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12/28/2008 7:43 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Significantly, the government does not employ double entry bookkeeping in the preparation of its accounts. This has been standard accounting practice since the seventeenth century, which classifies and tracks sources and uses of funds to create an accurate picture of a business (or public) enterprise. Today the Pentagon utilises no accountable means of tracking money authorised by Congress from its initial authorisation to its use, say in developing a fighter plane. Running a 21st century military machine using antique accounting methods is an anomalous situation with interesting implications, not least of which is that government agencies cannot, or will not, explain what they are doing with the money that is appropriated for their operations by Congress.
A similar state of affairs prevails at the Department of Housing and Urban Development (HUD). It exists primarily, at least in law, to ensure that low income Americans have access to affordable housing, which HUD provides as well as both credit and credit insurance on a nationwide scale. Yet HUD has never compiled information on its activities so that it or anyone else can see, by place, whether or not its activities in that place make money, lose money, or are simply irrelevant.
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12/28/2008 7:52 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.scoop.co.nz]
Fascinating and lucrative patriotism,
The negative return economy: a discourse on America’s black budget*
By Chris Sanders and Catherine Austin Fitts
*(Also published World Affairs, Journal of International Issues )
SEARCH NZ JOBS
Search Businesses FindA
Search Businesses FindA
Gifts to change the world
Keep the people frightened
Of things they cannot know
Is the secret of the Tomb
If they knew what you and I know
They would know it is just men
Who rob them, cheat them, kill them
Then start it all again
- Orville X
*********
Introduction
The United States government has operated a secret budgeting and spending program for decades outside the framework of the American Constitution. The institutional and political roots of this system of clandestine finance reach back to at least a century. The turn of the 19th and 20th centuries saw the consolidation of American industry and banking under the control of a restrictive cartel that for all practical purposes assumed control of the economy. The great magnates of American industry and finance in the late nineteenth century were superb practitioners of covert operations. Witness to this fact are the institutions set up during the twentieth century through which their descendants maintain control.
This paper is a summary of the structure of the American political economy which fits the facts better than the official model. Officially, American capitalism is characterised by democracy, opportunity, self-improvement, open and free markets, and constructive regulation for the public good, in short, happiness. Under this construct America has never fought a war of aggression and harbours no designs to do so. Its leaders have the nation’s interests at heart, and its politicians listen to their constituencies. The truth is different. Why the United States is so widely misunderstood is due in part to a controlled educational system and media. As the system evolved over the decades, time lent it legitimacy spanning the political spectrum. Gustavus Meyers, author of the seminal work History of the Great American Fortunes and no panegyrist, believed – following Marx as did many on the left – that the consolidation of American industry was inevitable and that the men who accomplished it were acting their part in a predetermined historical evolution. Once monopoly control had been achieved, the proletariat would rise and its dictatorship would begin. We shy away from such determinism; nothing happens but as a consequence of what men do and choose to do. If Meyers were alive today, he would still be waiting.
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Black Budget? What Black Budget?
At the time of the attack on the World Trade Center and the Pentagon in September 2001 according to the Government Accounting Office (GAO), Pentagon had incurred $3.4 trillion of “undocumentable transactions,” that is to say that there were $3.4 trillion worth of financial transactions for which there was no discernible purpose. The day before the attack, Secretary of Defense Donald Rumsfeld warned that the lack of control over its budget was a greater danger to the national security of the United States than terrorism. After the attacks, the government stopped publicly disclosing information about “undocumentable transactions”.
Blame the Bookkeeper
The problem is not restricted to the Pentagon but affects the entire spectrum of government agencies and departments from the Bureau of Indian Affairs to the Defense Department. For a number of years the GAO has compiled a parallel set of books for the Federal Government called the Financial Report of the United States. This report attempts to impose “Generally Accepted Accounting Principles” to the government’s financial reporting process in order to give a clearer picture of the government’s actual assets and liabilities and thereby enable better planning. Neither the Pentagon nor the Department of Housing and Urban Development (HUD), to name just two, have ever been able to pass a GAO audit on this basis.
Significantly, the government does not employ double entry bookkeeping in the preparation of its accounts. This has been standard accounting practice since the seventeenth century, which classifies and tracks sources and uses of funds to create an accurate picture of a business (or public) enterprise. Today the Pentagon utilises no accountable means of tracking money authorised by Congress from its initial authorisation to its use, say in developing a fighter plane. Running a 21st century military machine using antique accounting methods is an anomalous situation with interesting implications, not least of which is that government agencies cannot, or will not, explain what they are doing with the money that is appropriated for their operations by Congress.
A similar state of affairs prevails at the Department of Housing and Urban Development (HUD). It exists primarily, at least in law, to ensure that low income Americans have access to affordable housing, which HUD provides as well as both credit and credit insurance on a nationwide scale. Yet HUD has never compiled information on its activities so that it or anyone else can see, by place, whether or not its activities in that place make money, lose money, or are simply irrelevant.
Conflict of Interests
Few Americans are probably aware that Lockheed Martin, builder of the F22 air superiority fighter, is also a major outside contractor supplying financial control and accounting systems to the Pentagon. The Pentagon for its part is Lockheed Martin’s biggest customer. This example is by no means unique. Lockheed also has a subsidiary employed by HUD to administer housing in American cities, an unusual diversification for a corporation the majority of whose business is done with the military and intelligence agencies. [ii]
Similarly Dyncorp (recently acquired by Computer Sciences Corporation) is another contractor that, like Lockheed, derives almost all its revenue from government security and military contracts. It is also a contractor supplying information technology to a variety of government agencies including the Pentagon, HUD, the Securities and Exchange Commission (SEC) and the Department of Justice. At the Department of Justice it manages the case management software used by DOJ lawyers to manage investigations. [iii]
A prime example of overlapping interests is Herbert “Pug” Winokur. Not only was he on Dyncorp’s board of directors but he is also the Enron director in charge of that company’s risk management committee, and a long-standing board member of the Harvard Management Corporation, which invests in HUD projects.
AMS Inc., a computer software firm hired by HUD in 1996 to take over the management of its internal software for accounting and financial control, presided in two short years over an explosion in undocumentable transactions of nearly $76 billion. AMS violated fiduciary and control practices by installing its own equipment and software with no parallel runs against the legacy software and accounting system. In those same two years, HUD’s management more than tripled the volume of loan and insurance business being pushed through the system. Anyone familiar with running such systems in a bank or an insurance company immediately understands that a decision such as this (for it had to be a decision) would result in huge losses. [iv] Is this incompetence or design? Only the credulous would believe accident: the reward for Charles Rossotti, president of AMS, was to be named Internal Revenue Service (IRS) Commissioner at the Department of the Treasury, from which position he oversaw significant Treasury contract amendments to AMS. He was a direct beneficiary of this as a special White House waiver permitted Rossotti and his wife to retain their AMS stock.
Government’s response to criticism
The reaction of many people to the sorts of facts related above is to dismiss them as no more than evidence of incompetence and accident. The government does little to resist this sort of interpretation; on the contrary, it encourages it. For example, in response to calls for an investigation of its financial control, the Pentagon countered with an offer to investigate credit card abuse. Complaints about the performance of outside contractors such as AMS have been answered by a government-wide contract award to IBM for the standardisation of IT systems and practices. IBM, in turn, has awarded subcontracts to AMS, Lockheed, Dyncorp, SAIC and Accenture (formerly spun out from Arthur Andersen of Enron fame). It is these firms that have failed to provide systems that can pass a GAO audit. This manoeuvring and the government’s justifications affront common sense and are unethical. As private sector firms, they have to pass audits before their own accounts can be approved and reported to shareholders. Yet they routinely fail to meet the same standard for the government.
Often the government blames the previous, outgoing administration. However, consider that the incoming Bush administration replaced all the senior Clinton political appointees except: the Comptroller of the Currency, John D. Hawke; IRS commissioner Charles Rossotti (formerly of AMS); Comptroller General David Walker (Formerly of Arthur Andersen [v] – see [link to www.npr.org] and CIA director George Tenet. In short, the key positions necessary for the control of the federal credit, financial control, audit and intelligence.
Comptroller of the Currency, John D. Hawke ---->control of the federal credit
IRS commissioner Charles Rossotti ----> financial control
Comptroller General David Walker ----> audit
CIA director George Tenet ----> intelligence
This undisturbed transition from Democratic to Republican administrations represents a remarkable cross-party consensus, and highlights the real positions of power. With the exception of Rossotti, all these men are still in place in 2004. And Rossotti? He left the IRS to become a senior adviser to the Carlyle Group for information technology. A more richly symbolic and meaningful job move could scarcely be imagined. Carlyle’s business is global venture venture capital, which is to say it invests in corporate acquisitions all over the world with a speciality in arms manufacturers and technology. The large levels of undocumentable transactions at HUD and the Department of Defense inevitably inspire curiosity. Where is the money associated with those transactions? It is no great leap of imagination to wonder equally where the Carlyle Group raises the money with which to finance its acquisitions. [vi]
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The trusts are dead. Long live the trusts
The cartelisation of the American economy was for all intents and purposes completed by the end of the first decade of the twentieth century. [vii] In 1889, America’s leading banker JP Morgan held a meeting at his 5th Avenue mansion in New York. Its purpose was to reach a consensus whereby the owners of America’s railroads merged their competing interests. [viii] This was no mere group of transportation executives agreeing to fix prices. The railroads also controlled the nation’s coalfields and oil supplies, and were tightly bound to the nation’s largest banks. The creation of the Federal Reserve in 1914 completed this process of consolidation. In effect, Congress ceded control of the US currency system and the federal credit to the banks, thereby officially recognizing the cartel. This placed a relatively small number of men in a position to set prices across the economy with a degree of control heretofore unknown in US history.
The banking cartel’s interest in war
American foreign policy and the wars that America has fought over the course of the twentieth century (including the Spanish American War in 1898 [ix] and the present War on Terror) have successfully extended the cartel’s control over the world economy. The American Civil War was fought to determine control of the US economy. [x] Most Americans would explain the last 150 years of warfare as sadly necessary for reasons beyond America’s control. The implication is that America has accumulated its preponderant international position by some providential accident and not by design. Arguments for a contrary view elicit derisive accusations of falling victim to “conspiracy theory.” Reassuringly, they believe that self-interested individuals and organisations are incapable of collaboration to achieve common ends. When JP Morgan sat the owners of America’s railroads around a table and hammered out a non-compete agreement, it was no accident. Similarly, neither have America’s wars been accidents; they have been far more profitable than is widely understood. The US confiscated billions of dollars worth of German and Japanese war treasure at the end of World War Two. President Truman made a conscious decision to not reveal this to the public or repatriate it. Instead, it was used to finance covert operations. [xi]
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Command economy
Popular myth has it that the trusts were broken up in the first decade of the twentieth century thanks to the crusade of Theodore Roosevelt on behalf of the middle class. Roosevelt certainly used his public stance against “big business” to successfully bid for campaign money from the very businessmen whom he was attacking. This perhaps explains why he subsequently signed legislation repealing criminal penalties for those same businessmen. This is a common trait of “liberal” or “progressive” presidents. The second Roosevelt, Franklin, is remembered as the champion of the downtrodden, who put an end to the Great Depression. It was he who established the nation’s social security system which in reality was (and is) funded by a highly regressive tax on its beneficiaries. Matching contributions from business were allowed to be deducted as a business expense before tax which simply extended the regressive nature of the program by financing business’ share out of foregone tax revenue. Roosevelt, a superb politician, won a landslide victory on a platform of reform which he adroitly sidestepped fulfilling. Instead, he declared a national economic emergency, short-circuiting any constitutional challenge to his power in the court. He promptly defaulted on the gold clause in the government’s bond contracts, and established the Exchange Stabilisation Fund (ESF) in 1934. Ostensibly meant to promote dollar stability in the foreign exchanges, the Fund in practice was and is something quite different. It is exempt from reporting to Congress and is answerable only to the President and Secretary of the Treasury. It is, in short, an undisclosed fund that can tap federal credit.
Apparatus of a Command Economy
The establishment of the ESF was an extension of the same logic behind the creation of the Federal Reserve in 1914. The latter, the Fed, was also created in response to a crisis: the crash of 1907. The Wall Street legend credits JP Morgan’s genius and patriotism with saving the Nation. In reality, the crash and resulting depression enabled Morgan to destroy his competitors, buy up their assets and in the process revealed to the nation and the world just how powerful the banks and Morgan were. Not all were grateful, and some demanded legislative action to bring the federal credit and national monetary system under public oversight and control. In a campaign of masterful political legerdemain, the Federal Reserve was created in 1912 by an act of Congress to do just this. But by creating it as a private corporation owned by the banks, Congress effectively ceded to the banks a position even stronger than they had occupied before. Even today it is not widely understood that the Fed is a privately held business owned by the very interests that it nominally regulates. Thus the control of federal credit and the US monetary system and the rich flow of insider information that results from that control are veiled from public view and are privately controlled in secret which rather explains the Delphic nature of the Fed’s chairman.
The extension of secret control was not limited to finance. The National Security Act of 1947 created the Central Intelligence Agency (CIA) and the National Security Council (NSC) and consolidated control of the three armed services under one roof at the Pentagon. This merely served to extend this principle of secrecy to the field of “national security.” Like the Fed, the CIA was exempted from public disclosure of its budget and was given budgetary control over the entire intelligence community, while the National Security Council was set up as a policy-making body separate from the existing organs of state policy such as the State Department and the military commands reporting directly to the president.
The CIA Act of 1949 created a budget mechanism that allowed the CIA to spend as much money as it wanted “without regard to the provisions of law and regulations relating to the expenditure of government funds.” In short, the CIA has a way to fund anything –legal or illegal – behind the protection of national security law. [xii]
Implementation
Having created the bureaucratic means to conceive and make policy in secret, the next development was to create the means to implement it. The main issue was how to control money flows in the national economy. The government’s solution was to assume a commanding position in the credit markets. To that end, it created first the Federal Housing Authority in 1934 (forerunner of HUD and now part of HUD) [xiii] and subsequently Ginnie Mae and then Fannie Mae and Freddie Mac, which are government sponsored enterprises (GSEs) to supply mortgage finance and insurance for homebuyers. The underlying political purpose is more subtle. Combined with the power of the Federal Reserve (i.e. the cartel) to set the price of money, the ESF, the GSEs, and latterly the Department of Housing and Urban Development (HUD), have proven to be a powerful force for regulating money flows and demand in the US economy.
The military, too, was reformed with the adoption for the first time in American history of a wartime military budget and force structure in peacetime. In the early 60s this was fine tuned with the adoption of an explicit cost-plus acquisition process. The justification for this was, as usual, national security. This military budget has proven as effective in regulating the industrial sector as control over home finance has proven in regulating credit. Together they confer virtual control over the economy as conventionally measured in terms of money GDP.
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Credit, credit, and more credit
A few moments reflection on the institutional structure briefly outlined above makes clear the central importance of the federal credit in underwriting it. The federal government underwrites the GSEs by extending to them a subsidised line of credit from the Treasury. An additional indirect subsidy in the form of lower borrowing costs flows from the belief in the marketplace that this constitutes an implicit government guarantee of their solvency. While this subject from time to time excites controversy, the truth is that the GSEs are not the only corporate entities benefiting from government support. Since the failure of Continental Illinois in the early 80s, the government has informally made it clear that it stands behind the banking system. This was made even more explicit with the bailout of Citibank in the early 90s and the implicit subsidy that the entire banking industry received as a result. Nor are financial institutions the only ones to enjoy this kind of support. Both Lockheed Martin and Chrysler have been effectively saved from insolvency by the taxpayer in the past, presumably due to their status as major defence contractors.
Such a system places a significant value premium on sheer size, if for no other reason than what the banking system cheerfully and disingenuously refers to as the “too-big-to-fail” doctrine. But for industrial firms, too, there is significant value in having a contracting relationship with the Pentagon. Not only is there the economic nirvana of cost-plus contracting but, if you are big enough, your fundamental business risk is underwritten for national security reasons. Thus, there is a tendency for firms to migrate their businesses to military rather than purely civilian markets; today the Boeing Company is a perfect case study of this in action. And a result is that civilian business in sector after sector has been driven into insolvency or into acquisition by the very national security industry that is ostensibly protecting them. [xiv]
The dynamics of cost-plus contracting are such that profits rise as costs rise. [xv] This explains a great deal about the size of American military budgets, which have risen inexorably over the years even as military preparedness has fallen. [xvi] But as we have seen, the losses in terms of lower productivity are felt across wide swaths of the economy as non-military contracting competition is squeezed out or acquired. Obviously these losses in the real economy have to be financed, producing a higher demand for credit than would otherwise be the case. Given declining productivity and a narrowing production base, it was inevitable that at some point net exports would become negative, a condition that the US entered in 1982 and which has intensified since. Today the US net foreign debt [xvii] is on the order of $3,000 billion (30% of GDP) and is increasing at a rate of some $500 billion per year (5% of GDP). [xviii]
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User ID: 581258
12/28/2008 7:58 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
Concentrating capital
To finance such a large foreign borrowing requirement without currency depreciation requires both the ability to control as much of the national cash flow as possible as well as the collaboration of at least a few key foreign countries to achieve the same sort of control over international cash flows. In the latter case, this takes the form, in part, of ever larger amounts of intervention on the part of those countries running dollar surpluses and strong net export positions to prevent the markets from driving the dollar lower. In practice this means that they accumulate more and more dollars, which they in turn invest in US Treasury securities. Foreigners now own some 45% of US Treasury debt outstanding. In January this year the Bank of Japan intervened in the currency markets on behalf of Japan’s Ministry of Finance, purchasing a whopping $69 billion in that month alone, or more than 30% of its total intervention in 2003 which was itself a record year.
Current trends
All of this may seem to have little to do with the black budget, which most people associate with intelligence covert “black” operations. The truth, however, is that the black budget cannot be understood in isolation without understanding the political, historical and economic context from which it springs. One way of understanding this is by comparing trends. For example, in 1950 the Dow Jones Industrials stood at 200, and today the Dow is at 10,600. In 1950 narcotics trafficking was a relatively unknown crime in the United States. Today it is endemic, and not only in cities but in smaller towns and rural communities as well. In 1950 the US possessed most of the world’s gold and was the world’s biggest creditor. Today it is the world’s biggest debtor. In 1950 the US was a major exporter of industrial goods to the rest of the world. On current trends the US is not self-sufficient in manufactured goods and will not even have a manufacturing industry worth the name by 2020.
Then And Now
1950 Dow Jones Industrials at 200 2004 Dow Jones Industrials 10,600
1950 Drug trafficking virtually unknown 2004 Drug trafficking endemic
1950 US had the largest gold reserves 2004 Gold reserves …
1950 US world’s biggest creditor 2004 US world’s biggest debtor
1950 US industrial giant 2004 US no longer self-sufficient
Narcotics trafficking and the stock market
Is there a connection between these trends or are they random? It may seem strange to think of a positive correlation between narcotics trafficking and the stock market, but consider: in the late 90s the US Department of Justice estimated that the proceeds of such trade entering the US banking system were between $500 and $1.000 billion annually, or more than 5-10% of GDP. Now the proceeds of crime need to find a way into legitimate, that is legal, channels or they are worthless to the holders. If one further imagines that the banking system earns a fee of 1% for handling this flow (rather low considering that money laundering is a seller’s market) then the profits for the banks from this activity are on the order of $5 to $10 billion. Applying Citigroup’s current stock market multiple of 15 or so to this yields a market capitalisation of anywhere from $65 to $115 billion. One can thus readily see the importance of the illegal drug trade to the financial services industry. As it happens, this trade in illegal profits is concentrated in four states: Texas, New York, Florida and California, or four Federal Reserve districts: Dallas, New York, Atlanta and San Francisco. Can anyone seriously suppose that the Fed is unaware of this if the Department of Justice is? It, after all, handles the flows.
Narcotics trafficking and the National Interest
One reason for the Fed’s silence is that agencies of the government itself have been involved in drug trafficking for sixty years or more. [xix] For the purposes of understanding the black budget, one needs to be aware of the American practice of opening the American consumer market for drugs to foreign exporters in order to pursue strategic objectives abroad. The portability of narcotics and the huge price mark up from production to point of sale makes them a particularly useful source of financing for covert operations. Even more important is that the proceeds from narcotics sales fall completely outside conventional, constitutional channels of funding. This helps explain the ubiquitous presence of narcotics trafficking in zones of conflict around the world, from Columbia to Afghanistan. [xx]
Little examined, however, is the impact of narcotics trafficking on communities and economies at the point of sale. Consider, for example, the impact on real estate markets and financial services. Real estate is an attractive area in which to employ the cash surplus resulting from narcotics sales because it is, as an industry, entirely unregulated with respect to money laundering. Because cash is an acceptable and in some places familiar method of payment, large sums can be disposed of easily and with little comment. This can and does result in considerable distortion to local demand, and in turn provide fuel for real estate speculation and increased credit demand to finance it along with considerable opportunities for speculation and fraud. [xxi] The Iran Contra episode during the 1980s contained all these elements; although many are familiar with the sale of arms to Iran to provide cash to finance CIA backed guerrillas in Nicaragua and death squads in El Salvador, less well-known is the systematic looting of local financial institutions and narcotics sales in the US. Banking allows the application of leverage to the cash that is generated by “illegal” activity while simultaneously making it possible to launder the funds. And when a bank fails, it is the shareholders, uninsured depositors and the taxpayer who pick up the bill. The point here us that narcotics trafficking creates a milieu in which the incentives to engage in uneconomic activity are greater than those to engage in economic activity. In a word, the profits from stealing are higher than the profits from playing by the rules.
What counts from a public policy point of view in the cartelised economy is the ability to control and concentrate cash flows of any kind. To this end, it is less important that a bank fails than that the federal credit is available to make good the losses. In doing so, the cash cost of losses is shifted, or socialised, to the national taxpayer base. As long, therefore, as there are willing lenders to the Federal Government, the game can go on.
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Technology gives an edge
Government’s power combined with advancing computer technology has over the last thirty years vastly simplified the task of managing the national--and by extension the international--cash flow. Politically, the American victory in the Second World War meant that the entire West and its dependencies were co-opted into the International Monetary Fund (IMF) negotiated at Bretton Woods in 1944. Forty-five years later, the collapse of the Soviet Union in 1989 meant that for the first time in history there was no alternative monetary or political choice in the international arena. The British Empire had surrendered to the Americans precisely because America, represented an alternative to sterling, namely the dollar.
Today the US presides over a more or less fully closed global monetary system centred on the dollar. In practice this means that those countries within the system must exchange real value in the form of manufactures and commodities with the US cartel in exchange for dollars, which are no more than an accounting entry created out of thin air. This is analogous to a company with no assets exchanging watered stock for cash, and indeed this is no accident. It was a favoured technique by which the JP Morgans of the nineteenth century successfully financed the consolidation of American industry and finance. Today their heirs are busily dong the same thing, but on a global scale.
The diagram is a stylized representation of the relationship between the cartel and its allies outside the United States. Flows are both concrete and abstract. Concrete flows are manufactures, narcotics and commodities (mainly oil) inwards and arms outwards. Abstract flows are money outwards in payment for concrete flows inwards, which profits are recycled inwards where they both finance the inflation of the Federal Credit as well as buying political influence.
Technology has transformed the possibilities for creative management in banking. Its sheer number-crunching power has rendered the cost of iterative calculations to more or less zero. This has enabled the creation of a new sector in the industry, the derivatives business, which is nothing more than the breaking down of financial instruments such as stocks and bonds into their constitutive parts. This has increased the power of the banks many-fold, thanks to the cooperation of the Federal Reserve and Congress, who have allowed the banks to not only self-regulate their derivatives portfolios and businesses but have enacted rules to force other banks to use derivatives to “control” risk. In practice this has meant that the most profitable business of the banks has been moved off balance sheet, in effect creating a high level of secrecy in their business. It also confers a huge advantage on the largest banks to whom the others have to come for their derivatives. This has, in part, fuelled the manic consolidation in banking over the last twenty five years and has been applied with tremendous success internationally thanks to the imposition of the Basel Accords on money and banking which have forced other country’s financial institutions to either cooperate, which in practice has largely meant be acquired, or go out of business.
The banks’ tactics have been copied and refined by industry. An excellent example of this is the case of Enron, nominally an industrial company engaged in the production and transport of petroleum and natural gas, but which was transformed into a highly leveraged financial operation with a huge off balance sheet business trading derivatives. It secured a release from regulatory oversight by the time-tested method of purchasing lawmakers and by suborning its auditors. This gave it the power to restate earnings, virtually at will, simply by changing the assumptions on future interest rates embedded in the options, swaps and futures contracts constituting its unregulated derivatives book. Enron is a model also of the increasingly blurred distinction between the public and private sector. It employed as many as twenty CIA officers. One of its senior executives, Thomas White, was an army general before joining Enron and then left Enron to become Secretary of the Army. Enron executives were intimately involved with Vice President Richard Cheney’s energy task force. It is difficult to avoid concluding that Enron was anything other than a money-laundering operation employed in the interest of “National Security” on behalf of the cartel. [xxii]
The US has embarked on a costly global military adventure the outcome of which is anything but certain. This marks the culmination of more than fifty years of nearly continuous overt and covert warfare. In this it is supported by the most sophisticated financing apparatus in history, capable of mobilising the cash generated from a wide variety of activities both open and covert. The price has been the progressive hollowing out of the American economy itself, and the progressive erosion of civil liberties and the rule of law. The black budget is not the cause of this but the means.
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About the authors
Catherine Austin Fitts - [link to www.solari.com] is the founder of Solari. Ms. Fitts is a former managing director and member of the board of directors of Dillon Read & Co, Inc, a former Assistant Secretary of Housing-Federal Housing Commissioner in the first Bush Administration, and President of The Hamilton Securities Group, Inc. She is a graduate of the University of Pennsylvania and The Wharton School.
Chris Sanders - [link to www.sandersresearch.com] is a principle of Sanders Research Associates in London. Mr. Sanders has been a banker and asset manager for 21 years, and is a visiting professor in international finance at the School of Public Administration at the University of Göteburg in Sweden. He has degrees from in political science from Duke University and Arabic literature from the University of Michigan. He began his financial career as a private banker with Citibank in Saudi Arabia in 1979. Since 1984, he has lived in London and worked in the international investment management industry. He founded Sanders Research Associates in 1997.
Sanders Research Associates Ltd. provides international strategic planning and risk management services to both corporate and private clients. SRA also publishes a webzine available by subscription. Visit [link to www.sandersresearch.com] to get a good feel for the real deal.
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FOOTNOTES:
Remark attributed to a Wall Street broker in 1895 describing J.P. Morgan. Gustavus Meyers (2002). History of the Great American Fortunes. University Press of the Pacific, Volume 3, p.225. Morgan, regularly portrayed as a patriot, was at the time deeply engrossed in relieving the government of its gold reserve.
[ii] Lockheed’s contract was recently terminated by HUD--an action that the company is contesting.
[iii] Dyncorp was appointed as well to run the Department of Justice’s asset forfeiture program in 1993, winning a $60 million five year contract to do so.
[iv] For an insider’s account of the problems at HUD, see Catherine Austin Fitts, The Myth of the Rule of Law at www.sandersresearch.com.
[v] See [link to www.npr.org]
[vi] See Dan Briody (2003), The Iron Triangle, Inside the Secret World of the Carlyle Group. John Wiley & Sons: Hoboken. ISBN 0-471-28108-5. Carlyle’s phenomenal success as an investment firm owes a great deal to its ability to lure former political figures and senior industry executives onto its executive team and advisory board. Examples are former US President George H.W. Bush and former British Prime Minister John Major; Frank Carlucci, former deputy director of the CIA and former Secretary of Defense; James Baker III, former Secretary of State; Richard Darman former director of the Office of Management and Budget; Colin Powell, former Chairman of the Joint Chiefs of Staff and present Secretary of State (a Carlucci protégé); William Kennard, former head of the Federal Communications Commission; Arthur Levitt, former chairman of the Securities and Exchange Commission; Park Tae Joon, former Prime Minister of the Republic of Korea, and Louis Gerstner, former chairman of IBM. Of some interest as well has been the involvement of the Bin Laden family as major private investors in the Carlyle Group, represented by Shafiq Bin Laden, a brother of Osama Bin Laden.
[vii] For a brilliant history of the rise of America’s elite and its disenchantment with democracy and free markets, see Sven Beckert (2001). The Monied Metropolis. Cambridge University Press: Cambridge. ISBN 0521790395.
[viii] Gustavus Meyers (2002). History of the Great American Fortunes, Volume 3. University Press of the Pacific: Honolulu. (Reprint of the 1910 edition), p.225.
[ix] See Walter Karp ((1979). The Politics of War. Harper & Row: New York) for an analysis of the move to war in the case of both the war with Spain and WWI. Of particular interest here is Woodrow Wilson’s extension of a domestic security apparatus ostensibly to deal with a supposed foreign threat during war time. In fact, the draconian legislation and executive orders that created the FBI as a new appendage of the Department of Justice was hardly used during wartime, but were deployed after the war against domestic political opponents in the labour unions and the Progressive Movement.
[x] See Beckert, op. cit.
[xi] See Tim Weiner ((1990) Blank Check: The Pentagon’s Black Budget, Warner Publishing) and Sterling and Peggy Seagrave ((2003) Gold Warriors, Verso Press: New York). There is ample evidence that these funds were invested and have grown substantially in the years since, and are still used to further political and personal agendas.
[xii] Seagrave, Sterling and Peggy, op. cit., pp 119-120. The use of National Security as a rationale for acts that would otherwise be considered unconstitutional and illegal has become embedded in the America legal system, a curious inversion of original intent. Franklin Roosevelt declared a national economic emergency in the 30s which was used to justify extraordinary measures by the executive, including the abrogation of the government’s obligations to redeem government debt I gold. The Supreme Court refused to hear a case contesting the administration’s action. More recently, the government intervened in a labour dispute between the International Longshoremen Workers Union and the Pacific Maritime Association, citing the Patriot Act of 2001 and equating the union’s position to economic “terrorism”. In fact, rather than the union striking, the PMA locked the union out of the ports. Government intervention was in the form of the direct intercession of Tom Ridge, head of the Department of Homeland Security to force the union to accede to PMA demands.
[xiii] Notably, this is the same year in which the Exchange Stabilisation Fund was set up.
[xiv] In a similar fashion, manufacturing firms have migrated into finance, finding it easier to make money by arbitrage than by competition. Thus General Motors manufactures cars as collateral for its leasing business; similarly GE or Boeing make as much or more money out of financing the purchase of their products than from making them.
[xv] This is to say nothing of the wholesale transfer gratis of research undertaken at the taxpayer’s expense; for example nuclear technology transferred to the power industry.
[xvi] See Franklin Spinney, The Defense Death Spiral, www.d-n-i.net for an in depth analysis of the micro economics of military procurement and its impact on force readiness.
[xvii] This is the cumulative borrowing from abroad to finance net exports (or the trade deficit if you prefer).
[xviii] The annual rate of increase is the current account deficit.
[xix] See Alfred McCoy (1991). The Politics of Heroin in South East Asia. 2nd ed. Lawrence Hill Books: Brooklyn. ISBN 1556521251. McCoy documents thoroughly the genesis of US wartime cooperation with the mafia in Italy during WWII and its post-war toleration of narcotics trafficking in the US as a quid pro quo for the cooperation of Corsican and Italian organised crime in its covert war against the Communist Party in France and Italy. In Asia, it supported the opium and heroin business of a Chinese nationalist army in Burma after the Chinese Revolution in 1948. In Indochina the US supplanted French colonial rule after the French defeat at Dien Bien Phu, inheriting in the process French covert ties to opium production amongst the Hmong hill tribes. With overt American intervention in 1965 the importance of this traffic grew enormously, financing an escalation of the ground war in Laos.
See also Seagrave, Sterling and Peggy, op. cit. There is ample international precedent for American involvement in narcotics trafficking, beginning with the British organisation of opium production in Bengal two centuries ago and of its illegal distribution into China. For that matter, Japan turned Manchuria under its occupation into the biggest producer of opium and refined opiates in the world, the cash flow from which proved to be immensely useful to the operations of Japan’s Manchurian Army and intelligence services.
[xx] Peter Dale Scott (2003). Drugs, Oil and War: the United States in Afghanistan, Columbia and Indochina. Rowman & Littlefield Pub: Oxford. ISBN 0742525228.
[xxi] See Roger Morris ((1999) Partners in Power: The Clintons and Their America, Regnery Publishing) for a case study of the interaction of covert operations, narcotics trafficking, financial markets and politics in Arkansas during the governorship of Bill Clinton.
[xxii] See Catherine Austin Fitts and Daniel Armstrong, The Real Deal About Enron at www.sandersresearch.com.
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12/28/2008 8:31 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.scoop.co.nz]
Witnessing the Decay of Western Hegemony
Saturday, 27 December 2008, 12:06 pm
Column: Pablo Ouziel
Witnessing the Decay of Western Hegemony and the Role of the Organic Intellectual
By Pablo Ouziel
Abstract: While the military might of the world’s leading nations continues to expand, it has become apparent that western colonialism is abruptly coming to an end, yet the consequences are still not clear to any of the pundits traditionally involved in the discourse which has helped to build it. For many decades in the west, we have thrived on imperial expansion led by the United States of America and its allies, and legitimized by international bodies such as the International Monetary Fund, The World Bank and the United Nations. Today, this oligopoly of world domination is rapidly deteriorating and what only a few months ago seemed like the only option for humanity is today being severely put to the test. The organic intellectual must face these challenging times by offering viable alternatives to society so that a new world order can emerge out of the rubble left behind by liberal democratic capitalism.
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Introduction
Antonio Gramsci differentiated organic intellectuals from traditional intellectuals, by emphasizing the role of the former in cultivating roots within their communities to help develop a self-inspired organic consciousness. Accepting their position within the dominant ideology, according to Gramsci, organic intellectuals will ultimately support the working-class in developing an alternative hegemony within civil society.
For many decades, society has been indoctrinated with the belief that liberal democratic capitalism was the benevolent solution to all world problems. Through this model of society, hunger was going to be eradicated, wars would come to an end, the environment would be saved, and justice would be distributed equally amongst all members of the human species. Entering the new century, western society celebrated the new millennium with the euphoria of success, once and for all; we had entered the final face of existence, the one, which would bring upon the earth the mythical wonders of the Kingdom of Heaven. However, without having witnessed the passing of the first decade of the 21st century, this dogma has been broken and as many across the globe struggle for survival and society is marred by the continuous threat of revolving crisis, the time for the revolutionary transformation of the western ideal is upon us. Yet, the fundamental questions remain to be answered, how can we act? What can we do?
It is the role of the organic intellectual to answer these questions. If there are any left who have not yet awaken from their slumber, the time has come for them to abandon the petit bourgeois existence of the petty professor attending wine tasting events, the government bureaucrat justifying the wonders of his mind while working on the golf swing at the local country club, or the 1960s hippie, that after a stint in the Berkeley student movements went on to become a prosperous businessman. In today’s holistic global crisis, one which threatens every single aspect of our existence – from the food we eat, to the air we breath, and to the way we interact between each other – those who in their youth considered themselves conscious individuals fighting towards change, can no longer hide behind the mask of the liberal democratic ideal of a capitalist society striving towards justice, peace and prosperity. All of these having remained ideals, while a reality of extreme misery for the majority, coexists today with the growing prosperity of a shrinking minority capitalizing on the growing pains of humanity.
In today’s crisis, we will all perish together or we will overcome it together, and as professor Chomsky often states, “so much depends on will and choice”. Yet, the choice at this point is between prolonged misery, constant crisis, environmental deterioration and continual war, or the possibility of working together in unison to overcome the hurdles, which we are facing. If we are to honestly look at what is happening in society, on any given day we can observe that the interests of the majority are not being respected and instead, the elites benefiting themselves, pitch to society the benefits of their choices by attributing everything to the trickledown effect – a warped inversion of reality which supports investing on those at the top in order to protect people at the bottom. I often wonder when I hear such discourse bombarded by government officials and experts through the traditional channels of propaganda, whether the rest of society is awake and paying attention, or simply asleep and indifferent. I can never be quite sure, because if indeed society is awake and paying attention, then we live in a world of fools, yet, if the indifference is attributable to being asleep, the task of waking up is a daunting one. One, which can only be carried out by the organic intellectual committed to revolutionary social transformation.
Decay of Western Hegemony
As western society struggles with rising tensions, both within and outside of its borders, as those being colonized begin to throw their shoes in despair, and those who thought they belonged to the empire begin to realize that their dream is no longer sustainable, the organic intellectual is able to grasp the severity of the global crisis. As bankers announce their losses, the banking cartel slowly collapses. First, the major investment banks and hedge funds, then their traditional counterparts, all showing loses which only a year ago had been presented as ground breaking profits, as slowly the deck of cards unfolds and everything crumbles. Soon the job cuts begin, across continents furious workers revel against their enslaving owners, demonstrations, walkouts, sit-ins, failed negotiations between trade unions and shareholders. The sky is falling and the capitalist always strives to win. For a while, dormant workers watch their colleagues being laid-off, at first it seems an unavoidable aspect of capitalism, the dirty side of a casino culture, which rewards some at the expense of others. But then, neighbourhoods begin to witness empty houses, people evicted, squatters moving in, the law can do little to prevent it, the numbers are too big to contain. The lobbyists in Washington are eagerly fighting for pieces of the bailout money prepared by a government, which faced with complete anarchy must regain a foothold in the corridors of power. Confidence must never be lost. Hence, a new face in the White House, a new man, a new dream, perpetuated by the chanting of hope. But things will never be the same in America, as young bankers spend their holidays in despair not knowing if their job awaits them in the coming year, the dark thoughts of unemployment begin to creep in. Obama proposes solutions, three million jobs to be created by rebuilding the fallen infrastructures of the great American empire. An empire, which in its boom forgot to cement its foundations and now collapsing, will offer its unemployed bankers the opportunity to go and fix roads.
As America crumbles, its allies must wait and hope. they too must hold tight to the idea of a rebirth, they too must put their expectations and dreams in the hands of Obama. For the allies, there is not much more that can be done. They accepted the American way of life, they indulged in the great American credit card culture and now, millions of people around the globe are tied to the demise of Wall Street, thus the saying, “when America sneezes the rest of the world catches a cold.” So, as frantic politicians of the axis of good scramble for some sense of stability for their countries, industries collapse, unemployment raises, and currencies begin to witness the prospects of inflation, deflation, stagflation, stagdeflation, and ultimately, what few dare to mention – depression and eventual collapse.
At this point, relations which in the good times presented themselves as strong and unbreakable begin to shake, governments of the allied countries, the client states, are trapped between their commitments to the emperor and the demands of their people – their people need to eat and the emperor demands that his people eat first. So, the economies of the allied countries begin to fall one by one. As they do, chaos breaks within their borders and internal factions begin to fight for power, possibilities of revolution or civil war are no longer too far fetched as American influence retreats and the ruling parties are left in a vacuum, like sitting ducks, waiting for factions to fight for the reigns. First, the riots break out in the weaker allied countries such as Greece, where corruption has been so blatant that the disillusioned youth go out to the streets. At first, it looks like a minor incident, but soon it is apparent that youth everywhere are inspired by such actions. As the months go by, riots spark up in numerous countries, those that no longer feel a part of the empire are now eager to burn it.
The majority of people no longer see the governments as representing their interests, rather they are understood to be puppets of the ruling elites, the capitalist class, and this makes them the enemy. It didn’t have to be this way, but politicians have become so complacent that they flaunt the wealth accumulated through legalized corruption, something, which although accepted by the courts, is no longer accepted by the angry mobs. So politicians begin to flee into exile – first, they fly to the ally countries, but soon they realise that they are not welcomed there. Their presence can destabilize already fragile situations, so they hop from country to country, finding eventual refuge in some far away land, in the same way that Nazi war criminals ended up in the jungles of Latin America.
In the meantime, the military might of America and its allies keeps getting stretched, and the wars that were begun can no longer be effectively fought. With the unpopularity at home and the increased resistance of those being attacked, it seems like a retreat is in sight, however, the military commanders and the corporations involved in the creation of weapons of mass destruction, refuse to let go of this opportunity to continue their expansion. So the war continues, with every shell fired helping to discredit an act, which was presented as a necessary evil to liberate humanity from tyranny. Now the war is seen for what it is, an unjust act of aggression designed to conquer whole populations and generate profit for the small ruling elites. The United Nations, once believed to be a fair moderator of conflict, is now showing its face as the mechanism for justification of the mega-powers – it is no longer sustainable, it is now viewed as an aggressor. The International Monetary Fund is running out of funds and must call on the rising empires to support its transactions. As for The World Bank, it just passes from corruption scandal to corruption scandal, until soon it too will become obsolete. So, as the international institutions crumble and the allied countries collapse, America is left in debt with an internal discomfort brewing and external wars being lost. What was once a colonial project based on the strategy of sticks and carrots, has run out of carrots and all that is left, is the stick to continue the expansion. It is at this point that the American empire must decide between an all out war against the rising empires, or the acknowledgment of defeat. All empires rise and fall, what America can do, is to choose between a graceful fall and the third world war. For those in power the choice is clear, it is now essential for the people to speak loud and promptly. Will there be war, or will there be revolution? It is the role of the organic intellectual to promote revolution rather than war, but how? And what kind of revolution?
The rise of the organic intellectual movement
Mahatma Gandhi knew that soldiers had weapons when he chose to promote the path of non-violence. He also knew that only through this method India had a chance of transitioning from colonialism to a self-ruling nation, without descending into civil war. He understood the sacrifice people would have to make when they stood in front of guns with only their faces of indignation to protect them from their oppressors. The sacrifice proved worthwhile. Similarly, as liberal democratic capitalism comes to an end, the only option for western society to liberate itself from the chains of its ruling elites is to confront them through organized non-violent actions. It must be the role of the organic intellectual, to promote this path and educate the oppressed about its benefits, while proposing effective methods of direct communal action.
As the situation deteriorates in the west, there is no doubt that violence is going to increase. As the population begins to react to what is happening, governments will increase their police forces and will redeploy their militaries to monitor civilian streets – events, which are already apparent in certain areas of the United States. Yet, violence breeds violence, and we can no longer afford to take this route. So, as governments take bold steps to increase the controls of the civilian population and the clampdown on dissent becomes apparent, those who are currently ruled, need to understand the tools they have at their disposal in order to invert the pyramid of power. However, this reversal of the power structure in society requires sacrifices, and the sooner we all understand this, the faster we will be able to obtain true democracy based on peace, equality in front of the justice system, and sustainable prosperity for all.
Helping people understand this reality is the role of the organic intellectual. Of course, this is not an easy task, and it requires many people working together, using the tools at their disposal to build effectively coordinated information networks designed to empower the population. Many networks already exist at present, actively educating and organizing communities through grassroots efforts aimed at direct action, yet, the kinds of coalitions, which can reshape society in a revolutionary way are currently lacking friction. In America, the last time anything like this was actually lived was in the 1960s. Since then, groups have been fighting for their rights isolated from each other, which has allowed liberal democratic capitalism to contain them and appease them, without jeopardising the continual and coordinated expansion of the colonial project.
It is therefore the need to organize and unite outside of the elite power structures, which must be prioritized if there is going to be any kind of revolutionary transformation of western society. Once this step is acknowledged by the organic intellectual, and dealt with in a coordinated manner, efforts can then be directed to the numerous direct action initiatives, which are urgently needed: Putting an end to home evictions and making sure that everyone has a home. Organizing global trade unions, which can counteract capital strikes by paralyzing the capitalist economy and lobbying the demands of the workforce. Initiating consistent global demonstrations, requesting the halt of military investments and the dismantling of the war industrial complex. The start up of cooperatives focused on the development of new forms of sustainable technologies and alternative methods of production. The creation of community based and owned banking institutions. Coordinating the development of collectively owned community farming initiatives. The structuring of worker managed goodwill delegations, travelling around the world encouraging substitute forms of collaboration between countries.
Of course, these are only a few options out of the many which can be proposed and acted upon by an organized population, so these can only serve as suggestions, as organic intellectuals strive to unite existing grassroots efforts in coalitions designed to radically transform society. Sympathizing with the reality of the majority of workers – whose workday is committed without much choice to staying afloat within the strenuous capitalist economy – it is understandable that a critical mass is only achieved after many have been forced into poverty. However, it is the role of the organic intellectual, to educate the population about the consequences of not acting boldly and committing to the revolutionary project while still in the workforce, rather than having to do so later, when exposed to the charitable mercy of the ruling elite after being laid-off.
As things continue to deteriorate in the western world, these words will make much more sense. I do hope however, that a majority grasps this view before it is too late to avoid the third world war. Although, judging by the reflexes of society in predicting the current financial crisis, it might take a declaration of war before people understand where we are heading. The truth is, that unless the population is empowered and revolutionary, this event seems unavoidable at this point in time, when the ruling elites are amassing more power, the working class is clasping to its wages, and the industrial military complex is expanding at the fastest pace in the history of mankind.
*************
Pablo Ouziel is a sociologist and freelance writer
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| FHL(C)
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12/29/2008 1:55 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.newswithviews.com]
Business cable network CNBC is asking, in a special report, whether investment manager Bernard Madoff pulled off the “scam of the century.” But Madoff is only accused of a $50 billion heist. That’s peanuts compared to what the politicians have done to us.
On Monday, December 15, in a story that went unnoticed, the General Accountability Office (GAO) reported that the federal government has failed another financial audit. It was the 12th year in a row that the federal government has been unable to accurately report on its fiscal condition. Frankly, nobody knows precisely where the money is going. But we know where it’s coming from—the beleaguered taxpayers.
We have all seen the film footage of Madoff leaving his New York apartment and being pushed around by a horde of photographers and cameramen trying to get a shot of him. Why aren’t the politicians being surrounded in similar fashion for destroying the financial stability of our country?
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12/29/2008 1:59 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.newswithviews.com]
Re-distribution of Wealth and Economics
Once all of the above have been implemented, the “haves” will be forced to share with the “have-nots.” Remember, Government doesn’t create wealth; it gets its money from those who work.
Due to the severe economic conditions we are all seeing getting worse by the day, the bankrupt financial industry, dead real estate market, failing auto manufacturing, and empty retail stores, all set the stage for the epic economic collapse of America.
Most of you do not understand the extreme nature of this problem. Huge government spending, massive stimulus packages and bailouts cannot be sustained. Add to that the promised huge Public Works programs that the next president wants enacted and the federal budget deficit will soar exponentially.
None of it will help. The full financial burden will be continually and increasingly placed onto the backs of taxpayers (you and me).
Expect first deflation as the economy fails and then high inflation will kick in for anything of real value, and then the depression will begin as the entire economy collapses.
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12/29/2008 2:02 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Makes you wonder about all sorts of things, and demonstrably shows the close interconnection between capital and political power and elite safety/control mechanisms.
FU&FW
[link to www.straitstimes.com]
Down to his last US$500m
Former PM hit by global slowdown, so US$2 billion frozen in Thai banks is now more important
With the collapse of the global financial markets and the bulk of his wealth frozen, Thaksin's core money is now believed to be worth not more than US$500 million. -- PHOTO: AGENCE FRANCE-PRESSE
EX-PRIME minister Thaksin Shinawatra was believed to have $5 billion (S$7.2 billion) of overseas assets in nominal value as stock markets were peaking, oil was trading at US$140 a barrel and Middle East real estate was going up every day.
But with the collapse of the global financial markets and the commodity prices, Thaksin's core money is now believed to be worth not more than US$500 million.
'By my calculations, the core money is not worth much more than US$500 million at today's liquidation value, and Thaksin's capacity to hold on to the debt is diminishing fast, by the day. So, in brief, his net worth has declined from a notional figure of US$5 billion to the present value of US$500 million,' said the international financier, who asked not to be named.
Much worse, the UK government has frozen about US$4.2 billion in assets believed to belong to ex-prime minister Thaksin shortly after it revoked his and Ms Khunying Pojaman Shinawatra's visas in November, according to local and international money managers.
The UK authorities normally give the 'beneficiary owners' of the frozen assets six months to step forward to declare ownership. If the authorities are satisfied with the evidence, they release the assets back to the beneficiary owners.
Earlier, Arabian-business.com reported that the UK has frozen US$4 billion of Thaksin's assets.
'The UK froze his reputed US$4 billion of assets, forcing him to sell Manchester City to Abu Dhabi's Sheikh Mansour. To add to his troubles, his UK visa was revoked - oh, and his wife divorced him last week,' the Arabianbusiness report said.
Yet so far nobody has come out to confirm or deny this report.
Of the US$4.2 billion being frozen by the UK authorities, US$1.4 billion represents Thaksin's core money, plus US$40 million in futures trading margin, US$300 million in Swiss bank core money excluding margin money and US$300 million core money in Dubai. The rest is debt.
Thaksin's real problem, however, is to prove that the source of money in the UK and Switzerland is credible, without which a big chunk of his assets will be frozen for quite a while. Having too many offshore companies with bearer shares is not helping matters in an environment where he has been convicted and jumped bail.
'At the moment, the situation is rather complicated for Thaksin because all the frozen assets are under nominee names. He has been using 20 to 25 offshore companies for financial transactions, including two major Swiss banks and three private banks in Geneva,' said the international money manager, who has followed the Manchester City Football Club deal closely.
Parts of Thaksin's frozen money also represent margin loans provided by the Swiss banks, which are also trying to sort out the legal problems to get the money back, he added.
Other assets are invested in oil, rice and gold futures trading, in new condo buildings in Dubai and other portfolio investments. The total contracts of his oil, rice and gold future trading exceeded US$450 million in face value. They are now at risk of being liquidated because of the adverse market conditions.
'Also, I was told by Adnan Khashoggi's people in Dubai and Abu Dhabi that the huge investment in new condo buildings in the Gulf is at risk of being wiped out since it was loaded with bank debt. Total outlay is in excess of US$1.2 billion, though the loss (if materialised) will probably be about US$250-US$300 million,' said the international financier.
Another US$550-million portfolio believed to belong to Thaksin is being managed by the two major Swiss banks and three private banks in Geneva and is also doing badly. Without proper risk-insurance coverage, the value of this portfolio has declined significantly, he added.
He said: 'I believe Thaksin now has only US$500 million left. So the Thai assets are now very critical to him. Khunying Pojaman's return to Thailand is primarily aimed at protecting this final piece of their assets. Thaksin is also weighing the possibility of returning to Thailand himself to reclaim the Thai assets, which have become very critical to him.'
A Thai businessman by the name of 'Phairoj P' has been acting as a front man on Thaksin's behalf in making the dubious money transfers into the UK.
'Phairoj was a surrogate in helping Thaksin to acquire the football club. When only 10,000 pounds of (S$21,300) was transferred into Phairoj's bank account, the UK authorities asked him where the money came from but he could not give a satisfactory answer. That led the UK authorities to mount a series of assets freezes. Phairoj, too, is facing trouble with the UK authorities,' said a local banker, who asked not to be named.
'But I have not heard anything much beyond that. I only know that he has lots of money overseas.'
The UK authorities started to focus their attention on the high-profile Thaksin when he announced his buy-out of Manchester City in 2007. Since Thaksin was from Thailand and had taken refuge in London after being ousted from office by a military coup in September 2006, his money transferred into the UK should have come from Thai banks or Thai companies.
As it turned out, the UK authorities found out that Thaksin's money - virtually all under other nominee names - came from offshore companies located in such places as Guernsey or Isle of Man and directly from the Swiss banks. Thaksin altogether invested more than 200 million pounds, including the cost of buying the players, in the football club.
That huge investment prompted the UK authorities to launch an investigation into the trail of the money transfers and eventually nail Thaksin and his wife with the revocation of their visas.
Much worse, over the past two years, Thaksin has been actively making business deals that have turned sour to the extent that he is now desperate to reclaim his frozen assets in Thailand.
'Before Thaksin had more money in the overseas than his 76 billion baht frozen in Thailand. He could just easily walk away from his Thai assets. But now most of his overseas investment has been blown away. He has lost his money badly in the futures trading. My good guess is that he has only in the 10 billion baht range left. So he is rather desperate to try to get hold of his frozen assets in Thailand. But that will not be easy now,' said a local money manager who has extensive experience in international finance.
'Thaksin is bound to lose money in his investment because he only looks at the upside gains and never knows when to stop,' he added.
On Wednesday, Thai Rath, a local mass daily, hinted that Thaksin might decide to fly into Thailand soon in order to salvage his sagging political base, with the defection of Newin Chidchob, the political kingmaker, and the possibility of the breaking apart of the Pheu Thai Party.
Thaksin's whereabouts has been kept secret. But he is now believed to be operating out of Delhi as his headquarters.
'Interestingly, Thaksin appears to have strong links with India via a powerful agent in Delhi. He has established a base there and, in my view, that connection will prove his strongest international connection. It is close to Thailand, it is where he has the freedom to operate politically, it is a free-wheeling money market/investment climate and I guess no extradition treaty with Thailand,' the international financier said. -- The Nation/ANN
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12/29/2008 2:06 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.321gold.com]
The US Dollar is not Worth Saving
William (Bill) Buckler
Captain of The Privateer
Dec 22, 2008
The US Federal Reserve has made it - to ZERO. It has no further place to go after cutting official interest rates to record lows of 0.00 - 0.25 percent.
Endless US Credit - At NO Cost?:
From here on, monetary absurdities abound. The US Federal Reserve Note as issued into external circulation is on the balance sheet of the Fed as a liability - a debt. Anybody who accepts it has de facto given credit to the issuer of the note, they have made a loan to the Fed. Americans, of course, have no choice here because they must accept the Fed Note. It has been made legal tender inside the US. Foreigners, though, are under no such legal obligation. It shows. The US Dollar (aka the Fed Note) has dived precipitously on the currency markets.
The post July 2008 US Dollar rally is over - the USDX (US Dollar Index) has given back half its gains. The Fed is now strongly hinting that it will soon issue its own debts! This is absurd. The Fed is proposing to issue its own bonds, notes, etc which will pay a rate of interest. The interest will be paid in Fed Notes, non-interest paying debt paper which the Fed can create in unlimited quantities.
That amounts to the Fed paying interest payments on its future debts by printing the non-interest paying Fed Notes required. Economically, this makes the US Dollar (aka the Fed Note) not worth saving, buying or even holding. If the issuer of a debt can service the debt, and later redeem it - repay the principal amount of the loan - with its own non-interest paying notes, then no repayment has been made at all. One debt - the non-interest rate bearing Fed Note - will be used to repay the other. To repay a debt with another debt is fraud. That is what the Fed is proposing to do.
The Future Debts Of The US Fed:
Since September, the Fed's balance sheet has grown from $US 900 Billion to $US 2 TRILLION plus, as the US central bank has created new money and lent it out through all its new programs. The Fed now has plans to buy up US mortgage-backed debt and consumer debt paper. That will take its balance sheet up to about $US 3 TRILLION. The Fed plans to sell its own debt paper to, in part, fund this.
The US Internal Deflation Hits The Ground:
US consumer prices have fallen in November at the fastest rate since 1932, the darkest days of the Great Depression, the US Labor Department reported on December 16. The US CPI fell by 1.9 percent, the biggest decline since January 1932 at the nadir of the Great Depression. CASH - not credit - is King.
The Fed's Cut To ZERO Cuts The US Dollar Down:
Since the rally peaked on November 21, the US Dollar has fallen in international value against all sixteen of the most widely traded currencies, according to data compiled by Bloomberg. No wonder. US policy makers have flooded the world with an extra $US 8.5 TRILLION through 23 different plans designed to bail out the US financial system and pump up the American economy. Now comes the Fed's zero interest policy and its own attempts to sell more debt under its own banners. The US Dollar is on the edge of a global sell-off. It is no longer worth saving, buying or even holding as an investment.
William (Bill) Buckler
Captain of The Privateer
email: capt@the-privateer.com
Copyright ©1984-2008 The Privateer [link to www.the-privateer.com] All Rights Reserved.
capt@the-privateer.com (reproduced with permission)
Note: I have been following Bill Buckler for over 6 years now. He's simply brilliant and you owe it to yourself and the preservation of your wealth to at least try his service.
For a free trial of The Privateer go here.
Or for the Full Monty go here.
-Bob Moriarty
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12/29/2008 4:14 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.atimes.com]
Waking from Lever-Lever Land
By Spengler
The United States lived in Lever-Lever Land too long. Like Peter Pan, the country has refused to grow up. The object of the stimulus plans offered by the present and the next US administrations is to return to Lever-Lever Land, that is, to debt-financed consumption. It won't work. Leverage is for the young, who borrow to build homes and start businesses. The financial crisis forces Americans to act their age, that is, to save rather than borrow and spend.
For a world economy geared to servicing the once-insatiable maw of American consumption, that is very bad news for 2009. Recovery cannot begin until Americans have restored their decimated wealth by saving - an effort that will take years - or until
the youthful emerging markets start importing from the US, rather than exporting to it.
America's leaders haven't yet had the required moment of clarity. Its financial leaders still think the problem is a mere matter of confidence. These were the same people who swallowed their own sales pitch.
The crisis began in June 2007 with the failure of a Bear Stearns hedge fund backed by partners' money, and peaked in September 2008 with the failure of Lehman Brothers, a shop where managers famously had to drink the Kool-Aid. Wall Street fell on its own sharp elbows and died. Firms that survived the Great Depression have failed or merged into a mockery of their former piratical selves. Why did the kidders succeed in kidding themselves? Don't blame them: think of a middle-aged Peter Pan unwilling to admit that he shouldn't be flying.
Like Sauron in The Lord of the Rings, who was not evil at the beginning, the instruments of monetary destruction that caused the present crisis began as the agents of upward mobility and entrepreneurial change. Mortgage-backed securities (MBS), leveraged buyouts (LBOs), collateralized debt obligations (CDOs), asset-backed securities (ABS) and even subprime mortgages unleashed American energy during the 1980s, and made the US economy the wonder of the world.
At the outset, the alphabet soup of finance helped entrepreneurs and households to leap over barriers to market entry and make markets more efficient. Because financial innovation had done so much good, its practitioners refused to believe that it could do so much harm.
America was younger then. The Baby Boomers were in their 20s and 30s when Ronald Reagan took office in 1981, and they needed all the capital they would borrow. All the instruments of monetary destruction that rained ruin on American markets in 2008 came into the world as good things. They arrived at a moment when America need more debt.
Can America return to Lever-Lever Land? Not a chance. America is much an older country than it was during the tech boom of the 1990s. J M Keynes's "animal spirits" are made mainly of testosterone, and America had loads of that.
Figure 1: Young (25-50) vs older (50-64) American workers
In the mid-1980s, America was young, and was getting younger. Its ratio of younger (25-50) to older (50-65) workers peaked in the mid-1990s, when it had 1.5 citizens aged 25-50 for every one citizen aged 50-64. Those were heady times. The children of the baby boomers were happy to work for stock options, live on pizza, and spent 20 hours a day in a loft launching an Internet startup. Joining a startup was a rite of passage for bright young college graduates, and the exuberant young people of America momentarily persuaded the world that they had discovered a fountain of youth.
Ten years later, the number of aging workers and young workers is about even. The young programmer who worked for stock options during the 1990s still owns them, and all of them are worthless. He or she is pushing 40, with teenaged children who need money for college.
Youth needs leverage. The Reagan Revolution of the 1980s, which launched the quarter-century expansion of 1983-2007, rested on three kinds of leverage: home mortgages, junk bonds and leveraged buyouts. Turning mortgages into mortgage-backed securities made it easy for young families to buy homes and easy for entrepreneurs to draw working capital from the value of their homes. Junk bonds allowed emerging companies without the balance-sheet strength of their big competitors to enter the market and take on entrenched interests. And leveraged buyouts allowed clever upstarts to evict stodgy managers and make capital more efficient. The financiers who created these markets were giants.
The mortgage-backed securities market allowed savers in the aging rustbelt states of America to lend money to young families in the sunbelt. Later, it allowed investors around the world to invest in American homes. Federal agencies that standardized and guaranteed US mortgages made securitization possible, by creating a generic form of mortgage that could be bundled into securities.
The world's appetite for American mortgage-backed securities, though, grew out of bounds as an entire generation neared retirement in Europe and Japan, and the newly prosperous savers of Asia sought secure investments. America could not produce enough of the standardized, government-backed home mortgages to satisfy demand.
Mortgages with risky credit comprised a tiny portion of total issuance during the 1990s, but grew to $800 billion a year of issuance by 2006 before the market crashed to zero during 2008. Wall Street appropriate Milken's old idea of pooling credit risk and selling different grades of risk to different investors and applied it with a vengeance to risky mortgages, creating the sub prime disaster of 2008.
Figure 2: Annual issuance of non-agency (lower credit quality) mortgage-backed securities
Michael Milken, the creator of the modern high-yield bond market, might have been history's best judge of credit. By the time Milken went to jail on largely technical securities infractions in 1989, an army of imitators had turned the high-yield market into a manufacturing machine for soon-to-default credits, which helped trigger the recession of 1990. Milken invented the collateralized bond obligation - a pool of securities whose credit risk could be assigned to different investors willing to assume different degrees of risk in return for more or less income.
During the 1980s, junk bonds gave entrepreneurs access to clubby capital markets that had favored the stodgy Fortune 500. Sadly, this market financed a wave of telecom startups during the technology bubble of the late 1990s. At the peak of the bubble in 1999, telecom comprised a third of high-yield issuance, and the vast majority of the sector defaulted with little recovery for investors. The technology debacle discredited the market's original mission, namely to promote entrepreneurship; it had done far too good a job with the wrong sort of risks.
By the mid-2000s, Wall Street had stood the junk bond market on its head: if investors were once burned and twice shy of new market entrants with low credit ratings, they would buy junk bonds long-established companies that used to have investment grade ratings. Wall Street proceeded to issue vast amounts of low-quality debt to fund leveraged buyouts of industry-leading giants: US$33 billion for Health Care Associates in 2006, $36 billion for Equity Office Properties Trust, nearly $40 billion for the utility TXU, for a total of $350 billion of leveraged buyouts in 2006, compared with just $50 billion in 2003.
Wall Street sold junk bonds to finance the LBOs, and the junk bonds in turn were sold into alphabet-soup trusts such as collateralized debt obligations. Michael Milken's old vehicle for dealing out risks to different classes of investors became an assembly-line for levering up corporate balance sheets.
To accommodate the leverage boom in American and overseas corporate finance, issuance of collateralized debt obligations rose almost 10-fold between 2002 and 2006, before falling to zero this year.
Figure 3: Global issuance of collateralized debt obligations (quarterly)
Nearly $1 trillion of these structured instruments have been written off in the past year. The US Federal Reserve has added more than $1 trillion to its balance sheet, buying hundreds of billions of dollars worth of structured instruments from banks, not to mention roughly $300 billion of commercial paper issued by US corporations who otherwise could not raise money. The Treasury has injected over $300 billion of capital into the banking system and insurance companies, with full-dress bailouts for two of the largest players in the structured finance market, American International Group and Citigroup.
Some analysts worry that inflation is lurking behind the Fed's exploding balance sheet. I am less concerned. Aging people buy future goods (securities) for their retirement rather than current goods. Demographic decline is deflationary, as Japan should have taught the world by now.
Aging workers, who soon will predominate in the American workforce, missed their chance to accumulate savings for retirement and education during the boom years of 2002-2008. Instead, they borrowed cheap money from foreigners and gambled on real estate. Many analysts have drawn attention to the link between America's zero-percent personal savings rate and the current account deficit (Figure 4). Americans' home equity probably is worth half of what it was three years ago, and fall a great deal further. If they had a retirement savings plan, it is probably down by 40% or so. If they still have a job, they need to save as much as they can and make up for lost time. All the stimulus in the world won't persuade them to spend now that they know that they can't retire on the price of their houses.
Figure 4: US current account deficit vs savings rate
America's aging Peter Pans have discovered that happy thoughts and fairy dust no longer entitle them to fly. The young people of America led the world economy during the 1980s and 1990s, but now they are older, struggling to pay down mortgages that might be worth more than their homes, and to put something aside for a retirement that they never may be able to afford.
The world needs more young people to restore "animal spirits" to the market place, and America no longer has enough of them. That is why emerging markets must become more than an outsourcing shop for cheap manufactures, or an oilwell-cum-ethanol plantation. Harnessing the potential productivity of the world's young people is the challenge for next year and the next decade. Without them, America will endure a lost decade more depressing than Japan's during the 1990s.
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12/29/2008 10:37 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
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Kunstler's 2009 Forecast....More KlusterFuck from the "King of Klusterfuck"
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There are two realities "out there" now competing for verification among those who think about national affairs and make things happen. The dominant one (let's call it the Status Quo) is that our problems of finance and economy will self-correct and allow the project of a "consumer" economy to resume in "growth" mode. This view includes the idea that technology will rescue us from our fossil fuel predicament -- through "innovation," through the discovery of new techno rescue remedy fuels, and via "drill, baby, drill" policy. This view assumes an orderly transition through the current "rough patch" into a vibrant re-energized era of "green" Happy Motoring and resumed Blue Light Special shopping.
The minority reality (let's call it The Long Emergency) says that it is necessary to make radically new arrangements for daily life and rather soon. It says that a campaign to sustain the unsustainable will amount to a tragic squandering of our dwindling resources. It says that the "consumer" era of economics is over, that suburbia will lose its value, that the automobile will be a diminishing presence in daily life, that the major systems we've come to rely on will founder, and that the transition between where we are now and where we are going is apt to be tumultuous.
My own view is obviously the one called The Long Emergency.
Since the change it proposes is so severe, it naturally generates exactly the kind of cognitive dissonance that paradoxically reinforces the Status Quo view, especially the deep wishes associated with saving all the familiar, comfortable trappings of life as we have known it. The dialectic between the two realities can't be sorted out between the stupid and the bright, or even the altruistic and the selfish. The various tech industries are full of MIT-certified, high-achiever Status Quo techno-triumphalists who are convinced that electric cars or diesel-flavored algae excreta will save suburbia, the three thousand mile Caesar salad, and the theme park vacation. The environmental movement, especially at the elite levels found in places like Aspen, is full of Harvard graduates who believe that all the drive-in espresso stations in America can be run on a combination of solar and wind power. I quarrel with these people incessantly. It seems especially tragic to me that some of the brightest people I meet are bent on mounting the tragic campaign to sustain the unsustainable in one way or another. But I have long maintained that life is essentially tragic in the sense that history won't care if we succeed or fail at carrying on the project of civilization.
While the public supposedly voted for "change" this fall, I maintain that they underestimate the changes really at hand. I voted for "change" myself in pulling the lever for Barack Obama. I regard him as a figure of intelligence and sensibility, but I'm far from convinced that he really sees the kind of change we are in for, and I fret about the measures he'll promote to rescue the Status Quo when he moves into the White House a few weeks from now.
Where We Are Now
Without reviewing all the vertiginous particulars of the year now ending, suffice it to say that the US economy fell on its ass and that the "global economy" did a face-plant as well. The American banking sector imploded spectacularly to the degree that investment banking actually went extinct -- as if a meteor landed on the corner of Madison Avenue and 51st Street. The response by our government was to shovel "loans" onto the loading dock of every organization that pretended to be something like a bank, while "bailing out" an ever-longer line of corporate claimants with a pitiable song-and-dance. The oil markets went on a roller coaster ride. The housing bubble collapse grew to avalanche velocity (taking out whole colonies of realtors, mortgage brokers, and construction contractors in its path), the commercial real estate sector developed hemorrhagic fever, retail drove off a cliff on Christmas Eve, the stock market fell in the toilet, jobs and incomes went up in a vapor, and tens of millions of ordinary citizens addicted to revolving credit found themselves in a life-and-death struggle for the means of existence. None of this is over yet.
The Year Ahead
Much of what has been lost in 2008 will not be recovered: enterprises, personal fortunes, chattels, reputations.
I expect a period of euphoria to mark the early weeks, perhaps months, of the Obama team. It will be a relief to have a president who speaks English correctly and has experienced something like real life prior to politics. Restoring credibility and legitimacy in leadership will be a big deal. If nothing else, we may recover a collective sense of consequence from a president who tells the truth, even the harsh truth. The age when it was enough to claim that "mistakes were made" might be over. A sign of this sort of change may be the commencement of prosecutions for misdeeds in banking and securities that are now destroying the entire system of deployable capital. A good place to start will be an investigation of Henry Paulson for insider trading stemming from Goldman Sachs's shorting of its own issued mortgage-backed securities when Mr. Paulson was the company's CEO. Beyond his case, there should be enough work at Attorney General Eric Holder's office to employ a line of law school graduates stretching from Brattle Street to the planet Mars. It will be salutary for the nation to see those who engineered the banking collapse come to greater grief than the mere surrender of their Gulfstream jets and Hamptons villas. By the way, being allergic to conspiracy theories, I don't believe for a minute that there is some kind of shadow elite of "Bilderburgers" standing in the background to protect these grifters -- and I also believe the reason these paranoid notions persist is because it is otherwise hard to account for the extravagant irresponsibility of the Bush circle and its servelings.
Apart from "cleaning up Dodge," so to speak, and from issues of collective character-and conscience-in-office, I worry that the avalanche of troubles already ongoing will overwhelm Mr. Obama and his people. It's also well worth worrying whether they will pursue policies similar in kind to the ones pursued by Bush, namely throwing money at everything and anything, and it sure looks like they are planning to do just that. I am especially concerned about an "infrastructure stimulus" project aimed at highway improvement at the expense of public transit. This would be the epitome of a campaign to sustain the unsustainable. We need to begin planning right away for a transition away from automobiles, not in order to be good socialists but because Happy Motoring is at the core of our unsustainability trap. The car system is going to fail in manifold ways whether we like it or not, and it will fail due to circumstances already underway. For one thing, it will cease to be democratic as the remnants of the middle class find it impossible to get car loans, or pay for fuel, or insurance, and that will set in motion a very impressive politics-of-grievance setting apart those who are still able to enjoy motoring and those who have been foreclosed from it. Contrary to what you might make of the the current situation in the oil markets, we are in for a heap of trouble with both the price and supply of petroleum (more on this below). And there is no chance in hell that any techno rescue remedy to keep all the cars running by other means will materialize.
A consensus in the blogoshpere says that the stock markets will rebound strongly during the first Obama months. This is possible just on the basis of pure "animal spirits," but the Obama Bounce will occur against a background of continued dismal business and financial news. It will appear to defy that news. By May of 2009, the stock markets will resume crashing with the ultimate destination of a Dow 4000 before the end of the year. Meanwhile, jobs will vanish by the millions and companies will go bankrupt by the thousands, especially in the so-called service sector, and in all the suppliers of such, along with the landlords in all the malls and strip malls. The desolation will mount quickly and will be obvious in the empty storefronts and trash-filled parking lagoons. In the event, two things will become increasingly clear to the nation: that the consumer economy is dead, and that there is no more available credit of the kind that Americans are in the habit of enjoying.
We'll turn around early in 2009 and discover that we are a much poorer nation than we thought because from now on credit will be extremely hard to get for anyone for anything. The businesses that survive will have to keep going on the basis of accounts receivable. This is the area where the crash of giants will be heard. I've been saying since publication of The long Emergency that comprehensive downscaling in all our activities, from farming to business to schooling to governance, will be the categorical imperative of the years ahead. Giant enterprises requiring giant loans to get from quarter to quarter will tend to not make it. Borrowing from the future will become a practical impossibility as past bad debts from previous borrowings continue to unwind, cease performing, and get written off. This argument implies that the federal government will tend to flounder just as General Motors, Citicorp, Target Stores and other gigantic enterprises will tend to flounder. It would be sad to see a President Obama so hamstrung and helpless, and it is largely why I see his role as largely symbolic -- as a reassuring presence encouraging the distressed public to bravely bear their hardships, and to be kind and helpful among their neighbors.
Households, like businesses, will have to pay as they go from earned income. The house as ATM is over. Credit cards are maxed out and credit ceilings are lowering like the ceiling in "The Pit and the Pendulum," preparing to slice-and-dice the old "normal" of family life in America. Bankruptcy will be the new Nascar. A lot of families will lose everything. They will sift and disperse into the housing owned by other family members -- parents, siblings -- and a strange new not-altogether comfortable kind of togetherness will become common. Over time, a lot of people will go looking for casual work "under-the-table"( and probably low-paying). To some degree, these workers will begin to look and act like a new servant class, and before too long they may be absorbed into the households of people who employ them. There will be plenty of room for them there.
Counties, municipalities, and states will join in the bankruptcy fiesta. It would be reasonable to expect collapsing services as a result. This would be a situation fraught with danger -- of rising crime, of public health emergencies as water systems are not kept up and sewage treatment becomes unaffordable. I don't imagine the federal government stepping into every Podunk or Metropolis from sea to shining sea and propping up these services. People will have to cope with danger and deprivation.
2009 may be the point where we begin to understand what kinds of places will be more hospitable to human society further ahead. I maintain that our giant urban metroplexes have way overshot their sustainable scale and will contract severely. With all the economic hardship, we ought to expect a lot of demographic churning, people leaving hopeless places and moving on to something more promising. I believe we will see them move to smaller towns and smaller cities. The reorganization of the rural landscape into smaller-scaled farms has not begun to occur -- though 2009 might be very hard on agribusiness, given the shortage of capital and if oil begins to march up in price by late winter. Eventually, the rural landscape will require the labor of many more people than is currently the case. Whatever else happens, 2009 will surely see a massive return to home gardening as budgets become strained to the extreme. As the New Urbanist Andres Duany said recently, "Gardening is the new Golf!"
The oil scene
Many were stunned this year to witness the parabolic rise and fall of oil prices up to nearly $150 and then back around $36 by Christmas time. Quite a ride. I said in The Long Emergency that volatility would be the hallmark of post peak oil because it was obvious that advanced economies could not absorb super high prices and would crash in response; that at some point after crashing, these economies would respond to the new lower oil price, resume their cheap oil habits, and build to another price rise. . . and crash again. . . in a declension of ever-lower industrial activity.
What I probably didn't realize at the time was how destructive this cycling between low-high-and-low oil prices would actually be in the first instance of it, and what a toll it would take right off the bat. We can see now that our first journey through the cycle took out the most fragile of the complex systems we depend on: capital finance. As a result, a huge amount of capital (say $14 trillion) has evaporated out of the system, never to be seen again (and never to be deployed for productive purposes). It will be harder for the USA to rebound from the grievous injury to this crucial part of the overall system, and Europe has foundered similarly -- though the European nations are not burdened to the same degree by the awful liabilities of suburbia.
Even if these advanced economies -- throw in Japan too -- remain moribund, the price and supply prospects for oil look ominous. My own guess is that the price of oil has overshot on the low end just as it overshot on the high end, and that, when all is said and done, we'll still see an upwardly trending price line over the long haul. The plunge, which began right after the $147 peak in July 2008, was as much the result of banks, hedge funds, and individuals dumping oil investments and positions to raise cash as it was a matter of the markets predicting a sharp fall-off in economic activity (and supposedly oil consumption). The truth is that demand destruction for oil in the USA has been surprising mild compared to the drop in price. Jim Hansen's Master Resource Report says that gasoline consumption dropped from 9.29 million barrels a day in 2007 to 8.99 million barrels a day for 2008. That's not much of a fall-off, especially compared to the price drop.
As Julian Darley of the Post Carbon Institute put it recently: "There won't be any energy bail-out." And, as many other people have noted, the recent plunge in oil prices strongly implies future supply destruction, since so many planned oil projects have been suspended or cancelled because they are economic losers at $40-a-barrel (or even $70). Even projects well underway, such as Canadian tar sand production, have been scaled back or shut down because they don't make sense at current prices. Some of these other newer projects will now never get underway -- they have missed their window of opportunity with so much capital leaving the system -- and so the hope of offsetting very-near-future depletions in old giant oil fields looks dimmer and dimmer.
Those depletions are very serious. For instance, Mexico's super-giant Cantarell oil field, the second-largest ever discovered after Saudi Arabia's Ghawar field, has shown a 30 percent depletion rate in the past year alone. (Pemex had forecast a 15 percent rate entering the year.) Cantarell provides over 60 percent of Mexico's total production, and Mexico is America's third largest source of imports -- just after Saudi Arabia (#2) and Canada (#1). Obviously, Mexico soon will lose its ability to export oil, and as that occurs, America is going to feel more than pinch -- more like a two-by-four upside the head. In short, remorseless depletion is underway and we are less likely now than even a year ago, to make up for it.
At some point, then, demand, even if slightly lower, will catch up with declining supply. My prediction for 2009 is that we will see two things occur, possibly at the same time: a resumption of rising prices, and spot shortages. I say this because the global economic fiasco is sure to produce geopolitical friction, and inasmuch as America has to import almost three-quarters of the oil we use, the prospect for trouble is great.
The tragic part of all this, of course, is that the temporary plunge in oil prices has prompted an incurious American public to assume, once again, that the global oil predicament is some kind of a fraud. Given the flood tide of fraud they have been subject to in banking and investment matters, I suppose you can't blame them from thinking that everything is some kind of a scam. Given feeble car sales this season, there are reports that an increasing percentage of those sold now are are trucks and SUVs.
Though I give Boone Pickens high marks for stepping up to the leadership plate, I'm not altogether on board with his energy proposal for swapping natural gas for gasoline in motor fuels while we swap out wind power for natural gas in electric power generation. I don't believe that the ballyhooed shale-gas-plays of the last few years will prove-out long-term, as some huckster's claim. They are expensive to drill and run, and they all tend to deplete very quickly -- around one year. I'm not convinced we have the capital or the resources even to come up with the steel necessary to drill for it. Anyway, the last thing we need is a way to prolong our car-dependency.
In the meantime, there are still those who hope (as described above) that various alt.energy systems will insure the continuation of Happy Motoring. This is an idle hope, and 2009 will be very sobering for those who imagine that hybrid cars, or electric cars, or "air" cars, or natural gas cars, or any other kind of car technology will save the day. Even if President Obama mounts an "infrastructure stimulus" program, it will not keep up with all the necessary routine road repair that our highway system requires. The extreme financial hardship faced by localities and states insures that they will have to postpone a lot of expensive highway maintenance -- even if the federal government fixes a big bunch of bridges and tunnels -- and so we face the interesting prospect that our roadway systems will enter their own deadly zone of systemic failure even before the whole car issue is settled.
I am waiting to see whether Mr. Obama will undertake a restoration of passenger railroad service. I've said enough about this in the past, but it's worth reiterating that a failure to get comprehensive passenger rail service going will be a sign of how fundamentally unserious we are as a nation.
The Specter of Inflation
This is the "other shoe" that a lot of people are waiting to drop. Right now we are caught up in a compressive debt deflation as mortgages stop "performing" and loans of all kinds are welshed on. Since money is loaned into existence, and a great many loans are not being repaid, then a lot of money is going out of existence. That's what I mean when I say that capital is leaving the system. At the same time, the Federal Reserve has made good on its promise to drop money from helicopters if necessary to prevent an implosion of the banking system (as all that older money goes out of existence), and so it's now a question as to when the amount of new money will exceed the disappeared old money. (Of course when I say money, I mean "money," because we are dealing here in a shadow realm of assumed value.) In any case, there is bound to be a lag period between the time that the Fed's money is dropped from the choppers and the time it actually filters through the banks and other recipients to the so-called "real economy" of people who buy and sell real things. The credible estimates I hear run between six and 18 months.
I'll only venture to guess that we could see the start of serious inflation sometime in 2009. To some extent, all currencies are now free-falling together, some at slightly faster rates than others, but the situation of the US dollar is so grotesquely dire, and our structural imbalances so monumental, that it is hard to imagine that our currency will not win the international race to the bottom. Gold resumed its movement upward against the dollar a week before Christmas, and that may be an early sign. The government -- and anyone badly in debt -- benefits much more from inflation than deflation, so every effort will be made to avert the latter. The trouble lies in the government's dumb incapacity to control dangerous things that it sets in motion, so that an inflationary campaign to avoid compressive deflation can so easily lead to a fiasco of super or hyper inflation -- the kind that kills governments and turns societies into murderous monsters. I'll forecast the that the US dollar is worth 40 percent of its current value by next Christmas.
Geopolitics
Well, now, who the hell knows what's in store. Aside from a few bombs here and there, and pirates skulking around the horn of Africa, the world scene was miraculously free of major incidents in 2008 -- perhaps the worst being a toss up between the September Mumbai bombings and the fiasco in Georgia, where the US prompted Georgia President Mikheil Saakashvili to send troops into the South Ossetia region and the move was answered by overwhelming force from neighboring Russia, leaving the US looking feckless and retarded for our troubles. But otherwise, there wasn't a whole lot of action out there.
Until the last few days of the year, that is. I'm sure the ever-growing cohort of American anti-semites who send me emails will be tickled when I assert that the Hamas rocket attacks against Israel of recent days guaranteed a sharp response from Israel -- and now, of course, Hamas is playing the crybaby card: "... what'd we do to deserve this...?" Well, you fucking fired a bunch rockets into Israel. Did you ever hear of cause-and-effect? This matter requires no further elucidation, except that it seems to suggest a ramping back up of hostilities. I wonder if it is the beginning of a new coordinated offensive by Islamic extremism aimed at taking advantage of the West's current economic plight (and the West's probable aversion to anything that will complicate its desired recovery). We'll know in a month or so, I think, since any coordinated campaign (if such a thing were possible) might well be aimed at confounding the new American president.
The other hot corner of the world right now is the India-Pakistan border where the 60-year-old rivalry, which has already produced three wars, looks to be gearing up for yet another round. I'm not the first one to say that Pakistan is an extremely dangerous regional player, being an economic basket case, possessing a score or so of nuclear bombs, harboring more Islamic fundamentalist maniacs than any other place in the world, and having a government held together with duct tape and twine. The caper in Mumbai last September could well have been construed as an act of war, but somehow India kept its head. Who knows where this is going. . . .
So far I have only described what is already obviously going on. Add to this the likelihood that Iran is closer to achieving membership in the atomic weapon club. They've been spinning their centrifuges all year and nobody has done anything about it. My guess is that neither the US nor Israel will attempt to take out their facilities in the year ahead. If Iran used a nuclear device against Israel, or anybody else, they would be asking to become, in turn, the world's largest ashtray. End of story. A different story, though, is how Iran might behave if and when the US Military presence in Iraq is reduced. I can imagine Iran doing anything possible surreptitiously to gain control over Iraq's southern oil regions around Basra, but even the Iraqi Shia don't like the Iranian Shia that much. Anyway, iran's economy has suffered hugely from the fall in oil prices. That nation may be in for more internal trouble than they have seen in thirty years since the Shah was tossed out by the minions of Ayatollah Khomeini.
There's been a lot of sentiment the past year that as the US and the Europe fall into economic disarray, China would emerge as the great new hegemonic superpower. While it's come a long way in a quarter-century, China's internal problems are still enormous and worsening. They're in trouble with water, food imports, mass unemployment, and energy. They have locked in some oil contracts around the world, but they are still susceptible to vagaries in the oil markets and Black Swan events. As the US consumer economy falls into a coma, and the shipping containers from China to WalMart get sparser, the Chinese government will face the wrath of millions of unemployed workers. I believe they will struggle through 2009, perhaps growing more surly as the US dollar inflates and their holdings of treasury bills begins to look more like a swindle.
Russia may be suffering economically for the moment due to the crash of oil prices, but they are energy resource-rich -- at least for the next couple of decades -- and if they don't like the current price, they can keep more of their oil in the ground until the price looks more attractive. I think Mr. Putin has the confidence of the Russian people and will survive the current malaise.
Japan remains a riddle wrapped in toasted nori. They're beggaring their own factory workers to stay solvent. Their banking sector has been zombified for a generation. They import 95 percent of the energy they use. Do they have a plan? One can imagine them sliding in resignation back to something like the sixteenth century, giving up the whole industrial circus as more trouble than it's worth, just as they once gave up on firearms.
The over-arching geopolitical theme of 2009 will be the end of robust globalism as we've known it for some time. Reduced trade, competition for energy resources, sore feelings over debts and currencies will drive the nations inward or, at least, direct their energies toward their own regions. Note to Tom Friedman: the world turned out to be round after all.
Conclusion
The big theme for 2009 economically will be contraction. The end of the cheap energy era will announce itself as the end of conventional "growth" and the shrinking back of activity, wealth, and populations. Contraction will come as a great shock to a world of conventionally programmed economists. They will toil and sweat to account for it, and they will probably be wrong. Unfortunately, this contraction will do its work in unpleasant ways, driving down standards of living, shearing away hopes and expectations for a particular life of comfort, and introducing disorder to so many of the systems we have depended on for so long. People will starve, lose their homes, lose incomes and status, and lose the security of living in peaceful societies. It will become clear that the Long Emergency is underway.
My hope for the year, at least for my own society, is that we will transition away from being a nation of complacent, distracted, over-fed clowns, to become a purposeful and responsible people willing to put their shoulders to the wheel to get some things done. My motto for the new year: "no more crybabies!"
www.kunstler.com
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 583812
1/1/2009 8:27 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
silberinfo:
Looking at the production of the U.S. Mint in the past, it occurs that they have been producing and selling a lot more gold coins, as it is the case now. Could it be that the mint holds back gold on purpose, maybe following an order?
B. Murphy:
As mentioned earlier, there is no doubt in my mind there is a coordinated effort, not only by the US (it emanated here of course), but all countries to limit the amount of gold and silver that ends up in the hands of citizens.
C. Powell:
In many years over the last few decades the U.S.Mint has produced far more coins than it has produced so far this year, so minting capacity is not the problem. If the U.S. Treasury really holds the 8,200 tonnes of gold reserves it claims, and if the gold price is really declining as the futures markets say, obtaining the gold should not be a problem either. So I have to conclude that gold is actually quite scarce now and that the U.S. government (and other governments) want to reduce the public's access to it, lest more money flow out of government currencies and out of other markets. |
| Anonymous Coward
User ID: 583812
1/1/2009 8:31 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Financial Sense
silberinfo Interview with GATA
Bill Murphy and Chris Powell of the Gold Anti-Trust Action Committee (GATA) gave www.silberinfo.com the following exclusive interview
by Silberinfo Team | December 30, 2008
Print
silberinfo:
Our last interview dates back to March 2005. Bill and Chris, what has changed in the meantime for GATA and the work you do?
B. Murphy:
1. We held an international gold conference on April 18th, 2008 right outside of Washington, D.C.
2. We filed freedom of information requests to the Fed and US Treasury, asking questions about gold swap operations. The Fed withheld hundreds of pages of information, redacting hundreds of pages of others. The Treasury gave a non-response. When we queried specifically about the Exchange Stabilization Fund, they responded about the Exchange STABILITY Fund. Is the US Treasury truly an Abbott and Costello operation?
C. Powell:
More evidence of central bank intervention in the markets has been disclosed, and opinion in the precious metals markets increasingly is coming around to acknowledging the intervention.
silberinfo:
What are your thoughts regarding the present financial crises with respect to gold?
B. Murphy:
It is bad and going to get worse. On January 31, 2008 GATA placed a full-page color ad in the Wall Street Journal, which you can read at:
[link to www.gata.org]
Here are three sentences from our ad: "But to suppress the price of gold is to disable the barometer of the international financial system so that all markets may be more easily manipulated. The manipulation has been a primary cause of the catastrophic excesses in the markets that now threaten the whole world.
"Surreptitious market manipulation by government is leading the world to disaster."
There was not one press inquiry as to what GATA knew and what we were talking about. Some day this ad will receive enormous attention.
C. Powell:
If gold had been allowed to trade in a free market, it would have warned, via its rising price, of the excessive credit in the world financial system and the debasement of the money supply and maybe gold's warnings would have been heeded.
silberinfo:
It is said that at the moment a lot of gold is demanded and bought. Still the price of gold in USD is significantly lower than in March, although the crisis has escalated since then. Is this the case because of continued market manipulations, or are other reasons playing a role here?
B. Murphy:
I receive reports EVERY day of gold coin shortages in countries around the world --rom Germany, to Argentina, to Canada, to England, all of Asia, etc. Months ago the US Mint announced it was curtailing production of US gold coins.
Last week the Mexican Central bank limited sales of its Libertad silver coins. This is no accident. It is an organized effort to keep to limit demand for gold and silver and keep this kind of money out of the hands of the people.
C. Powell:
The benchmark price of gold, the price reported on the commodities exchanges, is low, it is something less than the true price. It is the price for promises of gold delivered in the future, promises that might be defaulted upon. The true price is for metal in hand, and that price is maybe 35-40 percent higher amid worldwide scarcity of real metal.
silberinfo:
The Washington Agreement on official gold sales is running out next year. Do you think there will be a new agreement?
B. Murphy:
With the way the world the financial market scene is changing, I am not sure central banks want to be seen squandering what gold they have left. GATA believes they have well less gold than half the gold they say they have.
My guess is we are going to a new day when it comes to official sector gold -- mainly because they will be forced to view gold differently.
C. Powell:
Central banks coordinate their gold policies -- that's what the gold price suppression scheme has been about -- and there likely will be continued coordination, though perhaps in a different direction eventually.
silberinfo:
The worldwide tonnage of mined gold has been going down consistently in the last years. Do you think that this trend will go on?
B. Murphy:
There is NO way gold production will even remain even the same in the years ahead. And the way The Gold Cartel has forced down the price of late, makes it even less likely production will increase for MANY years. Substantial production increases are five years off, or more.
C. Powell:
Yes, production is likely to keep declining for a while even if the gold price rises substantially soon, since bringing new mines to production takes years and returning mothballed mines to production may take many months.
silberinfo:
Because of the financial crisis, the governments attempt to rescue the financial industry with a lot of money worldwide. Is this good or bad for the future performance of gold?
B. Murphy:
Short term a deflationary spiral has been negative for all commodities. However, common sense dictates that so much new printed money will be extremely inflationary down the road -- when the staggering new amounts and the velocity of money turnover kicks in. Right now everyone is hoarding money and conserving cash.
C. Powell:
Insofar as bad debts are forgiven or made good and the money supply is reflated, this should be good for gold.
silberinfo:
You are "at the source"; do you have new information that points to countries that are considering to back their currencies with gold?
B. Murphy:
Don't know of any.
C. Powell:
No firm evidence of this. But any countries considering an alternative to the dollar as a reserve currency will automatically consider incorporating gold in some way.
silberinfo:
The new worldwide trend to nationalize and to establish public interests in companies is heading to socialism. Could you imagine that the COMEX could be the next potential victim?
B. Murphy:
The Comex is a farce and is a tool used by the US Government. The rules are made for the shorts, the big banks in this case. Something very dramatic is likely to occur in the future, like a default of some kind -- as the real world market detaches further from the Comex prices.
C. Powell:
In my view the Comex already long has been an agency of the U.S. government, insofar as it is the main mechanism of suppressing prices with the help of largely unregulated derivatives.
silberinfo:
Looking at the production of the U.S. Mint in the past, it occurs that they have been producing and selling a lot more gold coins, as it is the case now. Could it be that the mint holds back gold on purpose, maybe following an order?
B. Murphy:
As mentioned earlier, there is no doubt in my mind there is a coordinated effort, not only by the US (it emanated here of course), but all countries to limit the amount of gold and silver that ends up in the hands of citizens.
C. Powell:
In many years over the last few decades the U.S.Mint has produced far more coins than it has produced so far this year, so minting capacity is not the problem. If the U.S. Treasury really holds the 8,200 tonnes of gold reserves it claims, and if the gold price is really declining as the futures markets say, obtaining the gold should not be a problem either. So I have to conclude that gold is actually quite scarce now and that the U.S. government (and other governments) want to reduce the public's access to it, lest more money flow out of government currencies and out of other markets.
silberinfo:
It is reported that a lot of people in India are reluctant to buy gold right now, because the price looks very high to them. Is this just a temporary phenomenon in your opinion?
B. Murphy:
Gold demand in India has been inhibited by a very weak rupee and a weak stock market. The Indians have been the most significant buyers of gold over the years and likely to be that way for years to come.
They are the major buyers on significant price breaks like we have now.
C. Powell:
India is exquisitely sensitive to the gold price and probably knows better than most when gold is expensive and when it is cheap. But looking ahead some years, I think gold's price today will be considered a fantastic bargain.
silberinfo:
What do you think about the most recent developments regarding the opening of the Chinese gold market for private investors? Will China become a "Hot Spot" in the future with regards to the gold trade and the demand for gold?
B. Murphy:
Contrary to the US Government, it appears the Chinese Government wants to get more gold in the hands of their people. If they know what we know, then they know the price of gold is going to soar in the years ahead. The more gold they have in their country, the better. Gold ownsership is no threat to their currency.
C. Powell:
It will depend on whether the Chinese market becomes a free-trading and largely physical market or a largely paper market subject to manipulation by those with access to infinite government money.
silberinfo:
The mining stocks have been crushed since march. What are the reasons, and do you think that the markdowns are justified?
B. Murphy:
The collapse in the mining shares is historic. Most of the gains made from the bottom of 2000 have been erased over the past few months. It is my opinion gold and silver will be the go-toinvestments in 2009 and the run higher in the gold/silver shares will be unprecedented. Returns of 1,000 percent and more from these current depressed levels will be common.
C. Powell:
The stock market has been taking its cues from the Comex rather than the physical market. But if miners can't learn to get around the Comex and reach the retail market more directly, they may never make money and their low share prices may be deserved.
silberinfo:
What do you think about the increasing costs for mining companies and their effects on the realization of new projects (e.g. Novagold)? Doesn't this speak for physical gold and against investments in mining stocks? Would you still suggest to invest in both?
B. Murphy:
What is ignored for the time being is how much the drop in the price of oil and other commodities is benefiting the bottom lines of the gold producers. Right now, nothing matters in this bloodbath, but it will when the prices of gold and silver begin to soar again.
C. Powell:
Yes, until the gold price rises substantially, gold itself will be a better buy than mining companies. But eventually scarcity will drive the gold price high enough to make mining profitable again. The key question, as with every other investment, is exactly when. I wish I knew.
silberinfo:
Since our last interview a lot has been going on in the hedge books of many gold producers. The majors, particularly Barrick Gold unwound their forward sales. Does this surprise you?
B. Murphy:
No, their hedging programs were a disaster. Most of them kicked in with gold right above and below $300 -- put into effect by the bullion banks like Goldman Sachs and Chase Bank to enhance their gold price suppression scheme. Those still short hedges ought to be covering as fast as they can on this price dip.
C. Powell:
No. While this year has been terrible for gold, the gold price is still far above the price at which the hedges were incurred.
silberinfo:
What do you think of the danger that mining companies get nationalized in a crisis?
B. Murphy:
That can always happen and probably when the prices of gold and silver go bonkers, while other market sectors are struggling and revenue from those sectors dwindles.
C. Powell:
This is always a threat but less of a threat in jurisdictions where the rule of law is well-established, and of course a lot of financial companies already have been nationalized to some extent. Lately it has been far riskier to own banking company shares.
silberinfo:
The collapse of big U.S. banks has pointed out how dangerous it can be to invest in gold certificates. Nevertheless this market is still going on very well. What is in your opinion the reason for the continued popularity of "Paper Gold"? What conclusions to you take?
B. Murphy:
People are lazy to some degree. It is so much easier to buy the paper gold. However, as concerns grow about paper instruments of all kinds, there is likely to be a more dramatic shift to ownership of the physical. My favorite is James Turk's GoldMoney.com.
C. Powell:
People just don't understand that the gold may not be there. We'll keep trying to alert them.
silberinfo:
A lot of investors accumulated big losses because of the share price markdowns. How does the optimal structure of a portfolio look like in your view? How much gold should one own as a percentage, and in which form should that be?
B. Murphy:
Most all of my money is in gold, silver and the shares, so I am prejudiced. Right now the quality gold/silver shares are the buy of a lifetime. Investors should own as much of both as they think prudent for their own well-being.
C. Powell:
I'm a paranoid schizophrenic, not an investment adviser, so my ideal investment portfolio would be 100 percent gold and silver, stored safely on some other planet.
silberinfo:
Many of our readers are besides gold mainly interested in silver. Why does the price of silver lag behind the price of gold so significantly in these days? Is the potential for silver exhausted already, as many analysts have written recently? They wrote, that silver will be demanded less in an economic downturn, but is produced more as a byproduct of the increased copper and zinc production.
B. Murphy:
The silver price slide was orchestrated (public knowledge) by two large banks. It is totally manipulated. That said, the shorts have to be acquiring physical silver some place -- probably the ETFs, in order to supply it to the physical market. Meanwhile, the premiums on silver coins, IF you can find them, have gone through the roof.
C. Powell:
There's evidence from the Comex that silver is even more manipulated than gold, insofar as the short position is more concentrated. Since silver is produced largely as a byproduct of other mining, declining production of related metals is likely to reduce
silver production, increasing scarcity ... and price.
silberinfo:
The premium on the spot price of physical silver in Europe has reached more than 50% in Europe. What could be the reasons for this development?
B. Murphy:
As mentioned above, there is an organized effort to curtail gold and silver supply, in the form of coins and bars, from getting into the hands of ordinary citizens.
C. Powell:
The Comex price is not real -- that's all.
silberinfo:
Considering loss of trust into the financial system and the connected worldwide run for gold, do you think that the possession of physical gold will be banned again?
B. Murphy:
Instead of banning gold ownership, they are making it less available, hence the extraordinary premiums. I can't imagine the US banning gold ownership. So few Americans own it. People would say, "HUH?" The rest of the world would then laugh at us and buy all they could. That would be the death knell of the dollar.
C. Powell:
Maybe in some countries but not in all. Since gold is not a major part of any country's monetary stock anymore, there's not much rationale for any country to outlaw its private possession.
silberinfo:
Since several thousands of years gold has been in the hands of governments and religious aggregations, that controlled the price in one way or the other. Admittedly in this time gold usually was equal to money; still a critic could say that GATA is just a group of old people that are interested in a higher gold price for personal reasons and that forgot about the welfare of the other nations. Why exactly does GATA advocate a really free gold market without direct or indirect interventions from governments or central banks?
B. Murphy:
Who’s old? Not too old to remember GATA initially gained a great deal of attention in 2000 by focusing on the idle miners in South Africa, who were unemployed because of the gold price suppression scheme. Each miner supports 10 to 12 others in his family. Presidents Bush and Clinton are the worst of hypocrites when they mouth off about their caring for the AIDS/severe economic problems in southern Africa. Had they let the price of gold trade freely, SA would be in BOOM TIMES now and there would have been a lot more money to address the very serious problems.
C. Powell:
The private possession of gold and a free market in gold are simply essential to individual liberty and limited government. GATA doesn't worship the golden calf; that's idolatry. We seek to defend liberty and restrain government.
silberinfo:
Bill and Chris, thank you very much for your time and this interview. We wish you and GATA all the best for your future.
Bill and Chris: Thank you.
www.silberinfo.com ; www.gata.org |
| Anonymous Coward
User ID: 583812
1/1/2009 11:42 PM | | FHL(C)
User ID: 584792
1/2/2009 8:53 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.midasletter.com]
The Biggest Casualty of 2008
By James West
Thursday, January 1, 2009
There is a commodity not traded on any exchange, not measureable in dollars, immune to the effects of supply and demand, once present in many global markets, but now all but extinct. With the closing of 2008, the commodity with the grimmest prospects of recovery is trust.
From the laughable devaluation of the U.S. dollar through hyper-printing to the destruction of all the post-1933 regulations designed to thwart unregulated and over-leveraged gambling and lending, even school children are expressing their absence of trust in the adult world. While mainstream media occupies itself with causes and solutions that are short-sighted and just plain wrong, we’ve got to focus on this profound tragedy and develop a game plan for its restoration.
Despite the anti-regulation rhetoric of the new Obama economic team, it would behoove the rest of us to understand categorically that the investment banking industry’s sole interest is its own enrichment, and it will continue to act immorally and illegally (when it can get away with it) to achieve that goal.
Underlying the destroyed trust and the confidence that naturally accompanies it in world economics is the absolute destruction of trust in the number one unit of trade throughout the world, the U.S. dollar. Debasing the integrity of the global reserve currency through the unbridled and reckless expansion of it will cause its continuing decline in 2009, and demand for U.S. Treasuries and U.S. denominated assets will decline as we step into a hyper-inflationary future.
China holds the largest position outside of the United States in U.S. T-bills, and is also a regular participant in the financings of major financial institutions such as the Fannie and the Freddie. They are caught in the unenviable position of being forced to prop up the value of the U.S. dollar or risk undermining the value of its own huge USD holdings by abandoning it. The United States, in a persistent commitment to feckless and immoral business relationships with its creditors, understands this and confidently continues to undermine its own currency.
The time is quickly approaching when a new global reserve currency will replace the U.S. dollar, and contrary to the flawed wisdom of mainstream economists, an gold-pegged currency is not only feasible, it is perfect. It is astounding how many of these academic economists think that a global gold standard means that the available money supply is limited by the amount of gold in central bank vaults. If gold were merely allowed to trade absent the manipulative influences of the futures market and gold leasing and hedging operations, it would act as a natural barometer of the health of currency because in the simplest terms, how much gold you can buy with a given currency would be a direct reflection of that currency’s purchasing power relative to others. It is this market differential (and this same force is the “free market” force espoused superficially in so many modern economic tomes) that acts as a gold standard.
Unfortunately though, our nation’s ability to trust any currency, government bond issue, blue-chip stock, mutual fund, bank bond, or ETF is severely impaired by the general destruction of trust caused by the actions of Mssrs. Bush, Paulson, Madoff, Lay and Skilling, Blagojevich, Hsu, Black and a seemingly endless supply of other “pillars” of our communities.
Over Christmas, my nephew who seems to have evolved an abnormally keen interest in matters political for one so young (he’s 6) has embarked on the line of reasoning whose franchise is concentrated on the question “why”. Why did Bernie Madoff steal all those people’s money? Why doesn’t the government give all that money to the people instead of banks? Why don’t the banks lend people money anymore? Why isn’t George Bush isn’t arrested for lying repeatedly to the American people?
I listen to my brother explain things in a most diplomatic fashion designed to preserve the boy’s natural faith in the goodness of people and the importance of acting honestly in dealings with others, then watch as the apparent contradictions register in mischievous expressions on the youngster’s face. What else are you going to do?
Imagine:
“Son…its important that you understand that people who spend their lives making money as their primary occupation will generally lie and cheat and steal their way to their objective, and so you really must replace that charming yet naïve trust of yours with a healthy cynicism and mistrust that will better aid you in dealing with your fellow man.”
The thought is sickening. Yet if the truth were to be told in this day and age, that is precisely the approach one might be compelled to take.
The promise of Barack Obama appears to be diminishing rapidly as scandal follows blunder in his yet-to-be inaugurated administration. With the appointment of Summers, Rubin and Volcker to his economic advisory team, Obama sends a clear message that he will delegate the oversight of economics to a team of failed and corrupt academic yes men.
With his invitation to tele-evengelist Rick Warren to deliver the invocation, he confirms a populist approach the demonstrates both a dearth of experience and a puppy’s requirement for approval.
And most disappointingly, his commitment to spend billions of imaginary dollars on infrastructure projects to buy popularity and temporary jobs will compound the spiraling value of the dollar and add impetus for its demise as the reserve currency of the world.
There are more scandals and acts of fraud and duplicity yet to be uncovered in the upcoming year, and trust will continue to erode in the hearts and minds of average citizens the world over. While 2008 was a year that most would rather forget, 2009 will be worse – more so for the loss of trust.
*********************************
Fighting Government Fraud with Filmmaking. Visit www.CrimeoftheCenturyMovie.com to learn how you can help.
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 468982
1/4/2009 11:36 PM | | Anonymous Coward
User ID: 586450
1/5/2009 8:48 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Uh Oh..... Monetary Flat Spin
That has gone "just below" 1.0.
What is this?
I could go through the derivation of how money supply works in a fractional reserve monetary system (any), but won't, because most readers would have their eyes glaze over.
The important part of this graph is what it denotes. Bernanke has lost control of "N" (or velocity), which is the actual knob that he is trying to diddle when borrowing rates are changed (and in fact its the market that sets that, despite his protests.)
In fact the most useful tool in The Fed's box in terms of influencing monetary policy is the soapbox, that is, jawboning (whether it be by cajoling or threatening.)
The problem with an M1 multiplier below one is that the effect of printing money is of course multiplied by the velocity. That is, if you print up $10 into the economy the impact it has on economic activity depends on how many times that $10 circulates in a given amount of time. The more it circulates the higher the impact and the more your efforts do for the economy.
The bad news is that when the multiplier is less than one the more money you spew into the economy the worse the impact, as you get less for each additional dollar.
If you remember the "GDP for each dollar of debt" graph....
M1's multiplier going below 1 strongly implies (but does not yet prove) that we have reached that "zero hour".
Why? Because all money is in fact debt; this is inherent in all modern monetary systems.
When Bernanke "creates" money he is doing so against an asset - that is, he is issuing debt. A Federal Reserve Note (whether electronic or paper) is in fact effectively a bond of zero maturity and indefinite expiration against the future tax collection capacity of The United States.
That is, it's a treasury bond (via a circuitous route)
The paradox that Bernanke is in danger of discovering (the hard way) is the paradox of a pilot who finds himself in a flat spin. As the ground approaches he wants to pull back on the stick but if he does so, the spin simply tightens as the wings are not producing lift - the angle of attack is too high, not too low. As such if he does what his brain screams at him to do instinctively, he dies.
Or the scuba diver who sucks on the reg and gets nothing. Your instinct is to hold your breath and kick for the surface. If you do it you die.
In both cases your only hope of survival is to do exactly the opposite of your instinct. In the case of the pilot you must not only give counter-rudder (to stop the rotation) but also push the stick forward. In the case of the diver you must exhale that last breath you have in your lungs, knowing there are no more in the tank while you kick to ascend.
If you succumb to instinct you are dead. Really dead, as in splat (or exploded lungs.)
Bernanke is effectively in the same box. The foundation of his entire thesis as a banker is that a central bank can always reverse a deflation by printing money. Unfortunately as he has done so velocity has fallen and the multiplier has now gone below 1. If this induces him to do even more of what caused this decrease there is a very real risk that the actual market reaction will be to tighten the monetary flat spin.
This is because the underlying problem in the economy isn't the lack of debt (money) in the system. It is that there is too much debt of all sorts, and since money is in fact a form of debt, you can't fix the problem by playing helicopter drop!
As I have said for more than a year the only way out is to force the bad debt out into the open and default it. Yes, this will produce bankruptcies - lots of them, including some for "inconvenient" people like Paulson's buddies on Wall Street.
But until and unless that happens adding more debt to the system depresses the multiplier effect of that debt on circulation further, and harms, rather than helps the situation.
I don't expect our government officials to understand the math on this, nor would trying to go through it help 99% of the readers, but unfortunately, mathematics is the only true science - and you can't twist it, no matter how hard you try.
Bernanke knows this at an intellectual level, just as the diver - or pilot - knows that if he holds his breath (or pulls the stick) he is going to die.
The question now becomes whether Bernanke can overcome not only instinct but also political pressure to do the wrong thing and instead use his intellect - and the math - to do the right thing.
What is the right thing? Paradoxially, it is to withdraw liquidity and by doing so force the bad debt into the open where it does (and must) default.
How far can the above ratio contract before we cross an "event horizon" from which there is no escape?
I don't know.
But I do know that there is a "too late" point, as there is for all such things, and that we are approaching it, as I have been saying for months.
BTW, evidence that Bernanke's Monetary Flat Spin is already impacting the economy in ways that may do critical (if not fatal) damage was found this morning in the Case-Schiller numbers. Everyone, including Bernanke, was expecting the rate of home price declines to start to slow in the second half of the year. Instead, they accelerated.
We're in uncharted territory folks, and the forecast is for dark-and-stinky storms.
Buckle up.
PS: Congress, and the rest of America, can't say they weren't warned. They were - right here. |
| FHL(C)
User ID: 468982
1/6/2009 1:42 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
This was from another thread, it reveals some interesting things IMO, which need more research and exposure.
Anonymous Coward
User ID: 586589
1/5/2009 1:05 PM
Re: U.S. Economy: 2008 Job Losses Probably Worst Since 1945 U.S. Quote
[link to www.godlikeproductions.com]
The Postwar Economy: 1945-1960
United States History
As the Cold War unfolded in the decade and a half after World War II, the United States experienced phenomenal economic growth. The war brought the return of prosperity, and in the postwar period the United States consolidated its position as the world's richest country. Gross national product, a measure of all goods and services produced in the United States, jumped from about $200 thousand-million in 1940 to $300 thousand-million in 1950 to more than $500 thousand-million in 1960. More and more Americans now considered themselves part of the middle class.
The growth had different sources. The automobile industry was partially responsible, as the number of automobiles produced annually quadrupled between 1946 and 1955. A housing boom, stimulated in part by easily affordable mortgages for returning servicemen, fueled the expansion. The rise in defense spending as the Cold War escalated also played a part.
After 1945 the major corporations in America grew even larger. There had been earlier waves of mergers in the 1890s and in the 1920s; in the 1950s another wave occurred. New conglomerates -- firms with holdings in a variety of industries -- led the way. International Telephone and Telegraph, for example, bought Sheraton Hotels, Continental Baking, Hartford Fire Insurance, and Avis Rent-a-Car, among other companies. Smaller franchise operations like McDonald's fast-food restaurants provided still another pattern. Large corporations also developed holdings overseas, where labor costs were often lower.
Workers found their own lives changing as industrial America changed. Fewer workers produced goods; more provided services. By 1956 a majority held white-collar jobs, working as corporate managers, teachers, salespersons and office employees. Some firms granted a guaranteed annual wage, long-term employment contracts and other benefits. With such changes, labor militancy was undermined and some class distinctions began to fade.
Farmers, on the other hand, faced tough times. Gains in productivity led to agricultural consolidation, as farming became a big business. Family farms, in turn, found it difficult to compete, and more and more farmers left the land.
Other Americans moved too. In the postwar period the West and the Southwest continued to grow -- a trend that would continue through the end of the century. Sun Belt cities like Houston, Texas; Miami, Florida; Albuquerque, New Mexico; and Tucson and Phoenix, Arizona, expanded rapidly. Los Angeles, California, moved ahead of Philadelphia, Pennsylvania, as the third largest U.S. city. By 1963 California had more people than New York.
An even more important form of movement led Americans out of inner cities into new suburbs, where they hoped to find affordable housing for the larger families spawned by the postwar baby boom. Developers like William J. Levitt built new communities -- with homes that all looked alike -- using the techniques of mass production. Levitt's houses were prefabricated, or partly assembled in a factory rather than on the final location. The homes were modest, but Levitt's methods cut costs and allowed new owners to possess at least a part of the American dream.
As suburbs grew, businesses moved into the new areas. Large shopping centers containing a great variety of stores changed consumer patterns. The number of these centers rose from eight at the end of World War II to 3,840 in 1960. With easy parking and convenient evening hours, customers could avoid city shopping entirely.
New highways created better access to the suburbs and its shops. The Highway Act of 1956 provided $26 thousand-million, the largest public works expenditure in U.S. history, to build more than 64,000 kilometers of federal roads to link together all parts of the country.
Television, too, had a powerful impact on social and economic patterns. Developed in the 1930s, it was not widely marketed until after the war. In 1946 the country had fewer than 17,000 television sets. Three years later consumers were buying 250,000 sets a month, and by 1960 three-quarters of all families owned at least one set. In the middle of the decade, the average family watched television four to five hours a day. Popular shows for children included Howdy Doody Time and The Mickey Mouse Club; older viewers preferred situation comedies like I Love Lucy and Father Knows Best. Americans of all ages became exposed to increasingly sophisticated advertisements for products said to be necessary for the good life.
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 587925
1/7/2009 9:30 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Omega Subscriber
Total Unequivocal Bad Fuckin' News
User ID: 363842
1/7/2009 9:06 AM
Re: << BREAKING >> Private Sector Loses 693,000 Jobs in December: ADP (story developing) Quote
DISMAL number, daaaaaaymmm...
ADP Says U.S. Companies Cut 693,000 Jobs in December (Update1)
By Bob Willis
Jan. 7 (Bloomberg) -- Companies in the U.S. eliminated an estimated 693,000 jobs in December, the most since records began in 2001, a private report based on payroll data showed.
The drop in the ADP Employer Services gauge was larger than the median estimate of economists surveyed by Bloomberg News. Today’s report is the first to reflect methodological changes that ADP says will limit the differences between its calculations and the government’s payroll numbers.
Companies are accelerating the pace of firings as the recession plaguing the world’s largest economy heads into a second year. The Labor Department may report in two days that employers slashed jobs in December for a 12th consecutive month, putting total job cuts at 2.4 million for 2008, according to a Bloomberg survey median.
“Firms are continuing to react very quickly to the downturn in demand with a combination of layoffs and restricting new hires,” Nigel Gault, chief U.S. economist at IHS Global Insight Inc. in Lexington, Massachusetts, said before the report. “It’s a major drag on consumer spending.”
Revised figures issued Dec. 18 by ADP and Macroeconomic Advisers LLC showed the discrepancies with Labor Department data narrowed considerably using the new approach. The new data put ADP’s estimate of job losses from September through November at 1.03 million, more than double its prior projection and closer to the government’s figures showing a decline of 1.29 million in private payrolls for the period.
‘Time Will Tell’
The new version “should perform better than the consensus expectation -- which generally is tough to beat,” Seamus Smyth, an economist at Goldman Sachs Group Inc., wrote in an e-mail to clients last week. “That said, the ADP report was already revised once prior to this, and that revision fit very well on historical data. But when applied in real time over the past year, performance was much worse. Time will tell whether the new construction actually leads to better forecasts.”
The ADP report was forecast to show a drop of 495,000 jobs, according to the median estimate of 24 economists in a Bloomberg News survey. Projections ranged from declines of 250,000 to 550,000.
ADP includes only private employment and does not take into account hiring by government agencies, which is included in the monthly payroll report. Macroeconomic Advisers LLC in St. Louis produces the report jointly with ADP.
15-Year High
The government may report on Jan. 9 that total payrolls fell by 500,000 last month, and the unemployment rate rose to a 15- year high of 7 percent, according to the Bloomberg survey median. The economy lost 1.9 million jobs in the first 11 months of the year.
Other labor-market reports have also shown weakness. Job cuts announced by U.S. employers rose 275 percent last month from December 2007, to 166,348, Chicago-based Challenger. Gray & Christmas Inc. said today. For all of 2008, employers announced 1.22 million job cuts, the most in five years.
Today’s ADP report showed a decrease of 220,000 jobs in goods-producing industries including manufacturers and construction companies. Service providers cut 473,000 workers. Employment in construction fell by 102,000, the 21st consecutive month of cuts in the industry.
Companies employing more than 499 workers shrank their workforce by 91,000 jobs. Medium-sized businesses, with 50 to 499 employees, were down 321,000 jobs and small companies decreased payrolls by 281,000.
Financial Services
Financial-service companies and manufacturers are leading the cutbacks. Cigna Corp., the health insurer whose shares fell 69 percent last year because of investment losses, said this week it will cut about 1,100 jobs and take a fourth-quarter after-tax charge of $30 million to $40 million for 2008.
A declining stock market and the recession have eroded the earnings outlook for Cigna, which relies on investment returns for almost two-thirds of pretax income.
“Given the unprecedented economic situation we and our customers are facing, these actions are essential,” said Cigna Chief Executive Officer H. Edward Hanway in a Jan. 5 statement. “Decisions like these are difficult and never made lightly, but they are necessary given the current environment.”
The ADP report is based on data from about 400,000 businesses with approximately 24 million workers on payrolls.
ADP began keeping records in January 2001 and started publishing its numbers in 2006.
To contact the reporter on this story: Bob Willis in Washington at bwillis@bloomberg.net
Last Updated: January 7, 2009 08:25 EST
[link to www.bloomberg.com] |
| Anonymous Coward
User ID: 587925
1/7/2009 9:32 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
[link to www.godlikeproductions.com]
paladin SubscriberModerator
Forum Moderator
User ID: 570701
1/5/2009 11:30 PM
Report abusive post
BARRON'S......Get Out Now! .....The bubble in Treasuries looks ready to pop
Quote
BARRON'S COVER
Get Out Now!
By ANDREW BARY
The bubble in Treasuries looks ready to pop, sending prices on government debt sharply lower. But just about every other corner of the bond market beckons -- and could provide competitive returns with stocks, even if the equity markets have a strong 2009. (Video)
THE BIGGEST INVESTMENT BUBBLE TODAY may involve one of the safest asset classes: U.S. Treasuries. Yields have plunged to some of the lowest levels since the 1940s as investors, fearful of a sustained global economic downturn and potential deflation, have rushed to purchase government-issued debt.
The market also has been supported by comments from the Federal Reserve that it, too, may buy long-term Treasuries. - As a result, the benchmark 10-year Treasury note yields just 2.40%, down from 3.85% as recently as mid-November. The 30-year T-bond stands at 2.82%, and three-month Treasury bills were sold last week for a yield of just 0.05%. - Many investors argue it's dangerous to buy Treasuries with such low yields. While a holder can expect to get repaid in
full at maturity, the price of longer-term Treasuries could fall sharply in the interim if yields rise. The 30-year T-bond, for instance, would drop 25% in price if its yield rose to 4.35%, where it stood as recently as Nov. 13. The bear market may have begun Wednesday, when prices of 30-year Treasuries fell 3%. They lost another 3% Friday. - "Get out of Treasuries. They are very, very expensive," Mohamed El-Erian, chief investment officer of Pacific Investment Management Co., warned recently. Pimco runs the country's largest bond fund, Pimco Total Return (ticker: PTTPX). - Treasuries offer little or no margin of safety if the economy unexpectedly strengthens in 2009, or the dollar weakens significantly, or inflation shows signs of reaccelerating. Yields on 30-year Treasuries easily could top 4% by year end.
hey all.....this is a great read...paladin
[link to online.barrons.com] |
| Anonymous Coward
User ID: 587925
1/7/2009 9:34 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Will the New GCC Single Currency Include Gold?
by: Peter Cooper December 31, 2008 | about stocks: GLD
Peter Cooper
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Gulf Cooperation Council leaders yesterday concluded their 29th annual summit meeting in Muscat, Oman with a final approval for the creation of a single currency for the six-nation economic bloc, still targeted for 2010.
Saudi Arabia is the largest economy in the GCC and boasts substantial gold reserves. But whether gold will be included in the currency basket has not yet been decided.
Golden opportunity
GCC assistant secretary-general Mohammad Al Mazroui told Gulf News: ‘We first have to decide on the location of the Central Bank, then the Central Bank and Monetary Council will have to decide on the gold reserves for the Central Bank’.
The creation of the GCC single currency - likely to be known as the Khaleeji which means Gulf in Arabic - is a major gold event for two reasons.
First, the breaking of their dollar pegs by the Gulf Arab nations is clearly dollar negative. Secondly, any inclusion of gold either as a part of the monetary basket, or in the reserves of the new GCC Central Bank will create additional demand for the precious metal.
2009 deadline
The project is gathering pace, and no lesser a figure than Saudi Arabia’s King Abdullah has directed that GCC economic integration committees speed up their work and complete the whole exercise by September 2009.
It is only a couple of months since a group of Saudi businessmen allegedly bought $3.5 billion worth of gold, believed to be the largest ever single transaction for the precious metal. Perhaps in 2009 it will be gold rather than local currencies which become of interest to speculators about monetary reform in the GCC.
Gulf countries are keen to break away from the link with the US dollar because it ties them to inappropriate monetary policies that exaggerate the boom-to-bust cycle in their economies.
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[link to seekingalpha.com] |
| Anonymous Coward
User ID: 587925
1/7/2009 9:36 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
aznwarlord
User ID: 587229
1/6/2009 7:17 PM
Report abusive post
6 million truckers strike in india, massive shortages could collapse country,
Quote
India is very weak country, the mainstream media just wont cover it, Pakistan is looking at all this unfold.
[link to economictimes.indiatimes.com]
NEW DELHI: Over six million trucks went off roads across India in the early hours of Monday, a day after talks with the government over their
demand to reduce prices of diesel and tyres failed. Traders voiced fears of food shortages as the indefinite strike started. |
| Anonymous Coward
User ID: 587925
1/7/2009 9:50 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Willem Buiter warns of massive dollar collapse
Americans must prepare themselves for a massive collapse in the dollar as investors around the world dump their US assets, a former Bank of England policymaker has warned.
By Edmund Conway, Economics Editor
Last Updated: 3:05PM GMT 06 Jan 2009
MPC founder member Willem Buiter.
MPC founder member Willem Buiter. Photo: CHRISTOPHER COX
The long-held assumption that US assets - particularly government bonds - are a safe haven will soon be overturned as investors lose their patience with the world's biggest economy, according to Willem Buiter.
Professor Buiter, a former Monetary Policy Committee member who is now at the London School of Economics, said this increasing disenchantment would result in an exodus of foreign cash from the US.
The warning comes despite the dollar having strengthened significantly against other major currencies, including sterling and the euro, after hitting historic lows last year. It will reignite fears about the currency's prospects, as well as sparking fears about the sustainability of President-Elect Barack Obama's mooted plans for a Keynesian-style increase in public spending to pull the US out of recession.
Writing on his blog , Prof Buiter said: "There will, before long (my best guess is between two and five years from now) be a global dumping of US dollar assets, including US government assets. Old habits die hard. The US dollar and US Treasury bills and bonds are still viewed as a safe haven by many. But learning takes place."
He said that the dollar had been kept elevated in recent years by what some called "dark matter" or "American alpha" - an assumption that the US could earn more on its overseas investments than foreign investors could make on their American assets. However, this notion had been gradually dismantled in recent years, before being dealt a fatal blow by the current financial crisis, he said.
"The past eight years of imperial overstretch, hubris and domestic and international abuse of power on the part of the Bush administration has left the US materially weakened financially, economically, politically and morally," he said. "Even the most hard-nosed, Guantanamo Bay-indifferent potential foreign investor in the US must recognise that its financial system has collapsed."
He said investors would, rightly, suspect that the US would have to generate major inflation to whittle away its debt and this dollar collapse means that the US has less leeway for major spending plans than politicians realise. |
| Anonymous Coward
User ID: 588580
1/8/2009 1:24 PM | | Anonymous Coward
User ID: 589473
1/9/2009 1:07 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Ended Dollar Dead Bounce
Jim Willie CB
Jim Willie CB is the editor of the "Hat Trick Letter"
Jan 8, 2009
Use this link to subscribe to the paid research reports, which include coverage of several smallcap companies positioned to rise during the ongoing panicky attempt to sustain an unsustainable system burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by compromised central bankers and inept economic advisors, whose interference has irreversibly altered and damaged the world financial system, urgently pushed after the removed anchor of money to gold. Analysis features Gold, Crude Oil, USDollar, Treasury bonds, and inter-market dynamics with the US Economy and US Federal Reserve monetary policy.
The marquee line best describing the past two to three months has been that the Dollar Death Dance has been fueled by failure of US banks & corporations, along with sponsored assaults against speculative hedge funds. The climate has changed from liquidation and bankruptcies, obviously steered and exploited by the Powerz, toward more legitimate attempts to have a recovery initiative take root across the landscape, It is fast approaching a wasteland. The most vivid signal of market manipulation, intended to benefit the USGovt borrowing costs, and designed to promote the totally false notion of a Flight to Safety, has been the USTreasury bubble. It is not the last bubble. Next will be the gold & silver bubble in the next few years, as investors wake up to the reality that hyper-inflation is to take root in 2009. We have ridden the gold wave from the start. The precious metals will zoom in the middle months of 2009, as 2008 prices will be seen as the best bargains in a decade. The deflationists will be silent by the yearend. A few key charts reveal some important reversals in trend. Details are in the upcoming January Hat Trick Letter reports.
Tide is turning in an important political manner. Loan modification in the form of home loan balance reduction is finally being discussed by the USCongress. Payola takes time to set up. Foreclosures are not improving, nor are home inventory levels. Generosity is so broad in the corrupt dens in WashingtonDC that even redemption for Madoff victims is being discussed by the SIPC. Some will double their money from fraud twice committed, in a wonderful made-in-America hybrid scam. Move the entire account over there, reinstate that 'lost' account over here, pretty simple. A closer look might reveal that some 'victims' are ringleaders. As the Watergate Deep Throat said in 1973, follow the money, but this time look where it is hiding, with full protection from an extradition-free zone. What few seem to expect, never a surprise to the Hat Trick jackass wannabees, is the next step down for the big banks. Meredith Whitney once again is beating the drums for the Bataan Death March, not yet wrong, hardly revered, but surely respected. What a relief to gaze upon Meredith, rather than Abby Jo!
LONG-TERM USTREASURY BUBBLE BURSTING
Don't look now, but the USTreasury bubble has begun to burst. This should be an ongoing story throughout 2009. The entire sold story of a Flight to Safety is about as moronic and baseless as regarding the US stock and bond markets are regulated. The initial stage was clearly a flight out of non-guaranteed bonds like mortgages and corporates and junk and emerging nations. All but govt bonds were found to be junk! The second stage involves the hangover felt during the morning after, upon realization that the USGovt will fund the $8.5 trillion in pledged programs, bailouts, rescues, and other hidden fraud that are painfully apparent. If they cannot fund via USTreasury issuance, auction, and sale, they will print money and purchase in a process called monetization. Already, repurchases are messed up by low yields. The Untied States will not inflate its debts away, not at all! The US will inflate everything in sight in order to avert a collapse, with greater debts than ever before, so great that by the summer and autumn months, when more rational reckoning usually occurs, the enlightened discussion will center on potential USTreasury defaults. They are assured, but the framework intended to deceive its inevitability will be cleverly or brutally applied. The main issue right now is that the entire world has begun to spend their USTreasurys, starting with China, and soon enough the US Federal Reserve will reduce its own bloated inventory. Translation: the USTreasury Bond bubble will give off endless gas as 2009 proceeds, since the new primary directive is to produce inflation immediately, at all costs, and to toss aside all moral hazard concerns. The artificially high USDollar harms USTBond sales.
GOLD RECOVERY WELL UNDERWAY
Gold smells inflation, and does so much more accurately than fickle analysts, even those in the gold community itself. No sign of deflation exists in monetary measures, when the financial sector data is incorporated. Money velocity is at light speed in the corrupted failed financial sector, as desperation has set in thoroughly. Credit derivatives lift the speed way past any reasonably agreed upon speed limit. That financial kinetic energy will find its way to the main street roadways as a result of sheer political forces and utter needs. The gold price has begun to price in mammoth global stimulus. All major currencies are at risk of debauchery. This current week has been telling. The truly huge USTreasury security auctions demanded a rally of sorts in either the USTBond complex or the USDollar. The Powerz thought they could engineer one in the US$, since the guard had dropped. Not so! Notice the bullish hammer this week, as gold refused to go down or stay down. It smells bigtime monetary inflation from monetization relief for everything under the sun. As the entire globe embarks on substantial stimulus, the USDollar might stay afloat for a surprisingly long time. Watch for gold to de-couple from the USDollar, its alter ego. The MACD signaled a bullish crossover a few weeks ago. Next comes the technically significant bullish crossover in the moving averages. See the 20-week MA (in blue) soon to rise above the 50-wk MA (in red). Technicians react to such signals.
USDOLLAR FILLS GAP
Two major messages come to mind when viewing the USDollar chart. The first is that the rally has been based upon corporate failure with associated Credit Default Swap payouts denominated in US$. That effect is global in nature. The second is that the powerful decline in December, when reality entire the brain stems to FOREX traders, produced a very big gap that finally has filled from a technical standpoint. They sold at high valuation in a gift opportunity. Some more backing & filling from fluctuating price action might result in the 82-83 range, but it should not be the onset of any recovery for another leg up. The rally on weakness has run its course. Meaningful efforts to prevent a USEconomic and US Financial System collapse will assure degradation, devaluation, and a semblance of destruction for the beleaguered USDollar. It is on its last legs after 37 years since its removed tether from gold.
SILVER RECOVERY FINALLY
A nice sequence of bullish daily hammers has occurred during this week. There were three in succession, which confirm the uptrendline that is new in formation. This recovery is a long time in coming. The phony bottom has been set. The Powerz were more vulnerable on their silver contracts than with gold, on a per-contract basis. So they slammed the paper silver price.
CRUDE OIL CONTRACT LIQUIDATION ENDS
This is NOT demand destruction. The puny few percentage decline in demand is temporary, and surely grossly insufficient to explain the 60% to 70% price drop. The wreckage in the oil price is more from calculated, orchestrated, sanctioned genocide of hedge funds by Wall Street elite, with regulatory blessing and full motive to harm firms whose investment positions were in opposition to those of Wall Street firms. A hidden motive is strong: render great harm to both the Saudis and Russians, who are planning to launch new gold-backed currencies within 12 months time. By the way, the Chinese are ordering grandiose increases to their crude oil stockpiles. Call them smart. Call those on the US side corrupt. Also, oil traders are busily attempting to secure tankers to store crude oil bought for speculative purposes. A rising crude oil price usually renders harm to the USDollar.
BANK INDEX READY TO DECLINE AGAIN
Just when you might think the bank sector in the Untied States has rooted in stability, prepare for yet another leg down. Meredith Whitney today spoke of another $40 billion needed in bank capital. Debt downgrades dictate higher assets held on their books, so as to comply with ratio rules. They are so dead, that the word insolvent does not apply anymore. The BKX stock index shows an imminent bearish stochastix crossover, another important technical signal. The trendline shows some powerful resistance. If history is any guide, the BKX stock decline will come before the next stream of bank losses. My forecast is that bank losses will come from the next round of adjustable and Option ARM mortgage losses as well as basic consumer loans like for cars and credit cars, in addition to a new ugly wrinkle of failed commercial mortgages. The bank woes are nowhere near an end.
HOME INVENTORIES NOT IMPROVING
The primary impetus force behind the national wreckage is the powerful rise in bloated home inventories. The new and existing home inventory levels have each breached the 11-month supply levels. No signs of meaningful reduction for either. The flimsy federal programs to aid homeowners have resulted in revolving doors for the people and huge graft payoffs to Wall Street firms, in typical American style. Unless and until the inventories reduce materially and significantly, the destruction of banks and households will continue, in a remarkably simple analytic conclusion. Job losses are huge in recent weeks and months, which worsens matters.
HOMEOWNER DELINQUENCIES
Homeowner mortgage delinquencies are not improving, not a bit. They are growing worse by the month, mainly because the USEconomy has entered a disintegration phase, and because no mortgage relief program has any substance whatsoever. The policy to make home loan reduction voluntary to banks is empty and vacant and vapid, when lenders suspect a grandiose nationwide federal mortgage reduction program as near. They wait. The delinquency process will continue until home loan relief has real meaning. The delinquencies assure high levels of unsold property inventory, in plain view. The home foreclosure data shows no sign of improvement either.
SHOCKING VACANCIES
Contrary Investor provides market observations, with great work. A recent survey showed a shocking vacancy rate near 3% that is stubborn holding. Empty homes dot the landscape. Sure, rents will come down, but only because $trillions in home equity are lost. What a tragedy! What a pox on the nation! What a grotesque inefficiency! What a nasty epitaph to the misguided housing construction boom! What a clear signal of failure by the financial sector conmen! |
| FHL(C)
User ID: 589913
1/10/2009 6:03 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FU&FW
[link to www.gata.org]
China is losing its taste for U.S. debt
Submitted by cpowell on Thu, 2009-01-08 04:33. Section: Daily Dispatches
An hour later you're bankrupt again.
* * *
By Keith Bradsher
The New York Times
Wednesday, January 7, 2008
[link to www.nytimes.com]
HONG KONG -- China has bought more than $1 trillion of American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers.
The declining Chinese appetite for United States debt, apparent in a series of hints from Chinese policy makers over the last two weeks, with official statistics due for release in the next few days, comes at an inconvenient time.
On Tuesday, President-elect Barack Obama predicted the possibility of trillion-dollar deficits "for years to come" even after an $800 billion stimulus package. Normally, China would be the most avid taker of the debt required to pay for those deficits, mainly short-term Treasuries, which are government IOUs.
In the last five years China has spent as much as one-seventh of its entire economic output buying foreign debt, mostly American. In September it surpassed Japan as the largest overseas holder of Treasuries.
But now Beijing is seeking to pay for its own $600 billion stimulus -- just as tax revenue is falling sharply as the Chinese economy slows. Regulators have ordered banks to lend more money to small and medium-size enterprises, many of which are struggling with lower exports, and to local governments to build new roads and other projects.
"All the key drivers of China's Treasury purchases are disappearing. There's a waning appetite for dollars and a waning appetite for Treasuries, and that complicates the outlook for interest rates," said Ben Simpfendorfer, an economist in the Hong Kong office of the Royal Bank of Scotland.
Fitch Ratings, the credit rating agency, forecasts that China's foreign reserves will increase by $177 billion this year -- a large number, but down sharply from an estimated $415 billion last year.
China's voracious demand for American bonds has helped keep interest rates low for borrowers ranging from the federal government to home buyers. Reduced Chinese enthusiasm for buying American bonds will reduce this dampening effect.
For now, of course, there seems to be no shortage of buyers for Treasury bonds and other debt instruments as investors flee global economic uncertainty for the stability of United States government debt. This is why Treasury yields have plummeted to record lows. (The more investors want notes and bonds, the lower the yield, and short-term rates are close to zero.) The long-term effects of China's using its money to increase its people's standard of living, and the United States' becoming less dependent on one lender, could even be positive. But that rebalancing must happen gradually to not hurt the value of American bonds or of China's huge holdings.
Another danger is that investors will demand higher returns for holding Treasury securities, which will put pressure on the United States government to increase the interest rates those securities pay. As those interest rates increase, they will put pressure on the interest rates that other borrowers pay.
When and how all that will happen is unknowable. What is clear now is that the impact of the global downturn on China's finances has been striking, and it is having an effect on what the Chinese government does with its money.
The central government's tax revenue soared 32 percent in 2007, as factories across China ran at full speed. But by November, government revenue had dropped 3 percent from a year earlier. That prompted Finance Minister Xie Xuren to warn on Monday that 2009 would be "a difficult fiscal year."
A senior central bank official, Cai Qiusheng, mentioned just before Christmas that China's $1.9 trillion foreign exchange reserves had actually begun to shrink. The reserves -- mainly bonds issued by the Treasury, Fannie Mae and Freddie Mac -- had for the most part been rising quickly ever since the Asian financial crisis in 1998.
The strength of the dollar against the euro in the fourth quarter of last year contributed to slower growth in China's foreign reserves, said Fan Gang, an academic adviser to China's central bank, at a conference in Beijing on Tuesday. The central bank keeps track of the total value of its reserves in dollars, so a weaker euro means that euro-denominated assets are worth less in dollars, decreasing the total value of the reserves.
But the pace of China's accumulation of reserves began slowing in the third quarter along with the slowing of the Chinese economy, and appeared to reflect much broader shifts.
China manages its reserves with considerable secrecy. But economists believe about 70 percent is denominated in dollars and most of the rest in euros.
China has bankrolled its huge reserves by effectively requiring the country's entire banking sector, which is state-controlled, to take nearly one-fifth of its deposits and hand them to the central bank. The central bank, in turn, has used the money to buy foreign bonds.
Now the central bank is rapidly reducing this requirement and pushing banks to lend more money in China instead.
At the same time, three new trends mean that fewer dollars are pouring into China -- so the government has fewer dollars to buy American bonds.
The first, little-noticed trend is that the monthly pace of foreign direct investment in China has fallen by more than a third since the summer. Multinationals are hoarding their cash and cutting back on construction of new factories.
The second trend is that the combination of a housing bust and a two-thirds fall in the Chinese stock market over the last year has led many overseas investors -- and even some Chinese -- to begin quietly to move money out of the country, despite stringent currency controls.
So much Chinese money has poured into Hong Kong, which has its own internationally convertible currency, that the territory announced Wednesday that it had issued a record $16.6 billion worth of extra currency last month to meet demand.
A third trend that may further slow the flow of dollars into China is the reduction of its huge trade surpluses.
China's trade surplus set another record in November, $40.1 billion. But because prices of Chinese imports like oil are starting to recover while demand remains weak for Chinese exports like consumer electronics, most economists expect China to run average trade surpluses this year of less than $20 billion a month.
That would give China considerably less to spend abroad than the $50 billion a month that it poured into international financial markets -- mainly American bond markets -- during the first half of 2008.
"The pace of foreign currency flows into China has to slow," and therefore the pace of China's reinvestment of that foreign currency in overseas bonds will also slow, said Dariusz Kowalczyk, the chief investment officer at SJS Markets Ltd., a Hong Kong securities firm.
Two officials of the People's Bank of China, the nation's central bank, said in separate interviews that the government still had enough money available to buy dollars to prevent China's currency, the yuan, from rising. A stronger yuan would make Chinese exports less competitive.
For a combination of financial and political reasons, the decline in China's purchases of dollar-denominated assets may be less steep than the overall decline in its purchases of foreign assets.
Many Chinese companies are keeping more of their dollar revenue overseas instead of bringing it home and converting it into yuan to deposit in Chinese banks.
Treasury data from Washington also suggests the Chinese government might be allocating a higher proportion of its foreign currency reserves to the dollar in recent weeks and less to the euro. The Treasury data suggests China is buying more Treasuries and fewer bonds from Fannie Mae or Freddie Mac, with a sharp increase in Treasuries in October.
But specialists in international money flows caution against relying too heavily on these statistics. The statistics mostly count bonds that the Chinese government has bought directly, and exclude purchases made through banks in London and Hong Kong; with the financial crisis weakening many banks, the Chinese government has a strong incentive to buy more of its bonds directly than in the past.
The overall pace of foreign reserve accumulation in China seems to have slowed so much that even if all the remaining purchases were Treasuries, the Chinese government's overall purchases of dollar-denominated assets will have fallen, economists said.
China's leadership is likely to avoid any complete halt to purchases of Treasuries for fear of appearing to be torpedoing American chances for an economic recovery at a vulnerable time, said Paul Tang, the chief economist at the Bank of East Asia here.
"This is a political decision," he said. "This is not purely an investment decision."
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 589913
1/10/2009 7:34 AM | | FHL(C)
User ID: 589913
1/10/2009 7:46 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
To me the statement below is a major key to understanding the current long term incestuous relationship between the FED and the Treasury(and probably the IRS), it also give some murky insight into mechanisms that seem counter intuitive to the person on the streets understanding of money and how money works. IMO
FU&FW
[link to www.321gold.com]
Furthermore, it is interesting to note that the Federal Reserve (money-printer extraordinaire) has now started to inflate the supply of money. Over the past few weeks, the Federal Reserve has injected roughly US$300 billion into the banking system without a proportionate increase in its non-banking liabilities via deposits by the US Treasury. In simple terms, what this means is that the Federal Reserve is now increasing bank reserves without the US Treasury removing an equivalent amount of money from the system. Usually, when the Federal Reserves provides surplus reserves to its member banks, the US Treasury borrows this money from the market by issuing bonds; thereby offsetting the inflationary impact of the Federal Reserve's monetary injections. However, this is not what is happening now and this has inflationary implications. Essentially, the Federal Reserve is now creating money 'out of thin air', debasing its currency and sowing the seeds for sky-high inflation.
[link to freewordofgod.yuku.com] |
| .
User ID: 590993
1/11/2009 6:43 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
from another forum
Quote:
What will signal a turning point?
When all of the option ARMs have detonated, and the 110 TRILLION in unfunded fedgov liabilities have worked through the system, not to mention when the last of the $1.44 QUADRILLION of derivatives that will get triggered, gets triggered. And not before then.
Which of these elephants in the room aren't MUCH larger than the idea that 'investor optimism' will 'turn the market around'? What part of 'the market didn't return to 1929 levels until the mid '50's' is hard for these writers to understand?
/rant off. Am I overstating anything?
__________________
"Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." -Benjamin Franklin |
| .
User ID: 590993
1/11/2009 6:57 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
snagglepuss
User ID: 589181
1/8/2009 11:24 PM
Re: FED has ABANDONED MONETARY POLICY Quote
Invest in Spam.
snagglepuss
User ID: 590618
1/11/2009 6:29 PM
Re: FED has ABANDONED MONETARY POLICY Quote
The Fed’s decision to cut the Fed Fund Rates to 0.25 percent means that the Fed has embarked on a Zero-Interest-Rate Policy (ZIRP) and to proceed with the policy of Quantitative Easing (QE) – to turn on the spigot for “limitless supply of credit”.
In layman’s jargon, to encourage more debts – mortgage debts, credit-card debts, car loans, and more importantly to revive the derivative casino, presently on life support. This was the drug addiction that sustained the global financial system in the last twenty years and more intensely in the last seven years!
The announced policy (ZIRP / QE) is the last bullet in the Fed’s arsenal or as I have stated earlier, using another analogy, the final gamble, the last chip on the betting table. There will be no more ammunition left after this.
This huge gamble will take six months to play out but it will end in failure as surely as the sun will rise in the East tomorrow.
But a more sinister aspect of the zero-interest-rate policy which has not been highlighted by any economist or financial commentator is that the United States under the present Bush regime has declared to the entire world that the United States cannot and will not service anymore interest payments on the nation’s outstanding debts amounting to trillions.
Bush has declared that the United States for all intent and purposes is bankrupt and have no means to service the interest due, what more the principal sum.
Bush, Bernanke and Paulson have therefore collectively agreed to give the “two-finger sign” to the world’s creditors and in no uncertain terms are saying that:
You creditors, you a@#holes, you can jerk off. You know, I know and the whole bloody world knows that the US of A have no income to even service the interest which amounts to a few hundred billion a year.
So let us stop the pretense. We owe trillions and interest on top of that runs to hundreds of billions, which when unpaid is capitalized. And every year we have to borrow from you guys just to pay the interest so as to avoid a call on default. There were so many occasions when we have defaulted, but you guys allowed us to roll over to maintain the façade that the US of A is still floating.
We ain’t floating like a bee, but we are sinking fast! Let’s cut the crap and be real.
So this is the offer. And you jerks better listen good because this will be said once and once only.
You guys should be more than happy with so much interests already accruing on the outstanding. All these years, you guys have been only too happy to see us print the toilet papers in payment of your goods and to service the interests. It was an incredible con and what a free ride we had all these years. You guys were part of the con as well.
If you insist that I continue to pay you in toilet papers, why do you insist that we issue more toilet papers as interest payments? It is just more toilet papers. You guys are swarmed with toilet papers!
The toilet paper is worthless. So what is the point of paying “toilet paper interest” on outstanding toilet papers?
This is it! We are not paying anymore toilet paper interest. We are going to print more toilet papers to pay for whatever we want to purchase. If you want to sell to us, you will get toilet papers but with no interest. Period!
This is the greatest irony. The Fed, the world’s biggest money-lender and its partners-in-crime are telling their creditors to stuff it! When debtors cannot pay the exorbitant interests and the principal, these financial predators demand that the debtors give their pound of flesh in lieu of cash. But when they borrow, they repay in toilet paper money abd get away with it!
And now they even have the audacity to give an ultimatum:
We are the biggest buyers in town. If you don’t want toilet papers from us, that is fine by us. You can get tissue papers from the Europeans, bamboo papers from the Japanese and whatever that is on offer. Who is going to argue whether tissue paper would do a better job than plain toilet paper? Hey, this is a free market. Pick your choice!
This is the ultimate poker game. Bush, Bernanke and Paulson is betting that no one will call their bluff, turn away and stop selling anymore goods to the US of A. Bush is counting that the fear of recession and or social unrest in the creditors’ countries will force the creditors to capitulate.
Unfortunately, this gambit will fail. The reason is simple. The US cannot supply the goods that the American consumers want, even the most basic stuff. The manufacturing industries are all anemic, while others are on life support. Without imports, the United States will have to shut down within six months.
There will be massive riots all over the US, with people killing for food and other basic necessities. Basic raw materials, commodities for manufacturing etc. will be unavailable. There will be no more cars on the freeways! Millions of Americans licensed to carry arms will stalk the streets for whatever scrap they can get their hands on.
You can bet your bottom dollar, the Shadow Money-Lenders and its military partner will impose martial law.
Preparation is already on the way.
PRESIDENT BUSH’S STARK WARNING
On Tuesday, December 9th 2008, President Bush in fascist speak stated that, “I have abandoned free market principles to save the free market system.”
If you guys out there still don’t get it, this is what Bush is saying:
I am imposing dictatorial rule!
This is because the opposite of “free market” according to conventional wisdom is “state-control economy”. In a word, Socialism – Big Government.
The Fed and the Treasury, in connivance with Congress, have already approved and financed big time, the acquisition of the major banks in Wall Street through the Troubled Asset Relief Program (TARP), the Term Asset-Backed Securities Loan Facility (TALF), and the $700 Billion bailout plan. Several US financial commentators have already conceded that this is outright nationalization of the financial institutions.
Soon it will be the nationalization of the big corporations like GE, GM, Ford and Chrysler, all too big to be allowed to fail.
Too far fetched? Just look back to the events leading to World War I and World War II and to the dictatorships in Latin America in the 1970s.
How did Franklin Roosevelt get out of the 1930s mess if not for big government policies and engaging in the wars in Europe, against Germany and Japan in Asia? He even decreed Americans could no longer own gold in any form. They were all confiscated. President Roosevelt ruled with an iron fist, and don’t you believe otherwise.
Now that the entire world knows that the Federal Reserve Note (the dollar bill) is toilet paper and even though in law is “legal tender” (i.e. by law the toilet paper must be accepted as full payment of any debt, failing which the debt is deemed paid), the Shadow Money-Lenders cannot afford the risk of an armed open rebellion and the fiat money system to be overthrown. It is therefore necessary in these circumstances to enforce the use of the US dollar toilet paper by military rule and brutality.
To those who are not attuned to “dictatorship speak”, there is no clearer message to prepare the elites for the coming catastrophe that the announcement that free market principles will no longer apply. The emphasis is on the word “free” and not the word “market”.
We can argue till the cows come home whether my reading of events is correct. Time will be the final judge. |
| Anonymous Coward
User ID: 592402
1/13/2009 6:59 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
'investors imagine that US government debt, and the currency in which it is denominated, will be good forever. At the present nominal rate of return on Treasury notes, an investor would have to wait 50 years to earn back his investment. At the real rate - adjusted for the current rate of consumer price inflation - people will ice skate in Hell first. The real rate of return on T-notes is negative.'"
Apparently, the horrifying news of negative interest rates does not register with these morons; the bartender went back to talking to the pretty girl at the end of the bar, and the other barfly customers were flipping those little beer-stained cardboard coasters at me saying, "Shut up!"
So I shout back, "No, YOU shut up" and they shout back at me "No, YOU shut up!", and then I shout back at them, louder than before "No, YOU shut up, shut up, shut up!"
It was about the 10th time that they screamed "No, YOU shut up!" at me that I decided to, you know, shut up, and I said, "Okay, I'll shut up, but only so that you can listen to Mr Bonner, who has generously gone on to inform you that bond prices are going to fall into the toilet because bond prices are so insanely high right now, and that it makes the imputed yield insanely low, and if you think that the nation's houses losing value at 18% a year is bad, wait until a few zillions of dollars of debt loses half its value in a few months, weeks, days, hours or even minutes!" |
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