| | | Page 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28 | Watch, Its happening ,the global economic change.
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User ID: 10835
8/4/2005 7:43 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
So (and I really shouldn´t be telling you this because you might blab to the Parole Board), but if I ever get out of here, if see one more clueless jerkwad jackass lying piece of dog crap moron halfwits tell me that there is no inflation, I will probably really lose it. Big time.
Arnold Schwartzenegger, governor or California, has a fight with the entrenched morons and commie bastards who infest California politics. Sticking point? Trying to revamp the budget process so that the dimwits do not take windfall revenues (such as the now-busted dotcom bonanza) and create on-going programs (or provide more funding for existing programs) that will still be needing all this money (and more!) long after the windfalls dry up. A rich uncle dies and leaves you $100K, and you plan to increase your annual spending by $100K. Do you plan to have a rich uncle die every year? Hahahaha! And then they turn around and wonder why California gets so little respect!
But it is not just California, to be sure. And it is not just America, either.
From Alan Greenspan´s August 2002 comments from Jackson Hole we read that he acknowledges that you cannot deflate bubbles. "It seems reasonable to generalize from our recent experience that no low-risk, low-cost, incremental monetary tightening exists that can reliably deflate a bubble. The key policy question is: If low-cost, incremental policy tightening appears incapable of deflating bubbles, do other options exist that can at least effectively limit the size of bubbles without doing substantial damage in the process? To date, we have not been able to identify such policies, though perhaps we or others may do so in the future."
Hahaha! Everybody in or out of government for the last 500 years has tried, and failed, to "identify such policies," and not one of them has even come close. But Greenspan, clueless-yet-optimistic, thinks that one may be found! I stand up and shout "What a moron!"
As security guards surround me and drag me away, I hear him admitting, now that I am out of the room, "data suggest that nothing short of a sharp increase in short-term rates that engenders a significant economic retrenchment is sufficient to check a nascent bubble." Well, duh!
ContraryInvestor.com has taken a look at the unbelievably low interest rates, especially the low Fed Funds rate. "With a Fed Funds rate at 3.25% (soon to be 3.5%) and an implied forward inflation rate of 3% (as measured using the average TIPS yield YTD), we have a spread of 0.25-.5%. C´mon, if that isn´t theoretical zero, then what is it? Bottom line? On a real basis, the Fed is still wildly accommodative. Wildly. Money is still free, so to speak. What the Fed has essentially done over the last 13+ months is bring the Funds rate from negative territory to near zero on a CPI inflation adjusted basis."
Warming to the subject, they go on. "Let´s put it this way; if the Fed is even close to done in terms of tightening rates at the current time, it will be one of the most accommodative monetary policy stance relative to CPI at the end of a Fed tightening cycle ever seen in the last half century at the very least, if not ever. In other words, ´what tightening cycle?´ There hasn´t been any!!!!!!" Note the four, count ´em four, exclamation points!
Really getting going, they write "fixed residential investment as a percentage of GDP rose to 6%. For you history buffs, that´s a new fifty year high. How about one last historical marker before we part company? Along with the GDP report last week came the Employment Cost Index for 2Q. The year-over-year change in wages and salaries recorded its lowest level EVER." Prices are up, but wages and salaries are not! And you think that this portends a healthy, growing economy? Hahahaha!
Even worse, according to Challenger´s monthly job cut analysis, "overall job cuts are on the rise in 2005, reaching 538,274 through June." Ugh.
***The Mogambo Sez: This is a dangerous market to go short, as there is something so manipulative about it. I am pretty sure that it has something to do with Alan Greenspan, John Snow and that whole idiotic, war-mongering Bush administration, which could be properly characterized as Comanche, which other Indian tribes defined as "Somebody who wants to fight me all the time."
And although I do not know where all the money went, in the first 29 days of July alone , the national debt went up by $60 billion dollars! More than two freaking billion dollars a day!
If you don´t think that this is a reason to buy gold and silver, then nothing is.
[link to www.321gold.com] |
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User ID: 3499
8/6/2005 1:38 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Republican pork barrel
By Jeff Jacoby, Globe Columnist | August 4, 2005
AT $286.4 BILLION, the highway bill just passed by Congress is the most expensive public works legislation in US history. In addition to funding the interstate highway system and other federal transportation programs, it sets a new record for pork-barrel spending, earmarking $24 billion for a staggering 6,376 pet projects, spread among virtually every congressional district in the land. The enormous bill -- 1,752 pages long -- wasn´t made public until just before it was brought to a vote, and so, as The New York Times noted, ´´it is safe to bet that none of the lawmakers, not even the main authors, had read the entire package."
That didn´t stop them from voting for it. It passed 412 to 8 in the House, 91 to 4 in the Senate.
Huge as the bill was, it wasn´t quite huge enough for Representative Don Young of Alaska, chairman of the House Transportation and Infrastructure Committee. ´´It´s not as big as what he´d like," a committee spokesman said, ´´but is still a very good bill and will play a major role in addressing transportation and highway needs."
One wonders what more Young could have wanted. The bill funnels upward of $941 million to 119 earmarked projects in Alaska, including $223 million for a mile-long bridge linking an island with 50 residents to the town of Ketchikan on the mainland. Another $231 million is earmarked for a new bridge in Anchorage, to be named -- this is specified in the legislation -- Don Young´s Way. There is $3 million for a film ´´about infrastructure that demonstrates advancements in Alaska, the last frontier." The bill even doffs its cap to Young´s wife, Lu: The House formally called it ´´The Transportation Equity Act -- a Legacy for Users," or TEA-LU.
Christmas didn´t come early just for Alaska. Meander through the bill´s endless line items and you find a remarkable variety of ´´highway" projects, many of which have nothing to do with highways: Horse riding facilities in Virginia ($600,000). A snowmobile trail in Vermont ($5.9 million). Parking for New York´s Harlem Hospital ($8 million). A bicycle and pedestrian trail in Tennessee ($532,000). A daycare center and park-and-ride facility in Illinois ($1.25 million). Dust control mitigation for rural Arkansas ($3 million). The National Packard Museum in Ohio ($2.75 million). A historical trolley project in Washington ($200,000). And on and on and on.
If Carl Sandburg had lived to see this massive avalanche of bacon greasing its way down Capitol Hill, he would have named Congress, not Chicago, the hog butcher for the world. Or perhaps he would simply have seconded P.J. O´Rourke´s timeless observation in ´´Parliament of Whores": ´´Giving money and power to government is like giving whiskey and car keys to teenage boys."
Arizona Senator John McCain, who voted no, called the bill a ´´monstrosity" and wondered whether it will ever be possible to restore fiscal sanity to Congress. If ´´the combination of war, record deficits, and the largest public debt in the country´s history" can´t break lawmakers´ addiction to spending, he asked, what can? ´´It would seem that this Congress can weather any storm thrown at it, as long as we have our pork life-saver to cling to."
McCain is a Republican, and it might surprise younger readers to learn that spending discipline was once a basic Republican principle. Hard to believe in this era of bloated Republican budgets and the biggest-spending presidential administration in 40 years -- but true. Once upon a time Republicans actually described themselves with pride as fiscal conservatives. That was one of the reasons they opposed the promiscuous use of pork-barrel earmarks, which are typically used to bypass legislative standards, reward political favorites, and assert political control over state and local affairs.
For example, Ronald Reagan vetoed the 1987 highway bill because it included 121 earmarks and was $10 billion over the line he had drawn in the sand. ´´I haven´t seen this much lard since I handed out blue ribbons at the Iowa State Fair," he said. President Bush is a great admirer of Reagan´s record in foreign affairs. Too bad he shows so little interest in following the Gipper´s fiscal lead as well.
When Bush ran for president in 2000, he described his Democratic opponent, Vice President Al Gore, as a reckless high-roller who would unbalance the budget. ´´If the vice president gets elected," Bush said, ´´the era of big government being over is over."
Five years later, what is over is the GOP reputation for fiscal sobriety. Republicans today are simply the other big-government party -- just as capable of squandering public funds, and just as eager to fill barrels with pork, as their fellow-spendthrifts across the aisle.
Jeff Jacoby´s e-mail address is jacoby@globe.com.
© Copyright 2005 Globe Newspaper Company. |
| Obonoxious freakin´ Woo Woo
User ID: 15103
8/6/2005 1:55 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Thread : Watch the stock markets it cant be long now for the long awaited/expected correction/s.
Damn this thread´s almost as long as the "Watch CNN, NESARA to be announced in the next ten hours" thread.
Just sayin´. |
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User ID: 3499
8/6/2005 1:59 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Your welcome, but even with this mountain of evidence, probably because of, most will go about their normal dailys till it is too late. |
| Anonymous Coward
User ID: 1880
8/6/2005 2:23 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
It´s amazing how the market moves the other way when the majority of the people think they are right. |
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User ID: 10580
8/7/2005 9:25 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
aladin
User ID: 9010
8/7/2005
5:08 pm EDT CHINA´S BELL TOLLS LOUDER........ ARE YOU LISTENING?
CHINA´S BELL TOLLS LOUDER. ARE YOU LISTENING?
by Peter Schiff
Euro Pacific Capital
August 5, 2005
In the second week since China´s announcement of its decision to abandon the yuan’s peg to the dollar, the reaction in global financial markets has intensified. Those who have underestimated the significance of this policy shift are running out of time to reassess their complacency. If holders of U.S. dollars were wondering for whom this bell tolled, the markets themselves are crying in crystal clarity "It tolls for thee."
During the week the price of gold gained about $10 per ounce, with the Philadelphia Gold and Silver Index (XAU) surging over 7% at its intra-week peak, its highest level since March. In additional, oil prices rose sharply as well, reaching a new all-time record high above $62 per barrel. Furthermore, the U.S. dollar posted its largest weekly decline this year, with the euro rising about 2%. In fact, by penetrating key chart resistance and forming a classic head-and-shoulders bottom in the process, the euro could rise considerably in the weeks ahead. Treasuries continued their decline, with long-term yields rising to a four month high. The technical outlook suggests that this trend will continue as well. In addition, for the first week in five, U.S. stock prices fell. Rather than a correction, it appears to me that this change of trend is likely to continue, with much steeper declines to come.
In addition, this week´s economic data reveals that rather than correcting, America´s unbalanced economy continues to move further off kilter. On Tuesday we learned that the personal savings rate fell to zero, the second lowest level ever, just above the minus .2% rate recorded in Oct. of 2001. Friday we learned that another 200,000 found employment in the non-productive service sector, while more manufacturing workers lost their jobs. Diminished savings and production come at a particularly inopportune time, as foreign savers are becoming more reluctant to lend, and foreign producers are growing increasingly skeptical of exchanging real goods for paper dollars.
The fact that these rather obvious signs of a looming financial crisis have gone unnoticed by traditional Wall Street investment houses is consistent with their prior history of chronic investment myopia. For example, I recently reread a Barron´s article written Nov. 2, 2004, in which five Wall Strategists, myself included, where asked to predict oil prices in 2005. Of the five, I was the only one to have accurately projected higher prices (which at the time were in the upper $40 per barrel), estimating prices would reach $65-$70 per barrel. A money manager at Solomon Brothers and an energy strategist at Merrill Lynch predicted prices collapsing to $28-$35, and $31- $34, respectively. If so many Wall Street analysts could blow such an obvious call as higher oil prices, why should we expect their judgment to be any better now?
Perhaps the most ominous sign of all has been the recent increase in the local currency price of every foreign asset class in which Euro Pacific Capital clients have been investing. Capital flows of this magnitude into large cap, defensive names, reveal a major capital realignment in progress. These foreign asset classes include utilities, commercial property trusts, and oil and gas trusts, as well as energy and mining shares. The fact that demand is increasing for non-U.S. dollar, high yielding, safe-haven investments, as well as for traditional inflation and financial hedges while simultaneously decreasing for dollar denominated securities, reveals a major flow of funds taking place. Investors can either climb aboard and ride the wave to safety, or ignore its formation, and drown beneath its wake.
[link to www.financialsense.com] |
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User ID: 558
8/10/2005 10:23 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
by Russ Winter, Sunday August 07 2005
A perfect storm has been unloaded on the Housing and Credit Bubble since late June, led by 40-50 basis point increases in key indexes used to calculate adjustable rate and other exotic mortgages. The one year constant Treasury Maturity has increased from 3.36% to 3.87% during that period.
Small wonder that this comment appeared this week in an LA Times article:
West Los Angeles mortgage broker Mitch Ohlbaum said Friday that he had been fielding more calls in recent days from clients concerned about how rising rates will affect their loan payments. Prospective home buyers also are concerned that higher rates will make purchases more costly, he said. "Homeowners with home equity lines of credit, which are tied to short-term rates, are starting to see their payments increase, in some cases by 45% over the last year."
Adding fuel to the fire were these reserved comments by Robert Toll at his company´s earnings conference call:
"Some of the hottest U.S. upscale home markets may be cooling off, the head of luxury home builder Toll Brothers said on Thursday. ´We do see cooling in some local markets that were red hot a few months ago,´ Robert Toll, chairman and chief executive of Toll Brothers." "Demand for luxury homes in Las Vegas, New Jersey and the Washington D.C. area have relaxed a bit.
Now go ahead and tell us what you really think, Bob.
More mortal blows came from what can only be called the biggest rear-end cover jobs of the new century to date. You can rest assured there will be plenty more where this came from, before it´s all over. On August 1, the rocket scientists at Standard & Poors, after finally putting their pencils to the fact that 66% of all subprime mortgage backed securities (MBS) issued in 2004 are two year ARMs, concluded that lenders are allowing credit standards to slip too far. And too many of the borrowers using option ARMs are paying the minimum amounts per month, thereby accumulating potentially toxic levels of debt, especially in markets where home values are likely to soften. As Standard & Poor´s mortgage bond director Michael Stack put it, "´We wanted to jump in before this got any worse."
Not to be outdone, a task force headed by Deputy Comptroller of the Currency Barbara Grunkemeyer is preparing new underwriting and credit risk guidelines on option ARMs, interest-only mortgages and reduced-documentation loans. Sayonara to 125 percent mortgages at 1 percent to buyers with marginal credit, insufficient incomes, minimal down payments and no clue whatsoever about the potential payment-shock monsters lurking over the horizon. She added that financial regulators "have noticed that these products have taken off in the past six months."
For those who feel the fallout from this is "down the road," the small print in the Challenger job report indicating 102,971 new layoffs, says a lot about what really happening to the consumer and financial sectors that have led this historic bubble. Noting that consumer products, computer and financial industries accounted for roughly half of July´s cutbacks, he said that "one would expect employers in the consumer products, financial and computer sectors to be adding workers by the boatload in an expanding economy."
Meanwhile in the "market," participants have played this perfect storm by bidding aggressively for all the junk securities they can get their hands on. This has to be one the greatest cognitive dissonance and/or denial trades ever. S&P´s speculative credit spreads have closed from June 27 at 403.4 to 339.1 on August 3, an incredible 64 basis point rally right into the jaws of death. Of course the stock markets, led by beta and risk, did much the same thing. One should also take note that so far, and despite the fact that 52.5% of all the buying at the top mortgage activity of 2004 was in jumbo MBS, spreads on those instruments are near all time lows over Treasuries. Also keep in mind that the big buyers at the margin of the lower tranches of the MBS are hedge funds, who typically use leverge of 5 to 1 up to 8 to 1 for these speculations. For those seeking more background on this activity, Fitch put out
what can only be described as a warning report last week.
This just doesn´t add up. In fact, in another bout of cognitive dissonance,* I note that certificate of deposits offered by most banks barely yield more than current Treasury Bill rates. Very, very odd given the huge exposure of banks to mortgage lending, don´t you think?
Although I am tempted to offer readers my standard stream of consciousness trading ideas for dealing with this, I am going to restrain myself, at least today. I´ll offer a more basic, simple suggestion instead, one that anyone can carry out: Run, don´t walk, down to your banks and financial institutions, and remove your funds wherever and whenever possible. Then run, not walk to set up your Treasury Direct account. |
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User ID: 558
8/10/2005 10:30 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
August 9, 2005
Good News! Soon You´ll No Longer Need an Expensive College Education to Work in the US
Watching the Economy Crumble
By PAUL CRAIG ROBERTS
The US continues its descent into the Third World, but you would never know it from news reports of the Bureau of Labor Statistics’ July payroll jobs release.
The media gives a bare bones jobs report that is misleading. The public heard that 207,000 jobs were created in July. If not a reassuring figure, at least it is not a disturbing one. On the surface things look to be pretty much OK. It is when you look into the composition of these jobs that the concern arises.
Of the new jobs, 26,000 (about 13%) are tax-supported government jobs. That leaves 181,000 private sector jobs. Of these private sector jobs, 177,000, or 98%, are in the domestic service sector.
Here is the breakdown of the major categories:
• 30,000 food servers and bar tenders;
• 28,000 health care and social assistance:
• 12,000 real estate;
• 6,000 credit intermediation;
• 8,000 transit and ground passenger transportation;
• 50,000 retail trade; and
• 8,000 wholesale trade.
(There were 7,000 construction jobs, most of which were filled by Mexicans immigrants.)
Not a single one of these jobs produces a tradable good or service that can be exported or serve as an import substitute to help reduce the massive and growing US trade deficit. The US economy is employing people to sell things, to move people around, and to serve them fast food and alcoholic beverages. The items may have an American brand name, but they are mainly made off shore. For example, 70% of Wal-Mart’s goods are made in China.
Where are the jobs for the 65,000 engineers the US graduates each year? Where are the jobs for the physics, chemistry, and math majors? Who needs a university degree to wait tables and serve drinks, to build houses, to work as hospital orderlies, bus drivers, and sales clerks?
In the 21st century job growth in the US economy has consistently reflected that of a Third World country--low productivity domestic services jobs. This goes on month after month and no one catches on--least of all the economists and the policymakers.
Economists assume that every high productivity, high paying job that is shipped out of the country is a net gain for America. We are getting things cheaper, they say. Perhaps, for a while, until the dollar goes. What the cheaper goods argument overlooks are the reductions in the productivity and pay of employed Americans and in the manufacturing, technical, and scientific capability of the US economy.
What is the point of higher education when the job opportunities in the economy do not require it?
These questions are too difficult for economists, politicians, and newscasters. Instead, we hear that “last month the US economy created 207,000 jobs.”
Television has an inexhaustible supply of optimistic economists.
Last weekend CNN had John Rutledge (erroneously billed as the person who drafted President Reagan’s economic program) explaining that the strength of the US economy was “mom and pop businesses.” The college student with whom I was watching the program broke out laughing.
What mom and pop businesses? Everything that used to be mom and pop businesses has been replaced with chains and discount retailers. Auto parts stores are chains, pharmacies are chains, restaurants are chains. Wal-Mart, Home Depot, and Lowes, have destroyed hardware stores, clothing stores, appliance stores, building supply stores, gardening shops, whatever--you name it.
Just try starting a small business today. Most gasoline station/convenience stores seem to be the property of immigrant ethnic groups who acquired them with the aid of a taxpayer-financed US government loan.
Today a mom and pop business is a cleaning service that employs Mexicans, a pool service, a lawn service, or a limo service.
In recent years the US economy has been kept afloat by low interest rates. The low interest rates have fueled a real estate boom. As housing prices rise, people refinance their mortgages, take equity out of their homes and spend the money, thus keeping the consumer economy going.
The massive American trade and budget deficits are covered by the willingness of Asian countries, principally Japan and China, to hold US government bonds and to continue to acquire ownership of America’s real assets in exchange for their penetration of US markets.
This game will not go on forever. When it stops, what is left to drive the US economy?
Paul Craig Roberts has held a number of academic appointments and has contributed to numerous scholarly publications. He served as Assistant Secretary of the Treasury in the Reagan administration. His graduate economics education was at the University of Virginia, the University of California at Berkeley, and Oxford University. He is coauthor of The Tyranny of Good Intentions.He can be reached at: paulcraigroberts@yahoo.com
[link to www.counterpunch.org] |
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User ID: 3075
8/11/2005 11:19 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
User ID: 7745
8/11/2005
11:00 pm EDT Unbelieveable! Lok how execs are stealing workers pensions to get rich themselves!!
Company Focus
While pensions fall short, CEOs fly high
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Click Here!
Ford, GM, United Airlines, Continental. They´re just four of the companies struggling with falling profits and pension problems as their executives get huge payouts.
By Michael Brush
At companies across the country, workers are watching their pensions dwindle.
At UAL’s (UALAQ, news, msgs) United Airlines, workers stand to lose more than $3 billion in promised benefits as the airline passes its pension obligations on to the government.
Unfunded pension obligations at Ford (F, news, msgs) have risen to a whopping $12.3 billion, and General Motors (GM, news, msgs) is looking at shortfalls of $7.5 billion.
In the executive suites of these companies, however, there´s no pain to be found. United Airlines chief executives John Creighton, Jr. and Glenn Tilton collected $13.1 million in the two years leading up to its 2002 bankruptcy.
And while the pension pit grows at Ford, chief executive William Clay Ford Jr. has collected $53 million over the past three years. At GM, G. Richard Wagoner Jr. got $40.7 million over that period.
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It´s no secret that corporate bigwigs have paid themselves handsomely while stiffing their workers and sending jobs overseas. It´s particularly galling, though, to see these same executives locking in their own lifetime of luxury while rolling the dice with their workers´ retirement years.
Separate and unequal pensions
Consider the case of Continental Airlines (CAL, news, msgs). Last year, with Continental and other major airlines facing massive losses and the threat of bankruptcy, outgoing Continental chief Gordon Bethune took a $22 million lump-sum payment from his retirement plan. At the same time, Continental´s pension plan is underfunded by $1.58 billion.
“That situation with Bethune just crystallizes the whole unfairness of it all,” says Paul Hodgson, a senior research associate with The Corporate Library, a Portland, Me. company that examines executive pay and corporate governance issues for investors. “The amount that (executives) have earned over the years would seem to be enough to provide for their retirement, and the idea that you have to provide retirement benefits worth 50% of their annual compensation is absurd.”
Pensions don´t actually shrink unless a company files for bankruptcy and passes pension obligations on to the government. Pfizer (PFE, news, msgs) has a $2.98 billion pension plan shortfall, but $19.8 billion in cash. But seemingly healthy companies can be felled by unexpected events, as United discovered after Sept. 11, 2001. GM has $35.9 billion in cash on its books (much of it tied up in its financial arm), but earlier this spring analysts speculated openly about the likelihood of the automaker filing for bankruptcy protection.
Related news and commentary on MSN Money
Related resources image
• The Cadillac of 401(k)s belongs to GM
• Banks profit from employees´ 401(k)s
• Higher oil prices? It´s worse than you think
• How Buffett tripped over the dollar
• Is it doomsday for pensions?
With help from Standard & Poor’s, we took a look at the 20 companies currently running the most underfunded pension funds. We found that the top brass at some of those firms have rewarded themselves with retirement plans that promise millions of dollars in annual income for the rest of their lives.
Here’s a look at some of the most glaring examples from a Standard & Poor’s ranking of the 20 S&P 1500 companies whose pension plans are most deeply in the red. (See the results in the table below).
Pensions poor, CEOs rich
Company Name Pension underfunding (billions) CEO pay, past three years* (millions) Total executive pay** (millions) Total as a percentage of underfunding
Ford (F, news, msgs) $12.31 $53.2 $105.5 0.9%
Exxon Mobil (XOM, news, msgs) 11.5 91.9 196.2 1.7%
General Motors (GM, news, msgs) 7.53 40.7 104 1.4%
IBM (IBM, news, msgs) 7.38 55.9 112.6 1.5%
Delta Air Lines (DAL, news, msgs) 5.3 23.4 58 1.1%
Lockheed Martin (LMT, news, msgs) 4.88 54.4 140.7 2.9%
Delphi (DPH, news, msgs) 3.98 23.9 58.6 1.5%
Boeing (BA, news, msgs) 3.80 8 33.9 0.9%
Raytheon (RTN, news, msgs) 3.64 21.3 45.8 1.3%
DuPont (DD, news, msgs) 3.51 21.3 50.8 1.4%
United Technologies (UTX, news, msgs) 3.14 37.9 73.3 2.3%
Goodyear (GT, news, msgs) 3.12 9.6 22 0.7%
Pfizer (PFE, news, msgs) 2.98 62.7 137.6 4.6%
Dow Chemical (DOW, news, msgs) 2.8 27 60.1 2.1%
Excelon (EXC, news, msgs) 2.76 27.2 81.9 3%
Procter & Gamble (PG, news, msgs) 2.35 61.3 132.7 5.6%
ConocoPhillips (COP, news, msgs) 2.18 79.8 203 9.3%
Hewlett-Packard (HPQ, news, msgs) 2.09 31.2 98.2 4.7%
Altria (MO, news, msgs) 2.05 50 121.9 5.9%
Alcoa (AA, news, msgs) 1.95 45.9 72.9 3.7%
*Includes salary, bonus, restricted stock grants, "other" compensation
and S&P estimate of the value of options at the time they were granted, using the Black Scholes model.
**Top five executives
Source: Standard & Poor´s
Ford: Profits fall, CEO pay stays high
Ford takes top honors. Its $12.3 billion pension shortfall could someday force rank-and-file Ford employees to accept pension checks that are a fraction of what they´ve been promised.
But that didn’t stop Ford chief executive Bill Ford from collecting a cool $19.9 million last year, according to Standard & Poor’s. Collectively, the five top managers at Ford pulled down $105 million over the last three years while the automaker’s performance languished, making it harder for the company to fund pension promises to workers.
Like United Airlines, Delta Air Lines (DAL, news, msgs) may wind up in bankruptcy. If so, that could mean the federal government will have to pick up the tab for Delta’s pension obligations just like at United Airlines -- all but assuring retirement benefits will be dramatically cut.
Delta has the fifth-largest pension shortfall, at $5.3 billion. But former chief executive Leo Mullin collected $23.5 million in the three years before his departure as head of Delta two years ago.
Pensions suffer, in good times and bad
It´s not just companies in troubled sectors like airlines and automakers that have big pension shortfalls and fat executive compensation. Energy companies are recording huge profits and rewarding their chiefs while neglecting their future pensioners.
Exxon Mobil (XOM, news, msgs), for example, has the second biggest pension-fund shortfall (Ford is first.) Exxon has an $11.5 billion hole in its worker retirement plan. Yet the six top execs at the company took home $196 million over the past three years. Exxon Chairman and Chief Executive Lee Raymond pocketed $38.1 million last year.
All told, the top managers at the 20 companies with the biggest pension shortfalls earned $1.9 billion in the past three years, according to Standard & Poor’s.
At the same time, the deficits in their pension plans for the rank and file mounted to massive $89 billion. That disconnect between burgeoning pension deficits and rising executive pay has some retirement plan experts scratching their heads.
They can (and do) take it with them
The excesses don’t stop with the sweet pay packages. Indeed, while rank-and-file workers wonder if the red ink in their retirement plans may mean they’ll spend their final years in the poor house, their well-heeled execs are taking steps to assure they won’t.
Pfizer´s $2.98 billion pension shortfall didn’t stop chairman and chief executive Henry McKinnell from signing a juicy retirement plan that will give him $6.5 million in annual retirement income, according to the Corporate Library. It´s not like McKinnell will enter retirement short on cash. Pfizer has paid him $62.7 million over the past three years, according to Standard & Poor’s.
IBM (IBM, news, msgs) has a $7.38 billion hole in its retirement plan. Yet IBM chairman and chief executive Samuel Palmisano has a $4.1 million annual pension, calculates the Corporate Library. |
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User ID: 3075
8/11/2005 11:36 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Anonymous Coward
User ID: 3214
8/11/2005
6:07 pm EDT gas prices...follow the money
I have been watching, listening and squirming over the cost of pump gas. One of the few simple pleasures in my life is a nice ride in the country at sunset....now gone.
I have wondered why there are no public outcries. Have you noticed that every thing that happens seems to be an excuse for future oil price increases. The news over the last few years has warned us six months in advance that oil will be higher in the summer....oil will be higher in the winter...oil will be higher for vacation....ok....they are right.
A few cents up...a few cents down.... a few more up methodology. Typical act of cooking a frog in a pot of cold water...raising the heat slowly until he boils. Think about it.
Raise the price 5 cents, back it down three..raise it six etc. etc. eventually you have what we have now ..a 120% increase in just a few years.
Two things that really get my goat and no one ever mentions it. check the stock market...especially oil stocks/profits of domestic producers and suppliers. Domestic oil stocks/companies are posting record profits.
Ok...there is a war, there are refinery fires and natural disasters, there is pending increasing demands of emerging foreign economies and touted shortages relative to demand, there are hurricanes and other disasters worldwide and production shortages all of which are accused of being the culprit of higher prices but........
Why are the oil companies adding billions in profits to the already huge profits of just a few years ago. I am talking tens, hundreds of billions of dollars more. Think about it.
Of course...this creates a problem for the oil companies doesn´t it? They have a tax situation where these new windfalls will be taxed significantly....a problem that I wish I had.
Well....to the rescue, current executive and legislative members vote and pass a bill for a couple of hundred billion in tax credits for domestic oil producers in the new energy bill....it´s obscene.
Something that would really be interesting to observe would be a tracking graph that correlates domestic oil producer profits with the rate of at the pump prices.
That would really piss ya off.
Another thing....with the suggested shortages, pollution, Global warming and increasing demand...why is there a $100,000 tax credit to by a suv or hummer that gets around 10 mpg and only a $2000 tax credit to buy a hybrid that gets 60-70 mpg? Think about it.
Just some thoughts.....
[link to www.independent-media.tv]
[link to www.democrats.org]
[link to www.google.com]
perspective.......
We hear the word "billions" everyday coming out of Washington...to the point that we can not really understand or grasp how much money that word really represents...There are roughly 86,000 seconds in one day. If it were possible (for anyone but the government) to spend $10 per second...24 hours per day...7 days a week for a solid year...that would be only 31 million 400 thousand dollars. At this rate it would take 32 years just to get to one billion dollars.
Now consider that our Gov currently spends one billion dollars every ......
June 05, 2005
How Much is a Billion Dollars?
Every 8 hours and 20 minutes, the U.S. Government spends another billion dollars. (Thank us very much.) A billion is a difficult number to comprehend, let´s put a billion into perspective.
A billion seconds ago, it was 1959.
A billion minutes ago, Jesus was alive.
A billion hours ago, our ancestors were living in the Stone Age.
Of course, the current public debt is well over $7 Trillion dollars. So, How Much is a Trillion?
But, how many is a "trillion" dollars?
If we all decided to all pitch in and pay off just the first $5 trillion of the federal debt at the rate of $1.00 (one dollar) per second, it would take us around 160,000 years. One hundred sixty thousand years.
A tightly-packed stack of crisp new $1000 bills, totaling $5 billion, would be 315 miles tall. The Space Shuttle, which orbits at about 240 miles above the earth, would have to go around our "debt stack."
Anonymous Coward
User ID: 718
8/11/2005
6:42 pm EDT Re: gas prices...follow the money
an oily bump...
1. Maybe we should just SELL all our
worldly possessions.
2. Use the $$$ to BUY oil stocks.
3. Get rich?
Anonymous Coward
User ID: 13480
8/11/2005
7:07 pm EDT Re: gas prices...follow the money
Here´s another couple of thoughts you might consider:
The oil reserve found off the coast of Argentina (Falkland Islands) is greater than that of Saudi Arabia. When this was discovered, it was kept secret. Thatcher sent in battle ships to quell a civil uproar in the 70s to protect it. At the time, it is said that the oil giants did not have the money to set up drilling operations. They may be making their billion$ now to proceed. Maybe not.
Then...have you noticed how many people are buying more fuel-efficient cars now? They want the high mileage to save at the gas pump. Isn´t it such a timely thing now that the auto industry was in such a big slump. Their pension funds are in question. They have reached junk bond status, layoffs, etc. Is this a case of we scratched your back by marketing less fuel-efficient cars/SUVs, and now you scratch ours by sending the price of oil into the stratosphere? We need auto sales!
.
Anonymous Coward
User ID: 3214
8/11/2005
11:27 pm EDT Re: gas prices...follow the money
you could be right....think what a $100K tax credit would do for the hydroride makers....actually, that might be something Congress could do that may benefit everyone...for a change. |
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User ID: 19534
8/14/2005 9:00 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Concerned Aussie from Perth
User ID: 262
8/14/2005
7:59 am EDT
Description of a "Derivative".........WTF!!
Gee i would have guessed that.....not.
Check it out lmao
What a joke.
DESCRIPTION OF A DERIVATIVE SOLD BY BANKERS´ TRUST TO GIBSON GREETING CARDS: "The interest charged was calculated by: Multiplying the yield on two year treasury bonds by 103; Dividing the result by 4.88%; Subtracting the price of a 30 year Treasury Note from that number; Dividing the result by 100; All of which was subtracted from 1; And then multiplied by $30 million." -- The Washington Post, January 19, 1995
BANKERS TRUST DEALERS ON THE ART OF SELLING THIS DERIVATIVE: "Bankers´ Trust officials knew such transactions were getting too complicated for Gibson to comprehend, another transcript cited by the CFTC shows. ´They probably do not understand it quite as well as they should,´ one Bankers´ Trust official tells another. ´I think they have a pretty good understanding of it, but not perfect. ... And that´s, like, perfect for us.´" -- The Washington Post, January, 1995 |
| Anonymous Coward
User ID: 19842
8/14/2005 9:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Best long term investment steel (reliable firearm) brass & lead (the ammunition to go with it) |
| .
User ID: 19534
8/15/2005 11:17 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Rates Push System To The Brink.
Concerned Aussie from Perth
User ID: 411
8/15/2005
9:58 am EDT
Rising Interest Rates Push System To The Brink.
Just in Folks
FYI
[Source: SAS 33/05]
WIESBADEN, August 13—RISING INTEREST RATES PUSH SYSTEM TO THE BRINK. World financial markets these days are filled with asset bubbles of unprecedented size. And all these bubbles and their respective derivatives can only be sustained as long as interest rates remain near historic lows. However, interest rates, including long-term rates which are decisive for housing and mortgage bubbles, have started to pick up sharply. At the bond auction by the U.S. Treasury Department on Aug. 8, rates for three-month and six-month bills had to be pushed up to the highest levels in four years. The yield on 10-year Treasuries, the leading measure for long-term rates, went above 4.3% in early August, compared to 3.9% at the end of June. The average U.S. rate for 30-year mortgages has now risen for six weeks in a row, reaching 5.89% on Aug. 11.
The ten small increases of short-term interest rates by the Federal Reserve over the last 14 months are only part of the story. Another element is the falling demand for U.S. government bonds by foreign investors. This was expressed as an example by the $13 billion bond auction on Aug. 10, where the share of foreign buyers plunged to 22%, that is only half the usual level. This trend could dramatically escalate in coming months due to the precarious fiscal situation in Japan. Following all the mega-bailouts for the banking system, Japan has the largest proportion of government debt to Gross Domestic Product (GDP) among the G-7 countries, even surpassing Italy. Japan and the U.S. are therefore by far the largest issuers of government bonds in the world. The privatisation of the giant Japan postal service, which would create the largest bank in the world with $3 trillion assets, was supposed to soften Japan´s debt problems. However, Koizumi lost the vote in the Diet and the privatisation is stalled for the moment. The effect is likely to be a sharp rise of Japanese government bond yields. On Aug. 9, the day after Koizumi had to call elections, yields on 20-year Japanese bonds increased to a five-month high. But any such rise puts additional pressure on the U.S. Treasury to push up its bond yields as well.
Furthermore, there is commodity price inflation. Driven by hedge fund speculation, shortages of U.S. refinery infrastructure, and in particular the rising likelihood of a geopolitical nightmare orchestrated around the Iran issue, have send the oil price to new all-time highs on almost every trading day during the first half of August. On Aug. 12, the oil price at the New York Mercantile Exchange settled at $66.86 a prices, an increase by $10 over to just three weeks earlier. The even more important price of Brent crude in London, typically several dollars below New York´s light sweet crude, closed at $66.45 a barrel on the same day, again a record-high.
The rising oil price, in line with other booming commodity prices, is building up an inflationary spiral in the real economy and is also aggravating the U.S. dependence on foreign capital. As the Commerce Department reported on Aug. 12, the U.S. trade deficit in June rose to $58.8 billion due to the largest ever foreign oil bill. The annual trade deficit is now on the way to reach $686 billion in 2005. And this doesn´t take into account the dramatic rise of the oil price since the end of June.
In a new study, headlined "Currency Crashes and Bond Yields in Industrial Countries," Federal Reserve economist Joseph Gagnon tries to argue that a crash of the U.S. dollar, accompanied by a dramatic rise in long-term interest rates, would not necessarily bankrupt the overall financial system.
Aug 12 (EIRNS)—MOST WORKING AMERICANS CANNOT AFFORD TO BUY A HOME; MANY CAN´T AFFORD TO RENT AN APARTMENT, as Alan Greenspan has driven the price of homes in the U.S. up and up.
A national survey titled, "Paycheck to Paycheck: the Cost of Housing in America," released by the Center for Housing Policy (CHP), found that "the median price of a new home rose 20% [from $186,000 to $225,000] in just a year and a half," ending the first quarter of 2005. Yet, "at the same time, wages for key community workers remained weak, even stagnant in comparison." The CHP used a method that bases itself on the U.S. Department of Housing and Urban Development´s (HUD) premise that the combined cost of owning a home—the cost of home mortgage, insurance, and taxes—should be no more than 30% of a family´s income. Thus, if the cost of owning a home is $30,000 per year ($2,500 or more per month)—as it is in Boston, New York, Los Angeles, San Francisco, etc.—then a family would need an $100,000 annual income to buy and pay regular mortgage payments on that home, so that the home cost is only 30% of the family´s income.
The CHP´s survey studied 183 U.S. cities, finding the median home price in each of these cities, and for 63 different job types—assembly line worker, police officer, licensed practical nurse, etc.—finding the median annual salary for each of these job types.
EIR´s initial review of the CHP data found that retail clerks, of whom there are 24 million in the U.S. economy, cannot afford to buy a home in a single one of the 183 cities, nor could they afford to rent a two-bedroom apartment in 85% of these cities. Assembly line workers could not afford to buy a home in 95% of the 183 cities; police officers could not afford to buy a home in two-thirds of the cities.
Ability to Buy A Home or Rent an Apartment, in 183 U.S. Cities
Can´t Afford Can´t Afford to Buy a Home to Rent 2 bedroom apt. Occupation #Cities /Percent # of Cities /Percent
Retail Sales 183 / 100% 155 / 85% Assembly Line 173 / 95% 65 / 36% Licensed Practical Nurse 151 / 83% 22 / 12% Fire Fighter 152 / 83% 20 / 11% Police Officer 117 / 64% 9 / 5%
For none of the above occupations does the median income provide enough money to rent a two-bedroom apartment in Boston, MA; Orange County, San Diego, San Francisco, San Jose, Calif.; and Washington, D.C. Of these jobs, only the police officer could rent a two-bedroom apartment in Los Angeles.
[Source: Detroit Free Press 8-12-05]
FORD ACCELERATES, INCREASES LAYOFFS. Ford Motor Co., for the first time in generations, has resorted to firing salaried employees and immediately escorting them from corporate buildings, the Detroit Free Press reported Aug. 12. Attrition, buy-outs, and early retirement have not stripped nearly enough people off Ford´s payroll to meet its initial goal of cutting 2,750 of its 35,000 North American white-collar workers in the second half of 2005. Worse, CEO William Ford, in internal emails this week, said that the company´s $907 million second-quarter loss in North American operations, means cuts have to go deeper than 2,750 positions. The company wouldn´t say on Aug. 12 how many people it has fired in recent weeks.
von Doom
User ID: 8077
8/15/2005
10:02 am EDT Re: Rising Interest Rates Push System To The Brink.
The smoke and mirrors economy is coming to an end. No wiggle room left and only fools still believe otherwise.
Concerned Aussie from Perth
User ID: 411
8/15/2005
10:23 am EDT
Re: Rising Interest Rates Push System To The Brink.
Same all over in respect to house prices.
Median house price in Perth just hit AUS $300,000.000
Many of the professions and trades listed above are relative to OZ in many ways....houses are just way out of reach or getting to be that way for people in such income brackets.
Sucks. |
| .
User ID: 21391
8/17/2005 5:50 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Conspiracy Theory
August 15, 2005
by The Mogambo Guru
There are those who lay awake at night wondering things like, "What does The Mogambo use as technical indicators?" and "What in the hell is wrong with me that I even care what the stupid Mogambo thinks about anything?" I´ll ignore that last remark, but I will be happy to address the first question by example. Let´s mosey on over to the banks and start rooting around in their fetid bowels. What do we find? Well, for one thing, we find that the banks are getting rid of government securities, and their total stash of that toxic waste went down over the last month. This is, as one of the Famous Mogambo Market Indicators (FMMI), a very bad omen. For one thing, it means, since bond prices have fallen over the last few weeks, that the banks have lost a lot of money as they sold the bonds.
Sticking just to the facts and not launching into a long, tiresome tirade about how the banks and the Federal Reserve banking system are killing us and how they have doomed us with their stupid neo-Keynesian idiocy, the last time this kind of weird thing happened was in 2000, just prior to the market tanking! Of course, it may have been just a coincidence, but maybe not. Anyway, after the stock market dropped, the banks started buying government debt like crazy in 2001, and by the middle of 2003 had increased their holdings of government debt by 40%. Then the stock market stopped falling and was rising. By the middle of 2004 the banks pretty much stopped accumulating government debt, but only after they had increased their total holdings by 50% in just a couple of years!
Also, this forecasted decline in the market is strangely in keeping with the famed Fibonacci ratio. The SP500 topped out at about 1520, whereupon it fell to about 820. The difference is 700. So, a multiply that 700 point difference by .the Fibonacci number of .618, and you can expect a market rise of 432 points. The market is now at about 1220. So it has climbed 400 points from its low of 820, which is pretty close to what the Fibonacci predicts. The next step is, as I understand the theory, another big leg down in the market, breaking the previous low, as the secular downtrend continues.
And Samex Capital has observed that mutual fund cash levels have again reached historic lows. According to the Investment Company Institute, mutual funds decreased the amount of cash on hand to very low levels. How low? Well, cash is 2% LESS than what they are required to hold! They have sunk more than every available dime into the market!
Now, I am sure that there are lots and lots of very good reasons why this could be so. After all, they are hotshot investment type guys pulling down the big money because they are so smart and handsome and bathe regularly, and I am just a guy sorting through the neighbor´s trash as my tentative entry into the lucrative "identity theft" racket. But the stock market has been flat, despite all of this buying, and so that means that somebody was taking money OUT of the market at the same time as all this money was flowing INTO the market. Hmmm I smell a big, fat, stinking conspiracy here! Only this time it does NOT involve brain-sucking lizards from outer space or the CIA.
Samex writes, "This is only the third time in history that mutual fund cash-to-assets ratios have been this low. December 1972 marked the high point for more than a decade, and was followed by a 50% loss. March 2000 has marked the high point for more than five years to date and was followed by a 50% loss."
Another interesting market-timing indicator is found in a recent research paper entitled "Congress and the Stock Market" by Michael Ferguson of the University of Cincinnati and Hugh Witte of The University of Missouri reports that "an astonishing 90% of all the gains in the Dow Jones Industrial Average occurred while Congress was not in session. Dow Jones gains during Congressional sessions have been rare, they typically occurred when Congress had a high approval rating."
But before you run out and construct a new financial plan to time the market based on this highly interesting fact, perhaps you should also note "According to a recent poll by the Gallup Organization, only 35% of the U.S. currently approves of the way Congress is handling its job." Which proves, I guess, is that more than a third of Americans have absolutely no clue as to what in the hell they are talking about. What is more important, however, is that this is not an omen for a rising market!
And another indicator of the future of the stock market is the NYSE advance-decline line. If you have been watching the advance-decline line, you can´t help but notice the rise. This is usually a very good indicator of how the stock market prices have been going, which is, in turn, a pretty good indicator of where prices WILL be going. Well, maybe yes and maybe no. John P. Hussman writes, "In short, despite the apparent serenity of the NYSE advance-decline line, the market is already exhibiting the sort of internal turbulence and speculative characteristics that are hallmarks of late-stage bull markets. That´s not to make any pointed forecast that stocks will or must turn down any time soon. Rather, the point is to emphasize that there are emerging signs of distribution in market action that investors shouldn´t ignore." And "distribution" is the polite term used to mean "dumping these dog stocks onto some dumb suckers at high prices."
Eric J. Fry of Rude Awakening knows Jay Shartsis by sight, whereas I only know him as the guy who yells at me "Don´t call here again trying to borrow any money, you creepy little jerk!" Anyway, he says that he has noticed some interesting market indicators, too, and has found "A dizzying array of troubling signs, omens and auguries are warning that the stock market is due for a drop of some significance." And how does he figure that? "The small-time option traders - those who buy or sell less than 10 contracts at a time - have been aggressively buying into the market. On only two prior occasions in the last five years - July 21, 2000 and Jan. 16, 2004 - did small-time options traders buy more call options than they did last week." The upshot to all of this? Oh, nothing important. Forget I even said anything. Well, if you MUST know, he says that "On both of those two prior occasions, they soon regretted their buying binges...and they probably will again this time."
Even Carl Swenlin in the "Did You Notice...?" column of Daily Reckoning, has noticed some interesting things, and writes "A good way to determine overbought (and oversold) conditions is by tracking the percentage of stocks above their 20-, 50-, and 200-day moving averages, indicators which measure market conditions in the short-, medium-, and long-term respectively." Well, he has taken the time to look at the stocks in the S&P 500 Index, and he notes, "They are all approaching the 90% level, a level that represents the most extreme overbought conditions."
Mr. Hussman goes on to say "If investors don´t keep valuations, skew, and other factors in mind, it may be relatively easy to get sucked in by the continual talk of ´4-year highs,´ while forgetting that the annualized total return on the S&P 500 over those 4 years has been just 2%, and that the index still shows a negative return over 5 years." So the average investor has been earning just 2% over the last four years? Hahahaha! That´s a mighty fine investment manager you got there, dude! Hahahaha! And this moron has actually given you a NEGATIVE return over five years? Hahahaha! I´m laughing so hard that my stomach hurts! You lost 5% in nominal terms, and you also lost at least 25% in buying power because the dollar has lost that much in value. So adding them together, you lost 30% over the last five years? Hahahaha! Mr. Hussman sneers at my impolite guffawing, and showing what a class act he is, with understated dignity simply says, "Suffice it to say that I don´t find the talk of 4-year highs, economic sweet spots, and ´great earnings´ overly compelling."
The monetary base has stopped growing, and M3 is not growing much either.
The dollar has obviously started to roll over, as I gather from the chart. So SOMEBODY is out there dumping dollar-denominated financial crap!
And maybe last by not least; from UPI we learn that Saudi Arabia said it was "working to bring back to the kingdom a total of $360 billion invested abroad in the last 18 months." A third of a trillion dollars is coming out of something, and into Saudi Arabia? Wow! Woes betide whatever in the hell it is that is facing a withdrawal/sale of $360 billion!
Putting all of this together, if you are the gambling type, (and if you are married then you ARE the gambling type and you already know what it means to lose and lose big! Hahaha!), this is the time to start thinking about index put options, with all that lovely leverage and limited downside.
Regards,
The Mogambo Guru
for The Daily Reckoning
The Mogambo Sez: My mood is dark. The world of economics is dark. Dark dark dark. Only the glittering of gold consoles me now.
Editor´s Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter, an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron´s, The Daily Reckoning and other fine publications. If you´re inclined to read more, you´ll find the whole Mogambo here:
[link to www.dailyreckoning.com] |
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User ID: 13424
8/19/2005 8:07 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
The "greatest danger facing the world nowadays is [the] ... inherent instability" of the current global economic system, Rocard wrote. He described the massive indebtness of the U.S. economy, and warned that the required inflows of US$1.9 billion every day, will be endangered if the dollar collapses, oil gets too high, or "if the US economy backfires. The "US economy has become increasingly detached from reality," with manufacturing a mere 11%
The real-estate market and mortgages speculative bubbles "have become grafted upon each other and now dominate economic activity in the US. A crash, or at least a sharp spasm, is quite likely in the near future, and the consequences—for the US and the world—may be catastrophic."
[link to www.godlikeproductions.com]
thanks CAPF |
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User ID: 14578
8/23/2005 9:20 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Are you ready for the kaBOOM?
User ID: 15483
8/23/2005
10:42 am EDT I suggest that everybody read this article VERY carefully. Most detailed, best explanation of what IS going to happen and why!
That Hissing Sound
By Paul Krugman
This is the way the bubble ends: not with a pop, but with a hiss.
Housing prices move much more slowly than stock prices. There are no Black Mondays, when prices fall 23 percent in a day. In fact, prices often keep rising for a while even after a housing boom goes bust.
So the news that the U.S. housing bubble is over won´t come in the form of plunging prices; it will come in the form of falling sales and rising inventory, as sellers try to get prices that buyers are no longer willing to pay. And the process may already have started.
Of course, some people still deny that there´s a housing bubble. Let me explain how we know that they´re wrong.
One piece of evidence is the sense of frenzy about real estate, which irresistibly brings to mind the stock frenzy of 1999. Even some of the players are the same. The authors of the 1999 best seller "Dow 36,000" are now among the most vocal proponents of the view that there is no housing bubble.
Then there are the numbers. Many bubble deniers point to average prices for the country as a whole, which look worrisome but not totally crazy. When it comes to housing, however, the United States is really two countries, Flatland and the Zoned Zone.
In Flatland, which occupies the middle of the country, it´s easy to build houses. When the demand for houses rises, Flatland metropolitan areas, which don´t really have traditional downtowns, just sprawl some more. As a result, housing prices are basically determined by the cost of construction. In Flatland, a housing bubble can´t even get started.
But in the Zoned Zone, which lies along the coasts, a combination of high population density and land-use restrictions - hence "zoned" - makes it hard to build new houses. So when people become willing to spend more on houses, say because of a fall in mortgage rates, some houses get built, but the prices of existing houses also go up. And if people think that prices will continue to rise, they become willing to spend even more, driving prices still higher, and so on. In other words, the Zoned Zone is prone to housing bubbles.
And Zoned Zone housing prices, which have risen much faster than the national average, clearly point to a bubble.
In the nation as a whole, housing prices rose about 50 percent between the first quarter of 2000 and the first quarter of 2005. But that average blends results from Flatland metropolitan areas like Houston and Atlanta, where prices rose 26 and 29 percent respectively, with results from Zoned Zone areas like New York, Miami and San Diego, where prices rose 77, 96 and 118 percent.
Nobody would pay San Diego prices without believing that prices will continue to rise. Rents rose much more slowly than prices: the Bureau of Labor Statistics index of "owners´ equivalent rent" rose only 27 percent from late 1999 to late 2004. Business Week reports that by 2004 the cost of renting a house in San Diego was only 40 percent of the cost of owning a similar house - even taking into account low interest rates on mortgages. So it makes sense to buy in San Diego only if you believe that prices will keep rising rapidly, generating big capital gains. That´s pretty much the definition of a bubble.
Bubbles end when people stop believing that big capital gains are a sure thing. That´s what happened in San Diego at the end of its last housing bubble: after a rapid rise, house prices peaked in 1990. Soon there was a glut of houses on the market, and prices began falling. By 1996, they had declined about 25 percent after adjusting for inflation.
And that´s what´s happening in San Diego right now, after a rise in house prices that dwarfs the boom of the 1980´s. The number of single-family houses and condos on the market has doubled over the past year. "Homes that a year or two ago sold virtually overnight - in many cases triggering bidding wars - are on the market for weeks," reports The Los Angeles Times. The same thing is happening in other formerly hot markets.
Meanwhile, the U.S. economy has become deeply dependent on the housing bubble. The economic recovery since 2001 has been disappointing in many ways, but it wouldn´t have happened at all without soaring spending on residential construction, plus a surge in consumer spending largely based on mortgage refinancing. Did I mention that the personal savings rate has fallen to zero? Now we´re starting to hear a hissing sound, as the air begins to leak out of the bubble. And everyone - not just those who own Zoned Zone real estate - should be worried.
In a subsequent column, Krugman elaborates on the consequences of a collapse of the housing boom. According to Krugman, housing construction in the United States during the Bush II years created 2 million new jobs, increased house prices created 1.5 million more and the military buildup created 1.3 million jobs. Now, given the shaky employment situation the United States finds itself in, where would we be without those 4.8 million jobs created on quicksand?
Safe as Houses
By Paul Krugman
I used to live next door to a Russian émigré. One day he asked me to explain something that puzzled him about his new country. "This place seems very rich," he said, "but I never see anyone making anything. How does the country earn its money?"
The answer, these days, is that we make a living by selling each other houses. Since December 2000 employment in U.S. manufacturing has fallen 17 percent, but membership in the National Association of Realtors has risen 58 percent.
The housing boom has created jobs in two ways. Many jobs have been created, directly and indirectly, by a surge in housing construction. And rising home values have fueled a simultaneous surge in consumer spending.
Let´s start with home building. Between 1980 and 2000, which was before the housing boom, spending on the construction of new homes averaged 4.25 percent of G.D.P. In the most recent quarter, however, the figure was 5.98 percent. That difference is equivalent to about $200 billion a year in additional spending, generating roughly two million extra jobs.
Then there´s the jump in house prices. Over the past five years housing prices have grown much faster than the overall cost of living, adding about $5 trillion to the public´s wealth. Typical estimates say that each additional dollar of housing wealth adds about 3 cents to annual consumer spending, as families reduce their savings and borrow against their newly valuable homes. So we´re talking about an additional $150 billion in spending, and roughly 1.5 million more jobs.
Does anything else in the U.S. economy rival housing as a source of job creation? Well, there´s also the military buildup. The Economic Policy Institute estimates that increased military spending over the past four years has created 1.3 million private-sector jobs.
And, yes, there are the Bush tax cuts, which the administration insists are the source of everything good in the economy. And it´s true that some portion of the tax cuts, which amounted to $225 billion this year, must have been spent in ways that created jobs. Given reasonable estimates of the effect of tax cuts on spending, however, they were probably a smaller force for job creation than the military buildup, and dwarfed by the housing boom.
So it´s an economy driven by real estate. What´s wrong with that?
One answer is that it has been a pretty disappointing recovery. Two new reports, one from the Center on Budget and Policy Priorities and one from the Congressional Budget Office, compare the current economic expansion with other postwar recoveries. By any measure except corporate profits, which have done very well, this one comes up short.
Even the good months would have been considered subpar in the past: the administration hailed last month´s job growth as something wondrous to behold, yet there were 68 months during the Clinton years when employment grew faster. Still, the economy is expanding.
But because that expansion depends so much on real estate - without the housing boom, the economic picture would look dismal indeed - you have to wonder how much to trust it.
I´ve written before about the reasons to believe that current house prices in much of the country represent a bubble. When that bubble begins to deflate, so will housing-related employment.
Beyond that, there´s the disturbing point that we´re paying for the housing boom (and the military buildup and tax cuts) with money borrowed from foreigners.
Now, any economics textbook will tell you that it´s fine to borrow from abroad if the money is used to expand the economy´s productive capacity. When 19th-century America borrowed from Europe to build railroads, it was also enhancing its ability to repay its debts later. But we aren´t borrowing to build productive capacity. As a share of G.D.P., investment other than housing construction is below its average between 1980 and 2000, and way below its level at the end of the 1990´s.
In other words, a fuller answer to my former neighbor would be that these days, Americans make a living selling each other houses, paid for with money borrowed from the Chinese. Somehow, that doesn´t seem like a sustainable lifestyle.
How solid, then, is America´s economic recovery? The British have a phrase that applies: "safe as houses." Our economy is as safe as houses. Unfortunately, given current prices and our dependence on foreign lenders, houses aren´t safe at all.
We wrote last week of the rigged nature of most markets. Mike Whitney lays the blame for the housing bubble on the rigging of Alan Greenspan and, in the process, answers the question of “who benefits?”
Pop Goes the Weasel
Greenspan and the Housing Bubble
By Mike Whitney
It´s strange that Alan Greenspan hasn´t been blamed for the housing bubble. After all, he set the "easy money" policies that put the whole thing in motion and he´s the one who should be held responsible when it goes up in smoke.
Let me explain.
Most people expect the Federal Reserve to lower rates when business is flagging to stimulate the economy by making loans more available for commerce, home buying, recreational spending etc. But, just as higher rates can stop the economy in its tracks by making money too expensive to borrow, so too, lower rates can have equally adverse consequences.
For example, when Greenspan lowered rates to 1% in 2002 he knew that money would surge into the economy and create the appearance that everything was hunky-dory. Predictably, the economy sputtered along from the economic activity generated by the housing boom and from the 30% increase in government spending.
But, what else did Greenspan´s lower rates achieve?
Well, they achieved the results for which they were designed; they kept the economy humming along while Bush dragged the country to war, they kept the American people asleep while $400 billion per year in Bush tax cuts were siphoned from the US Treasury, and they generated what the "The Economist" calls this "the biggest bubble in history"; the housing bubble.
All of these were purely political choices made at the Federal Reserve under the auspices of Fed-chairman Greenspan.
Thanks, Alan.
Now, of course, Greenspan has signaled that the Happy Days are over and that the Fed will continue to ratchet up rates to strengthen the dollar. So far, the Fed has raised rates 10 times in the last 14 months. This eventually will strain the resources of all the poor slobs who took out ARMs (Adjustable Rate Mortgages) trusting is the soundness of the system. They will inevitably see their monthly payments go through the roof.
…The Fed seduces the public with cheap money, so that credit spending increases and, then, "presto", millions of Americans slip inexorably into indentured servitude.
Isn´t this what´s happening right now?
The American public is presently mortgaged up to the hilt with most of their personal wealth invested in their homes and with the highest level of personal debt in any period since the Great Depression.
Not good.
Especially when we consider that the current bubble is "larger than the global stock market bubble in the late 1990s (an increase over five years of 80% of GDP) or America´s stock market bubble in the late 1920s (55% of GDP)." Or, when we consider that "over the past four years, consumer spending and residential construction have together accounted for 90% of the total growth in GDP." (The Economist")
Or, when we consider that 2 out of every 5 jobs in America are now related to construction. One blip in the housing market and we´ll all be hawking pencils on the street corner.
Regrettably, this Greenspan-generated pyramid scheme is headed for the dumpster. The fundamentals for securing a loan have all been abandoned; putting traditionally unqualified applicants in a position to buy a home. 42% of all new home buyers cannot even come up with a few thousand dollars for a down payment. Equally disturbing is the fact that "nearly one third of all new mortgages this year call for interest-only payments (in California, it´s almost half)" (NY Times)"
The Fed´s "cheap money" policy has spawned a "creative financing" monster and the speculation in the housing market has grown accordingly. A full 36% of homes are bought either for investment or as second homes; "the very definition of a financial bubble." (Economist)
"Speculation"? Not according to Colonel Greenspan. According to him, it´s just a bit of "froth" in the market.
"Froth"? The biggest bubble in history!?!
Of course, none of this even vaguely resembles the activities of a "free market". The market is not free when a privately owned banking system like the Federal Reserve sets the prime rate according to its own political-economic agenda.
Most people have no idea to what extent Greenspan has abandoned his principles to carry out his task as the country´s foremost class-warrior. Earlier in his career, Greenspan proclaimed, "Deficit spending is simply a scheme for the confiscation of wealth".
Hmmmmm?
That, of course, was when deficits were used to pay for exorbitant social programs, like Welfare or Medicaid that benefited the broader American public. Greenspan has revised his thinking now that the deficits are a means for lining the pockets of his rich constituents.
Greenspan fully grasps the danger of his current strategy of flooding the market with, what he once called, "easy money". As he noted in an article he wrote in 1967 "Gold and Economic Freedom":
"After a mild business contraction in 1927 the fed decided the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. The excess credit which the Fed pumped into the economy spilled over into the stock market -- triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in breaking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed."
Let´s see if we got that right?
"The excess credit which the Fed pumped into the economytriggered a fantastic speculative boom.which collapsed the American economy".
Sound familiar?
…Greenspan has worked exclusively to serve the interests of American elites. He has helped shape the policies on taxation, minimum wage and Social Security that have enriched the wealthy and battered the middle class. His lowered interest rates have perilously expanded credit and produced the "largest speculative market of all time". Whatever economic calamity befalls the American people certainly bears his imprimatur.
The nation now faces the end of the Greenspan epoch and the very real prospect of an economic tidal wave greater than 1929. The bubble was manufactured by Greenspan and his colleagues at the Fed to swindle millions of working-class Americans out of their life-savings and to facilitate the greatest transferal of wealth in American history.
The lesson of the housing bubble is simple: whenever monetary policy is put into the hands of privately owned institutions like the Federal Reserve, those policies will invariably reflect the narrow interests of the men who own them and the members of their class.
That´s why Thomas Jefferson warned, "Banking institutions are more dangerous than standing armies." |
| .
User ID: 14578
8/23/2005 9:28 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Anonymous Coward
User ID: 15483
8/23/2005
11:11 am EDT Re: I suggest that everybody read this article VERY carefully. Most detailed, best explanation of what IS going to happen and why!
PAYING MORE TO GET LESS
by The Mogambo Guru
I remember that I was still trying to shake a killer hangover when I read that Total Fed Credit abruptly fell by $7.4 billion last week, taking the total back down to $792 billion. The next thing I knew, I was in the emergency room and doctors were trying to re-start my heart while trying to restrain my wife, who is screaming, "Let him die! He wants to die with dignity!"
But it wasn´t my heart causing the initial distress. It was my brain, which interpreted this fall in Total Fed Credit as meaning one of two things; either the Fed is finally trying to curtail the decades-long explosion of money and credit, or there are not as many people wanting to borrow money, and so they don´t need to expand money and credit to accommodate them. Either way, this is what we in the Mogambo Economics Biz (MEB) officially call The Big Freaking Bell Going Clang Clang Clang (TBFBGCCC).
Ours is a country that does nothing but spend every dime it makes, and which continuously borrows more money. Historically, this is a recipe for disaster. Nobody wants to hear this, especially my family, who think that money grows on trees, and I keep telling them that money does not go to all the hassle of growing on trees, which involves fertilizing and pruning and weeding and applying pesticides and picking, and then some drunken, stoned-out illegal alien migrant worker falls out of a tree and sues the hell out of you, and then they find out how you have been stealing them blind and selling them substandard food at premium prices, and you don´t have a prayer in court and you know it. Brrrrr. Gives me the chills just to think about it!
But this is not about how Mogambo International Exploitative Enterprises (MIEE) is screwing over the poor wretches, just as the government and the Fed are screwing the poor by destroying the purchasing power of the little bit of money they get per month. It´s just that MIEE, as a prototypical capitalist-pig company with no scruples or ethics in my mindless quest to secure profits, demeans the people directly, and they suffer because they get less. The government does it indirectly, making them get less by destroying the purchasing power of their money. But my whole case rests on the fact that, in the end, we both make life miserable for lots and lots of people because they must pay more and get less.
And the only reason that we have anything going for us at all is because we spend every dime, which makes and economy go, to indulge in an orgasmic orgy of glorious, greedy, gluttonous over-consumption, and simultaneously grow the size, the grasp, and the bankrupting expense of a huge, suffocating, inter-locking structure of governments that has, to use a phrase used in the Declaration of Independence "erected a large multitude of new offices, and sent hither swarms of officers to harass our people, and eat out their substance." By which they mean, in Mogambo-ese, "The government sucking you dry through your wallet to give total strangers money and services for the rest of their lives."
The joke goes, "I spent my entire million-dollar inheritance. Most of it I spent on women, fast cars, booze and drugs. The rest I spent foolishly." In our case, the rest we spent foolishly to party party party (PPP).
Recognizing that this sudden slowdown in the growth of money and credit would mean the total collapse of the United States, you will, I hope, forgive me for jumping up, running in panic, pushing my wife and children out of my way as I run, as fast as I could, to try and lock myself inside the heavily-fortified Mogambo bunker (HFMB), which would, theoretically, protect me from the hordes of scared, angry and desperate people whose lives are being destroyed as the economy is being destroyed, including my family, who were already scared and angry about being related to me in the first place because I seemingly will never die.
And this slowdown may be showing up in the way that inventories are sort of building. I would assume that inventories are increasing because people are not buying as much, which would explain why they are not borrowing as much, although the producers and retailers are still stocking as much. Trying to be as philosophical as I can (and you can tell I am being philosophical by the way I wipe the drool off of my chin and try to act dignified for a change), this had to happen sooner or later, as every schoolchild knows that you cannot continually go farther and farther into debt forever. I, personally, learned this valuable Mogambo lesson (VML) rather early in life, and I remember it like it was yesterday, when I went to my dad and asked to have another advance on my allowance, and how he laughed, and with acid in his voice asked, "Do you think you can perpetually bring forward future consumption into today?" Maybe it was HOW he said it, but I never forgot the lesson about over-consumption via debt, and I hope you don´t either.
But this is not about my cruel life of pain and anguish that I mostly brought on myself for acting like such a jerk all the time, but about money and the spending thereof and how rising prices are no fun. Like gasoline prices. And with gasoline rising dangerously in price, people do not have as much money to spend on the rest of the silly crap that we love to indulge in, making things worse.
The proof of this is demonstrated by the fact that people are going to the movies less, and all kinds of businesses that depended on the flow of all this frivolous discretionary spending are finding that sales are down dramatically. This is another Mogambo Sign That Things Are Not As Good As They Say (MSTTANAGATS) that highly-trained market technicians use to chart the markets.
For you who believe that "the trend is your friend", I will note that the Fed has had this mindless expansion of credit going gangbusters since 1997. So, all this sudden and surprising absence of growth in money and credit is, in a word, ominous. But you probably already gathered that from the spooky soundtrack, which is all low, wailing horns in ugly disharmonies that sound like banshees wailing. Or, if you are deaf, then you can also figure it out from the graph of Total Fed Credit, which has being growing like a huge, malignant cancer since 1997, pausing only in early 2000, whereupon the stock market fell like a stone, which put the Fed back in credit-expansion mode ever since. Until the last couple of months. Listen to the soundtrack, which is telling all that you need to know. OooooOOOooooo!
You´re going to love the way I end this! Slowly fade in from black, see? An indistinct, fuzzy form appears out of the gloom. What could it be? Soon, it looks like a - what is that? A hand? Yes, it´s a hand holding something. As the lighting continues to come up, we see that it is indeed a hand, a hand holding a revolver, and it is pointing right (pause) at (pause) you. Slowly, the thumb reaches up and cocks the gun, and you can hear it going "click click click" as the hammer is drawn back. Then the clicking stops. The thumb returns to its place on the butt of the gun. The forefinger moves to the trigger. And as the camera pans in closer and closer and closer, we plainly see that the finger is beginning to flatten as it begins to pull on the trigger. Of the gun. That is pointed right (pause) between (pause) your (pause) eyes.
One of the reasons that I use this gun metaphor is that the latest reports shows that inflation is running at 0.5% for July, and when you multiply that by twelve months in a year, you come up with (and you can check me on this) 6%. Inflation, even after all the massaging and tweaking by the government to make things look good, is running at 6%! This is terrible, terrible, terrible news! It was within living memory that Nixon (as I recall) seized dictatorial power and imposed wage and price controls on the entire economy because inflation was at an intolerable 4%! So this 6% thing is terrible, terrible, terrible news! And it demonstrates, one more time, the utter, utter failure of the Federal Reserve.
Regards,
The Mogambo Guru
for The Daily Reckoning
The Mogambo Sez: Repeat after me: Oil. Gold. Silver. Ommmm. This is the sound of cosmic salvation. Ommmmm.
Anonymous Coward
User ID: 15483
8/23/2005
11:22 am EDT Re: I suggest that everybody read this article VERY carefully. Most detailed, best explanation of what IS going to happen and why!
What the new bankruptcy laws mean to you
A major new law will make it more difficult to declare bankruptcy. Jean Chatzky explains some of the new measures
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By Jean Chatzky
"Today" Financial Editor
Updated: 11:51 p.m. ET Aug. 14, 2005
Jean Chatzky
The ´Today´ show Financial Editor
• Profile
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A couple of weekends ago in Chicago, 1,600 bankruptcy attorneys from around the country gathered to learn the ins and outs of the new bankruptcy reform law that goes into effect on October 17.
Attorney Max Gardner from Shelby, N.C., was in the crowd. "I´ve done consumer bankruptcy work since 1974. I went through the last round of changes in 1979. This was the most complex seminar I´ve ever been through," he said. "My head still hurts."
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And that´s what the changes are doing to attorneys — for whom there´s a big silver lining in terms of fees that will escalate, in some cases even double. Where consumers are concerned, the changes in George Bush´s Bankruptcy Abuse Prevention and Consumer Protection Act are even more daunting. They make it harder (particularly for middle-class folks) to qualify for Chapter 7 bankruptcy protection, which allows you to cancel your debts, give back the underlying assets like houses and cars, and make a fresh start. Instead, most of those people will have the option of filing Chapter 13 and paying back their creditors — not for three years as the old law specified, but for five.
The good news in all of this is that it´s still August. Now is the time to figure out if you really need to file bankruptcy. And if you do, to hustle to an attorney´s office well before the October deadline rolls around. Here — in a nutshell (though this somewhat vague piece of legislation is very difficult to actually fit into one) — is a look at some of the questions people who are considering bankruptcy should be asking:
Will I qualify for Chapter 7? You have to pass a means test that says that individuals who reside in households where the total income is greater than the median income in the state in which they live (in New York for a family of four it´s $66, 206) are ineligible.
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How much do I have to pay back under Chapter 13? That´s determined, again, by formula. Essentially, the government wants to make sure that you pay your creditors at least as much as they´d have received if you filed Chapter 7 and gave back the underlying assets. Stretching the time horizon from three years to five is a way to ensure your creditors — particularly your credit card companies and auto lenders, who lobbied hard for this legislation — get paid.
What about retirement assets? There´s a bit of good news here. Under the old law, 401(k) assets were exempt from bankruptcy proceedings. Under the new ones, individual retirement plans — like IRAs — are safe up to $1 million. Rollover IRAs have no limit. And under the old law you´re not allowed to continue to repay pension loans; under the new law you can. "That´s very positive," says Jay Fleishman, a New York bankruptcy attorney.
"I hear you can shelter some money by buying a big house in Florida ... will that work?" Yes, but it´s not as easy as it used to be. In order to claim the homestead exemption in Florida and several other states, you have to have lived there for 40 months. Otherwise, the exemption is capped at $125,000.
Only on TODAY.MSNBc.com!
Each week, ´Today´ show Financial Editor Jean Chatzky addresses questions about personal finance. Visit the Money section at Today.MSNBC.com every Monday for new topics.
• THIS WEEK:
How to find a bona-fide credit counselor
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What the new bankruptcy laws mean to you
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How much will all of this cost me? More than it used to, that´s for sure. The cost of filing a simple Chapter 7 used to be well under $1,000. The new law bumps the filing fees by about $60. But more than that, it requires lawyers to jump through hoops including double-checking all of a client´s personal information. That´ll boost the overall cost of legal fees by 25 to 50 percent, depending on your attorney.
And here´s the other hitch: Before you can file, the new law requires mandatory credit counseling. That throws you into a hornet´s nest. There are many good credit-counseling agencies out there, but there are also a lot of scamsters out to grab outlandish fees from money you don´t have. In this space next week, I´ll tell you how to tell the difference.
Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright ©2005. For more information, go to her Web site, www.JeanChatzky.com. |
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User ID: 12170
8/25/2005 11:34 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Mat 24:37 But as the days of Noah were, so shall also the coming of the Son of man be.
Mat 24:38 For as in the days that were before the flood they were eating and drinking, marrying and giving in marriage, until the day that Noah entered into the ark,
Mat 24:39 And knew not until the flood came, and took them all away; so shall also the coming of the Son of man be. |
| Anonymous Coward
User ID: 7592
8/25/2005 11:40 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
FHL(c) states: "Watch the stock markets it cant be long now for the long awaited/expected correction/s"
just like the false prophets we have been warned about. FHL(c) may preach about christ and god, but you will know a tree by the fruit it bares. |
| .
User ID: 14411
8/26/2005 11:44 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Who was it that said the first creatures of a sinking ship was the rats?
Greenspan Worries About Economic Health
Friday August 26, 10:55 am ET
By Jeannine Aversa, AP Economics Writer
Federal Reserve Chairman Greenspan Voices Concerns About Long-Term Health of U.S. Economy
JACKSON, Wyo. (AP) -- Creeping trade protectionism and bloated budget deficits pose a risk to the United States´ long-term economic vitality, Federal Reserve Chairman Alan Greenspan warned Friday.
"Developing protectionism regarding trade and our reluctance to place fiscal policy on a more sustainable path are threatening what may well be our most valued policy asset: the increased flexibility of our economy, which has fostered our extraordinary resilience to shocks," the Fed chief said in a speech to an economic conference here, sponsored by the Federal Reserve Bank of Kansas City.
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Maintaining economic flexibility is especially important, Greenspan said, to deal with what he called some of America´s current economic imbalances: the swollen current account trade deficit, which surged to a record $668 billion last year, and the housing boom.
Greenspan also worried in his speech about what will occur with the ending of the recent sustained period of low interest rates and low risks for investors. "History has not dealt kindly with the aftermath of protracted periods of low risk premiums," he said in his prepared remarks.
Rising stock and home prices have made households feel more wealthy and has helped to support consumer spending, a key ingredient of the economy´s good health. But Greenspan seemed to caution that people shouldn´t count on that paper wealth, which can evaporate if economic conditions deteriorate rapidly.
"What they perceive as newly abundant liquidity can readily disappear," he said. "Whether the currently elevated level of wealth-to-income ratio will be sustained in the longer run remains to be seen."
Low interest rates have powered the booming housing market. Home sales have hit record highs four years in a row and house prices are surging. In previous speeches, Greenspan has warned of "froth" and "speculative fervor" gripping some local housing markets.
If house prices were to suddenly fall or if interest rates were to rise rapidly, some local housing markets, homeowners and lenders could get hurt.
Stock prices and house prices are factors that Fed policy-makers are increasingly needing to consider when setting interest-rate policy. "Our forecasts and, hence policy, are becoming increasingly driven by asset price changes," Greenspan said.
Greenspan said that "fear of change" is behind stalled international trade negotiations and the hesitancy of Congress and the White House to "face up to the difficult choices that will be required to resolve our looming fiscal problems."
In the past, Greenspan has urgently called on policy-makers to shore up Social Security, saying a big wave of baby boomers starting to retire in 2008 will put massive strains on the system and if not fixed can imperil the overall economy as well.
On other issues, Greenspan said the economy thus far seems to be weathering reasonably well the run-up in energy prices over the last two years.
Greenspan´s speech was to a conference titled "The Greenspan Era: Lessons for the Future."
The Fed chief, who has steered the world´s largest economy through both smooth and choppy economic waters for 18 years, plans to step down in just five months.
Greenspan´s appearance at the annual Fed conference, which is attended by other Fed policy-makers, economists, academics and central bank officials from around the world, is expected to be his last as Fed chairman.
Looking back over his tenure, Greenspan said that a key hallmark of his approach to monetary policy-making has been preparing for a wide spectrum of economic outcomes: from the most likely to the most unlikely.
The Fed´s worry in the summer of 2003 about the remote threat of deflation -- a widespread decline in prices that can severely harm the economy -- prompted the Fed to keep cutting short-term interest rates, Greenspan noted.
"Given the potentially severe consequences of deflation, the expected benefits of the unusual policy action were judged to outweigh its expected costs," he said. |
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User ID: 14411
8/26/2005 7:54 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
you sound bitter 6947, and very judgemental, quoting scripture too, unrighteously, you need Yahshua and repentance before your ways catch up with you |
| .
User ID: 2429
8/27/2005 4:36 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Fed Summons 14 Banks to Discuss Credit-Derivatives Controls
Aug. 24 (Bloomberg) -- The Federal Reserve Bank of New York invited 14 of the ``major participants´´ in the credit- derivatives market to a meeting next month amid concern the $8.4 trillion industry is rife with unconfirmed trades.
The meeting at the Fed´s New York office on Sept. 15 will focus on market practices, according to an Aug. 12 letter sent to bank chief executives by New York Fed President Timothy Geithner. Fed spokesman Peter Bakstansky confirmed the letter´s contents and declined to name the firms invited.
The credit-derivatives market more than doubled in the past year, giving companies, investors and governments the ability to bet on or protect against changes in credit quality. A backlog of confirmed trades may undermine investor confidence, a group led by E. Gerald Corrigan, managing director at Goldman Sachs Group Inc. and a former New York Fed president, said last month.
The Counterparty Risk Management Policy Group, the banking industry group led by Corrigan that first met in 1999 after the collapse of hedge fund Long-Term Capital Management, said in a report on July 27 that ``urgent´´ effort is needed to tackle the ``serious´´ accumulation of trade confirmations. Banks should be prepared to consider reducing trading until the deals are confirmed, the report said.
JPMorgan Chase & Co., Deutsche Bank AG, Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. dominate the credit- derivatives market as the five most-cited trading partners, according to Fitch Ratings.
`Senior´ Executives
The Fed´s letter said ``a senior business representative and a senior risk management person,´´ should attend the meeting.
Credit derivatives are the fastest growing part of the $24 trillion derivatives market, based on the so-called notional value of the debts underlying the contracts.
A derivative is a financial obligation whose value is derived from interest rates, the outcome of specific events, or the price of underlying assets such as debt, equities and commodities.
Investors use credit-default swaps to bet on a company´s creditworthiness or protect against non-payment. The contracts are the most common credit derivative.
Like insurance, buyers pay an annual fee similar to a premium to protect a certain amount of debt against default for a specified number of years. In the event of a default, they get the face value of the bonds or loans.
The settlement process for credit-default swaps is resource intensive, and typically requires faxed signatures. Banks and companies risk getting swamped by investors seeking settlement on their contracts in the event of a corporate default, Corrigan´s group said.
Derivatives traders must ensure they have systems and controls in place to keep up with the growth in their business, the U.K.´s Financial Services Authority said in a letter to companies this year. |
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User ID: 22272
8/28/2005 9:38 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
LaRouche, Jackson Hole Report: FREAK-OUT AT JACKSON HOLE .
Concerned Aussie from Perth
User ID: 381
8/28/2005
9:23 pm EDT
LaRouche, Jackson Hole Report: FREAK-OUT AT JACKSON HOLE .
"Wishful people who refuse to think clearly are deluding themselves"
For you.
FYI
Jackson Hole Report:
FREAK-OUT AT JACKSON HOLE
by Lyndon H. LaRouche, Jr.
August 27, 2005 (12:10pm)
Even the mere hint of today´s global, financial reality from Fed Chairman Alan Greenspan, and a matching side remark by former Treasury Secretary Robert Rubin, have touched off a furore of lunatic rage among the customary annual coven of wishful dreamers assembled for this weekend´s annual rain-dance at Jackson Hole.
I restate, in clear text, what Greenspan and Rubin were actually thinking about as they spoke on this occasion.
Alan Greenspan took over the Fed from Paul Volcker at the point that the New York stock market had just gone through the October 1987 equivalent of what happened to Hoover in 1929. Greenspan´s reign has been distinguished by his regime´s bail-out strategies, which have consisted chiefly of a resort to the massive legalization of what are actually gamblers´ side-bets, but are called, euphemistically, "financial derivatives" or "hedge funds," a kind of play-money which has been used as a way of papering over the effects of a major stock-market crash. About the time the unlucky, and easily duped George W. Bush, Jr. was entering office in January 2001, the beginning of a financial-derivatives-driven general collapse of the world monetary-financial system, was already in progress. Nonetheless, despite this reality, Greenspan continued to play his part in the wilder and wilder pumping up of collapsing world financial institutions by a method most fairly and kindly described as "blowing bubbles."
During the interval since the 2000 collapse of Greenspan´s earlier "IT" financial bubble, the Fed Chairman and his accomplices overseas have postponed the overripe collapse of the world´s current financial system so far, by resort to dubious schemes typified most visibly by an international hyperinflationary spiral in mortgage-based financial securities markets, such as those in the U.S.A., the United Kingdom, Australia, and so forth. A blow-out of that over-ripe mortgage-securities bubble, is the leading immediate threat to the U.S. and British banking systems, a threat of an event which would spread like wildfire throughout world markets.
As a result of Greenspan´s pumping policy, since about April of this year, the entire world system has been flirting with the increasing possibility of an immediate general blow-out of the hedge-fund system. Now, as until the present international system actually blows out, that system is wobbling on the edge of something far more menacing than a mere stock-market crash like that of 1929 or October 1987.
To calm the worst fears of the panicked pack at this weekend´s Jackson Hole affair, I describe the actual situation of the markets in the plain language which Greenspan and Rubin avoided on this occasion.
The world markets as a whole are gripped now by what has been an accelerating global hyperinflation with certain mathematical-functional similarities to what happened in Germany during the Summer and Autumn of 1923. This threat is immediate, and worsening at an accelerating rate, but, fortunately, the challenge is manageable, on condition that certain essential emergency reforms are made quickly. As Franklin Roosevelt once said, famously, "We have nothing as much to fear as fear itself" — or, if not fear, the kind of mass-delusions exhibited by the maenads of Jackson Hole.
The Nature of the Crisis
The immediate problem of the world´s principal financial markets has the following leading characteristics.
Greenspan´s methods have amounted to flooding the financial system´s current accounts through a massive infusion of financial-derivatives "Monopoly play money." The crux of the problem is, that short-term apparent returns on current financial markets have been bought by an accelerating rate of growth of unpayable long-term financial obligations, which have been generated by Greenspan´s and by similar methods used abroad. When that hyperinflationary debt-inflation, halts, the present world monetary-financial system blows apart. The relationship between apparent financial returns and long-term unpayable financial obligations is now clearly hyperbolic. The really bad news is, that the longer the market does not collapse, the worse the financial collapse becomes, that at an accelerating rate.
Wishful people who refuse to think clearly are deluding themselves, like people living on the proceeds of taking in one another´s laundry, by asking one another, "Are we sure that the market will never really crash?" Asking "When" is their potentially fatal mistake; they should be asking, "How?" instead.
The best thing would be to have had the crash sooner, rather than later, but on the condition that the U.S. government were thinking clearly, and was prepared to act as Secretary Rubin and President Clinton had posed the need for international financial-system reform, back during September 1998.
The problem is that the crowd of virtual bankrupts represented at Jackson Hole are clinging so desperately to their delusion of riches, that they, like the dupes of 1923 Germany, would rather cling for another moment to their own doomed dreams, than face the reality of the urgently needed general reform.
Sometimes the worst kind of insanity is clinging to denials, as we see from the spectacle of the diabolical romp of the wild-eyed warlocks and witches assembled at Jackson Hole.
Even chief warlock of the Federal Reserve, Greenspan, can no longer charm them with his spells.
The question is, are they willing to accept a merciful path to survival in bankruptcy proceedings, or the permanent torment their continued folly of today would assure them now? The question is: "Since most of that crowd at Jackson Hole are probably hopelessly insane, and probably soon bankrupt, for the moment, what are you, John Q. Citizen, willing to do, to save your country, and, also, your own butt?"
30-30-30
Concerned Aussie from Perth
User ID: 381
8/28/2005
9:27 pm EDT
Re: LaRouche, Jackson Hole Report: FREAK-OUT AT JACKSON HOLE .
""The really bad news is, that the longer the market does not collapse, the worse the financial collapse becomes, that at an accelerating rate.""
Remember that. |
| .
User ID: 22553
8/29/2005 11:23 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
Concerned Aussie from Perth
User ID: 38
8/29/2005
9:55 pm EDT
Corruption in America: Big Three Execs Get Huge Pay To Ruin Auto Sector / How Dereg Causes Blackouts.
Apalling is the word.
FYI
This article appears in the Sept. 2, 2005 issue of Executive Intelligence Review.
Corruption in America: Big Three Execs
Get Huge Pay To Ruin Auto Sector
by Richard Freeman
Since 2000, driven by shareholder value, the Big Three global automakers—GM, Ford, and DaimlerChrysler—have fired 100,000 American workers, more than 65,000 of them skilled auto production workers. In this process, they have utterly destroyed the advanced machine-tool capacity embedded in the U.S. auto industry. This year, the process of destruction intensified, with GM and Ford walking toward the cliff of bankruptcy. Yet for their efforts, deserving more of long jail sentences, the CEOs are treated to huge compensation packages. The chiefs of each of the Big Three—GM´s Rick Wagoner, Ford´s William Clay Ford, Jr., and DaimlerChrysler´s recently retired Juergen Schrempp—have each hauled in between $10 and $25 million in total annual compensation.
GM and Ford executives have recently portrayed the problem at their companies, as being the payment of allegedly "expensive" worker health and pension benefits. GM publicly cries that it is being put at a competitive disadvantage by having to pay health care benefits. But GM is hiding corruption behind this public complaint. The management teams of these companies, often trained at the Harvard or Stanford Business Schools, are shutting down valuable capacity, and incompetently driving their companies into the ground, guided by the idea of adding a few extra pennies increase to the company´s stock price or dividends. Often, the executive´s compensation level is tied to the company stock price or other similar targets. Moreover, for this history of incompetence, the auto company stockholders reward the executives with higher salaries, bonuses, and stock option plans.
Lyndon LaRouche has called this "shareholder corruption" and said on Aug. 11 that stockholders bear equal blame with the executives. The morally corrupt shareholders are only concerned about their investment: They will permit and encourage executives to destroy their companies, "to maximize return" in the short term; and then, when the company is ruined, demand that the U.S. government bail them out.
What is true for the Big Three automakers, applies equally to the airline industry, which is trying to throw off its pension and health care costs, and to most sections of U.S. manufacturing and industry.
We examine each of the Big Three automakers, to see to what extent this damaging shareholder corruption has progressed, hollowing out the core of U.S. manafucturing:
General Motors: Since the beginning of 2000, GM has slashed its U.S. hourly production worker workforce from 140,000 to 115,000 workers. Then this year, CEO Rick Wagoner, who has presided over this destruction since 2000, closed down five GM production facilities: its Saginaw, Michigan malleable iron plant; its Linden, New Jersey assembly plant; its Baltimore, Maryland assembly plant; and both a body plant and a chassis assembly plant in Lansing, Michigan. All told, another 7,900 workers were laid off.
On June 7, Wagoner further psychotically boasted to a stockholders meeting that he will oversee the elimination of 25,000 more hourly UAW production workers´ jobs, accompanied by the closure of an unspecified number of production facilities—probably seven—all by 2008. Given the speed with which GM is being dismembered, many of these cuts in production and employment will occur in the immediate future. In toto, since 2000, this would mean the axing of 57,900 production worker jobs by Wagoner´s company. During May, GM´s bonds were reduced to junk status, producing seizures among hedge funds and the world´s $400 trillion derivatives market, threatening systemic breakdown to the world´s financial system.
For this unparalleled helmsmanship, according to GM´s 10K report for 2004 filed with the Securities and Exchange Commission, Wagoner received a $2.2 million salary that year; plus a $2.46 million bonus; plus 400,000 stock options valued at $5.1 million; plus $78,000 in perks including "personal use of company aircraft"; plus $79,000 as a GM contribution to his "savings plan." Counting some other benefits, Wagoner´s total compensation came to over $10 million; this does not count an additional lavish pension benefit.
GM´s Chairman Bob Lutz, and its chief financial officer, John Devine, each received total compensation packages of $6.4 million in 2004. It is estimated that the GM top management team took in more than $50 million in compensation for the year.
Emulating Big Brother GM
Ford: Since 2000, Ford Motor Company has eliminated 22-25,000 American hourly production jobs, and shut down four production facilities, and cut 10,000 salaried jobs as well. A Ford Motor Company spokesman told EIR Aug. 15, "We don´t print for the public the exact number of production workers, I doubt we can tell you that." Ford is planning to close an additional one to four production facilities, including the Hazelwood plant near St. Louis. In May 2005, Ford´s bonds were reduced to junk status,
The individual who has overseen this take-down, first as a top officer, and then as CEO since October 2001, is William Clay Ford, Jr. Ford is a total "green"-nut. The Jan. 1, 2002 issue of HighBeam Research characterized Ford as "a vegetarian birdwatcher partial to auto paint made from soybeans." In 2001, Ford anted up $25 million to launch the Center for Environmental Leadership In Business, which preaches about global warming. He has spent tens of millions more to spread Gaia-ism throughout the United States. As a genuine Baby-Boomer, Bill Ford, Jr. is not the least disturbed that Ford´s biggest sellers are gas-guzzling SUVs, or that he is destroying tens of thousands of workers´ livelihoods.
Although worth many hundreds of millions of dollars, in 2004, Bill Ford was awarded by Ford stockholders with $12 million in Ford stock—mostly as a "bonus"—and a stock option grant worth a further $9.9 million. This was worth $22 million, and other benefits were also bestowed on him. In 2004, Ford President Jim Padilla was awarded $7.1 million in total compensation.
DaimlerChrysler: Since 2000, DaimlerChrylser has cut 17-20,000 hourly workers in the United States, and an additional 5,000 salaried workers.
In 1998, Daimler Benz purchased Chrysler Corporation. The man at the head of the wrecking operation was Jürgen Schrempp, who was CEO of DaimlerChrysler until early August. In May 1995, Daimler Benz Chairman Edzard Reuter—who had supported some infrastructure-building in the Middle East, among other locations—was replaced by Schrempp. By about late 1997, the unhinged Schrempp had reduced the number of Daimler Benz units from 35 to 23, and had axed 63,000 Daimler workers.
Upon completion of Daimler´s merger with Chrysler in 1998-99, Schrempp turned the same "shareholders value" process loose against Chrysler´s production in the United States. Schrempp was assisted by his Satanic little helper, Dieter Zetsche, who two weeks ago, replaced him as DaimlerChrysler CEO.
Chrysler does not list the compensation level of its executives in its 10K reports to the SEC. However, the July 7, 2004 print issue of Deutsche Welle reported that in 2003, in return for the havoc he wrought, DaimlerChrysler CEO Schrempp hauled in total compensation of $12 million. Further, the Daily Oakland Press reported on April 11, 2004, that "as a group, the board of management had collected more than $48 million in compensation during 2003." In 2004, the compensation was at least at that level.
EIR has determined that since 2000, the top executives for the Big Three U.S. automakers have collectively looted their companies for between $500-$750 million in obscene total compensation—equal to the wages of 15,000 production workers for one year. Instead, they should have fired themselves.
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Concerned Aussie from Perth
User ID: 38
8/29/2005
10:02 pm EDT
Re: Corruption in America: Big Three Execs Get Huge Pay To Ruin Auto Sector / How Dereg Causes Blackouts.
Remember this little episode.
FYI
This article appears in the Sept. 2, 2005 issue of Executive Intelligence Review.
How Electricity Dereg Causes Blackouts
by Marsha Freeman
During the Winter of 2000-01, citizens in California watched while rolling blackouts shut the lights off in their homes and workplaces. The previous Summer, the state´s utilities watched while an unregulated power mafia drove electricity prices from $30 to $3,000 per megawatt-hour. Deregulation had opened the state to manipulated "shortages" designed to drive up prices—and to power marketers like Enron, which made a financial killing trading on the volatility of the market. Deregulation eventually drove the state´s largest utility, and the state itself, into bankruptcy.
In early 2001, Lyndon LaRouche proposed a straightforward—and the only—solution to the crisis: Re-regulate the electric utilities. Go back to the framework set up in the 1930s by President Franklin Delano Roosevelt, which established that the provision of universally available, reliable, affordable electricity is a public good, and a government responsibility.
An increasing number of state legislators agreed with LaRouche that that might be the right thing to do, as the California crisis worsened. But, they protested, "You can´t put the toothpaste back in the tube." LaRouche replied, "Oh, yes, you can." And there is no other choice.
Now, a study released on Aug. 24, conducted by a group of engineers with years of high-level experience in the electric power industry, documents in detail what had been the case in the earlier California crisis: that the Northeast blackout that affected 50 million people on Aug. 15, 2003, was caused by deregulation.
Power Engineers Supporting Truth (PEST) was formed in 2003 in order to review and evaluate then-forthcoming reports from investigations of the 2003 blackout. As retired executives, they said, they are "no longer constrained from speaking out by employment or financial ties." They report that they were "disheartened by the failure of the leadership" of professional organizations which did not speak out, when incompetent, if not compromised, investigations into the blackout were being carried out.
According to George Loehr, a PEST founder, more professionals do not speak out either because they are afraid, or they have been "bought off" with bonuses and other financial carrots. What had been a "culture of cooperation," he says, after the 1965 blackout in New York City, was destroyed by deregulation. "Commercial entities" infiltrated the industry, with Enron being the most aggressive, to promote policies and water down reliability standards to see "how much power they could push around the system."
The PEST report, "Contributions of the Restructuring of the Electric Power Industry to the Aug. 14, 2003 Blackout," states unequivocally that "deregulation and the concomitant restructuring of the electric power industry in the U.S. have had a devastating effect on the reliability of North American power systems, and constitute the ultimate root cause of the Aug. 14, 2003 blackout."
The Danger of Putting Profits First
Deregulation was based on "an almost fundamentalist reliance on markets to solve even the most scientifically complex poblems," the report states. Optimizing reliability has been replaced by a "total dependence on immediate profits." With deregulation, "the emphasis shifted from technical knowledge and competence to financial and marketing knowledge. Economic theory replaced engineering fact."
What have companies done to be "competitive"? According to the report, between 1990 and 2000, investment in new transmission capacity fell at a rate of about $50 million per year. Between 1990 and 1999, the labor force in the generation industry decreased from 480,000 to 350,000. There was an additional ratchet collapse in manpower from 1999 to 2000, when the number of employees in power-generation fell from 350,000 to 280,000, and in transmission and distribution, from 196,000 to 156,000.
To maximize profits, companies reduced or eliminated the training of professional engineers and systems operators. Senior personnel were encouraged to take early retirement, "effectively ending the transfer of essential expertise from one generation to the next."
The transfer of operation and oversight of transmission assets from professionals in the industry to Federal regulatory agencies, put electricity delivery in the hands of bureaucrats with little or no knowledge of the complexity of the transmission system. The notorious Federal Energy Regulatory Commission (FERC), from its inception has been staffed largely with pro-deregulation neo-conservative ideologues, who lack any knowledge or expertise for their positions, "or are beholden to certain segments of the industry," the report states. (Enron´s financing of President Bush´s career, its role in formulating Vice President Cheney´s energy "policy," and its role in "recommending" who gets chosen for key energy regulatory positions are well known.)
The engineers´ report ridicules the conclusion of previous studies of the 2003 blackout, conducted for the Department of Energy, for blaming untrimmed trees, lack of communication, and other specifics, rather than finding the root cause. The problem is "not an error or two in procedures or protocols," but "a belief system." An indication of this, it says, "is the fact that, despite such evidence as the California Meltdown, unprecedented price spikes, the criminal actions of Enron and others, and the most devastating blackout in our history, policy makers still steadfastly deny that deregulation and restructuring had anything at all to do with any of it. Sociologists call this ´cognitive dissonance.´ "
The engineers conclude that unless the root causes of the 2003 blackout are reversed, "the likelihood of future blackouts will increase."
From Bad to Worse
That the lessons of the California crisis and the Northeast blackout are yet to be learned is shown by the repeal of the Public Utility Holding Company Act (PUHCA), in the recently enacted Energy Bill. PUHCA, promulgated by Franklin Roosevelt, prevented holding companies from extending their service area into noncontiguous territories, limiting them to serve their regions. It barred foreign purchase of U.S. utilities, and allowed very limited non-utility investments by electric companies. PUHCA built a wall between the regulated electricity company, and any unregulated subsidiaries it might hold, to prevent customers from being milked to bail out failed, high-risk investments. It required holding companies to register with, and meet the standards set by, the Securities and Exchange Commission (SEC). As FDR intended, the law drove Wall Street and speculators out of the utility industry, and broke up the holding company conglomerates which had had a stranglehold on the industry.
Congress and Federal (de)regulators had been nibbling away at the restrictions and protections under PUHCA since the push for deregulation started in earnest in 1992. At that time, Congress legislated that American utilities would be allowed to purchase foreign utilities, and vice versa. The Securities and Exchange Commission moved into a more "flexible" interpretation of PUCHA, as utilities merged and the number and assets of holding companies mushroomed.
A day after President Bush signed the Energy Policy Act of 2005, which repealed PUHCA, Aug. 8, the General Accountability Office of the Congress released a report suggesting that the SEC should more strongly enforce PUHCA´s restrictions! Over a decade, the GAO reports, the number of holding companies registered with the SEC went from 15 to 31 in 2004. An additional 81 claimed, and were granted, exemptions from SEC standards.
There are already shadows of what lies on the horizon with PUHCA repeal. Southern Company, which produces power and delivers it to millions of consumers in the Southeast, spun off an unregulated subsidiary, Mirant Corp., to get in on the speculative frenzy of Enron-inspired power marketing. Mirant is now bankrupt, and is suing Southern. Will electricity customers end up bailing out the power pirates, the very thing that PUHCA had prevented?
But even the SEC itself finally thought FERC´s granting of approval for far-flung mergers, and its own rubber stamp, had gone a bit too far. On May 3, SEC Administrative Law Judge Robert G. Mahony ruled that the acquisition by Ohio-based American Electric Power Co. of Central & South West Corp. of Texas in June 2000 violated a key provision of the PUHCA.
PUHCA, as even the Wall Street Journal noted, had been made nearly "moot," as the SEC joined FERC in making deregulation de facto Federal law, in many cases, without Congressional approval or oversight. So what convinced a bipartisan majority in the Congress to repeal a law that for 70 years had protected the American people from abuses?
The Congress has fallen, once again, for the siren song of deregulation promises. "I´ll invest $10-15 billion in the capital-starved energy sector, if you just repeal PUHCA," says mega-speculator Warren Buffett, through his Berkshire Hathaway-owned MidAmerican Corp., just as Enron CEO Ken Lay had promised gullible California state legislators in 1996 that the price of electricity would be lowered dramatically, if they passed a deregulation law.
Deregulation, which was sold to the public as a way to increase "competition," has, in fact, led to a consolidation of the industry, where utilities that have merged now own power plants spread across ten or more states, making it impossible for state utility commissions and regional reliability councils to maintain control over their regions of responsibility. Now, with the repeal of PUHCA, "merger mania" is expected, and new "players" will enter the field. (See "Will Warren Buffett Be the New Samuel Insull?" EIR, Aug. 26, 2005.)
Not everyone has been hoodwinked. In July 2004, Public Citizen filed a lawsuit which challenges a key tenet of deregulation. The suit charges that FERC is in violation of the Federal Power Act. That Federal law states that wholesale rates will be set that are "just and reasonable," not what the market will bear. FERC´s "market rate" regulation scheme, in which companies virtually set their own price for selling electricity, allowed them to manipulate the "market" and overcharge consumers billions of dollars. The suit was filed in the District of Columbia Circuit U.S. Court of Appeals by State Attorneys General of New Mexico and Rhode Island, state agencies in Colorado and Utah, the National Consumer Law Center, and consumer advocacy organizations,
The attorney of record, Lynn Hargis, who worked for FERC for ten years, says there will be a "massive consolidation" of the industry now that PUHCA is repealed. The oil industry, known for monopoly control and price fixing, she says, will now buy up utilities. The prospect that investment banks will also join the merger spree is "frightening." FDR´s purpose in PUHCA, she says, was not just to regulate the electricity industry for the benefit of the consumer, but to "control the investment banks."
No patchwork of proposals to mitigate the disaster caused by deregulation will restore this critical infrastructure. The only solution is to "put the toothpaste back into the tube."
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Anonymous Coward
User ID: 583
8/29/2005
10:27 pm EDT Re: Corruption in America: Big Three Execs Get Huge Pay To Ruin Auto Sector / How Dereg Causes Blackouts.
"Since 2000, driven by shareholder value, the Big Three global automakers—GM, Ford, and DaimlerChrysler—have fired 100,000 American workers, more than 65,000 of them skilled auto production workers. In this process, they have utterly destroyed the advanced machine-tool capacity embedded in the U.S. auto industry. This year, the process of destruction intensified, with GM and Ford walking toward the cliff of bankruptcy."
Can you say "Weapons of Mass Destruction?" |
| .
User ID: 22553
8/29/2005 11:27 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
EIR has determined that since 2000, the top executives for the Big Three U.S. automakers have collectively looted their companies for between $500-$750 million in obscene total compensation—equal to the wages of 15,000 production workers for one year. Instead, they should have fired themselves. |
| .
User ID: 12992
8/31/2005 12:02 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The Day the World Ended
by Charles Mackay, Wednesday August 31 2005
The energy price shock wave, greatly amplified by the monster Hurricane Katrina, is blasting away expectations that market forces will gently guide the US through the developing economic crisis.
The Countdown to Recession had already started before Katrina was even a ghost on some weather person´s radar screen. Yet after it was apparent that Katrina would batter the southern Gulf coast of the US, the Wall Street Journal blithely announced on Monday (August 29), in a front page story, that "broader economic forces have been offsetting the oil shock." Outrunning would have been a better word.
Consumers have outrun the shock wave so far by running down available savings and increasing household debt. To finance that debt, the US as a nation has greatly expanded its current account deficit* to between $800 and $900 billion per year annually, from about $520 billion for the 2003 year. Tapping available savings, the M1** money supply is now falling at about a 2% annual rate, about 5 % less than the rate of inflation.
Gasoline prices, barreling out of control like a runaway freight train, are a warning sign that we are about to enter the twilight economic zone of energy shortages. Personal income gains will now fall well behind the accelerated cost of living. With no savings left to tap and our national credit card with foreigners just about run up to the max, the fast-paced, credit-backed spending spree of the last few years is over.
Will Alan Greenspan save the day and once again get applause from his cult of personality on Wall Street? Not this time. The days of economic growth have ended and a new period of unsettling economic tremors lies ahead.
* The current account deficit is generally defined at the amount of money needed to finance the trade deficit plus net interest/dividend payments on international investments and debt.
**M1 consists of (1) currency outside the U.S. Treasury, Federal Reserve Banks, and the vaults of depository institutions; (2) travelers checks of nonbank issuers; (3) demand deposits at commercial banks (excluding those amounts held by depository institutions, the U.S. government, and foreign banks and official institutions) less cash items in the process of collection and Federal Reserve float; and (4) other checkable deposits (OCDs), consisting of negotiable order of withdrawal (NOW) and automatic transfer service (ATS) accounts at depository institutions, credit union share draft accounts, and demand deposits at thrift institutions. |
| Anonymous Coward
User ID: 493
8/31/2005 12:06 PM | | Re: Watch, Its happening ,the global economic change. | Quote |
The stock market is managed by the Government. It has been since 911. They buy and sell S&P futures with an unlimited supply of credit. The Japanese government has done this for a long time and openly admits it. The difference with the US is that they don´t openly admit it, they use terms like "whatever means necessary". The stock market will not crash. They will buy S&P futures as necessary to prevent it. |
| Bump
User ID: 22955
9/1/2005 5:25 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Thank you user . for this.
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User ID: 45
8/29/2005
7:46 pm EDT OIL FUTURES REPORT & KATRINA
interesting read
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User ID: 45
8/29/2005
7:48 pm EDT Re: OIL FUTURES REPORT & KATRINA
ask yourself ...who made money out the disaster caused by Hurricane Katrina...
Anonymous Coward
User ID: 457
8/29/2005
7:50 pm EDT Re: OIL FUTURES REPORT & KATRINA
Weather Derivatives Market - Background
The weather derivatives markets are active and liquid with established products as well as innovative structures. Some key players in the market include:
Energy Marketers/Utilities
In the regulated energy market, utilities were allowed to pass through losses associated with the weather to ratepayers. No longer. Utilities and power marketers now turn to the over-the-counter weather derivative markets to hedge exposure to the elements. As the first major participants, some utilities and energy marketers have become market makers with proprietary trading operations.
Insurance/Reinsurance
Insurance and reinsurance companies are the natural supply of risk capacity for the market. Historically, their role has been to provide catastrophic insurance for major weather events such as hurricanes and floods. Recently, they have begun writing non-catastrophic weather insurance policies. Although most of these companies do not deal directly in the derivatives market, writing weather insurance is an important part of supply-demand balance of the market
Transformers
Transformers have emerged to provide an important bridge between weather insurance and the weather derivatives market. Weather insurance and derivatives are parallel markets. They are both used for risk management. Counterparties wishing to convert an insurance policy into a derivative or vice versa, turn to transformers for this service.
Financial Institutions
The emergence of the financial institutions in weather derivatives markets brings major benefits. One is the opportunity to cross market weather products to their existing customer base. Another benefit is the depth and breadth of their trading experience.
OTC Derivative Brokers
Over-the-Counter (OTC) Derivatives brokers, such as Evolution Markets, facilitate transactions between market participants, both inter-dealer and end-user. These companies solely act as intermediaries, matching buyers and sellers and do not take on proprietary trading positions. A key service of the OTC Broker is to provide unbiased pricing information, market insight, and to assist in the structuring of complex transactions.
Insurance Brokers
Insurance brokers are matchmakers between insurance companies and end-users. They facilitate the transferring of risk through insurance policies between these two knowledgeable counterparties without actually writing insurance policies
[link to www.evomarkets.com]
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User ID: 45
8/29/2005
7:52 pm EDT Re: OIL FUTURES REPORT & KATRINA
"Others are engaging even in an eco-type of terrorism whereby they can alter the climate, set off earthquakes, volcanoes remotely through the use of electromagnetic waves. So there are plenty of ingenious minds out there that are at work finding ways in which they can wreak terror upon other nations.It´s real, and that´s the reason why we have to intensify our efforts, and that´s why this is so important."
[Secretary of Defense William Cohen at an April 1997 counterterrorism conference sponsored by former Senator Sam Nunn. Quoted from DoD News Briefing, Secretary of Defense William S. Cohen, Q&A at the Conference on Terrorism, Weapons of Mass Destruction, and U.S. Strategy, University of Georgia , Athens , Apr. 28, 1997].
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User ID: 45
8/29/2005
7:55 pm EDT Re: OIL FUTURES REPORT & KATRINA
AP
Katrina Nearing Oil, Refinery Operations
Monday August 29, 9:43 am ET
By George Jahn, Associated Press Writer
Oil Briefly Climbs Past $70 a Barrel After Hurricane Forces U.S. Oil Facilities to Close
VIENNA, Austria (AP) -- Crude-oil futures briefly surged past $70 a barrel for the first time ever as Hurricane Katrina barreled toward the heart of U.S. oil and refinery operations in the Gulf of Mexico on Monday, shutting down an estimated 1 million barrels of refining capacity.
The Category 4 storm advanced on an area crucial to the U.S. energy infrastructure -- offshore oil and gas production, import terminals, pipeline networks and numerous refining operations in the southern states of Louisiana and Mississippi. Oil companies evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf.
After slamming ashore, it charged toward low-lying New Orleans with winds of 145 miles per hour and the threat of an extremely dangerous storm surge.
"This is the big one," said Peter Beutel, an oil analyst with Cameron Hanover. "This is unmitigated, bad news for consumers."
Light, sweet crude for October delivery jumped as much as $4.67 a barrel to hit a high of $70.80 a barrel in electronic trading on the New York Mercantile Exchange, before slipping back to $69.71 by afternoon in Europe. That was still up $3.58 from its close on Friday in New York.
Gasoline traded at $2.1275 a gallon, up 20 cents, or 12 percent, while heating oil rose by more than 12 cents to $1.9587 a gallon.
Brent crude was not trading Monday, with London´s International Petroleum Exchange closed for a bank holiday.
Hurricane Katrina threatened a 28-foot storm surge, forcing a mandatory evacuation of the below-sea-level New Orleans.
Katrina has already forced the shutdown of an estimated 1 million barrels of refining capacity and curbed offshore production, but analysts said the storm´s potential damage to facilities was even more worrying.
"It´s not only the suspension of production that´s causing concern, it´s the fact that we could see potential damage to the platforms, which would cause longer disruptions to production," said energy analyst Victor Shum of Texas-headquartered Purvin & Gertz in Singapore.
The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the United States´ domestic output, according to the U.S. Mineral Management Service.
"It looks like the perfect storm to drive prices up," Shum said.
Katrina quickly grew from a smallish storm threatening Florida into a menacing hurricane in just a few days.
On Friday, the Nymex crude oil contract fell more than a dollar to $66.13 a barrel as many traders took profits on forecasts that Katrina would likely have little impact on U.S. refineries and production facilities in the Gulf of Mexico.
"But then the storm reloaded over the weekend, gained strength and set on a path toward the oil facilities," Shum said. "The people who sold on Friday are probably kicking themselves now."
Unlike last year´s Hurricane Ivan, which only hit the edge of the oil and natural-gas producing areas in the central Gulf of Mexico, Katrina is plowing right through the heart of that region.
"If this thing knocks out significant quantities of refining capacity ... we´re going to be in deep, dark trouble," said Ed Silliere, vice president of risk management at Energy Merchant LLC in New York.
PVM Oil Associates in Vienna, Austria, said Katrina had the potential to do more damage to southeastern Louisiana than Ivan, which damaged seven platforms, 100 underwater pipelines and shut down production at some facilities for several months.
Some analysts have said the only way to rein in surging prices would be for the United States to tap some of its petroleum reserves.
"President Bush could announce a release of supply from the Strategic Petroleum Reserve," said commodity strategist David Thurtell of Commonwealth Bank of Australia in Sydney. "(That´s) the only thing that will prevent further significant price rises from here."
The Bush administration has said the petroleum reserves should be tapped only when there are disruptions of oil imports from overseas.
The Louisiana Offshore Oil Port, the largest oil import terminal in the United States, evacuated all workers and stopped unloading ships on Saturday.
Royal Dutch-Shell Group, BP PLC and ExxonMobil Corp. also evacuated offshore workers by Saturday.
ChevronTexaco Corp. evacuated all workers in the eastern and central Gulf of Mexico and nonessential workers in the western Gulf late Saturday, but company spokesman Matt Carmichael said Chevron will continue to produce 90 percent of its normal production by remote.
Shell estimated 420,000 barrels of oil and 1.35 million cubic feet of gas per day will be shut in at its central and eastern Gulf facilities. ExxonMobil said it has ceased daily production of 3,000 barrels of oil and 50 million cubic feet of gas.
French oil company Total SA said Monday it has joined the growing list of producers to evacuate from Katrina. Staff began leaving Friday, said Total spokesman Paul Floren.
Associated Press Writers Gillian Wong in Singapore and Justin Bachman in New York contributed to this report. |
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User ID: 11285
9/14/2005 8:46 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Monetary Insanity
Richard Daughty
...the angriest guy in economics
The Mogambo Guru
Archives
Sep 07, 2005
- This week I am beside myself with outrage at everything. Seeing me standing there beside myself like that, I am captivated by my own snarling, supercilious insolence, vaguely reminiscent of Marlon Brando in "The Wild One", with a cigarette hanging out of the corner of my mouth, looking so cool, and how I am the original Rebel Without a Cause and, I might add, an all-around seriously bad dude who drives the chicks wild. My reverie is abruptly broken when my wife yells out, "Are you smoking a cigarette out there, you idiot moron?" I quickly throw the butt down, stomp it out, and yell back "No! Now just shut up and leave me alone, ya old bag!"
But this is not about my awesome Mogambo powers of imagination (AMPOI), but about how I am outraged, mostly by how the damned Federal Reserve increased Total Fed Credit by $6.4 billion last week! Note the exclamation point, which I cleverly use to indicate emphasis for some reason, mostly because I am, as I said, outraged.
Today I will be taking us on a little field trip, away from the hallowed halls of Mogambo Extreme University (MEU). So follow along in your Mogambo Guidebook Of Monetary Insanity (MGOMI) as we take you to where credit is created in that wonderful, magical place in Central Bank Fairy Tale Land. This spooky place is where the little magic fairies at the Federal Reserve come out and dance by the light of the moon, sit on toadstools, and literally increase the amount of potential credit in the banking system by waving a magic wand, or sacrificing babies, or pressing a button, or something. And this sudden supply of fresh credit drives down the interest rate as it swamps instantaneous demand for credit. Then, the next thing you know, total debt is up as people rush to borrow this new, cheap credit. Not surprisingly, all this increased demand for credit did NOT increase the interest rate, which you would expect, as the supply of credit expanded beforehand! And even better, in doing so - like magic! - borrowers create money at the very instant - poof! - that they sign the loan papers!
Standing up, groaning and moaning, to take a look out of the window at the banks, we see that, sure enough, the banks suddenly had another $22 billion in new loans and leases on their books last week. Peeking around the corner at the money supply, we see that the money supply blipped - blip! - up, too. And lookie there! Total debt went - blip! - up, too!
Predictably, the dollar went down, which means that the dollar now has less purchasing power , as befits the currency of a brain-dead country that produces nothing and consumes everything. Which means that (and you are going to really love this because it affects you), each dollar YOU have now buys less! And each dollar that you are going to get in the future will be worth even less, too, even though you are being paid under a contract written back when the dollar had a lot more purchasing power. Hahahaha! Sucker! But you are also selling some things under a contract that was written way back then, too, and so it, I guess, sort of washes out, although I know I am going to have a hell of a time explaining this to the Board of Directors, who are already out to get me. If I didn´t have all those incriminating photographs and microfilm of them, I´d REALLY be on thin ice around here!
But this is not about the Board screwing me over for my incompetence and how I´ll be lucky if I don´t end up in jail about that blackmail thing. No, this is about your government letting the central bank screw you over with harmful monetary policy so that they can hide the inevitable, disastrous results of the criminally-stupid monetary policies of the Federal Reserve and Congress for lo, pilgrim, lo these many decades. And especially the last couple of decades in particular!
And I am also outraged, as you can tell by the way my hands are clenched into Mogambo fists of iron and steel (MFOIAS), they also used some of this magical credit themselves. The Federal Reserve is, after all, just a damn private bank that has been given pure monopoly power over the money, credit, and all the other banks in the USA. This awesome power was bestowed upon them in 1913 by a bunch of government guys (who are now all dead), and who were in cahoots with a bunch of banker guys (who are also now all dead, too). So the lesson is; when you support the adoption of a central bank, then you support the Roaring Twenties when the central bank started issuing excess money and credit, and then you support a Depression, and then when you make the final mistake and support a fiat currency in 1933, you end up dead. Dead!
And, since this will hopefully show up on your SATs, remember that 1913 was a time when theoretical communism and the beneficial rise of the Omniscient State was all the rage among the snotty intellectual crowd (and still is among the snotty intellectual-elite Democrat crowd).
And here is where the invaluable Mogambo Theory of Educational Sequencing (MTOES) comes in handy. If you first learn American history AFTER you learned economics, then your first reaction is, of course, sheer horror at what these people did. And your first instinct is to locate their graves and dig up their decayed, rotten bodies in a frantic, screeching rage, scatter the ashes, burn the bones to ashes and then spread THOSE ashes, too, and then obliterate the graves. Not that I would advocate such a thing, of course, but I could understand how you could be that angry about it.
And if incomprehensible rage and mindless violence is not enough to get the job done, then at least desecrate the graves of all the horrible people involved in this the Federal Reserve/ fiat money/ extreme fractional banking/ supranational agencies (e.g. World Bank and the International Monetary Fund)/ pandemic debt everywhere/ huge government/ hugely expensive government/ hugely expensive AND suffocating AND deadly government government government craziness! Whew! I am all out of breath!
Panting like the winded thoroughbred that I am and gobbling nitroglycerine pill like the little pill-popping dope fiend that I am, I use my last remaining energy to look up into your soulful eyes and caution you that this is a big, big task, because there were lots and lots of them, as it includes the people infesting the public schools, and the media, and the universities, and your parents, and your neighbors, and everyone you probably ever knew, and they are all out to get you, and take all your money only because they are not allowed to kill your and drink your blood.
Anyway, last week these banker guys created the money and used some of it to buy up another $2.1 billion in government debt! Hahaha! It´s hard to believe that foreign people are loaning us money, when we are blatantly committing this ultimate monetary fraud right in front of their eyes! And yet it doesn´t seem to make an impression on them! Hahahaha! Buffoons! I´m sure that you noticed that I am hanging my head in despair and dismay, even as I laugh at these foreigners and their strange ways, and their funny accents, and the way they stupidly keep loaning us money, because it sure doesn´t seem to make an impression on us Americans, either! Alas, this only proves that we Americans are NOT (like we think and still believe), smarter, and stronger, and bigger, and better, and better-looking than all the foreigners in the whole world put together. Well, we may be bigger and stronger and better-looking. Especially you, with your Hollywood movie-star good looks and all. Of which I am very envious and angry about, now that you brought it up. But we are obviously NOT smarter.
Ron Paul, one of the few guys in all of Congress (and maybe the only guy in Congress) that does NOT have his head up his fat, worthless wazoo about economics, has looked at this blatant theft of American wealth and writes "The greatest threat facing America today is the disastrous fiscal policies of our own government, marked by shameless deficit spending and Federal Reserve currency devaluation. It is this one-two punch-- Congress spending more than it can tax or borrow, and the Fed printing money to make up the difference-- that threatens to impoverish us by further destroying the value of our dollars."
If that is not enough for you, then give an ear to Addison Wiggin, who is a best-selling author, is big shot at DailyReckoning.com, and Agora Publishing, and all kinds of other successful stuff (and so I gotta listen to my wife saying "Why can´t you be more like Addison?" and I say, "Addison?" And then I find out that he allows her to call him by his first name! But let ME try that crap and suddenly the battery mysteriously goes dead in my car!). But I brought this up because Mr. Wiggin was writing a web promo for the Richebächer newsletter, and he quotes Doctor R. as ominously saying, "The main [economic] problems in the world are all in America. What has happened in America in the last few years is the most irresponsible policies that have ever happened in history."
So you can see why I am outraged.
I am also outraged at other things this week, including the embarrassing incompetence of everything connected with the disaster in New Orleans, including the incompetent FEMA halfwits, the incompetent mayor of New Orleans, his whole staff, and the Governor, too, as far as I am concerned. I blame everybody but me.
As Kate Incontrera of the Daily Reckoning so pithily put it, "Despite all of the money and time and new policies the federal government has put into Homeland Security - we were still completely unprepared for a hurricane that officials knew about days ahead of time." And it wasn´t just Homeland Security, either! This country has been pouring tens of billions of dollars every year into this emergency response crap, and they all have Hazmat suits, and Biohazard suits, and special trucks, and tons of equipment, and they go to expensive, special training in faraway places, and they give each other awards and things, and they belong to professional associations, and they are all unionized and bringing down some serious money and benefits packages, and yet this is the best they can do? Hahahahaha! And you thought The Mogambo was an overpaid, incompetent bozo! Hahahaha!
And this incompetence comes at the end of decades of continual incompetence, as Lew Rockwell put it in his essay entitled "The State and the Flood" on the Mises.com site "It was the glorified public sector," he writes, "the one we are always told is protecting us, that is responsible for this. And though our public servants and a sycophantic media will do their darn best to present this calamity as an act of nature, it was not and is not. Katrina came and went with far less damage than anyone expected. It was the failure of the public infrastructure and the response to it that brought down civilization."
Beyond this, a lot of people have sentiments that are echoed by Robert Tracinski, at TIAdaily.com, in an essay entitled "An Unnatural Disaster: A Hurricane Exposes the Man-Made Disaster of the Welfare State." He writes that "This is not a natural disaster. It is a man-made disaster. The man-made disaster we are now witnessing in New Orleans did not happen over four days last week. It happened over the past four decades. Hurricane Katrina merely exposed it to public view."
So what is the real disaster in New Orleans? He thinks it is "The man-made disaster is the welfare state. There were many decent, innocent people trapped in New Orleans when the deluge hit-but they were trapped alongside large numbers of people from two groups: criminals-and wards of the welfare state, people selected, over decades, for their lack of initiative and self-induced helplessness."
And why are all these people poor, and sometimes resorting to being criminals and on welfare? Because they cannot do any work that can pay enough wages to support themselves, you idiot! And why can´t they get a job and support themselves? For two very good, damned good, extremely good reasons. One, because inflation has made things so damned expensive that they cannot make enough money to support themselves, and if you think that a little inflation, or ANY freaking inflation, especially over the long-term, is anything but a damned disaster, then take a look at these poor damn people in New Orleans, and then come back and tell me that you STILL think that the advantages of "a little inflation" outweigh their misery, and the combined misery of the unemployed, the handicapped, the sick, the dependent, the injured, those living on fixed incomes, and all the other millions upon teeming millions of people in America whose incomes, if they exist at all, are NOT keeping pace with inflation, and everyone´s standard of living is spiraling down, and down, and down, until they end up here. This is the ugly, ugly face of persistent, simmering inflation spread over years and years and years until it evolves into a cancer.
The second reason that they are that way is because productivity is how you reduce the use of manual labor in the economy, which is what these pathetic people have to do! In other words, the jobs they can do, with their limited set of skills and assets, don´t pay enough as it is, and the government turns around and actually makes it profitable for businesses to replace workers with capital (machines) or outsource the work altogether to places with cheaper labor and expenses! Hahahaha! "We´re from the government, and we are here to help you!" Hahahaha!
The news media rushes over to where The Mogambo is holding a press conference. When everyone is assembled and finally quiet enough to suit me, and enough of the pretty lady reporters are right up front where I can see them to suit me, and the most scandalously dressed one of them all is close enough and right in front where I can keep an eye on her to suit me, I step to the front of the podium and take the microphone into my meaty Mogambo paw (MMP). All eyes are upon me as I raise it agonizingly slowly to my lips, so as to "build the moment". After what seems like agonizing minutes, I finally intone "Inflation, at the root, directly caused the misery and disaster of New Orleans!"
The crowd is wowed! Or, they WOULD be if they had any idea what in the hell is happening. But they are "journalists", and you can tell by my snotty tone and that undercurrent of raw, undisguised contempt that I am not a big fan of journalists as a rule. They don´t know anything! They report their "feelings" and sop up direct quotes from the government and government-sponsored spokesmen, mostly about how The Mogambo is a big fat idiot, and how I came here in a flying saucer, and how I obviously have mental problems concerning personal hygiene.
But this is not about journalists or the egregiously bad job that they have done for the last fifty years or so, but about inflation. And it is these kinds of horrors, and many more, each worse than the last, that come from inflation. And it is inflation that causes The Mogambo to rest but fitfully, and see how he tosses and turns in his sleep, and has violent, disturbing nightmares about what is going to happen one day soon that will be considered by future historians to be the "tipping point", or the "turning point", or the "straw that broke the camels´ back", or the "thing that made The Mogambo finally lose it completely and go freaking berserk."
And speaking of going berserk, I am further outraged (and there are many scientists who thought I could not GET more outraged) that the gold lease rates literally collapsed last Friday. Suddenly, out of nowhere, the lease rates on gold collapsed to an historically anomalous single point, as the 1-month, the 2-month, the 3-month, the 6-month and the 12-month lease rates ALL dropped to virtually the same low, low, low rate!
Everyone has their own ideas about what this means, but they all, and we all, agree that it means something bad. Very bad. Perhaps even very, VERY bad. But then, when the markets opened again on Tuesday, they sprang- boing! -back up. Too strange to suit me!
So, what other outrage could there be but to rebuild New Orleans? Of course! Everyone agrees that building a city next to the sea, on land that is lower than sea level, that is sinking, and thus spending astonishingly large sums of borrowed money to disrupt the natural flow of silt down the Mississippi, is always a really, really, really good idea! And the umpteen billions and billions and billions and billions of dollars it will take, every year until forever, to build and maintain the levees will be considered to be well worth it, as it will give the shallow, spendthrift morons infesting Congress a reason to spend oodles of money, most of it going to their friends, by plunging us farther into unfathomable, unbelievable, un-payable debt.
In case you were wondering, just the interest on the national debt so far is about $318 billion per year. About $3,000 a year for every non-government worker in America! And this is just the interest! This is NOT a mandated "minimum payment" Just the freaking interest! Hahahahaha! This is the economic and financial and Congressional brilliance of the USA that we are so proud of! Hahahaha!
But perhaps it is rude to laugh when discussing death and suffering. Sorry. But apart from the death and suffering, of the hurricane, it is the effect on the gasoline situation that has everyone´s attention, as well it should! This is America! We have priorities! We gas up first, then ride around looking for the dead and injured!
But gasoline, like everything else, is just a matter of price. If the price gets high enough, then you will see entrepreneurial people in leaky rowboats, bringing 5-gallon cans of gasoline ashore to waiting tank cars, rowing in precious fuel from dark and mysterious tankers anchored offshore somewhere, 24-hours a day, and we will have all the gas we need.
But I was speaking of inflation, although you have a point that all I ever talk about is inflation, mostly because it is the only problem that cannot be solved by finding out who is more heavily-armed. Continuing, I note that on the inflation front, it is roaring right along, and the CRB index gained 4.5% for the week, meaning that it is up 16.7% year-to-date. The Goldman Sachs Commodities index leapt 6.1%, or 49.2% YTD. Of course, these indexes contain oil, which has risen mightily in price lately. This is price inflation staring you right in the kisser! This is NOT benign!
In fact, this may have something to do with a Bloomberg.com new item that reported, "Manufacturing in the Chicago area contracted in August for the first time since April 2003, suggesting record oil prices are slowing factory demand, a private report showed"
Separately, the Commerce Department also said that factory orders fell 1.9 percent in July.
And finally ("This just in!") from the racquetball courts in Pinellas Park, the latest survey of the people who play racquetball with The Mogambo (PWPRWTM) shows that all of them are very, very grumpy about the price of gasoline, and have actually cut back on other spending to make up for it. And they are grumpy about that, too.
But they must be the only ones, because, as noted by the famed John Mauldin, he of the Millennium Wave Advisors, "U.S. consumers spent more than they earned in July for just the second time in the last 46 years, the Commerce Department said Thursday. Personal incomes increased 0.3% in July, while spending roared ahead by 1%. As a result, the personal savings rate tumbled to negative 0.6%, the lowest since monthly records began in 1959." Hahahaha! What do you call a country that is doing something so stupid? Answer: Idiots! Hahahaha!
As to what this means, he ventures "My guess is that this is going to get worse as energy costs force families to adjust and dip into savings in the interim. This is clearly a condition that cannot continue." And so it is obviously time for the Congress, already exposed for the incompetent dorks that they are, to respond (insert blare of trumpets, "Ta daaaaaa!") with some of their "fiscal magic", and declare a whole raft of new tax credits, new tax deductions and more deficit-spending! Hahahahaha! Which only exposes them AGAIN for their incompetence! Hahahaha! And foreigners are buying our debt, why? Hahahaha!
But this is enough laughing. Then we get to the money part. As Mr. Mauldin says, "The estimates of how much all this is going to cost are all over the board. A leading catastrophe risk-modeling firm, Risk Management Solutions said today that Katrina and the flooding of New Orleans will probably cost more than $100 billion in total economic losses. In the grand scheme of things, that is less than 1% of US annual GDP. That is one reason why most economists do not think Katrina will push the US into recession."
Well, you know that The Mogambo is not "most economists", nor "normal" in any way measurable by modern science, and he is out here on the thin, razor-edged extremities of fear and panic, and I say that the enormous amounts of leverage that are so ridiculously extant in the USA will easily push the losses to ten times that much. And suddenly you are talking a trillion dollars, which is about 9% of GDP, which is plenty more than enough to CAUSE a recession, because it is plenty big enough to BE a recession, all by itself!
Enrico Orlandini of the Lasco Report agrees with all of this when he writes that "Unlike other moments in history, there is no safety net this time around. The average American hasn´t saved, is deeply in debt, his wages are declining in real terms, and won´t be able to stand the pressure. He´ll give the keys to his house and SUV back to the bank and go rent a smaller house or apartment and use mass transit. Unfortunately, bankruptcies will skyrocket and unemployment will rise dramatically. I see a Depression with one big difference when compared to 1930. In 1930, the bankers jumped out of windows of their own free will. This time around, I suspect that disgruntled Americans will be helping them out. That translates to social unrest and should lead to serious and much needed reforms on all level." And as for the social unrest, again I direct your attention to New Orleans.
- And it is not just New Orleans that is swamped. Martin Weiss of Safe Money Report reports that the permanent, huge-discount sales offered by the new-car dealers have resulted in a lot of used cars being on the market, and a lack of buyers for used cars, too. "All over the country, used car dealers have been swamped and they now have an estimated 300,000 more vehicles on their lots than they´d normally expect at this time of year."
And speaking of cars, if you have ever heard the saying "What is good for General Motors is good for America", then get ready to wrap yourself in your ceremonial blankets and sing the death-wail for the USA, as Mr. Weiss reports that "Recently, GM announced its worst quarterly loss since the company narrowly skirted financial collapse 13 years ago. In response, they laid off 25,000 workers. And in the near future, you can expect a whole new round of lay-offs."
And there is no hope, either. "But it doesn´t matter how many people they lay off," says Mr. Weiss, "because they´re buried under an avalanche of debt. Last I checked, they owed 284 BILLION dollars. For every dollar of cash they had left, they owed $9. The interest alone is killing them. And every time the Fed raises interest rates, they have to pay more."
Just like everyone else who has large debts to pay, dude!
- The next time somebody taunts you for being a gold-bug, and how only idiots are gold bugs, and so that means you are an idiot, you can tell them that the International Monetary Fund, the IMF, believes in gold. From their website we read that one of their "principles" is that "As an undervalued asset held by the IMF, gold provides fundamental strength to its balance sheet. Any mobilization of IMF gold should avoid weakening its overall financial position."
So even the IMF itself says that gold is undervalued! I mean, what more do you want, for crying out loud? Buy gold!
As for their stash of the yellow metal, "The IMF holds 103.4 million ounces (3,217 metric tons) of gold at designated depositories." This is the gold that the USA, and the other signatories of the deal that created the IMF, literally gave them. I stare at you blankly for a few seconds, until I finally say, with a deadpan expression, "We gave them our gold." It should sink into your head how I feel about that, and that is how YOU will feel about it, too, or else you will do very badly in this class.
Anyway, they go on to say "The IMF´s total gold holdings are valued on its balance sheet at SDR 5.9 billion (about $9 billion) on the basis of historical cost. As of February 28, 2005, the IMF´s holdings amounted to $45 billion (at then current market prices)."
Not only that, but the IMF used gold as money, as is clearly indicated when they write that "A payment of charges (i.e., interest on members´ use of IMF credit) were normally made in gold. A member wishing to purchase the currency of another member could acquire it by selling gold to the IMF." So, you are probably asking yourself, why didn´t they just pay each other with a fiat currency? Hahahaha! They know the value of THAT crap! Which ought to tell you something, too!
All this was changed when "The Second Amendment to the Articles of Agreement in April 1978 eliminated the use of gold as the common denominator of the post-World War II exchange rate system and as the basis of the value of the Special Drawing Rights (SDR)." In case you were wondering, SDRs are just another fiat currency, a new and special "let´s pretend" money used only to transact IMF business, and World Bank business, and God only knows what all. But they eliminated gold as the basis for their money because they knew that gold was going to get very valuable very soon, and sure enough, it did! It soon went over $850 an ounce! And remember that Nixon had de-linked the dollar from gold just seven years earlier, when gold was selling for about $35 an ounce! And anybody who had borrowed gold at $35 an ounce was going to pay it back with gold that costs $850 an ounce? Hahahaha!
Another principle that they say guides the IMF´s policy on gold is that "The IMF should continue to hold a relatively large amount of gold among its assets, not only for prudential reasons, but also to meet unforeseen contingencies." And this is exactly what I have been screeching for YOU to do, too! But do you listen to me? No! But I feel a little better knowing that you don´t listen to the IMF, either, and they have he fancy-pancy offices, and I am just a lonely guy who is paid to clean the toilets and refill the snack machine. So, and here´s a tip, while I don´t expect the fawning deference you would have for the IMF, a little respect might help me decide which one I do first.
Anyway, as we march relentlessly forward in time, we watch as our hair first becomes grey, then thin, and we don´t notice that the IMF has also been busy. But they have. During the years 1976-80, under "Auctions and ´restitution´ " we learn that "The IMF sold approximately one third (50 million ounces) of its then-existing gold holdings following an agreement by its members to reduce the role of gold in the international monetary system." In short, the IMF started selling the gold that we gave them to get the IMF started, and did it to try to gobble up some of the mountains of money that were being created by the idiot governments, hoping to prevent a world-wide conflagration of inflation. My God! Aren´t we scared enough?
Anyway, how were they paid for the gold? Easy! "Half of this amount was sold in restitution to members at the then-official price of SDR 35 per ounce; the other half was auctioned to the market to finance the Trust Fund, which supported concessional lending by the IMF to low-income countries." Let me get this straight so far; we created the IMF, and we gave them a lot of gold to get started. Then, later, after IMF had screwed things up and a caused bunch of countries to become so highly-indebted that they are on the edge of default and so much money was created that it was literally sloshing around, threatening to produce roaring inflation, the IMF sold the gold, to again finance a bail out a bunch of low-income countries (with "concessional lending") that were so stupid as to follow the bad advice of the IMF, and which threatened to default on debts owed to our banks? Hahahaha!
If your heart is thumping ("boom boom boom"), and you have sharp pains shooting through your chest ("ouch!") and your left arm is numb, then you are starting to really get the hang of this economics thing. I´m proud of you!
Anyway, abruptly we are again off to the future, and after a short ride we get off the bus at the period 1999-2000. This is where we reach the historical spot where we first find "Off-market transactions in gold." This was initiated in December 1999, when "the Executive Board authorized off-market transactions in gold of up to 14 million ounces to help finance IMF participation in the Heavily Indebted Poor Countries (HIPC) initiative", which is, as always, another welfare giveaway program. And welfare programs always expand and expand until they bankrupt any country so brain-dead as to allow it to happen, which is, as it turns out, almost all of them. Including the USA, I am sorry to say, as almost a third of all the people in this country are supported by the government. And it makes you wonder what in the hell an "off-market transaction" is, but I don´t want to know, as I know too much already, and if I really knew what in the hell was going on, I would certainly be on the evening news, and breathless on-the-scene reporters are yelling "It´s The Mogambo again, Ted! He´s really lost it this time!" and in the background you can hear the sound of gunfire and screams of pain and torment, yelling "The Federal Reserve has killed our money and are killing you, too! We´re freaking doomed!"
Fortunately, my usual cacophony of screaming anguish and mortal torment are muffled by the thick walls of the Mogambo Top Secret Bunker In The Backyard (MTSBITBY), because when I think of the inflation that is coming our way, thanks to all the money that has headed our way, I have to ask myself, as you will no doubt ask yourself, "Is the .50 caliber machinegun truly adequate to defend against neighbors rioting in the streets because inflation has impoverished them all, and now they want revenge on The Mogambo for one flimsy reason or another, mostly involving a few un-repaid loans and an unfortunate incident that was eerily similar to the Hardy Boys book, ´Mystery of the Missing Lawn Furniture and Barbeque Grills.´? "
- To show you how weird things are, even the Federal Reserve has started listening to The Mogambo, probably because it is hard NOT to listen to the Mogambo, because every day I am calling them up and leaving messages, such as "Hey, you big fat stupid buttheads! Inflation is roaring in stocks and bonds and houses and government! Wake up, you morons! Inflation is every freaking where, dudes!"
Anyway, whether or not they actually DID listen to me, Stephen Roach of Morgan Stanley notes that "Belatedly, Alan Greenspan has finally paid lip service to the mounting perils of the Asset Economy. In his recent swan song at Jackson Hole, the Fed chairman cautioned that ´history has not dealt kindly´ with investors (i.e., American consumers) who may have gone too far in ´accepting lower compensation for risk´ on their asset holdings. Even couched in all the oblique caveats so typical of Fedspeak, this is quite a confession. The Father of the Asset Economy now fears he has created a monster."
Well, duh! Isn´t that exactly what I have been saying over and over and over for years and years? And isn´t that ALL I have been saying? And isn´t that why I have no friends (but plenty of new enemies), and I am now old and bitter and very, very angry? And did I mention very, very scared and paranoid? I meant to.
So if you are a holder of stocks or bonds or houses, then you should be afraid.
And if you hold bank stocks, you should be especially afraid, too, as Alan Abelson, in his "Up and Down Wall Street" column in Barron´s, noted that 61% of the total credit of the nation´s banks is (drum roll, please!) mortgage-related assets. And when you remember that economic crises always come about as the result of banks acting crazy and irresponsible, then, as the saying goes, "be very afraid."
And it is NOT just us American swine, as we are referred to by the Gestapo in those old movies, who are acting crazy and irresponsible. Who do you think that been buying all those tons and tons of debt we have created? Hahaha! Foreigners! Hahahaha! Guys with funny accents who get all the good-looking chicks even though they probably smell bad, too! Serves them right!
Speaking of oil, Hugo Mackenzie of the newsletter M2 has some "Venezuela presently has little interest in achieving its OPEC mandated quota @ 2.9 million bbl/d; despite all the mass media pabulum to the contrary. Chávez is first and foremost seeking reparations for previous Kleptocratic resource rape and pillage executed prior to his tenure."
So where is Chavez looking for someone to pay those reparations? "In October 2004, he began raising royalty fees to an average of ~ 17% from 1%. More importantly, he began exercising currency seignorage in paying for contract services in nonconvertible Venezuelan Bolivares as opposed to U.S. Dollars."
Smart move! It will increase demand for Bolvares, strengthening that currency, and they will get an extra boost from the way we are devaluing our own money, too! Nice move there, Mr. Chavez! It looks like I owe an apology to Mr. Chavez and the rest of the world´s Leftist collectivist idiots, as I usually criticize them, and everything they do and say, by getting right in their stupid little faces and screaming at them in a really, loud, snotty voice, dripping with the acid tones of Mogambo contempt and disgust (MCAD), about their pea-brained stupidity in believing that socialism or communism could ever actually work in the real world.
Speaking of oil, another Mogambo Alert Reader (MAR) named Feizal M. has a friend who works at the Saudi embassy, who says "A friend who works in the Saudi oil ministry, told us that the US pays for Saudi oil with inflation-linked securities. Which might explain the repeated adjusting of the components of the official CPI."
Further, Feizel has looked at the ratio of oil to gold and decided that "At yesterday´s prices of $434.5 vs. $68.94 it stands at 6.3 barrels of oil per ounce of gold, which is absolutely the cheapest it has ever been for a century if not more."
- In the newsletter View from Silicon Valley, they featured an essay by Rick Merritt, of EE Times, who says that a friend of his named Martin went to China, and came back, and reported "China reminds me of what this business was like in the U.S. 20 years ago. "People are young, enthusiastic and curious about what will happen next. You don´t see that so much here anymore."
Naturally, anytime I hear somebody criticizing someone as being old and unenthusiastic and having no curiosity left, I figure that they are criticizing The Mogambo, as I am not young, nor enthusiastic, nor curious. But before I fire off an email dripping with venom and containing just enough veiled threat of me coming over there and stapling his tongue to his forehead to keep him off my damned case in the future, I belatedly note that he was NOT being critical of The Mogambo, but was instead noting how China is going to eat our lunch. Oops! My mistake!
They suggest that Silicon Valley, that iconic jewel of the New America, could be the next "Rust Belt"! Hahaha! The march of time!
Pay and promotions are getting scarce. Even jobs are scarce. One guy wrote, "I work for Nortel. We haven´t hired new engineers in five years." And others say things like "We´ve only laid off workers the last four years", and "All new hires are from non-U.S.A. markets"
In response, the workweek is now averaging 47.1 hours per week. One guy says "I am required to carry a cell phone 24/7. I am called any time there is a problem, and expected to answer. We have had people terminated for not answering phones."
The surprising part was when I read, "Despite tough times, 68 percent of engineers said they are generally satisfied with their employers and careers. A whopping 88 percent said they were very or somewhat satisfied with engineering overall."
- I think it is interesting that nobody is standing up and saying that they want to be the next chairman of the Federal Reserve when Greenspan retires next January. I am hoping to be the surprise, dark-horse, write-in winner. So, if anybody calls you asking for suggestions about the next chairman of the Federal Reserve, I would appreciate it if you would tell them "The Mogambo! Go, go, Mogambo!"
This is a good move, as I know exactly what to do. And since nobody likes me anyway, I don´t have to worry about making people mad at me. The first thing to do, of course, is to disable the button that creates money and credit in the banking system, and then go to lunch. And stay there. From then on, Adam Smith´s famous "invisible hand" of the marketplace will take care of everything, as each person will seek to produce, so that they can consume, everyone fighting it out in the open marketplace with the twin weapons of price and quality, slashing and thrusting, dog-eat-dog, relentlessly driving prices down and quality up, which produces a rising standard of living for everybody, with the glorious blessing of zero (or falling) inflation, so that everybody partakes in the blessings of a perfectly-run economy, and everyone is happy, and everything is wonderful, and then they don´t have to work so much, and then people could spend a lot of time gorging themselves on barbeque, and dancing the night away in the streets, reveling in a staggering, drunken haze at the monthly celebrations of the Monthly Mogambo Festival (MMF), where all people celebrate their beloved Mogambo, whose wise economic leadership made it all possible, but who merely followed the macroeconomic prescriptions as laid out by Mises and the only true theory of economics, the Austrian School of Economics. But just make sure that we understand one another, The Mogambo gets the glory and the money.
As an example, Joseph Z, in casual conversation with friends who are police and hospital ER workers, has found out that heroin is cheaper than it ever was, especially when you adjust for quality. He writes " ´Dime bags´ STILL cost US$ 10.00 and have more content (and is) around 60-75% pure. So how does this ´commodity´ [and I use this term MOST loosely], increase in purity, AND in amount but stay the same price in nominal US$?"
The answer is that the marketplace for heroin, as are most drugs, is large and has been around a long time, and now there are lots and lots of producers and suppliers. And anytime you get that much competition in anything, they must all compete with each other on the basis of quality and price. It´s how economics works when unfettered by a fascist government. It´s as simple as that!
This is the wonderful beauty of free enterprise! You end up with higher quality and lower price, which is the same as increasing the quality of living! And I am sure that you are NOT going to argue with me about whether or not heroin addicts have received a higher standard of living, in that they have experienced zero inflation in price and gotten higher quality!
- To show you that the news about inflation is finally getting around, there was a cute little self-test at Newstarget.com, that they called their Gullibility Factor test. The question is (true or false) "Inflation is a natural side effect of a healthy, growing economy."
The answer is, of course, false. But beyond that, they deliciously explain it as "FALSE. Monetary inflation, which saps the buying power of your dollars, is intentionally caused by the expansion of the money supply which is, in turn, controlled by the Federal Reserve. The net effect is a hidden tax on Americans´ income and savings (a tax most people never notice). In an honest economy, the money supply would remain constant, and the annual inflation rate would be zero. Inflation is not natural, it´s a manipulation that acts as hidden taxation."
I leap to my feet and shout "Bravo! Well said! Bravo!"
And suddenly I am excited, since it was looking like I might have found another test that I could pass, unlike calculus or that damned impossible Driver´s License test. Anyway, I stuck around to read more. Another question was "When you deposit money in a savings account at a bank, that bank holds your money for you until you ask for it back." The answer, again, of course, is "FALSE. Banks do not hold your money, they use your money as a reserve and then lend out ten times as much money to other customers."
This is where I took points away for being hopelessly out of date. (The crowd shouts in unison "How far out of date, Mogambo?"). I answer, "To show you how far behind the times these guys are, the ratio is now almost a hundred to one! The banks have given themselves permission to loan out almost a hundred dollars for every dollar of deposits! Hahahaha! It´s fractional reserve banking gone mad!"
Then they go on to explain fractional banking. "The entire U.S. banking system is a fractional reserve system, meaning only a fraction of your money is held in reserve. Banks are counting on the fact that only a small percentage of their customers will ever ask for their reserves on any given day." So, in "bank-think", this is "idle money".
So they loan out a hundred dollars for every dollar of deposits. The money supply is increased by $100. And when each of those newly-loaned dollars get spent and deposited in some bank somewhere, then THAT bank loans out a hundred dollars for each newly deposited dollar! Now the money supply has been expanded by $10,000. And then when THOSE new dollars are spent and deposited in some bank somewhere, then the bank loans out ANOTHER hundred dollars for each dollar deposited, and the money supply has expanded to $1,000,000! And around, and around, and around it goes, new money being created at each step! We started off with one lousy dollar, and after just three iterations of the system, we have a million dollars! A million! And after just three iterations, we are not even CLOSE to being done! Now you see why I am so insane about this thing? The economy hada money supply of one lousy dollar, and suddenly there are a million dollars in the money supply, all chasing the same amount of goods and services! It´s inflation! Gahhhhhhhh!
- Since I haven´t brought up my usual demand that you stop downloading pornography from the net and go out and get some gold, you think I may have forgotten about it. Ha! Although things look bleak, Bill M. writes "Trust me. If you can survive, it will only be with gold and silver." But it will not be an easy task, as "Fascists and Socialists can, and do, do anything they want, unless they are stopped. And the ´stopping´ this time will bugger your wildest imagining." Hahaha! "Bugger my wildest imagining"! What a terrific phrase! And so delicately reminiscent of how pleasant it will be getting royally screwed big time.
And speaking of alert readers, Mike in Long Beach wrote to say that he was impressed with my argument that silver is a screaming buy, although silver has been a losing bet for him for almost a decade. Even so, he captures the surprising devaluation of silver as "Imagine a saloon in 1900.´Hey, barkeep!´ you say. ´Give me a beer.´ Barkeep says ´Comin´ up... One ounce of silver, please.´ "
What would have been the result of charging an entire ounce of silver for a lousy beer? Mike figures "BAM, BAM, BAM! No mo´ barkeep." Hahaha!
What is the moral of the story? Silver is rock-bottom cheap at these prices, as in "never before in the annals of time" cheap. And if you go rooting around in those annals of time, you will likely be impressed with how much things stunk in the old days, mostly because there were horses and animals taking a crap everywhere you looked, but you will also be gainfully instructed by how everybody who ever bought any real asset at the "lowest prices in history" always made some serious money in the end.
Another Mogambo Alert Reader (MAR), Scott G., reports that "Steve Liesman said that the total destruction of New Orleans would be an economic plus to the good ole US of A." Hahahaha! Thanks, Mogambo Alert Reader Scott G.! I was going to actually run a contest about who would be the first to say that they were totally ignorant of the Bastiat Broken Window Fallacy. I just never imagined that it would be the chief economics hot shot of CNBC! Hahahaha! Of course, I do not actually know if this is true or not, but it is just too, too, too delicious a piece of vicious gossip to not pass along.
Dr. Gary North, of the newsletter Reality Check, is behind me on this one, too.. He writes, "There are still economic illiterates out there who think that a catastrophe is good for business. After all, it will lead to increased employment in the construction industry. But this analysis ignores the fact that nobody was ready to spend this kind of money voluntarily prior to the hurricane. There are winners, but there are far more losers."
And Bill Bonner of the Daily Reckoning is another guy who is really, really, really hip to this economics stuff, too, and he writes "A few dimwits imagine that a natural disaster can be a positive thing. They see the clean-up and the new building as economic boons. Of course, if it were that easy to make economic progress, we could knock out the levees every few years. No, the hurricane is a negative for the wealth of Americans. It will cost money to undo the damage."
- On Bloomberg we read that the dollar is responding to the inexorable pressures of Gresham´s Law, were bad currency is shunned. "China and Russia may stop using the dollar to service bilateral trade. The two countries started moving in this direction by letting their banks open corresponding accounts with each other."
- As another example of the horror of inflation, as if you needed another one, the Census Bureau said that "another 1.1 million Americans fell into poverty last year, bringing the total to 37 million people living below the poverty line, defined as $19,307 for a family of four." In terms of percentage of the population, they say that "The poverty rate was 12.7 percent last year, up from 11.3 percent in 2000 before the beginning of the last recession." So the percentage increase in poverty was 12.4% in five years? That comes to 2.36% a year! Just about the same as the inflation rate! Coincidence? Ha! I think not!
At 40 hours a week for 52 weeks a year is, that´s 2,080 hours of work (and paid holidays). When multiplied by $5.15 an hour, the worker earns $10,712! Of which he has to pay 7.67% right off the top for FICA! Hahahaha! So the most the worker can take home, assuming no income tax or other deductions at all, is $9,892! So TWO minimum-wage workers, pooling their wages from full-time work, will take home $19,784, which is $477 more than the poverty line! Hahahaha!
So the next time you see Alan Greenspan or Ben Bernanke or any of those other bozos, what I want you to do is strike up a casual conversation, talking about the weather or something, and then, unexpectedly, you grab him by the tie, haul his face down to the page, and scream "Look at it! Look at it, damn you! This is the result of your consistent, persistent, grinding, impoverishing inflation, you despicable loathsome morons!"
But you won´t. And they won´t let me get near the place anymore.
Ugh.
*****The Mogambo Sez: A new report published by Sprott Asset Management of Toronto, entitled "Move Over, Adam Smith: The Visible Hand of Uncle Sam" concluded that the U.S. government has manipulated the stock market to keep asset prices up so many times, and for so long, that "what apparently started as a stopgap measure may have morphed into a serious moral hazard situation, with market manipulation an endemic feature of the U.S. stock market."
That anyone doubted it is what surprises me. They HAVE to keep the stock market up, as the financial services industry produces 40% of the profits made by the whole freaking country! Every level of government has borrowed and spent with the idea that inflation will always be around 3%, which means that their tax revenues will increase forever, and they have spent accordingly!
And, as if that wasn´t dependence enough, everybody´s retirement plan is also totally dependent on the stock market! My God! And you thought the government was NOT intervening in the market? Hahahaha! When the tragic results of the market falling by 50% would only put it in the middle of historic range of the price to earnings (P/E) statistic? Hahahaha!
Like they say, at the end of long booms brought about by the creation of excess money and credit, the amount of corruption is off the charts.
Sep 06, 2005
Richard Daughty
email: scgcjs@gte.net
Daughty Archives
The Daily Reckoning
Richard Daughty is general partner and C.O.O. for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise the better to heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron´s, The Daily Reckoning and other fine publications. |
| Anonymous Coward
User ID: 40
9/14/2005 8:50 AM | | Re: Watch, Its happening ,the global economic change. | Quote |
Futures are all down this am dow/nasdaq/s&p |
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