S&P on the Kill List: U.S. Government Seeking Vengeance for S&P Downgrade of U.S. Credit.

S&P On the Kill List By Douglas French Thanks to Douglas French and The Daily Reckoning

“Paybacks are a bitch,” as they say.What was Standard & Poor’s thinking back in August 2011, when the ratings agency took the Red, White, and Blue’s AAA rating away? A rating the most powerful government in the history of the world had held for 70 years. S&P downgraded long-term US debt to AA-plus. That score ranks lower than over a dozen governments, including Liechtenstein’s, and is level with Guernsey’s and France’s.McGraw-Hill Companies (S&P’s owner) may be a big corporation, but you don’t kick sand in Uncle Sam’s face like that and get away with it. Now the government, in the person of Attorney General Eric Holder, is kicking back. The US government is accusing the ratings agency of committing fraud by inflating the ratings of mortgage investments, which, of course, created the financial crisis.S&P, along with its competitors Fitch and Moody’s, famously rated the mortgage security goulash that Wall Street concocted AAA, thus allowing everyone everywhere to participate in America’s housing boom. And why not? According to computer models, housing prices never go down. Pension funds as far away as Reykjavik and Heerlan were gobbling up what Wall Street was serving because all three ratings agencies provided their stamp of approval. According to the government’s suit, S&P “knowingly and with the intent to defraud, devised, participated in, and executed a scheme to defraud investors.” Yep, in the minds of the government’s gumshoes, the clairvoyants at S&P knew these securities stunk to high heaven. They knew, or should have known, that the housing market was ready to crash any moment, but they were greedy capitalists who, while they were making a buck, created and carried out a diabolical plan to bring the financial world to its knees. Yeah sure, that’s what happened. S&P should be ashamed for maintaining that it ratings “were objective, independent, uninfluenced by any conflicts of interest,” the suit said. The suit centers around 40 collateralized debt obligations (CDOs) created from 2004-2007. The firm was paid $13 million for rating these securities. Giving these securities the highest rating must have been fraud, because everyone knew by that time that the market was toast. Right? After all, in 2004, the nation’s deposit insurer and bank regulator, the Federal Deposit Insurance Corporation (FDIC), published a paper on housing that concluded: “It is unlikely that home prices are poised to plunge nationwide, even when mortgage rates rise.” This is because “housing markets by nature are local, and significant price declines historically have been observed only in markets experiencing serious economic distress.” Plus, housing markets have “characteristics not inherent in other assets that temper speculative tendencies and generally mitigate against price collapse.” In conclusion, “it is highly unlikely that home prices would decline simultaneously and uniformly in different cities as a result of some shift, such as a rise in interest rates.” Whoops. Where’s the lawsuit against the FDIC?

Why the U.S. Government Hates -and Fears- Gold

By Alan Walsh

The U.S. Government hates Gold because it serves as a clear, unambiguous, and constant sign of their fiscal irresponsibility.

U.S. currency used to be issued by the U.S. Government, and was backed by Gold. You could literally trade-in your dollars for Gold. Then, the Federal Reserve system was created, the dollar was disconnected from Gold, and the U.S. government stopped issuing currency. To really “seal the deal”, the government even outlawed individual ownership of Gold for awhile and forced citizens to sell it to them at a fixed price they set; then they raised the “official” price of Gold, devaluing every dollar citizens held by about 40%.

The Federal Reserve (also referred to as the U.S. central banking system, or central bank) is not a government agency; it’s a private bank, owned by other big banks, and run by people from those banks. When the U.S. Government wants additional money to spend, it buys it at face value ($100 for a $100 bill, for instance) from the Federal Reserve; which creates the currency. That’s why your dollars say “Federal Reserve Note” on them. In order to buy the currency, the U.S. government goes into debt  via Treasury Notes & Bills, etc. The government then spends that money.

Why did the U.S. government do this? So politicians could avoid accountability, buy votes, get reelected, increase their power, and transfer the effect of their spending to the future. This is how the federal government got to be the monster it is today. Under the old system, the government could only spend as much as it held in gold-backed dollars. If they wanted to spend more, they had to tax citizens. Citizens don’t like higher taxes, and get upset. Politicians lose jobs. Government was held accountable. The new Federal Reserve system removes this nasty inconvenience by letting the politicians just go buy currency from the Federal Reserve, creating new debt in the process; and government debt is a claim on the productivity of the nation – therefore it is your debt. Government doesn’t produce; it only consumes – your wealth. The income tax was created at the same time as the Federal Reserve system to pay for this debt.

As government buys more dollars from the Federal Reserve (and creates more debt in the process), it increases the number of dollars in circulation; thus creating inflation – plus damaging boom & bust cycles in the economy – plus interest expense on the debt. This is where Gold becomes very annoying to them. Gold, like any other commodity, adjusts in price with inflation and glaringly points it out. As the number of dollars in circulation goes up, the price of Gold rises.  People see their purchasing power in dollars go down, so they trade them for Gold; which holds its purchasing power in times of inflation and serves as alternative money. Government doesn’t want you to notice their little shell game, and they don’t want you to stop using and holding their inflationary dollars, so they hate Gold.

Our government, and other governments who play the same shell game, try to control the price of Gold and hold it artificially down through surreptitious trading activity in league with major financial firms. They try to send you false signals about their inflationary borrow & spend activity by artificially holding the cost of Gold down. If the price of Gold is low, everything must be okay, right? Wrong! Very, very wrong!

We’ve now reached a point where government borrowing and spending is so extreme that they can’t artificially hold Gold down to the price level they would like anymore.  Thus, Gold is trading near $1,700.00 per ounce. Many experts argue that if the government wasn’t surreptitiously intervening in the market to hold the price of Gold down, it would be trading for $3,000 or more.  Regardless, the rise in the price of Gold is a clear and unambiguous signal that government spending is out of control. The effect of this is to undermine peoples’ faith in the dollar and our government.  That makes it hard for government to keep up their shell game. Their borrowing & spending has also created a debt that the income tax can’t begin to cover – plus those nasty and growing interest obligations.

Sober people have also questioned how much of the Gold the government holds it actually owns anymore. They suspect that the government’s secret Gold sales to flood the market and hold the market price of Gold down have been so extensive that very little of the Gold they hold is actually owned by them anymore. Large Gold sales usually don’t involve physical transfer. An electronic record is created to note the new ownership. Therefore the government may be sitting on a large cache of Gold that “we the people” don’t own anymore. Perhaps this is partly why the price of Gold has risen despite government’s best efforts to hold it down. Maybe they’ve run out of Gold to sell. We can’t know for sure, because the government hides this activity behind a thick wall of secrecy. But bits and pieces of info leak out now and then, and they paint a dismal picture. Investigators have even uncovered documents created by central bankers for central bankers on how to execute market intervention between each other to hold the Gold price down.

As the government shell game grows, people start paying attention, and realizing how they’re being hosed by the government’s inflationary, destructive borrow and spend policy. If more Americans understood how our monetary policy works, and what government’s doing to them, they’d be screaming. Government does everything it can to keep us in ignorance.

Faith in the U.S. Dollar has been so severely undermined that other nations, who are not so naive in these matters, are seriously talking about abandoning the dollar as the “world currency”, a beneficial status which the U.S. has enjoyed since the end of World War II. If that happens, investment coming into the U.S. will decline and government will find it increasingly difficult to sell or roll-over their debt; China being our largest current creditor. Then the U.S. will hit a “fiscal cliff” that makes the current one look like a ride in the park.

The U.S. national debt is now over $16 Trillion dollars; over $52,000 per person, and approx. 125% of gross domestic product (gross domestic product being our productivity as a nation – your productivity – the productivity our government taxes you on) – a new record by far. The current government’s policies alone added $8 Trillion to that debt in the last four years. Then there’s the interest on all that debt. Budget projections indicate that the national debt could hit $20 Trillion in the next couple years if we keep going the way we are. Other nations are starting to look at the U.S. like Greece; a bankrupt financial disaster. We’re mortgaging our nation to entities like China, who are not exactly our friends. The current administration’s indebted the nation to a greater extent than any other, but they’re not the only perpetrators. This has been going for decades since the new system was created. It’s not a Democrat or Republican problem – it’s a national tragedy.

Gold at $1,700 an ounce sends this signal clearly – which government fears and hates.

The government wants you to hold their inflationary dollars. The Federal Reserve does too; and bad-mouths Gold. The finance houses who surreptitiously work with the government to control the price of Gold tell you that Gold is an unproductive asset, and you should hold dollars instead; while they quietly buy it for their own accounts. They’re all propagandizing you to keep their shell game going. I remember one time a couple of years ago when one of the major financial houses (JP Morgan I believe) was publicly telling it’s clients to sell Gold, while privately buying it for their own account.

The national tragedy goes even deeper. The Federal Reserve holds secret meetings where it shares inside information with the finance houses who help it; information that they use to make millions and billions on the markets from you unknowing investors. If you think the equity & debt markets are free and open, think again. It’s all manipulated.

Let’s talk about one of the many ways in which your government shafts you with this shell game – Social Security. You are required to make tax payments into Social Security. These payments are made with post-income tax dollars (you’re first income-taxed on the income you pay the social security tax with). The government spends the social security revenues (money) and replaces them in the social security trust fund with government debt instruments; thus, the government spends your social security contributions as it sees fit, and replaces them with new government debt. Of course, government debt is a claim on the productivity of the country – your productivity – and therefore represents a new debt you as citizens take on. This is important to note, because government spends your social security contributions, and creates a new debt owed by you as a citizen (another tax) for payment of benefits to you. Then, when you receive your benefits, up to 85% of them are subject to income tax depending on your filing status and how much income from other sources you have coming in.

To recap, the government first taxes the income you pay social security taxes with (income tax), then taxes you for social security (social security tax), then spends the money and replaces it with new debt (a new claim on your productivity, or tax), and then taxes you on your benefits (income tax). That’s three taxes on the money you put into social security, plus the social security tax itself. Of course, the government must pay interest on the new debt they created (another claim on your productivity, or tax), so really you pay five taxes; and your contributions are spent now for anything the government wants. Most citizens think the government is taking their money and putting it into a social security trust fund (savings account) to pay your benefits. Nope! That money’s gone. They spent it and replaced it with debt – debt that you owe as citizens.

The government says that your benefits money is safe because it’s invested in instruments guaranteed by the U.S. government. What they really mean is that your benefit claims are backed by their ability to tax you; or create new debt that you owe as a citizen; and that’s the only way those benefits are going to be paid. They just keep spending the tax money as it comes in, and pass the buck for social security obligations to future generations. Neat trick huh?

Additionally, “people retiring today are part of the first generation of workers who have paid more in Social Security taxes during their careers than they will receive in benefits after they retire. It’s a historic shift that will only get worse for future retirees, according to an analysis by The Associated Press.”  The government absorbed all the money you put in, plus the employer contributions, and you won’t even get back what you alone put in; let alone all the interest you could have earned on that money over the years. This is what your government has done for you. Isn’t it great? What a deal!

Your wealth, purchasing power, and financial stability are being undermined every day by the government’s borrow & spend shell game, the underhanded dealings of the Federal Reserve and it’s finance house cronies, and very likely the sale of our nation’s Gold reserves (your Gold reserves) to manipulate the markets and fool you. Even your most basic “protections” are being undermined by government subterfuge. Gold serves as a clear warning, and an alternative.

That’s why the U.S. government hates -and fears- Gold.

Be informed.

Learn More About the U.S. Government Monetary Policy:

http://walshal.wordpress.com/2009/04/11/monetary-policy-a-primer/

Other Suggested Reading:

America Has Become a Pinata

http://walshal.wordpress.com/2012/12/28/america-has-become-a-pinata/

Cashflow is King

New article from Alan Walsh: Cashflow is King.

Click to go to article on Slideshare

Credit and Credibility: by Greg Canavan

Is it laughable, or lamentable? The market, that is. In the past few years, it has become a joke…a tool of manipulation, an unreliable source of information. Despite the outperformance of the US equity markets this year, ordinary investors (presumably people with savings they would like to invest in productive and attractive businesses) are not interested.

Reuters columnist Felix Salmon recently posted a few charts to highlight this trend. This one, originally appearing at ZeroHedge, shows the decline in trading volumes since the credit bubble bust in 2007/08.

Using the Monday after Thanksgiving as the comparison date (the first day of trade after the 2-day Thanksgiving holiday) trade volumes in 2012 are back to 1997 levels. So while you’re being told a recovery is underway, it’s clearly not a recovery in investor confidence or involvement in the stock market.

Read more: Credit and Credibility http://dailyreckoning.com/credit-and-credibility/#ixzz2DkEOKUxw

Germany Tip-Toes Toward a Euro Exit

Germany Tip-Toes Toward a Euro Exit

Dan Amoss The stock market will not remain in its current tranquil state. Investors will soon be roused from their blissful trance. This trance traces its origins back to the mass self-delusion that central banks can revitalize multi-trillion-dollar economies, simply by prodding investors into stocks and other “risk assets.” Investing is not that simple. The comparison between bond yields and stock yields — two completely different investments — has become absurd. Bonds are contracts involving a fixed stream of cash flows and a predetermined maturity date. Stocks are claims on highly uncertain streams of future free cash flows that often stretch out for decades. Many risks can enter the picture and alter the trajectory of free cash flow — and investors’ expectations of them. Risks tend to appear out of the blue and smack investors out of their blissful trance — a trance created by central banks that have shifted far too much attention on the returns of stocks versus bonds… Here is just one negative catalyst growing closer as the weeks and months pass: Germany could exit from the euro and return to the deutsche mark. While a German exit would offer long-awaited clarity about the future of Europe, it would also spark a mad scramble to adjust to a new reality. A German exit would trash the euro’s value against the currency that’s steadily becoming the reserve of choice: gold. Only weak economies with bankrupt governments would be left standing behind the euro. The European Central Bank (ECB) would be free to monetize as much Italian and Spanish debt as it wished (i.e., print euros to buy the government bonds of Italy and Spain). The economists calling for a weaker currency to restore prosperity to the PIIGS countries would get to see their prescription play out in a real-world laboratory. Results would show that currency debasement does not create stronger, more competitive economies. Countries left in the euro would see collapsing living standards: import prices would rise and capital investment would fall amid a chaotic currency regime. ECB president Mario Draghi famously deemed the euro “irreversible”; he would do whatever is necessary to preserve it. But what Draghi sees as necessary will eventually be seen as intolerable in creditor countries like Germany. Once Draghi starts monetizing Spanish debt, Germany and other wealthy countries will view the euro’s costs as greater than its benefits. The German central bank — the Bundesbank — still exists. The Bundesbank could convert its liabilities from euros to deutsche marks at a predetermined exchange rate and take a one-time write- down on assets related to claims on PIIGS central banks. It would certainly be costly, but the alternative is worse: perpetually financing eurozone states unwilling to restructure public benefit programs unaffordable for their economies. Having seen the example of Greece, the Spanish public suspects that austerity will only make things worse. Spain will come to believe that its salvation lies in the printing press — in the ability to inflate away its heavy debt burden. After promising markets that the ECB would buy Spanish debt, Mario Draghi now has no choice but to fire up the euro printing press. Most other debt holders will flee the chaos unfolding in Spain. They’ll refuse to hold Spanish bonds at yields too low to compensate for default risk. The ECB, once it establishes a fake, above-market price for Spanish bonds, will ultimately find itself the only holder of those bonds. This is what happens when central planners impose prices far from what private investors consider fair value (in this case, pushing Spanish debt yields to below 4%, versus a much higher market-based yield). Once the German taxpayers see that the ECB will become the majority holder of Spanish debt, they will insist that German politicians plan an exit from the euro.

A Dummy’s Guide to the 2007-2008 Financial Crisis

Helga is the proprietor of a bar.  She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar.

To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later.  Helga keeps track of the drinks consumed on a ledger; thereby granting her customers loans.

Word gets around about Helga’s “drink now, pay later” marketing strategy and as a result, increasing numbers of customers flood into Helga’s bar.  Soon she has the largest sales volume for any bar in town.

By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer; the most consumed beverages.

Consequently, Helga’s gross sales volume increases massively.  A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Helga’s borrowing limit.

He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.  At the bank’s corporate headquarters, expert traders figure a way to make huge commissions; and transform these customer loans into DRINKBONDS.

These “securities” then are bundled and traded on international securities markets.

Naive investors don’t really understand that the securities being sold to them as “AA Secured Bonds” are really debts of unemployed alcoholics.  Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Helga’s bar.  He so informs Helga, who then demands payment from her alcoholic patrons.  But being unemployed alcoholics, they cannot pay back their drinking debts.

Since Helga cannot fulfill her loan obligations she is forced into bankruptcy.  The bar closes and Helga’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%.  The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.  The suppliers of Helga’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities.  They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations.  Her beer supplier is taken over by a venture capital asset management firm; which immediately closes the local plant and lays off 150 workers.

Fortunately though – the bank, the brokerage houses, and their respective executives are saved and bailed out by a multi-billion dollar no-strings-attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who’ve never been in Helga’s bar.

Now do you understand?

Still Think Gold and Other Financial Markets Aren’t Manipulated? – Read Their Ad!

The Bank for International Settlements Bares It’s “Dirty Little Secret”.

Thanks to;

CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc. -and- Researcher R.N.

The powers-that-be do their best to hide their manipulations of the financial markets, but every now and then the truth leaks out.

A researcher found a 24-page brochure prepared by the Bank for International Settlements to introduce itself to prospective members at a seminar at BIS headquarters in Basle, Switzerland, in June 2008.  The brochure includes an advertisement for the gold market-rigging services provided by the BIS to its 50 or so member central banks.  Page 17 of the brochure touts “Our Products,” including “Gold & Forex Services — Interventions.“

Can they make it any clearer?

Debt Derivatives and Gold will Explode Shortly

Courtesy of: CHRIS POWELL, Secretary/Treasurer Gold Anti-Trust Action Committee Inc.

Debt derivatives and gold will explode shortly, von Greyerz tells King World News

Fund manager Egon von Greyerz, interviewed by King World News today, expects debt derivatives to start exploding across Europe and the United States soon, and gold to end its consolidation phase and to start moving up again as soon as next week. An excerpt from the interview is posted at the King World News blog here:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/17_Greyerz_-_Gold_to_Begin_a_Major_Advance_Starting_Next_Week.html

Proof of U.S. Greater Depression

Proof of U.S. Greater Depression

Courtesy of Jeff Nielson

It has become increasingly difficult to engage in credible economic analysis, especially with respect to the U.S. economy. The problem: ever more limited sources of uncorrupted data, while the farcical “official statistics” have long since been totally divorced from the real world.

Fortunately we have been presented with some raw, uncorrupted data which demonstrates in conclusive terms that the U.S. economy is literally shriveling before our eyes: a 21^st century economy with plummeting energy consumption, and even a declining use of electricity.

As I was sifting through all of Bloomberg’s propaganda on the latest U.S. trade numbers (and trying to latch onto a few facts), I came across one very peculiar passage:

…American companies also bought more consumer household items, automobiles and parts, and crude oil from overseas.

Exports increased 0.7 percent to $178.8 billion, boosted by record sales of petroleum to buyers overseas. That caused the trade gap excluding petroleum to widen even more than the deficit overall…

The great U.S. economy, the largest oil-glutton in the history of humanity (by several multiples) is now a “net energy exporter”. How can this be possible? The U.S. economy has contracted so severely (already) that the only way that U.S. refineries can sell all the petroleum products they produce is to sell them to the growing economies of “emerging market” nations.

Reflecting the broad-based collapse of the U.S. economy, these refineries are now exporting all categories of petroleum products: diesel, jet fuel, and even gasoline are now being exported in large quantities, month-after-month by U.S. refineries. Recall that it was only four, short years ago that many American politicians were alarmed by the crisis of the “lack of U.S. refining capacity”. No new refineries have been constructed in the U.S. in more than 30 years, and at that time those refineries were straining to meet the demand of solely the U.S. domestic market. With that domestic market collapsing, these refineries are now straining to find enough foreign buyers to unload all of their inventories.

Given these facts alone, it is utterly absurd for the U.S. government to pretend that the U.S. economy is growing. Note that the government claims that most of this growth is occurring in agriculture and manufacturing – both very energy-intensive industries. There’s no doubt that the energy-intensive agriculture sector is thriving, a result of a growing global “appetite” and Wall Street-induced shortages in most commodities. So with the large U.S. agriculture sector gobbling up more energy than ever, what does that say about the rest of the (decaying) U.S. economy?

Let us not forget that the U.S. population continues to grow. More people using much, much, less energy; and this is called a “growing economy”? Absurd. Even more absurd, this steadily growing population has been using much less electricity, going back to around 2007.

Mark Lundeen provided a very detailed analysis of the consumption of U.S. electricity in a recent commentary. It shows U.S. electrical consumption peaking in approximately 2006, and then beginning a distinct decline starting in 2007. Yes, power demand has “bounced back” somewhat from the worst of the collapse – but at levels still more than 3% lower than in 2007. Put another way, the supposed “U.S. economic recovery” has only resulted in roughly half of that lost demand being restored.

 

 

 

This minimal boost in electrical demand reflects nothing more than pent-up demand from the increase in population which has taken place since 2007, and in no way is suggestive of any economic growth. And we must keep in mind that this is taking place in a climate of ultra-insane monetary policy: interest rates permanently frozen at 0%. Even with this maximum stimulus, the dying U.S. economy is unable to come close to maintaining its level of demand for electricity.

We must also never forget that all of this decline in energy and electricity consumption comes after the largest/most reckless fiscal stimulus as well. The U.S., with by far the world’s largest national deficit (even using the absurd, official number), has not yet begun the fiscal tightening being attempted in most other Western nations (with the notable exception of Canada).

What happens when this dying economy actually turns off the taps with all of this “easy money” from the government (which the U.S. government obviously cannot afford)? If the most insane/extreme fiscal and monetary stimulus in the history of the global economy has produced nothing but further economic decay, what happens when this unsustainable stimulus ceases to be sustained?

The obvious answer to that question is a Soviet Union-like economic implosion, assuming that reckless money-printing doesn’t produce the nightmare of hyperinflation first.

How sick is the U.S. economy? Bloomberg was recently trumpeting the news that construction of “multi-family units” in the U.S. housing market (the low end of the market) was rising to the same level as in 2008. Yes, and everyone can remember what a wonderful year that 2008 was for U.S. housing. And this is the good news?

Actually it is. Construction of single-family units remain at all-time lows since they first began gathering such data on the U.S. housing market. Thus we are to believe that the U.S. economy is growing and producing new, net jobs each month with plummeting energy consumption, declining usage of electricity, and with the propagandists cheering the housing market because things are now only as bad as they were in 2008.

Again, what happens when the unsustainable stimulus can no longer be sustained?

This is a dying economy in the midst of a Greater Depression. Even with B.S. Bernanke’s permanent 0% interest rates (something which would have been totally unthinkable just four years earlier), this monetary defibrillator cannot continue to feign “life” in this economic corpse. The moment that fiscal tightening inevitably begins, the full brunt of the U.S.’s Greater Depression will bludgeon the American people – and hopefully (finally) awaken then from their terminal apathy.

Any further pretensions of economic growth and job-creation can now only be regarded as absurd and transparent fiction. The world’s great energy glutton is claiming a robust “economic recovery”without using any energy. The statistical charlatans at work for the U.S. government can pretend there is positive GDP growth. They can pretend there is positive jobs growth. But they cannot pretend to consume energy.

There was never any “economic reckoning” for the U.S. economy following the economic collapse which began (in earnest) in 2007. Reckless money-printing (the most reckless in history); reckless fiscal spending (the most reckless in history); and absurd statistical lies (the largest in history) have merely provided a coat of whitewash over top of this economic train-wreck…and now the paint is beginning to peel.