June 10, 2008
Elaine Meinel Supkis
Scanning the headlines we can clearly see that the supposed economic recovery after the G7 banks handed out over a trillion in Funny Money™ to member banks, all would be well. Then, the resumption of the Japanese carry trade would restore prosperity. Then, the price of oil was supposed to drop. Alas, the Bush rushed off to Europe yesterday to raise the price of oil another $3 a barrel with even more Iran war talk. Not only are food riots erupting across the Third World, farmers are fighting off the Doha Rounds of free trade. And tomatoes have salmonella and are being removed from stores. And violent storms smash homes, rip up roads and destroy crops across the entire Midwest. And the Derivatives Beast must be tamed only it is growing at a 35% rate.
These headlines make it perfectly clear: we are entering the exact same economic complex we lived in during the stagflation years. If I had a screen shot from 1974 or 1978, it would be probably an exact match. The heyday of booming stocks coupled with very low oil prices, a strong dollar and free-wheeling spending on the Vietnam war and expanding social services ended with a loud bang which convulsed the world. China slid into the chaos of the Cultural Revolution, Russia invaded Czechoslovakia and expanded into Asia and the US was collapsing into defeat in Vietnam.
The 1990s are now fondly remembered now by the US public. I predicted this would happen. 'The Clinton Golden Years would be viewed as a shining moment in our history,' I wrote more than once during the last seven years. Those years were fun for gas guzzling US consumers because the drop in world oil prices when Russia was being looted by the Yeltsin gang right when the entire world eased up to the Hubbert Oil Peak. Also, thanks to the Gulf War I victory, Saudi Arabia increased oil pumping, flooding markets. And Iraq's oil was boycotted but due to US and European interests, Saddam was allowed to export a tremendous amount of oil.
US government overspending was clipped by a hostile Congress determined to destroy the power of the Presidency. This, in turn, caused our own government to function properly. We can plainly see that only the threat of impeachment keeps some semblance of honesty in DC. Also, a historic moment of greatest importance: China entered the labor markets. Historically, the Chinese peasants have been renown for hard, grinding work. Efficient and willing to put up with a great deal of harshness, the superb workforce inherent within the ancient ethos of Chinese farming was finally, after 200 years of destruction of Chinese industry and commerce, it was reborn in all its majesty.
Because of all this, the 1990's was characterized by increasingly cheap manufactured goods coupled with low commodity overheads due to a flood of cheap energy in world markets. On top of all this, the crowning achievement of the 1990's: for the first time in banking history, a major manufacturing power dropped interest rates to 0% and then kept it there, year after year, starting in 1996. Up until 1996, the good times that were already flowing but were still within normal bounds. But after 1996, everything suddenly began to balloon badly.
For not only were markets opening up in Asia, the Middle East and Africa, Funny Money™ was being created at an increasingly accelerating speed. This money was not 'printed' by any government. It was purely electronic. Banks lent to each other and to anyone and sundry as fast as they could. For global interest rates all dropped due to lack of 'inflation' thanks to cheap Chinese labor and cheap Russian oil. The merging of both communist giants into the global economic systems was a tremendous, absolutely astoundingly huge world event.
This gave everyone the idea that 'free trade' was responsible, not the mere emergence and integration of a quarter of the planet's labor coupled with a quarter of the planet's resources. The mania of opening all the spigots, removing all of the barriers and controls that guided banking and global trade has made the world's top 1% extremely rich. They discovered there was a dark pool [their own words for this] of wealth that seemed to be bottomless. They opened this window that let the wind blow into our economic house. They found the keys to the Cave of Wealth. They thought they were gods.
A screen shot of Bloomberg news shows us clearly that we are not at the end of this economic collapse brought on by the insane greed of the top 1% of this planet's populace. During the 1970-1990's, a host of new instruments and schemes were launched alongside the new-fangled 'Floating Currency' regime. Never before, had international trade lived by paper alone. It was a 'noble' experiment that was very foolish. The only way this system could work is if the regulators of it were totally vigilant and crushed any rush towards infinity. Alas, human nature loves to see if one can get something for nothing and if one can get everything with the least labor. Instantly, the first 10 years of the Floating Currency regime, everything exploded out of control. Totally.
This was an obvious warning sign. But instead of heeding Libra who is the Lady with the Scales, the regulators thought that they could open small doors and tiny windows in the vast cavern of eternal Wealth and instant Death. If you look outside tonight at midnight, you can see Libra straight overhead in the Heavens, next to Scorpio, the Goddess of Death, next to the Milky Way. Death and Wealth are two sides of the same celestial coin. The entire reason why I talk about money so much is not due to a desire to be rich but fear of the future. My sole reason of existing is to try to stop WWIII. This is why we have to figure out all the riddles of the Sphinx: what is wealth? Who gets it? Will it save us from death?
Inflation is raging. This isn't due to too many dollars chasing too few goods. Many goods of solid value like properties or manufactured goods are NOT being chased by anything. Instead, dollars are DRAINING from these things. Dollars are chasing only a few things! And these are EXACTLY the same few things dollars chased in the previous two global inflation episodes: food and fuel. I certainly do NOT have extra dollars to hand over for anything. Food and fuel takes up more and more of my own budget and I seriously worry about the future. Will I be able to buy anything? Money is VANISHING from my pocketbook. I have a couple of dollars in my purse. It will buy less gasoline today when I go to the dentist which means my dollar is shrinking even as it sits next to me at this desk.
In the 1990's, I could buy micowaves, autos, tractors, shoes, clothing, you name it, cheaper and cheaper. During these cheap years, assets climbed in value. Housing, art works, fine wines, all the good things in life became very expensive. But these are always bought with income left over from feeding and caring for one's own self. Inflation was raging in the 1990s----in housing, entertainment and luxuries. Now, all of these are collapsing in value while we struggle with the Dragon of Inflation.
As usual, Mother Nature steps in to sweep aside mere humans. We are like ants to Her. She is the Queen of the Earth and if we are foolish and ignore ancient stories about the seven fat cows and the seven starving cows, we are reminded of this by Her Majesty, Mother Nature. Now, all events hammer us. The world's grain stores are at a record low. This means many millions of people will be exposed to the entire fury of the weather. Note above in the NYT screen shot, South Korea has a massive demonstration against specifically the US. The farmers do not want our beef. Like Japan or France, they know that a flood of corporate-produced food will beggar the farmers at home. Unlike in the footloose US where we have no settled peasantry, in the rest of the world, the most tenacious people on earth are the peasants who own their own land. The frontier mentality of America has meant we have no real communities.
In the rest of the world, the peasants live in clustered villages. I lived in one such village in Germany. All the villages are an easy stroll from each other. Between them lie a complex web of farm plots owned by clans within these villages. Everyone is related in some fashion to each other. The complex social nature of these villages is their strength. These endure for thousands of years. In the US, each farmer, due to easy land purchasing power and the huge scale of the farms in the Midwest, everyone spread out and lived in near total social isolation. There really are no 'villages' in the sense of ancient usage.
There is also no sense of being or community. So people abandon these farms for greener pastures or go to the cities and they are increasingly stripped of all humanity. They are then being bought up by investors in the cities and farmed by cheap labor that has no ties at all to the land and are rotated out on a frequent basis. The produce from these slave estates are flooding global markets. It isn't that they drop prices. Prices are going up! But they outstrip local farming due to TRANSPORTATION. The industrial output of Asia and Europe is flowing mainly to the US. In return, they must take in something. So they take in our farm output from these slave estates.
This, in turn, is killing the web of kinship villages! And this strikes at the heart of the yeomanry of the developed nations, the ancient empires. We see in the Middle East how this has been destroyed by oil. Oil killed the villages of this sector of the world. Just as oil killed our own villages. My village of Berlin founded by stranded Hessian soldiers after the Revolutionary War, was a classic European-style village. surrounded by fields, the 2,500 population lived within a very short walk of each other and the churches, schools and stores that made up this place. The village grew quickly and had all the hallmarks of civilization including a marching band, a baseball team, factories, a rail road station, doctors, a library and all the good things of life back in 1900 when it reached its zenith.
Then it collapsed. Today, there is virtually no farming going on. No marching band. Not doctors. The library, one of the oldest in America, barely open a few hours a week. Nearly all the manufacturing businesses are gone. First global free trade and now, inflation, is rapidly destroying this village of mine. And the population is collapsing.
Thousands clash with police in Egyptian bread riot
Thousands of demonstrators fought with police after a protest over flour rations in a town on Egypt's Mediterranean coast, a security official and state media said Sunday.The state-owned daily Al-Ahram said some 8,000 protesters sealed off the main Cairo-Mediterranean highway for seven hours Saturday and burnt tires to stop traffic. Police fired tear gas and arrested dozens to disperse the crowd,
The protesters were angered by the decision of authorities in Burullus to stop distributing subsidized flour directly to residents and instead deliver it exclusively to bakeries, the official said on condition of anonymity because he is not authorized to give statements.
We will see more food riots. It is interesting that the fishermen want control over their own bread. The US pays to keep Egypt fed via money we funnel in to keep the dictator in power. We also pay him to crush uprisings like this one. The Egyptian dictator is crushing the Palestinians, too. And he is tremendously unpopular. The US empire is spending a fortune to keep everyone evil in power. The populace at large generally allow this monstrous activity but ONLY if they are fed. Once they get very unhappy, bullets don't stop them. Eventually, someone rises up in the ranks who takes control and wrests away from the dying empire, the power they seek to exert over distant lands.
Global inflation is a sign of death for the US. It indicates our empire is finished. The short good times of the 1990s was only a pause that was like the halt of a stalking lion gathering up his hindquarters, tensing up to spring. Speaking of beasts ready to spring, the Derivatives Beast is in the news today:
Fed, 17 Banks Agree on Credit-Default Swaps Changes
Regulators and 17 banks that handle about 90 percent of the trading in credit-default swaps agreed to changes aimed at easing the risk of a collapse of the $62 trillion market, the Federal Reserve Bank of New York said.Morgan Stanley, Deutsche Bank AG and Goldman Sachs Group Inc. are among the banks creating a system to move trades through a clearinghouse that would absorb a failure by one of the market- makers, the New York Fed said today in a statement following a meeting with the firms.
The central counterparty, more automated trading and settlement and other fixes ``will help improve the system's ability to manage the consequence of failure by a major institution, and we expect to make meaningful progress over the next six months,'' New York Fed President Timothy Geithner said in a speech to the Economic Club of New York.
Concerns that the market could fail erupted in March when Bear Stearns Cos., then the fifth-biggest U.S. securities firm, faced a cash squeeze. The central bank agreed to back an emergency sale of Bear to JPMorgan Chase & Co. in part because of the systemic losses that would have resulted if the firm had filed for bankruptcy, Geithner said today.
The Fed has conferred with banks since September 2005 to improve processing and settlement in the market. Ten of the 17 banks at the meeting today were owners of Chicago-based Clearing Corp., which has said it will start guaranteeing credit-default swap trades by September. Investment firms AllianceBernstein LP, Citadel Investment Group LLC and BlueMountain Capital Management LLC joined the meetings today for the first time.
This news is supposed to assure us that when Lehman Brothers and Citibank go belly up, nothing bad will happen. For the last 6 months, the top powers of the planet have been having increasingly hysterical meetings. They can't kill the Derivatives Beast, tame the Inflation Monster or stop food riots unless they come clean on this entire Floating Currency mess. As well as their wretched desire to be tremendously rich at everyone's expense. If they were as smart as I, they would look at these food riots and think, 'Let them eat cake is a bad, bad thing to say!' Or perhaps they should read some history: unhappy peasants, the minute they get rebellious, are very hard to stop. They will literally fight to the death. Previously, they are easily put in their place. But once they band together and begin to move forwards, they are a tremendous force.
This is why all revolutions spawn great armies that fight with tremendous fury. Even if they are out-gunned, they fight to the death for they cease to fear death if there is no escape from death. This force of humanity is great and powerful and moves history forwards. It is admirable as well as frightening. We will not see sad sack responses to global financial mismanagement in lands with villages! The US might sag and collapse, the workers filled with despair. But in Europe, Asia, Africa, South America, across this planet villagers will be going to war and the enemy will not be each other but the ruling elites.
Mukasey Declines to Create a U.S. Task Force to Investigate Mortgage Fraud
Attorney General Michael B. Mukasey rejected on Thursday the idea of creating a national task force to combat the country’s mortgage fraud crisis, calling the problem a localized one akin to “white-collar street crimes.”Mr. Mukasey made clear that he saw the mortgage fraud problem at the root of the nation’s housing crisis as a serious one. But he said he was confident that the Justice Department’s current approach — using local prosecutors’ offices around the country to oversee separate F.B.I. investigations — was adequate.
Since he took over as attorney general last November, Mr. Mukasey has grappled with how best to deal with the law enforcement side of the growing housing crisis. He said in March, for instance, that the Justice Department was still struggling to determine whether there was a “larger criminal story” behind the housing crisis.
The ruling elites are terrified of going to jail. In America, there is a long and growing list of criminal public and private officials, all of them elites, all of them multimillionaires. They enable each other, help each other, cover up for each other, they hate the workers, the peasants, the teeming masses in the cities. They are now clinging desperately to Obama who started out as 'one of the people'. Elevated from the teeming masses, he is perfect for the rulers. He is busy coming to terms with them. They are buying his labor to thrust him in front of them so he can protect them from the fury that will be unleashed soon.
But as he protects them, the demon of reaction rises. All of the Muslim world is outraged by his embracing of Zionist expansions and warmongering. The dreams of Africans rely on the US not flooding their continent with free food that has strings attached. Obama has no global vision except American domination. To do this, he feels he must appeal to the ruling elites. This is why they hastily scheduled the latest Bilderberg meeting to be held in Chantilly. And Hillary and Obama met at Pelosi's mansion in DC. Pelosi is a war monger who makes a fortune off of military equipment.
A prediction: if Obama mouths agreements with the ruling elites but then steps away from this and reaches out to the needs and fears of the real masses, the people of this planet, he will be ranked up there with Martin Luther King or Gandhi and be just as dead as both. If he joins the ruling elites and decides he, too, wants to be a multimillionaire, then the meltdown of the planet will proceed and we all better learn to read and speak Chinese. Or communicate with cockroaches.
Calpers May Sell a Part of its Land Holdings After 31% Decline
The California Public Employees' Retirement System, the largest U.S. public pension fund, may sell part of its $2 billion residential land holdings after the investments lost 31 percent last year amid falling home prices.Sacramento-based Calpers hired Morgan Stanley to review seven land deals it made with joint-venture partners and real- estate advisers, said fund spokeswoman Pat Macht. The fund may decide to sell some of the land, purchased to develop new homes, or renegotiate the partnerships.
``Calpers is doing a case-by-case review, and of course there could be some restructuring,'' Macht said in an interview. ``There could be some selling. We could hold some. As each partnership is reviewed, there could be a variety of dispositions.''
Vacant land intended for housing is losing value as new home sales drop to the lowest in 17 years. The 10 largest homebuilders reduced their land holdings by 39 percent at the end of 2007, Paul Puryear at Raymond James & Associates Inc. said on April 9. Demand for new homes may not revive for two or three years amid a supply glut, according to a report last month by RREEF Research, a unit of Deutsche Bank AG.
Note how the collapse in value of all housing is running alongside raging inflation. Normally, housing falls if interest rates are low. THEY ARE VERY LOW. But housing is collapsing. So we are in a depression except for food and fuel. The pension funds which like to hold 'solid' investments are losing huge value. One third losses is just terrible no matter how one looks at it. Future spending by retirees is vanishing. This future money is depressionary. The transfer of wealth from retirees to speculators in oil and food commodities continues. As it always does when we go into pre-revolutionary cycles. If retirees are happy, we get no revolutions. This is why the revolutions of the sixties petered out. Once the draft war slave labor was ended, there was no will to fight.
Retirees in 1974 were being destroyed by the government hastily fixed that by indexing benefits to inflation. Since 1990, this index has been tinkered with in anticipation of future inflation so it now lags far, far behind inflation and uncertainty grows. If they give us a 2% hike this coming year, the rising rage will join with the fury of the young to topple governments.
Derivatives industry says tools to manage risk in place
While politicians and regulators talk about improving transparency and reducing credit risks in the multitrillion-dollar off-exchange derivatives markets, industry participants have been managing risk on their own.The credit default swaps industry, which has grown to a $62 trillion market over the past decade, has grabbed the attention of some regulators and lawmakers who fear there is too little information disclosed among firms about risk exposure.
But according to the International Swaps and Derivatives Association, firms have increased collateral for off-exchange derivatives transactions on their own.
The association's latest survey released in April says that collateral grew by 60 percent in 2007 from a year earlier with some 65 percent of credit exposure for these privately negotiated contracts covered by collateral.
"These mechanisms help to reduce to less than 3.0 percent of notional values the exposures between dealers," said Robert Pickel, the trade group's chief executive officer.
3% of $675 trillion is still huge! And our entire banking system has no reserves. It only has the Federal Reserve and that has a reserve that is laughably small. All the Fed has is the ability to turn US government debt into assets it calls 'Treasuries'. And this is based on FUTURE TAXES and these taxes increasingly come off the hides of the bottom 80% of the US population and this is the part of the economy that is being hammered by food and fuel inflation. And so this whole thing is tremendously unstable.
FAREED ZAKARIA
The American economy might surprise us by the year-end. Many economists and businessmen believe that although the current slowdown could turn into a recession, a financial collapse is now highly unlikely. Bruce Kasman, the chief economist at JPMorgan, is an optimist. He believes that even though the economy has been hit by some big problems, it also has strengths that will encourage recovery. (American exports, which now account for most of the country’s economic growth, are booming.) But Kasman is a short-term optimist; he has a much gloomier view of the longer term.For the past 15 years, the U.S. economy has outperformed all other rich countries, averaging real GDP growth of 3.2 percent and monthly job gains of 150,000. This remarkable economic run, which took place as Japan slumped and Europe staggered, has been critical to the country’s economic vitality and to the pre-eminent role Washington has played in the world. Kasman argues—with careful research to back him up—that this period of high productivity and GDP growth has ended. “U.S. growth rates for the next decade or more are going to look more like those in Europe and Japan,” he says. Current projections suggest that the long-term growth rate will fall to 2.5 percent at best. If so, that will have huge implications for jobs, incomes and America’s general well-being.
Why is this happening? The biggest reason is that there are now fewer workers in the American economy.
This total idiot gets to hog the Washington Post's precious web space to spew total garbage. If we ignore all the dire markers of future economic woes, sure, we did just great. Note how this tool of the elites ignores the trade and budget deficits. See how he lies outright about our own growth. He doesn't separate the military/industrial parts from general manufacturing, for example. And growth? All the charts and graphs I look at show that Japan and the US are totally at the bottom of domestic growth! And Japan is at the top of INTERNATIONAL TRADE GROWTH while the US barely rates in that arena. We have trade deficits with everyone. Japan has surpluses with many.
And China has grown at over 10% GDP. Note how this fool, Fareed, is careful to say 'RICH' countries. But then what is that? Germany? Germany has outstripped us in growth and especially in export growth! Ditto, Japan, actually. We did surpass Britain, that tired moth eaten old lion pretending to be an empire. But everyone else grew much better than us. We deindustrialized! Factories here closed during the last 7 years! And ones that opened were all owned by the Chinese, Japanese, French and Germans! They colonized us! This is good news?
Fareed wrote this piece so the elites would feed him and keep him and his spawn in a nice town house and he can take vacations and hobnob with the true nobility who treat him like a pet puppy. He hopes to be their slave. As in the Deep South, the house slaves were happy and considered themselves to be better than the field slaves.
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