Dying of Thirst While Drowning

January 27, 2008

Elaine Meinel Supkis

Too much liquidity is being cured with even more liquidity. The attempt at eliminating risk by creating over $20 trillion [!!!!] in insurance on CDOs and SIVs based on properties insured by the FHA or insurance on buy-out deals in the corporate arena are now coming due as bankruptcies rise. Only there is no way we can see a pay-off of $20 trillion! This is more than the net worth of the world per annum! Far more. Time to talk about the ongoing banking crisis that is causing global trading messes. And is creating conditions that encourages deflationary interest rates.

THE ROAD TO HYPERINFLATION

Fed helpless in its own crisis

By Henry C K Liu

After months of denial to soothe a nervous market, the Federal Reserve, the US central bank, finally started to take increasingly desperate steps to try to inject more liquidity into distressed financial institutions to revive and stabilize credit markets that have been roiled by turmoil since August 2007 and to prevent the home mortgage credit crisis from infesting the whole economy.

Yet more liquidity appears to be a counterproductive response to a credit crisis that has been caused by years of excess liquidity. A liquidity crisis is merely a symptom of the current financial malaise. The real disease is mounting insolvency resulting fromexcessive debt for which adding liquidity can only postpone the day of reckoning towards a bigger problem but cannot cure. Further, the market is stalled by a liquidity crunch, but the economy is plagued with excess liquidity. What the Fed appears to be doing is to try to save the market at the expense of the economy by adding more liquidity.

The Fantasia cartoon I used to illustrate the business of the French trader who destroyed many euros in wealth playing computer games with funds is appropriate here, too. In the cartoon, Mickey Mouse must work hard to move buckets of water from one well which is where there is this spring of fresh liquidity pouring in and then carries it downstairs and then upstairs again to a holding water containment system. He then automates this process and goes to sleep.

It overflows so he chops up the program which grows like a cancer and suddenly there is this army of machines flooding the whole place as they throw infinite buckets of 0% loans into the banking system, nearly drowning Mickey. The world is awash in money and inflation is hammering peculiar sectors: gold, oil, food. As interest rates collapse due to the amazing flood of liquidity, the price of survival items or alternative moneys climb. The magicians doing the magic money have changed absolutely nothing ever since the banking crisis suddenly materialized right in front of everyone. They keep doing the same things they did in the past over and over again. They try to get money to flow in the directions it was flowing 6 months ago. They try to get the system to reset as if this is 2002 and the US can drop rates to 1% rapidly to fix the Dot Com bubble burst and 9/11.

Mr. Liu has a long record of accurately calling the shots. I think he is one of only a very tiny handful of economic writers who views things in a non-ideological way. He is interested in analysis that describes the hidden realities. A problem with many other writers is, they are pushing stocks or international forex trading or gold and silver, for example. This warps the analysis. Keeping an open mind and a steady hand is very hard when the goal is to push an agenda. In the present crisis, the gold people are important to listen to for they show us clearly there is a collapse in the real bond market. Institutional organizations and countries as well as banks and corporate entities will all buy the usual fiat-backed bonds because this is their habit and all people tend to stick to old habits even if they are useless or dangerous.

But financial speculators and investors who are not part of some machine are opting for gold. Their emotional response to the ongoing banking crisis is important to understand and is an indication of the true level of panic. The same banks which are in dire straits right now, tried their hardest last year to convince everyone that gold is useless and can't compete with bonds when it comes to profitability and staying ahead of inflation [caused by the banks issuing way too much liquidity!]. This con game has collapsed. But the sales of bonds continues only the return there is also falling if not collapsing.

Banks left exposed

That instrument is the credit default swap, or CDS. It was developed as a way for bondholders to buy insurance against the possibility that companies might fail to pay their debts, and later it morphed into a way for big traders to actively bet on the likelihood of the default of bonds and other credit instruments. But what is only now becoming clear is that major U.S. and European banks and hedge funds bought up to $20 trillion worth of that insurance to offset their exposure to mortgage-related securities they owned. And those banks and hedge funds are discovering the sellers of the swaps may not pay up.
*snip*
The problem surfaced to an important degree in a footnote to the news last week that Merrill Lynch (MER, news, msgs) would take an $11.5 billion write-down of bad debts for the fourth quarter. Of that amount, $3.1 billion was a write-down of credit default swaps that Merrill had purchased from bond insurer ACA Capital to hedge the risk of owning a lot of collateralized debt obligations, or CDOs, which are leveraged bundles of asset-backed securities. (In a typical CDS transaction, a debt holder or speculator agrees to pays 1.5% or more per year for $10 million worth of insurance on a specific slice of a debt security.)

This means that not only is Merrill unprotected against a default in the CDOs, but it has lost all the money it has paid for that insurance. It's as if you had paid $200,000 in premiums over the years in a $1 million life insurance policy for your spouse, and when a death occurs not only does the insurer tell you it's broke and can't pay -- but your premiums are down the drain, too.

It is very notable that the stream of stories last year of ever-bigger purchases of corporations, $10 billion then $20 billion and then up to over $50 each, are now replaced with identical stories of losses in these same amounts. Only out of the darkness comes uglier stories. Just as the story of the French trader has now suggested he actually made up numbers in the multi-tens of billions, not merely $7 billion, so it is here. The obligations that are collaping are a spectacular $20 TRILLION. This is more than the entire planet's GNP worth for the last year! Far more! How on earth can an insurance fund's liabilities be greater than all the wealth generated this year on earth?

Call me hyper-suspicious but I know from real estate, many a person, when the economy goes bad, will over-insure a property and then voila! It is destroyed! This can be so bad, whole sectors of cities can burn down pretty rapidly and the insurance companies either go bankrupt or they have to charge ever-higher rates to make up for losses and this kills the real estate market even more and the fires rage out of control. I have seen more than one family have a fire and then rebuild a much bigger, fancier house than pre-fire. This way of spinning old housing straw into new housing gold happens in auto insurance, too.

When times are good, insurance claims in this area are not high. When there is a bad recession, it shoots up. I used to see people drive out to the slum I was rebuilding in NYC and within minutes of parking their cars, the darn things would be on fire! I got so annoyed by this, aside from the rooftop-arson watch as well as the anti-arson patrol, we also tracked auto arsonists. We would alert insurance companies that we would testify in court if they took the arsonists to trial. This scared them off from our community at least!

The point here is simple: the people buying insurance for deals have the same temptations as anyone else. Just like my rich neighbor who went bankrupt instantly started committing crimes, so it is here. The temptation to over-subscribe with the insurance and then to use this to build up more 'hedges' that do the same has caused this particular sector to balloon grossly. This is the problem with derivatives which are pure numbers inside of computers. The savage mess created by the young trader in Societe Generale is classic. The shadow world of these numbers are like a slumlord building up a pile of multiple insurance policies against a property in financial trouble. Then he moves in some rough people who are very careless with trash and matches. Oops. It burns down, he collects and throws them the chump change.

There is no way a bunch of sliced and diced SIVs and CDOs rang up $20 trillion in value. Indeed, this is much worse. They not only were never worth $20 trillion, as they lose 'value' when the truth comes out, they are losing value faster than the banks are admitting they are losing value. And this is a feed back loop typical of all bubbles: the collapse feeds on itself. The slum buildings that had high mortgages put on them and which had to be insured at every level where they passed through hands, the insurance piled on top of these already-overpriced babies became many times greater than the buildings or businesses were worth in the middle of the bubble and now, as they fall, the insurance is kicking in and kicking the bucket. Because there isn't enough money in the world to pay off these stupid things! And if the central banks even drop interest rates to 0%, the creation of $20 trillion in order to satisfy these future claims we know will happen, is purely impossible.

The push right now is to steal money from savings around the world and use it to patch over this mess that should never have happened. Bond insurance is silly in the first place. Like any system, we have to PRICE RISK. If these slum buildings or cars are over-insured, they will be torched! And to price risk, the bond holder doesn't get 'insurance'---THIS IS WHAT INTEREST RATES ARE FOR! Gads! Since banking was invented, the people lending things like money or gold or cows or houses would ask for a good sized return in case the people receiving can't pay in full. The insurance is on the THING BEING LENT not on the loan itself. This is so the debtor can repay if it goes up in flames. The lender doesn't care who pays, they just want payment. Modern banks make home owners take out fire insurance so the property which the bank owns until it is paid off, is intact. Otherwise, if there is a fire, the person owing money will walk.

All the properties in the CDOs peddled by the brokers should be INSURED. By the buyers of the properties. But the CDOs are NOT insurable. They are gambles that the mortgages and the insurance on the properties will be good! When the brokers selling these stupid CDOs claimed they would return 7% or more per year, the 7% was the bait, the lure, to buyers. Obviously, the brokers would hold these themselves IF THERE WAS NO RISK.

But while selling these things, they had to hold them. And having no good faith in their bonds, they decided to put insurance on the rigged mess so they would not have to pay ANYTHING if fecal matter hits the metaphoric fans. This meant they didn't have to 'price in risk' because they thought there was no risk at all, for themselves! HAHAHA. They thought all this would be pure profit up or down. They called this 'hedging'. I call this 'insurance fraud.'

Now these SPECULATIVE BROKERS want someone to pay for their reckless, risky sales! They don't want to take the losses from the very things they created. They want to shovel all this onto the central banks. And to my disgust, the central banks are assisting them, not careful savers. By forcing down interest rates to ludicrous levels, they force savers to buy these CDOs. This attempt at herding all savers into lousy deals is failing since many savers are going into the gold, oil or other commodities or are buying government bonds which they hope will be safe. I do hope I have all of this right? It is very hard, untangling this mess.

Banks May Need $143 Billion for Insurer Downgrades

Banks that raised $72 billion to shore up capital depleted by subprime-related losses may require another $143 billion should credit rating firms downgrade bond insurers, according to analysts at Barclays Capital.

Look at that story! The banks know perfectly well, the ultimate sum is around $20 trillion. Trillion! They creep out of their dark caves and hiss that it is $20 billion. Then $70 billion. OK, $150 billion! Hell's bells! How about that? Now it is $500 billion! And so on. Bit by bit, they will reel this out. Neither the US nor Europe are in a recession yet. But this mess began last July, BEFORE the stocks collapsed, BEFORE the sales figures began to fall! Even with this obvious bank collapse going on, the attempt to pretend this is meaningless and small continues even as the numbers become amazing. I have NEVER seen such numbers in the red in my life! The costs here are tremendous. And all this, while world trade is booming.

The stories of the great Panics like the one in 1873, for example, shows how seemingly small banking messes, in this case, France raising 10X more than needed to pay off Germany while at the same time, a scandal in a Belgium bank handling some of these sums, led to a collapse in Vienna that triggered a global financial crisis that hit even the US. The bad effects back then showed up instantly. The global stock collapses were finished in less than 2 years. In today's case, due to all the new systems, schemes and conspiracies, these collapses are becoming agonizingly slow even as the stock market corrections still tend to be swift. This month's rescue operations have not brought the US stock market much time. It still looks like it is very much a bear market. The main function seems to be, give the biggest players like Goldman Sachs a chance to wind up their business and pull back safely without big losses for themselves.

Bank of China's shares suspended

"Bank of China failed to make a statement on an important event," the Shanghai stock exchange said.

According to media reports, the Bank of China may post a loss for 2007 because of its exposure to the US sub-prime mortgage sector.

The bank's Hong Kong-listed shares were not suspended and lost 8.6% on Tuesday.

China is caught in the same gears as everyone else. They have one big advantage, though: China is a creditor nation. Also, dynamic. They will lick their wounds but move onwards. The US will bleed badly.

U.S. Treasuries Rally a Sixth Week After Surprise Fed Rate Cut

``Government bonds are the beneficiary when things look really bad,'' Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG's Private Wealth Management unit in New York, said in an interview on Bloomberg Radio. ``We'll get more weak economic data and the Fed therefore must lower short-term rates.''

The two-year note yield fell 15 basis points this week, or 0.15 percentage point, to 2.2 percent, according to bond broker Cantor Fitzgerald LP. The 3 1/4 percent note due December 2009 rose 1/4, or $2.50 per $1,000 face value, to 101 31/32. The yield touched 1.84 percent on Jan. 23, the lowest since April 2004, and has dropped about 1 percentage point in a month.

There is no insurance on these bonds. Supposedly, no risk, either. So they have a low return. But the reason why all the big players are flooding this market is their scheme to create bonds that were very, very, very risky while having no risk at all via the agency of 'insuring' them has collapsed. This is hammering the risky markets which are now seen as far riskier than the returns justify. But when all the big money flows suddenly into no-risk situations, money ceases to flow back into the accounts of these same people. It keeps boats afloat, barely. But the trick of misstating true inflation is also hammering these same people fleeing to bonds for safety.

If the interest rate data is false, going into government bonds is no safety at all. It loses wealth, too! This is why they are not inflating things but deflating. If everything deflates to Japanese levels of fake banking statistical lies, why even these lousy bonds will still create wealth! This is why the deflation danger troubles a number of us.

CAN THE SECOND COMING OF PAUL VOLCKER SAVE THE DOLLAR?

Anatal Fekete
Dec. 2006

One of the most frequently asked questions from my readers is the title above. Conventional
gold-bug wisdom holds that in 1979 the new Chairman of the Federal Reserve, Paul Volcker,
raised interest rates drastically, thereby putting an end to the galloping inflation then raging, and
aborting the bull market in gold. Volcker’s high-interest policies are credited with the feat of
turning the dollar back from the brink where it looked into the chasm of worthlessness, the chasm
into which the French assignat, the German Reichsmark, and the Chinese yuan (of 1949 vintage)
among countless other national currencies have fallen. Conventional wisdom goes on to conclude
that Bernanke, hopelessly committed as he is to a regime of low interest rates, will be fired. A
new chairman with the outlook and resoluteness of Volcker will be named who will repeat the feat
of his tall, cigar-smoking predecessor, in saving the dollar once more in a nick of time. History will
replay itself.

The replay of history in 2007 will be similar except with the opposite signature. Interest rates are
still declining, and so are prices adjusted for inflation. Deflation is being imported into the United
States from Japan, through the mechanism of the carry-trade. It appears to confirm and surpass
Bernanke’s worst fears. Lethargy is spreading. Businessmen decline to take the loans offered at
historically low rates. Production keeps contracting; unemployment may follow with a lag. We
may even see, horribile dictu, some genuinely falling prices! Yet these events could be just a
smoke-screen camouflaging an incipient hyper-inflation that would wipe out the dollar for once
and all.

Fekete is quite clear about the many layers of deceit and duplicity which characterizes modern banking as well as global trade. I don't see any Volker arising to save us from this mess. The entire US is far too deep into debt to survive a Japanese-style unwinding. Nor will we be allowed to do this. All our trade partners rely on us for export markets. They will lower interest rates to 0% like Toyota does for selling cars here. They can do this with impunity and it will simply increase their market shares and put us further into debt. As it is, everyone is struggling to find a means for putting us into debt. And debtors prefer to repay in weaker currencies, not stronger.

News On Conforming Limit Increase: $625,000?

"Sources in the House, the Senate, and the White House are all indicating today that a tentative consensus has been reached that the economic stimulus bill that Congress will send to the President will include much of the FHA Reform Legislation including raising the FHA loan limit max to match the FHA conforming limit AND a one year raise of the conforming limit to $625,000 with the possibility of an additional one year extension at expiration.

The emergency insurance to get housing going again in the Great Depression lives on. And it is now replacing the regular insurance. Arsonists have exploited this. I know this for certain, I saw it during the previous oil price hikes! Heating homes by burning them down. The FHA loans removed risk from banks holding mortgages. They love this and use it. They get to make a profit no matter what. They hope.

The spreading of safety nets has a perverse effect on the human mind. Seeing the net below, we tend to get careless. We need a net to protect us when we are suddenly ill or disabled or when economic messes cause us to lose our livelihoods. But too many nets can cause problems. In this case, bidding up the value of housing far beyond its true value. When safety nets cause prices to soar, they are a danger, not safety.

The Federal Housing Administration, generally known as "FHA", provides mortgage insurance on loans made by FHA-approved lenders throughout the United States and its territories. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934.

What is FHA Mortgage Insurance?

FHA mortgage insurance provides lenders with protection against losses as the result of homeowners defaulting on their mortgage loans. The lenders bear less risk because FHA will pay a claim to the lender in the event of a homeowner's default. Loans must meet certain requirements established by FHA to qualify for insurance.

Why does FHA Mortgage Insurance exist?

Unlike conventional loans that adhere to strict underwriting guidelines, FHA-insured loans require very little cash investment to close a loan. There is more flexibility in calculating household income and payment ratios. The cost of the mortgage insurance is passed along to the homeowner and typically is included in the monthly payment. In most cases, the insurance cost to the homeowner will drop off after five years or when the remaining balance on the loan is 78 percent of the value of the property -whichever is longer.

Not only have the FHA insurance programs warped prices upwards badly, the politicians used this as yet another cookie jar in elections. Bush is the most recent example. At the beginning of the housing boom, he boasted the new rules would increase ownership tremendously. Insuring buyers who put nothing down increases risk tremendously! Everyone and their uncle went on multiple housing buying jags! If the money is free and the insurance total, the banks didn't care, either. Everyone had really lousy ratios: the banks had virtually no reserves, the insurance has only the taxpayers as a reserve and the government is in debt! And on top of this, the ceiling keeps going up so they can buy more and more and bid up more and more and who cares if all this is insured? So we got a multi-trillion dollar housing bubble that has blown up in our faces! DUH! What did they expect?

Worse! If the value of all these overpriced properties NEVER leave the 78% level of loan left which is where the insurance stops, then this GROWS MASSIVELY. No housing for the next 20 years will leave the FHA program so there will be NO TURN OVER. Instead, the FHA obligations will not only grow and grow, the default rate will soar. So the losses will shoot up. This will keep the reckless, stupid banks afloat that handed out ridiculous loans but it will topple the whole system. For anyone trying to buy under FHA rules in the future will be hammered by higher and higher rates due to bleeding within the system which will be seeing more and more defaults compared to good prospects!

ENRON CREDITORS SEEK $18B FROM CITI

Enron Corp. creditors could see their original payout more than quadruple to as much as $31 billion after a trial against Citigroup Inc.
Enron Creditors Recovery Corp., the entity winding up the defunct energy trader's affairs, has settled with 10 of the 11 banks creditors accused of aiding the fraud that wiped out the company.

However, they argue that Citigroup, the only lender that hasn't settled, should pay the rest of the claims, about $18 billion.

We could see Enron was a scam long ago. I said, back then, 'They are the biggest supporters of Bush. Ergo: they are frauds.' And I was right. Citigroup has a very poor record for sagacity and honesty. I wonder if even the Arabs can keep them afloat much longer. I won't cry much if they are gone.

Hokkaido farmers plan up to 24% in dairy price hikes

The increases, effective April 1, will be the first in 33 years for the association as the cost of feed grain rises, NHK said.

Um, Japan's inflation they exported to the whole planet via the carry trade is coming home. The Bank of Japan will still drop interest rates, anyway. But this won't stop this inflation from coming home like the cows at sunset.

Trade surplus up 37%; China No. 1 destination

Japan's trade surplus expanded 37 percent in 2007 from the previous year to ¥10.8 trillion, marking the first growth in three years, the Finance Ministry said Thursday in a preliminary report.

The expansion was based on solid export growth to Asia, Europe and oil exporting countries.
*snip*
Exports, the main driving force of the country's economic growth, rose 11.6 percent to a record ¥83.9 trillion in the calendar year, led by deliveries of cars, steel and telecom equipment.

However, imports rose 8.6 percent to a record ¥73.1 trillion as the average price of crude oil rose 7.9 percent from 2006 to a record $69 per barrel in 2007.

The report also says that in 2007, China, including Hong Kong, for the first time in postwar history replaced the U.S. as Japan's biggest export destination on a calendar-year basis.

Exports in 2007 to China, which already overtook the U.S. as Japan's biggest trading partner in fiscal 2006, amounted to ¥17.4 trillion, thanks to brisk exports of electronic devices and organic compounds. Exports to the U.S. totaled ¥16.9 trillion in the same period.
*snip*
U.S.-bound exports declined 0.2 percent to ¥16.9 trillion, marking the first drop in four years, as exports of machinery for construction and mining dropped 32.5 percent.

Automobile shipments to the U.S. rose 0.5 percent last year, while exports to China surged 79.2 percent.

Imports from the U.S. rose 5.4 percent to ¥8.34 trillion due to increasing imports of whole grains, including corn. As a result, the trade surplus with the U.S. shrank 5.1 percent from a year earlier to ¥8.56 trillion, marking the first drop in four years.

The trade surplus with the EU expanded 20 percent to ¥4.75 trillion for the second consecutive year of expansion, while the trade surplus with other parts of Asia, including China, expanded 38.5 percent to ¥8.88 trillion for the first time in three years.

This was in today's news in Japan. They are hoping this rising trade will prevent a collapse like they always have when the US goes too deep into red ink debts. But I think this is over-confident. The EU has a huge trade surplus with the US. So does China. When we go under, all of them will see a lot of the positive flows reverse. Note also, the 'trade' with China is 'electronic devices.' The cars built in China for the Japanese giants, for example, do not have any electrical systems that are secret, manufactured there. Ditto, the US. Japan makes these at home and ships them to the assembly points. And what are these 'organic compounds'? Ingredients for manufactured products using plastics? I wonder. Certainly, Japanese are not building cars in Japan and selling them in China. Unlike with the US.

And goodie gum drops! The US has increased the value of our exports to Japan! Our value-added grains and corn! Unprocessed, of course. The Japanese process them. HAHAHA. We are the bread basket for the Asians. The trend is obvious. We are a declining market that has little to sell Japan outside of mostly raw materials and a few Boeing jets.

What was expected to be a stormy season for U.S. corporate earnings has turned into a blizzard, at least as far as financials are concerned.

Fourth-quarter earnings for companies in the Standard & Poor's 500 are on track to fall 20.5% from the same quarter last year, the most severe drop since the fourth quarter of 2001. By contrast, analysts were expecting a 9.8% drop in profits heading into this month's round of earnings reports, according to Thomson Financial.

Profits are falling. Capitalism is all about profits. As risk rises, interest rates on bonds fall, defaults shoot up and insurance on everything begins to collapse or vanishes entirely, the profitability of corporations is also falling. For years now, they have depended upon all sorts of gaming schemes and tricks to make profits. Now that is ending quite abruptly. The whole system depended on rising prices and rising debts.

Both are in reverse. In the wrong places. More debts won't fix what is wrong as Mr. Liu at the top noted.

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Comments

[mad mike]

in the great state of new jerky, we have a gov-ner who used to work for goldman sachs.
he spent millions of his own money on tv commercials protraying himself as your favorite high school teacher or the uncle you put the touch on for a few bucks. in short a real nice guy.
but now he wants to sell all the toll roads in new jerky to balance the budget. and rise the tolls like 200%. i figger no one will use these roads. the quasi private entities that run these roads will fail and tax payers will pay for all the bonds.
i put a 3kw PV solar array on my roof.
the electric utilities sed they didnt want to deal with a bunch of small producers
to buy energy credits from them. so the gov-ment in new jerky created a middle man class. i have to share my energy credits with people who did not fork over a small or large fortune to install the solar panels.
truly it is a state of new jerky.
expect things to get worse!
i believe that a bunch of goldman sachs guys got together. they played duck-duck goose, except they call it republican-republican -democrat.
corzine, this gov-ner sed he will not run for reelection but head for the beach. i say he should have skipped th gov-ner part and went straight to the beach. better yet would have been not to pass go and do not collect $100 and go straight to jail. fat chance of that happening.

[Elaine Supkis]

Goldman Sachs runs many parts of our international and national politics. They are making a total hash of it. As I said before, we are privatizing public things and making public private stuff. The government insures bank loans on houses but makes us pay tolls on roads that connect these houses and the tolls will now go to private purses. Talk about retrograde.

[Carlos]

The best description of what’s going on is – suppose you find a crack addict in the fetal position in the gutter. To help him you shoot him up with more crack so he can become ambulatory. LOL

It is a total laugh-riot that that rookie Ben flooded to market due to SG unwinding its rogue trader positions. Rather than protecting the US dollar and managing inflation the Fed has morphed into a savior of the averages and the avaricious investment bankers that created the mess.

[Elaine Supkis]

French, no less! History has humor.

[MIKE]

so whats the grain and minereals of the new jerky toll roads worth...under them also. to sell to the foreign industrialists owning production, productions here

[OC]

Mike,

The communists and the terrorists just have to own 9% of JP, Merill, Citi + a couple of other big banks, they'll own every business and politicians in US and EU.

It's not far off - can u sense the gleam in the dragon's eye like Elaine...

[Elaine Supkis]

Yes, the commies are winning. Isn't that fucking HILARIOUS.

[Al]

Dr Liu is a very smart man. In early 2003, he wrote on article in Asia Times explaining that the US would lose the war in Iraq, predicting a quick conventional military victory followed by a guerrila war which would drive us out. Although the details were not exact, most of what he predicted has come to pass. Liu took a lot of ridicule but is proving to be right. He is a historian as well as an economist.

[Elaine Supkis]

Readers send my his articles but I also look for them. He is better than most but still cannot see everything. Underestimating problems or opponents is common in this world.

And history tells us a lot and his reading of history makes his commentary much stronger.

[Chris]

Yep Mr Liu is a fascinating writer. I believe his wikipedia entry (now gone!) stated he is the relative of an extremely high ranking official in the Mao government, a surviver of the Long March (not sure if that was disinformation though). Mr Liu is a former Harvard professor in Architecture I believe. I have been reading his articles since about the time of the invasion of Iraq. I actually think he is a Marxist(!). He does have some 'eccentric' ideas about Lincoln and Mao. Nevertheless he is a brilliant writer and analyst of current economic events and he brings a refreshing perspective to events. His mind is extremely sharp, and his record is very good. No human being is capable of seeing all that will unfold. This is the great failing of those currently in charge in the US and the West. The West imagines they have it all nailed down. Yet there will always be [b]unforseen[/b] events, reactions and counterreactions that by definition the humans at the time failed to see and react to. The riskier the scheme the more certain the unseen will slay that scheme. This is the madness of the neocons, the source of the hubris in the West, they think they can ride chaos to success.