| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
| Anonymous Coward
User ID: 367653
2/4/2008 11:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Futurist and trends forecaster Gerald Celente, director of the Trends Research Institute in Rhinebeck, NY, predicted the 1987 stock market crash, the collapse of the Soviet Union in 1989, the Asian economic implosion of ‘97, the decline of the dollar beginning in 2005, the meteoric rise in gold prices in an age of currency volatility, and the turn of events that may be the blessing of our era, the subprime mortgage crisis.
Because of this habit of prescience, Celente has appeared regularly on CNN and Fox and MSNBC, his “Trends Reports” widely quoted in newsprint, on Oprah Winfrey, on Good Morning America.
Now in his Report for 2008, issued in mid-December, he carried the news every thinking American already knows. “The United States of America,” Celente pronounced, “has gone from first class to third rate.” It’s a “nation on the skids and heading down.”
Celente projects economic and political crisis in the coming year. “In 2008, Americans will wake up to the worst economic times that anyone alive has ever seen,” he wrote on December 17. “Just as they didn’t see 9/11 coming and were frozen in shock when terror struck, [Americans] will be frozen in shock when terror strikes again.” He predicts “failing banks, busted brokerages, toppled corporate giants, bankrupt cities, states in default, foreign creditors cashing out of US securities…the stage is set, the big one is on its way.”
A similar wake-up call was issued last summer in a report by none other than the chief investigator for the US Government Accountability Office, comptroller general David Walker, who warned that US policy on energy, education, the environment, health care, immigration, Iraq – pretty much the gamut – was on an “unsustainable” course, bound for a maelstrom of insolvency that could threaten to sink the ship.
According to the GAO chief, the fall of Rome seemed an apt historical comparison:
“[D]eclining moral values and political civility at home, an over-confident and over-extended military in foreign lands, and fiscal irresponsibility by the central government. Sound familiar? I’m trying to sound an alarm.”
When I called up Celente on Jan. 2 to see how the new year was taking shape on the first day of trading, he fired back in an e-mail:
“An attack in Nigeria (Africa’s biggest oil producer) by anti-government forces on the port city of Port Harcourt hit the futures markets hard. On the New York Stock Exchange, trading conditions worsened on reports that the Institute for Supply Management's manufacturing index dropped to 47.7, the lowest reading since April 2003. Growth in European and Singapore manufacturing also slowed in November, showing signs for all those that were looking that the slowdown would be global.”
By early afternoon, gold had surged $24 an ounce, crude oil climbed $3, the dollar fell against all major currencies, and the Dow was down over 200 points. The next day, Jan. 3, oil hit a record $100 a barrel. And indeed, as Celente warned, world markets were unraveling by the second week of January, the Nikkei on its worse start to a new year since 1970, the MSCI World Index dropping 6.9 percent, a loss of $2.1 trillion from members' market capitalization, while Swiss world banking giant UBS posted a $13 billion loss, and authorities in Britain reported the first run on a British bank in a hundred years.
When on January 14 Celente sent out his weekly e-mail alert to subscribers, the news was no better. The Dow registered its third consecutive week of losses, one of its worst New Year starts in history, losing in just the first week of 2008 half its gains from 2007.
“Slumping retail sales, dire housing data, rising unemployment rates, gloomy consumer confidence, spiking oil prices, a ballooning trade gap, eroding wages, mounting credit card debt and delinquencies, mortgage defaults, record foreclosures,” said Celente. “The data floods the wires and spreads the fear.” It’s telling that Tiffany's was off 11 percent in sales, as even the very rich hide their cash under beds.
So is the subprime mortgage mess the catalyst for the Big One, what Celente calls the Panic of ‘08? Stock guru Jim Cramer, host of CNBC’s Mad Money and co-founder of TheStreet.com, seems to think so.
“There are a group of insurance companies that insure all these bad mortgages,” he told Chris Matthews on Jan. 18. “And I think they’re all about to go belly up. And that will cause the Dow Jones to decline 2,000 points. They have got to be shut down. This is going to happen in maybe two, three weeks, Chris. It’s going to be on the front of every paper. And no one in Washington is even willing to admit it. I am telling you these companies do not have the capital to make good. And, when they do fall – I believe it is when – if the government doesn’t have a plan in action, you will not be able to open the stock market when they collapse…No one is even talking about it.”
From panic, offers Gerald Celente, will arise almost overnight an era of social and political upheaval and plain awfulness. Self storage will finally “live up to the meaning of its name. Down and out, thrown onto the streets, homeless Americans will empty out storage lockers of useless junk…to store themselves.”
He predicts wage riots and anti-government street protests and intensified anti-immigration movements looking to scapegoat the “aliens” among us.
Toward the 1 percent of Americans who received 50 percent of all income gains in recent years – those same 1 percenters, roughly 3 million people, who took in 22 percent of all income in 2005 – there will be growing rage.
“Kidnappings for ransom will become common, as they were in the Depression and as the poor strike out against the rich,” Celente predicts. Lawlessness will be met, as in most third rate nations, with violence from an increasingly sophisticated and brutal police state. A different type of violence from the ground up, tax revolts, will also develop in strength, targeting a tax-ravenous federal government that Celente charges has failed “to protect food, win wars, clean the environment, upgrade infrastructure, improve living standards, provide health services or advance education.”
Meanwhile, the dollar will bottom out at 10 cents to the euro sometime in the next several years, perhaps by 2010. Newspapers report that even Third World vendors are beginning to refuse payment in greenbacks, while foreign governments and investors, mostly the Chinese, deploy the muscle of their currencies to buy US property and businesses (proxies of the Chinese government late last year snagged a 5 percent stake in Citibank, a 10 percent stake in Morgan Stanley).
Note that this is no fringer veering into conspiracist phantasm: Celente consults for hundreds of large and small corporations, addresses government bodies worldwide. Norway flew him to Europe in 2006 to address a conference on innovation, while the International Council of Shopping Centers hosted him as the key-note speaker at its 2007 convention – the mall builders hoped to glean from Celente “what people want from malls.”
It’s notable, in the wake of the prognoses of his 2008 reports, that he is no longer invited onto the TV and cable networks – “the first year in decades,” he says, “that they did not have me on and that USA Today did not cover the Trends Report.” When Celente sent out an e-mail alert to his mailing list in mid-January, Jack Marks, the publisher and CEO of The Wall Street Reporter, one of the oldest investment organs in New York, wrote him back to say “You are a ****ing retard mother****er” and “Remove me from this list, you ****ing moron.”
The local publishing group near Celente’s home in Rhinebeck is perhaps more typical in its spinelessness: The Taconic Press, which publishes six newspapers in the Hudson Valley and upstate New York, told Celente in December via e-mail that there was “a general uproar about the inclusion of your Trends forecast [in 2007]… reader and advertiser reaction was strong, and they made their feelings known to our publisher.” Celente’s long relationship with Taconic Press is no more. Par for the course in the nation of blinkered denial.
There is apparently an upside to the rottenness to come, according to Celente – if Americans dare to reinvent for the 21st century the free thinking and civic courage of their past. This good cheer as Rome burns is buried somewhat in Celente’s report for 2008, but what it suggests is that, catalyzed by crisis, a fair number of Americans – a minority, likely, but still to watch – will begin this year a transformation of consciousness.
Celente predicts that the smaller communities, the smaller groups, the smaller states, the more self-sustaining communities, will “weather the crisis in style” as big cities and hypertrophic suburbias descend into misery and conflict.
“Like Katrina’s victims that knew the hurricane was coming but didn’t flee – and looked to Uncle Sam to save the day – those that don’t take action before panic strikes or wait for Washington to lend a hand, will suffer the most from the calamity that follows,” he writes.
Economically, the new consciousness will recapture Yankee frugality and reject the lunatic behaviors that have been unsustainable since the Second World War – big houses, big cars, big spending. Those who market and embrace “products and services that focus on compact, smart, functional, efficient, neat, clean, reusable, 'less is more' and 'small is beautiful',” Celente writes, “will handsomely profit.”
There will be a downsizing of expectations and perceived needs. There will be a downsizing of giantist institutions to fit to human scale – the center cannot hold, particularly as state’s righters and tax rebels and what Celente calls “the newly flourishing state secessionist movements” begin to repudiate a $9 trillion-in-debt federal government that too often practices the most offensive kind of taxation without representation. Altogether, there will be a downsizing of America.
“This could be the end of something really ignorant and stupid and dark,” Celente told me recently in a phone interview. “The end of a dark age! The end of the age of what I call Bottom-Line Fascism, the ruthless and dictatorial profit-only way of thinking that produces crap over quality in all the major institutions, dopiness and blob-thinking, the manipulations of an idiotic media and political establishment, the Cartoon News Networks, the Greta Van Susterens and the Hillary Clintons uttering the same pablum ad nauseum over and over. All the institutions are coming apart – government, corporations, media, education, health care. They present nothing less than a vacuum! Something has to fill it! The systems that are in place? Things can only get worse if they stay in place. But I’m an optimist. I’m gunning for something better to replace what we got.” He pauses. “A renaissance! I’m gunning for a renaissance: an era where quality beats out the crap of quantity.”
source
POST-SCRIPT: Alarm bells are also ringing for former CIA consultant Chalmers Johnson, author of the Blowback Trilogy, including most recently the final installment Nemesis: The Last Days of the American Republic. Like Celente, Johnson sees the subprime mess as only the most visible part of a far-reaching debt crisis with lethal implications. “Confronted by the limits of its own vast but nonetheless finite financial resources and lacking the political check on spending provided by a functional democracy,” Johnson wrote in Harper’s last January, “the United States will within a very short time face financial or even political collapse.” The folly of what Chalmers terms “military Keynesianism” – devotion to militarism, weapons, warfare as fiscal stimulus, a policy embraced with equal fervor by both parties in Congress – will speed the country to moral, fiscal and political bankruptcy. To grasp the horror of military Keynesianism, consider this statistic: By 1990, production for the Department of Defense amounted to 83 percent of the value of all manufacturing plants and equipment in the US. Only 17 percent of the US manufacturing base actually made products not meant to kill. In this regard, bankruptcy and collapse is much-deserved, a comeuppance long overdue. On the bright side, Johnson notes that “bankruptcy will not mean the literal end of the United States any more than it did for Germany in 1923, China in 1948, or Argentina in 2001. It might, in fact, open the way for an unexpected restoration of the American system, or for military rule, revolution, or simply some new development we cannot yet imagine.” |
| Anonymous Coward
User ID: 367653
2/4/2008 12:19 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
To grasp the horror of military Keynesianism, consider this statistic: By 1990, production for the Department of Defense amounted to 83 percent of the value of all manufacturing plants and equipment in the US. Only 17 percent of the US manufacturing base actually made products not meant to kill. In this regard, bankruptcy and collapse is much-deserved, a comeuppance long overdue. On the bright side, Johnson notes that “bankruptcy will not mean the literal end of the United States any more than it did for Germany in 1923, China in 1948, or Argentina in 2001. It might, in fact, open the way for an unexpected restoration of the American system, or for military rule, revolution, or simply some new development we cannot yet imagine.” Quoting: Anonymous Coward 367653 |
| Anonymous Coward
User ID: 367653
2/4/2008 4:47 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The situation concerning the bond insurers is tied to derivitive traders.
From the Sovereign Individual, a financial newletter, Fall of 2007
By John Pugsly, Chairman of the Sovereign Society
There's a fuse box buried deep within the U.S. economy...and it's about to blow...When it does, the lights on the dimming U.S. economy will go black.
Major banks (once thought "too big to fail")will be shaken to the ground. Corporate bankruptcies will soar. Bonds will crash. The Dow will dive toward 4000. And the dollar will continue its slide into the dustbin of monetary history...
At their simplest, a derivitive is merely a bet. Derivitives are mostly used to hedge against risk, but they are also used to make highly leveraged and highly dangerous bets. (Note: Banks are Wall Street Casinos.)
In 1988, the global derivitives market was just over $1 trillion. Today, that figure is a staggering $400 trillion. What's more disturbing is that nearly one-third of these derivatives are concentrated in the hands of just three American banks: JP Morgan Chase, Citigroup, and Bank of America. .......
One bad move...one unexpected crisis...could blow these banks' delicately balanced derivatives portfolios off their axis and spin world inancial markets into an unprecedented collapse...
The alchemy of derivitives rests on complicated mathematical models which predict how markets and derivitives will behave under certain conditions. The models use past market performance to predict the future. But they can't account for the unaccountable. Every once in a while an asteroid strikes or a country blows up...which throws these delicately-balanced derivatives portfolios off their axis.
Trades take place in electronic neverland and can be entered from ANYWHERE IN THE WORLD. And computers are enabling the creation of purer and purer financial plutonium. And, as with nuclear mishaps, there are no small accidents. Get ready for "The Chernobyl of the Financial World".
(Could this be the reason for the cables being cut? It does buy time so that foreign banks can't get their funds transferred out of the U.S. Just sayin'.) |
| Anonymous Coward
User ID: 370683
2/9/2008 6:46 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Bush Financial and Economic Bust of 2008 - The Destruction of Capital
Economics / Economic Depression Feb 07, 2008 - 08:33 PM
By: Mike_Whitney
Economics
Best Financial Markets Analysis Article" I just saw a picture Bernanke stripped to the waist in the boiler-room shoveling greenbacks into the furnace .” Rob Dawg, Calculated Risk blog-site
On January 14, 2008 the FDIC web site began posting the rules for reimbursing depositors in the event of a bank failure. The Federal Deposit Insurance Corporation (FDIC) is required to “determine the total insured amount for each depositor....as of the day of the failure” and return their money as quickly as possible. The agency is “modernizing its current business processes and procedures for determining deposit insurance coverage in the event of a failure of one of the largest insured depository institutions.” ( [link to www.fdic.gov] )
The implication is clear, the FDIC has begun the “death watch” on the many banks which are currently drowning in their own red ink. The problem for the FDIC is that it has never supervised a bank failure which exceeded 175,000 accounts. So the impending financial tsunami is likely to be a crash-course in crisis management. Today some of the larger banks have more than 50 million depositors, which will make the FDIC's job nearly impossible.
Good luck.
It's worth noting that, due to a rule change by Congress in 1991, the FDIC is now required to use “the least costly transaction when dealing with a troubled bank. The FDIC won't reimburse uninsured depositors if it means increasing the loss to the deposit insurance fund....As a result, uninsured depositors are protected only if a bank acquiring the failed bank will pay more for all of the deposits than it would for insured deposits only.” (MarketWatch)
Great. That's reassuring. And there's more, too. FDIC Chairman Shiela Bair warned that “as of Sept. 30, there were 65 institutions with assets of $18.5 billion on its list of "problem" institutions;” although she wouldn't give names.
So, what does it all mean?
It means there's going to be an unprecedented wave of bank closures in the US and that people who want to hold on to their life savings are going have to be extra vigilant as the situation continues to deteriorate. And it is deteriorating very quickly.
Right now, many of the country's largest investment banks are holding $500 billion in mortgage-backed securities and other structured investments that are steadily depreciating in value. As these assets wear-away the banks' capital, the likelihood of default becomes greater. This week, Fitch Ratings announced that it will (probably) cut ratings on the 5 main bond insurers (Ambac, MBIA, FGIC, CIFG,SCA) “regardless of their capital levels”. This seemingly innocuous statement has roiled markets and put Wall Street in a panic. If the bond insurers lose their AAA rating (on an estimated $2.4 trillion of bonds) then the banks could lose another $70 billion in downgraded assets.
That would increase their losses from the credit crunch--which began in August 2007---to $200 billion with no end in sight. It would also impair their ability to issue loans to even credit worthy customers which will further dampen growth in the larger economy. Structured investments have been the banks' “cash cow” for nearly a decade, but, suddenly, the trend has shifted into reverse. Revenue streams have dried up and capital is being destroyed at an accelerating pace. The $2 trillion market for collateralized debt obligations (CDOs) is virtually frozen leaving horrendous debts that will have to be written-down leaving the banks' either deeply scarred or insolvent. It's a mess.
There were some interesting developments in a case involving Merrill Lynch last week which sheds a bit of light on the true “market value” of these complex debt-pools called CDOs. The Massachusetts Secretary of State has charged Merrill with “fraud and misrepresentation” for selling them a CDO that was "highly risky and esoteric" and "unsuitable for the City of Springfield.” (Most cities are required by law to only purchase Triple A rated bonds) The city of Springfield bought the CDO less than a year ago for $13.9 million. It is presently valued at $1.2 million---MORE THAN A 90% LOSS IN LESS THAN A YEAR.
Merrill has quietly settled out of court for the full amount and seems genuinely confused by the Massachusetts Secretary of State's apparent anger. A Merrill spokesman said blandly, “We are puzzled by this suit. We have been cooperating with the Secretary of State Galvin's office throughout this inquiry.”
Is it really that hard to understand why people don't like getting ripped of?
This anecdote shows that these exotic mortgage-backed securities are real stinkers. They're worthless. The market for structured debt-instruments has evaporated overnight leaving a massive hole in the banks' balance sheets. The likely outcome will be a rash of defaults followed by greater consolidation of the major players. (re: banking monopolies) The Fed's multi-billion bailout plan; the “Temporary Auction Facility” (TAF) is a quick-fix, but not a permanent solution. The real problem is insolvency, not liquidity.
The smaller banks are dire straights, too. They're bogged down with commercial and residential loans that are defaulting faster than any time since the Great Depression. The Comptroller of the Currency,John Dugan--who is presently investigating commercial real estate loans---discovered that commercial banks “wrote off $524 million in construction and development loans in the third quarter of 2007, almost nine times the amount of 2006”. The commercial real estate market is following residential real estate off a cliff and will undoubtedly be the next shoe to drop.
Dugan found out that, “More than 60% of Florida banks have commercial real estate loans worth more than 300% of their capital, a level that automatically attracts more attention from examiners.” (Wall Street Journal) He said that his office was prepared to intervene if banks with large real estate exposure maintained unreasonably low reserves for bad loans. Dugan is forecasting a steep “increase in bank failures.”
According to Reuters: “Dozens of U.S. banks will fail in the next two years as losses from soured loans mount and regulators crack down on lenders that take too much risk, especially in real estate and construction," predicts Gerard Cassidy, RBC Capital Markets analyst. Apart from the growing losses in commercial and residential real estate, the banks are carrying over $150 billion of “unsyndidated” debt connected to leveraged buyout deals (LBOs) which are presently stuck in the mud. Like CDOs, there's no market for these sketchy transactions which require billions in cheap, easily available credit. They've just become another anvil dragging the banks under.
On January 31, Bloomberg News reported: “Losses from securities linked to subprime mortgages may exceed $265 billion as regional U.S. banks, credit unions and overseas financial institutions write down the value of their holdings.” Standard and Poor's added that “it may cut or reduce ratings of $534 billion of subprime-mortgage securities and CDOs as default rates rise.” Another blow to the banks withering balance sheets. Is it any wonder why the "new loans" spigot has been turned off?
Surprisingly, there's an even bigger threat to the financial system than these staggering losses at the banks. A default by one of the big bond insurers could trigger a meltdown in the credit-default swaps market, which could lead to the implosion of trillions of dollars in derivatives bets. The inability of the under-capitalized monolines (bond insurers) to “make good” on their coverage is likely to set the first domino in motion by increasing the number of downgrades on bond issues and intensifying the credit-paralysis which already is spreading throughout the system.
MSN Money's financial analyst Jim Jubak summed it up like this:
"Actually, I'm worried not so much about the junk-bond market itself as the huge market for a derivative called a credit-default swap, or CDS, built on top of that junk-bond market. Credit-default swaps are a kind of insurance against default, arranged between two parties. One party, the seller, agrees to pay the face value of the policy in case of a default by a specific company. The buyer pays a premium, a fee, to the seller for that protection.
This has grown to be a huge market: The total value of all CDS contracts is something like $450 trillion..... Some studies have put the real credit risk at just 6% of the total, or about $27 trillion. That puts the CDS market at somewhere between two and six times the size of the U.S. economy.
All it will take in the CDS market is enough buyers and sellers deciding they can't rely on this insurance anymore for junk-bond prices to tumble and for companies to find it very expensive or impossible to raise money in this market." (Jim Jubak's Journal; "The Next Banking Crisis is on the Way", MSN Money)
Jubak really nails it here. In fact, this is what Wall Street is really worried about. $450 trillion in cyber-credit has been created through various off balance sheets operations which neither the Fed nor any other regulatory body can control. No one even knows how these abstruse, credit-inventions will perform in a falling market. But, so far, it doesn't look good.
The enormity of the derivatives market ($450 trillion) is the direct result of Greenspan's easy-credit monetary policies as well as the reconfiguring of the markets according to the “structured finance” model. The new model allows banks to run off-balance sheets operations that, in effect, create money out of thin air. Similarly, “synthetic” securitization, in the form of credit default swaps (CDS) has turned out to be another scam to avoid maintaining sufficient capital to cover a sudden rash of defaults. The bottom line is that the banks and non-bank institutions wanted to maximize their profits by keeping all their capital in play rather than maintaining the reserves they'd need in the event of a market downturn.
In a deregulated market, the Federal Reserve cannot control the creation of credit by non-bank institutions. As the massive derivatives bubble unwinds, it is likely to have real and disastrous effects on the underlying-productive economy. That's why Jubak and many other market analysts are so concerned. The persistent rise in home foreclosures, means that the derivatives which were levered on the original assets (sometimes exceeding 25-times their value) will vanish down a black hole. As trillions of dollars in virtual-capital are extinguished by a click of the mouse; the prospects of a downward deflationary spiral become more likely.
As economist Nouriel Roubini said:
“One has to realize that there is now a rising probability of a 'catastrophic' financial and economic outcome, i.e. a vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe. That is why the Fed has thrown caution to the wind and taken a very aggressive approach to risk management.” (Nouriel Roubini EconoMonitor)
"In the fourth quarter of 2007, new foreclosures averaged 2,939 a day, double the pace of a year earlier." (RealtyTrac Inc.) The banks are presently cutting back on home equity loans which provided an additional $600 billion to homeowners last year for personal consumption. Bush's $150 billion “stimulus package” will barely cover a quarter of the amount that is lost. As consumer spending slows and the banks become more constrained in their lending; businesses will face overproduction problems and will have to limit their expansion and lay off workers. This is the downside of “low interest” bubble-making; a painful descent into deflation.
Capital is now being destroyed at a faster pace than it is being created. That's why the Fed is looking for solutions beyond mere rate cuts. Bernanke wants direct government action that will provide immediate stimulus. But that takes political consensus and there's still debate about the gravity of the upcoming recession. The pace of the economic contraction is breathtaking. This week's release of the Institute for Supply Management's Non-Manufacturing Index (ISM) was a shocker. It showed steep declines in all areas of the nation's service sector---including banks, travel companies, contractors, retail stores etc—The Business Activity Index, the New Orders Index, the Employment Index, and the Supplier Delivery Index have all contracted at a “historic” pace. Everyone took a hit.
“The numbers are so terrible, it's beyond belief,” said Scott Anderson, senior economist at Wells Fargo & Co.
The $2 trillion that has been wiped out from falling home prices, the slowdown in lending activity at the banks, the loss $600 billion in home equity loans, and the faltering stock market have all contributed to a noticeable change in the public's attitudes towards spending. Traffic to the shopping malls has slowed to a crawl. Retail shops had their worst January on record. Homeowners are hoarding their earnings to cover basic expenses and to make up for their lack of personal savings. The spending-spigot has been turned off. America's consumer culture is in full-retreat. The slowdown is here. It is now. We are likely to see the sharpest decline in consumer spending in US history. Bush's $150 billion will be too little too late.
America's place in the world has been guaranteed not by what it produces but by what it consumes. The American consumer has been the locomotive that drives the global economy. Now that engine has been derailed by the reckless monetary policies of the Fed and by shortsighted financial innovation. When equity bubbles collapse; everybody pays. Demand for goods and services diminishes, unemployment soars, banks fold, and the economy stalls. That's when governments have to step in and provide programs and resources that keep people working and sustain business activity. Otherwise there will be anarchy. Middle class people are ill-suited for life under a freeway overpass. They need a helping hand from government. Big government. Good-bye, Reagan. Hello, F.D.R.
The Bush stimulus plan is a drop in the bucket. It'll take much, much more. And, we're not holding our breath for a New Deal from George Walker Bush.
By Mike Whitney |
| Anonymous Coward
User ID: 370683
2/9/2008 6:47 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Why the price of 'peak oil' is famine
By Ambrose Evans-Pritchard International Business Editor
Last Updated: 2:54am GMT 09/02/2008
Vulnerable regions of the world face the risk of famine over the next three years as rising energy costs spill over into a food crunch, according to US investment bank Goldman Sachs.
"We've never been at a point in commodities where we are today," said Jeff Currie, the bank's commodity chief and closely watched oil guru.
# Read more by Ambrose Evans-Pritchard
# More economics news
Sugar cane on a bullock cart in India. Rising energy costs spill into food crunch.
Sugar cane on a bullock cart in India - the commodity is popular as the basis of biofuel, as it is a cost-effective and cleaner alternative to oil
Global oil output has been stagnant for four years, failing to keep up with rampant demand from Asia and the Mid-East. China's imports rose 14pc last year. Biofuels from grain, oil seed and sugar are plugging the gap, but drawing away food supplies at a time when the world is adding more than 70m mouths to feed a year.
"Markets are as tight as a drum and now the US has hit the stimulus button," said Mr Currie in his 2008 outlook. "We have never seen this before when commodity prices were already at record highs. Over the next 18 to 36 months we are probably going into crisis mode across the commodity complex.
"The key is going to be agriculture. China is terrified of the current situation. It has real physical shortages," he said, referencing China still having memories of starvation in the 1960s seared in its collective mind.
While the US housing crash poses some threat to the price of metals and energy, the effect has largely occurred already. The slide in crude prices over the past month may have been caused by funds liquidating derivatives contracts to cover other demands rather than by recession fears. Goldman Sachs forecasts that oil will be priced at $105 a barrel by the end of 2008.
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The current "supercycle" is a break with history because energy and food have "converged" in price and can increasingly be switched from one use to another.
Corn can be used for ethanol in cars and power plants, for plastics, as well as in baking tortillas. Natural gas can be made into fertiliser for food output. "Peak Oil" is morphing into "Peak Food".
Land use for biofuels has shot up from 12m to more than 80m hectares worldwide over six years. Biofuel provides 3pc of global energy needs, which will rise to an estimated 10.6pc by 2030.
In a pure market, sugar cane would be the only viable biofuel with a cost of $35 a barrel (oil equivalent). The others are sugar beet ($103), corn ($81), wheat ($145), rapeseed ($209), soybean ($232), cellulose ($305).
Subsidies drive the business. The US offers tax relief of $1 a gallon for biodiesel. The EU has a 10pc biofuel target by 2010.
Graphic showing increase in land given over to biofuels
The crop switch comes just as China and India make the leap to an animal-based diet, replicating the pattern seen in Japan and Korea, where people raised their protein intake nine-fold as they became rich. It takes 8.3 grams of soya or corn feed to produce a 1g weight gain in cattle - compared with 3.1g for pigs, 2g for chicken and 1.5g for fish.
Mr Currie said investment cycles in energy typically last about 10 to 12 years as producers struggle to catch up with demand. However, this cycle has been short-circuited by politicians after barely six years.
"The political environment is extremely hostile. The world is looking like the 17th century under mercantilism when countries saw economics as a zero-sum game. They exported as much as they could to get gold, and erected enormous barriers. China looks like that, so does Russia, the Mid-East and most of Africa and Latin America," he said.
While the West has much of the skill for developing energy projects, it is blocked by nationalist petro-states from investing directly. |
| Anonymous Coward
User ID: 370683
2/9/2008 6:48 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Sackloads of cash to burn? Then why not 'waste it'
By Damian Reece, Head of Business
Last Updated: 2:52am GMT 09/02/2008
Aqueous organic biodegradable effluent - so that's what it's called these days. While most bankers are in it up to their necks, thanks to the credit crunch, one or two are hoping to make a killing from the stuff. Biffa, the waste management business, has finally attracted a firm takeover offer having been demerged from Severn Trent back in 2006. If the mergers and acquisitions business was going to make a comeback, I suppose it had to start somewhere and you may as well start at the bottom.
# Binmen to collect £1,000 in Biffa bid
Anyway, the consortium that has made the bid, led by private equity fund Montagu, has proved two things. First, where there's muck, there's brass may be a cliche but it still holds true. Second, the leveraged buy-out is not dead. To fund this deal the buyers have persuaded the banks to put up a loan of more than £1bn, although there's a sizeable cheque being written by each of the buyers to provide a chunk of equity in the deal. Nevertheless, with credit markets having frozen it's no mean feat to get this deal off the ground.
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In many ways Biffa gets private equity back to basics. It's a classic public-to-private deal. What makes it attractive for financial buyers is the fact that, long term, waste management is a stable business with clear trends. But in the shorter term it's also an industry going through fundamental change. This is the kind of upheaval that private equity loves but which investors in public stock markets seem to loathe. With waste-related directives pouring out of Brussels, printed on enough paper to fill a small landfill site, this is a business that is crying out for investment. If you're a private equity fund overflowing with uninvested cash then waste management is a perfect home for that spare capital. We're producing more waste of every conceivable kind which needs ever more cunning methods to dispose of it. Chucking it in the ground is no longer an option. But while this means there is more opportunity for a business like Biffa, and potentially more profit, it also means a lot more investment is needed.
Committing that sort of capital expenditure is likely to sit uncomfortably with investors in this relatively sleepy backwater of the UK stock market. Such a change would also mean your results would take some explaining every six months to shareholders as dividends disappeared and the financial structure of the business was re-engineered. So private equity looks like the best home and although Montagu and its friends face some potential rival bidders, it looks like the clear favourite. Even Biffa's dustmen are in the money, to the tune of about £1,000 each.
This piece of M&A may be a load of rubbish but at least it's got the deal machine going again.
Society's debt is near critical but not terminal
The repo man is back in business, probably in one of the few guaranteed growth industries of 2008. Repossessions of UK properties hit 27,000 last year. This sounds modest compared to the 75,000 homes repossessed in 1991 when we were in the depths of the last recession. But it's the rate at which repos are growing that's concerning. Our doom-laden "Decade of Debt" warnings over the past couple of years are now coming true. People were forceably separated from the ownership of their homes at a level 21pc higher in 2007 than 2006. At this rate, it won't take too long before we start approaching critical levels. But while repos grab all the headlines, they are the tip of the bad debt iceberg.
# Increasing home repossessions to hit 12-year high
Submerged by a rising tide of misery is a whole layer of debt that people are only just coping with. Having taken on £1,400bn of debt consumers are increasingly strapped for cash. We've already seen plenty of retailers who have found that even at Christmas trading was grim. The economy is slowing. Having expanded at 3pc last year, if we make 2pc this year, we will be lucky.
I don't think we'll suffer the sort of sub-prime melt down that the Americans have seen, but we do have some worrying structural weaknesses in the UK housing market, such as the level of highly leveraged buy-to-let homes. But I can't help feeling things won't be as bad as the early 1990s. Employers are in better shape so unemployment should be limited and there is scope for further rate cuts. The economy will get much worse but we should escape a return to negative equity and the days of house keys being pushed through the door. |
| Anonymous Coward
User ID: 370683
2/9/2008 6:52 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The WallStreetWindow free weekly newsletter is packed full of ground breaking financial views, stock picks, and commentary on the stock market, currency, and global markets. Join today to start to profit from Mike's financial advice. Start now
Investor’s View Magazine
The 24th Hour for the Dollar
December 2006
Hedge fund manager and newsletter writer Mike Swanson sees a big decline in the dollar and a return of the gold bull market just ahead. "I just took some short positions in the dollar today and am going to start to build a long position in gold stocks over the next few weeks. Gold tends to trade opposite to the dollar and the dollar is about to resume its long-term decline," he said.
Swanson, has had an uncanny track record when it comes to gold stocks. In his newsletter, WallStreetWindow, he first recommended that people buy them in the Spring of 2002 when gold was under $300 an ounce. He then sold them in the following summer and told his subscribers to buy them back in April of 2003. Incredibly, he put out a sell recommendation one day before gold peaked last December. "We had an incredible ride in gold last year and I made a literal fortune when I got out," he said. Swanson thinks that gold investors are going to experience similar rewards this year.
Most investors may be totally asleep when it comes to the dangers of a falling dollar, but there appears to be a buzz of activity inside the Federal Reserve and the Treasury Department. In two weeks the Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke are going to travel to China to discuss the US trade deficit with China and probably try to talk the Chinese government into lowering the value of the yuan.
The Treasury Secretary is taking steps to prepare for a dollar crisis. According to the Wall Street Journal, Paulson "has reinvigorated the President's Working Group on Financial Markets, which had languished. Mr. Paulson is chairman of the Working Group, which coordinates government policy on financial markets and includes the heads of the Federal Reserve, Securities and Exchange Commission, and Commodity Futures Trading Commission. Mr. Paulson has insisted that they meet about every six weeks. Before his arrival, the group met every few months and sometimes as infrequently as once a quarter."
The Wall Street Journal went on to say, "Mr. Paulson is having the Working Group look at the systemic risk posed by hedge funds and derivatives, and the government's ability to respond to a financial crisis, officials said. He has ordered his chief of staff, Jim Wilkinson, to oversee the creation of a Treasury command center to track markets world-wide and serve as an operations base in a crisis. The center would revive a market-monitoring room closed in a 2003 budget cut."
As you probably know the Working Group on Financial Markets is the official title of what some people call the "plunge-protection team."
After the Wall Street Journal article came out, Fred Barnes, of the neo-conservative Weekly Standard magazine, wrote this: "Paulson believes a financial crisis is overdue a serious crisis that would be a body blow to the economy. This fear is shared to some extent by Bush and Bolten, who wanted a major Wall Street player at Treasury in case an economic emergency occurs."
According to Mike Swanson, "the accumulation of debt in the United States cannot continue much longer. In the last century the ratio of debt to GDP hovered between 120% and 160%. In 1929 debt rose to 260%. Now the ratio of debt to GDP is at a mad 300% and has been growing over the past year. Something has to give."
Economist Mark Thornton, author of Tariffs, Blockades, and Inflation, agrees. He thinks investors need to pay attention to gold. "There is always a bull market somewhere in the economy. It could be junk bonds, real estate, a particular currency, tech stocks, foreign markets, land, blue chips, or small caps, " he says, "Today we are in a bull market in gold and commodities. Oil and gas are at all-time highs while metals such as silver are up more than 25% in 2004."
The Bulletin of the Atomic Scientists created the famous "Doomsday Clock," whose hands they move forward and backward as they see the dangers of nuclear war ebb and flow. A few years ago they moved the hands of the clock seven minutes to midnight, a setting higher than it was at the end of the cold war, because the US had rejected a series of arms control treaties while terrorists had been seeking to acquire nuclear weapons.
If you were to draw a similar clock to describe the threat of a currency crisis in the United States its hands would certainly be in the 24th hour.
The dollar has taken a plunge during the past two weeks. The US dollar index broke below its 85 support level and has been falling ever since. Its next support area is 80, which has been support for the dollar index for thirty years. "It seems very likely that this level will be tested within the next few months. And if the dollar index stays below 80 for more than a few weeks a full blown dollar rout will be very likely," says Mike Swanson.
The thing about currencies is when they get in a trend they tend to stay in that trend. The fundamentals behind currencies include economic growth rates, interest rates, and debt levels. The dollar topped out in 2000 and 2001 as the bubble in the Nasdaq burst and the US economy entered into a recession. It then fell until the Fed began to raise interest rates in 2005.
That cycle of interest rate hikes helped to put a bid underneath the dollar. That cycle came to an end this summer and it now appears that the Fed will actually start to lower interest rates next year. Fed funds futures contracts are now predicting a 60% chance of a rate cut in March as recent economic data points to signs of a slowing economy. A slowing economy and falling interest rates will bring with them a resumption of the dollar bear market.
"I would expect an orderly drop in the dollar index down to the 80 level to occur in the first quarter of 2007. After that though, if the dollar stays below 80 for several weeks, a full blown dollar crisis will likely begin. Gold, of course, will move up ahead of that. I expect gold to go through the 700 level early next year as the US dollar index tests 80. A move below 80 in the dollar index however, will bring the price of gold above $1,000 an ounce," says Swanson.
This is the 24th hour. I'd say we are 15 minutes away from midnight on the dollar clock.
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| Anonymous Coward
User ID: 361711
2/9/2008 7:27 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
This is a really valuable thread because it goes all the way back to 2005 and shows how certain analysts' predictions about the economy came true. Three years later, it shows how our current state was entirely predictable!
Could it have been averted in 2005? I doubt it. 2002 was probably the last time that emergency measures could've been brought in... but instead the USA went to war in Iraq.
Maybe the war was intended as a stimulus for the US economy? With 83% of America's engineering production geared towards military hardware, the only way to stimulate a recovery was to generate a war somewhere.
Looking at the state of the USA's economy in 2008 I can only assume that this gamble has failed. The only silver lining is that Herbert Hoover now has someone to look down on in the list of worst US Presidents! |
| FHL(C)
User ID: 370683
2/9/2008 10:57 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
Economic Scene
Now That a Penny Isn’t Worth Much, It’s Time to Make It Worth 5 Cents
By AUSTAN GOOLSBEE
Published: February 1, 2007
How dumb do you have to be to mint money at a loss? In the latest only-in-Washington episode, we find that the government may have lost as much as $40 million coining pennies and nickels last year.
The metal in them — the zinc, copper and nickel — has soared in value in the last few years, making the coins more valuable as raw materials than they are as currency. The government reaction has been to ban the melting of the coins to get the metal. But there is a good chance that we will find ourselves in an outright coin shortage of a form we have not seen in four decades and one that harks back to the monetary problems of medieval times.
In their landmark book on monetary history, “The Big Problem of Small Change,” two economists, Thomas J. Sargent of New York University and François R. Velde of the Federal Reserve Bank of Chicago, point out that before the 20th century, the value of coins came from the material they contained: silver or gold. In the words of economics, it was “commodity money.”
But as the price of silver or gold increased, people pulled the coins from circulation. These shortages are a basic problem with commodity money and began almost as early as Charlemagne’s minting of the first silver penny around 800 A.D.
But the United States doesn’t have commodity money anymore. Our coins are just tokens now. They are valuable only because the government says they are — because the government is willing to trade them for dollars.
And making tokens that cost more to manufacture than they are worth is monetary insanity. We could make them out of any material we want, so why in the world would we lose money?
To stop this senselessness, we would seem to have only two choices: debase the coins (i.e., make them out of something cheaper) or abolish pennies (and, perhaps, even nickels).
The United States has debased money in the past. In World War II, we made steel pennies to save copper. In the 1960s, the high value of silver caused a run on quarters and dimes and led to a full-blown coin shortage until we substituted copper and nickel. We also took most of the copper out of pennies in 1982 for the same reason.
But debasement only puts off the inevitable for a short time. Because the penny is fixed in value at 1 cent, no matter what the penny is made of, the cost of its material will rise with inflation and eventually be worth more than a cent.
Most economists, then, argue that we should use this opportunity to abolish pennies the way Canada, Britain and the European countries that use the euro abolished their smallest coins. Because of inflation, a penny isn’t half the coin it once was. Indeed, the United States ended the half-cent in 1857 when it was still worth about 8 cents in today’s terms, so we’re probably well overdue to retire some coins.
But polls show that a majority of Americans like their pennies, and abolition might lead people in Illinois — the land of Lincoln, where pennies still work at tollbooths — to outright currency rebellion.
On top of that, Raymond Lombra, an economist at Pennsylvania State University, claims that the rounding of prices — a $6.49 bill would cost you $6.50 — might not be evenly distributed and might cost consumers as much as $600 million a year, a cost that would be paid disproportionately by the poor who use cash more often.
Others counter that retail stores could not get away with such shenanigans. But, clearly, the case for abolishing pennies is not universally believed.
So what to do?
Mr. Velde, in a Chicago Fed Letter issued in February, has come up with a solution that would abolish the penny, solve the excess costs of making nickels, help the poor, keep the Lincoln buffs happy and save hundreds of millions of dollars for taxpayers.
As Mr. Velde explained in an interview, “We face a very medieval problem so I took inspiration from the medieval practice of rebasing.”
He would rebase the penny by having the government declare it to be worth 5 cents.
At first that sounds impossible. But our coins are just tokens the government gives a value to. We can say they are worth whatever we like. Indeed, Mr. Velde observes that the United States did something similar in 1834, when it changed the gold-silver ratio and suddenly the half-eagle $5 coin was actually worth $5.625.
Pennies would then cost a little over 1 cent to make and would be worth a nickel, so the government would again be making a profit on money. We would have plenty of new Lincoln nickels so we could stop minting our current nickels at a heavy loss. The Jefferson nickels would stay in circulation, just as the old wheat pennies do now. Because metal in nickels is valuable, though, they would probably be melted down.
Rebasing pennies is printing money. But don’t get too worried about inflation. With about 140 billion pennies in circulation ($1.4 billion) — counting the ones in your couch and your kids’ piggy banks — this rebalance would make them worth $7 billion, adding about $5.6 billion to the money supply. For comparison, at the start of 2007 there was about $1.4 trillion in currency and money available for purchases, to say nothing of credit cards.
Plus, the money would go disproportionately to the poor (and to people getting allowances from their parents), more than offsetting any “rounding tax” from eliminating the penny.
So pull out those sofa cushions, ladies and gentlemen, and start looking for the shiny face of Honest Abe. All that glitters may not be gold, or even nickel, but it may be worth 5 cents.
[link to www.nytimes.com]
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 370683
2/9/2008 11:56 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
Quotes from latest Mogambo's
Patrick Creadon as saying, "America's federal debt is $8.6 trillion and growing at a frightening rate. In addition, our major entitlement programs (Social Security, Medicare and Medicaid) are dangerously unfunded. As a country, we are slowly spending ourselves to death."
Well, he couldn't be more right about us spending ourselves to death, as the national debt is actually $9.1 trillion, already grown by $500 billion since he was interviewed for a movie so new that it just premiered! Hahaha! We're freaking doomed!
And this reminds me of Junior Mogambo Ranger (JMR) Bob B, who says, "Amazing huh? The United States created 18,000 jobs during November while 270,000 (9,000/day) of the US population turned 62 years of age in the same month and became eligible for Social Security on January 1, 2008. Let me get my calculator. OK. That's one new contributor (to Social Security) for every 15 new beneficiaries. When is this going to hit the fan?"
"US Comptroller General David Walker as he crisscrosses the country explaining America's unsustainable fiscal policies to its citizens", which is the sad, sad story of a corrupt Congress (except Ron Paul) letting the corrupt Federal Reserve create the excess credit, which creates the backbreaking debt, which creates the money that the government wants to borrow, all of which radically distorts the economy and expands the money supply, which dooms us to suffer from horrendous inflation in prices as a result of this horrendous inflation in the money supply.
the fact is that the economy is ditto down the crapper, as I can confidently say since the BLS reported that inflation is already starting to kill us as, "Consumer prices advanced at a seasonally adjusted annual rate (SAAR) of 5.6% in the fourth quarter of 2007. For the 12-month period ended in December, the CPI-U rose 4.1%."
The worse news is that "The index for energy turned back up in the fourth quarter, advancing at a 37.1% annual rate. Overall energy costs rose 17.4% in 2007. The food index, which rose 2.1% in all of 2006, advanced 4.9% in 2007."
Brian Bloom of beyondneanderthal.com is my kind of guy, and you can detect his concern and fear when he writes that the Labor Department said that not only are prices up according to the CPI, but that it is actually worse than that, as, "From January 2007 to December 2007 the US$ Index fell, roughly, from 85 to 75. Thus, the price of an imported article - if it was priced in a foreign currency - would have risen from 100 to 113 or by 13%." Yikes! 13% inflation!"
He says, "Of course, the 'poor' Chinese manufacturers would have absorbed some of the impact because they price in US dollars", which is certainly true as far as contracts are concerned. But he thinks it is worse than that, as for the Chinese manufacturers, "their own input costs rose far faster than their yuan rose relative to the US dollar. It follows that they must have shared some of the US's inflationary pain, but not enough to have put a 4.1% cap on US inflation."
We look at each other. I know what I am thinking, and he knows what he is thinking. I'm thinking that he agrees with me that anyone who thinks that inflation in prices in the United States is only 4.1% is a Big Stupid Idiot (BSI).
After examining a few clues related to the Chinese economy, Mr Bloom comes to the conclusion that, "the stated 4.1% inflation rate in the USA is a crock".
Hurriedly, he re-examines the inflationary evidence, and again comes to the conclusion that "the stated 4.1% inflation rate in the USA is a crock". But his heart really isn't in it anymore.
Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 370683
2/10/2008 10:30 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
PARIS (AFP) - World stockmarkets lost 5.2 trillion dollars (3.6 trillion euros) in January thanks to the fallout from the US subprime crisis and fears of a global economic slowdown, Standard & Poor's said Saturday.
ADVERTISEMENT
"If investors thought the market could only go up, January's wake-up call pulled them back into reality," the independent credit ratings' provider said.
Standard & Poor's said the world's equity markets lost a combined 5.2 trillion dollars as emerging markets fell 12.44 percent and developed markets lost 7.83 percent to register one of the worst starts to a new year.
"There were few safe havens in January as 50 of the 52 global equity markets ended the month in negative territory, with 25 of them posting double-digit losses," said Howard Silverblatt, senior index analyst at S&Ps.
All 26 developed equity markets posted negative returns in January, with 16 losing at least 10 percent of their value.
The January declines negated all previous market gains, leaving all of the developed markets in the red for the trailing three month period.
In Paris, the stock exchange lost 12.27 percent over the course of January, 15.27 percent over the past three months, more than wiping out its gains over the last 12 months -- down 0.74 percent).
The situation was even worse in London -- down 8.85 percent in January, down 16.54 percent for the past three months and down 2.22 percent over 12 months -- and in the US, which was down 6.07 percent in January, down 10.78 percent over three months and down 2.42 percent over 12 months.
The story was similar in Japan, where the market lost 4.47 percent in January, 10.31 percent over three months and down 10.44 percent over the past 12 months.
In Germany, in contrast, although the stock exchange lost 13.72 percent in January and 13.84 percent over three months, it was up 13.43 percent over the year.
Equity markets in emerging countries also suffered heavy losses in January, apart from Morocco which gained 10.17 percent and Jordan, which was up by 3.11 percent. Turkey was the most affected with January losses reaching 22.70 percent, followed by China on 21.40 percent, Russia on 16.12 percent and India at 16 percent.
But only Argentina and Taiwan slipped into negative territory for the 12-month period. |
| .
User ID: 373025
2/14/2008 12:17 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Uncle Sam Crying "UNCLE!"
Antal E. Fekete
Gold Standard University Live
aefekete@hotmail.com
Feb 12, 2008
Tertium datur
People tend to think in terms of black-and-white. Many of my correspondents think that either hyperinflation or deflation is in store for the dollar; tertium non datur (no third possibility given). I would say tertium datur. The third possibility is a hybrid of hyperinflation and deflation. I described this scenario in my previous article "Opening the Mint to Gold and Silver."
It is possible, even probable, that we shall witness collapsing world trade and collapsing world employment together with competitive currency devaluations, as the three superpowers compete in trying to corner gold. The lure of gold is very strong. "There is no fever like gold fever" and, contrary to conventional wisdom, governments are especially susceptible.
A large part of the problem is that the Central Bank is helpless in the face of bond speculation. The Fed is no Sorcerer. It is the Sorcerer's Apprentice. It can pump unlimited amounts of "liquidity" into the system, but cannot make it flow uphill. As we shall see, new dollars flow to the bond market causing a lot of mischief there, instead of flowing to the commodity market as hoped by the Fed.
Up to now leading commodities have outperformed gold. That could change. A select few commodities might continue in the bull-mode for a time, although gold could easily beat them. Most other commodities might go into a bear-mode similar to that of the commodity markets of the 1930's. If that's what was in store, then most investors would be totally lost. They would be navigating without a compass. There would be endless debates whether the country is experiencing deflation of hyperinflation. Your motto in this hybrid scenario should be: "expect the unexpected".
Of course, the Fed will keep printing dollars like crazy. Few of them, if any, will go into commodities. Indeed, most of the newly created dollars will go into bond speculation. Why? Because commodity bulls are running into headwind and face grave risks. By contrast, bond bulls enjoy a pleasant tailwind. Bond speculation is virtually risk-free. Under our irredeemable dollar bond bulls have a built-in advantage. The Fed has to make periodic trips to the bond market in order to make its regular open-market purchases of bonds to augment the money supply. In order to win, all the bond speculator has to do is to stalk the Fed and forestall its bond purchases. This is the Achillean heel of Keynesianism: it makes bond speculation inherently asymmetric favoring the bulls, and that will ultimately derail the economy on the deflation-side of the track.
Uncle Sam in agony
Russia is not as enigmatic as China. The Russians' game is gold. China is the big unknown. It looks as if China prepares to corner silver. Will the Chinese force a silver standard on their trading partners? It is quite possible that their pile of paper profits in silver is already so huge that they can well afford to gamble. They find trading T-bonds most profitable. Indeed, theirs is the greatest U.S. T-bond portfolio ever, anywhere. They can overwhelm any opponent bidding against them. Just think about it. The financial destiny of the U.S. is in China's hand. The good news is that the Chinese have vested interest in keeping the bond bull charging. They also have a vested interest in keeping the dollar on the life-support system. The bad news is that the Chinese insist that it is their finger that must be on the switch. Here is an incredible sight, the U.S. being under the thumb of China. Not because the Red Army is a match for the U.S. military, but because Uncle Sam has voluntarily put his head into the noose. The Chinese ask: why fight shooting wars when you know that your antagonist is painting himself into a corner anyhow? They know that Uncle Sam will sooner or later start crying: "Uncle!" in agony. They have all the marbles. The marbles of saving. The marbles of producing. The marbles of silver. Maybe, one day, they will also have the marbles of gold.
The Logarithmic Law of Deflation
Most economists are ignorant of the mathematics of depressions. They have certainly never heard of what I call the Logarithmic Law of Deflation. It states that halving interest rates brings about the same proportional increases in bond prices, regardless at what level the halving takes place. It makes no difference whether you go from 16% to 8% or from 2% to 1%, the value of long-term bonds will increase by about the same factor. It can be seen that a much smaller drop in interest rates could bring about the same proportional increase in bond prices, provided that the rates are low enough.
Why is this important? Because it gives away the secret of the deadly deflationary spiral. It is wrong to describe Fed action as cutting interest rates. We should think in terms of the Fed halving them. The bull market in bonds can go on indefinitely under the regime of the fiat currency. People assume, wrongly, that the Fed will run out of ammunition when the rate of interest is approaching zero. The bond-bull will run out of breath. Not so. The Fed will never run out of ammunition. The lower the rate, the smaller cut will do. The Fed can halve interest rates any number of times without ever reducing them to zero. The bond-bull will never run out of breath.
"Gigolo of science"
The trouble is that the bond-bull is the root cause of depressions. Falling interest rates create capital gains for bondholders, yes, but these gains do not come out of nowhere. They come right out of the capital losses of producers. They are the very stuff out of which depressions are made. The serial cutting of interest rates by the Fed is the grave-digger of the economy: it causes wholesale bankruptcies in the producing sector. The large-scale dismantling of the producing sector in America during the past twenty-five years is a direct consequence of the regime of falling interest rates. Production stopped as a result of the financial sector siphoning off capital from the producing sector. Industrial jobs were exported as there was no capital left to support them at home. This shocking truth was never investigated by mainstream economists, sycophants of Keynes. They did not want to expose the gravest error of their idol in confusing a low interest-rate structure with a falling one. Keynesianism is the gigolo of science (Ayn Rand).
"Moral cannibalism"
As the example of Japan shows, we are not looking at a ditch into which the Japanese economy has stumbled. We are staring a black hole in the face, the black hole of zero interest. It can suck in the Japanese economy. It can suck in the economy of the United States. It can even suck in the entire world economy. It is powered by the regime of the irredeemable dollar, and the Fed's policy of serial interest-rate cuts.
Ayn Rand called the confiscation of gold in 1933 by F.D. Roosevelt "moral cannibalism". As I have shown elsewhere, the epithet is apt. The removal of gold as the chief competitor of government bonds was one of the main causes of the Great Depression in triggering, as it did, a protracted fall in interest rates. (The other cause was the deliberate manipulation of interest rates lower by the Fed.) The latter-day equivalent of moral cannibalism is risk-free bond speculation by the banks, perpetuating the bull market in bonds. It is made possible by the open-market operations of the Fed that have been clandestinely and illegally introduced and, by now, have become the mainstay of the management of fiat currencies. The result is another protracted fall in interest rates. Could they herald another Great Depression?
What American Century?
There is an historical lesson to learn here. The twentieth century was not the "American Century" as advertised. The sun started setting on America as early as 1913 when, in imitation of the Europeans, Americans embraced the idea of a central bank. An earlier attempt to establish a central bank in the United States was found contrary to the Constitution, and the Bank's charter was not renewed. But by 1913 the visionary admonition of Thomas Jefferson was totally forgotten.
"If the American people ever allow the banks to control the issuance of their currency, first by inflation, and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property, until their children wake up homeless on the continent their fathers conquered. The issuing power of money should be taken from banks and restored to Congress and the people to whom it belongs. I sincerely believe that the banking institutions having the issuing power of money are more dangerous to liberty than standing armies."
In less than a generation after 1913 adventurers invaded America's institutes of higher learning and exiled monetary science, replacing it with a hodge-podge of dubious nostrums. America's economy and finance started to be run on a completely false theory. Gold, and the power to create and to extinguish money was taken away from the people. It was given to the banks.
Operating on the basis of this false theory Americans scrapped the foundations of the international monetary system: they threw out positive values (such as that of gold and silver) and replaced them with negative values (such as debts and deficits). As a consequence, outstanding debt can no longer be reduced through the normal course of retirement. Total debt can only grow. In no time at all America has turned itself from the largest creditor into the largest debtor nation of all times. Not only did the U.S. government allow its debt to grow exponentially; it also allowed it to accumulate in the hands of America's adversaries. At the same time America's industrial heartland was dismantled. Well-paid industrial jobs were exported and replaced by low-paying service jobs.
Hedging versus gambling
The United States is like a train running downhill without brakes. The derivatives monster is the proof of that. It has its own dynamics, but it cannot be grasped without a solid understanding of gold. Under the gold standard interest rates, and hence bond values, were stable. In fact, that is the main excellence of a metallic monetary standard: it makes interest and foreign exchange rates stable. There are no derivatives markets on interest and foreign exchange rates, because the lack of volatility makes trading unprofitable. Under a metallic standard "bond trading" is an oxymoron, as is "bond insurance". Private issuers of debt must set up a sinking fund that will buy up all bonds offered in the market below par. People buy bonds as a vehicle of saving. Today, you would have to be insane if you wanted to buy bonds as a vehicle of saving.
Why then are bonds still in demand? They are in demand because they are by far the best vehicle of gambling. As I shall now show, under the regime of irredeemable currency, speculation in bonds is risk-free.
When the gold standard was thrown to the winds, interest rates started gyrating and bond values were totally destabilized. After all, bonds promised to pay principal and interest in terms of a currency of uncertain value.
Mainstream economists betrayed their sacred duty of searching for and disseminating truth. They started preaching the false gospel that it is possible to take out insurance against losses in the bond portfolio. However, the thesis that bond futures can be used for purpose of hedging the bond price (in exactly the same way as wheat futures can be used for the purpose of hedging the wheat price) is an outright lie. Only those price risks can be hedged where the price variation is nature given, as in the case of agricultural commodities. If the price variation is artificial, that is, subject to government and central bank manipulation as are foreign exchange and bonds under the regime of irredeemable currency, then it is preposterous to talk about hedging. One should talk about gambling instead of hedging. As in the casino, the so-called hedger is placing a bet against the house, in this case the central bank, whose job it is to manipulate the price.
The Derivatives Monster
The derivatives tower is just a layered pyramid of "bond insurance", so-called. Nobody asks the question whether insuring bond values is possible in principle. As I have stated, it is not. Insurance means spreading the risks over a larger population than that needing compensation. Insurance is the very opposite of gambling where the player wants to increase his risks in the hope of a large payoff, not to decrease it.
Now think of an inverted pyramid delicately balanced on its apex. The apex represents the bond market (layer 1). The next layer is bond insurance (layer 2). But since the value of bond insurance is inherently even more unstable than that of the bond, it is in need to be insured as well (layer 3). And so on it goes. The pyramid is growing at an exponential rate as the need for reinsurance keeps increasing.
There are several problems. First of all the whole idea is hare-brained, much the same as the idea of "operation boot-strap". A soldier, no matter how strong he is, cannot lift himself by his own boot-straps. Similarly, you can't insure bond values without an anchor. The second problem is that the slightest hitch at any layer will bring down the house of cards. The principle of insurance assumes that no tornado will destroy all the insured homes simultaneously. The same assumption cannot be made about bond insurance. The volume of outstanding bond insurance is much higher than the existing supply of bonds. It is even larger than the existing money supply (and goodness only knows that it is very large.) Therefore it is a physical impossibility to compensate insurance-holders in case of global trouble. If any doubt arises at any level about the validity of the insurance policy, the whole Ponzi-scheme collapses. The Derivatives Monster is meant for simpletons.
The Presidential election year of 2008
I find it frightening that none of the Establishment candidates for the presidency even vaguely refer to the on-going self-destruction of the nation's monetary and banking system. Like an ostrich they ignore the problem. A presidential election year should be a great opportunity for the nation to discuss its most urgent problems and take remedial action wherever necessary. In this election year the country is blessed with the running of a competent and upright candidate who sees and understands the problems involved, and is willing to engage in a public discussion of the gold standard as a way to avert national and world economic disaster. This candidate is Dr. Ron Paul, a physician who did not go into politics with the idea of making money or accumulating power. He went into politics as Cincinnatus, patriot and hero of the old Roman republic. When Cincinnatus was drafted to become consul, the messengers who came to tell him about his new dignity found him ploughing on his small farm. He answered the call, but after solving the problems of the nation he declined the offer to become dictator for life. He returned home to pick up the plough again.
Already in 1985 Ron Paul called for the opening of the U.S. Mint to gold and silver as a way to stop the threatening monetary and banking crisis in his address The Political and Economic Agenda for a Real Gold Standard. If the country had listened to him then, people would have been spared of the economic pain of 2007, and the possibly much greater pains that may be in store.
Ignorance or lust for power?
Not one among the Establishment candidates is willing to take up the challenge of Ron Paul, thus depriving the electorate of a singular opportunity to learn about the dangers threatening the Republic. We are left wondering whether their ostrich-like behavior is due to ignorance, or to lust for power.
The electorate cannot make an informed decision in November without understanding the current monetary and banking crisis and its connection to gold. It is not too late to have a great debate on the gold standard and on the consequences of maintaining the irredeemable dollar standard in the face of an escalating monetary and banking crisis. Labor leaders and captains of industry should demand an answer to all those questions that the representatives of the financial press refuse to ask of the candidates.
* Lucius Quinctius Cincinnatus (c.519-433 B.C.) Cincinnati was named in honor of Cincinnatus.
References
Ron Paul, The Political and Economic Agenda for a Real Gold Standard, RonPaul2008 January 17, 1985
A.E. Fekete, The Double Whammy of Geopolitical Global Gold Games, 321gold January 31, 2008
A.E. Fekete, Fiat Currency: Destroyer of Labor, www.professorfekete.com pdf
A.E. Fekete, Fiat Currency: Destroyer of Capital, www.professorfekete.com pdf
A.E. Fekete, Opening the Mint to Gold and Silver, 321gold February 6, 2008
GOLD STANDARD UNIVERSITY LIVE
Session Three is being held in Dallas, Texas, February 11-17, 2008. For details, go to my website.
Feb 10, 2008
Professor Emeritus
Memorial University of Newfoundland
email: aefekete@hotmail.com
Professor Antal E. Fekete was born and educated in Hungary. He immigrated to Canada in 1956. In addition to teaching in Canada, he worked in the Washington DC office of Congressman W. E. Dannemeyer for five years on monetary and fiscal reform till 1990. He taught as visiting professor of economics at the Francisco Marroquin University in Guatemala City in 1996. Since 2001 he has been consulting professor at Sapientia University, Cluj-Napoca, Romania. In 1996 Professor Fekete won the first prize in the International Currency Essay contest sponsored by Bank Lips Ltd. of Switzerland. He also runs the Gold Standard University. |
| fieldolight
User ID: 373590
2/14/2008 12:20 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
quoted from above article....I am hoping it's right. Change would be a really good thing.
“This could be the end of something really ignorant and stupid and dark,” Celente told me recently in a phone interview. “The end of a dark age! The end of the age of what I call Bottom-Line Fascism, the ruthless and dictatorial profit-only way of thinking that produces crap over quality in all the major institutions, dopiness and blob-thinking, the manipulations of an idiotic media and political establishment, the Cartoon News Networks, the Greta Van Susterens and the Hillary Clintons uttering the same pablum ad nauseum over and over. All the institutions are coming apart – government, corporations, media, education, health care. They present nothing less than a vacuum! Something has to fill it! The systems that are in place? Things can only get worse if they stay in place. But I’m an optimist. I’m gunning for something better to replace what we got.” He pauses. “A renaissance! I’m gunning for a renaissance: an era where quality beats out the crap of quantity.”
source
turtles know: low profiles are best.
I like turtles! |
| .
User ID: 373025
2/14/2008 12:53 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
ebruary 14th, 2008
Southern California Housing Numbers Exposed: The Bottom Falls out of the Housing Market, Again.
“Anyone who lives within their means suffers from a lack of imagination” -Oscar Wilde
The housing market in Southern California is similar to skydiving, except with a small caveat of course. You are told by the expert skydiver that you are all ready to go once you reach maximum elevation. As you get ready to jump, starring at the open air, you are told that for maximum excitement you shouldn’t take a spare parachute. So you agree and remove the extra security measure. Right when you jump you hear a fainting voice, “there is no parachute!…” As you start to panic, free falling in descent you try to pull your ripcord and nothing. You try to be creative and make something out of your empty parachute holder. Nothing. Try as you may, there will be a crash.
Then I think of lifting caps, mortgage freezes, or dropping the Federal funds rate and I think of the above comparison. For a brief moment, we like to psychologically think that these measures will help but the end result is unavoidable; there will be a crash simply because that is the inherent nature of all bubbles. Trying to intervene will only force the historical economic river of reversion to find another way to correct itself. There has to be an adjustment simply because the fundamentals never existed to justify current prices. The irony of all the new proposals is that they now examine income, verify employment, and do all these fact finding measures after the person has jumped from the plane. It may feel like it is helping but the economic momentum is clear and it wants and needs to correct. We will continue to face problems because the fundamentals were never there to begin with. The Southern California housing numbers released on Wednesday show a free descent:
County Median Jan. 2007 Median Jan. 2008 Percent Change
Los Angeles $520,000 $458,000 -11.9
Orange $600,000 $520,000 -13.3
Riverside $415,000 $331,500 -20.1
San Bernardino $370,000 $298,500 -19.3
San Diego $472,000 $429,000 -9.1
Ventura $565,000 $477,750 -15.4
SoCal $485,000 $415,000 -14.4
Aside from the reality that two of our counties are already seeing 20 percent year over year losses, we also notice that other counties are quickly following. We went into detail exposing the numbers for Southern California in January so this continued trend should not be a surprise to anyone that is paying attention to market indicators. These numbers without context do not examine the entire picture. In fact, Los Angeles County did not go year over year negative until October of 2007. Did housing problems only start at this time? Of course not. Even a few years ago, I was carefully examining sales numbers because this would be the first leading indicator to tell us where prices would be heading. Take a look at this chart comparing sales numbers versus the median sale price in Los Angeles County since December of 2000:
Los Angeles County Sales Numbers
*Click to see full graph
What should be incredibly obvious is that the sales number trend broke in the forth quarter of 2005! I talked about the above cyclical sale trend in the following post:
When the Housing Clock Stops Ticking: Why the Median Price is Going up While Sales are Going down.
The above post discusses the above cyclical fall and winter drop in housing. Yet the drop in the winter of 2005/2006 was more than your typical seasonal downturn. This was the breaking point that led to the current slowdown. Amazingly, it took roughly two years before the median sales price in Los Angeles County caught up to what the sales numbers were telling us. Of course the pundits ignored the sales numbers at their own peril and now after only 4 negative year over year months, want every government measure to support the housing market. Keep in mind that we have seen month over month of amazing gains since 2000 without any hesitation; in fact 7 years of constant growth and only 4 negative months is enough to destroy a decade of appreciation? Clearly, this was a house of cards predicated on perpetual housing motion.
What is the bigger story is the drop in sales. I’ll leave it to DataQuick to summarize the information:
“Last month’s sales total was the lowest for any month in DataQuick’s statistics, which go back to 1988. Since September, sales for each calendar month were a record low for that particular month.”
In Los Angeles County, only 3,398 homes sold in January. Compare this to the peak high of 12,324 reached in August of 2001. In fact, I ran a quick average for the entire series from December of 2001 to the present and we arrive at the amazing number of 9,138 sales per month. Now, do you see us coming anywhere close to this average anytime soon? It looks like Los Angels County will continue to be a renting majority county.
And regarding the Oscar Wilde quote, it appears that our imagination led us to believe that exotic mortgages would give us the ability to fly on the wings of equity forever. And as Wilde unfortunately found out in his last three years of life going about penniless, even those who have great intelligence and wit cannot defeat economic laws. Eventually your spending habits do catch up with you. Even Sir Isaac Newton gambled in the South Sea Bubble telling us after his disastrous investment:
“I can calculate the motion of heavenly bodies, but not the madness of people.”
This is a quote all financial engineers should post above their workstations for a little perspective. |
| Anonymous Coward
User ID: 375904
2/18/2008 10:41 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Rock shareholders may end up with nothing
Investors expected to take legal action over government's handling of crisis
By Simon Kennedy, MarketWatch
Last update: 8:02 a.m. EST Feb. 18, 2008
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LONDON (MarketWatch) -- Shareholders in Northern Rock may see their investments completely wiped out under the U.K. government's plan to nationalize the stricken mortgage lender, which has sparked threats of legal action and claims that the crisis has been mishandled.
Chancellor Alistair Darling announced the decision to nationalize the bank (UK:NRK: news, chart, profile) Sunday after private-sector bids weren't considered to offer a good deal for taxpayers. Darling also said an independent audit will work out what compensation is due to shareholders. See full story.
Analysts, however, believe there will be little or no cash left because the valuation of the shares will assume that around 25 billion pounds ($49 billion) of loans from the Bank of England have been withdrawn. See MarketWatch First Take.
'We will not accept the transfer of this company to a third party after some temporary nationalization from which that third party will subsequently make substantial profits.'
— Roger Lawson, U.K. Shareholders Association
"The valuation will be calculated assuming that the bank has not been supported by government loans, and on this basis the shares could have no value," said Bear Stearns analyst Robert Sage in a note to clients.
James Hamilton, an analyst at Numis Securities, agreed the value could be virtually nothing. But he said the government could still decide to make a payment to shareholders in order to avoid a repeat of the drawn-out legal battle it faced when rail infrastructure group Railtrack went into administration in 2001.
Shares in Northern Rock were suspended following the announcement over the weekend. They closed on Friday at 90 pence a share, down from a high of 1,258 pence around a year earlier.
Other U.K. banks rallied with Barclays (UK:BARC: news, chart, profile) (BCS:
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, , ) up 6.3% ahead of its latest earnings Tuesday. Northern Rock's closest rivals Alliance & Leicester (UK:AL: news, chart, profile) and Bradford & Bingley (UK:BB: news, chart, profile) both gained over 1%.
The British pound weakened following the decision to nationalize the bank, falling to $1.9481 from $1.9613 and nearing a fresh record low against the euro. See Currencies.
Legal fight expected
The response from investors has been highly critical and legal action now looks almost inevitable, said Keefe, Bruyette & Woods analyst James Hutson.
The U.K. Shareholders Association said Monday that it intends to "pursue any legal options available" to halt the nationalization process.
"We will not accept the transfer of this company to a third party after some temporary nationalization from which that third party will subsequently make substantial profits," Roger Lawson, a director of the association, said in a statement.
Lawson also said in an interview with CNBC that the association would consider joint legal action with hedge fund SRM Global, Northern Rock's biggest shareholder, which began building its stake soon after the bank's problems began.
In electing to nationalize Northern Rock, the government turned down bids from Richard Branson's Virgin Group and an in-house management team having previously asked the pair to improve their offers.
In a press conference Monday, Prime Minister Gordon Brown said Northern Rock will be run at arms-length from the government by Ron Sandler, former head of the Lloyd's of London insurance market.
Brown said he remains confident that the Bank of England will get its loans back and even said the U.K. taxpayer could still profit from the eventual sale of the bank.
He also dismissed calls from the opposition Conservative Party that the bank should be put into administration, saying this would still require public ownership, but also means assets would have to be sold off at a low point in the market, leading to losses.
Unlike other U.K. companies that have been allowed to fail -- such as car maker Rover in 2005 -- Northern Rock had to be rescued because of the potential knock-on effect it could have had on the banking system, Brown and Chancellor Darling argued.
Credit market woes remain
The Northern Rock crisis began in September when it revealed it had arranged an emergency loan facility with the Bank of England, sparking the first run on a U.K. bank in over a century.
The bank needed to borrow money because credit markets had seized up, cutting off financing for its fast-growing mortgage book.
But credit market conditions have remained tough, meaning the bank will have trouble funding any new borrowing and will likely have to sharply reduce its asset base.
"With the credit crunch causing the initial problems for Northern Rock the continued credit difficulties are the reason why a deal to rescue the group could not be reached," said Numis Securities' Hamilton.
"Given the capital markets funded model we expect the group to be placed into runoff until such time as they reopen," he added. End of Story
Simon Kennedy is the City correspondent for MarketWatch in London. |
| Anonymous Coward
User ID: 375904
2/18/2008 10:43 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The bank needed to borrow money because credit markets had seized up, cutting off financing for its fast-growing mortgage book. Quoting: Anonymous Coward 375904 |
| .
User ID: 401137
3/27/2008 10:10 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Those who saw this coming already know where its going, but only a few actually know what is yet to come
The Reality Of The Situation Sets In
Author: Jim Sinclair
Dear Friends,
While fielding questions from an overflowing crowd at the AMEX Base and Precious Metals conference, it became clear to me that for the first time in my life, I am scared.
Not for me, not for those of you prepared, but for those stuck by inertia and the average hardworking family man.
Monty is right in that criticism of actions taken carries no contribution. It is our job here to focus on consequences, to be prepared for all consequences, but to hope for the best.
Two new figures can be seen on the horizon. One is a political review of OTC derivatives and the other is OTC derivative litigation. Both these specters are capable of pulling the blanket of secrecy back to expose the reality of why the Fed had no other choice but to finance and broker the “bury the bankruptcy” deal of Bear Stearns into JP Morgan.
The Fed has now established a precedent for being the lender of last resort to any entity that has the capacity of calling into view the credit ability of US Treasury instruments and the net work of obligations thereupon.
The revelation that politics and litigation has is to reveal the character of the defunct so called asset being accepted as collateral for permanent 28 to 30 day loans and outright purchases that are sure to be rolled over repeatedly.
Another revelation is that these are not mortgage buys but specific performance contracts and items derived from mortgages called SIVs. These now defunct former assets are now working their evil on the balance sheet of the central bank of the USA.
Central Banks cannot go broke as they have a mechanism that results in a blank check for themselves or others. What can happen as the virus of OTC derivatives infects the balance sheet of the Fed is to further pressure the US dollar lower.
The threat that the army of attorneys poses in the descent upon the directors and officers of defunct companies is a killer blow to an already reeling dollar.
The political thrust is against the Fed’s use of public money to sustain just those who have vented this awful situation on mankind. The Fed did what it had to do as doing nothing would have been a bigger mistake than doing something with vast long term economic consequences.
All the machinations of Fed activity can only hide the reality of the worthlessness of derived entities from real assets.
This is not a mortgage crisis. It is a crisis of the light of reality being shined on the lack of reality in OTC derived items as assets with value and fundability.
The definition of a derivative meltdown is not visible smoke and fire, but the inability of one side (the loser) of a special performance contract to perform as obligated.
Inability to perform is an inability to pay, hence the bankruptcy and no comeback in value ever.
We are in the midst of a meltdown with the effort being to prevent the domino effect.
Now to markets:
Gold will do best not to challenge $1000 immediately as it will meet stiff opposition right in front. Let some time pass, defined as a few weeks, and the next challenge will again move into the $1024 bull’s eye, probably to be sent back again. The best bet of putting $1024 behind us exists on either a second try of $1000 that is somewhat delayed, or on the third try.
You can dismiss all the noise in between by putting your hand in mine as we walk to $1650 together. I do not think that will occur, I do not rely on some technical grouping of candlesticks, clouds or theoretical mathematics. I know it will occur!
Buying the reactions for those of you that must trade as they take the fishing line look is for me a no-brainer. Go modestly, do it each time and those who must trade will trade smart. You will have a few thousand more opportunities.
The US dollar will be fortunate if it can halt a decline at .5200 on the USDX. This is because the central bank, like it or not, is in a corner from which there is no escape. It must and will provide the liquidity required so that no financial entity capable of starting a domino effect will outright fail.
That means a rather constant production of more dollars in a condition where the world seems determined not to wish to pay up or even the same for that ever-increasing supply of US paper. More apples brought into the apple market where apple buyers are really not that interested results in a sharp decline in the price of apples. It is no different where the US dollar is concerned.
As a result, our Middle Eastern brothers get their receipts for each barrel of oil sold devalued as they accept dollars in exchange. Should they stop accepting the dollar, a major buyer as in the apple equation steps out and then the price of apples (dollars) goes into a free fall.
Now you see why I am concerned for those readers caught in the inertia of not acting and the average Joes who really have little, if any, ability to protect themselves.
Prepare for the worst, then get it out of your mind and hope for the best.
Respectfully,
Jim
[link to www.jsmineset.com]
__________________ |
| .
User ID: 402217
3/28/2008 12:54 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Chinese exporters shun flagging dollar
By Robin Kwong in Hong Kong
Published: March 27 2008 22:02 | Last updated: March 27 2008 22:02
Rising numbers of Chinese exporters are shunning the US dollar or devising ways to offset the impact of the falling currency as they confront rising labour and raw material costs at home.
According to Alibaba.com, the online company that matches Chinese suppliers with international buyers, the vast majority of their almost 700,000 Chinese suppliers no longer use dollars to settle non-US transactions to minimise foreign exchange risk.
“They are moving to euros, pounds, Australian dollars or even quoting prices in renminbi,” David Wei, chief executive, told the Financial Times. Moreover, he added, prices quoted in dollars were now often valid for just seven days compared with the 30-60 days common previously.
The dollar has long been the currency of choice for Chinese and other exporters around the world. However, the impact of its recent weakening has led exporters to begin questioning its place as the de facto world currency.
The renminbi, which western governments have long alleged is undervalued, thus giving Chinese exporters an unfair advantage, has appreciated 6.7 per cent against the US dollar in the past six months. Economists expect it to rise 10-15 per cent against the dollar in 2008.
Quanzhou Leething Garment & Knitting, a Chinese men’s underwear factory, said it had started encouraging clients to pay in euros instead of dollars in November. While the Chinese currency has appreciated against its US counterpart in recent months, it has moved little against the euro.
Other companies have taken more unusual approaches, such as setting their own exchange rates and therefore in effect raising prices.
Xiao Zheng, chairman of Dongguan City Shima Toys in southern China, said its price quotations were valid for three months but were calculated based on an exchange rate of Rmb6.6 to the dollar.
With the official exchange rate at Rmb7.01 to the dollar on Thursday, this in effect raised prices 5.8 per cent.
“We are thinking about renewing our quotations every other month and we are also going to offer quotations in euros very soon,” said Mr Xiao.
William Fung, managing director of Li & Fung, a global supply chain company, said international buyers would have to accept higher export prices from China, especially for goods such as toys that are largely made only in the country.
[link to www.ft.com] |
| .
User ID: 402217
3/28/2008 12:55 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Posted On: Thursday, March 27, 2008, 2:56:00 PM EST
Market Commentary From Monty Guild
Author: Monty Guild
Dear CIGAs,
A PREDICTION THAT WILLCHANGE THE FACE OF INVESTMENT AND FINANCIALMARKETS
We predict that due to the current major market turmoil Investment banks will cease to exist in the United States of America.
ONE CHARCTERISTIC OF INVESTMENT BANKS IS THAT THEY OPERATE AT A BOUT 30 TO 1 LEVERAGE. COMMERCIAL BANKS OPERATE AT ABOUT 12 TO 1 LEVERAGE.
For this reason and others we predict there will be no investment banks in a few years. Pressure from the government will force them into the arms of commercial banks. They may operate in name only within the commercial banks but the free-wheeling activities of investment banks will be greatly curtailed.
Governments do not want entities with that kind of leverage (30 to 1), especially those who are outside of the regulatory purview of the Federal Reserve. Investment banks are not regulated by the Fed, however commercial banks are.
Respectfully yours,
Monty Guild |
| .
User ID: 402217
3/28/2008 1:15 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Perth Mint and Kitco Scheme Exposed
By: Jason Hommel, Silver Stock Report
-- Posted 26 March, 2008 | Digg This ArticleDigg It! | Discuss This Article - Comments: 6
(What's going on here?!)
Silver Stock Report
Yesterday, I got into a bit of trouble by writing that the NorthWest Territorial mint was bankrupt, which they are not (consider this a second retraction). The NorthWest Territorial mint only has a risk of bankruptcy since they have so much silver owed to them by their suppliers, and those risks concern me in light of shortages of silver reported everywhere, and their long delivery times.
What is going on with Perth and Kitco is very unfortunate, since the Perth Mint is reportedly one of the largest bullion dealers in all of Asia, and Kitco has the largest presence on the internet, ranking number two in the search terms for silver and gold, just behind wikipedia.
So I have to choose my words carefully regarding the Perth Mint & Kitco. Perhaps the words of Jesus and Andrew Jackson are appropriate to quote in this context:
"You are a den of vipers. I intend to rout you out and by the Eternal God I will rout you out. If the people only understood the rank injustice of our money and banking system, there would be a revolution before morning." --Andrew Jackson, 1828
Matthew 23:33 "You snakes! You brood of vipers! How will you escape being condemned to hell? 34 Therefore I am sending you prophets and wise men and teachers. Some of them you will kill and crucify; others you will flog in your synagogues and pursue from town to town.
You know who Jesus and Andrew Jackson were addressing? The moneylenders who offer to hold your money for you!
Since I advocate that you hold your own bullion yourself, I've wondered if the business practices of Kitco gave them a bias to rarely ever publish my articles, even though I was an advertiser for years, and my articles appeared far more regularly at gold-eagle.com and goldseek.com. I think I finally figured it out, and it's time for me to finally burn my bridge to kitco; as I don't need them anyway, and stopped advertising with them a while ago.
Kitco is a partner in a bullion certificate scheme with the Perth Mint, and also offers a pool account like Perth Mint does.
https://online.kitco.com/pmcp/
I believe, but cannnot prove, that Kitco is short of bullion owed to their own customers in their pool account, and this would explain why they publish the anti-gold articles that they do. If you own precious metal in a pool account or certificate form with anyone, Kitco, Perth, Monex, Goldline, any Major Bank or Brokerage, or anyone else, I think you would be wise to cash out, and get real silver somewhere else, even if you have to pay extra fees to do so.
Here are my five witnesses in my case against the Perth Mint (Kitco is implicated only by association, as they advertise the Perth certificates.)
The testimony of the people below go to show that you cannot trust silver certificates, nor can you trust allocated silver storage, nor can you trust government guarantees. (Trusting government guarantees for bullion is the most absurd thing I can think of, since governments are the ones who are printing money which competes with the demand for silver as money!)
=============
Date: Thu, 28 Feb 2008 18:52:05
Subject: Re: Silver Stock Report: How to Get Into Silver, for Billionaires
S Tabikh wrote:
Jason,
Ive just ordered $20k worth of Silver 100oz bullion from the Perth Mint and have to wait upto 6 months for delivery for such a small order. Goes to show the lack of Silver avaliable.
Regards,
Shafic
=============
Date: Thu, 28 Feb 2008 15:07:40
Subject: Re: How to get into Silver for Billionaires
peter wrote:
Hi Jason,
Thanks for sending me your latest email, I'm always interested in hearing your opinion of the current state of the Silver market.
I was rather alarmed, however, to read the story of the gentleman you mentioned who had 10,000 ozs of allocated Silver stored on his behalf by a "AAA rated,... guaranteed " mint which "services the Asian market" ...I assume you are unable to publicly identify the mint concerned for legal and other reasons, but I would greatly appreciate it if you could inform me privately of same. IE: Is it the Perth Mint?
The reason I ask, as you can probably guess, is that my own situation is almost identical to the one mentioned in your article (which listed difficulty getting allocated silver which took 6 months) and you have now further aroused my suspicions about the alleged security of allocated storage of precious metals. In addition, I have also met with an un co-operative attitude when making enquiries about taking delivery of my Silver, so again there are further parallels with your story.
I hope you can take a moment from your busy schedule to share this information with me as obviously, its vitally important to my future financial security -just a simple 'yes' or 'no' in answer to my query above would suffice, no need to elaborate.
Thanks again for your time and I wish you every success in spreading the Story of Silver to the world.
Regards,
Peter
Jason: YES! I was alluding to the Perth Mint, but I didn't have enough testomony at the time to name them publically, but now the truth comes out! Get your silver. Travel to their location, and get it, and haul it away, as soon as possible. (They might not have it!)
=============
3/19/2008 9:20 PM
Jason,
Just placed another order with Perth Mint, they are out of stock on everything, however there waiting period is no longer 6 months (Im guessing they received alot of complaints) its now 6-8 weeks.
Just got off the phone with them, they have no bullion in stock, its all on backorder, the official excuse is that it takes along time to make the bars and everyone wants them, could be viiewed as a good thing knowing demand is high, but I personaly dont like waiting 6-8 weeks for delivery.
I contacted several other dealers in Sydney, only 1 out of 5 has stock...... Everyone has back orders with PM which is the distributor.
Regards,
S
=============
In the March 26th Midas report, from lemetropolecafe.com (a site I subscribe to, and highly recommend):
G'day Bill
The shortage of silver is becoming acute in Australia. I phoned my supplier (THE major in my state) this morning, to confirm the developing situation re supply and he has confirmed that he cant get silver until May. He has always had ample stocks on hand, with my son or myself able to walk in and transact on a cash and carry basis.
NOT ANY MORE!!! He can't get a price from his supplier whom I assume is the Perth Mint or the Australian Bullion Co, as these are the bars that I have received from him. He only does Open Book orders where he will take your order but will not be able to price the metal until he is assured of a delivery price from his suppliers. Mid April is when he expects to be able to price an order. He said he has knowledge of a Perth Mint customer who has his money tied up in their Unallocated Pool Account, using Silver Certificates. Taking the advice of various "hold it in your hot little hands" advocates (such as yourself, Ted Butler and Jason Hommel etc,) he tried to redeem his certificates and have his holdings transferred into an Allocated Account.
The Perth Mint has advised him that they WILL NOT buy his certificates from him and WILL NOT allocate physical silver to him. They will however ALLOW him to swap them for gold. They will only do this by slugging him on the spreads. They slug him on their buy back price for silver and then whack him for their mark up on gold. He apparently is a man on the edge as my dealer feels that he is close to topping himself over the issue. Must be on Margin. I wonder if the Perth Mint is so broke that they can't pay him. Apparently they are backed by the full faith and credit of the Western Australian Govt. Yeah Right!
Stow it or blow it is the right call from you et al, and I thank you dearly for the advice, as I was once a Perth Mint PAPER silver certificate holder.
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5:24 AM, March 26th
Hi Jason,
just wanted to let you know about recent dealing with Perth Mint.
As I have been following your emails now for some time I recently decided to buy silver at Perth Mint in the form of the PMCP (Perth Mint Certificate Program).
Talking with a person in their Treasury Department I opted for Unallocated silver with the view of changing that to Allocated or pick up at a later stage.
After your email "If you don't hold it, you don't own it" I sent an email saying when I wished to pick it up, giving about 4 weeks notice that I was told I needed to give.
Still have had no reply after a phone call and another email.
Wondering if you have had any similar emails from anyone else regarding Perth Mint?
God bless,
Graeme.
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I've been thinking more about how people who are afraid of risks, and who don't want to pay the costs of storing their own silver, tend to trust promises of men rather than the provision of God. The Great Harlot of Revelation 17-18, I believe, refers to moneylenders who lend to the kings of the earth to control them; and this is harlotry because the Harlot will trust the kings of the earth for security rather than the King of Kings, Jesus Christ.
So, now, I wonder how much different it is to trust having someone else hold your silver for you; is that an act of spiritual harlotry as well? Do these people who put their trust in the Perth Mint, guaranteed by a "king", the government of Australia, get what they deserve? The kings are said to turn on the harlot to destroy her, and I wonder if the Perth Mint not giving out silver that was paid for is like a preview of that prophecy. You judge.
As for me, I've long decided to choose to be responsible for taking dominion over God's provision of silver that He has entrusted to me to care for, and I'll accept and take the risks of holding it myself, and I'll trust in God that things will work out ok without man's insurance.
I know that if I have wealth, then I must also have the wealth to guard it, as that is a basic undeniable truth.
If you have a small amount of silver, get a lock box. If you have more, get a floor safe. If more, get a large gun safe. If more, get several gun safes. If more, build a vault. If more, build a warehouse.
According to God, if you are Christians, you are Kings and Priests, and so, I try to act like it; taking possession and guarding my silver with my own safes, and preaching that others do the same.
Revelation 5:10 And hast made us unto our God kings and priests: and we shall reign on the earth.
The united States is supposed to be a nation of sovereigns, kings, the people are the kings.
Act like a King. Get your silver.
Act like a Priest. Tell other people to get their silver.
[link to find-your-local-coin-shop.com]
Sincerely,
Jason Hommel
www.silverstockreport.com
www.miningpedia.com
[link to news.silverseek.com] |
| .
User ID: 402217
3/28/2008 1:18 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to online.wsj.com]
Ten Days That Changed Capitalism
Officials Improvised
To Rescue Markets;
Will It Be Enough?
March 27, 2008; Page A1
The past 10 days will be remembered as the time the U.S. government discarded a half-century of rules to save American financial capitalism from collapse.
On the Richter scale of government activism, the government's recent actions don't (yet) register at FDR levels. They are shrouded in technicalities and buried in a pile of new acronyms.
But something big just happened. It happened without an explicit vote by Congress. And, though the Treasury hasn't cut any checks for housing or Wall Street rescues, billions of dollars of taxpayer money were put at risk. A Republican administration, not eager to be viewed as the second coming of the Hoover administration, showed it no longer believes the market can sort out the mess.
"The Government of Last Resort is working with the Lender of Last Resort to shore up the housing and credit markets to avoid Great Depression II," economist Ed Yardeni wrote to clients.
First, over St. Patrick's Day weekend, the Fed (aka the Lender of Last Resort) and the Treasury forced the sale of Bear Stearns, the fifth-largest U.S. investment bank, to J.P. Morgan Chase at a price so low that a shareholder rebellion prompted J.P. Morgan to raise the price. To induce J.P. Morgan to do the deal, the Fed agreed to take losses or gains, if any, on up to $29 billion of securities in Bear Stearns's portfolio. The outcome will influence the sum the Fed turns over to the Treasury, so this is taxpayer money; that's why the Fed sought Treasury Secretary Henry Paulson's OK.
Then the Fed lent directly to Wall Street securities firms for the first time. Until now, the Fed has lent directly only to Main Street banks, those that take deposits from ordinary folks. That's because banks were viewed as playing a unique economic role and, supposedly, were more closely regulated than other types of lenders. In the first three days of this new era, securities firms borrowed an average of $31.3 billion a day from the Fed. That's not small change, and it's why Mr. Paulson, after the fact, is endorsing changes to give the Fed more access to these firms' books.
Increased Leverage
In the days that followed, the Republican Treasury secretary leaned on two shareholder-owned, though government-chartered, companies -- Fannie Mae and Freddie Mac -- to raise capital that their boards didn't want to raise. In exchange, their government regulator allowed them to increase their leverage so they can buy about $200 billion more in mortgage-backed securities.
So Fannie and Freddie will get bigger, a welcome development when mortgage markets are in trouble. Already, they have regained lost market share. They accounted for 76% of new mortgages in the fourth quarter of last year, up from 46% in the second quarter, Mr. Paulson said Wednesday. But everyone knows that if Fannie or Freddie stumble, taxpayers will get stuck with the tab.
And then, the federal regulator of the low-profile Federal Home Loan Banks, which are even less well capitalized than Fannie and Freddie, said they could buy twice as many Fannie and Freddie-blessed mortgage-backed securities as previously permitted -- more than $100 billion worth.
Was this necessary? It's messy, uncomfortable and undoubtedly flawed in many details. Like firefighters rushing to a five-alarm fire, policy makers are making mistakes that will be apparent only in retrospect.
Too Great to Ignore
But, regardless of how we got here, the clear and present danger that the virus in the housing, mortgage and credit markets is infecting the overall economy is too great to ignore. The Great Depression was worsened because the initial government reaction was wrong-headed. Federal Reserve Chairman Ben Bernanke spent an academic career learning how to avoid repeating those mistakes.
Is it working? It is helping. One key measure is the gap between interest rates on mortgages and safe Treasury securities. A wide gap means high mortgage rates, which hurt an already sickly housing market. A lot of recent activity, including Wednesday's previously planned auction in which the Fed is trading Treasurys for mortgage-backed securities, is aimed at increasing demand for those securities to drive down mortgage rates.
The gap remains enormous by historical standards, but has narrowed. On March 6, according to FTN Financial, 30-year fixed-rate mortgages were trading at 2.92 percentage points above the relevant Treasury rates; Wednesday the gap was down to 2.22. Normal is about 1.5 percentage points. Money markets are still under stress, as banks and others hoard cash and super-safe short-term Treasurys.
Is it enough? Probably not. Although it's hard to know, the downward tug on the overall economy from falling house prices persists. The next step, if one proves necessary, is almost sure to require the explicit use of taxpayer money.
Cushion the Blow
The case for doing more is twofold. One is to cushion the blow to families and communities, even if some are culpable. The other is to disrupt a dangerous downward spiral in which falling prices of houses and mortgage-backed securities lead lenders to pull back, hurting the economy and dragging asset prices down further, and so on.
In ordinary times, a capitalist economy lets prices -- such as those of homes, mortgage-backed securities and stocks -- fall to the point where the big-bucks crowd rushes in, hoping to make a killing. But if the big money remains on the sidelines, unpersuaded that a bottom is near, the wait for bargain hunters to take the plunge could be very long and very painful.
So the next step, no matter how it is dressed up, is likely to involve the government's moving in ways that put a floor under prices, hoping that will limit the downside risks enough so more Americans are willing to buy homes and deeper-pocketed investors are willing, in effect, to lend them the money to do so.
Write to David Wessel at capital@wsj.com3 |
| .
User ID: 402217
3/28/2008 1:20 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fed May Gain Influence From Crisis at SEC's Expense (Update1)
By Craig Torres and Jesse Westbrook
March 27 (Bloomberg) -- America's financial system faces its biggest overhaul since the Great Depression as officials weigh lessons from the credit-market rout and the near collapse of Bear Stearns Cos.
Federal Reserve policy makers are redefining which companies are vital to the flow of credit, an area once the sole domain of commercial banks, and which institutions pose risks to the entire economy if they fail. Treasury Secretary Henry Paulson said in a speech yesterday that the Fed should broaden its oversight to include Wall Street investment firms, now regulated by the Securities and Exchange Commission.
Former regulators predict the changes will see the Fed accrue influence at the expense of the SEC, which was created by President Franklin Roosevelt to make rules for dealers and stock exchanges. The Fed is taking almost $30 billion in assets off Bear Stearns's balance sheet to encourage JPMorgan Chase & Co. to buy the firm, even though Bear's main supervisor is the SEC.
``This is tectonic,'' said Ralph Ferrara, a former general counsel at the SEC, and now a partner at Dewey & LeBoeuf LLP in Washington. ``We no longer want to have a balkanized response to a national crisis.''
In 2006, New York Fed President Timothy Geithner, saw the need to ``revisit'' the Fed's authority. In a panel discussion on Sept. 26 of that year, he said the Fed supervised a ``diminished'' portion of the system as securities firms and hedge funds grew in influence. Paulson is finishing his own review.
`View of Potomac'
The SEC will be so diminished that it ``will be given a nice view of the Potomac from whatever floor of the comprehensive financial services regulator they are given,'' said Ferrara.
Geithner has already redrawn the lines, invoking a little- used authority to push the Fed into the role of an orderly bank liquidator, much like the Federal Deposit Insurance Corp., by helping finance and sell $30 billion of illiquid Bear Stearns securities.
``Because of financial innovation, we have lots of these financial firms that started to look like banks,'' said Mark Gertler, a New York University professor and visiting scholar at the New York Fed. ``Any institution that may need to go to the discount window directly or indirectly ought to be under the supervisory control of the Fed.''
Congressional Role
As Paulson addressed the U.S. Chamber of Commerce yesterday, the Senate Finance and Banking committees said they are reviewing the Bear Stearns sale.
``We want to know the extent to which Paulson was involved in the deal, whether it was done by an independent Fed on their own impetus,'' Charles Grassley, the top Republican on the panel, said in an interview with Bloomberg Television. He said he doubted Congress would try to block the deal.
Legislators are already considering a new regulatory structure. House Financial Services Chairman Barney Frank said last week Congress should consider creating an agency to monitor market risk or give that authority to the Fed. The Massachusetts Democrat also said he will seek less duplication. Currently, there are five separate regulators of banks, thrifts, and credit unions.
Congress may not control the debate over the future of the Fed, SEC and other regulators because many of the institutions are already redefining their roles in the credit crunch.
FDIC Chairman Sheila Bair has been praised by consumer advocates for pushing lenders toward a voluntary mortgage modification program.
Glass-Steagall Repeal
Banks and securities firms began competing more directly after the repeal nine years ago of the 1933 Glass-Steagall Act, which separated commercial and investment banking.
The repeal allowed lenders such as Citigroup Inc. to underwrite and trade instruments such as mortgage-backed securities, and set up off-balance sheet structures to buy those assets. Citigroup, the biggest U.S. bank, has suffered $23.9 billion in writedowns and credit losses since the collapse of the U.S. subprime-mortgage market.
``This will be the first time Congress and the regulatory agencies will have to address the consequences of the end of Glass-Steagall,'' said James Doty, a former SEC general counsel now in private practice at Baker Botts LLP in Washington.
Extended Credit
For the first time since the 1930s, the Fed extended credit to non-bank corporations, lending $28.8 billion as of March 19 to bond dealers, including Morgan Stanley and Goldman Sachs Group Inc. The Fed said on March 16 that the facility will be available for at least six months.
``You need to follow the money,'' said David Becker, a former SEC general counsel and now a partner at Cleary Gottlieb Steen & Hamilton LLP in Washington. ``The fact that the Fed has now put up a great deal of money in dealing with an investment bank means they are going to want, and may well get, a more active regulatory role.''
The SEC was created to restore confidence in markets after the 1929 stock-market crash and the Depression. The agency's mandate is to make sure investors are treated fairly, and it enforces rules for both companies that sell stock to the public and people who sell and trade securities.
Enforcement
``While each of the agencies has different roles and responsibilities, together we bring our collective authorities to bear on behalf of investors and capital markets,'' said John Nester, a spokesman for the SEC in Washington.
On Wall Street and in Washington, the SEC has a reputation as a much stronger enforcer and prosecutor of malfeasance than the central bank. Congress blamed the Fed for lax consumer protection during the housing boom and has threatened to strip or share its consumer protection powers.
``Bank regulators have, in general, been good at worrying about the safety and soundness of banks,'' said Harvey Goldschmid, a former SEC commissioner who's now a professor at Columbia Law School in New York. ``They have not, however, been strong on protecting consumers and investors.''
[link to www.bloomberg.com] |
| Anonymous Coward
User ID: 402578
3/28/2008 9:12 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
New York Times
2008-03-28
LONDON — At one point, Alexis Hall had more than 50 pairs of designer shoes and handbags. It never occurred to the 39-year-old media relations executive from Glasgow that her £31,500 in debt ($63,000) would be a problem.
“It was so easy to get the loans and the credit that you almost think the goods are a gift from the shop,” she said. “You don’t fully realize that it’s real money you are spending until you actually sit down and consolidate your bills and then it’s a shock.”
As the United States economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.
By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P.
And while the Federal Reserve in Washington has cut interest rates, in an effort to loosen lenders’ grip on credit, the Bank of England’s interest rate increases last year are trickling through to mortgages at the very time home values are dropping and banks are becoming more reluctant to lend.
Until now, debt has mostly been a good thing for Britain. In the hands of free-spending consumers, it fueled economic growth. The government borrowed heavily in recent years to invest in infrastructure, health and education, creating a virtuous cycle: government spending led to job creation, which led to greater consumer confidence and more spending, which, in turn, stimulated growth.
Economists say Britain’s relationship to debt is complex, but at its core is a phenomenon more akin to recent American history than European trends. As in the United States, a decade-long housing boom and strong economic growth bolstered consumer confidence, creating a perception of wealth almost unknown in countries like Germany and Italy.
“Culturally, maybe also because of the defeat in the war, Germans remain reluctant to borrow and banks are often state-owned, pushing less for profits from lending,” said Alistair Milne, a professor at Cass Business School in London.
Since many younger Britons have never lived through a period of slow growth, few now see the need to hold back on borrowing, not to mention saving.
“The general mantra is spend now, think later,” said Jason Butler, an adviser at Bloomsbury Financial Planning. “It’s easier to get a loan or a credit card these days than to get a savings product.”
The average British adult has 2.8 credit or debit cards, more than any other country in Europe. A growing number are borrowing to pay for vacations, furniture, even plastic surgery. As a result, Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.
To her parent’s generation, Ms. Hall said, owing money beyond a mortgage was “shameful,” an admission of living beyond one’s means. Debt was also more difficult to get.
That changed in the late 1990s when American lenders, including Citigroup and CapitalOne, pushed into the British market with a panoply of new lending products. Fierce competition among banks meant potential borrowers were suddenly bombarded with advertising and offers for low- or no-interest loans and credit cards.
While Britain’s financial regulators watched the explosion of retail lending from the sidelines, their counterparts in Germany and France were more restrictive. As a result, the British market became the largest and most sophisticated in Europe.
The growth was also fueled by soaring demand for debt on the back of rising real estate prices and relatively low interest rates in the late 1990s and early 2000s. Those who did not own a house rushed to join the homeowners watching their property triple in value.
The trend on the Continent was the opposite. Home prices in most European countries barely moved, mainly because markets were more regulated, there was more housing stock and renting was more popular.
Liz Bingham, head of restructuring at Ernst & Young in London, blames the obsession with homeownership on Britain’s “island mentality”: land is seen as a finite good and a valuable asset.
“The housing boom automatically made people feel richer than they actually were and people went on to use the equity locked up in their property almost as a bank account they can dip into every time they want to buy a new car,” Ms. Bingham said.
As the perception of wealth grew, the social stigma around debt disappeared. Borrowing became such an accepted part of life that today one in five teenagers does not consider being in debt to be a bad thing, a survey by Nationwide Building Society showed.
Debt levels increased further as it became easier to get loans, and retailers, like computer chain PC World, offered both goods and the loans to buy them. Consumers happily accepted, thinking that as long as they were deemed creditworthy, they were not in danger of defaulting.
Andy Davie is a case in point. Even after he had racked up £70,000 in personal debt trying to keep his fruit and vegetable business afloat, credit card issuers kept increasing his credit limits.
“You tend to use credit to pay for credit and as far as the banks are concerned you are fine,” said Mr. Davie, 41.
He was finally forced to declare bankruptcy. Though still painful, the process made the prospect of defaulting slightly less daunting.
“Rather than showing up at court you just fill in an online form and speak to someone on the phone,” said Mark Sands, director of personal insolvency at KPMG in London.
The ease of the bankruptcy process, the availability of debt, the property boom and strong economic growth, lulled consumers into a “false sense of security that is now coming to haunt us,” said James Falla, a debt adviser at London-based Thomas Charles.
“It’s all good as long as the economy is doing well, but if that changes people will really get caught short,” he added.
And things are changing. Growth has already started to slow this year, and the government lowered its 2008 forecast to 1.75 percent to 2.25 percent, after 3.1 percent growth last year.
Home prices are falling, despite a dearth of housing and an influx of wealthy Middle Easteners and Russians, especially in London. Last year, housing foreclosures reached the highest level since 1999 and are expected to rise still further this year.
And more than one million homeowners have adjustable-rate mortgages that are expected to reset in the next 12 months — to significantly higher rates.
The prospect of rising costs has already prompted some consumers to change their spending habits. The camera retailer Jessops and the fashion store French Connection are among retailers feeling the squeeze and reporting lower sales since the end of 2007.
But changing spending habits will not be enough to solve the problem of rising debt levels, said Mr. Butler, the debt adviser. Consumers will also have to learn to save.
According to a survey for the Office of National Statistics, less than half the population saves regularly, and more than 39 percent said they would rather enjoy a good standard of living today than save for retirement. Ms. Hall said she was among that 39 percent. She recently took out new loans, planning to repay her existing debt. But she ended up spending the money on more luxury goods instead.
This year, she published a book about her experiences. She said she did not expect the book’s proceeds to repay her debts, but it may help the growing number of people in similar positions cope with theirs. |
| Anonymous Coward
User ID: 402578
3/28/2008 9:15 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
China to become joint source of private equity, but only for Joint Ventures within the country initially. |
| .
User ID: 409505
4/6/2008 11:22 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Forbidden Financial Topic: U.S. National Debt
by Mike Adams
(NaturalNews) As we wind our way towards an election between the numerous professional liars who have been put forward as candidates for U.S. President, it seems to be a great time to remind us all about the financial issue being routinely ignored by virtually everyone (except Ron Paul, of course, who was never really embraced by the "please lie to me" mainstream public). To what financial issue am I referring? The national debt, of course.
Americans don't want to hear about the national debt. It's like a family living paycheck to paycheck, maxed out on their credit cards, trying to pretend the collection notices are all being lost in the mail. They don't want to admit they have no ability to actually pay off the debt they've incurred by pursuing a flamboyoant lifestyle, blowing wads of cash on high-priced wines, luxury vehicles, and an occassional line of coke -- they desperately want to imagine they can keep living on money that appears from nowhere, regardless of how much they owe to everybody else and the fact that their incomes don't even come close to matching their expenditures.
See the related Counterthink Cartoon on this topic at: [link to www.naturalnews.com]
Too bad every household in America doesn't have its own Federal Reserve, huh? If it did, we could all just print money to pay off our debt, save our skins, and ignore the fundamentals of economics. But even in Washington today (and New York), the Federal Reserve is too busy bailing out greedy, criminally-operated banks to turn much attention to the much larger issue of the United States' national debt. Apparently, saving the banks is more important than anything else, and the Fed is now committed to destroying the U.S. dollar through runaway hyperinflation in order to prevent a few rich bankers from facing the consequences of their outrageous sub-prime lending sprees.
America runs its finances like a crack addict
But let's get back to the national debt for a moment. The United States government is broke. The only reason it's been able to operate for this long is because other nations and foreign central banks have been foolish enough to keep lending the U.S. government more money. It's like giving cash to a crack addict and hoping he will somehow seek out a drug rehab center on his own.
This is the person who never gets a job, never makes an honest living, but yet somehow manages to hit up everybody else for cash. You know how it works: "I need to buy a car to get a job," they say. And then when you pony up the cash for their car, they get drunk and wreck the car, and they never try very hard to get a job in the first place. They keep spending and spending, tossing money down the drain on blows of crack, meth, heroin or booze. They promise to go into rehab someday, if you'll only help them through "the next month" with a little more cash. This is the life of a drug addict. (Do you know one? Everybody does, it seems...)
America is that drug addict. It borrows cash from the central banks around the world, blowing it all on Medicare prescription benefits signed into law by Bush (money for drugs, see?). It spends trillions on military campaigns that accomplish nothing positive, yet enrage the global community and recruit lifelong enemies of this nation. Notice how the price of oil has more than tripled since the war with Iraq started? It's so bad now that truck drivers are going on strike over the price of diesel.
America spends money not merely like a drunken sailor, but like a crack-addicted sailor with a wheelbarrel piled high with one-hundred dollar bills, locked in a room full of Gov. Spitzer's favorite hookers and a suitcase spilling over with blow.
Don't dare explain the national debt to anyone
But try to explain the simple workings of finance, debt and economics to the uninformed, and you'll be accused of being a doomsayer, a pessimist, or -- the worst insult in today's fear-based society -- unpatriotic! How dare you point out the economic truths that will soon bring this country's federal government to its knees! Such blatant truths shall not be tolerated... especially not in a country whose entire financial system is based on a cascade of fictional financial instruments propped up by nothing more than wishful thinking and Enron-style accounting fraud.
Let me translate all this for you in serious terms: The United States is already broke. The Federal Reserve is destroying the currency. The U.S. dollar will soon be virtually worthless. There is no saving the dollar, and there's no saving the savings of any U.S. citizen foolish enough to be holding dollars when the music stops. The Federal Reserve has already decided to do anything in its power to save the rich bankers; even if it means destroying the value of all the dollars held by hard-working Americans. The day will come, folks, when your savings accounts will all be "recalibrated" and you'll be given ten cents on the dollar while the Fed slinks away with 90% of your savings, using it to bail out overpaid bank owners.
And the federal government? Under a long string of presidential crooks -- Democratic and Republican alike -- it has decided to pursue a dangerous experiment called, "What happens if we never pay our debtors while running up more debt?" That experiment, not surprisingly, will end in the financial demise of this nation. (But there's good news: A new, better system may emerge from the dust of the greenback... keep reading...)
You can't defy the laws of gravity... nor economics
These aren't careless predictions, by the way. These are simple observations the follow the fundamentals. Why are the nations of the world fleeing the U.S. Treasury debt auctions? Why are dollars increasingly worthless everywhere except in the United States itself? The answer is because the Fed is hyperinflating the currency to save the banks, even while the government is snorting yet more crack and spending unprecedented levels of increasingly-worthless dollars on drugs and war (or, as they call it, "medication and defense").
Hence the bumper sticker: Annoy everyone. Explain the national debt. People don't want to hear this. They'd rather imagine none of these problems exist; that debt doesn't matter; that unlimited dollars can be created out of nothing with zero impact on peoples' savings; that the U.S. government is wise enough to avert financial disaster. These are the hopes of the deluded. These are precisely the ramblings of Enron's accountants before the crash, or dot-com stock pushers before that crash. They're the slobbering blatherings of all the people who said housing prices will never fall, and therefore everyone will get rich off the never-ending housing price booms!
Important lessons learned the hard way
I've spend many years pointing out the idiocies of the deluded. I publicly predicted the dot-com crash and began warning people to get out of the market in 1998 - 2001. (This is a matter of public record, not some wishful hindsight.) I also publicly predicted the collapse of the housing market right here on this website, beginning nearly two years ago. And now, those predictions that once seemed "radical" are the Wall Street Journal's front page news. What am I predicting now? Like I said, it's not a prediction, it's just an observation.
It's like observing gravity. If you toss something into the air, you can be confident it's going to come falling back to the ground. You don't have to "predict" gravity; it's a law of the universe. It works by itself, like clockwork, regardless of what you want it do to (I'm ignoring near-light speed travel, relativity, quantum physics, and all that fun stuff for the purposes of this metaphor, by the way, for those readers who are physicists). Likewise, when you see a nation throw its dollars into the air, spending its way to oblivion, ignoring its debt and ramping up its spending to even higher levels, it doesn't take much of a prediction to know that it's all going to fall back to the ground in a grand economic collapse.
So I'm not even calling the coming collapse of the U.S. government a "prediction." It's just common sense. It's as obvious as gravity. If you don't believe me, do the math. There is no mathematical solution to the current financial crisis facing not merely the banks and the currency, but the federal government itself. The only unknown factor is WHEN things will happen. Can the Fed help the economy limp along in a state of near-collapse for another year? Perhaps. Five years? Maybe. Ten years? I doubt it.
Now for the good news: The good news is that the U.S. federal government will eventually go bankrupt. Yes, that's the good news! Because after the financial chaos passes (which will not be fun, believe me), we have a chance to create a new society, a new currency and a new, honest system of government that actually represents the People for a change. The current cabal of corruption and criminal behavior that sits in Washington and pretends to protect the interests of the voters is about to find itself on the receiving end of an angry mob. The 200+ year experiment called The United States of America is in its final chapter. But out of its failure, we can learn important lessons. We can learn things that will help us create a better future society. Lessons like:
• Never let a private company (the Federal Reserve) control the money supply.
• Never let "representative" legislators vote in your place. Insist on a DIRECT Democracy in the next society. (We don't need Senators and Congresspeople, folks. The whole concept is long since outdated, and most Senators and Congresspeople are crooks.)
• Never let a government abandon the gold standard for its currency. If you do, that government will inevitably hyperinflate the currency and leave the people broke.
• Never let corporations run the government. If you do, your government will become a branch of the corporations, and the regulators (like the FDA, USDA, etc.) will become agents of corporate-sponsored terrorism that abandon all ethics and destroy the health and safety of the People.
• Never allow the centralization of power in one branch of government. For example, do not allow the creation of Executive Orders we've seen signed by the President.
• Never allow one man (the President) to commit acts of war. Didn't we learn this after Vietnam?
• Never allow people from industry to take jobs in the government where they become biased, pro-corporate pushers of everything from pharmaceuticals to beef.
• Never allow politicians to censor scientists.
• Never allow the population to be dumbed-down through sub-standard public schools that only raise a generation of obedient workers, not skeptical thinkers.
• Never allow the media to control the population through advertiser-supported propaganda and violent programming.
• Never allow politicians to destroy citizens' rights. When they attempt to do so, march on your capitol (in a non-violent way, of course). Arrest the politicians. Prosecute them for crimes against the People.
• Never allow corporate lobbyists to have access to lawmakers. If you do, you'll end up with a corrupt government that only protects corporations, not the People.
• Never allow your government to operate in secret, with secret prisons, secret wiretapping laws and secret war "evidence" that is never made public. Secrecy breeds corruption. Honest societies do not need to conduct their judicial processes in secret.
• Never allow corporations to play God with the food supply by genetically modifying the crops.
• Never allow corporations to be granted intellectual property ownership over seeds, genes, animals and medicines. If you do, you will one day wake up impoverished, "homeless on the continent your fathers conquered," to quote Jefferson.
• Never allow banks to operate on a fractional reserve system of loans and money creation that's just begging for a series of cascading failures.
... I could go on, but you get the point. We have learned some very tough lessons over the last 200+ years, and once this present government collapses, it is crucial that we apply those lessons in creating a new system that abandons tyranny and embraces genuine freedom. We will have this opportunity soon. Many Americans will lose their life savings on the journey towards this new opportunity, but if we maintain our collective vision of a brighter future society, I believe we can create something much better out of the ashes of this failed experiment called the United States of America.
Please note: In no way do I support violence of any kind in creating a new society in the aftermath of this current one. I only support collaboration, openness, freedom and great respect for all living creatures as well as our sacred planet Earth. I believe the passing of this failed government is a blessing, not a curse, and I believe the collapse of the U.S. dollar will ultimately help awaken many to the tough but rewarding decisions that will face us all in the very near future. We must consciously decide to take back our freedoms, our rights and our futures from a system of corporate and government control that has destroyed our planet, exploited our people, and stolen our savings. But if can make the rights decisions based on creating a more promising future for our children, then the rewards will be unimaginable.
We the People hold the power to create a new society based on the freedoms and promises once held sacred in this land. Be ready to play your role, a constructive role, in the aftermath of this current society. And do not be surprised when gravity kicks in and this entire fictional government charade comes crashing down along with the fractional reserve banking system, the criminal Federal Reserve, the war-mongering politicians and the endless, endless debt. There is no way out now other than collapse and rebirth.
I can't say when it will come, or exactly how it will play out. I only urge us all to remain positive, informed and constructive. The coming chaos will be painful in the short term, but out of the ashes of a failed society, we can work together to rebuilt a new one based on real freedom, honest money, sensible medicine and limited government.
[link to www.naturalnews.com]
forgive the length but....
Imagine for a moment that someone inherits a farm. Let's say that the farm has good topsoil, a good well, good breeding stock, good seed, and excellent farm equipment in good repair. Prior to passing into the control of the present owner the farm did a good business selling vegetables, meat, and dairy products to the local market, and it made a small profit.
But let us suppose for a moment that the present owner of the farm doesn't understand farming, or isn't even really interested in learning. The present owner has no objection to standing around looking good, so he stays at the farm, standing in front of it, looking good to passers by.
Of course, the bills still come in, so our farmer puts them on his credit card. When that bill comes due he uses another credit card, Then another. Pretty soon the interest payments alone are higher than his bills and the banks get nervous and call him. No problem. Our farmer sells the tractor, takes the money around to the various credit cards, the food store, the utilities, and pays off all his bills. Then he stands around in front of the farm looking good to passers-by, the lord of his domain.
Well, the bills still come in. Again the credit cards get loaded up. So, this time our farmer sells the harvester. Then later on, the cattle, then the chickens, then the seeds, then he leases the well to his neighbour and finally sells the top soil from his farm to another farm down the road whose soil is getting tired. The cash is taken around to the various creditors, the food store, the utilities, etc.
Now at this point, our farmer thinks everything is okay. The bills are paid, he has a little cash in his pocket, and everything is fine.
Of course, you know better. The farm simply does not exist any more; it's just an empty lot with a few buildings, and soon they will be gone as well. The path from the farmer's present condition to seizure of the property for unpaid taxes is a foregone conclusion, even if the farmer doesn't look far enough ahead to see it. Poor, dumb, stupid farmer!
That farmer is your government, and your business leaders.
Just as our hypothetical farm has lost its soil, livestock, seed, and farm equipment, America has lost its manufacturing ability. Short sighted business leaders, with as little interest in manufacturing as our farmer had in farming, decided their own personal bonuses would be higher if they simply sold their factories rather that ran them. After WW2, the 27 American TV companies including Zenith, Emerson, RCA, GE, etc. led the world in TV technology. Then, the owners of the patents on TV technology decided they didn't need to dirty their hands by actually making the TV sets themselves any more, and they started selling licenses to manufacture, which the Japanese bought.
By 1987, the only remaining American TV company is Zenith. The patent holders get their money, but the American products which can be sold overseas are gone, along with the jobs to make them.
The same happened in high-tech electronics. The integrated circuit was invented in the United States. But rather than focus on selling integrated circuits, the companies that owned that technology sold the machines to MAKE integrated circuits around the world, and now America sells very few chips anywhere. The patent holders have their money, but the cash flow from sales of manufactured goods, and the jobs that go with them, are gone. When Seymour Cray needed custom chips for his supercomputers, he had to order them from Japan.
The same thing has been happening in aviation. The airplane was invented in the United States, and through the 60s, we sold a lot of them around the world. But lately, all aircraft sales to foreign countries involve "offsets", a portion of the core technology that gets licensed to the purchasing nation and gets manufactured there. Bit by bit, the core technology gets bled off, taking with it jobs, and cash flow from the sale of those manufactured products. Along the way, the rights to manufacture American inventions outside America leak away on a steadily increasing basis. Even the mighty F-16 is now being manufactured overseas, under license.
part 2
To cover the loss of manufacturing jobs, our government has invented the catch phrase "service economy". This is the idiotic notion that we don't need to actually sell manufactured products; that we can grow and prosper our nation by doing each other's laundry. To conceal the loss of manufacturing jobs, the government has legislated into existence thousands upon thousands of useless paper-shuffling jobs, and declared their necessity by fiat. The most obvious is the income tax which has been so obfuscated by the government that half of you had to rely on an outside expert to figure out just what all those incomprehensible words really meant. By this device, the government has replaced those jobs that made products to sell with an equal number of jobs that produce nothing whatsoever of any worth, except to keep the unemployment figures down. This over-burdening of the American people with gratuitous regulations and paperwork has accomplished nothing except to obfuscate the loss of manufacturing jobs, and to transform the American character from innovators and inventors creating new products to that of minor clerks, peeking under each other's seat cushions for lost change.
So, with most of our manufacturing now gone, just what DOES America make? Trouble, mostly. With 4% of the world's population and 18% of the economy, we have 50% of all the lawyers, all looking to make a killing by looting those few industries that still call America home (like Microsoft). Kids don't want to be scientists and engineers; they've seen how little such people are valued in our country. Based on recent history, kids see the "big bucks" are in corporate law, specifically investment banking, leveraged buyouts, greenmail, junk bonds, in short what other countries describe as "trying to make money grow by shaking it side to side".
With America's ability to actually produce products that can compete on the open world market in decline, it's no wonder that the balance of trade is the problem it is. Nobody buys our export products because we just don't make that many any more, and like or not, we have to buy our appliances from the people who make them, which are NOT Americans. (When Ampex invented the VCR, they didn't even bother trying to find an American company to make it, they immediately sold the rights to Japan).
So, what do all these countries on the plus side of the trade imbalance do with their surplus billions? Well, they have been loaning it right back to us!
Our government engages in a practice politely called "deficit spending". Other terms which would aptly describe the practice include "counterfeiting" and "check kiting", but it all comes down to the same thing; spending money one does not actually have.
What would be a jailable offence for a normal citizen was rendered legal for the government by the Federal Reserve Act. This was not a popular piece of legislation. In fact the Democrats had campaigned in 1912 on a platform of rejection of the creation of a private bank in charge of a fiat money system. Nevertheless, on December 23, 1913, taking advantage of the absence of congressmen opposed to the creation of a fiat monetary system during the Christmas break, the Federal Reserve Act was passed.
Years later, during the great depression, Congressman Louis T. McFadden (who served twelve years as Chairman of the Committee on Banking and Currency) asked for congressional investigations of criminal conspiracy to establish the privately owned 'Federal Reserve System'. He requested impeachment of Federal officers who had violated oaths of office both in establishing and directing the Federal Reserve -- imploring Congress to investigate an incredible scope of overt criminal acts by the Federal Reserve Board and Federal Reserve Banks. McFadden even suggested that the Federal Reserve deliberately triggered the great stock market crash of 1929, in order to eventually force the passage of the Emergency Banking Act of March 9, 1933, which suspended the gold standard.
In describing the FED, McFadden remarked in the Congressional Record, House pages 1295 and 1296 on June 10, 1932: |
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User ID: 409505
4/6/2008 11:24 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
"Mr. Chairman, we have in this country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve banks. The Federal Reserve Board, a
Non - Government Board has cheated the Government of the United States and the people of the United States out of enough money to pay the national debt. The depredations and the iniquities of the
Federal Reserve Board and the Federal reserve banks acting together have cost this country enough money to pay the national debt several times over. This evil institution has impoverished and ruined the people of the United States; has bankrupted itself, and has practically bankrupted our Government. It has done this through the maladministration of that law by which the Federal Reserve Board, and through the corrupt practices of the moneyed vultures who control it".
Why all the fuss over the gold standard?
Well it goes back to the original Founding Fathers and the meaning of the word "dollar". "Dollar" is actually a weight measure of silver, 371.25 grains, to be exact. Our American silver dollars are actually heavier, since other metals were added for durability. But that 371.25 grains of silver WAS the dollar, matching in weight an unbroken chain of accepted monetary units that reached back through the Spanish Milled Dollar, the Dutch Daller, back to the German Thaler; the product of a silver mine which sold it's product in coins of an exact weight. The Coinage Act of 1792 defined our dollar to exactly match in weight the silver dollars in use around the world, and then defined the gold dollar to be that amount of gold which would equal the worth of silver in a silver dollar, 24.75 grains, 1/15 the weight of the silver in a silver dollar.
So, what's wrong with this? Nothing really. When you, as a citizen, hold a silver dollar or a gold dollar in our hand, you hold that actual worth of metal. Nothing the government can do can change the worth of the money in your control.
Take the Roman Silver Denarius. The Roman Empire is long gone, but the money that Rome issued still has worth because the coins themselves had inherent worth. Long after the collapse of the empire, Roman silver coins were still used as money, because the silver in the coin itself did not depend on the issuing government for its worth.
Of course, carrying around too much coin can be bothersome, so many nations, including our own, issued paper notes as a convenience. But that paper currency of the nation was just a convenience. The gold and silver certificates were merely “claim checks" for the equivalent weight of gold or silver held in the treasury, and which would be produced on demand when the certificate was presented. But in the end, the lawful dollar of the United States was 371.25 in silver, or 24.75 grains of gold.
part 3
The problem with this system from the point of view of the government or the banks is that it limits the amount of money they can work with. When the bank runs out of silver or gold (or the equivalent certificates) it can no longer lend any more money with which to earn interest. When the government runs out of gold or silver (or the equivalent certificates) it can no longer spend money (just like the rest of us).
The immediate effect of ending the gold standard was that with the paper dollar no longer legally dependent on 371.25 in silver or 24.75 grains of gold, more paper dollars (now called "Federal Reserve Notes") could be printed, their worth no longer under the control of the citizens but under the control of the issuing central bank, based on the total number of dollars printed (or created as credit lines). The more dollars which are created out of thin air, the less each one is worth.
A Federal Reserve Note.
The swindle of the system is simple. The Federal Reserve Bank hires the US Treasury to print up some money. The Federal Reserve only actually pays the treasury for the cost of the printing, they do NOT pay $1 for each 1$ printed. But the Federal Reserve turns around and loans out that money (or credit line) to banks at full face value, those banks which have exhausted their deposits then loan that Federal Reserve fiat money to you, and you must repay it in the full dollar value (plus interest) in work product, even though the Federal Reserve printed that money for pennies, or created it out of thin air in a computer.
As the Federal Reserve overprints more money, the money supply inflates, and too much money starts chasing too few goods and services, which means prices go up. But contrary to the charade put on by the Federal Reserve, inflation doesn't just come and go due to some arcane sorcery. The Federal Reserve can halt inflation any time it wants to by simply shutting down those printing presses. It therefore follows that both inflation and recession are fully under the control of the Federal Reserve.
Over time, that excess of printing has destroyed the value of that dollar you think you have. If you want to know by just how much, go out and try to purchase 371.25 in silver right now. Usually, the deterioration is gradual. Sometimes, it has to be obvious, such as the 1985 devaluation (done to halt the trade imbalance) which triggered the Japanese real-estate grab in this country.
Many politicians have attempted to reverse this process. John F. Kennedy issued an Executive Order 11110, requiring the Treasury Department to start printing and issuing silver certificates for the silver then remaining in the US Treasury.
Kennedy decided that by returning to the constitution, which states that only Congress shall coin and regulate money, the soaring national debt could be reduced by not paying interest to the bankers of the Federal Reserve System, who print paper money then loan it to the government at interest. This was the reason he signed Executive Order 11110, which called for the issuance of $4,292,893,815 in United States Notes through the U.S. Treasury rather than the traditional Federal Reserve System.
John F. Kennedy's United States Note.
That same day, Kennedy signed a bill changing the backing of one and two dollar bills from silver to gold, adding strength to the weakened U.S. currency.
Kennedy's comptroller of the currency, James J. Saxon, had been at odds with the powerful Federal Reserve Board for some time, encouraging broader investment and lending powers for banks that were not part of the Federal Reserve System. Saxon also had decided that non-Reserve banks could underwrite state and local general obligation bonds, again weakening the dominant Federal Reserve banks".
Kennedy's E.O. was never implemented following his assassination, and shortly afterwards, United States silver coins were taken out of circulation and replaced with the copper clad slugs in use today. These two events, the failure to print new silver certificates, and the substitution of worthless slugs for our silver coins, may explain why the Warren Commission included on its panel John J. McCloy, a man with no experience in crime, law enforcement, or national security, but who had been the President of the Chase Manhattan Bank.
It should be noted that the banks themselves are still using the gold standard. Accounts are still settled between major national banks by the transfer of gold bullion.
So here we are with a bank that legally counterfeits the money you borrow but expects a full value (plus interest) repayment.
But what's good for the Federal Reserve is good for the government itself, and this is where we get back into that funny word "deficit spending". The government spends more money than it takes in. It has for many years now. The Federal Reserve, being the only lawful source of this fiat money, prints up the excess cash the government needs (or manufactures a credit line in a computer). This extra cash is treated as a loan, in order to keep the government overspending from further eroding the worth of the dollar in the world market. The government (meaning the taxpayers) is on the hook for the full face value, plus interest.
But there's another problem. The government is borrowing so much money that it drives the interest rates up! You pay MORE interest on your mortgage, car loan, and credit cards, because the government cannot balance its books. That extra interest you pay is therefore another hidden tax. The government, in its "generosity", gives you a tax credit on mortgage interest that is higher because of their own borrowing!
During the 80s, as exports dropped, and jobs moved from manufacturing to lower paying "service sector" jobs, the US tax base declined. In order to keep the jobless rate from rising, a massive defence program called the Strategic Defence Initiative was cranked up, but since this program produced no exportable product, it produced no taxable sales revenues, and hence the money poured into the project accelerated the government decline into debt. Because manufacturing was on the decline, fewer start-up companies were approaching the lending institutions, so the government loosened up the rules (while increasing the insurable deposit limit) to allow "investments" in more high risk ventures, most of which turned out to be frauds, or worse, money laundering operations for drug criminals. This includes Whitewater, Flowerwood, and Castle Grande. Despite shifting the S&L loss primarily onto the taxpayers (to reassure foreign investors that the taxpayers still made America a safe place to park their surplus cash) the government plunged further into debt.
In the 12 years of the Reagan/Bush administrations, the United States went from being the world's largest creditor nation to the world's largest debtor. Many of those nations which had enjoyed huge trade surpluses started loaning that profit back to the United States with the stipulation that we work on our manufacturing, clean up our infrastructure, raise taxes, in short, clean up our act, so that investment in America makes sense!
However, we didn't quite do that.
There has been some shuffling around to try to conceal the real scope of the problem. Over the last several years, the Federal Government has been sending less tax money back to the states than it takes in, in taxes. This means that the states have to borrow MORE money to cover their obligations. The net result is that the debt is being transferred to the states, to conceal its true size. The government will easily admit to a $3 trillion "publicly held" debt, grudgingly concede that it's "unfunded liability" brings that number to almost $7 trillion, but the real hard truth is that total government debt, state and federal, is now over $14 trillion dollars, or about 50,000 for every man, woman, and child inside the United States.
Since 1960, the taxpayers have shelled out $15 trillion in interest payments alone, while the principal continues to rise.
Yet another stunt the government has pulled is to "borrow" from the various trust funds under its control. Some $2 billion has vanished from the trust accounts of Native Americans (presently suing the Departments of the Interior and Treasury), and nearly ¾ of a TRILLION dollars has been removed from your Social Security retirement trust fund and spent in the last 8 years.
If the government has to borrow your retirement money when things are supposed to be so good, under what conditions can it repay the money? Or is that government IOU in your retirement account merely a promise to either tax you a second time or stiff you on the benefits you thought you were paying for?
In the last 8 years, during what are supposed to be record setting good times, the Federal government has nearly DOUBLED its debt load. The estimated interest on the debt equals all the personal income tax paid by all Americans. Our government is so deep in debt that it cannot get out.
This brings us to the issue of collateral. We've borrowed so much money the lenders are getting nervous. Back during the
Johnson administration Charles DeGaulle demanded the United States collateralize the loans owed to France in gold and started carting out the bullion from the treasury. This caused several other nations to demand the same and President Nixon had to slam the gold window closed or the treasury would have been emptied, since the United States was even then in debt for more money than the treasury could cover in gold.
But Nixon had to collateralize that debt somehow, and he hit upon the plan of quietly setting aside huge tracts of American land with their mineral rights in reserve to cover the outstanding debts. But since the American people were already angered over the war in Vietnam, Nixon couldn't very well admit that he was apportioning off chunks of the United States to the holders of foreign debt. So, Nixon invented the Environmental Protection Agency and passed draconian environmental laws which served to grab land with vast natural resources away from the owners and lock it away, and even more, prove to the holders of the foreign debt that US citizens were not drilling. mining, or otherwise developing those resources. From that day to this, as the government sinks deeper into debt, the government grabs more and more land, declares it a wilderness or "roadless area" or "heritage river" or "wetlands" or any one of over a dozen other such obfuscatorial labels, but in the end the result is the same. We The People may not use the land, in many cases are not even allowed to enter the land.
This is not about conservation, it is about collateral. YOUR land is being stolen by the government and used to secure loans the government really had no business taking out in the first place. Given that the government cannot get out of debt, and is collateralizing more and more land to avoid foreclosure, the day is not long off when the people of the United States will one day wake up and discover they are no longer citizens, but tenants.
If you were to imagine a map of the united States (correct spelling, then take 4/5’s of the western US, you’d get a pretty good idea of the current extent of all lands grabbed by the government under the guise of environmentalism.
In short, the United States is in deep trouble. We have lost a huge amount of our manufacturing capacity, and those products we still make do not compete well on the world market, despite the steady devaluation of the dollar. In short we have vast debts to pay and little to pay them with. Like the foolish Farmer we have sold the machinery that allowed us to prosper, and we stand around shaking our investment portfolios back and forth in the hopes that the money inside will somehow grow all by itself. It won't. It never has. The very best that can be said is that money gets moved from one person to the other.
Those nations and banks to whom we owe money have been very patient indeed with us. They know that our economies are so tightly entwined that what hurts America will hurt them. But sooner or later, possibly after a market crash, someone, in order to pay their own debts, will demand their loans to the United States be paid. Rather than get caught with "bad paper", there will be a run on the United States government.
In addition to the government debt of $14 trillion, our businesses are home to trillions more in foreign investment, kept here by the promise that the American taxpayer will be made to cover all losses. But with our manufacturing in decline and our schools producing far more lawyers than anything else, it should be obvious to the prudent observer that the American taxpayer, even if so inclined, may not be able to cover the losses of their own government, let alone a foreign investor.
That has to be making them nervous as well.
This brings us to the "equities markets", most notably the stock market. Over the last several years a constant media harangue has assured us that the soaring numbers of the stock market are the sole measure of how good our economy is. But close examination of those high-priced stocks reveals that most are heavily over-valued; their price the result of market forces rather than underlying worth (earnings ability). Amazon.com, as one example, has had a terrific run-up of its stock price, even though the company itself has yet to show a profit.
The government has admitted to using covert means to prevent a market downturn; to keep the stock prices at an artificially high and overvalued level, in order to wave those impressive numbers about as "proof" that everything is okay so that the taxpayers go back to work and pay more taxes. But in order to keep those stock prices up above their actual worth, demand must be maintained to keep the prices high. In other words, NEW investors must constantly be brought into the bottom of the pyramid to keep the prices of the stocks at the top from dropping. Hence the onslaught of commercials luring neophyte investors into the stock market via "online trading". Like any Ponzi scheme, the stock market will collapse when no more new buyers can be dragged in at the bottom. As the market starts to stutter, governments (most recently Britain) have moved to dump huge reserves of gold onto the world market to depress gold prices and deter investors from deserting the stock market for gold.
Some years back I worked on the film version of "The Day The Bubble Burst", and in between playing a stock broker, I got to spend some time with the show's consultant, Mr. William Hupt, who had been on the trading floor in 1929 as it all fell apart.
He still had, framed, that last strip of ticker tape that ushered in the Great Depression, and he shared some stories which have a bearing on what is going on today.
The first story Bill shared is that there had been early indications of a dangerously over-valued market, running to deep on margin, and like the Plunge Protection Team, the largest investment houses, in particular the House of Morgan, attempted to reverse the early corrections by purchasing large blocks of stock in order to create market demand and drive the prices back up. It worked all but the last time.
The second story Bill shared was that a friend of his, riding up to his office in September of 1929, overheard the elevator operator chatting about his own stock portfolio, and his investments. Something about that image of an elevator operator playing the market set of warning signals, and Bill's friend immediately liquidated his entire portfolio, just in time to miss the great crash. Many people, including the actor Charlie Chaplin, had recognized the "recruitment" of that segment of society that did NOT have risk capital as new investors as a desperate attempt to prop up an overvalued market, and got out in time to save their own personal fortunes.
In the end, there is no such thing as a free lunch. You cannot make money grow in value by shaking it back and forth from one bank to another. You cannot prosper a nation by doing each other's laundry, or filling out their government mandated and greatly obfuscated paperwork, or flinging stock certificates around which may have as little real worth as Federal Reserve Notes. To make money, to show a profit, you must make products that somebody else wants to buy, and sadly, that is a capability the United States has allowed to slip away in great measure. The "service economy" was political propaganda to make the public believe that the decline of our manufacturing ability was a good thing.
Our nation is broke, bankrupt, and having sold much of its machinery and technology (or given it away to political donors), is unable to easily return to those endeavours which once made our nation great. Our infrastructure is in decay (the percentage of roads in the US with major damage doubled last year alone,) our public schools unable to produce a workforce able to function in a high-tech manufacturing environment, and those managers end engineers with manufacturing experience have in great part been lured away to other nations. The severity of our total government debt has reached a point where the promise that the taxpayers can be made to cover any foreign investment loss rings hollow, because we can no longer pay the debts our government has now.
Our nation is in trouble. We don't make many of the products we used to make. Consequently we don't have the products to sell that we used to. We don't even make most of the products we need ourselves (like that computer you're staring at this very moment). Result: we have a massive trade imbalance. Cash is flowing out of the nation, and it's not coming back in anywhere near as fast. There's no way to spin it; that is a major problem. Our nation is becoming poorer, it is hopelessly in debt, and all the artificial escalation of stock prices cannot conceal that.
And as the artificially pumped up stock market continues to decline, the true scale of the economic horror which is the product of decades of government corruption, will become apparent to all.
Speaker- Rep. James Traficant, Jr. (Ohio) |
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User ID: 409505
4/6/2008 11:30 AM | | .
User ID: 409505
4/6/2008 11:42 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
I work retail and I can tell you something big is definitely coming
I have worked retail for several years. I am in mid-level store management right now. I don't want to say exactly what company I work for, but it is in the top 3 largest. I work at a store in a major city.
There have been some crazy things going on recently. The changes that we are being asked me make per corporates direction makes me think that the people at the top think something VERY big is going to be happening to the economy soon. I don't think the media or the government is giving us the full details of what is actually going on, but I think the CEO's and others at the top are fully aware and are making plans.
For one thing I check sales every day. At the store level we usually compare what sales are today compared to sales for the same day, week, month, and year last year. Sales at our store, our district, and company wide have taken a HUGE drop compared to the same time last year. When I looked at them today my store and every store in our district was down over 30% for the same time last year. The company as a whole is also in the negative for the same time last year. (but not as much, but it gets lower every day)
Honestly at my store I could say that we have done everything in our power at the store level to increase sales, but it just isn't happening. Departments like electronics are literally almost completely empty the entire day. The only departments that actually are getting sales are consumables, health, and chemicals. Just walking the store these are the only departments I ever even see people in ever since christmas ended.
Sometimes I will cover the service desk so a team member can take a lunch/break. When I do I sometimes process peoples credit card payments which lets me see how much they owe and how much they are paying. There are tons of people with THOUSANDS of dollars on their card only making minimum payments. These balances are usually at interest rates over 20%. Then there are people bringing in checks for the full amount, but they are BALANCE TRANSFER checks.... they are just moving it to other cards.
But that isn't what really worries me. What worries me is the changes corporate is making. I have worked here for years, and in the last 4 months I have seen more changes than all that time combined.
We are getting emails all the time from corporate telling us to reduce costs anyway we can. We recently got one telling us to start pulling fluorescent light bulbs, that we don't need all of them in order to provide illumination.... and those bulbs barely use any power.
Corporate has instructed all stores to lower the AC. It has been lowered enough to the point we get complaints from team members and customers.
Corporate has sent us emails telling us to make sure we fill bags to the absolute possibly maximum. They are not even sending us large bags anymore to some stores.
Corporate has recently eliminated (what I would estimate based on how many positions we lost vs the thousands of stores we have) several thousnad management positions at *all levels* of management at stores. This NEVER APPEARED ON THE NEWS! I suspect because it was not a traditional lay off. What corporate basically told us was "Your position is eliminated, but you are not laid off. Once you quit/get your self fired/whatever your position just won't be filled again" So we are basically slowly losing jobs as people company wide quit, get fired, etc.... but the jobs are never filled again. So basically we are cutting jobs, but the way it is being done is preventing it from getting reported in the media or tracked by the government as job losses.
No non-management positions have been eliminated, instead hours have been cut for them.
Raises this year have also been lowered in amount compared to in previous years. They have been lowered enough that corporate is keeping it a secret until we have to tell team members.
The company is also buying less. Our distribution centers are sending us, for example, 3 of a certain item when normally we would get 50.... and they don't send us more until those sell. I have not been able to keep departments full of product despite contacting corporate and asking for more because we are being sent such small amounts of product.
We have had trucks cancelled all the time now simply because we sold so little that they can't justify sending so few items to a store.
People are simply NOT buying things. They are not buying anything that isn't a consumable basically. I asked our pricing team to do a store mark down and lower the price on almost all of our TVs by 30-50%. We still have not sold a single one in over a week after! Our TVs were not priced very high to begin with.
Our pricing team is also being sent price increase changes from corporate in huge numbers. I am talking entire aisles of product for them to raise the prices on. The other day we got a STACK of pages of product to increase prices on. We thought it HAD to be a mistake because that has simply never happened before. We have emailed corporate asking if it was a mistake... we have not heard back yet, but I suspect it was not.
Many stores are now changing to non-overnight stores. They will be closed overnight and ALL power except in office areas will be cut overnight to save on costs.
There have even been changes to job descriptions recently. Corporate is basically giving job dutys to people at lower levels which used to be reserved for people at higher levels. Even some management tasks are being given to people in non-management positions. Basically they are paying people less to do what people used to get paid more to do.
Things are NOT looking pretty right now. I can tell you from a consumer spending point of view something is definantely going on.... All these changes tell me the people at the top are trying to brace for something big that is going to be happening to the economy.
[link to www.democraticunderground.com...ss=389x3111866]
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User ID: 409505
4/6/2008 11:45 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
In my neck of the woods, we see Subway hawking foot long subs for 5 bucks now, normally $8.00. The subway in my area has striped down their menu and got rid of the daily soup. It's fairly plain that something is going on, as in belt tightening.
McDonald's has also gotten into it by issuing a full page of buy one, get one free coupons. The local pizza joint has stripped down their menu too, removed half of their pop coolers and even said thanks, we really appreciate your business on the way out the door. That was a first for me. The pie was 14 bucks for a medium cheese and pepperoni and it was the size of their old small. |
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User ID: 409505
4/6/2008 12:26 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
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