The Economy as 2013 Begins Daryl Montgomery January 10, 2013 Copyright 2013, All Rights Reserved The contents of this presentation are not intended as.

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