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User ID: 2329
4/28/2005 9:40 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Gold & Oil
April 22, 2005
Eric Hommelberg
The Gold Drivers Report
Gold&Oil is chapter VIII of the Gold Drivers Report. It discusses the historical Gold/Oil ratio which suggest a price of Gold exceeding $800 nowadays and shines a light a light on previous oil shocks and their consequences. This is important since the era of cheap Oil will only be found in History books from now on. Sure, Alan Greenspan comes to the rescue every now and then to assure us that high Oil prices are just temporary, but unfortunately his statements contradict those of many industry experts such as Matthew Simmons, Colin Campbell and Kenneth Deffeyes who all claim that we´re approaching PEAK-OIL at an alarmingly high speed. It could be very well the case that PEAK-OIL is here right now but unfortunately we´ve to wait a few years in order to confirm. This chapter discusses PEAK-OIL and why it is about to bring a nasty Oil shock coming years.
As we will see, previous oil shocks were a perfect call for higher inflation figures and recession. Will this time be any different ? According to Alan Greenspan yes, he says that higher oil prices won´t be much of a problem for the economy these days and inflation won´t pop up as during the seventies. Well, energy experts such as Mathew Simmons and Colin Campbell do think otherwise. They make a powerful case for the end of cheap energy . The nasty consequence of a lack of cheap energy is the end of economic growth. Will we ever come out of a recession again for a sustained period of time ? Richard Heinberg author of "The Party is over - Oil, War and the Fate of Industrial Societies" doesn´t think so. Matthew Simmons (energy advisor for Dick Cheney) just uses different words, he says :
" there is not one serious economist in this world who would say that you can have significant economic growth without the availability of cheap energy." END.
Simmons rules out the possibility of cheap energy coming decades. When asked if there is a solution to the impending energy crisis he said :
"I don´t think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it´s a certainty." END.
Professor Kenneth Deffeyes (author from the Book Beyond Oil-the View from Hubbert´s PEAK) has some unpleasant news for us as well. He says :
So the big News is : World Oil production has ceased growing, and by the year 2019 production will be down to 90% of the peak-level. This is not your standard News story. END.
No standard News indeed ! What is going on you wonder ? They´re just a bunch of Alarmist speaking right ? Otherwise politicians and News directors would have picked it up long time ago right ? So no need to worry, all is well as Greenspan says right ? Well, lots of questions which deserves serious attention. Time for further investigation :
Let´s focus on the following issues :
1. Previous Oil shocks and their consequences
2. Gold as a financial protection against coming Oil shock
3. PEAK-OIL and the end of cheap energy
1 - Previous Oil shocks and their consequences.
Stephen Leeb (president of Leeb Capital Management and editor of the prestigious newsletter ´The Complete Investor´) wrote an excellent book last year called ´ The Oil Factor - Protect Yourself (AND PROFIT) from the coming Energy Crisis´. In this book he explains how to use the Oil indicator in order to predict upcoming stock bear markets and economic recessions.
In an interview with Jim Puplava on the Financial Sense Newshour Stephen Leeb says :
It´s so easy, nothing has been a more reliable indicator for an upcoming recession as the price of Oil. Every major bear market, every major economic decline has been preceded by a large spike in oil prices. The 73-74 recession, recession of beginning 80´s and the recession of 2000. Oil prices jumped 80% between 1999 and 2000. Oil prices have been the most important indicator of major economic disasters. Whenever Oil prices rises about 80% from year ago levels, a fair chance does exists that a recession/bear market will follow. END.
So any sudden increase in the price of Oil should be something to fear or at least pay serious attention to it. Furthermore Stephen Leeb warns for the rapid rise in the price of Oil in the face of a less rapid growing demand. He says :
When you are facing rising commodity prices in the face of a declining or less rapid growing demand, it tells you something. It tells you that you can´t count on the supply being there when needed. It tells you that the world has changed. END.
It tells you that the world has changed. Stephen Leeb sounds serious, maybe even a bit alarming. What consequences Stephen Leeb expects from rapid rising Oil prices ?
Stephen Leeb says :
Sharply rising energy prices, similar the the 70´s, will lead to double digit inflation figures over the next 10 years. It´s going to turn the economy on its head.END.
Higher Oil prices leading to higher inflation is well illustrated in the chart below :
But wait, the FED can fight inflation by engineering a recession (rapid increase of interest rates) as former FED chief Paul Volcker did in the early 80´s right ?
Stephen Leeb says :
Today, we cannot engineer a recession. In 1980 when Paul Volcker took over the head of the FED, he was able to say : Well, inflation is at 12%, I don´t care what it takes, I´m getting Inflation down and he was willing to engineer a big recession.
Today because of all that debt, that´s not a policy alternative. Sure , the FED will raise interest rates a little bit here and there but not in such a dramatic way to create a recession. In the face of the giant total US debt, a recession would be a catastrophe. END.
Stephen Leep´s Oil indicator has worked remarkably well over the last 30 years. If this Oil indicator is going to perform as well in the future as it did before than investors should be on high alert for possible nasty future economic events and be prepared to take appropriate measures in order to protect themselves financially.
2 - Gold as a financial protection against coming Oil shock
So why to buy Gold when Oil prices are rising rapidly ?
The reason for this is two-fold :
* Gold as an Inflation Hedge
* Gold/Oil ratio says Gold is a screaming Buy.
Gold as an Inflation Hedge
Gold is being considered as the ultimate Inflation Hedge. The most obvious example is of course the 70´s whereby Gold really took off when inflation kicked in.
In 1977 when inflation began to pick up steam it reached 9% by 1978. Gold followed by breaking its previous high of $200. When Inflation hit 10% in 1979, Gold really took off skyrocketing to $500. Excitement kicked in and a Gold rush mania launched the yellow metal to its all time high of $850 in 1980, see chart below :
In times of Inflation you are losing money by holding paper money. A flight from paper money into real money (Gold) is just a logical result.
The Gold/Oil ratio
The Gold/Oil ratio says Gold is a screaming Buy.
Over the last 30 years Gold has been trading at an average of 16-17 barrels of Oil per ounce of Gold. At the moment Gold is dirt cheap compared to Oil and trades for about 8 barrels of Oil for an ounce of Gold. Such extremes won´t last for a long period of time so what gives, lower Oil prices down the road or Gold catching up ?
According to Matthew Simmons we shouldn´t count on cheap Oil anymore coming decades. Let´s repeat once more what he said when asked if there is a solution to the impending energy crisis he said :
"I don´t think there is one. The solution is to pray. Under the best of circumstances, if all prayers are answered there will be no crisis for maybe two years. After that it´s a certainty." END.
So with these kind of statements in mind, would you bet on lower Oil prices or higher Gold prices ? (see chart below)
OK, fine you´ll say, higher Oil prices should make a case for Gold indeed but how serious are those people screaming about the end of cheap Oil ? Should we take their claims seriously ? Why hasn´t the mainstream media hardly picked upon it ? Why didn´t we hear anything about it from politicians lately ? I´ve heard that at least for the next 30 years there should be plenty of Oil, what about that ? Well, many questions which deserves serious attention.
3 - PEAK-OIL and the End of Cheap Energy
Alarmist preaching a peak in oil production within a few years are referring to studies by Shell geophysicist Dr. Marion King Hubbert. Hubbert predicted already in 1956 that US domestic Oil production would peak around 1970. Unfortunately Hubbert wasn´t taken seriously at all. But what happened ? US Oil production indeed peaked in 1970 as predicted by Hubbert but still it took many years before geologists were willing to admit that Hubbert was right and that US Oil production indeed had peeked in 1970.
So based on what theory Hubbert made his predictions and how reliable is this theory in order to predict a future peak in world wide oil production ? It goes far beyond the scope of this article in order to explain the scientific background of PEAK-OIL (Hubbert´s Peak) , it´ll just focus on its conclusions backed up with data available for the last 100 years.
Hubbert says more or less that oil discoveries and oil production do follow a so called Bell Curve. The production curve follows the discovery curve with a 40 year delay.
Prof. Kenneth Deffeyes who wrote the book ´Hubbert´s Peak - The Impending World on Shortage´ explains in detail the scientific background of Hubbert´s theory. But let´s focus on just two important issues here :
* Oil discoveries do follow a Bell Curve
* Oil production does follow a Bell Curve with a 40 year delay compared to the discovery curve.
OK, but what does actual data regarding oil discoveries and oil production tell us so far ? Could Hubbert be right ?
Dr. Colin Campbell is most probably the dean among Hubbert´s followers. He worked for Texaco and Amoco as an exploration geologist working in countries as Borneo, Trinidad, Colombia, Australia, Papua New Guinea, the US, Ecuador, the UK, Ireland and Norway. Later on he was associated with Petroconsultants in Geneva, Switserland and brought about the creation of the Association for the Study of Peak Oil (ASPO). Dr. Campbell did a tremendous amount of research regarding Peak-Oil and published his findings in his book ´The Coming Oil Crisis´. His findings indeed confirmed what Hubbert predicted so many years ago.
Let´s focus first on data available regarding world wide Oil discoveries. We´ll see that the peak of Oil discoveries already occurred in the 60´s, see chart below :
Now please digest this carefully. If Hubbert is right then the world Oil production should peak somewhere during this decade (40 years after discovery peak). But the problem is that you can´t say with certainty that Oil production indeed has peaked until several years after the fact. So the only thing we can do is to analyze the production curves of oil producing countries which had a discovery peak way earlier than the 60´s. A good example is the US which saw it´s discovery rate peaking during the early 30´s. Hubbert concluded that the US therefore should experience a peak in Oil production somewhere during the early seventies. At the time Hubbert made that prediction in 1956 he was ridiculed by Oil experts and economists, but nevertheless Hubbert´s prediction came true in 1970, see chart below :
So the US Oil production peeked in 1970 indeed and declined ever since then just as Hubbert predicted.
When examining the production curves of all Non-Opec countries combined we´ll see a production curve which matches the predicted Bell Curve almost 100%. See chart below.
So what do we see so far :
* US Oil production already peaked in 1970.
Non OPEC Oil production already peaked in the early 90´s.
What does it tell us ? It tells us that the world oil production still hasn´t peeked because OPEC Oil production still hasn´t peaked. So in order to make predictions about world peak production one should focus on the main OPEC producers.
So when will OPEC peak ?
According to Bush energy advisor Matthew Simmons OPEC will peak when Saudi Arabia peaks.
So what about Saudi Arabia ? When will Saudi Arabia peak ?
Matthew Simmons says :
When Gharwar peaks (Gharwar is the largest oil field ever found) Saudi Arabia peaks and when Saudi Arabia peaks the whole World peaks. END.
But the problem is that Gharwar is aging rapidly. It´s one of the oldest Oil fields in production and lots of water injection is needed in order to keep production going. At one moment more water injection won´t be able to keep production going and Oil production will fall off a cliff meaning the Oil field dies.. According to Matthew Simmons, the end for Gharwar must be near. It goes far beyond the scope of this article to specify why Matthew Simmons does think so but interested readers can study Simmons findings themselves at :
Matthew Simmons : Saudi Arabian Oil - A Glass Half Full Or Half Empty
www.simmonsco-intl.com/files/Hudson%20Institute.pdf
In February this year Matthew Simmons came out with his strongest warning yet :
Expert says Saudi oil may have peaked
By Adam Porter
Tuesday 22 February 2005,
Energy investment banker Matthew Simmons, of Simmons & Co International, has been outspoken in his warnings about peak oil before. His new statement is his strongest yet, "we may have already passed peak oil".
The subject of peak oil, the point at which the world´s finite supply of oil begins to decline, is a hot topic in the industry.
Arguments are commonplace over whether it will happen at all, when it will happen or whether it has already happened. Simmons, a Republican adviser to the Bush-Cheney energy plan, believes it "is the world´s number one problem, far more serious than global warming".
Saudi oil peaking?
Speaking exclusively to Aljazeera, Simmons came out with a statement that, if proven true over time, could herald by far the biggest energy crisis mankind has known.
"If Saudi Arabia have damaged their fields, accidentally or not, by overproducing them, then we may have already passed peak oil. Iran has certainly peaked, there is no way on Earth they can ever get back to their production of six million barrels per day (mbpd)." END.
So Mr. Simmons tells us that if Gharwar peaks the whole world peaks. With that in mind this next statement from the Bank of Montreal won´t make you feel much happier either :
Bank says Saudi´s top field in decline
April 12, 2005
Speculation over the actual size of Saudi Arabia´s oil reserves is reaching fever pitch as a major bank says the kingdom´s - and the world´s - biggest field, Gharwar, is in irreversible decline.
The Bank of Montreal´s analyst Don Coxe, working from their Chicago office, is the first mainstream number-cruncher to say that Gharwar´s days are fated.
"The combination of the news that there´s no new Saudi Light coming on stream for the next seven years plus the 27% projected decline from existing fields means Hubbert´s Peak has arrived in Saudi Arabia," says Coxe, referring to data compiled by the International Energy Association´s (IEA) August 2004 monthly report. END.
The Bank of Montreal is not an exception, French Investment Bank Ixis-CIB isn´t too optimistic either on future Oil prices :
Will oil strike $380 a barrel by 2015 ?
By Adam Porter in Perpignan, France
April 21, 2005
A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.
Analysts Patrick Artus and Moncef Kaabi said in the next 10 years demand for oil will outstrip supply by around 8 million barrels per day (mbpd).
"If one takes into account the level of previous oil shocks such as in the 1970´s, we don´t think a price level of $380 per barrel is out of the question," they said. END.
You would probably wonder that if this situation is so dire indeed why politicians and or news directors don´t seem to bother.
Prof. Kenneth Deffeyes says :
My own feeling is that editors and news directors aren´t interested in another Chicken Little story. No politician was going to run on a platform promising blood sweat and tears. END.
But hey, still there´re brave congress man who aren´t afraid to pick up the issue and to raise serious questions. Congressman Roscoe Bartlett, Chairman of the Projection Forces Subcommittee of the Armed Services Committee, gave an hour long presentation on Peak Oil to the US Congress on Monday March 14 :
Peak Oil Presentation in the US Congress
By Roscoe Bartlett
Mar 14, 2005
Let me mention that M. King Hubbert looked at the world situation. He was joined by another scientist, Colin Campbell, who is still alive, an American citizen who lives in Scotland. Using M. King Hubbert´s predictive techniques, oil was predicted to reach a maximum in about 1995, without perturbations. But there were some perturbations. One of the perturbations was 1973, the Arab oil embargo. Other perturbations were the oil price shocks and a worldwide recession that reduced the demand for oil. And so the peak that might have occurred in 1995 will occur later. How much later? That is what we are looking at this evening. There is a lot of evidence that suggests that if not now, then very quickly we should see world production of oil peak. END. [Entire transcript can be found HERE :
So with the peak of world Oil production in sight, what kind of production curve could we expect for total World Oil production ?
Dr. Colin Campbell calculates the following production curves :
Any case whether it´s the high case, base case or low case, what should be obvious is that the end of World Oil production increase is near. A World which requires ever increasing amounts of energy (eg China, India, increasing world population etc…) and facing a limit in increasing Oil production simply has to face an increase in Oil prices. It simple as that. Demand outstrips supply by a great margin coming years. Yes, people arguing that there is still Oil left for 30 years, they are right. The Earth contained approximately 2 trillion barrels of Oil. We just consumed 1 trillion barrels of Oil by now so still 1 trillion barrels of Oil to go. With current demand of 80 million barrels a day it´s easy to see why people come up with an estimate of another 30 years of Oil supply. Again, it´s not the problem of No Oil, but it´s the End of Cheap Oil what causes economic turbulence. Matthew Simmons says that Oil prices exceeding $100 / barrel is unavoidable and that should be a wake up call for all investors out there because the end of cheap energy could lead to an unwelcome economic slowdown.
Highlights :
* Oil discoveries have peeked already 40 years ago.
* According to M King Hubbert Production peaks follow Discovery peaks after approximately 40 years.
* US Oil production already peaked in 1970.
* Non OPEC Oil production already peaked in the early 90´s.
* World Oil production will peak when OPEC peaks
* OPEC peaks when Saudi Arabia peaks
* Saudi Arabia peaks when Ghawar peaks
* Ghawar is aging rapidly and its life expectancy isn´t rosy. Matthew Simmons says that the end is in sight.
* Prof. Kenneth Deffeyes predicts PEAK-OIL to happen in 2005
* Bank of Montreal says that Gharwar is in already in decline.
* World Oil peak production means the End of Cheap Oil
* The End of Cheap Oil means continuing rising Oil prices which translates itself into Oil shocks.
* French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.
* Previous Oil shocks were an perfect call for recession/Inflation
* Gold is the ultimate Hedge against Inflation
* Rising Oil prices brings the historical Gold/Oil average way out of balance
* Historical average of the Gold/Oil ratio suggest a price of Gold exceeding $800 nowadays.
Historical average of the Gold/Oil ratio suggest a price of Gold exceeding $800 nowadays. Please think about that !
[link to www.gold-eagle.com] |
| FHL(C)
User ID: 11787
4/30/2005 2:15 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:
The Three Trillion Dollar Plot
April 29, 2005
Urban Survival
I have been astounded by the lack of coverage of the recent bust in the Philippines of two men in possession of three trillion dollars worth of bonds. I asked Cliff - the inventor of the web bot technology (which scans huge portions of the internet seeking linguistic shifts that seem to portend future events) to look at the data stream coming in for the current web bot run and sketch out the "big picture" behind this amazingly under-reported story. Here´s his report... George Ure, The People´s Economist
Flavell and Beany get busted! 04.29.2005
"Flavell and Beany. No, not the ingredients of a new multi-bean soup, nor the description of the latest craze in the production of wine from legumes. No, in this case Flavell and Beany are the two central, although minor, players on a real game of risk aimed at bringing down the global economy by crashing the USofA dollar and thus shifting the balance(s) of power instantly.
Paul Edward John Flavell and Sam Beany came to global, albeit internet, media attention as they were just going about their business and were paying a freight bill at their local DHL shipping office in Manila, Philippines. Just as Flavell was handing over the 53,967 Philippine Pesos required to ship their largish box to Zurich, Suisse, he and Beany were busted.
"NBI Director Reynaldo Wycoco said the suspects, Paul Edward John Flavell and Sam Beany, both temporary residents of Room 305, CEO Apartments on Jupiter Street, Makati, had tried to send the fake US reserve notes, which had a face value of $3 trillion, to Zurich, Switzerland, through a commercial courier company.
NBI agent Manuel Eduarte, head of the NBI Antigraft Division, said the suspects were arrested after the agency received a call from DHL courier company about a suspicious package the two suspects were sending to Switzerland. "
The first clue that Flavell had about his sudden change in legal status came when the Manila freighting office of the international cargo forwarder DHL Philippines Inc was instantly filled with agents if the Philippines National Bureau of Investigation. The NBI agents crowded in very small office and to Flavell’s horror, seemed to take an inordinate amount of interest in his and Beany’s package to Switzerland.
Details of the arrest can be found at [link to www.abs-cbnnews.com]
As the story unfolded, it appears that the NBI agents were quite justified in their curiosity about Flavell’s box. When opened, the packages revealed 3 Trillion dollars in crisp, counterfeit USofA bonds. Now note that this was ‘trillion’ with a ‘t’, in deference to the importance of the amount, it ought to be spelled out in all capitals as in THREE TRILLION DOLLARS!
While it is true that 3 trillion is hardly real money these days, and actually only represents about a third of the USofA GDP, it nonetheless was apparently enough fake currency to do the job.
What job was that? Well, nothing much, just the collapse of the USofA dollar and by extension the collapse of the global financial infrastructure. Even though Flavell and Beany are not saying much since they posted 16,000 Philippine Peso bond and disappeared, there are a host of clues about the plot emerging globally.
Of course, vast quantities of speculation are involved as well, it is the internet after all. However, given the nature of our data gathering and sifting work, and the fortunate coincidence that we had an ALTA report series {web bots – see explanation at [link to www.urbansurvival.com] for explanation of web bot history} run underway at the time of the occurrence of the bust, we have found ourselves privy to some very interesting data-points which lead to some very interesting speculation.
For instance we first note what is not reported, and that is the story as a whole. Yes, it did make the MSM {mainstream media}, but it was given the ‘chop and stop’ approach to delivery wherein the story is told factually with very little emotive addition through adjectives or adverbs, and with deliberately impact-crushing verbs. That is, the story was just put out there in such a manner as to sink rapidly below the general perceptive threshold of the public. The story is told, just so that its absence does not incite further interest. Fundamentally, as any MSM observer would note, it was given ‘no legs’.
However, the story very much has legs on the internet. Now true, much of the spew out there is froth and worthless, but if one knows how to look, and how to read, and what to judge as valid, there are some very interesting data points floating around amidst the speculation.
One of the data points has to do with the languages in which the story is being discussed. We note with interest that Israeli, Brazil, Dutch, and Malay-Chinese have more verbiage about the story than has appeared in the internet-published, MSM, English language press. Curious, eh?
Our work consists of filtering vast quantities of data from the internet, parsing through it all and seeking changes in language which we postulate precede changes in behavior. In this run our bandwidth capture target is in excess of 80 million reads each potentially as large as 2048 words clustered around our subject target words. One of our largest ever runs.
So we are sitting there happily watching our servers hum along to themselves when the story about the Flavell and Beany bust floats across our processing. It is intriguing, not every day that 3 trillion in counterfeit bonds gets busted. Then there is the associated information, most of which makes no sense.
Ok, being captured in the Philippines does make sense. In fact, it initially went along with our pre-conception of the Philippine population as a very hard working, enterprising people. And, it makes sense that such a thing could occur in Manila as it is one of the major cross-cultural boundary gateway from SE Asia to the Western world. So, not really out of place. As noted, the Philippines population is hard working, and enterprising, and if they were to turn their hands to counterfeiting they would do well at it. But even so, the amount was a bit large. After all, 3 trillion represents a whole lot of dollars and would be very hard for the average counterfeiting ring to work through their usual distribution channels. Bear in mind the point of counterfeiting is to work the fake money into the system such that real value can be ‘extracted’ in the process. Usually that means making purchases, and either getting the ‘real value’ back in the form of the ‘change’ or alternatively, either returning the item purchased later for cash, or selling it at a discount for cash. No matter how it is achieved, the point of counterfeiting is to swap your fake notes for real FRN’s {USofA Federal Reserve Notes commonly called dollars}.
So, for a counterfeiting story, it is very unusual. A very large amount of fake dollar bonds in very high denominations making it virtually guaranteed that it is not to be processed through regular distribution for such work. Then SE Asian association through Manila, and it turns out that Flavell and Beany are not Philippines citizens, and claim to be British. Indeed, they used British passports and converted British Pounds to pay their bail. And they have two, yet to be apprehended accomplishes according to the NBI, both of whom are also thought to be British. Hmmm….
Nor is it the first time in recent months that such a counterfieting operation has been detected. As the Manila Times noted:
"The NBI said the package, sealed in an iron-cast chest, was similar to the shipment the NBI seized a few months ago that also contained fake US dollar notes. " (emphasis added)
That is when we set a few flags on our processing to pick up references to the Flavell and Beany bust should they arise. It was all just to curiosity provoking. Too large to distribute amount of counterfeit money going to Zurich? Home of banks and banksters. Again, hmmmm…. Now why would Suisse banks cooperate in distributing 3 trillion dollars in fake money? Hmmm….
And just what effect would nearly 1/3rd of a whole years USofA GDP have if it hit the financial system suddenly? Hmmmm…externally generated hyper-inflation? Have Flavell and Beany and their masters been getting their ideas from old movies? Specifically the Peter Falk/Alan Arkin film, ‘The In-laws’…..hmmmm, again.
Since most of our work is based on the summation of numeric representations for emotional values, we thought it interesting to find out just where, on this wide planet of ours, and in which languages we would find the most emotively bound content around the story of Flavell and Beany’s bust. Curiously again, it was neither British or American based sites where we located the higher levels of emotive summations. Rather we found that the highest two sites for emotive summations {Ed Note: language/cultural differences thought to be normalized by our processing} turned out to be Russian, and Israeli. True the values on the Russian sites are lower on a total verbiage associated, but higher on emotive impact into the future so the summations are nearly the same. Then we have Brazilian sites, Malay {local Chinese variants}, Dutch, German, and rapidly descending after that, local Philippines languages, then English, followed by Chinese. Again, a very large hmmmm arises from the summation values. Given that the MSM in the USofA ‘chop and stopped’ the story, it is not actually surprising that it has longer international legs. What is surprising is the speculation that arose instantly as to Israeli links to the British Flavell and Beany. We noted that within 30 minutes of the Flavell and Beany bust hitting the net, the first speculation appears that it was an Israeli Government sponsored project. And where the speculation first appears….Israel, then Russia, then English language discussions. [link to www.whatreallyhappened.com] Hmmmm.
Then we noted the rise in verbiage about the bust in various other languages including some significant discussion about the alleged accomplices, Seki Mehmet Bayram and Peter Whittkamp. Both names showed up repeatedly with SE Asian associations localized to Malaysia, and India. What was odd was to see some discussion and press reports of some serious lengths appear in Malay-Chinese news sources. Again, an oddity in a case of oddities.
Having surveyed the data points as they are coming in around the Flavell and Beany bust this past week, it is easy to agree that one possible goal for the creation of the 3 Trillion dollars was to actually inflict fatal inflation at strategic vulnerable points in the economic system with the idea of crashing the USofA dollar. The result would be global chaos.
Of course, since the Federal Reserve Bank, which is not a part of the Federal Government of the USofA, and has no reserves, and is not a bank, is also in the business of creation of money from nothing, which is sort of like counterfeiting, perhaps there would have been no major impact from the 3 trillion new worthless dollars. After all, when you have a bazillions pieces of green paper out there {or digi-dollars}, what is a few trillion more going to hurt?
One thing to note is that motivation, and goals ascribed to the now vanished Flavell and Beany are all speculative. We may never know the inside of the Flavell and Beany story. But some things can be ascertained with reasonable certainty: 1) the story is not yet complete; 2) Flavell and Beany are not whom the appear; 3) It takes banks and banksters to move 3 Trillion dollars, legitimate or fake; 4) Banks and banksters are part and parcel of the global governance infrastructure, so somewhere there is someone inside the system who is deeply involved {ed note: don’t buy life insurance for this person(s)}; 5) 3 trillion dollars is not created for the increase of personal wealth, this is a ‘strategic’ amount of money {conclusion from evidence}, likely intended as a weapon {speculation as to use}; 6) the speculation of the use of the 3 trillion as a weapon leads to the conclusion that a ‘war’ is ongoing between non-national, or supra-national groups.
While there is much yet to be revealed about the Great Global Adventure in Counterfeiting, and indeed more will likely emerge over the next few weeks, one conclusion that can be drawn, from this story, and its data-points, is that it is a dangerous universe, and the powers that be {TPTB} have their agents out there working their asses off between busts. This is probably not a good sign for regular humans. Heads up there peoples, Flavell and Beany are out-and-about at large.
[link to urbansurvival.com]
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 11787
4/30/2005 2:21 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:
The Seven "D´s" of the Developing Disaster
April 28, 2005
Alf Field
321 Gold
"The objective of investing is to increase the purchasing power of capital." —From the Foreword to "The Art of Asset Allocation" by David M Darst. (Published in 2003 by McGraw-Hill).
David Darst is Managing Director and Chief Investment Strategist for the individual investor business of Morgan Stanley. "The Art of Asset Allocation" is possibly the definitive work on the principles of asset allocation in investment portfolios.
David´s book deserves a plug firstly because it is good, but also because David has generously donated the entire royalties from this book through the Morgan Stanley Foundation to the families of the 13 Morgan Stanley employees who died in the World Trade Center on Sept 11, 2001.
It was David who planted the seeds of the idea for this article when he suggested that most of the major problems facing the USA (and thus the world) commenced with the letter "D". I have refined his idea to produce the following list:
1. DEFICITS (US CURRENT ACCOUNT AND BUDGET)
2. DOLLAR (US)
3. DEVALUATIONS (COMPETITIVE)
4. DEBT
5. DEMOGRAPHICS
6. DERIVATIVES
7. DEVOLUTION
Most readers will be familiar with the first 6 but will be puzzled by the last one, DEVOLUTION. It is included because the first 6 problems, combined with the likely Government responses, will probably lead to a situation where one single investment criterion will become so important that it will transcend all other factors in investment decisions. That situation will lead to DEVOLUTION. We will return to this later.
The first 6 problems have received a great deal of coverage elsewhere and there is no need to regurgitate them in detail here. These problems generally involve huge mind-numbing, incomprehensible numbers of dollars. Those numbers continue to grow so rapidly that they tend to be out of date shortly after they are published. The following brief notes on the first 6 "D´s" deliberately ignore these gigantic numbers.
The US Current account and Federal Government DEFICITS have grown to chronic levels where each deficit now exceeds 6% of the country´s GDP. How will these continuing deficits be financed? The answer, by creating increasing quantities of electronic US Dollar credits.
The US DOLLAR will be under downward pressure while these deficits continue. The lower the US Dollar declines, the greater the pressure on those countries that export to the USA. These countries will protect their markets by invoking competitive DEVALUATIONS. This cannot happen in a freely floating exchange rate system, but is effectively done by foreign countries creating massive quantities of their own currencies. These new foreign currency electronic credits are then dumped on the foreign exchange markets, thus weakening their currencies. In this way the American problem is exported to the rest of the world.
DEBT of all kinds in the USA has been reaching record high levels for decades and continues to do so. This is the way the economy is stimulated in a fractional reserve banking system. DEBT must continue to grow. A contraction in DEBT will lead to those other unmentionable "D" words, DEFLATION and DEPRESSION. This will not be allowed to happen. New electronic US Dollar credits will be created to whatever quantity is required to avoid this outcome.
DEMOGRAPHICS refers to the imminent retirement of the Baby Boomers generation and the huge unfunded liabilities that exist in Social Security, Medicare, Pension Funds and other US programs that need to be funded. Several books have been written on this subject. One of which is "Running on Empty" by Peter Petersen. Those unfunded liabilities will be funded, probably once again by the creation of new electronic US Dollar credits to the extent necessary to meet the unfunded liabilities.
DERIVATIVES have been the fastest growing area in US finance over the past 15 years. The numbers involved are truly mind boggling. About 25% of the Derivative instruments in existence are Exchange traded items such as futures and options. The other 75% are Over-the-Counter instruments, privately created and traded between major financial institutions. These tend to be extremely complicated transactions that are often difficult to value. They rely heavily on their counter parties in these transactions actually meeting their obligations when they fall due.
There is a grave risk of counter party failure in the Over-the-Counter derivative area. If one major counter party goes bankrupt and fails to meet its commitments, it could trigger a domino like collapse of major institutions in the financial markets. The numbers involved are so vast that there is potential to bring down the entire financial system in the event of a major counter party default.
If this risk is readily discernible to outsiders, then bankers and others involved in the OTC derivatives must be acutely aware of the problem. Bankers are not stupid. They are extremely clever, cautious people. So how could they allow the OTC derivative situation to grow to such a massive extent with all the concomitant risks involved?
One suspects that they know something we don´t. Do the major players in the market have some assurance that there will be no counter party failure? Without that assurance, the gigantic build up of OTC derivatives over the past decade would surely have been unthinkable. Alternatively, they must have deliberately built up the derivative market without considering the size or risks involved on the assumption that, as with past similar cases, the Federal Reserve and Federal Government would combine and to come to the rescue of a failed major counter party.
The OTC derivative market looks like an accident waiting to happen. Already some lesser players are showing signs of strain. How do the authorities rescue a problem situation when it occurs? Again by creating electronic US Dollar credits to the extent necessary to prevent a catastrophe.
The common thread that runs through this brief summary is that when problems emerge in the US financial system, the authorities will solve them by throwing money at the problem, by creating new electronic US Dollar credits whenever necessary and to whatever extent necessary. This is not just a personal opinion. We have been told by no lesser personage than Dr Ben S Bernanke, who is a member of the Board of Governors of the Federal Reserve Board, that the authorities now have a new tool, the electronic printing press, which will be utilised when disasters threaten.
When the supply of something is increased sharply relative to demand, the value of that commodity will decline. If the supply continues to increase rapidly and indefinitely, then that item will become worth less and less, with the potential to finally become nearly worthless. This is the Developing Disaster facing the US Dollar and the world. This is the factor that could become the single most important criterion in investment allocation decisions and possibly even for individual financial survival.
When that point is reached, the headline to this article: "The objective of investing is to increase the purchasing power of capital," will become ever more pertinent.
We can now return to the final factor, the 7th "D", which is DEVOLUTION. Dictionary definitions of the word DEVOLUTION include the following:
1. A passing down or descent through successive stages of time or a process.
2. Transference, as of rights or qualities, to a successor.
3. Delegation of authority or duties to a subordinate or substitute.
4. A transfer of powers from a central government to local units.
It is the first definition that is applicable here. Imagine an inverted pyramid of various investment type assets where the least secure (and most prolific assets) are in the very wide top layers. The inverted pyramid then narrows down through layers of increasingly more secure asset classes to the small point at the base which consists of the most secure (and least prolific) assets. This is an idea propagated years ago by John Exter.
The theory is that in times of financial crisis investors will cause their investments to devolve downwards (hence DEVOLUTION) through the different asset class layers in the inverted pyramid as they search for greater security. DEVOLUTION is thus a movement by investors out of riskier, speculative asset classes into more secure ones. This is what can be expected in the months and years ahead as the creation of electronic US Dollar credits gathers momentum and faith is lost in the US Dollar.
The assets in the most secure category at the tip of the inverted pyramid are gold and silver bullion, assets that have performed the function of protecting wealth throughout the ages. In the layer above the precious metals lie the companies that mine and hold large deposits of gold and silver. The least secure assets in the envisioned environment, which form the broad layers at the top of the inverted investment pyramid, will be the electronic US Dollar credits and assets or loans that are repayable in US dollars.
The DEVOLUTION of assets into more secure investments is not just an esoteric theory. It is already happening and can be observed in the actions of thinking investors such as Warren Buffett, possibly the greatest investor of the past century. Buffett has been gradually moving the assets of his investment company, Berkshire Hathaway, into increasingly more secure asset classes. He made headlines last year when he moved over $20 billion out of US Dollar cash assets into foreign currencies.
Buffett already has a stash of silver bullion, so is clearly aware of the protective power of precious metals. It is only one short further step for Buffett to move out of foreign currencies (which will eventually follow the path of the US Dollar) into gold bullion and precious metal mining company shares, a move that seems logical and inevitable in the circumstances envisioned above.
A move into precious metals and their associated mining companies by a person like Buffett would instantly change the public perception of this asset class. If it is not Buffett, it will be someone else, as the logic of doing this will become increasingly apparent to investors. Then the devolution of investments down through the asset classes of the inverted pyramid will truly gather momentum. The quantity of precious metals and their associated mining company shares is very limited while the quantity of electronic US Dollar credits is infinite. It will be a question of "first come, first served".
[link to www.gold-eagle.com]
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 11787
4/30/2005 2:28 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:
Flexible Chinese Currency by End of 2005 May Change World Commerce Forever
Indian Rupees may revalue to higher level also!
April 28, 2005
Babu Ghanta
India Daily
According to sources from Bejing, China plans to implement partially flexible currency by end of 2005. United States is encouraging China to do so. The Chinese currency’s appreciation against US dollar will help reduce American trade deficit and also help China in reducing its bill on imported crude oil. China is going through major restructuring of its banking system to help the transition at the end of the year.
China Banking Regulatory Commission Vice Chairman Shi Jiliang said on April 27 that China is examining its options under World Trade Organization (WTO) commitments to limit foreign access to the country´s banking sector in order to avoid "excessive competition between foreign and Chinese banks." One such strategy would be to ban foreign banks from buying stakes in more than two major Chinese banks. Currently foreign banks are only allowed to carry out business in local currency in 18 Chinese cities. The end of 2006 will lift all restrictions as part of China´s WTO agreements.
India will also have to go through similar revaluation of currency. Washington at this time is not exerting pressure on India to revalue the currency. But the outsourcing boom has manifested India’s apparent financial strength with increased Foreign Direct Investments and ballooning Foreign Exchange Reserves. This means Indian Rupees will also be revalued and made flexible over time. A realistic target of Rs. 32 to 1 US Dollar is what some international finance think tanks are talking about. Many in Indian financial sector believe such a target is non-realistic.
[link to www.indiadaily.com]
[link to freewordofgod.yuku.com] |
| Anonymous Coward
User ID: 12274
4/30/2005 2:36 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
any time now! |
| .
User ID: 13318
5/1/2005 11:35 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Four Busted in $250B Bond Scam
October 10, 2002
Paula Moore
Business Journal
On Oct. 10, federal agents in metro Denver broke up a sting operation to sell bogus bearer bonds represented as worth $250 billion.
A deal to sell 250 bonds, supposedly with a face value of $1 billion each, was to have been concluded in Denver on Oct. 9, according to a U.S. District Court filing in Denver.
Officials at the U.S. Attorney´s Office in Denver were unavailable for comment.
The dealers arranged to sell the bonds via a California company called Concord Capital Ltd. to a Greenwood Village-based company called NCO/Capstone Consulting, a fake company created by federal agents. NCO agreed to pay $100 million for the 250 bonds, according an agreement between the parties.
At Wednesday´s meeting to consummate the deal, U.S. Customs and Secret Service agents arrested the brokers. They are: Johnny Tal of Agoura Hills, Calif., also called Yoni; Stephen M. Feldman of Encino, Calif.; Nathan A. Bickley of Dallas, Texas; and Jerry J. Tidmore, address unknown.
The four are charged with one count each of attempting to sell fraudulent securities. If convicted, each faces 25 years in prison and $250,000 in fines.
The government learned of the dealers in June of this year, when the U.S. Customs Service got a tip that Feldman was trying to broker the sale of fake Federal Reserve bearer bonds.
Bearer bonds are a type of bond not registered on the books of the issuer. Their owner holds them and gets interest payments by detaching coupons from the bond certificate, and delivering them to the paying agent.
A customs agent then went undercover as a representative of NCO/Capstone, and Feldman allegedly tried to sell him bogus bonds supposedly valued at more than $1 trillion. In July, the undercover agent offered Feldman $100 million for the fake bonds and was turned down.
Tal, saying he was client of Feldman´s named Yoni, then allegedly contacted the agent in September, and said he would sell $25 billion worth of bonds for $100 million, according to the court filing. "Yoni" supposedly told the agent he had a company called Concord Capital and that he formerly was with the Israeli Secret Service.
© 2002 American City Business Journals Inc.
[link to www.bizjournals.com] |
| Anonymous Coward
User ID: 11494
5/2/2005 12:26 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
That´s interesting FHL. Tell me though, if all the countries that owed us money from WWII paid us what they owed plus the standard interest rate of the loans which was probably 10-15% annually in that Era and we subtracted that from what we owe I bet you would see that we dont owe anything.
Bottomline: everyone screws everyone else over and doesnt repay their debt and the only thing that is hurt is confidence which will come back as a new generation of suckers gets involved in the mix. |
| .
User ID: 10670
5/4/2005 12:53 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Original Sin
Stephen Roach (Tokyo)
Morgan Stanley
In all my years in this business, never before have I seen a central bank attempt to spin the debate as America’s Federal Reserve has over the past six or seven years. From the New Paradigm mantra of the late 1990s to today’s new theories of the current-account adjustment, the US central bank has led the charge in attempting to rewrite conventional macroeconomics and in making an effort to convince market participants of the wisdom of its revisionist theories. The problem is that this recasting of macro is very self-serving. It is a concentrated effort on the part of the Fed to exonerate itself from the Original Sin of failing to address asset bubbles. The result is an ever-deepening moral hazard dilemma that poses grave threats to financial markets.
I am not a believer in conspiracy theories. But the Fed’s behavior since the late 1990s is starting to change my mind. It all began with Alan Greenspan’s worries over “irrational exuberance” on December 5, 1996, when a surging Dow Jones Industrial Average closed at 6437. The subsequent Fed tightening in March 1997 was aimed not only at the asset bubble itself, but at the impacts such excessive appreciation in equity markets were having on the real economy -- consumers and businesses alike. It was a classic example of the Fed playing the role of the tough guy -- the central bank that, to paraphrase the words of former Chairman William McChesney Martin, “takes away the punchbowl just when the party is getting good.” Unfortunately, the tough guys weren’t so tough after all. Predictably, there was a huge outcry on Capitol Hill as the Fed took aim on the US stock market. But rather than stay the course as an independent central bank should, the Fed ran for cover in the face of political criticism. Not only were its initial bubble-containment efforts put aside, but Alan Greenspan went on to champion the notion of a sea-change in the macro climate -- a once-in-a-century productivity miracle that would justify the stock market’s exuberance as rational. That was the Original Sin that has since been compounded in the years that have followed.
Out of that pivotal moment in the late 1990s, a New Economy actually did come into being. But it was not the new economy of ever-accelerating productivity growth that infatuated the New Paradigm Crowd and legions of equity-market speculators. Instead, it was the Asset Economy that enabled consumers and businesses to draw on the pixie dust of a new source of purchasing power -- asset appreciation -- as a means to augment what has since turned into a stunning shortfall of organic domestic income generation.
Unfortunately, the asset-based spending model has given rise to many of the distortions and imbalances evident in the US today. That’s especially true of low saving rates, the housing bubble, high debt loads, and a runaway current account deficit. When the equity bubble burst, asset-dependent American consumers barely skipped a beat. Courtesy of an extraordinary shift to monetary accommodation, the pendulum of asset depreciation quickly swung into property markets; US house-price inflation has since surged to a 25-year high. To the extent that equity extraction from ever-rising property appreciation was viewed as a substitute for organic sources of labor income generation, hard-pressed consumers went deeply into debt to monetize the windfall. As a result, household sector indebtedness surged to nearly 90% of US GDP -- an all-time record and up over 20 percentage points from levels in the mid-1990s when the Asset Economy was born. Secure in the asset-driven spending posture that resulted, consumers saw no need to save the old-fashioned way out of earned labor income. That’s why the personal saving rate has collapsed and currently stands near zero. Asset-based consumption is also at the core of America’s current-account problem. In an income-based accounting framework, the “missing saving” has to come from somewhere. In this case, that “somewhere” is the foreign saver -- giving rise to the current-account and trade deficits required to attract the foreign capital. As a result, the US current-account gap probably exceeded 6.5% of GDP in the first quarter of 2005 -- easily another record and well in excess of the 4% deficit prevailing in the mid-1990s.
This whole story, in my view, remains balanced on the head of a pin of absurdly low real interest rates. And the Fed has certainly been pivotal in nurturing this low-interest-rate regime. In an extraordinary display of policy accommodation, the real federal funds rate is only now moving above the zero threshold after having spent three years in negative territory. Of course, a central bank has little choice to do otherwise if it has made a conscious decision to underwrite the Asset Economy. After all, it takes low interest rates to provide valuation support to most financial assets -- initially stocks, then bonds, and now property. Furthermore, it takes low rates to make refi debt -- and the equity extraction it sponsors -- look attractive from a carrying cost perspective. Low rates also discourage income-based saving by underscoring the paltry returns available to savers in traditional asset classes. A migration to riskier assets -- such as property and “spread” products (i.e., high-yield and emerging market debt) -- is encouraged as a result. And low real rates make it easier to finance an ever-widening current-account deficit -- especially if the incremental flows come from foreign central banks, where there is reason to tolerate subpar returns in exchange for currency competitiveness. In short, without low real interest rates, the Asset Economy -- and all of its inherent imbalances and excesses -- is nothing.
The Fed is not only hard at work in the engine room in keeping the magic alive with a super-accommodative monetary policy but is has also become the intellectual architect of the New Macro. Time and again, since Alan Greenspan rolled out his New Paradigm theory in the late 1990s, senior Federal Reserve policy makers have taken the lead role as proselytizers of a new macro spin that condones the saving, debt, property bubble, and current-account excesses of the Asset Economy. The examples are far too numerous to mention, but consider the following highlights:
* Chairman Greenspan has made light of traditional measures of household indebtedness -- even going so far as to urge consumers to move from fixed to floating rate obligations (see his February 23, 2004, speech, Understanding Household Debt Obligations. Note: All references are to speeches available on the Fed’s website at www.federalreserve.gov).
* Fed governors have also borrowed a page from the Roaring 1990s in denying the possibility of a housing bubble (see Chairman Greenspan’s October 19, 2004, speech, The Mortgage Market and Consumer Debt, and Governor Kohn’s April 1, 2004, speech, Monetary Policy and Imbalances).
* More recently, an army of senior Fed officials -- namely, Chairman Greenspan, Vice Chairman Ferguson, and Governors Bernanke and Kohn -- have unleashed a veritable broadside against the time-honored notion of the current-account adjustment (see their various 2005 speeches, especially Governor Kohn’s April 22 speech, Imbalances and the US Economy, Vice Chairman Ferguson’s April 20 speech, U.S. Current Account Deficit: Causes and Consequences, and Chairman Greenspan’s February 4 speech, Current Account).
* Governor Bernanke has also led the charge in coming up with a new theory of national saving -- that the United States is actually doing the world a favor by absorbing a so-called glut of global saving (see his April 14, 2005, speech, The Global Saving Glut and the U.S. Current Account Deficit); Vice Chairman Ferguson has been on a similar wavelength in dismissing concerns over subpar personal saving (see his October 6, 2004, speech, Questions and Reflections on the Personal Saving Rate).
Is this is an appropriate role for a central bank? In my view, absolutely not. The problem with an activist central bank is that decision makers in the real economy -- consumers and businesspeople alike -- mistake the Fed’s point of view for strategic advice. And so do financial market participants. After hearing the Fed pound the table, consumers feel left out if they don’t spend their housing equity. Business managers felt equally deprived in the late 1990s if their companies didn’t achieve the dotcom-type valuations in the stock market that Chairman Greenspan insisted in the late 1990s and even early 2000 were well grounded in a once-in-a-century productivity miracle. The resulting overhang of excess IT spending was a direct outgrowth of this perceived deprivation. Needless to say, when investors and financial speculators saw the equity train leave the station and the Fed condone the high growth of a productivity-led economy by leaving interest rates low, they saw no reason to believe that a bubble was about to burst. When consumers hear from a Fed chairman that it makes little sense to take on fixed rate debt, they rush to floating rate instruments; not by coincidence, the adjustable rate portion of newly originated mortgage debt shot up in the immediate aftermath of Chairman Greenspan’s comments on consumer indebtedness. And should asset-dependent, saving-short, overly indebted American consumers feel at risk if the Fed assures them that there is no housing bubble -- that the asset-based underpinnings of their decision making are well grounded? A record consumption share in the US economy -- 71% of GDP since 2002 versus a 67% norm over the 1975 to 2000 period -- speaks for itself.
The rhetorical flourishes of America’s central bankers have dug the US economy -- and by definition, a US-centric global economy -- into a deep hole. To this very day, the Fed has never confessed to the Original Sin of condoning the equity bubble. On the contrary, Greenspan & Company have been on the defensive ever since by dismissing the increasingly dangerous repercussions of the original post-bubble shakeout. Far from playing the role of the tough guy that is required of independent central bankers, the Fed has become an advocate of the easy money of a powerful liquidity cycle. One bubble has since begotten another -- from equities to bonds to fixed income spread products (i.e., emerging market and high-yield debt) to property. And financial markets have gone along for the ride -- not just in the US but also around the world as global investors and foreign central banks have rushed with reckless abandon to finance America’s record current-account deficit.
The day is close at hand when US monetary policy must get real. At a minimum, that will require a normalization of real interest rates. Given the excesses that now exist, it may even require a federal funds rate that needs to move into the restrictive zone -- possibly as high as 5.5%. Yes, this would cause an outcry -- perhaps similar to that which occurred in the spring of 1997 on the occasion of the Original Sin. But in the end, there may be no other choice. Fedspeak has taken us into the greatest moral hazard dilemma of all -- how to wean an asset-dependent system from unsustainably low real interest rates without bringing the entire House of Cards down. The longer the Fed waits, the more perilous the exit strategy.
[link to www.morganstanley.com] |
| Anonymous Coward
User ID: 881
5/4/2005 4:58 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Congradulations. this post/thread is so huge, big and fat that i decided to put it all in word. You should have a cooke mister whoever is typing this massive stuff (or pasting for all i care) |
| Captain_Outrageous
User ID: 13816
5/4/2005 5:30 AM
 | | Re: Watch, Its happening ,the global economic change. | Quote |
Well Iraq was going to change the value of their oil to the Euro from the US Dollar, so we invaded them to stop it. The Iranians are planning on changing the value for their oil from the US Dollar to the Euro in July 2005, this will lead to a major decline in the value of the US currency.
Oh yea, get the Commi-Iranian arses before they get us,
Now war arose in heaven, Michael and his angels fighting against Satan(and Apollo-yon), the deceiver of the whole world, the Devil was thrown down to the earth, and his angels were thrown down with him.
-- Revelation 12:7-9 [RSV] |
| Witness
User ID: 2694
5/4/2005 5:54 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
I have been trying to find credible repoprts of the Iranian change to Euros. Does anyone have this to hand? |
| TIFF(C)
User ID: 6557
5/4/2005 6:49 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Lurking econometrically... |
| .
User ID: 8101
5/4/2005 7:25 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Yuan Not the Cause of US Trade Gap: China
May 3, 2005
Asia Times
BEIJING - Recently, some US senators have blamed China for the Sino-US trade deficit hitting a new high last year, and proposed placing a 27.5% tariff on all Chinese products if China does not revalue the yuan. They believe that if China appreciated its currency, the US deficit problem would be solved. But it is unfair to blame China when one considers the following facts.
Does China export too many products to the United States? No. According to US statistics, since 1994 Canada has been the biggest exporter to the US. In 2004, Canadian exports to the US amounted to US$256 billion, 30% more than Chinese exports that year. Before 2003, the second- and the third-largest exporters to the US market were Japan and Mexico. China became the second-largest only in 2003. The reason why the trade gap between the US and China is so large is that US exports to China are far less than those sent to Canada, Mexico and Japan.
The Chinese government has not manipulated its currency exchange rate to limit imports from any country, including the US. According to Chinese customs statistics, China had a trade surplus of about $32 billion in 2004. Reconciling this figure with US trade statistics implies that China had a huge trade deficit of $130 billion with the rest of the world. In 2004, Chinese imports from Asia accounted for about 66% of its total imports, while imports from the US were only 8% of the total. China ran huge trade deficits with South Korea, Japan, and the ASEAN nations. Including the mainland´s trade deficits with Taiwan, the total reached about $127 billion.
Since China opened to the outside world in 1978 and began shifting from a planned economy to a market economy, more and more foreign direct investment (FDI) has come into China. The import and export conditions in China have changed dramatically. Foreign-funded companies in China have been the main drivers of import and export trade; in 2004, imports and exports of foreign-funded companies accounted for about 60% of the country´s total trade volume.
FDI in China mainly came from Asian markets, such as Japan, South Korea, Singapore and Taiwan, which invested $16.8 billion in 2004, nearly 50% of the country´s total (excluding investment from Hong Kong and the Virgin Islands). Those overseas-funded companies aimed their money at not only the rapidly growing Chinese market, with its 1.3 billion consumers, but also at the country´s lower labor costs.
China is a low-middle-income country. The gross domestic product per capita only exceeded $1,000 in 2004. The average hourly wage for urban manufacturing workers is only about $1, 4.7% of the US level. Even if the Chinese currency appreciated by 100% over the US dollar, the average hourly labor cost in China would still amount to only $2, less than 10% of the US level. And the majority of Chinese still live in rural areas, providing an abundant and low-cost labor supply.
These lower labor costs have triggered a massive shift of Asian manufacturing capacity and export orders to China, especially from Japan, Taiwan, and South Korea, whose investments are export-oriented. Originally they produced products at home to export to US. Now they have moved the work to the Chinese mainland. Initially, labor-intensive export industries such as apparel, footwear, toys, and furniture moved to China. Later, technology-intensive industries, such as notebook computers, hard disk drives, and chip fabrication moved here also.
As a result, China has become increasingly integrated into the global manufacturing and supply chain. There are more and more Japanese and South Korean brands of electronic goods sold in the US market with a "Made in China" label. These trends are obviously related to the shift of many export-oriented production lines from leading Asian economies to China.
China needs to import more raw materials, parts, equipment and machine tools both for export purposes and its domestic market. But the main import sources are from Asia, not the US. In 2003, imports from Japan, Taiwan and South Korea by overseas-funded companies totalled $116 billion, accounting for more than half the mainland´s total imports, while imports from the US were just 7.5% of the total.
There are several reasons why foreign-funded companies in China prefer importing from Asia to importing from the US. First, a large fraction of Chinese imports were related to processing and assembly activities of foreign-funded companies in China. The manufacture of major parts, components, equipment and technology needed by assembly lines has generally remained in the home countries. Consequently, when the assembly lines are operating, they need to frequently import from the foreign-funded companies´ parent companies, which are mostly located in Asia.
Second, many companies, especially Japanese and South Korean subsidiaries in China, usually purchase goods from their own industrial group (i.e., their parent company, or another subsidiary of the parent company) in their home countries. Third, because Japan, South Korea and ASEAN economies are Chinese neighbors, they have a structural advantage in transportation costs compared to US companies exporting to China. Fourth, quality goods from Asia are generally cheaper than equivalent items from the US because of lower labor costs. For instance, in 2003, the hourly wages of manufacturing workers in South Korea were about 47% of those in the US.
Fifth, China is a big high-tech importer now, and many high-tech products can only be produced by the United States. According to US statistics, in 2003 China imported US aircraft, nuclear reactors, machinery and equipment worth $10.6 billion, accounting for 40% of China´s imports from the US. High-tech items are an area in which US manufacturers have a comparative advantage. But this advantage has been weakened by some US policies, especially the rigid controls over such exports to China. Partly as a result of this, in 2003, US high-tech exports to China constituted 10% of the total Chinese high-tech imports, with the US ranking as just the fifth-largest source of China´s imports of such goods.
The conclusion is clear: The reason for the US trade deficit with China is not China´s currency exchange rate. The key problem is American policies that cause US manufacturers to lose their comparative advantages to other exporters. If the US truly wishes to compete on a fair and open playing field, it should review its policies, including its erroneous trade policies regarding China, rather than simply making China a scapegoat. To place tariffs on all Chinese products will only hurt the interests of both countries.
(Asia Pulse/XIC)
[link to www.atimes.com] |
| .
User ID: 8101
5/4/2005 7:50 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Iraq and the coming dark age
The Iraq conflict is a test of how far we are progressing towards the coming dark age.
The question is to what extent the western hegemon (the United States) can still shape the world in its own image and thereby stop the Iraqi regime shaping the world in its image.
e.g. We will have weapons of mass destruction but you may not. No, Kuwait must remain an independent country and you are not allowed to take control of it.
The fact that this conflict is taking place at all is already a sign of the weakening of western hegemony (the dark age syndrome of disintegration).
A hundred years ago, the west used to lay down the law in this region. British officials drew up its borders, decided what kind of government it should have and who would be its king. It did all this while tying up only a fraction of its armed forces, and no one questioned its authority to do so.
Today, despite Iraq´s obvious weakness, the US seems unable simply to go in with a small force and sort things out with the minimum of fuss. It is taking a huge military operation and much messing around with the United Nations, while emerging as a major geopolitical crisis.
Will the US restore peace and order to Iraq, turning it into a stable democracy and reliable member of the western axis -- as it did with Japan and Germany after the Second World War? If so, US power is still something to be reckoned with, and the dark age is still quite a way away.
Or will the US leave Iraq in anarchy, as happened in Somalia and seems to be happening in Afghanistan? If so, the world will have slipped a little bit further towards the dark age. The tide of chaos will be continuing to rise and it can be expected that it will eventually engulf even the most powerful nations.
The west´s trail of anarchy - sign of a crumbling civilisation
The essential point of the Iraq conflict is for the United States to maintain the differentials of power and wealth that allow it to force its will on other nations and enjoy a share of the earth´s resources far out of proportion to its population size. There is nothing wrong with that, in the sense that it has been the aim of all great powers throughout history.
One of the issues here is to prevent Iraq building up its forces and taking control of Kuwait -- for its power and wealth might then challenge those of the United States, which would be less able to get its own way.
A look at the map of the region shows Iraq´s problem. Its borders seem naturally to angle down towards the head of the Arabian/Persian Gulf. However, a big chunk of its coastline has been carved off, leaving it with just 16 miles of seashore. To add to the pain, the territory involved is packed with oil fields.
Iraq´s ´natural´ borders
Iraq´s loss of coastline and oilfields to Kuwait
A bit of history. From the middle ages, Iraq was part of the Ottoman Empire. It was not a distinct country but consisted of the provinces of Mosul, Baghdad and Basra. Kuwait was not a distinct country either, but was simply a part of Basra province. Nominally it was under the rule of the Ottoman governor of Basra, but in practice, from the eighteenth century onwards this fairly lawless region was controlled by the Sabah clan. In 1899, Sheikh Mubarak of the Sabah clan put himself under the protection of the British Empire, and agreed not to allow Russian or German influence to extend itself into his territory. After World War One, when the Ottoman Empire had been broken up, this region came under British mandate. In 1922, the British High Commissioner, Sir Percy Cox drew up the modern boundaries, leaving Iraq almost landlocked. By way of compensation, Iraq was allowed to retain control of Kurdish regions in the north. This all suited British geopolitical interests. It did not, of course, suit Iraqi geopolitical interests. Since the British granted Kuwait formal independence in 1961, Iraq has repeatedly threatened to ´recover´ what it considers to be its ´nineteenth province´. In August 1990, it invaded and took over the entire country, but was expelled in Operation Desert Storm, otherwise known as the Gulf War. Since then, Iraq has been persona non grata with the United States, leading up to the present conflict. Previously, in the 1980s, Iraq was friendly with the west and received tacit support from the United States because it was fighting Iran, whose fundamentalist regime was far more disliked by the west -- apart from anything else, Iranian student revolutionaries had held American embassy staff hostage for over a year in 1979-80. Just before the 1990 invasion, the United States seems to have signalled to Iraq that it would turn a blind eye to an attempt to seize some disputed territory from Kuwait. In driving all the way to Kuwait City, however, Saddam Hussein went much too far. The US offered him a titbit, but he tore the arse out of it, and that is why he had to be punished.
So long as the west remains powerful, Iraq will never be allowed to redefine its borders, and that creates a vicious circle, leaving it handicapped and weak. The point about dark ages is that they disrupt these vicious circles. Western civilisation is crumbling of its own accord, for a huge variety of reasons. The coming dark age will eventually allow a new geopolitical order to emerge, not just in the Gulf region but throughout the world. Then the populations of these regions, such as Africa, who are today embroiled in a trap of poverty and powerlessness, will be able to turn their fortunes around.
So, the issue being put to the test in the Iraq conflict is whether the west can still preserve the present world order, in which it has all the advantages. Or whether our planet is moving towards a more disorderly condition and eventually towards the liquid anarchy that will allow a new world order to emerge. |
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User ID: 8101
5/4/2005 7:52 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
World Without Oil
by Lise Maring
When most of us think about oil, we tend to think about heating oil for the furnace and about the gasoline and diesel fuel that keeps our cars and trucks on the road. What most of us don´t realize, however, is that oil does more than just fuel our vehicles and keep us warm in winter. It has become the foundation upon which our entire modern civilization has been built. Recently, that foundation has begun to develop some cracks and has become a little shakier than it used to be, as cheap oil and natural gas become harder to find and acquire. Even if we were to develop a new source of energy and a more fuel-efficient car today, without oil, modern civilization as we have come to know it is still in deep trouble.
To start with the basics, armies aren´t the only organizations that run on their stomachs. So do civilizations. Agribusiness is totally dependent upon large machines and artificial fertilizers and pesticides in order to raise, harvest, and transport the vast quantities of grain, fruit, and vegetables we enjoy today. Fertilizers and pesticides require oil and natural gas, not only in their distribution, but in their manufacture as well. Also, feed for beef cattle, chickens, and turkeys depends very heavily on these same fertilizers and pesticides. When cheap sources of oil and gas are not readily available, the chemical industry passes the increased costs on to agriculture. The increasing prices for fertilizers and pesticides then results in increased food prices for the rest of us.
We may find ourselves eating farther down the food chain in the near future. In other words, we eat the grain instead of feeding it to something else first, since each link added in the food chain results in energy loss. In the future, the turkey and chicken "factories" we have now may not exist. The vast feedlots where cattle are fattened on grain before being slaughtered and made into hamburger patties for the nation´s fast food restaurants may no longer be economical. Thus, wastes from such industries may no longer be available to those who believe it could serve as a viable large-scale energy source for the future.
The world is now consuming roughly 77 million barrels of oil a day. And the demand grows every year as other countries aspire to our style of living and level of consumption. What´s really interesting is that out of that 77 million barrels, the U.S. consumes most of it. In 2002, the U.S. consumed 19.66 million barrels a day on the average--more than one-quarter of the entire world´s oil consumption--and the demand in this country continues to grow every year. You can check this out for yourself on this US Department of Energy web site: eia.doe.gov
Today, much of our food travels an average of 1200 to 1500 miles before it gets to our tables. Most of the vegetables consumed in the East were transported overland by truck from California. The roads the trucks roll on are made of asphalt. Where does asphalt come from? You guessed it--from petroleum. When the supplies of asphalt become more restricted, our entire transportation system may very well begin to deteriorate. There are some substitutes, but certainly not in the quantities required to maintain a national road system. And the substitutes also require energy to manufacture and transport. Which roads will be sacrificed first? Will it be the interstate system on the edge of town, or the street in front of your home?
And, oh, by the way, those tires on the trucks and on your family car? They also required petroleum in their manufacture and distribution. Along with the machinery that mined the iron ore, converted it into steel, and formed it into the frame for your car.
So, okay, what else is oil used for? Well, plastics for one thing! Look around you. How much of your world is made up of plastic? The keyboard you type on is most likely plastic, as are the casings for your monitor and your printer. Much of our food comes in plastic containers, even our eggs these days, and the spouts on our plastic-coated juice and milk cartons are themselves plastic as well. The hospitals depend on disposable plastic supplies, such as syringes and oxygen tubing. Bottom line: it would take a book to document all the uses of plastic, and plastic depends on the rich chemical soup called petroleum. Oh, and have you looked at what ink is made of? Or that pen in your hands?
But it doesn´t stop there. The roofing tiles and tar paper used in home construction require petroleum for their manufacture and distribution; the lubricants in our engines and machinery--even "synthetic" oils--are currently oil-derived. Many medications require petroleum for their manufacture. Our synthetic textiles, such as nylon and rayon, depend on the chemicals derived from petroleum. Petroleum, in other words, touches every industry…every technology…every business…every home…and each and every one of us in one vital way or another, every single day of every single week.
Many people have suggested all we have to do is begin manufacturing oil and plastics from organic sources such as corn or soybeans or other such crops. Unfortunately, there is only so much land available, and most of the arable land is currently being used to grow food--or is being developed into more homes and shopping centers. The nice thing about oil is that it is underground and takes up relatively little space to extract. So, do we give up food production for energy substitutes and plastics instead? And who is it that will go hungry while perfectly good farmland is used to grow plastic for all those McDonald´s Happy Meal toys?
It may be that in the not too distant future, we end up with several different schemes for energy production that will indeed keep us warm and allow us to keep driving our cars while the tires hold out. But one thing´s for sure: no single method will be able to replace petroleum and everything we use it for.
Also, ask yourselves this: Do we really want to find something that will totally replace oil so our civilization can continue as it is right now? Even if we were to find a substitute, and energy doesn´t become a limiting factor, then food and water are sure to be. While the corporate fishing fleets are busily mining the oceans and destroying the world´s fisheries, similar corporate agricultural interests are busily mining our topsoil and groundwater. Personally, I´m beginning to think it might actually be better if our civilization were brought up short--so our planet doesn´t end up becoming a giant, uninhabitable dust ball.
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Just one negative event in the middleast could cause the western world to be without oil for a very long time. Think about it. Let´s say, for instance, that we have a war with Iran. What could be the consequences for oil supplies if the Strait of Hormuz are totally shut down? No Saudi oil..................what would be the result..............Instant dark ages. |
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User ID: 8101
5/4/2005 8:07 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
With thanks to concerned aussie from perth.
[Sources: FDIC, Comptroller of the Currency, ISDA, BIS]
U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S. commercial banks had $88.3 trillion in derivatives at the end of 2004, up from $71.4 trillion at the end of 2003. Total assets of the banking system rose 11% in 2004, to $8.4 trillion from $7.6 trillion, while loans rose 11% to $4.9 trillion from $4.4 trillion. Equity capital rose 23% to $850 billion from $692 billion. Three banks dominated in terms of assets and derivatives: JP Morgan Chase had $1.2 trillion in assets and $45 trillion in derivatives; Citigroup had $1.5 trillion in assets and $19 trillion in derivatives, and Bank of America had $1.1 trillion in assets and $18 trillion in derivatives.
Globally, there were $165 trillion in interest rate and currency derivatives outstanding as of mid-2004, plus another $6.4 trillion in credit derivatives and $3.8 trillion in equity derivatives, according to the International Swaps and Derivatives Association. During the last half of 2004, the level of credit derivatives soared 55%, to $8.4 trillion, topping their 44% growth in the first half. Since credit derivatives are sold as insurance against default on bonds and other instruments, this growth reflects increasing instability and desperation in the markets, and a mad rush to paper over losses.
The Bank for International Settlements put the global derivatives market at $221 trillion as of mid-2004.
While EIR believes the level of derivatives reported by these agencies falls far short of the actual size of this casino, we have no basis for calculating our own numbers. However, if one were to assume a 25% annual growth rate, the $300 trillion in derivatives (out of $400 trillion in financial aggregates) LaRouche estimated in 2000, would have grown to $730 trillion in 2004 and $915 trillion—nearly $1 quadrillion—in 2005. The U.S. bank numbers are cumulative totals, whereas the BIS and ISDA numbers are adjusted to eliminate double counting on deals between derivatives dealers, essentially cutting them in half. Whatever the actual level of derivatives is, it is way beyond the pale.
[Source: White House website]
BUSH DIAMETRICALLY OPPOSED BUSH ON TREASURY BONDS. The two statements President George W. Bush made on U.S. Treasury securities, during his April 28 press conference, directly contradicted one another, within a matter of minutes. First, pushing privatisation of Social Security, Bush said, "I know some Americans have reservations about investing in the stock market, so I propose that one investment option consist entirely of Treasury bonds, which are backed by the full faith and credit of the United States government."
Then minutes later, answering a question, Bush described Treasury securities as follows: "You pay into the system through your payroll taxes, and the government spends it. It spends the money on the current retirees, and with the money left over, it funds other government programs. And all that´s left behind is file cabinets full of IOUs."
Of the multiple media outlets covering Bush´s performance, after EIR´s press release only ABC News commentator George Stephanopoulos and Barron´s magazine (see slug below) noted the crazy President´s obvious self-contradiction.
Anonymous Coward
User ID: 1537
5/3/2005
4:02 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
The US and the whole system is bankrupt the only thing that keeps it going is the sheeple accpetance, here I mean the sheeple of the financial insitutional players as well as foreign investors, who also keep on buying US treasury paper to safe guard the value of their already invested money.
However, in the final end, the foreign investors will have to let go, on cannot sustain a system of paper money and fraud indefinitely and in absurdum by commiting and losing real resources!!!
Anonymous Coward
User ID: 72
5/3/2005
4:08 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
it is going to make 1929 look like a boyscout gathering.
not only people in the street, but people scavaging for food, total out of control mobs.
the main cities will burn in the first few months.
Omega Operative
User ID: 3149
5/3/2005
4:23 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
That´s right 72. In 29 the US was an agrarian society and people got by on farms growing thier own stuff.
Hell most kids today couldn´t cook a hamburger if their life depended on it.Its gonna get real ugly.
Guns, knives, dawgs, trailers and trucks are my core holdings. cow
Concerned Aussie from Perth
User ID: 9874
5/3/2005
6:07 am EDT
Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
Greenspan´s Remarkable
1966 Admission About Gold
From Mike G.
5-2-5
How fitting..from Rense.com
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. . . . The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists´ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth."
--Alan Greenspan, 1966
"Let me issue and control a nation´s money and I care not who writes the laws." Mayer Amschel Rothschild
Concerned Aussie from Perth
User ID: 9874
5/3/2005
9:28 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
bump
Anonymous Coward
User ID: 132
5/3/2005
9:32 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
Good Lord. hiding.gif
JCS
User ID: 3142
5/3/2005
10:04 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
it will only take one accident to bring down the house of card, a house that the Fed and other central banks have allowed to be built.
In 1998 Long Term Capital Management, considered the "Premier" hedge fund, with computer models that dazzled the Wall Street Crowd, had an equity base of $25 billion, which had grown from approx. $5 billion in just a few years. From that equity base, they controlled over $1 trillion in various derivative contracts, and the counterparties to some of the contracts were among the biggest names in WS, including banks.
One leg of their derivative trading blew up on them, I think it was their gold carry trade account, and when it did the whole house of cards came down. From a late emergency session at the FRB in NY, it carried over through the weekend and the Federal Reserve saved the system. It WOULD HAVE BEEN a global melt down of the entire world banking system.
The next time it won´t be so easy because of the sheer numbers involved, both in terms of dollars and the number of hedge funds and institutions who wrap around on these contracts.
When it goes it will be like the Titanic going down and probably just as fast.
Anonymous Coward
User ID: 718
5/3/2005
10:41 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
Anonymous Coward
User ID: 433
5/3/2005
11:17 am EDT Re: U.S. BANK DERIVATIVES TOP $88 TRILLION IN 2004, UP 24% FOR YEAR. U.S.
THe demise of Long Term Capital Management had nothing to do with derivatives. In August of 1998 the Russian Gov´t devalues the ruble and announced a moratorium on payments of Russian Gov´t debt. ( In effect, they defaulted. ) This caused two problems for LTCM. One, they were heqvily invested in emerging economy debt and the Russian default hammered them. Worse, one of their largest positions was a "convergence trade" basiclly betting that the prices of on-the-run and off-the-run US Treasuries would get closer. The Russian default caused a flight to quality in the global market. This flight to quality pulled tons of money from the emerging markets and plopped it down into on-the-run US Treasury securities. SO the prices of on-the-run diverged sharply from off-the-run and this killed LTCM. Please note that derivatives had nothing to do with this scenario. True, LTCM did a large derivative business, but it was the plain vanilla stuff that killed them. |
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User ID: 8101
5/4/2005 8:32 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Re 88 Trillion in bank derivatives,
i am thinking 88 trillion as credit sure can buy you a lot of wolves(er friends?), makes the casinos look like card sharps playing on street corners. |
| Anonymous Coward
User ID: 2954
5/4/2005 6:56 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
"Uncle Sam has reneged and defaulted on up to 40% of its trillion-dollar foreign debt, and nobody has said a word except for a line in The Economist."!!!!!!!!!!!!!!!!!!!!!!!
 |
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User ID: 2191
5/4/2005 11:59 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
You Want a Piece of the Mogambo, Punk?
“So how does the Chinese not pegging its money to the dollar ease the flood of imports, and thus reduce the level of imports? I leap to my feet and wave my hand enthusiastically in the air! This is an easy question! Call on me! Let me answer this one!”
April 26, 2005
by The Mogambo Guru
Daily Reckoning
The world is slowly coming apart, and the big news, for me, is that some yahoo high up in the Chinese banking world, Zhou Xiaochuan, who is the governor of the People´s Bank of China, admits that they may be prodded along by international pressure to more quickly allow their currency to appreciate against ours.
How much? Well, I have no idea, but the Financial Times noted that the futures market was "betting on an exchange rate of Rmb7.818 to the dollar in 12 months´ time, down from the current peg of about currency 8.3 to the dollar. So, in answer to your question, the dollar will suffer a 6% devaluation, give or take, in twelve months. Since there is nothing that says that the devaluation will stop there, perhaps you had better count on a 12% devaluation in twenty-four month´s time, too.
This implies that, ceteris paribus (which is a Latin phrase that I use to try and impress somebody, since it seems classier than saying "all other things remaining the same") imports from China will cost 6% more, twelve months from now, and you can call the Federal Reserve all day long to try and find somebody who will say that paying 6% more is a lot of inflation in prices, but you won´t find anybody. What you WILL find, however, is a lot of people (maybe even Greenspan himself!) who will tell you that inflation is low, lower than low, very low, extremely low, so low they can hardly see it, and even when you DO see it, after and you deflate that 6% rise in prices by the fact that you don´t have to haul as much stuff home (which saves you gas and wear and tear on your car), and you don´t have to rent a place to put all your stuff because you won´t have so much stuff (saving you rental money), and when you add all of these hedonic adjustments-- and more! -- to the raw inflation numbers, you can make inflation magically disappear! So therefore, there is no inflation!
But you can call the Mogambo, day or night, and I will tell you the first damn time the phone rings that 6% higher prices is a LOT of inflation and it is bad, bad news. And for you doubting Thomases, here is actual video footage to help you change your mind. The room goes dark, and suddenly the screen is filled with the scene of reception area of the swanky offices of the chairman of Mogambo Enterprises, a man both hated and feared, but mostly hated.
You notice that I am keeping James Bond waiting, and he is one of Her Majesty´s Secret Service guys and is a big, big movie star, too, so obviously I must be a Real Important Guy (RIG) to keep a guy like him cooling his heels, him and his snotty little 007 License to Kill, which are almost impossible to get unless you "know somebody", and all the people I know hate and fear me, but mostly hate me, and so they usually aren´t in the mood to do The Mogambo any favors.
Anyway, the camera moves through the big oak door with the reinforced gun portholes, past the security guard who demands you keep your hands where he can see them and then nobody will get hurt, and into a lavishly decorated office, then out the back door, down the hall, around the corner, and next to the janitor´s closet is the cramped little dingy office of The Mogambo himself. Suddenly, the phone is ringing! Perhaps it is a world leader, asking for advice! Perhaps it is a national bank, begging for help! Maybe it is Mrs. Kravitz, yelling about how she saw me throw that dog crap over the fence into her yard!
But without even checking his Caller ID, The Mogambo picks up the phone on the first ring, and yells into the receiver, "That´s a hell of a lot of inflation, dude!"
So, given this demonstrated difference in level of service, who you gonna trust, me or the Federal Reserve?
Now before you answer, let me tell you that the Cleveland Fed President, Sandra Pianalto, has joined a number of other despicable, lowlife, lying pieces of Federal Open Market Committee garbage, in that she has come out as supporting a Fed inflation target, which translates into her and those other Rabid Monsters From Monetary Hell (RMFMH), actually wanting the Federal Reserve to maintain a constant, simmering inflation! And yet the Congress, always sticking their noses into everything and are always calling witnesses and inviting testimony and strutting around like they are such hot stuff, are forgetting that the damn private banks who have all banded together and called themselves the Federal Reserve are given the responsibility to achieve "price stability" as part of their damn mission! That is one of their expressed and explicit duties! That is why they are supposed to do! And yet here are these Fed morons actually saying they want to do the one thing that is guaranteed to cause suffering; create inflation!
I know that you are incredulous, and could not imagine anyone connected with the Federal Reserve, or claiming to know the first thing about economics, would actually admit that they are so insane or stupid that they want to purposely create inflation. I was ready for you skepticism! Here are her very own words. "My view", and notice that she says it without the least bit of shame in her voice, "is that the rate of inflation should average about 1.5 percent as measured by the Personal Consumption Expenditure index, over periods of about three to five years."
See? That´s her talking! She´s actually saying it! If the American people were not so ignorant, thanks to the abysmal and manipulated school system, about the horrors of inflation (and how what you really want is gently falling prices because then everyone would have a rising standard of living, and that is the whole freaking point), they would be brandishing flaming torches and storming the Cleveland Federal Reserve Bank, running this Pianalto bozo and all her creepy little cronies out of town, and then spending the rest of the day leaning out of the windows, waving to the adoring crowds, and having a big party, now that they are National Heroes and they have saved our money from a planned 1.5% per year loss in buying power! The crowd goes wild! Yayyyyyy!
But if Ms. Pianalto gets her way, and you better hope that she does not, then you better start kissing-up to your bosses in a more unctuous and toady way (and I recommend, “Gee, Mogambo! All your ideas are swell! You are not as stupid as everyone says!" and "I´m not going to finish this chocolate donut. Do you want it the rest of it, Mogambo?"), as you have to find a method to increase your income by at least 3% a year just to stay even with the rise in prices, as you buy stuff with after-tax dollars, and so you need at least 1.5% more after-tax money to pay the higher prices.
But while I am not sure how we digressed, I am sure that we started off talking about the coming devaluation of the dollar and how my mind is screaming in fear and my whole life is flashing in front of my eyes as I clearly see our destruction looming, looming, looming before us. For one thing, ceteris paribus again, oil ought to cost 6% more, or about 13 cents more per gallon.
The reality is that to move the peg to Rmb7.8 to the dollar from 8.3 means that they are raising prices to the world´s best customer! And not only that, but the gigantic hoard of American debt and assets, that the Chinese government and the Chinese citizens now own, will be worth 6% less yuan in one year! I know what you are thinking. You are laughing and going "hahahaha" at the Chinese idiots who thought that buying all that American debt and equities was such a smart move! And if you REALLY want a big laugh, then if interest rates also rise in the year, they will lose an additional big chunk of change on top of that, as their American bonds will go down in price! Hahahaha! They could easily be looking at a 50% loss on their investments that totals to a huge, whopping huge, gigantically huge loss of wealth! Hahahaha! Chinese chumps!
Bill Bonner of the Daily Reckoning says he already knows that 1) we have inflation in the USA and almost everywhere in the world, and that 2) the Chinese are going to suffer losses due to a devaluation of the dollar, and 3) he certainly doesn´t need a nitwit like me to call him up to tell him either of those things. Then I innocently ask, "Then what DO you need a nitwit to call you up about?" But instead of answering me, he sums up the inflation and dollar-devaluation thing with the pithy, "U.S. standards of living must fall; foreign lenders must get stiffed."
Market Nugget.com notes that the allure of gold in these uncertain times not quite unique to America, as you have no doubt erroneously heard. They say, "Since 2001 gold has increased in value against the US dollar, the Euro, the Yen, the Canadian dollar, the Pound, and the Swiss Franc. Gold now appears to also be starting to strengthen against the South African Rand, previously the strongest currency." Now, I can hear you saying to yourself, "This is all well and good, but tell me, mighty Mogambo (MM), how does that affect me, the American homeowner with an SUV, 1.5 kids, debt out the wazoo, a monster mortgage that could choke a pelican, and a serious drinking and drug problem?"
I´m glad you asked! This is the perfect time to introduce a lesson in values. If you had accumulated gold all these last few years, especially back when it was actually under $270 an ounce, see, instead of accumulating an SUV, 1.5 kids and a crippling mortgage, you would be sitting on a HUGE pile of gold, and thus a HUGE pile of capital gains, and then you could afford to buy a house outright, and have lots of money left over, which would give you a lot of spare time, which you could use to produce the 1.5 children in your palatial master bedroom, instead of in the backseat of your parent´s car. And it gets even better for people who own gold, or are anticipating owning some, when he says, "Although the price of gold in the different currencies has fluctuated, the long term trend is still up."
Speaking of gold, in one of the more unusual bits of news of late is that the United States Mint announced that it will manufacture pure gold, 24-karat, un-circulated, "gold bullion investment" coins. They hope to get this thing up and going sometime in, so they say, early 2006. This will be, according to various articles, the first time that the United States Mint has ever produced 24-karat gold coins.
This fits in perfectly with a lot of the email I am getting lately, where the prospect of the US government again confiscating everybody´s gold looms heavy on their minds. Some say yes, some say no, some (me) say it is only a matter of time before those who say "no" start saying "yes", because if there is one thing that I know for a fact, it is that the Constitution-shredding, lying, despicable FDR was not an aberration, but is emblematic of everything horrible about government, and they will stop at nothing to keep their Big Government socialist system from collapsing under its own bankrupting weight. And the idea of the government getting into such desperate shape that they declare a national emergency of some kind, and that they own everything, especially gold, is almost certain.
But they have to give you dollars for the gold, so they can make the argument that they aren´t screwing you out of anything, although they are making you take dollars in exchange for your gold, and then the government goes on debasing the dollars. So in the end, they ARE screwing you! See? I TOLD you that they are out to get us!
So, is this the scenario? The government starts flooding the world with these new gold bullion coins, created from the gold that they are still holding from FDR´s confiscation? Which drives down the price of gold? Which gives them cover for their own inflationary ambitions, because they can now say, "There is no inflation! If there was, then gold would be rising! But look! It is not!"? Plus, they make a few bucks on the deal? Then, one day, they stop, thus driving up the price of gold? Which they then confiscate again? And then you are supposed to use those dollars you got in the exchange to resuscitate the economy by spending it? Sounds about right to me!
The trade deficit over the last twelve months (to February) has ballooned to $693 billion, which almost certainly means that we will be going over the 700-billion mark pretty soon, if not already. This is a hell of a lot of stuff! This is about $2,400 for every freaking man, woman and child in the whole country! What´s worse, this is about $7,000 for everybody who has a freaking non-government job in the whole country! All of these people are going off to their boring, horrible little jobs and working eight, nine or ten hours a day, every damn day, alongside horrible little co-workers who are always accusing you of stealing their lunch from the refrigerator, but who won´t lend you any money to go buy any lunch of your own, so who is REALLY the victim here? But they have to pay their higher taxes, and their higher housing costs, and buy higher-priced food, and pay for the depreciating cars, and pay, pay, pay for every damn thing in the whole damn world out of one lousy little paycheck. And after all of THAT, they are supposed to STILL have $7,000 left over to buy imports?
But it is going to get worse and worse for these people, as the Washington Post notes "Treasury Secretary John W. Snow called on China to stop pegging its currency to the dollar, a reform intended to allow the Chinese currency to rise, easing the flood of cheap exports that contributes to the record U.S. trade deficit."
So how does the Chinese not pegging its money to the dollar ease the flood of imports, and thus reduce the level of imports? I leap to my feet and wave my hand enthusiastically in the air! This is an easy question! Call on me! Let me answer this one! So the teacher calls on me, and everybody groans. I rise to my feet in my best John Wayne impersonation, and I drawl, "Because everything will cost more, pilgrim! So while you are still spending the whole $7,000, you get less stuff!" The teacher´s jaw dropped open, and the whole class breaks into spontaneous applause because The Mogambo finally got one damn question right! Even though we are spending just as much money (all of it), we are getting less stuff, and so our standard of living has fallen. Damn! No wonder I am real sullen here lately.
But to show you that he was just kidding, Mr. Snow then says, "at the same time" according to the article, "promised cuts in the U.S. budget deficit." Hahahaha! Somebody in the Bush White House is saying that the budget deficit will be cut? Hahahaha! Anyway, he figures that cutting the budget deficit "would reduce the nation´s consumption, including the consumption of imports." And although he does not say it, and the Post does not say it, this cutting of the deficit would necessarily be accomplished by, obviously, cutting people´s incomes, as all of that deficit is actually somebody´s current income. And so these people would be forced to consume a LOT less stuff, both because their incomes are lower and because things cost more at the same time, including things like food and gasoline and donations to the Mogambo Oil For Food program (modeled on the famous United Nations program which was a bonanza for insiders), and then I would have to declare bankruptcy and fire everybody and skip out of town in the middle of the night with all the money. Again.
Mr. Snow, and remember that he is the Secretary of the Treasury, so you would think he would comprehend this stuff, thinks that Japan and the European Union should be urged to "promote growth, which would suck in U.S. exports." And hopefully suck in the current level of exports that the USA will no longer be importing with heretofore gusto, because if we ain´t buying, then somebody has to.
And that is one hell of a lot of stuff to suddenly buy! It is so much stuff that you could fill up a line of shopping baskets so long that could reach out of the supermarket, down the street, all the way to Disney World, down to South Beach in Miami to gawk at the freaks, up to Daytona beach for a couple of beers, then back across to Tampa, across the bridge, down to 54th, up the street, into my driveway, and still scratch my car.
So who is going to buy all of this stuff? Hell, the entire euro area is only showing a trade surplus of $82 billion, and this is with Germany, the worlds largest trade-surplus nation, showing a whopping $198 billion surplus all by itself. Japan and China-- combined! --only show a surplus of less than $200 billion. So who in the hell is going to step up their economies to even start to absorb even a tiny fraction of the amount of the $700 billion of stuff that we Americans now import? Hahahaha! And then, on top of that, they are going to also suck up increased American exports, too? Stop! Stop! My sides hurt from laughing!
E.R. Maybury, in the Mar-Apr 2005 issue of his Early Warning Report, notes, "Every major war Washington has ever gotten into has produced inflationary trends. This means, for speculators, wartime is as close as it gets to a no-brainer." So the way to make a few bucks on this is to invest in those areas that benefit from inflation? A nice piece of investment advice! And the good news is that you don’t even have to be in a hurry, because you have all the time in the world to get your money invested in things that will benefit from inflation, as he concludes, "The 1990s were the decade of high tech. Next, I am afraid, will be the decade of war." And thus, I assume, the decade of inflation. And profits from owning the stocks of companies that make war materiel, too.
The Bureau of Labor Statistics has released the Consumer Price Index (CPI) report. From Bloomberg we read "Overall U.S. consumer prices rose 0.6 percent last month, the Labor Department said in Washington. Core prices, which subtract food and energy, rose 0.4 percent."
Yahoo News did a little research, and noted that the "worrisome" 0.4 percent rise in the core rate of inflation was "the largest jump in 2 1/2 years."
Couple this inflation news with the stagnant economy, and it is no wonder that we read two back-to-back paragraphs from AP about stagflation. "Economists said the new inflation report was likely to raise worries at the Federal Reserve because of price pressures becoming evident outside of the energy area" and "The higher inflation pressures are coming at a time when a number of reports in recent weeks have shown economic weakness, from a disappointing employment rise in March to lower-than-expected retail sales".
Then AP provides a quote from a guy from the old school of economics, David Wyss, chief economist at Standard & Poor´s in New York, who says, "We are getting slower growth and higher inflation numbers. The Fed would like to keep interest rates low to keep the economy moving but on the other hand they have to fight against inflation."
See how this is so old school? The Fed does NOT have to fight against inflation any more! In fact, as this Pianalto butthead has said, she and other jackasses in the Federal Reserve WANT inflation!
George Ure takes us a little farther into the report when he says. "Buried further into the news release is word that health care for the first three months of this year was increasing at a 10.3% clip and energy commodities, like gasoline, were up 39.6%"
Okay, now what happened? I mean, here is the government, which is doing everything it can to disguise and deny inflation, and yet their best efforts STILL resulted in inflation that made the poor Mogambo (TPM) run screaming into his little steel-reinforced concrete bunker, put on that stupid aluminum-foil hat, and start feverishly loading fresh ammo into the Mogambo Self-Defense System (MSDS), which is centered around firepower that emphasizes caliber, as in "large", and I am not going to get into any of that whole Freudian thing about how, deep down inside, this is my pathetic way of trying to compensate for my feelings of inadequacy because, although it is true, I just don´t like discussing it, and I would rather talk about how I was raised by wolves, who do not have any firepower at all, putting them at a severe disadvantage that exists to this day, and there is a Mogambo Lesson In Nature (MLIN) in there, if you take the time to look.
But we were not talking about any of that, but we were talking about was how the inflation report came out, and it was horrible. But, like some mondo bizzarro mass hysteria, bonds went up in price! Guys were bidding up the price of bonds in some insane buying frenzy! I can close my eyes and imagine them climbing all over each other to buy bonds, driving up their prices, which gives them a lower yield, at the same time, no, make that at the EXACT SAME FREAKING TIME as the inflation report shows that every dollar in existence will buy less! They are deliberately losing wealth to inflation!
Suppose that a bond costs a hundred dollars, and it gives you 4% interest. So, at the end of each year, the bond issuer will pay you the four bucks, in cash. Hey! Neat! So, after waiting an entire year, you can buy four bucks worth of stuff and you (theoretically) still have your original hundred bucks! Buy yourself something nice! I recommend something fried, like a nice juicy hamburger. In fact, make it a double! And the good news is that you can get a Big Double-Chubby Combo burger-- with fries! --down at Eddies Easy Greasy Grub ("High-class chow!") for four bucks! This is going to be sooOOOooo sweet!
Now, continuing our happy tale, after the year is up, which you spent moaning and groaning because you spent the hundred bucks on that damn bond and if that interest check doesn´t get here soon I am going to go wring my four bucks out of somebody´s neck because I really could use a little cash right now. But every day, it´s the same thing; you meet the mail carrier at the mailbox. There is no check. You accuse her of stealing your check. She denies it. I tell her she is a filthy lying thief. She sprays me with Mace, and the next thing I know she is storming off in a huff. So I brightly say after her, "See you tomorrow!" and she makes a rude hand gesture, showing everyone that postal workers are a rude bunch of people.
But then, one day, your ears prick up at that unmistakable sound of something dropping into your mailbox! You run out! She sees you coming and she takes off, trying to spray Mace at you over her shoulder! Tears of joy come to your burning eyes and you drop to your knees in grateful thankfulness, because there, right there in the mailbox, sitting on top of all those "Final Notice" and "Payment Overdue" letters, is the check! The money came!
So, quick as a bunny, you jump in the car and make a high-speed run down to the bank and cash the check. Four bucks! In cash! Yahoo! Running out to your car, you drive like some demented demon from hell to get something to eat, and then it strikes you, "That double hamburger that The Mogambo recommended sounds mighty, mighty tasty!" So swerving to take the 42nd Street exit, you go down Hoffner to 66th Street, though the alley, hang a left, go two blocks, and it´s there on your left! You can´t miss it!
Sure enough, suddenly, there it is! Eddie´s Easy Greasy Grub restaurant! Yanking the steering wheel over, you screech into the parking lot with tires squealing, motor racing, and pedestrians scampering. You park, run to the counter and declare to the cashier, "Gimme a Big Double-Chubby Combo with everything!" "Fine!" she says. "That will be five bucks, please".
"Five bucks?" you scream. "When the hell did a Big Double-Chubby Combo cost five bucks? They cost four bucks just last year!" and she says, all snotty like (and to tell you the truth I don´t understand what Eddie sees in her), "We had to raise prices in the last year, and now the Big Double-Chubby Combo is five bucks. You want it or not, jerk?" and I say "Yes I want it, you stupid fat cow, that´s why I came down here and ordered one! But I only have four bucks!" and so she laughs in my face, and that makes me so mad that it takes every bit of Mighty Mogambo Willpower (MMW) I can muster to keep myself from reaching out and slapping her smirking little face, and not because I am averse to slapping the old bag, but because she´d jump over that counter and beat the hell out of me again, which is embarrassing and painful. Mostly painful. She says that I can still get a lousy Big Double-Chubby sandwich for four bucks, but no fries.
So what have we learned? We have learned that if you are going to loan money, then the smart thing to do would be to make sure that you at least charge enough interest so that you can stay ahead of inflation. And if you want to be really smart about it, you charge enough interest so that you not only stay up with inflation, but maybe make a little extra, so that when you get that annual interest check in the mail, you can stroll into Eddie´s Easy Greasy and order not only a Big Double-Chubby Combo, but also get a nice Biggie Beverage, and still have enough left over to leave her a tip, which you won´t, because you hate her guts and she hates yours.
But these "investment professionals" that are supposed to be so smart (and that is why you are letting them manage your retirement account), are doing the exact opposite of this! As prices rise, as the purchasing power of the dollar falls, they are locking themselves into getting less money by buying bonds at these lower yields! Of course, all this buying makes the price of bonds go up, but it does not affect you, since you bought your bond last year. But if interest rates rise in response to this rise in prices, your bond, which you bought for a hundred dollars, will now be only worth $80 or so! Hahahaha! Chump! And your income stream will still be that same four lousy bucks a year, for the next thirty years! Hahahaha! Pretty soon you won´t even be able to afford a lousy bag of fries, which will rise and rise in price until THEY cost four bucks, all by themselves! Hahahaha! Welcome to the world of inflation, dude!
And yet here are these people, and I again use the phrase "investment professionals" in a decidedly derogatory fashion, are financially killing you faster by doing the exact opposite of what rational people, people who actually know what they are doing, do! It´s astonishing! And yet, there it was, right in front of my eyes, as I watched in rapt fascination, munching on, as if you had to guess, a Double-Chubby hamburger, watching these guys purposely lose wealth. What a weird world!
The National Legal Debt Centers notes that the rise in inflation and interest rates are not such good news, as, "Interest rates are starting to increase and many homeowners are finding themselves falling behind with their mortgage payments." This is reflected in the number of people who can´t make their mortgage payments, which, according to Foreclosure.com, is up, as the number of "Foreclosure listings nationwide went up 50% from February to march 2005." Numbers-wise, they say, "Over one million Americans were late on their mortgage payment last month and half went into foreclosure."
Part of the explanation for this may be found in an interesting essay entitled "America´s riotous real estate" by Mike Davis, "The great American housing bubble, like its obese counterparts in the United Kingdom, Ireland, the Netherlands, Spain and Australia, is a classical zero-sum game. Without generating an atom of new wealth, land inflation ruthlessly redistributes wealth from asset-seekers to asset-holders, reinforcing divisions within as well as between social classes." So, buying over-priced houses does not create any new wealth, but only new debt? And this is NOT going to end badly? Hahahaha! Where in the hell have I been all these years not to have learned this? Hahahaha!
Richard Russell offered, "One more tidbit -- How much does the public love gold? Central Gold Trust of Canada is now selling at a 4.5% DISCOUNT from its actual gold holdings. That will change, count on it." Shares of a gold fund are selling at a discount to actual gold holdings, and his whole 40-plus years of career in being mostly right about the market is telling you that "this will change" and you are NOT buying shares of Central Gold Trust of Canada to lock in what must be a profit? Why not? Oh, right! Like me, you don´t have any money. But if you HAD some money, you´d buy the shares, right? Me, too!
An interesting bit of information comes from the Turov On Timing newsletter, where he has looked at what happened when the stock market in other Januaries have been down, and there have been six of them since 1953. "In all six cases, the SP500 has declined over the remaining eleven months, for an average decline of 9.21%". Now, I am probably not like you, because you are brave and fearless, but when something happens every time, a little bell goes off in my head, and I just can´t shake the idea that the same thing will happen again.
I watched some of Alan Greenspan´s testimony before the Senate Budget Committee last Thursday, and if you want proof that these people are morons, I can sum the entire thing up for you: They have no clue. They think that they can, by careful questioning, tease out of Greenspan some fabled middle ground, where taxes are not raised, yet spending is increased, and everything will work out just fine. Like I said; morons.
The housing market, as it eventually had to, is perhaps showing signs of cooling off, as evidenced by housing starts falling by 17.6% in March. But untold hundreds of billions and trillions of dollars have been created out of thin air and washed into the economy via being spent on houses, and the sellers got some and spent some, and the mortgage brokers got some and spent some, and the real estate agents got some and spent some, and everybody got a little piece of the action, and the excess eventually worked its way into the stock and bond markets, creating inflation in those assets, too. In the end, people who were up to their eyeballs in debt are now up to their eyebrows in debt, but the aggregate spending level of the whole country was artificially held up for awhile.
In the same housing vein, on the Economist.com site we got the report entitled "Will the Walls Come Falling Down?" which is a kind of a play on words or something, I guess, since it has to do with houses, which have walls, but I don´t know, as I was never any good at that kind of literary symbolism thing, if that IS what it was. But then again, I don’t know, because, as I have already admitted, I was not very good at that kind of thing, so why in the hell don´t you just leave me alone and quit picking at me, always picking, picking, picking at me about it? Are you looking for a fight or something? Is that what you want? Huh? You want a piece of The Mogambo? Is that what you want, punk?
But that is not what they wanted, thank God! They wanted to tell us about how houses affect the GDP of a country. They write, "It is probably not a coincidence that Germany, one of the few European countries where house prices have not been rising, fared far worse during the slowdown than its neighbors or America. Unfortunately, when housing markets decline, the same process works in reverse: consumers have to cut back their spending and save more to compensate for lost home equity. Lower consumer demand generally means a slowdown in GDP. The sharper the correction, the greater the effect on the overall economy."
If that was not enough to scare you, the article went on to say, "An IMF study on asset bubbles estimates that 40% of housing booms are followed by housing busts, which last for an average of four years and see an average decline of roughly 30% in home values." And what happened to the other 60% of housing booms? Well, obviously they just petered out. So the lesson is clear that in 100% of housing booms, a few people made money, but most people either lost money or did not make any money. And you call this "investing?" Hahahaha!
And speaking of bubbles, let´s not forget that the Nasdaq bubble stands at only 60% of its peak value five years ago! A dollar invested at the top is now only worth forty cents! Hahahaha! The Dow and The SP500 are also off from their peaks of years ago, too. And now they think that housing will be the bubble that never bursts? Hahahaha! I can´t help myself! I gotta laugh! Hahahaha!
There may be many reasons why the real estate market and continual profligate consumption that defines America has not collapsed in flames, but one of them is not because of rising wages, as wages have been lagging price inflation for at least a year now. In fact, the Labor Department said, "Average real weekly earnings fell 0.3% in March and 0.5% in the past 12 months. Increases in average hourly pay for 80% of U.S. workers have not matched the increase in prices." Now, anybody who knows me knows that I am probably the biggest idiot on the planet, and that is why I am not able to comprehend how it is that some fabulous robust economic growth is going to happen when people are only able to buy less and less stuff. Maybe magic or something, and my uncle James is going to pull a quarter out of somebody´s ear or something.
I heard that the CEO from Annaly Mortgage Management Inc (NLY) was on CNBC, and what he said reverberated around the net. He apparently said: "We are witnessing a slow motion car wreck in credit. GM was just the first to go through the windshield." Hahahaha! But the bigger joke is that General Motors is going to throw itself a lifeline by tapping the $6 billion in the retirement fund of employees.
From MarketNugget.com we get a nice tip on how to play the technical timing game. They says that the glossary on the Stockcharts.com site describes the VIX as "The Market Volatility Index (VIX) measures the volatility of the market. Traders use the VIX as a general inverse indicator of market volatility and sentiment. High numbers mean that there´s excess bearishness, and low numbers indicate excess bullishness."
Well, as good as this is, it gets better. "Extreme lows in the VIX are often followed by periods of increased volatility and some corrective action in stock prices." So, what we want to do, as I understand it, is wait for these of "extreme lows" in the VIX, and then go short the market! So where are we now? They say we are there! "Recent readings in the 11-12 range can be considered extreme lows."
And apparently you can even use the VIX to time whipsaw action in the markets, as they explain, "In periods when stock prices go one way and the action is not confirmed by the opposite direction in the VIX, it often means stock prices will reverse."
I had a few frequent-flyer miles from an airline, I forget which one, but I DO remember that all the damn airlines seem to have some "policy" against letting drunk and abusive passengers get MORE drunk and abusive, and it always involves the co-pilot coming back to my seat and kicking me in the groin for some reason, although NONE of them is able to show me where it actually says that in writing. But the miles had gone bad, see, now that I don’t fly much, not that I don´t want to, you understand, but if YOU think it is easy getting on an airplane with one of these Justice Department ankle-monitor alarms beeping like crazy and people supervising my Community Service sentence are screaming, "Stop that man!", then you must be a rookie to the system. But instead of just cheating me out of my frequent-flyer miles, I was offered the opportunity to subscribe, absolutely free, to some magazines for, apparently, about six months.
So you can imagine my delight when I got, in the mail, Money magazine, because on the cover is a photo of two people, one standing, one sitting, on either 1) a beige shag rug that is covering something, or 2) a congealed mound of puffed rice or wheat or something, I´m not sure which. But there is no explanation or hint of it anywhere in the magazine, and I know because I looked.
But this is not about how Money magazine is covering up some dreadful secret with an old rug, almost surely in violation of some little-known provision of the Patriot Act, and it wouldn’t surprise me a bit to learn that the Homeland Security Department is already on the case. But this is about these two people posing on the cover. One is a pretty young Asian-American woman and the other is a handsome Hispanic-American male, ditto on the young side, for which I am both jealous and hateful, as MY youth is far behind me and these two complete strangers are showing off how they are still young and beautiful and apparently rich! It´s not fair! They are, I assume, the pictorial representation of the magazine´s feature article, "Getting rich in America. The strategies that work now. P 98".
You can imagine my excitement as my trembling fingers scrambled to turn to page 98. "Getting rich in America"! Man! These guys are talking my language! I am already IN America, so I already have something going for me as I save those transportation costs! This is going to be so great! Upon reaching page 98, I quickly scan the article. I scan it because, although I would certainly like to be rich, I´m an American, and as such I don´t want to waste ten whole minutes of my valuable time actually reading some dumb article. I want it now! I want everything now! But I quickly find out that if I want to be rich, (and you might want to write this down, because it was the thrust of the featured article in the magazine, so it must be important!), I should get more education, speculate in houses, and start my own business. Man! That IS easy! Golly! Thanks, Money magazine!
But although the advice was mere pedestrian fluff, towards the end of it, we get this interesting paragraph. "So does that 1999 way of getting rich, the stock market, matter anymore? Yes, but definitely not as a quick way to wealth. One of the reasons that people thought you could get rich in a hurry buying stocks a few years ago was the many people did. The S&P500 returned about 28% a year for the five years that ended in 1999. That party, of course, is long over."
Wow! This is Money magazine declaring, as an apparently a commonly-acknowledged fact (as I glean from their use of the phrase "That party, of course, is long over"), that the stock market is a loser, as a way of getting rich quickly, anyway. But if you take the speculative money out of the market, what is left to cause the froth that sends prices up so high? And how can they be held at these heights without that speculative money?
A guy named Sam Vaknin, Ph.D. has written "The Bursting Asset Bubbles - Introduction (Part 1)" on the GlobalPolitician.com site, and it is a nice essay about how bubbles in assets are not new, they always burst, and many other bad things about bubbles, and that is why you never read of anybody but central bankers waxing ecstatic about bubble economies and how they love to foster bubble economies, and that is why they cannot recognize that a bubble is a bubble (and that is why they continue financing them) until after it bursts (when they will step up their financing of them to prevent "deflation" of the bubble).
He says as much when he notes, "Ponzi and pyramid schemes have been a fixture of Western civilization at least since the middle Renaissance." To prove it, he notes that the famous tulip-mania happened in 1634.
And these get-rich-quick schemes are still happening, and one of them was in Israel, as "More than one fifth of the population of 1983 Israel were involved in a banking scandal of Albanian proportions. It was a classic pyramid scheme. All the banks, bar one, promised to gullible investors ever increasing returns on the banks´ own publicly-traded shares.
"These explicit and incredible promises were included in prospectuses of the banks´ public offerings and won the implicit acquiescence and collaboration of successive Israeli governments. The banks used deposits, their capital, retained earnings and funds illegally borrowed through shady offshore subsidiaries to try to keep their impossible and unhealthy promises. Everyone knew what was going on and everyone was involved. It lasted 7 years. The prices of some shares increased by 1-2 percent daily."
So people were getting rich, and a fifth of the population was now involved in it, all of them trying to get rich. Then, "On October 6, 1983, the entire banking sector of Israel crumbled. Faced with ominously mounting civil unrest, the government was forced to compensate shareholders. It offered them an elaborate share buyback plan over 9 years. The cost of this plan was pegged at $6 billion - almost 15 percent of Israel´s annual GDP. The indirect damage remains unknown."
This is not about how Israel is full of people who will fall for a Ponzi scheme, as EVERY country is full of people who will fall for a Ponzi scheme. Why do they do this, you ask? Search me, but the author concludes, "People know that they are likelier to lose all or part of their money as time passes. But they convince themselves that they can outwit the organizers of the pyramid, or that their withdrawals of profits or interest payments prior to the inevitable collapse will more than amply compensate them for the loss of their money. Many believe that they will succeed to accurately time the extraction of their original investment based on - mostly useless and superstitious - ´warning signs´."
But it is more than people acting like idiots. He goes on to say, "Investments by households are only one of the engines of this first kind of asset bubbles. A lot of the money that pours into pyramid schemes and stock exchange booms is laundered, the fruits of illicit pursuits. The laundering of tax-evaded money or the proceeds of criminal activities, mainly drugs, is effected through regular banking channels. The money changes ownership a few times to obscure its trail and the identities of the true owners." People are laundering money in these schemes, too!
But this is not about Ponzi schemes and how people are so stupid that they fall for these idiotic scams time after time and never seem to learn, or how criminals are laundering money, nor is this about how governments using a fiat currency is the biggest Ponzi scam of all, and how we never seem to learn from this either, although it is obvious that every other idiot government in the history of idiotic governments have always started spending too much, and they all resorted to one currency-debasement scheme or another in their dire desperation, that they thus destroyed the currency, and then that destroyed their country.
No, the REAL lesson that I wanted to note was that the government stepped in to bail them out! The winners won, and the government paid back the losers! Which unleashed not only inflation, as the money supply rose, but more stupidities, too!
And speaking of government stupidities that are unleashing more idiocies, United Airlines in unloading its busted pension fund, and sticking it in the PBGC (Pension Benefits Guarantee Corporation), even though the PBGC is itself already $23 billion in the hole from the OTHER busted pension funds that it absorbed! Part of the pain will be felt by the people covered by the plan, as their total promised benefits will be cut by almost a third ($3 billion), but the rest of it will, theoretically, be borne by everybody, as the government sells bonds to pay the retirees through the PBGC, which drives up the money supply, which makes inflation rise, which makes everything worse for everybody. Especially when the other airlines find they cannot compete with the deadweight of THEIR retirement plans. Ugh.
*** The Mogambo Sez: One of the new heroes is John Ruiz Dempsey, who has filed a class action lawsuit against banks "on behalf of the People of Canada alleging the financial system creates money out of ´thin air´." The lawsuit argues, according to FreeMarketNews.com, that "financial institutions illegally charged interest on money that was loaned to borrowers", as "Banks and credit unions did not actually have the capital that it gave as loans, and didn’t have the right to loan depositors’ money without obtaining consent. Furthermore, the lawsuit claims that money was counterfeited by digitally creating money that never existed."
He is right, of course. Likewise, his suit will fail, of course, as he does not have a prayer in trying to keep the banks and the government from having as much money as they want, to spend and play with as they want.
[link to www.dailyreckoning.com] |
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User ID: 2191
5/5/2005 12:01 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
If that was not enough to scare you, the article went on to say, "An IMF study on asset bubbles estimates that 40% of housing booms are followed by housing busts, which last for an average of four years and see an average decline of roughly 30% in home values." And what happened to the other 60% of housing booms? Well, obviously they just petered out. So the lesson is clear that in 100% of housing booms, a few people made money, but most people either lost money or did not make any money. And you call this "investing?" Hahahaha!
And speaking of bubbles, let´s not forget that the Nasdaq bubble stands at only 60% of its peak value five years ago! A dollar invested at the top is now only worth forty cents! Hahahaha! The Dow and The SP500 are also off from their peaks of years ago, too. And now they think that housing will be the bubble that never bursts? Hahahaha! I can´t help myself! I gotta laugh! Hahahaha!
There may be many reasons why the real estate market and continual profligate consumption that defines America has not collapsed in flames, but one of them is not because of rising wages, as wages have been lagging price inflation for at least a year now. In fact, the Labor Department said, "Average real weekly earnings fell 0.3% in March and 0.5% in the past 12 months. Increases in average hourly pay for 80% of U.S. workers have not matched the increase in prices." Now, anybody who knows me knows that I am probably the biggest idiot on the planet, and that is why I am not able to comprehend how it is that some fabulous robust economic growth is going to happen when people are only able to buy less and less stuff. Maybe magic or something, and my uncle James is going to pull a quarter out of somebody´s ear or something.
I heard that the CEO from Annaly Mortgage Management Inc (NLY) was on CNBC, and what he said reverberated around the net. He apparently said: "We are witnessing a slow motion car wreck in credit. GM was just the first to go through the windshield." Hahahaha! But the bigger joke is that General Motors is going to throw itself a lifeline by tapping the $6 billion in the retirement fund of employees.
From MarketNugget.com we get a nice tip on how to play the technical timing game. They says that the glossary on the Stockcharts.com site describes the VIX as "The Market Volatility Index (VIX) measures the volatility of the market. Traders use the VIX as a general inverse indicator of market volatility and sentiment. High numbers mean that there´s excess bearishness, and low numbers indicate excess bullishness."
Well, as good as this is, it gets better. "Extreme lows in the VIX are often followed by periods of increased volatility and some corrective action in stock prices." So, what we want to do, as I understand it, is wait for these of "extreme lows" in the VIX, and then go short the market! So where are we now? They say we are there! "Recent readings in the 11-12 range can be considered extreme lows."
And apparently you can even use the VIX to time whipsaw action in the markets, as they explain, "In periods when stock prices go one way and the action is not confirmed by the opposite direction in the VIX, it often means stock prices will reverse."
I had a few frequent-flyer miles from an airline, I forget which one, but I DO remember that all the damn airlines seem to have some "policy" against letting drunk and abusive passengers get MORE drunk and abusive, and it always involves the co-pilot coming back to my seat and kicking me in the groin for some reason, although NONE of them is able to show me where it actually says that in writing. But the miles had gone bad, see, now that I don’t fly much, not that I don´t want to, you understand, but if YOU think it is easy getting on an airplane with one of these Justice Department ankle-monitor alarms beeping like crazy and people supervising my Community Service sentence are screaming, "Stop that man!", then you must be a rookie to the system. But instead of just cheating me out of my frequent-flyer miles, I was offered the opportunity to subscribe, absolutely free, to some magazines for, apparently, about six months.
So you can imagine my delight when I got, in the mail, Money magazine, because on the cover is a photo of two people, one standing, one sitting, on either 1) a beige shag rug that is covering something, or 2) a congealed mound of puffed rice or wheat or something, I´m not sure which. But there is no explanation or hint of it anywhere in the magazine, and I know because I looked.
But this is not about how Money magazine is covering up some dreadful secret with an old rug, almost surely in violation of some little-known provision of the Patriot Act, and it wouldn’t surprise me a bit to learn that the Homeland Security Department is already on the case. But this is about these two people posing on the cover. One is a pretty young Asian-American woman and the other is a handsome Hispanic-American male, ditto on the young side, for which I am both jealous and hateful, as MY youth is far behind me and these two complete strangers are showing off how they are still young and beautiful and apparently rich! It´s not fair! They are, I assume, the pictorial representation of the magazine´s feature article, "Getting rich in America. The strategies that work now. P 98".
You can imagine my excitement as my trembling fingers scrambled to turn to page 98. "Getting rich in America"! Man! These guys are talking my language! I am already IN America, so I already have something going for me as I save those transportation costs! This is going to be so great! Upon reaching page 98, I quickly scan the article. I scan it because, although I would certainly like to be rich, I´m an American, and as such I don´t want to waste ten whole minutes of my valuable time actually reading some dumb article. I want it now! I want everything now! But I quickly find out that if I want to be rich, (and you might want to write this down, because it was the thrust of the featured article in the magazine, so it must be important!), I should get more education, speculate in houses, and start my own business. Man! That IS easy! Golly! Thanks, Money magazine!
But although the advice was mere pedestrian fluff, towards the end of it, we get this interesting paragraph. "So does that 1999 way of getting rich, the stock market, matter anymore? Yes, but definitely not as a quick way to wealth. One of the reasons that people thought you could get rich in a hurry buying stocks a few years ago was the many people did. The S&P500 returned about 28% a year for the five years that ended in 1999. That party, of course, is long over."
Wow! This is Money magazine declaring, as an apparently a commonly-acknowledged fact (as I glean from their use of the phrase "That party, of course, is long over"), that the stock market is a loser, as a way of getting rich quickly, anyway. But if you take the speculative money out of the market, what is left to cause the froth that sends prices up so high? And how can they be held at these heights without that speculative money?
A guy named Sam Vaknin, Ph.D. has written "The Bursting Asset Bubbles - Introduction (Part 1)" on the GlobalPolitician.com site, and it is a nice essay about how bubbles in assets are not new, they always burst, and many other bad things about bubbles, and that is why you never read of anybody but central bankers waxing ecstatic about bubble economies and how they love to foster bubble economies, and that is why they cannot recognize that a bubble is a bubble (and that is why they continue financing them) until after it bursts (when they will step up their financing of them to prevent "deflation" of the bubble).
He says as much when he notes, "Ponzi and pyramid schemes have been a fixture of Western civilization at least since the middle Renaissance." To prove it, he notes that the famous tulip-mania happened in 1634.
And these get-rich-quick schemes are still happening, and one of them was in Israel, as "More than one fifth of the population of 1983 Israel were involved in a banking scandal of Albanian proportions. It was a classic pyramid scheme. All the banks, bar one, promised to gullible investors ever increasing returns on the banks´ own publicly-traded shares.
"These explicit and incredible promises were included in prospectuses of the banks´ public offerings and won the implicit acquiescence and collaboration of successive Israeli governments. The banks used deposits, their capital, retained earnings and funds illegally borrowed through shady offshore subsidiaries to try to keep their impossible and unhealthy promises. Everyone knew what was going on and everyone was involved. It lasted 7 years. The prices of some shares increased by 1-2 percent daily."
So people were getting rich, and a fifth of the population was now involved in it, all of them trying to get rich. Then, "On October 6, 1983, the entire banking sector of Israel crumbled. Faced with ominously mounting civil unrest, the government was forced to compensate shareholders. It offered them an elaborate share buyback plan over 9 years. The cost of this plan was pegged at $6 billion - almost 15 percent of Israel´s annual GDP. The indirect damage remains unknown."
This is not about how Israel is full of people who will fall for a Ponzi scheme, as EVERY country is full of people who will fall for a Ponzi scheme. Why do they do this, you ask? Search me, but the author concludes, "People know that they are likelier to lose all or part of their money as time passes. But they convince themselves that they can outwit the organizers of the pyramid, or that their withdrawals of profits or interest payments prior to the inevitable collapse will more than amply compensate them for the loss of their money. Many believe that they will succeed to accurately time the extraction of their original investment based on - mostly useless and superstitious - ´warning signs´."
But it is more than people acting like idiots. He goes on to say, "Investments by households are only one of the engines of this first kind of asset bubbles. A lot of the money that pours into pyramid schemes and stock exchange booms is laundered, the fruits of illicit pursuits. The laundering of tax-evaded money or the proceeds of criminal activities, mainly drugs, is effected through regular banking channels. The money changes ownership a few times to obscure its trail and the identities of the true owners." People are laundering money in these schemes, too!
But this is not about Ponzi schemes and how people are so stupid that they fall for these idiotic scams time after time and never seem to learn, or how criminals are laundering money, nor is this about how governments using a fiat currency is the biggest Ponzi scam of all, and how we never seem to learn from this either, although it is obvious that every other idiot government in the history of idiotic governments have always started spending too much, and they all resorted to one currency-debasement scheme or another in their dire desperation, that they thus destroyed the currency, and then that destroyed their country.
No, the REAL lesson that I wanted to note was that the government stepped in to bail them out! The winners won, and the government paid back the losers! Which unleashed not only inflation, as the money supply rose, but more stupidities, too!
And speaking of government stupidities that are unleashing more idiocies, United Airlines in unloading its busted pension fund, and sticking it in the PBGC (Pension Benefits Guarantee Corporation), even though the PBGC is itself already $23 billion in the hole from the OTHER busted pension funds that it absorbed! Part of the pain will be felt by the people covered by the plan, as their total promised benefits will be cut by almost a third ($3 billion), but the rest of it will, theoretically, be borne by everybody, as the government sells bonds to pay the retirees through the PBGC, which drives up the money supply, which makes inflation rise, which makes everything worse for everybody. Especially when the other airlines find they cannot compete with the deadweight of THEIR retirement plans. Ugh.
*** The Mogambo Sez: One of the new heroes is John Ruiz Dempsey, who has filed a class action lawsuit against banks "on behalf of the People of Canada alleging the financial system creates money out of ´thin air´." The lawsuit argues, according to FreeMarketNews.com, that "financial institutions illegally charged interest on money that was loaned to borrowers", as "Banks and credit unions did not actually have the capital that it gave as loans, and didn’t have the right to loan depositors’ money without obtaining consent. Furthermore, the lawsuit claims that money was counterfeited by digitally creating money that never existed."
He is right, of course. Likewise, his suit will fail, of course, as he does not have a prayer in trying to keep the banks and the government from having as much money as they want, to spend and play with as they want.
[link to www.dailyreckoning.com] |
| Anonymous Coward
User ID: 815
5/5/2005 12:01 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
How to overcome TPTB and TEOTWAWKI
[link to www.learn-ecurrency-exchange.com]
Best Regards,
The poor and the oppressed have three reasons to stay poor and oppressed:
1. Fear
2. Ignorance
3. Laziness |
| FHL(C)
User ID: 2191
5/5/2005 1:34 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:
Will Oil Strike $380 a Barrel by 2015?
$14/gal at the pump?
April 21, 2005
By Adam Porter in Perpignan, France
Aljazeera
A steep rise in prices is expected due to growing energy demands
A report prepared by energy economists at the French investment bank Ixis-CIB has warned crude oil prices could touch $380 a barrel by 2015.
Analysts Patrick Artus and Moncef Kaabi said in the next 10 years demand for oil will outstrip supply by around 8 million barrels per day (mbpd).
"If one takes into account the level of previous oil shocks such as in the 1970´s, we don´t think a price level of $380 per barrel is out of the question," they said.
The analysts argued that the shortfall in energy needs would not be made up by alternatives as they were not developed as yet. "Thus the world will still need to rely upon traditional fossil fuels," their report said.
Growing demands
They also said existing new oilfield projects would not be enough to satisfy unprecedented growth in demand from developing economies, particularly China.
"We have taken into account every new oil discovery and potential source … as well as this we note the continuing situation of a fall in new field discoveries," the analysts said.
They pointed out China would contribute greatly to the world´s rising energy needs.
"Rapid movements of people from the Chinese countryside into the cities would increase the demand for housing, cars and general transportation. All of this will fuel energy consumption," the report said.
Economic juggernaut
Industrial production in China is also growing rapidly with no major signs of decline.
"The types of energy-intensive production in China are growing fast and forecasts also point to continued growth."
"Chinese economic development is at a stage where the amount of energy used is not yet recycled back into the economy. This has definitely been the case in recent times and this explains the sharp increases in China and other similar nations recently," Artus and Kaabi said.
"One could thus envisage a scenario where there is a near seven-fold increase in crude oil prices, whereby, adding annual 2.5% inflation ... we arrive at a price of $380 per barrel by 2015."
[link to english.aljazeera.net]
Personally i think China has enough coal for synthetic fuel if they have too, and enough bio alts for ethanol if they need too.
[link to freewordofgod.yuku.com] |
| .
User ID: 2191
5/5/2005 7:26 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Daily Forex Commentary
May 4, 2005
By Jack Crooks
Asia Times
Key News
Australia´s central bank kept interest rates unchanged for a second month. (Bloomberg)
Key Reports due Wednesday (WSJ)
10am: April ISM non-manufacturing index. Consensus: 61.2. Previous: 63.1.
Quotable
"The real secret of stock market success still remains (and probably will remain) locked up in the bosoms of a few who are too busy to write, and too rich to feel the need of writing." - Henry Howard Harper, The Psychology of Speculation
FX Trading
"Oops! Sorry. We forgot a little sentence. It reads, "Longer-term inflation expectations remain well contained." And another sentenced added even later by the Federal Open Market Committee (FOMC) that the press failed to notice was this, "PS, there really is a Santa Claus."
You gotta love it. Twelve grown economists on the FOMC pouring through every nook and cranny of US economic data - no stone left unturned in the pursuit of monetary policy to guide the masses. Yet, all 12 miss that sentence. It makes one wonder out loud: are these guys as clueless about the direction of the economy as everyone else?
The Wall Street Journal carried the reaction of several economists to the Fed statement Tuesday, our favorite came from Ian Shepherdson, High Frequency Economics:
The net effect of this is to make the Fed´s message a bit less stark, but the clear signal remains that (a) Rates are still too low (b) Inflation pressures are building and (c) The slowdown is nothing like severe enough to induce a pause in the rate hikes. Conspiracy theorists will likely have a field day with this bizarre turn of events [the additional sentence about inflation expectations and Santa Clause], but we think that old-fashioned human error is more likely the story.
So there we have it. To err is human. More validation for Milton Friedman´s suggestion on how to run the FOMC many moons ago. He believed it would be a lot more efficient and "transparent" to have a computer replace the 12 grown economists on the committee. The computer would simply buy and sell Treasuries in an amount necessary to maintain a stable and growing money supply in proportion to support the natural long-term growth rate of the US economy.
No one would be confused about policy. And there would be no need to parse (read guess the real meaning)of every utterance from the FOMC. But you have to admit, it´s a lot more fun the way it is now. How else would we have learned there really is a Santa Claus?
The dollar got whacked last night in Asian trading on the Fed news. The market seems to have expected a little more aggression from the Fed - me too. Now sentiment seems to have shifted, whether temporary or not we don´t know, to a Fed that will slow its rate hike campaign. Bond King Bill Gross said the same Tuesday on CNBC before the FOMC statement was issued. And he is no slouch when it comes to interest-rate forecasting.
But the bottom line is that the US economy is in a soft patch and may rebound. Europe and Japan are in the doldrums and may slip into full-blown recession. The Fed is raising interest rates. The European Central Bank (ECB)and Japan are not. In fact, some are already talking about an ECB rate cut.
The following ugly stats on the European economy come from a recent issue of Weldon´s Money Monitor:
Following the release of the NTC-PMI survey results for April, sentiment is intensifying rapidly, as we note comments from NTC chief economist Chris Williamson: "What we are seeing now is a downward trend becoming increasingly entrenched in the euro area. It is too early to say we are in a recession, but we are in a situation where the chances of a recession have increased. We are moving into rate cut territory. Indeed, note these dynamics as apply to this morning´s data:
- French business confidence hit an 18-month low
- German and Belgian confidence hit a 19-month low
- Eurozone confidence lowest since September 2003
- Headline indexes now contracting, posting sub-50 readings across the board
- Input prices hit a 15-month low
- Employment indexes hit new lows, with the Eurozone reading posting its 47th consecutive sub-50 reading
- Netherlands employment at 16-month low
- German employment at a 17-month low
- Spanish employment at a 22-month low
"The economic erosion in Europe is broad-based, and intensifying at an accelerating pace."
As much as we understand the market´s disappointment with the Fed´s inability to convey a clear message, or show confidence in whatever belief they do have, we wonder how long the euro can be a viable alternative to the dollar, given the relative economic growth and interest rate comparisons which so clearly favor the buck - soft patch or not. But it´s not always facts and the real world that drive currencies - sentiment is the key. As George Soros stated too perfectly in his book, Alchemy of Finance: "Financial success depends on the ability to anticipate prevailing expectations and not real world events."
That´s probably a good thing, because the Fed seems to be operating in La-La Land anyway.
[link to www.atimes.com] |
| FHL(C)
User ID: 4772
5/6/2005 9:54 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:Wake Up or Be Eaten Alive by Inflation!
May 4, 2005
Richard Daughty, ...the angriest guy in economics
The Mogambo Guru
321 Gold
Chuck Butler, president of the Everbank and author of the of the Daily Pfennig column, says, "Looking at the spreads in the forward market, one has to conclude something´s going on." And I am here to tell you that no more scary words were ever spoken, as I have seen too, too many movies where the cowboys are sneaking up to take a look at the Indian encampment, and there they all were, decked out in war paint, dancing and whooping it up around their campfire with drums going "boomity boom boom." After watching for a few moments, one cowboy leans over and whispers to the other one, "Something´s going on." Now, I am not sure if Mr. Butler is referring to Indians on the warpath coming to shoot and scalp us and we will have to somehow rescue the beautiful schoolmarm. But the lesson is clear.
The funny thing is that in the same movie when our heroes are trapped in the abandoned mine, and they are watching a fuse burning that is approaching the keg of gunpowder, none of them ever says "Something´s going on." They always yell like crazy and everybody starts high-tailing it out of that damned mine! In the movie, the hero and his friends always make it out of danger just in time before it explodes, and then they turn the tables on the bad guys and everybody lives happily ever after. In real life, it "don´t work that way."
What is going on may be hinted at by the affable Bill Bonner, whom I assume is affable, although I am not sure. I AM sure, however, that he is succinct, as all our phone calls always end the same way. Ring. Ring. Someone says "Hello?" and I recognize his voice. I say "Hello Bill, this is" and then there is a click on the phone and the line goes dead, and I can hear those CIA guys who are tapping my phone line giggling and laughing at me. But while he is not answering or slamming down phones, he has the time to write, "As for stocks, the bear market that began in January 2000 seems to have resumed. This, too, comes as a shock to many people, who were pretty sure that they couldn´t lose money in stocks - at least, not over the long run. But the short-run losses that most investors have suffered are getting longer and longer. It´s a rare investor who´s made any money at all for the last seven or eight years." Eight years? Eight freaking years in a row? This is the wisdom of "investing for the long haul"? Hahahaha! Another Big Wall Street Lie (ABWSL) exposed! Hahahaha!
And the number of people who have made any money in the last few weeks and months are very few, too, reports Eric J. Fry in his Rude Awakening column in at the Daily Reckoning site. "The S&P 500 tumbled below both its 50-day and 200-day moving average on very heavy volume, although this high-profile benchmark did mange yesterday to claw its way back above the 200-day moving average. Unfortunately, the Nasdaq still languishes well below both its 50- and 200-day averages."
But even after eight years of taking loss after loss, people keep on pouring perfectly good money into the stock market. Why? One of the reasons may be illustrated by the following interesting experiment which I lifted wholesale from someplace or somebody, I can´t remember which.
Tradition
The Psychology Of Civil Self-Policing And Obedience
1. Start with a cage containing five apes. In the cage, hang a banana on a string and put stairs under it. Before long, an ape will go to the stairs and start to climb towards the Banana.
2. As soon as he touches the stairs, spray all of the apes with cold water. After a while, another ape makes an attempt with the same result - all the apes are sprayed with cold water.
3. Turn off the cold water. If, later, another ape tries to climb the stairs, the other apes will try to prevent it even though no water sprays them.
4. Now, remove one ape from the cage and replace it with a new one. The New ape sees the banana and wants to climb the stairs. To his horror, all of the other apes attack him. After another attempt and attack, he knows that if he tries to climb the stairs, he will be assaulted.
5. Next, remove another of the original five apes and replace it with a new one. The newcomer goes to the stairs and is attacked. The previous newcomer takes part in the punishment with enthusiasm.
6. Again, replace a third original ape with a new one. The new one makes it to the stairs and is attacked as well. Two of the four apes that beat him have no idea why they were not permitted to climb the stairs, or why they are participating in the beating of the newest ape.
7. After replacing the fourth and fifth original apes, all the apes which have been sprayed with cold water have been replaced.
Nevertheless, no ape ever again approaches the stairs. Why not? "Because that´s the way it´s always been done around here!" Hahahaha!
For you who still have money with which to speculate, Mark Lundeen sent me an update on "Barron´s Confidence Index." To construct the CI index, merely divide the yield from "Barron´s Best Grade" bonds by "Barron´s Intermediate Grade" bonds, which are found, as if you had to be told, in the weekly Barron´s newspaper. This is the labor-intensive method employed by guys who have actually mastered the valuable skills, like long division, which ain´t me, and it probably ain´t you, or else we would be able to get a real job, and would not be sitting here in front of the TV, wishing we were not too drunk to follow the plot line of Bonanza, because it looks like Little Joe is in some kind of a jam again.
The better way, the modern way, the high-productivity way, to determine the CI is to merely look it up in Barron´s, where the math, with all that those tricky numbers and multiplying and subtracting and blah blah blah, is already done for you. Merely go to the Weekly Bond Statistics column, and there is it, about halfway down.
The theory of the CI is that during good times, namely bull markets, the poorer grade bonds will increase in value compared to the best grade bonds, as the chances of default on the lower grade bonds is reduced, since everything is coming up roses all over the place, and thus the prices of the two grades of bonds should be roughly equivalent. So when the yields between higher-grade bonds and lower-grade bonds are roughly the same, meaning that the market sees nothing bad coming down the line, the ratio should be, roughly 1.
During bear markets, on the other hand, these marginal companies issuing these high-yield bonds have a higher risk of screwing over the bondholder by being so rude as to go bankrupt, and thus have an increased probability of defaulting on their debt. Then The Mogambo is stopped at the border with a suitcase full of company cash and hauled into court by Eliot Spitzer, where I testify, of course, that I don´t remember or that I didn´t know anything about Mogambo Enterprises, as a LOT of guys are named Mogambo, so obviously he has the wrong guy. Therefore, since there is a higher risk of you getting nothing on your bond because the company has gone down the tubes, the price on these bonds should be lower, and the yield higher (so as to compensate the bond holder for the increased risk). Then the ratio of the CI will be less than 1. (In case you were wondering, the CI cannot be greater than 1, since that would mean that low-quality debt is yielding less than high grade debt, and if that this is okay with you, then please send all your money to me and I will send you boxes full of Mogambo Bonds that are yielding, according to the latest quotes, nothing, which means, according to this theory, they are very, very valuable. You also get Ginzu paring knife, so you know the offer is on the up-and-up).
So much for the theory. In practice, how has it worked? Says Mr. Lundeen, "The CI called the top of the bull market in stocks" in 2000. And the latest update? The CI is heading down again, big time.
The Economist accurately describes the U.S. central bank as "the world´s giant printing press." In talking about the two years of 2003-2004, the magazine says "In no other two-year period since 1975 has liquidity increased by so much."
And although the increase in the money supply is actually the definition of pure inflation, the practical result is that all that new money will, because it always does, show up as inflation in prices, since there is nowhere for the money to go except into buying something, and with all that new demand, prices rise.
I can see that many of you are groaning and rolling your eyes, because all I ever seem to talk about is inflation inflation inflation. But after you read what has happened to countries in history that experienced price inflation after inflating their money supplies, it seems to linger on your mind and in your nightmares, or at least on MY mind and in MY nightmares.
In considering the horror of inflation, I naturally bring up the fact that no matter how bad the government says inflation is, it is at least twice what they are telling you, because I am hoarse from screaming, screaming, screaming about the government´s methods of massaging inflation out of the real inflation numbers by the slimy, lying adjustments devised by the loathsome Michael Boskin, who will surely be known in the future as First Henchman to America´s Economic Anti-Christ (who is, of course, AlanGreenspan), so that the government can lie to us with a straight face, "Inflation is low! Inflation is benign! Inflation is well-controlled! Inflation is nothing to worry about! Don´t listen to that idiot Mogambo!" so that people, like me for instance, will not run screaming down the street, bellowing "The government is killing our money! You are going to die a horrible, painful economic death, and I don´t care if it IS two o´clock in the damn morning and you are all asleep! You should be THANKING me for waking you up to warn you, because you are going to be even CLOSER to economic death when the sun comes up, you stupid, sorry bastards who always called the cops when I was merely standing out in the front yard in my ratty underwear and bunny slippers, not bothering you, just minding my own business, maybe testing-firing a new machinegun, or maybe a rocket launcher. But would you listen to me? NoooOOOooo! Now you are going to be eaten alive by inflation! Now wake up and open this door! And stay away from that telephone!"
Now, everyone admits that my approach seems riveting-yet-stupid, like living theater, especially when it is on Court TV and I am being dragged into the courtroom in a straightjacket, screaming and crying, struggling to break free, and trying to kick the bailiff, whom I call a "stinking fascist bastard" in this real loud voice, but I know that is probably unfair because he is just doing his job. But, then again, that excuse didn´t save those Nazi bastards at Nuremburg, either. But Reader David B.C. is so much more witty when he notes that the new "official" inflation numbers are frightening. He calmly writes "Nice inflation numbers, huh? Now they are indigestable even when they are cooked." Hahahaha! Well said! But I´ll bet nobody listens to him, either!
According to Reefer Madness: Sex, Drugs and Cheap Labour in the American Black Market, by Eric Schlosser, "Marijuana, pornography and illegal labour have created a hidden market in the United States which now accounts for as much as 10% of the American economy, according to a study. As a cash crop, marijuana is believed to have outstripped maize, and hardcore porn revenue is equal to Hollywood´s domestic box office takings."
This interesting factoid has inspired me to draft the Mogambo Pot And Porn Act (MPAPA), which I urge Congress to adopt, where I note that if marijuana is this popular when it costs so much AND you can go to prison for lengthy terms for smoking it, then the market for legalized-and-taxed pot must be freaking enormous! And the Porn part of the Act is to give acting jobs and camera-crew jobs and lighting jobs to the idiots graduating from high school today, and don´t get me started on the astonishing dumbing-down of school curricula. The MPAPA works like this: If you can get the nation´s senior citizens to start legally smoking it, inhaling and puffing away until they zone-out and perhaps even get so wasted that they think that the music of the Grateful Dead sounds good, then you can balance the nation´s budget deficit with the taxes from legalized pot, and screw the old-timers out of their Social Security benefits since they are too stoned to notice. And we investors, for our part, can make a fortune by investing in companies that produce munchies, especially the yummy kinds that you can eat by just opening the package, gobbling it down and then lying there on the couch with your mouth full of food and you languidly say "I am sooOOOoo wasted, dude!" I call it my Mogambo Plan To Save America And Give Everybody A Good Buzz (MPTSAAGEAGB), because we are going to need a lot of soporifics and diversionary entertainment (known as the Roman expedient of "bread and circuses") when this stupid debt bubble, and this stupid stock market bubble, and this stupid bond market bubble, and this stupid housing bubble, and this stupid Big-Government bubble finally burst. Which they will. Because they must.
I know that you are, as I am, astonished to read that incomes are going up, because all the people that I am trying to borrow money from are all telling me that their incomes are stagnant or down. But if incomes are going up, then who (meaning "everybody but me and these lying bastards I am trying to get a small loan from") in the hell is making all this bigger money? Well, as a helpful tip, take a look at the compensation of the executives of the companies whose quarterly statements are arriving in your mail boxes. It is a rare, rare thing to see any of the top five or ten or employees of any large company making less than a million dollars a year, some several times that, plus gobs and gobs of stock and stock options and "performance incentives" and bonuses, that all get paid no matter how badly the company does.
I know that you don´t believe me, and I would have very little respect for you if you did. But perhaps you will listen to Graef Crystal, a columnist for Bloomberg, who was not literally referring to this big Mogambo macro picture (BMMP) where executives are all a big bunch of grossly-overpaid wienies, but he was making a comment about a tiny slice of executive-land, namely the enormous salaries of chief executives at the eight biggest homebuilders. "The chief executive officers of those eight major companies need to find some way -- a legal way -- to show their appreciation of what Greenspan has wrought for them. They, as it turns out, earned an average pay in 2004 of $23.9 million each -- 139 times Greenspan´s annual pay of $171,900."
Marc Faber highlights Paul Kasriel of Northern Trust, who has taken the time to show the change in total household liabilities, figured as a percent of total household spending. "In 2004," he writes "households total borrowing represented 12.5% of their total spending - the highest percentage since the 1952 start of the series."
So, I made seven bucks, and I spent eight bucks, after borrowing that last dollar? Hahahaha! And they think this is something good? Hahahaha! This is the brilliant Americans showing their educational achievements, which, according to published studies, ranks among the lowest in the world? Hahahaha!
As an aside, in Florida, seniors in high school must pass an achievement test called the FCAT, which stands for Florida Comprehensive something something. It appears, according to today´s newspaper, that 10%-- a tenth! --of Florida high school seniors will not pass the test, and will not graduate with a diploma. And if you have taken a look at the curricula of the nation´s schools, you will be stunned to see the degree that it has been dumbed-down, then you realize that it would take a mighty stupid kid not to pass the FCAT.
But we were not talking about the stupidity of American kids and how they are supposed to be so smart and educated that they will make so much money that just two of them can easily afford pay the entire cost of the enormously-expensive future Social Security benefit packages, and how the thought of these numbskulls even qualifying to get a job flipping burgers seems beyond their ken and how that just cracks me up, where I would then use one of my patented "Hahahaha!" lines. No, we were talking about incomes, and I was going to go from there to some snide comment about wondering how it is that you can actually have savings if you are already borrowing to spend? You saved, even though you went into farther into debt?
And then that was supposed to lead to how a lot of people think that the real savings rate of Americans is a lot higher than the dismal 0.4% that appears in the statistics. Mr. Kasriel then suggests that "another way to look at the alleged underestimated after-tax income and savings rate is to look at households net acquisition of financial assets - stocks, bonds, deposits, pension fund reserves, etc. - compared to their net acquisition of liabilities (in other words, borrowings). Since the Fed provides the relevant data, it is possible to precisely determine whether households are saving or dissaving." He says that he HAS taken a look at the relevant data, and he says that it looks like we are dissaving, and it "looks to me about $200 billion a year."
And I am here to tell you that even if you count financial assets of Americans as part of wealth, the value of those "financial assets" are variable, meaning that they are wildly over-priced now, while the enormous debts of those selfsame Americans are NOT variable. So that $200 billion a year is, to me, wholly optimistic.
The idiocy known as the European Union is coming apart, and of course it is about money, because all things are now money, and in this case, lots and lots of money, and if it wasn´t about the money, they would have an EU for decades. In essence, the EU expanded like crazy to get as many people into it as possible, which was to (so it was promised) increase trade and the velocity of money and all those wonderful things that were supposed to accrue from liberalizing trade and eliminating the exchange rate between different currencies, and therefore MORE wonderful things would happen, and that would cause MORE wonderful things to happen, and, after a few weeks or so, everyone would live happily ever after, and everyone would be rich, rich, rich.
Unfortunately, they all decided that their first priority was to expand their welfare states and provide subsidies to everybody. Thus they needed to spend more and more and more, and they went into debt to get the money to spend, and pretty soon they exceeded the agreed-upon limits of budgetary deficits (3% of GDP, and only for "a limited time") as specifically specified and agreed-to in their Growth and Stability Pact, which was the major reason why they all signed on in the first place. Naturally since they are all now exceeding this limit like the dimwits that they are, they all want to scrap that whole G&S restriction and let everybody have as much budget deficits and inflation as they want. The only problem is that they are all using the euro, a common currency, so huge deficits and inflation in one country affect the money (and economies and interest rates), of the other nations, too! Hahahaha! Idiots!
The euro and the EU may linger for awhile, but only until the moment when the profligate people of Germany, or the profligate people France, or the profligate people of Italy realize that they are suffering, thanks to some other profligate jackass nation that is more profligate and corrupt than they are.
The fact that mortgage applications keep increasing is not surprising. It would have been surprising to learn they had NOT been increasing. The reason is that so much money has been made in buying and selling real estate since the stock market stopped being profitable in 2000, and since people are so desperate to make some money (now that they have sunk into so much debt, so incredibly, impossibly much debt), that they are willing to take a desperate gamble and plow a few bucks, and a little time, into the housing market, hoping for that big windfall payday (BWP) that will save their financial butts.
Plus, it involves something they understand (houses) as they all live in one, although I am not such an expert, as I live under a bridge and scream at the cars that go by to shut off that damn radio and think about how the Federal Reserve is destroying our money, and then maybe they will spend a little more time at home, thinking and whimpering and hatching plots of revenge against Alan Greenspan, instead of driving up and down the damn roads, up and down, down and up, back and forth, forth and back, night and day, day and night, until I can´t stand it any more because it is making me crazy with the driving, driving, driving!
But plowing into real estate they are, as sales of new homes climbed to a record in March. The Commerce Department reported that "sales unexpectedly increased 12.2 percent to 1.431 million houses at an annual rate." But before you interpret this to mean that house prices are going up in response to this increased activity, the Commerce Department also reported that "The median price fell to $212,300 in March from $234,100 a month earlier." Wow! A ten percent plunge in prices in one lousy month!
Beyond that, another "wow!" is in order when you consider that this means that demand is going up, but prices are coming down, violating the whole principle of the theory of supply and demand!
Kurt Richebächer, everybody´s favorite Austrian school of economics deep thinker, doesn´t even live in the US, but in Europe. But even from way over there across the Atlantic ocean he can easily see that there is a housing bubble in the USA, and he writes that "The growth of home mortgages exploded from an annual rate of $368.3 billion in 2000 to an annual rate of $884.9 billion in 2004, compared with a simultaneous increase in residential building from $446.9 billion to $662.3 billion. Altogether, the United States experienced a credit expansion of close to $10 trillion during these four years. This equates with simultaneous nominal GDP growth of $1.9 trillion. America´s financial system is really one gigantic credit-and-debt bubble."
For a moment, the revelation is so startling that it makes time stand still. My brain gasps and reels as it tried to comprehend the concept of ten MORE trillion dollars in debt (which is almost as much as the total value of ALL the goods and services produced in the whole freaking country in a whole year!) in four lousy years!! Note the use of two exclamation points to indicate that my eyes are bugging out in freaking disbelief!! Look! There they are again!
The Financial Times newspapers quote Paul Kasriel, chief economist at Northern Trust, as remarking that, on a nationwide basis, the market value of real estate is now close to 200% of disposable income. The previous high in that ratio was in the late ´80s, when it climbed close to 160%. They note that he thinks that "A ratio close to 200% cannot last more than a few months. It is the equivalent of Nasdaq trading over 5000."
Speaking of houses, Jeremy Grantham, chairman of GMO, in his letter to his investors, notes that prices of houses are going crazy all over the place. He notes that in the UK, house prices are selling for 6 times average earnings of the guys buying the houses, a mortgage so huge that it is more than three standard deviations above the earnings norm (3.6 times annual earnings) established during the previous zillion years.
If you remember what a standard deviation is, then you are not drinking enough beer, For the rest of us, I put on my Mogambo Educator Mortarboard (MEM), and explain that it is a measure of the variability from the average (also called the "mean"). In this case, three standard deviations from the mean, which is a long, long way from the average, means that the chances are about 1-in-10 zillion that the mortgage application is going to be submitted to a loan officer who is so drunk or incompetent that he will loan somebody enough money to buy a house that is 3.6 times as much as the guy makes in a whole year. From a financial standpoint, the reason that mortgage people don´t loan that kind of money to people is that the guy is almost sure to default on the loan, and the mortgage people hate that. Well, I assume that they hate it, as I surmise from the way the guy at the bank goes ballistic when I tell him that I can´t make this month´s mortgage payment again, which is a long, LONG way from actual default. In may case, about three more months, I figure.
But it is not just in the UK, but also in Sydney, Australia, where mortgages are routinely made at "about 4.8 times annual earnings." Here in the USA, he notes that "In Boston, a whopping 6.5 times annual earnings (over 2 standard deviations), and for the United States as a whole, about 4.3 times annual income, versus an historical average of 3.4 times income, and is three standard deviations above the mean."
Germany remains about the only place where people did not go crazy with this silly house-buying crap, and so they will be rewarded in the end.
I have lost the author of "What do we really know?" and if you are the person who wrote it, I apologize, but if you send me a few bucks maybe I will be more careful next time, but probably not. But whoever it is has also looked at things from this standard deviation thing, although they refer to a standard deviation as a "sigma."
They have looked specifically at economic/financial indices that are, or were, at the 2-sigma level, which are pretty rare occurrences. I can see you are on the edge of your seat, and you want to know "What happened?
They say that ALL bubbles (which they define as anything where the average prices are in the range of 2-sigma events) broke and ended badly. So how many bubbles did they find? They found 28 bubbles around the world, including stock markets, currencies, and commodities, and including our stock market bubble here, although they did not, as far as I can tell, include our bond bubble and our housing bubbles in their analysis. And all of them broke, which they characterize as "all the identified bubbles did indeed move all the way back to (or below) the trend that existed prior to those bubbles forming." What they did NOT mention was that the reversion back down to the mean left bankruptcy, heartache and misery strewn all over everything.
And they perfectly sum up The Mogambo´s stupid opinion that there is nothing that can be done with bubbles except try and prevent them from forming, and, failing that, suffer from them. They write, "Bad monetarist policy may have caused the Great Depression, and good policy may have let us down gently after 2000 (we shall see), but both were clear asset bubbles and both broke. The monetary environment was different for all 28 bubbles, but all of them broke."
As an example of government in action, here is an update on the new gold-colored, one-dollar coin that the House of Representatives has approved minting, as if the unpopular Sacagawea dollar-coin was not embarrassing enough. So why was the Sacagawea coin so unpopular? Because it was almost identical in size to a quarter, and you had to squint at the coins in your hand to see how much money you had, and then you realize you had left your glasses at home, and although you can easily discern the nickels and dimes and quarter, you can´t see that damn dollar coin, and you have to ask somebody standing nearby to, you know, kind of help you out, and all they want to talk about is how bad you smell and how his wife is all upset that you are hitting on her, which is a lie because she hasn´t said a word the whole time, as she is too busy holding a handkerchief to her nose and saying "P-U! What the hell is that smell?"
But, and this is the part that makes me crazy. They are hoping that a new design will make it more popular, although these new dollar coins would be the exact same shape, size and makeup as the gold-colored Sacagawea $1-coins that everybody hates! They are exactly the same! The only difference is, and pay close attention here, the new dollar-coins will have the faces of dead Presidents on them, as if we are all so bigoted that we rejected the Sacagawea dollar-coin because we don´t like Indians, or Indian maidens, or the fact that it reminds me that she was probably out partying it up with Lewis and Clark, probably in some kinky three-way action out under the stars, and we aren´t getting any action at all, and who needs that slap in the face every time we take out some damn change?
And people still trust the government? Hahahaha!
Lew Rockwell, Jr. on the Mises.org site has an interesting article entitled "What Made the Next Depression Worse," which is a cute title and I wish I had thought of it. In it, he lists ten reasons why the proverbial we are up the proverbial creek without the proverbial paddle. He says that the Number One reason is the appointment of Ben Bernanke, who left his cozy little academic career to go to work at the Federal Reserve, and from there to be the chairman of the Council of Economic Advisers to President Bush.
Mr. Rockwell says "Please listen to his words from a speech given in 2002, given in the context of trying to settle down people´s fears of the economic future: ´The U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.´ " The scary thing is that he is right, and that is why no sane person would ever say those words, much less a member of the Federal Reserve.
Mr. Rockwell, gracious as ever, does not mention the fact that this Bernanke bird-brain is also in favor of "targeting inflation" which means that he wants to keep inflation bubbling along! Although that is the worst thing that an economy can do to itself!
I can almost see Mr. Rockwell smiling to himself as he says "Well, these comments certainly do calm fears that deflation is in our future." Hahahaha! Always the jokester! Then, waiting until our laugher has died down, Mr. Rockwell goes on to say "But what he seems incredibly sanguine about is the effects of inflation. Already, inflation amounts to a daily robbery of the American consumer. Even in these supposedly low-inflation times, price indexes have doubled since 1980. What this means is that one dollar in 1980 purchases only 50 cents worth of goods and services today. There are no long lines at gas stations and we aren´t panicked for our future, but we are still being robbed, only more slowly and more subtly than in the past."
He extrapolates beyond that to the horrid Bush administration when he writes, "The Bernanke appointment is certainly a wake up call for anyone who has a benign view of the Bush administration´s economic priorities. Indeed, we might as well say that, long term, this could be the most egregious decision that the Bush administration has made." To which I add the inevitable Mogambo two cents (ITMTC) when I say that appointing Bernanke is not the problem, but listening and heeding the advice of this jackass IS.
This Bernanke halfwit is also the subject of a comment by Bill Bonner of the Daily Reckoning, who reminds us that "Just two week ago, Fed governor Ben Bernanke brought forth his ´Glut Theory´ to explain away America´s huge current account deficit. The problem was not that Americans spent too much, said he, but that Asians saved too much! We were just doing them a favor by taking the money off their hands. According to this theory, an alcoholic is merely helping to alleviate a glut of booze...and a sex fiend is only reacting to a glut of women!" Hahahaha! Well said! Now you know why clear-thinking people despise Ben Bernanke and everything he stands for.
Today´s installment of the popular Mogambo Guru segment (PMGS) I like to call "I Can´t Believe I Am Reading This Crap." Today´s item is a column on Bloomberg by Kathleen M. Camilli, "principal and owner of Camilli Economics, an independent economic advisory firm in New York, and is a Bloomberg News columnist." The title of the column was "1970s Stagflation? Not Today´s Reality."
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 4772
5/6/2005 9:57 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Continued:
She says "In today´s world of open global-trading arrangements, deregulation and the use of Internet-based technology, the idea that stagflation might rear its ugly head couldn´t be further from the possible." Huh? The economy is stagnating in front of our eyes, and prices are rising, also in front of our eyes, and yet she thinks that this is impossible? Huh?
Apparently she did not read the minutes of the Fed Open Market Committee, or the April 23 issue of the Economist magazine, which, like everybody else, sees "an unhappy combination of lower growth and higher inflation," which is, by definition, stagflation. In fact, they note that the "inflation data were surprisingly bad."
She goes on to say "The combination of free-market capitalism, deregulation, globalization of capital markets and the birth of the Internet have been the death knell to pervasive and entrenched demand-pull and cost-push inflation." Hahahaha! Thanks to China´s ravenous and growing demand, this demand-pull has not affected the price of oil, even though the price of oil is already $50 a barrel? Hahaha! Firms are raising prices because their costs are rising, and yet this is not cost-push inflation? Hahahaha!
It gets better! "In this new world," she writes "outsourcing, off-shoring, in-sourcing and global supply-chain management mitigate these traditional forms of inflation. Producers tap into the global labor pool to find the best and cheapest ways to produce goods. Suppliers find the most cost efficient and fastest ways to deliver those goods to customers, including use of the Internet. Consumers, with their insatiable demand for new goods and services, can shop on line day and night to find the product, service and price they want, delivered to their doorstep. Such is the wave of powerful global and technological forces sweeping away old views of inflation."
Hahaha! So the solution to preventing inflation is to build a WalMart on every block? And a gas station on every corner? And somehow all these new outlets will keep prices from rising? Hahahaha!
It gets even weirder than that, as she goes on to say "When a local market is closed to competition, merchants and providers of goods and services do what they wish with prices. If they have higher taxes and heating bills, they pass those costs directly to their customers. It´s simply incorrect to assume that this happens in a macro sense across geographic lines and swaths of the consuming public without competitive forces." Apparently in Camilli-world, when a lot of producers or suppliers have higher taxes and heating costs, to name but two, they are happy to make less profit, or even take a loss! And these producers and suppliers are, I guess, going to remain in business, year after year, making no profit, probably making losses, just so they can sell things to customers at a low price! Hahahaha!
What REALLY happens, in case you were wondering, is that all this competition keeps the prices so low, for so long, that many of them go out of business, reducing competition and wasting lots of money and resources along the way. And when the number of suppliers falls enough, then the survivors raise prices. And not just to cover their bills, but they raise them enough to make up for the lost profits of those lean years, too. It´s as easy as that.
Then she goes into hyper-weird when she says that inflation of 3% is not even worth mentioning, although 3% inflation is the historical cut-off between inflation that is worrisomely high and inflation that calls for immediate and drastic action. Here in the USA, it was only twenty-five years or so ago that emergency wage and price controls were imposed on the USA because inflation was 3%! So she has no idea of how silly she sounds when she says that "Today, the CPI has barely managed to stay at more than 3 percent." Now, when I say "barely," I mean that it is real, real close, or temporary, or something. In this case, when she says "barely," she means "much more than," as she immediately makes clear when she goes onto say "It is 3.2 percent year over year." So over-stating your case by 7% is "barely"? 3.2% inflation is "barely"? Hahahaha! That is like the policeman, responding to my frantic call to 9-1-1, poking me with his flashlight as I lay there on the kitchen floor, suggesting that I calm down and not file another spousal-abuse complaint because "Your wife repeatedly hitting you on the head with that fireplace poker has barely caused any bleeding, and you are barely losing consciousness!"
She even says that the higher cost of gasoline and fuel is all in your imagination when she blithely notes "Higher oil prices have failed to translate into higher sustained consumer price inflation because the world has changed drastically, and for the better," which I assume means that there is some magical energy source now powering semi´s up and down the road, delivering the goods that pack the WalMart. Or maybe businesses will find a way to eat the higher energy and shipping costs that I haven´t heard about, either. Or maybe the inflation that we are seeing is not "sustained" enough to suit her, and so that makes it all okay. She never says.
But Mark Rostenko has taken a look at the CPI, too, and come away with a different conclusion about the level of inflation. He says "The most recent CPI data revealed a ´surprisingly high,´ (as brain-dead analysts and CNBC pundits like to call it), annualized rate of 7.2%."
John Myers says that inflation is so insidious that nothing is immune. "In 1969, the Dow was about 1,000. Not bad when you consider that in 1950 it stood at just 200. But the bull market was on its last legs. In 1980 the Dow bottomed out at 759. A 24 percent decline over 11 years would, in itself, be bad enough. But factor in inflation and you find out that in 1969 terms, the 1980 Dow was worth only 363. That means that during the decade that was the 1970s, the Dow damn near lost two-thirds of its value!"
But before you throw up your hands and exclaim, "We´re screwed!", there is a way to fight back, and here is how, he says, it is done. "So let´s imagine there were index funds back in 1969. Take two investors, each with $100,000, one invested in the Dow Index and the other in the CRB Index. By 1980 the guy who had purchased the Dow would have had, in 1969 dollars, $33,800. The one who bought the CRB would have the equivalent, in 1969 dollars, of $190,000. That means that the guy who turned his back on Wall Street, and instead invested his money in real assets, had done more than five times better than the guy who had stuck with the Dow!"
And to keep this from being a dry history lesson, let´s jump into our time machine and whiz forward to the present. "Over the past five years," he says, "the Dow has fallen 32 percent, in inflation-adjusted terms. Yet the CRB Index, by the same measure, has climbed 47 percent. Wall Street is already on a trip to nowhere called stagflation. The economy is getting weaker, the dollar is falling and prices are rising. The good news for us is that we can get out of this damn trap by selling our bonds and big board stocks and buying real asset stocks. Not only will it protect us from the ravages of a bear market in stocks and bonds, but it could make us very wealthy."
Rich R. says that the political idiocy of the last few decades in general, and the various wonderful new Plans To Save Social Security in particular, remind him of the John Galt Plan, which appeared in the Ayn Rand book Atlas Shrugged. The relevant quote from the book is "The John Galt Plan will reconcile all conflicts. It will protect the property of the rich and give a greater share to the poor. It will cut down the burden of your taxes and provide you with more government benefits. It will lower prices and raise wages. It will give more freedom to the individual and strengthen the bonds of collective obligations. It will combine the efficiency of free enterprise with the generosity of a planned economy."
Which was, of course, a gigantic load of crap. To prove it, at the end of the novel, John Galt, as an exemplar of the rich, ran away, driven away by the demands of the sweating, grubby masses that they sacrifice themselves for the good of the masses. Sort of like today, with the "soak the rich" rhetoric.
Daniel G. sent me a summary of Ted Butler´s observations on the silver market. According to Mr. Butler, the insiders have leased more silver than is available in the whole world. "This means that, currently, the Leased Position is greater than 8 times known inventories and the Short Position amounts to over 2 times known inventories."
The theory is that these slimy manipulators will have to close out their positions by buying silver, and lots and lots of it, and all that demand is what makes silver such an exciting and potentially lucrative asset. Sounds right to me!
Florida is one of those low-IQ states that has embraced the idea that the way to improve lives is to force businesses to give more money to employees, and thus enacted (by referendum, which demonstrates the fatal flaw in democracy) the idiotic idea to mandate a minimum wage that is higher than the federal minimum wage requirement, which is horrific enough, thus boosting the Florida minimum wage to $6.15 an hour.
Predictably, my Leftist hometown newspaper, the St. Petersburg Times, has filled its Sunday "Money" section with all kinds of happy articles about how thrilled low-wage workers are with their higher incomes and how this is going to be so great, and now we are on the road to Utopia, and how everything will be fine from now on, and poverty will be forever eliminated in a few hours.
But the inflationary downside of doing something as stupid as this is hinted at in the lead article "The Minimum Wage Effect." In it we read that Outback Steakhouse is boosting its prices by 2%, in other industries "increases rippled up the pay structure, meaning raises even for salaried managers," and at the end of the screed we read "As a result, most prices on each McDonald´s menu item have been raised by a nickel." Ed Shaw, manager of a McDonald´s franchise admits "We´re paying more, but so are our customers."
So requiring higher wages is, predictably, inflationary, which will cause suffering to those whose incomes are not increased. Such as the retired, whose incomes do not increase except as a Cost Of Living Allowance in Social Security payments. And the unemployed, whose wages will obviously not increase. But all of them, every single one of them will, as will everyone else, pay the higher prices. And that means that people can only afford to buy less stuff, and thus the national standard of living will fall, which is the exact opposite of what is supposed to happen! The exact freaking opposite!
But beyond the blatant inflationary impact, there is no mention whatsoever about how businesses will now have an incentive to find MORE ways to employ fewer people ("higher productivity"), or fewer American people ("outsourcing overseas") to get out from under the increasing burden of ever-rising employee costs.
Also not mentioned, because it is never mentioned, is why the push to increase wages? The answer is simplicity itself: Because prices have risen so much. And why have prices risen so much? Because the damnable Federal Reserve has created so much money and credit, and all that money devalues the dollar, and the excess money always finds its way into prices. And yet, here in Florida, the people have literally voted to hurt themselves by voting to increase the minimum wage. Like I said; low-IQ.
Martin Weiss, of the Safe Money Report, reminds us that "In June 1980, the inflationary pressure of soaring commodity prices became too much to bear. The price of 10-year Treasury notes started to collapse, just like they are starting to do now. Short-term interest rates soared from 6% to more 16% in just 7 months!"
He compares the CRB, a composite index of 17 commodities, versus the yield on the ten-year Treasury bond. The gulf has never been wider, all; the way back to 1968, when his analysis began. Instant Mogambo Analysis (IMA): if there IS a connection between commodity prices and inflation (and I think there is), and if there IS a connection between inflation and bond yields (and I think there is) then bonds are waaAAAaaaay over-priced, and the imputed yields are thus waaAAAaaay too low.
Accordingly, with the CRB index exploding in price, signaling hefty and rising inflation, the ten-year T-bond should be yielding, historically, almost 12%. In his words, "Fast forward to today. Interest rates are just coming off of 46-year lows, while commodity prices are experiencing one of their greatest bull markets of all time."
His conclusion? "Interest rates are coiled up like a spring, ready to rocket higher."
In a related vein Ron Insana on CNBC was asking a couple of big shot guests what is causing the abnormal low yield on the 10-year Treasury bond. Donald Luskin, of Trend Macro, said global liquidity, as there are so damn many dollars in the world, and that they have to go somewhere. And the 10-year Treasury market is one of the few things that can absorb all that money. He is exactly right.
Then we heard from Wayne Angell, an ex-member of the Federal Reserve (cue the ominous music), and now the head of his own eponymous firm, Angell Economics, and who is the most laughably clueless bonehead I have ever listened to. Angell= says that Mr. Luskin is wrong, wrong, wrong, and that it is because of all the cash that corporations have! Hahahaha! If the corporations had been buying all those T-bonds, they wouldn´t have the cash! They´d have a little cash and a lot of T-bonds as an asset! But somehow, and perhaps I do not understand corporate accounting, cash and T-bonds are now the same thing? Wow! Where have I been all this time not to know that?
Mr. Angell is also infamous around here for forcefully stating, just a few months ago, that anybody who thought that we would have any inflation was "out to lunch."
According to the Bureau of Labor Statistics, $5.89 in 2004 dollars equals the purchasing power of $1.00 in 1966. So since 1966, the purchasing power of the dollar has fallen to, in 1966 purchasing power, 17 cents. Mark G.´s opinion? "We have experienced a long drawn out inflationary depression; a depression so subtle that we don´t even realize that has happened."
An interesting detail about what has happened since 1966 was provided by Philip Spicer, who notes that the Dow Jones Industrial Average "closed at 10,549 on 17 Nov ´04, equaling 1,791 in 1966 dollars."
TheStreet.com´s Peter Eavis, senior columnist starts out his article, entitled "Selloffs Suggest a Looming Credit Crunch" with the ominous "The credit boom is still on schedule to collapse in early 2006, taking the economy and the stock market down with it" and then implying that the problems in the stock market are directly related to investors finally wising up.
Jay Taylor of MiningStocks.com is as morose as The Mogambo and Mr. Eavis about the eventual outcome of the Federal Reserve acting like such idiots and creating such a monstrous over-abundance of money and credit, and American acting like idiots to borrow this money and therefore plunge into the unfathomable depths of an over-abundance of un-payable debt. He says, "All that has been accomplished is that the downturn will be much greater. In other words, rather than a garden-variety recession, the Fed has sealed our fate. We will in time, perhaps sooner rather than later, experience the mother of all recessions, namely a Kondratieff winter that is equal to or worse than the last Kondratieff winter experienced by our senior citizens now in their seventies and eighties." Ugh.
**** The Mogambo Sez: The Federal Reserve and the government, in cahoots with their cronies on Wall Street, are going to pull every trick in the book to keep the markets up. How else to explain that the stock market ended up after the Fed raised interest rates today, for the eighth time in a row?
[link to www.321gold.com]
[link to freewordofgod.yuku.com] |
| FHL(C)
User ID: 4772
5/6/2005 9:59 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fair use:
The 4 Derivative U.S. Dictators: Secrets of the Plunge Protection Team
May 5, 2005
World Vision Portal Forum
There are just four people who control all of the U.S. markets through their use of dangerous and explosive DERIVATIVES. They are risking the assets and retirement funds of all Americans. Because of their manipulations, especially since 2001, U.S. financial markets are now based on the gambling whims of a special fraternity of Federal Government DERIVATIVE dealers.
This group is known among Wall Street as the Plunge Protection Team (PPT). Their "official" role was to prevent another 1987 "Black Monday". They have the entire U.S. Treasury at their disposal to manipulate the markets through DERIVATIVES (futures options). In other words, they are using the assets behind the U.S. Treasury to rig the prices of commodites (gold, currencies, etc.) and stocks.
This fraternity comprises of Fed Chairman Alan Greenspan, the Secretary of the Treasury, and the heads of the SEC and the Commodity Futures Trading Association. It works closely with all the U.S. exchanges and Wall Street banks, including the largest DERIVATIVE risk holders Citibank and JP Morgan Chase.
Few people are aware of Executive Order 12631 signed by Ronald Reagan on March 18, 1988. In a nut shell, this is the "authority" behind the four dictators and the [sic] "laws" and "regulations" that have backed their casino-style DERIVATIVE gambling spree since 2001. Here are some highlights of this Executive Order to ponder:
Executive Order 12631 - Working Group on Financial Markets - Mar. 18, 1988; 53 FR 9421, 3 CFR, 1988 Comp., p. 559.
"By virtue of the authority vested in me as President by the Constitution and laws of the United States of America, and in order to establish a Working Group on Financial Markets, it is hereby ordered as follows:
Section 1. Establishment. (a) There is hereby established a Working Group on Financial Markets (Working Group). The Working Group shall be composed of:
(1) the Secretary of the Treasury, or his designee;
(2) the Chairman of the Board of Governors of the Federal Reserve System, or his designee;
(3) the Chairman of the Securities and Exchange Commission, or his designee; and
(4) the Chairman of the Commodity Futures Trading Commission, or her designee.
Section 2. Purposes and Functions. (a) Recognizing the goals of enhancing the integrity, efficiency, orderliness, and competitiveness of our Nation´s financial markets and maintaining investor confidence, the Working Group shall identify and consider:
(2) the actions, including governmental actions under existing laws and regulations (such as policy coordination and contingency planning), that are appropriate to carry out these recommendations.
(b) The Working Group shall consult, as appropriate, with representatives of the various exchanges, clearinghouses, self-regulatory bodies, and with major market participants to determine private sector solutions wherever possible.
Section 3. Administration. (c) To the extent permitted by law and subject to the availability of funds therefore, the Department of the Treasury shall provide the Working Group with such administrative and support services as may be necessary for the performance of its functions."
Get out of the markets before the inflated DERIVATIVE bubble bursts
The pre-911 U.S. markets showed an astounding - yet confounding and puzzling - rise for the 4 months proceeding 911. The U.S. media dubbed it a "patriotic rally". The European Press called it a "PPT [Plunge Protection Team] rally". Obviously, the U.S. markets were manipulated and rigged to an inflated value in advance of the 911 disaster. Was this a coordinated measure in anticipation of what was to come? Only The Powers That Be can answer that question directly.
Since 911, there have been at least three major long-term stock market rallies. In all 3 instances, when the markets opened all the indexes began to quickly plunge. In each incidence, by early afternoon the markets were brought back from the brink of collapse to the surprise of everyone, including historical analysts.
An event that should have sent markets spiraling downward was the Enron, et al, unprecedented corporate accounting scandals. Yet despite this, an unprecedented accross-the-board markets rally began on July 24, 2002. Once again, the European Press called it a "PPT rally".
Outside the U.S., it´s no secret who is behind these secretive "no-name" purchases of high risk DERIVATIVE gambling wagers:
On September 16th, 2001, The Guardian reported "that a secretive committee... dubbed ´the plunge protection team´... is ready to coordinate intervention by the Federal Reserve on an unprecedented scale. The Fed, supported by the banks, will buy equities from mutual funds and other institutional sellers... "
On Feb 21, 2002, the Financial Times featured an article about Japan´s Stock Buying Body. The article stated that "...government backed equity markets, as Japan has recently become aware, do not work... Plunge protecting the world´s markets may be a hazardous pursuit."
In each of these occurances, a large "no-name" buyer in the futures market secretly plunged in and bought up massive quantities of DERIVATIVES through banking groups such as JP Morgan. These were completely reckless gambling bets that the futures index [S&P] would rise even though it was obvious that it was going to fall. Because such a large amount of money was wagered on the S&P´s rise, in each instance, it reversed the market´s free-fall.
At the Federal Open Market Committee meeting on Jan 29-30, 2002, the Federal Reserve System (Greenspan) openly discussed the use of "unconventional methods" to stimulate the economy. Recently, the Financial Times of London quoted an anonymous U.S. Fed official who stated that one of the extraordinary measures "considered" in January 2004 was "buying U.S. equities".
These gambling interventions by the "Four Financial Dictators" have successfully brought the markets back each time... despite the inflated financial realities that existed. The purchase of these gambling DERIVATIVES at a great loss have transformed each market crisis into a rally. By manipulating the markets in this way, they have further inflated the highly overvalued market indexes.
Perhaps Americans can now understand why the major U.S. banks, such as JP Morgan, are holding TRILLIONS of gambling derivatives on their books as the PPT group of four use them to rig the markets. Sooner or later, these market "fixes" will no longer hold the bubble from bursting.
Thus, we have witnessed the creation and growth of the financial bubble that is on the brink of explosion... and we know who rigs and controls the markets to create this inflated bubble of gambling debt.
Paper Stocks Rise as Metals Loose - PTT Rigging is Obvious
In the same motus opperandi, the PPT group of 4 are currently buying metals futures (DERIVATIVES) in great amounts on the New York and Chicago exchanges. For the past two weeks, they have created a loss in silver and gold indexes by purchasing (at U.S. taxpayer´s expense) large gambling bets (derivatives) against the true value of intrinsic metals.
The result is that they have rigged the value of metals to discourage investors from purchasing gold and silver instead of U.S. Federal Reserve Notes. This is a measure by the PPT to plug a large hole in the bursting dam of the financial bubble, but even Hans Brinker cannot stop this leak.
The bottom line? Stick with history and prepare for the financial explosion. When the bubble deflates and pops, economic deflation will control our daily lives. The PPT cannot continue to spend what it doesn´t have. The retirement funds they are "borrowing" from are already exhausted. Get yourself some gold and silver... it will buy your bread to survive in the coming future... while paper Federal Reserve Notes will burn in your furnace to heat your homes.
[link to worldvisionportal.org]
[link to freewordofgod.yuku.com] |
| .
User ID: 7589
5/10/2005 6:57 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Debt Slavery: What the Bankruptcy Bill Could Do to You
March 31, 2005
by David Swanson
Common Dream
The U.S. Senate has passed a dream bill for credit card and financial service companies that, if passed by the House, will land millions of American families in debt slavery. Rather than being able to file for Chapter 7 bankruptcy and make a difficult new start, families and individuals will be placed on long-term payment plans to credit card companies, companies that will take their houses, their cars, their child-support payments, and their paychecks.
If you think you´re unlikely to land yourself a share-cropping position in this new feudal system, ask yourself if you can be sure that no one in your family will get sick, be injured, die, lose a job, or get divorced. More than one in every 100 adults in America files for bankruptcy each year. If you´re a child, the chances of your family filing for bankruptcy are about twice that. (Kids cost money.) These rates have doubled in the past decade. The basic reason that bankruptcies have increased is that personal debt has increased. In fact, in proportion to debt, bankruptcies are actually down.
About 50 percent of all families who are forced to file for bankruptcy do so as the result of medical expenses. And three quarters of those have health insurance. Another 40 percent have suffered a death in the family, lost their job, or gotten divorced, or suffered some combination of these factors and medical costs. Almost everyone who files for bankruptcy does so as a last resort. Sixty-one percent of those who do so have gone without medical care that they needed but could not afford. Fifty percent have failed to get prescriptions filled. A third have had their utilities shut off. Twenty-one percent have gone without food. Seven percent have moved their elderly parents to cheaper care facilities.
The satirical magazine, The Onion, posted fictional comments on the bankruptcy bill from people in the street, one of which said "Well, there goes my foolproof get-bankrupt-quick scheme!" Only in the mind of a comic or a Republican do people try to go bankrupt. But some Democrats (see below) seem not to be grasping this concept either.
After filing for Chapter 7 bankruptcy, you´re required to liquidate some assets and pay off what you can. But you are then able to write off the rest of your debt and start over, albeit with a credit record that will make it harder to borrow and sometimes harder to find work. Under the current system, if a judge finds that you have significant assets or income, you can be denied Chapter 7 and be required to enter into Chapter 13 bankruptcy, in which you pay off your debt over a number of years. This current "means test" is conducted by a judge who is able to look at actual income and expenses, as well as to distinguish between someone whose child has diabetes and someone who´s been going on reckless shopping sprees.
The bill that is coming up for a vote in the House would create a new means test that would forbid making any such distinctions. It would even forbid comparing what someone actually earns with what they actually have to pay for rent and basic expenses. A court would be forced to use standard government figures for expenses, regardless of what you´re actually having to pay. It would base your income on your last six months of income, even if you just got laid off. If your income is below the median, it would spare you the means test but require that you purchase credit counseling, even if you have no money to pay for it and it isn´t offered anywhere near your home. It would also require significant new legal expenses and paperwork.
But wait, there’s more
The problems with this bill could fill an encyclopedia. In fact, the thing is 500 pages of convoluted changes to current law. But, before looking at a few of the details, let´s stop and think about the basic idea.
Credit card companies, like most lenders, charge interest rates based on the risk they see of each borrower failing to pay back the loan. Some people pay 9 percent on their credit card and others pay 29 percent. The higher rate is supposed to cover the losses the lender will suffer when some of the riskier borrowers default. This system has been bringing in massive record profits for the credit card companies: $30 billion last year.
"Here´s what´s so strange," writes Corinne Cooper, a retired law professor in Arizona, "The credit card companies collect this risk premium, year in and year out. But when the risk actually happens and the borrower cannot pay, the lenders want the Federal government to intervene to force the debtor to pay, by passing a law prohibiting them from filing bankruptcy and discharging the debts. It´s as if a life insurance company took premium payments for years and then asked the government to pass a law prohibiting death! Bankruptcy is credit death, and if this bill passes, the courts will be clogged with credit ´zombies´ – consumers who can never pay back their debt, and never get rid of it. Why, then, shouldn´t the debtor be able to recover all that extra interest paid to cover risk?"
So, here we have an extremely profitable industry and a legal system that´s basically working. And yet, as with Social Security, a corporate lobby group and their servants in Congress have tried to manufacture a "crisis." In this case, the imaginary crisis is fraud in bankruptcies. As with Social Security, there´s a grain of truth that can be found if you dig for it, but the largest problems are being entirely ignored, as are real unrelated crises (such as health care, war, trade, wages, pensions, voting rights, the deficit, etc.). Estimates of cases of abuse of bankruptcy law range from 3 to 10 percent. The non-partisan American Bankruptcy Institute estimates that at most 3 percent of filers – and almost certainly less – are able to discharge debts they could actually pay. But few analysts see this bill (HR 685) as a useful way to go after those abuses. Several have referred to it with such metaphors as "shooting a gnat with an elephant gun."
In fact, an elephant gun would have been useful if someone had known which way to aim it. Corporations have a very easy time filing bankruptcy. CEOs are able to squirrel away fortunes while canceling employees´ pensions. Millionaires can file for bankruptcy and keep unlimited amounts of money out of reach in "asset protection trusts" as well as in super-expensive houses. The press secretary for the bill´s primary sponsor, Senator Charles Grassley, told the New York Times that "the senator´s staff was unaware of the trusts and the loophole for the wealthy that they represented." Uh-huh.
These loopholes need not be exploited offshore, as in the olden days. There are a number of states that allow them, regardless of whether the robber baron lives in the state. But the legal costs of setting up "asset protection trusts" place them beyond the reach of most people. Oh, and corporations are allowed to shop for friendly judges from state to state, a right that Congress recently took away from the victims of corporate practices who try to file class action suits. The current bankruptcy bill leaves these millionaires´ loopholes in place, although it requires that pirates of industry have purchased their mansions three and a third years prior to bankruptcy if they intend to keep them through the homestead exemption.
To watch a spokesperson for this abomination of a bill get taken down by a knowledgeable opponent on CNN, click here.
In this interchange, George Mason University´s Todd Zywicki is no match for Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard University. These two also testified to the Senate Judiciary Committee, which found Zywicki more convincing. You´ll notice, though, that he argues that there is massive fraud without providing any evidence, and at the end is reduced to claiming that it is 10 percent. He starts out trying to use as evidence of fraud simply the fact that bankruptcies are up, combined with a bizarre claim that we´re living through an age of widespread prosperity. Excuse me? He points to the stock market as a sign of prosperity, apparently unaware of how many people own little or no stock. Then he points to housing prices having shot through the roof. Zywicki also cites low interest rates. I don´t know about you, but my paycheck stretches farther with low interest rates. Sometimes I just pay half the tab at the grocery store. "It´s OK," I tell them, "interest rates are low!" Zywicki also mentions low unemployment, which would be relevant if it were true.
The hypocrisy
The Republicans (and the corporate Democrats) have outdone their usual level of hypocrisy this time. This bankruptcy bill would make it very difficult for a family like Terri Schiavo´s to ever get out of debt. It would deny bankruptcy protection to the families of soldiers killed in Iraq or sent to Iraq and away from their jobs and incomes. It would make it very difficult for small business owners who take risks and fail to start over. And it would impose on individuals a standard of fiscal responsibility to which the White House and Congress, not to mention the credit card companies, do not even pretend.
Columnist Robert Scheer notes that Grassley, the bill´s sponsor in the Senate, in another bit of hypocrisy "actively opposes abortion and same-sex marriage on biblical grounds yet believes the Good Book´s clear definition and condemnation of usury is irrelevant. The Old Testament, revered by Jews, Muslims and Christians alike, mandates debt forgiveness after seven years, as was pointed out earlier this month by an organization of Christian lawyers in a letter to Grassley. ´I can´t listen to Christian lawyers,´ said the senator, ´because I would be imposing the Bible on a diverse population.´"
This would be funny if this bill were going to be easily defeated. It can be defeated in the House if we put our minds to it, and – if need be – put our bodies on the line for it in nonviolent civil disobedience. But this fight won´t be easy. Corporate America has been pushing this bill for eight years. It passed both houses of Congress once before and then was vetoed by President Clinton. Two years ago, it passed the Senate, but the House voted it down because the Senate had attached an amendment that would have prevented violent anti-abortion demonstrators from avoiding paying damages to clinics. This time around, the Senate and the Senate Judiciary Committee voted down that amendment and numerous other amendments aimed at making this bill less than utterly disgusting.
These included amendments to:
– close off the trusts loophole for millionaires,
– limit the homestead exemption,
– create a minimum homestead exemption to save the homes of the elderly,
– protect employees and retirees from corporate practices that deprive them of their earnings and retirement savings when a business files for bankruptcy,
– discourage predatory lending practices,
– exempt debtors from means testing if their financial problems were caused by identity theft,
– limit the amount of interest that can be charged on any extension of credit to 30 percent,
– preserve existing bankruptcy protections for individuals experiencing economic distress as caregivers to ill or disabled family members,
– exempt debtors whose financial problems were caused by serious medical problems from means testing,
– provide protection for medical debt homeowners,
– require enhanced disclosure to consumers regarding the consequences of making only minimum required payments in the repayment of credit card debt, and for other purposes,
– protect service members and veterans from means testing in bankruptcy, to disallow certain claims by lenders charging usurious interest rates to service members, and to allow service members to exempt property based on the law of the State of their premilitary residence.
Each of these amendments was proposed by a Democrat, and each was voted down by the Republican majority.
Similar amendments were voted down in the House Judiciary Committee on March 16, including:
– An amendment by John Conyers (D-MI) protecting military personnel from predatory payday lenders,
– An amendment by Mel Watt (D-NC) exempting tuition costs from the expense calculation in the means test
– An amendment by Adam Schiff (D-CA) protecting people whose bankruptcy is due to identity theft
– An amendment by Howard Berman (D-CA) protecting bankruptcy filers who file due to medical crises
– An amendment by Jerry Nadler (D-NY) which would make debts arising from civil rights violations non-dischargable in bankruptcy.
The Democrats
The greatest hypocrisy on this bill may come from the Democrats, who often speak as if they are the party of working people. Some Democratic senators spoke against the bill and then voted for it. One of them, Senator Joe Lieberman, spoke for it and against it, voted for cloture (cutting off debate and moving the bill toward passage) and then voted against the bill. Another, Senator Hillary Clinton, did not vote for or against the bill. Nineteen Democratic Senators voted for the bill, while 24 voted against it. These are the 19 who chose to side with the credit card companies:
Sen. Joe Biden (D-Delaware)
Sen. Tom Carper (D-Delaware)
Sen. Ben Nelson (D-Nebraska)
Sen. Tim Johnson (D-South Dakota)
Sen. Max Baucus (D-Montana)
Sen. Evan Bayh (D-Indiana)
Sen. Jeff Bingaman (D-New Mexico)
Sen. Robert Byrd (D-West Virginia)
Sen. Kent Conrad (D-North Dakota)
Sen. Dan Inouye (D-Hawaii)
Sen. Jim Jeffords (I-Vermont)
Sen. Herb Kohl (D-Wisconsin)
Sen. Mary Landrieu (D-Louisiana)
Sen. Blanche Lincoln (D-Arkansas)
Sen. Bill Nelson (D-Florida)
Sen. Mark Pryor (D-Arkansas)
Sen. Harry Reid (D-Nevada)
Sen. Ken Salazar (D-Colorado)
Sen. Debbie Stabenow (D-Michigan)
The Senate Democrats have stood strong and begun to win over moderate Republicans on Social Security. They have blocked judicial appointments. They are not powerless. They chose to let the bankruptcy bill pass.
House Democrats are showing glaring signs of weakness, and many of them will back this bill if they don´t feel pressure from their constituents to oppose it. The House Judiciary Committee passed the bill, 22-13, with one Democrat, Rep. Rick Boucher of Virginia, joining the majority Republicans to support the legislation.
These 20 House Democrats wrote a letter to Speaker Dennis Hastert supporting the bankruptcy bill. The ones with an asterisk have also signed on as co-sponsors of the bill. The first three on the list are members of the Congressional Black Caucus:
Rep. Harold E. Ford, Jr. (D-TN) Rep. Artur Davis (D-AL) Rep. Gregory W. Meeks (D-NY) Rep. Ellen O. Tauscher (D-CA) Rep. John Larson (D-CT) Rep. Jim Davis (D-FL) * Rep. Ed Case (D-HI) * Rep. Melissa Bean (D-IL) Rep. Dennis Moore (D-KS) Rep. Mike McIntyre (D-NC) Rep. Shelley Berkley (D-NV) Rep. Steve J. Israel (D-NY) Rep. Carolyn McCarthy (D-NY) Rep. Joseph Crowley (D-NY) * Rep. David Wu (D-OR) Rep. Darlene Hooley (D-OR) * Rep. Stephanie Herseth (D-SD) Rep. Jay Inslee (D-WA) Rep. Adam Smith (D-WA) * Rep. Ron Kind (D-WI)
The following Democratic Congress Members did not sign the letter to Hastert but have signed on as co-sponsors of the bill:
Rep. Robert E. Andrews (D-NJ) Rep. Rick Boucher (D-VA)
As noted above, Boucher also voted for the bill in the Judiciary Committee.
The first obvious explanation for the Democrats´ behavior is campaign contributions. And this explanation has even penetrated the corporate media. The New York Times wrote:
"The main lobbying forces for the bill – a coalition that included Visa, MasterCard, the American Bankers Association, MBNA America, Capital One, Citicorp, the Ford Motor Credit Company and the General Motors Acceptance Corporation – spent more than $40 million in political fund-raising efforts and many millions more on lobbying efforts since 1989."
To phone, fax, or Email these and other Congress Members to tell them how you feel, go to DebtSlavery.org.
At this link you´ll find various analyses of the money trail.
The Senators who voted yes received more on average from credit card and financial services companies than did those who voted no. Democrats who voted yes received the most. But, at the same time, some of the Senators and Congress Members supporting the bill have received more money from labor than from credit card and financial services companies. So, why the betrayal of workers?
One reason may be that this bill has been the single top agenda item for these companies for years. They´ve given money specifically for this for years. They wrote the bill and endlessly lobbied for it. The benefits they offer are not merely contributions. In the case of Congressman Jim Moran (D., Va.), MBNA bailed him out of debt with a sweetheart loan in order to win his support for denying others any hope. These companies also offer the possibility of connections to others with wealth, the possibility of well-paid careers after Congress, of the use of company jets, and so forth. And it´s not just the financial companies that support this bill. Any corporation that realizes it could someday go the way of Enron, or even K-mart, favors this bill. The US Chamber of Commerce has lobbied for this bill.
In contrast, this issue has not been at the top of the agenda for grassroots advocacy groups, for labor, for civil rights groups. It´s been on the agenda, but not near the top. Debtslavery.org is working to change that in the next days or weeks, to build pressure on Congress Members, Democratic and Republican alike, to oppose this bill.
"Why did we lose so many votes on cloture on such an awful, venal piece of legislation?" a House Democratic staffer asked rhetorically on DailyKos.
"It´s really a structural matter in terms of who Democrats end up soliciting for campaign donations. Most Dems have a pretty solid labor-environmental-trial lawyer base that they then try to build out from to amass a large enough war chest to scare off challengers.
"Groups that lack steady conflict with the labor-enviro-lawyer triumvirate offer the most attractive targets. That´s why Dems end up cozied up to the technology and financial services industry – few labor issues since they´re mostly not unionized/union organizer´s targets, few environmental issues b/c they don´t pump soot into the air, and relatively less contact with the trial lobby.
"Since campaign contributions play a significant role and Dems have demonstrably fewer targets, especially on K Street, many Dems end up VERY close to the industries that pushed hardest for the bill – namely the American Banker´s Association and the credit card companies....
"If we take any lesson from the bankruptcy bill and Bush´s slavish support of corporate interest groups, it´s that we as progressives need to find a way to think of ways to give consumers´ issues teeth. Then maybe bills like this won´t even make it to the floor. If there´s no penalty for voting for a pro-Chamber bill, Dems have an easier time peeling off and supporting bad legislation. If you need proof, just watch how many House members vote yes on the bill when it comes up. I bet it´s at least 320+."
The Democrats also organize into New Democrats and Blue Dog Democrats to build strength as the Republican Wing of the Democratic Party. After David Sirota, a fellow at the Center for American Progress (CAP), sent out an Email accusing 16 of the 20 House Democrats who had written to Hastert of doing so because of money they´d received from credit card and financial services companies, CAP President John Podesta, in the words of The Hill newspaper, "faced pointed questions from lawmakers at [a] New Democrat Coalition (NDC) meeting.... Nearly every lawmaker who arrived ... voiced concern about the Sirota broadside, calling it overtly personal and unhelpful to the two organizations´ shared goal of helping the Democratic Party grow.... Some participants said they were looking for more contrition than they received from Podesta and wanted assurances that his organization would abstain from attacking centrist Democrats for their pro-business stances."
Congressional Black Caucus Member Artur Davis (D-Ala.), had this to say:
"The unfortunate thing about the Email is that it questioned the good faith of the Democrats who support the bankruptcy bill. Whenever you question the good faith, that´s problematic. But I certainly don´t blame John for that e-mail. I don´t think it was authorized."
The media
It´s also possible that some senators believed no one was watching when they voted for the Debt Slavery Bill of 2005. The media coverage has been nowhere near that of the Social Security "crisis," much less Terri Schiavo. There´s been very little on the airwaves, and only relatively more in print. But the media has not done nearly as bad a job on this as it´s done on a long list of other issues. Numerous opinion pieces have denounced this bill with unbridled fury at the cruelty and arrogance it embodies. And some of the news articles have been fairly decent as well. One gets the impression that what 19 Democratic Senators were able to stomach, some editors and journalists are unable to.
Of course, what coverage there has been has been limited by the media´s childish understanding of "balance," as exhibited in the video clip above. Print articles, similarly, present two views from two sources (never one or three), without including information of which of the claims made have evidence behind them. Of course, some pieces of information that are considered neutral, such as the increase in bankruptcy filings, are presented directly by the journalist as factual, but the cause of that increase and other contested points are off-limits for actual reporting because they are contested. While the New York Times and the Washington Post and others have produced some good and lengthy articles, often these articles are framed with poor headlines and leads that obscure the important information. Short, one-paragraph stories on this issue have been, as usual, more misleading than the longer ones. And why have there been no opinion polls? But in every aspect, the media has out-performed its usual miserable standard.
The media has, in a move that is always damaging to democracy, reported too heavily on the horse race, predicting a near certain passage of the bill, predicting a last-minute surge in filings before it´s enacted, and praising the Republicans for being winners, even when acknowledging that their bill will hurt millions of people. Here´s how Newsweek summed things up:
"GOPs + New bankruptcy bill is latest victory for No Big Business Left Behind. Bonus: Deadbeat millionaires keep their loot.
"Dems – The "party of the people" can´t even protect cancer victims overwhelmed by bills. Talk about bankrupt."
Not just ordinary readers, but Democratic Party strategists will look at something like that and decide that the solution is to move even closer to the Republicans, because they are winners.
Here´s a typically misleading lead to an article from Newhouse News Service:
"The bankruptcy bill speeding through Congress has triggered a debate over who goes bankrupt in the United States and whose fault it is.
"Lenders say that for some, bankruptcy is not a last resort but rather an easy way out of debt. The bill, they say, would crack down on abuse and force individuals to take more personal responsibility. But its critics say that bankruptcies typically are caused by emergencies, such as medical crises or layoffs. [But who has evidence to support their claims? And what exactly was journalism school for?]
"One thing is certain: As consumer indebtedness has skyrocketed, so have bankruptcy filings. A review of data from the Federal Reserve, U.S. Bankruptcy Courts and the Census Bureau found that credit card debt and bankruptcy filings have increased nearly in lockstep since 1980."
Here´s an excerpt from the San Antonio Express News that builds on a myth that credit card companies would lower their rates on the rest of us if some of their customers weren´t sneaking out of their debt:
"In a statement explaining why changes are needed, Sen. Chuck Grassley, R-Iowa, said bankruptcy ´was not intended to be a convenient financial planning tool where deadbeats can get out of paying their debt scot-free while honest Americans who play by the rules have to foot the bill.´"
While those comments went uncritically reported in the media, other voices were heard in the progressive and "mainstream" media. WashingtonPost.com has done a good and more honest job of presenting information originally reported in the print version of the paper.
The editor of Fortune Magazine, Andy Serwer, has done even better. He wrote:
"As for the bankruptcy bill, too many Americans have been copying big business – and they shouldn´t be allowed to do that. Folks just don´t understand that companies that declare bankruptcy – like US Air, Winn-Dixie, and Kmart – are living, breathing entities. And a bankrupt company like, say, Interstate Bakeries (they make Ho Hos and Ding Dongs) is more important than any one citizen, regardless of whether or not he or she makes Ding Dongs for a living. You follow? Another problem is that personal bankruptcies were cleaning out the credit card industry. According to CardWeb.com, profits in the card biz grew from $ 12.9 billion in 1995 to $ 31.6 billion last year. That´s only a 144% increase in a decade, which is a scandal. Earnings should have been up at least 300%!
"I guess what I´m suggesting is a return to the Gilded Age, when it was ‘anything goes’ and everything did. The way we´re stifling wages, ending personal bankruptcies, and blocking lawsuits, soon even corpulent guys in top hats may be coming back into style."
Even the New Republic´s Noam Scheiber suffered an outbreak of populism, writing:
"[S]upport for the bill by Democratic moderates betrays a striking obliviousness to the most important debate underway within the Democratic Party. Moderate Democrats have been under assault from grassroots liberals lately for selling out Democratic values in their rush to appease conservative interests. I normally think this criticism is highly misplaced, and that moderates have exactly the right instincts when it comes to social issues and foreign policy, even most economic issues. But in this case the moderates proved the liberals´ point for them, which could set back the cause of moderates within the party for months, if not years. It really is a colossal, inexcusable mistake."
All I can say is, let´s hope so!
Taking action
To learn more, to contact your Congress Member, and to find out what else you can do, visit [link to www.debtslavery.org.]
[link to www.commondreams.org] |
| Anonymous Coward
User ID: 191
5/10/2005 6:59 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Steep drop today? |
| Anonymous Coward
User ID: 12012
5/10/2005 7:08 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Dow futures down heavily. Not sure why. Maybe Iran´s nuclear enrichment announcement after yesterday´s close, or maybe the breaking story by Posner that Saudi oil fields are rigged to be destroyed for decades if the Saudi kingdom falls. War can only take profits so far before reality sets in, it´s bloody mayhem. |
| idol_harobed
User ID: 509
5/10/2005 7:10 AM
 | | Re: Watch, Its happening ,the global economic change. | Quote |
I do not care. If my money becomes worthless someday I will simply go back to the farmlands where I was raised and life will continue, although without the technological benefits of the modern society.
It is important to be ready for a sudden material loss, thus one must be spiritually prepared and not clinge to the mundane things.
However, I tend to think crisis means opportunity for new leaderships rather than catastrophy.
I am what I read. |
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