The Economy as 2013 Begins

Daryl MontgomeryJanuary 10, 2013

Copyright 2013, All Rights Reserved

The contents of this presentation are not intended as a recommendation to buy or sell any security.

Fiscal Cliff As It Happened

Fiscal Cliff – Congress Finally Acts

French President Hollande: “Greece is Solved”

World Didn’t End Dec 21st, But There Were Some Weather Anomalies

Fiscal Cliff Deal • Signed into law Jan 2nd:

CBS/AP: “President Obama signed a bill late Wednesday night boosting taxes on the wealthiest Americans, while preserving tax cuts for most (???) American households.”

• Higher taxes-Social Security rate up 2% (affects 77% employed).

-400/450K tax rate goes up to 39.6%.-AMT tax indexed to “inflation” -Emergency unemployment extended 1 year.-Estate Tax 5.12 million exemption.

• Higher Spending: Net $74 billion added (or more)

The Fiscal Cliff – Tax Increases Vs Deficit

Next on the Agenda

•Raising the Debt Ceiling- Ceiling is $16.4 trillion- Debt subject to ceiling is $16.394 trillion•Sequestration – holding back monies, when various spending bills add up to too much. •Continual Resolution – continued funding without appropriation bill being passed.

• Debt Ceiling at $16.4 trillion. • National Debt: $16.43 trillion

National Debt Subject to Limit: $16.39 trillionState and Local Debt $2.95 trillionUnfunded liabilities $121 trillion.

• Debt to GDP ratio >106% (actually much greater).• Debt doesn’t include Federal Reserve or Fannie

Mae, Freddie Mac and FHA obligations. • Federal budget deficit for 2012 was $1.1 trillion.• 2012 Trade Deficit could reach $600 billion.

U.S. Fiscal State

U.S. National Debt since 1945

Federal Interest Payments

Fed Debt Held by Federal Reserve

Global Economy• EZ: Unemployment reaches new high at 11.8%, in

Spain 26.6%. Youth rate at 24.4%, in Spain 56.5%.

• Spain has still not asked for a bailout.

• Greece was bailed out again (3rd time).

• EZ in recession. UK facing triple dip recession.

• Japan in recession and massively pumping money, trying to devalue Yen.

• China: Watch consumer prices, shadow banking, import/export, industrial production and real estate bubble.

• US Q4 GDP estimated at 1.5%.

Greece Youth Unemployment

Spain Youth Unemployment

Portugal Youth Unemployment

Italy Youth Unemployment

Ireland Youth Unemployment

Monetary Policy Worldwide• Central Bank Interest Rates:

- U.S. and Japan close to 0.0%- UK at 0.50%- ECB at 0.75%

• Fed seems to be done with Operation Twist.

• No evidence of QE3/QE4 on Fed Balance Sheet.

• BOE: QE2 done. QE3 next?

• ECB balance sheet flat.

• U.S. Monetary Base pauses, money supply rising.

Fed Balance Sheet – Where’s QE3/QE4?

U.S. Monetary Base (Indication of Future Inflation)

MZM Money Supply

Global Inflation Highlights

• Syria – 48.10% reported (war)

• Sudan – 46.50% reported (war)

• Malawi – 33.30% reported

• Iran – 29.50% reported (currency collapse)

• Belarus – 22.86% reported (socialism)

• Venezuela – 18.00% reported (socialism)

• Argentina – 10.60% reported (30% actual)

Actual figures should be considered much higher. 3 times higher possible.

U.S. Inflation – Reported Versus Actual

How Fed Chair Bernanke Pays for Things

How the British Royal Family Saves Their Money