I was eating lunch with a 6-year-old and I asked her, “What is the 20th of February?”

She said “President’s Day!”

She is a smart kid, so, I asked her, “What does President’s Day mean?”

I was waiting for something about Washington or Lincoln etc.

She replied, “President’s Day is when President Obama steps out of the White House, and if he sees his shadow we have one more year of unemployment.”

You know, it hurts when hot coffee spurts out your nose.

It would be funny if it weren’t based on millions of people struggling to survive.

“The freight market is completely oversupplied because shippers put in orders for new vessels two years ago in expectation of a firm recovery by now,” one freight paper trader said, and added: “They clearly did not expect the crisis to reignite as it has.”

Analyst Lou Basenese declares:

The Baltic Dry Index tracks the cost of shipping major raw materials (iron ore, coal, grain, cement, copper, sand and gravel, fertilizer and even plastic granules). Or, more simply, it tracks the precursors of economic output. As such, the Index provides a measurement of the volume of global trade at the earliest possible stage.

When I last reported on the Baltic Dry Index in October 2011, it was coming off an impressive two-month, 50% rally. That rally’s come to an end. As you can see in the chart above, the Index is down 48.4% in the last month, and 54.4% in the last three months.

The culprit is Europe, of course. You’ll recall that European sovereign debt fears spiked (again) last October. And that’s precisely when the Baltic Dry Index also began its descent. Coincidence? I think not. And the World Bank and International Monetary Fund (IMF) have my back. On Wednesday, the World Bank cut its world economic growth forecast explicitly because of Europe’s never-ending debt crisis. Meanwhile, as Europe’s debt crisis persists, Bloomberg reports that the IMF plans to cut its global growth forecasts, too.

Another bit of bad news is that Spain has come out and admitted that it will not be able to meet the agreed-to target deficit of 4.4% go GDP, as projected GDP growth is now weaker than previously thought. James Kostohryz says that the unfolding of a global fiasco is upon us:

In various articles I have said that the endgame in Europe will probably take the form of PIIGS economies shrinking more than expected, their revenues shrinking more than expected and fiscal deficits ballooning more than expected. All of this will cause fiscal targets and commitments to be violated on the part of PIIGS. This in turn will lead to a showdown with Germany centered on how such shortfalls will be handled.

Spain has now begun the process of acknowledging publicly that it will violate its commitments under recent accords; it is preparing the way for confrontation. According to various reports, Budget Minister Cristobol Montoro has warned that Spain will not meet its target deficit of 4.4% of GDP in 2012. Montoro said that this target was based on an outdated forecast of 2.3% economic growth for Spain in 2012 made by the previous government.

In my view, the absolute best-case scenario for Spain’s GDP growth in 2012 will be a contraction of -2.0%. My own base case estimate is for a contraction of -3.5%. A contraction that exceeds -5.0% is entirely plausible.

Exactly.

And the Food Stamp President will continue to embrace the same failed policies that are destroying Europe.

Bear Fight is the latest in a series of authors that note that the historically reliable Economic Cycle Research Institute is calling for a U.S. recession in 2012 and presents a series of charts (including the one below) that highlight our economic plight:

While many are calling for another recession the charts below highlight that our recovery was short and shallow and unlikely to help the average citizen. Since the 2008 recession, real GDP has been stagnant, while unemployment has improved only modestly. Most troubling is the overall debt situation which has yet to be resolved. The stagnation in debt growth is exacerbating the problems of anemic GDP growth and stagnating unemployment.

“… our recovery was short and shallow and unlikely to help the average citizen.”

Exactly.

About a year ago, I spoke at a conference in Europe that attracted a lot of very rich people from all over the continent, as well as a lot of people who manage money for high-net-worth individuals.

What made this conference remarkable was not the presentations, though they were generally quite interesting. The stunning part of the conference was learning – as part of casual conversation during breaks, meals, and other socializing time – how many rich people are planning for the eventual collapse of European society.

Not stagnation. Not gradual decline. Collapse.

As in riots, social disarray, plundering, and chaos.

Prepare. If TEOTWAWKI doesn’t happen you will have lots of ammo to support your shooting addiction for years to come. But if it does you will at least have a fighting chance of surviving.

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, “is this 2008 all over again?”

No, it’s worse. Much worse.

In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.

Anyone who has paid attention knows that those “magic potions” proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.

If you don’t go read it all, at least go and skip down to the circular graphs at the very bottom. Trust me, these are not your normal economic graphs.

But they will scare the hell out of you.

Deflation’s Back, And Stocks Just Don’t Get It

Signs Of Deflation Grow

Latest Price Data Show U.S. On Brink Of Deflation As World Economy Slows

For an elegantly simple explanation of what deflation is and why it is bad:

A Visual Guide to Deflation

And for a final scare:

50 Economic Numbers From 2011 That Are Almost Too Crazy To Believe

For instance, we now know that by March 2009 some $7.77 Trillion taxpayer dollars were committed to the bailout of banks on a global basis.

The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.

Saved by the bailout, bankers lobbied against government regulations, a job made easier by the Fed, which never disclosed the details of the rescue to lawmakers even as Congress doled out more money and debated new rules aimed at preventing the next collapse.

A fresh narrative of the financial crisis of 2007 to 2009 emerges from 29,000 pages of Fed documents obtained under the Freedom of Information Act and central bank records of more than 21,000 transactions. While Fed officials say that almost all of the loans were repaid and there have been no losses, details suggest taxpayers paid a price beyond dollars as the secret funding helped preserve a broken status quo and enabled the biggest banks to grow even bigger.

With details now emerging, more than one congressman is regretting his or her support of the bailouts. Democrat Senator Brown from Ohio describes it as “an issue that can unite the Tea Party and Occupy Wall Street.” Even Gary H. Stern, president of the Federal Reserve Bank of Mineapolis up until 2009 was suprised upon hearing these numbers, saying he “wasn’t aware of the magnitude.”

While unemployment stayed at incredibley high levels, big banks that caused the whole thing were rewarded and got even bigger:

Instead, the Fed and its secret financing helped America’s biggest financial firms get bigger and go on to pay employees as much as they did at the height of the housing bubble.

Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.

No wonder the “most transparent administration in history” fought so hard to keep these dealings secret.

Fundamental characteristics that define a 3rd world country include high unemployment, lack of economic opportunity, low wages, widespread poverty, extreme concentration of wealth, unsustainable government debt, control of the government by international banks and multinational corporations, weak rule of law and counterproductive government policies.

Sound familiar? Ron thinks so.

Other factors include poor public health, nutrition and education, as well as lack of infrastructure. Public health and nutrition in the U.S., while below European standards, stand well above those of 3rd world countries. American public education now ranks behind poorer countries, like Estonia, but remains superior to that of 3rd world countries. While crumbling infrastructure can be seen in cities across America, the vast infrastructure of the United States cannot be compared to a 3rd world country. However, all of these factors will rapidly deteriorate in a declining economy.

Ron goes on to cover unemployment: 

Officially, long-term unemployment is 16.5% (.pdf) and the ranks of the long-term unemployed (.pdf) (those jobless for 27 weeks and over) include 5.9 million, 42.4% of those unemployed. However, prior to the Clinton administration, unemployment measures included workers who are now no longer counted as part of the workforce. Using the more accurate pre-Clinton criteria, unemployment exceeds 22%, only 3% below the worst point (24.9%) of the Great Depression.

Falling wages and household income:

In fact, if household income is adjusted for inflation, most American families have grown significantly poorer over the past ten years. In 2010, for example, real median household income fell 2.3%.

Poverty:

The number of families living in poverty has risen sharply since 2006 and continues to climb. …

The U.S. Department of Agriculture’s Supplemental Nutrition Assistance Program (SNAP), commonly known as “food stamps,” serves 45.8 million households as of May 2011. The program now feeds 1 in 8 Americans and nearly 1 in 4 children.

And more, with charts and graphs. Go. Read. And prepare for the Great Decline.

Financial blogger Bruce Krasting picked up on possible new regulations the EU is considering as part of the effort to save Greece from default:

[The Greeks have] moved billions of Euros to Swiss banks in an effort to preserve their wealth. In the process they have crippled the Greek banks and have added to the downward spiral in Greece and the rest of the EU.

There was (IMHO) a very significant development on this front last week. A move is being made in Brussels to “force” the Swiss government/banks to transfer all of the assets of Greek citizens back to the Greek banks. For a Greek this means that your money is hostage. It has been functionally expropriated. It will be transferred into a banking system that is fraught with risk. Some portion of the money that goes back to Greece will certainly be lost.

I have talked with some who I know in Athens. They are out of their minds with this development.

Read it all, as Bruce analyzes the possible consequences should the regulations become law. I agree with all he foresees, but am also concerned with the horrible precedent such legislation would create. Precedent that may, one day, be seen as perfectly acceptable by our own elected servants.

And that would be a very bad thing indeed.