1. The Economy as 2013 Begins Daryl Montgomery January 10, 2013 Copyright 2013, All Rights Reserved The contents of this presentation are not intended as a recommendation to buy or sell any security.

2. Fiscal Cliff As It Happened

3. Fiscal Cliff – Congress Finally Acts

4. French President Hollande: Greece is Solved

5. World Didnt End Dec 21 st, But There Were Some Weather Anomalies

6. Fiscal Cliff Deal Signed into law Jan 2 nd : 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)

7. The Fiscal Cliff – Tax Increases Vs Deficit

8. 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.

9. Debt Ceiling at $16.4 trillion. National Debt: $16.43 trillion National Debt Subject to Limit: $16.39 trillion State and Local Debt $2.95 trillion Unfunded liabilities $121 trillion. Debt to GDP ratio >106% (actually much greater). Debt doesnt 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

10. U.S. National Debt since 1945

11. Federal Interest Payments

12. Fed Debt Held by Federal Reserve

13. 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 (3 rd 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%.

14. Greece Youth Unemployment

15. Spain Youth Unemployment

16. Portugal Youth Unemployment

17. Italy Youth Unemployment

18. Ireland Youth Unemployment

19. 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.

20. Fed Balance Sheet – Wheres QE3/QE4?

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

22. MZM Money Supply

23. 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.

24. U.S. Inflation – Reported Versus Actual

25. How Fed Chair Bernanke Pays for Things

26. How the British Royal Family Saves Their Money