Elaine Meinel Supkis
Japan's trade surplus profits rose 400% this last year. US auto workers cease their strike and lose pay and benefits as the depression being imposed on the working class relentlessly forces them back down the economic ladder and back into poverty and servitude. The British banking system is very weak yet the Queen is still allowed to run tax haven pirate coves that weaken England. Hahaha. And Carlyle, even as it hides under Her skirts, lost a lot of money in July. I examine all this and tie the lose ends together yet again. Oh, and the bears are supposed to be routed due to a rising stock market. How 1929 of them to say this!
Fukuda Elected New Premier, Retains Most Of Abe's CabinetTOKYO (Kyodo)--Liberal Democratic Party leader Yasuo Fukuda was elected Japan's prime minister by the Diet and formed his Cabinet on Tuesday by retaining most of the Cabinet members of his predecessor Shinzo Abe in hopes of breaking the political impasse with the opposition camp, which has control of the House of Councillors. (New Cabinet Lineup)
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Yamada Denki To Buy Kimuraya Select To Boost Tokyo OpsTOKYO (Nikkei)--Yamada Denki Co. (9831) will make discount store operator Kimuraya Select a wholly owned subsidiary by acquiring all of its shares from Asset Managers Co. (2337) for over 5 billion yen by the end of October, company sources said Tuesday.
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Ozawa Turns Up Heat On Fukuda, Calls For Snap ElectionTOKYO (Kyodo)--Japan's opposition camp led by Democratic Party of Japan President Ichiro Ozawa turned up the heat on new Prime Minister Yasuo Fukuda on Tuesday, pledging to pressure the premier to call a snap election in the near future.
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ANALYSIS: Govt Must Help Lure Investment Money Back To Japan StocksTOKYO (Nikkei)--One of the most urgent challenges facing the new Fukuda government is to reverse the current trend where individual investors are increasingly staying away from Japanese stocks.
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Dollar Weaker Vs Yen As U.S. Stocks Seen Opening LowerNEW YORK (Dow Jones)--The dollar is lower against the yen on risk aversion as global stocks trade lower and U.S. equities are expected to open lower as U.S. housing reports out Tuesday could show further problems in the sector.
As I keep saying, the Japanese can't keep the dollar stronger by themselves. Once China broke the spell, the army of Japanese FOREX traders who used to be savers at banks now bet FOR the yen rather than constantly against it. All the mindless FOREX traders were bankrupted or destroyed during July and August leaving the ones who learned from the hand being burned by the FOREX fire. The dire condition of American financing is so great, even the Japanese are unable to deny this. The yuan has risen around 10% against the dollar so the yen has also done this. I keep remembering that Japan's elites were boasting, yes, boasting that they expected the yen to be 130 to the dollar by October and we are very near October and there isn't a ghost of a chance of the yen being anywhere near that by Halloween.
Note the instability in Japan's politics: Ozawa is pressing the ruling elites hard. Fukuda is a colorless, robotic apparatchik that reminds me of the dying Soviet Union's grey political old school. The Chinese want Japan led by such a man and if I were Japanese, the Chinese endosement of his rise should be rather alarming, I would suggest. Japan's present direction is directly killing off US power in Asia and the world. Their trade or rather, NON-trade with the US is directly responsible for us losing our grip on the world and exposes Japan to Chinese domination. And the Chinese know this, they want this. They don't want reforms in Japan.
They don't even want a strong yen, they just want Japan to shut up and cease supporting the US concerning the buying power of the yuan. This is now the new game. Japan is also alarmed at the flow of money out of Japan. They know they must strengthen their deliberately weak financial/stock market systems. They are very exposed to a sudden Chinese take-over and they are now alert to the fact that China and Russia are rapidly reaching a point where they can do this jointly, quite suddenly. Anyone tracking world FOREX reserves can see this!
One of our readers sent this analysis by Rodrigue Tremblay:
First, we must consider that the U.S. dollar is still a key reserve currency, although loosing ground to the euro, and it is still being held in massive amounts by most central banks in their foreign reserves, and also by private banks, commercial and economic entities and individuals around the world. For example, in early 2007, foreign central banks alone held some two and a quarter trillion in U.S. dollars reserves, which represented about 66 percent of their total official foreign exchange reserves, with a bit more than 25 percent being held in euros.Since the dollar is loosing its purchasing power, both in absolute and relative terms, central banks and other foreign investors have been “taxed” by the American Fed’s policy of benign neglect regarding the dollar. In real terms, the seigneurage tax on foreign holders of the dollar can be measured by taking the difference between the annual rate of depreciation of the dollar vis-à-vis major convertible currencies and the short-term rate of interest on these reserves. For example, if the annual rate of depreciation of the dollar is five percent and the short-term rate of return on U.S. T-bills is four percent, central banks are loosing annually some $22.5 billion on a yearly basis. Since private foreigners hold more than two trillion in dollar denominated debt, the net annual loss of foreign holders of U.S. dollars can easily reach $50 billion a year.
Absolutely no one holds dollars to make a profit in FOREX markets. They hold dollars for political reasons. Since this is being done mostly by government officials we must assume this has diplomatic and power politics value.
I used to hang out at Kiseido.com. It is worth a visit, they explain the game and have interactive practice pages that are great at tutoring beginning Go players.From the NYT:
Go has a much higher profile in East Asia. In China, weiqi, "the surrounding game," was historically considered one of the four arts that a cultured gentleman should master.The Chinese government is in no hurry to clue our own diplomatic corps in the fine arts of this game for obvious reason.
Here is a picture I drew for that story from January, 2006.
China and Japan don't lose billions by holding dollars right now, they make many tens of billions keeping the dollar from collapsing totally. But the dollar is dropping now against all currencies and this is because the lesser nations that make less money in uneven trade are now being forced to pass along the dollars they get via 'trade.' The fact that China and Japan's top bankers are now holding what will be a series of secret meetings to conspire as to how to manipulate the dollar is a sign that we lost control of our own currency totally.
The fact that we can't demand to be party to these meetings is proof the US is a paper tiger, a wet one, at that. The US spends a lot of time trying to prove China manipulates their currency. This, in a world where everyone manipulates their currencies via holding US dollars in FOREX reserves! Cross-border cooperation in strategies for holding or not holding dollars are now growing greater and greater as we can see between Russia and China and now Japan joining them. A confrontation about this is avoided by the US because we still benefit in the short run from these empires playing a holding game. Nothing fills our own rulers with more fear than the idea that these three nations holding over $3 trillion might drop it suddenly.
Japan is boasting that their foreign trade and foreign financial holdings have doubled in value in the last year, their profits are soaring to such a degree that even American economists and politicians are noticing...barely. The sucess of the hold-dollars/weak yen gambit is now resounding.
Japan's August trade surplus widened to 743.2 billion yen ($6.5 billion), three times higher than economists predicted, as car and steel shipments jumped and import growth slowed.Exports rose at more than twice the pace of imports, the Finance Ministry said in Tokyo today, helping the surplus almost quadruple from a year earlier. The median estimate of 37 economists surveyed by Bloomberg News was for the gap to swell 23 percent to 235.5 billion yen.
Their surplus grew 400% over last year???? YIKES. This is due to the US unable to sell to Japan. So far, Japan can sell to the US and it sells to US auto workers who can buy Japanese cars that are high quality yet 'cheap' and which have 0% loans via the Bank of Japan as a deal-maker here.
General Motors Corp. reached an historic contract agreement with the United Auto Workers, ending a two-day strike and taking $50 billion of future health-care obligations off GM's books.The four-year accord may transform the competitive landscape for the U.S. auto industry, allowing the Detroit automaker to operate with a cost structure closer to that of its Japanese rivals. Should the deal be approved by GM workers, Ford Motor Co. and Chrysler LLC will seek similar cost-cutting UAW contracts. GM rose 6.8 percent in early trading.
By holding dollars, the Japanese can prevent any imports of American cars. US imports of value-added goods to Japan's consumers continues to steeply decline due to cutting the financial ability to buy in Japan coupled with an artificially strong dollar. The US is now moving towards the Japanese model: workers get less and less money in pay as inflation eats up their pay but the government runs the statistics so this shows up as little to no inflation so they can have low interest loans for the industrialists, etc. We will be shoved into the same dual system Japan has: depression in the bottom 2/3 of the population while the top financiers, exporters and military/industrialists roll in dough and have rising profits, rising income shares.
I suspect the rulers want to clip the US worker's ability to buy and use gas guzzlers and even any cars. This will save the world's oil, I suppose. Their wants and desires clash with reality: if the US consumer goes down in flames, will Europe fill in? Will they go nuts and buy lots of useless things and not prepare for the Hubbert Oil Peak?
It is a toss-up. Europe is much more serious about renewable energy generation systems than the US.
Businesses reduced their orders for capital equipment from U.S. factories in August, another sign that capital spending and exports may not be strong enough to offset weakness in other areas of the economy.Orders for durable goods plunged 4.9% in August after a 6.1% gain in July, the Commerce Department reported Wednesday, as bookings for new aircraft see-sawed lower. It was the biggest decline since January.
Excluding the 11.2% drop in transportation goods orders, new orders fell 1.8% in August after a 3.4% gain in July.
Shipments of durable goods fell 1.6% in August, the biggest decline in 11 months.
Just before the 1929 Stock Market Crash, shipment of durable goods began to fall. The real estate bubble in Florida had popped a year and a half earlier. Real estate sales were increasingly laggard. Germany was having greater and greater trouble with paying WWI reparations and the US had been increasing loans to Germany but was reaching a limit. With sales declining, Germany was struggling and could not take on more debt. Sounds familiar? The US was very much a creditor nation back then. England was clinging to empire and expanding it as much as possible, fighting in Iraq and China as well as Africa. They couldn't pay their own way and needed US loans to keep the pound strong and the empire going. As the US Federal Reserve tried to keep all this afloat, the money they generated flowed into the stock market that ballooned on the easy money.
Once the housing boom went bust, it was only a matter of time before the other things would happen here. The media hyped the idea that the bust was small, there was no bubble, the bust wouldn't affect any other systems, etc. This bust, of course, is causing all systems to crash, one by one. Heroic measures to prevent this have only prepared the way for a Great Depression because the US empire is financially unsound, overextended and losing wars all over the place. So the news that durable orders are down as well as railroad shipping, this is a serious indicator that the recession is growing, not shrinking.
In a sign that the housing slump is far from over, home resales slipped for the sixth month in a row in August as the credit squeeze forced many sales to fall through, the National Association of Realtors reported Tuesday.With sales of existing homes falling 4.3% to a five-year low seasonally adjusted annual rate of 5.50 million in August, inventories of unsold single-family homes rose to an 18-year high.
Many bearish commentators have already pointed out the obvious: the low interest rates offered by the Fed can't fix what is wrong, it won't save all those overpriced properties. How true! On to of this, the higher rates offered by the mortgage agents was predicated on having higher rates because the REAL rate of inflaton was higher than the traditional mortgage rates already! Dropping the official rates makes this worse, not better. The other day, I pulled out an old article at Market Watch that urged investors to buy into Alt-A loans because THEY MADE MORE PROFITS. If no one is offering high rate mortgages, no one will buy these lower rate ones because they 'grow' money too slow and inflation will kill anyone holding them!
Indeed, the dream that Alt-A loans would 'grow' was an illusion. The people getting these loans couldn't possibly pay the higher and higher rates. The attempt to turn the US housing market into a credit card system is a resounding failure. And this is now eating into the sales of all things. For the vast majority of home owners with standard mortgages all re-financed during the Greenspan 1% year and thus, got a bounty of 'free' money but these 30 year mortgages at 3.75% per annum are, TODAY, hemorrhaging losses like crazy. Anyone holding these are in trouble and this is at the core of the problem, not the people going bankrupt but the people happily paying off these super-cheap traditional mortgages.
I suspect in the not-too distant future, banks may be forced or the government forced to cancel these cheap deals and force a mass re-financing that will be at a much higher rate, say, 8%. This is quite possible but will be hideously politically unpopular. This is why we are in increasing danger of losing the last vestiges of our democracy. Only a strong man like Putin could do this.
The practice of rolling together lots of different kinds of debt, including low quality US mortgage loans, and selling them on piecemeal in the global financial markets has diffused the responsibility for checking that the underlying loans are sound, the IMF said. The use of off-balance sheet funding vehicles has also made it harder to judge the creditworthiness of major banks.But it cautioned against making knee-jerk changes to the regulation of the debt markets. Greater transparency is needed, it said, "however, given the volume and complexity of the information that could potentially be provided, and the cost of providing it, it will be important to carefully consider the appropriate amount and type of disclosure needed."
The most important financial institutions have enough capital to withstand the shock, it said, and global growth has been solid in 2006 and 2007, "though some slowdown could be expected".
They want someone to control things so they don't go nuts and do goofy, Risky things. But they don't want controls that really stop them when they want to play with Risky. They dearly love Risky but they want enough Safety that they get lots of money but won't die. This is very childish. Either they follow ancient banking rules or they play with fire and set the whole world to flames. One match can cause a forest to vanish in a roaring fire. But they want boxes and boxes of matches. And global 'growth': way too much of it is sending stuff to the US and getting trillions of dollars in exchange and nothing else.
Nearly all the banking rules set up after the Great Crash and in the Great Depression were designed to prevent the creation of 'new products' by banks. They restricted the ability to lend recklessly. This is why broker loans to Wall Street gamblers was forbidden. The markets don't need to shoot up, they need to prosper the old-fashioned way: paying dividends! Most of the heat in the Stock Market fires are pure speculation: buy outs and buy ups. The bonds raised in this enterprise are so toxic, no banks want to hold any of them and they were flipping out when, in July, this suddenly stopped and the bankers were still holding $300 billion in bonds for useless, destructive buy out schemes and deals! They are rapidly selling these stupid things off and have unloaded about 5% of them and are very anxious for the central banks to help them unload the rest.
U.K. commercial banks shunned the Bank of England's three-month money auction after a drop in market interest rates enabled them to avoid the potential stigma of borrowing at a penalty rate.Financial institutions made no bids for the 10 billion pounds ($20 billion) that the central bank made available to ease strains in the money market, the Bank of England said. The cash was offered at a minimum rate of 6.75 percent, 1 percentage point above the Bank of England's benchmark.
Thanks to the trillion dollar Nanny State rescue operations run in Europe and the US last month, the banks don't need rescue funds with higher interest rates at this point. The dynamics leading to the bankruptcy of all these banks are still operational and will overtake them all with time, the mortgages that are at super-low rates are still undermining the entire system, but they can pretend all is well for a while longer. I would suggest the world's bankers get together and talk to the Dragon respectfully. Maybe it will help us.
Britain's deposit protection scheme currently holds funds of just £4.4m, it emerged yesterday as banks warned that consumers face sharp price rises to pay for the Chancellor's plans to offer a £100,000 guarantee.The Financial Services Compensation Scheme took control of a £9m fund from its predecessor scheme but that has been gradually whittled down through payouts to depositers with collapsed credit unions.
The scheme's meagre resources are in stark contrast to America's Federal Deposit Insurance Corporation which has a $49bn (£24bn) fund and the power to take control of the deposits of failing banks.
The former British Empire is threadbare and facing serious problems due to being psycholgically unable to let go of imperial pretensions. $8 million is all they have in their official rescue accounts? That is like the US having FOREX reserves of only $66 billion in a world where more than one rival has reserves of over half a trillion to over a trillion! It shows fatal weaknesses. The US has only $49 billion. This sounds like a lot until we realize that several hedge fund hell hounds sit on $150 billion accounts, each. In all, if we have a total collapse like in 1933, this would require $49 trillion, not $49 billion to fix. The US makes up money so of course, to 'fix' any bank failures, they will print money a la Weimar Republik. And this will fail.
The independent:
However, in the event of a major failure it would have no choice but to impose a huge levy on the rest of the industry, which some observers warn could severely dent its profits.
Banks sell stocks. And are part of the stock market mix. And this is why the top elites panicked last month. They could see what was evolving and they hope to push this aside, to evade it, via many tricks. And the top priority is to crush the unions totally so they can kill inflation via destroying the purchase power of workers and this requires ending the fiction, workers can be middle class. The middle class in classic times in the past wasn't 'the middle incomes' but were the bourgeoise, namely, doctors, lawyers, craftsmen who were guild members and the miller and cloth merchants and such. They were about 10-15% of the population in the more developed states but in Russia, about 3%, for example. The vast majority were peasants in serfdom. This is the alternative system that still runs in many countries like India and even China, still. The industrial revolution changed all this. Workers were able to cease being serfs and could get money, real money, not barter.
The pre-revolutionary system where peasants had to provide labor with no pay to the aristocrats is a system some humans want to re-establish. The collapse of buying power of the people toiling within the industrial capitalist system will lead to a global depression whereby money becomes scarce again. This is why the LDP wants to raise sales taxes: to soak up any pay raises the Japanese workers have eked out of a hostile system. Here, we are cutting, cutting and cutting more and more. And this is depressing purchasing. Which leads to more wage cutting, etc. A vicious cycle. The news today is, stocks will shoot up on the expectation that middle class workers will now fall into the lower classes. But this is a fatal celebration! As Japan shows. Their stocks don't rise much at all despite the good export news. And what will they export if we can't buy much anymore? This worries them a lot.
Foreign-exchange trading rose 65 percent in the past three years to a record $3.2 trillion a day on average, led by hedge funds and foreign investors, the Bank for International Settlements said in its triennial survey.The increase in the value of transactions from 2004 was the biggest in the survey's 18-year history, the Basel, Switzerland- based BIS said today. Taking into account the appreciation of currencies, turnover rose 71 percent. The share of emerging market currencies climbed to 20 percent, the BIS said.
The world FOREX markets are pure gambling. It produces nothing useful. It is churned for its own sake. It feeds off of and creates instability. And coupled with frantic central banks openly manipulating currencies in various ways the main ones being interest rates and FOREX reserves, we have a situation where the more this is done, the higher the trading, the more 'little people' enter the system to game rises and falls in value, the more we see a complete collapse of the whole system as people begin to rush like mad for the lifeboats when any of the parties finally falters and a country or a series of countries suddenly give up and either cease playing this game or go bankrupt...the Great Asian Currency Crisis but 100X worse!
Why we want a system this unstable baffles me. Lots of people get rich playing this and this is the dark heart of 'hedging': when all else fails, play FOREX games! And this is what they mean when they talk about 'holding cash.' The 'holding cash' element is mushrooming badly. The amounts in FOREX reserves world wide have ballooned badly in just 7 years! This is due to the US running record deficits during this time while lowering interest rates alongside Japan doing this the previous 7 years. When everyone ends up holding masses of paper script called 'money' all at once, it doesn't take much to cause this to collapse.
Carlyle Capital Corp., the publicly traded credit fund backed by private-equity firm Carlyle Group, fell 24 percent in August as it sold assets and global debt prices declined.Carlyle Capital's net assets dropped to $642.1 million from $843.5 million at the end of July, according to a monthly financial statement obtained by Bloomberg News. The decline wiped out 61 percent of the $327.8 million in capital that the Guernsey, U.K.-based fund raised in the previous two months.
Note that Carlyle, owned by our rulers, the Bushes and the Cheneys, operates out of a pirate cove run by the Queen of England. Note how She has visited here several times to hobnob with her subjects, Bush and Cheney. And both have been invited to her palace and even when Bush trod on her beloved rose bushes, she didn't blink her reptilian eyes at all. She had the servants clean up and went onwards, making deals with the despots ruling us.
They are losing money! They must make money! How, how, how??? Note that CARLYLE LOST 61% OF THEIR CAPITAL...NOT PROFITS...CAPITAL IN JULY! Want to know why the Federal Reserve was yelled at? Well! 'It's brutal out there, there is blood in the streets,' shrieked the idiot on TV in August, he and our rulers need more money and they want it no matter how it is made or who they owe in the end. And manipulating FOREX markets while making insider deals is a great way to get back hundreds of millions, fast. If this means betraying the US economy and the American people...hooray! They don't care about OUR blood in any of OUR streets!
Citic Securities Co. is the fastest- growing brokerage firm in the world thanks to the booming market for Chinese stocks, and Wall Street may have to get used to the industry neophyte challenging Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. as the biggest.Founded just 12 years ago, Beijing-based Citic now has a market capitalization of $39.4 billion, or $7.6 billion more than Lehman Brothers Holdings Inc., $23.1 billion more than Bear Stearns and $15.1 billion more than Charles Schwab Corp., after rising threefold in 2007. Haitong Securities Co., China's No. 2, also eclipsed Bear Stearns as the seven largest U.S. brokers lost $37 billion in value this year.
US household debts went from $2.5 trillion in 1986 to $7.7 trillion in 2001 and then ballooned to $12.9 trillion in 2007 acorrding Dr. Swanson, author of 'Hyperinflation.' Meanwhile, we are reamed out in trade by the Asians. Note that China's brokerage and banking giants are now bigger than our own. This will effect us in the end since world banking systems need to please the biggest deal makers and customers and we are rapidly being eclipsed. Unlike Japan that can only exist as an exporter, China has heft and size and can be an alternative economy to the US. They can end up needing us less than we need them and Japan will cheerfully switch to subsidizing the US sales to focusing on penetrating China's markets.
Lori and Steven Siravo earn $56,000 a year and say they can't afford health insurance.They consider themselves lucky to live in New Jersey, where the family's income isn't too high to qualify their 16-year-old daughter, Carlie, for U.S. government-subsidized coverage under the State Children's Health Insurance Program.
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President George W. Bush says families making that much can afford private coverage and that the 10-year-old program should return to its purpose of ``helping poor children.'' His effort to stop middle-class families from obtaining benefits in states such as New Jersey is at the heart of a conflict with Congress over renewal of the health plan set to expire Sept. 30.
Understanding how inflation works is easier if one compares today with yesterday. I used to live in a pretty high-class community in New Jersey. I restored a run down mansion there and made a 150% profit when I sold it three years later. We had an income of $50,000 back then and lived very nicely, very nicely. Today, this is poverty rates? Wow. And this is pure inflation! Unadulterated inflation. Inflation that has ravaged our economy in silent ways.
HAHAHA! I'll bet King George is throwing a hissy fit. Not only is Iran making more money from the higher price of oil, they're not having to take in soon-to-be-worthless dollars AND it is Bush's BFFs in Japan who are doing it.
Oil is king, not Boy George. The Japanese will gladly sell their grandmothers for better oil deals.
Posted by: shargash | September 26, 2007 at 12:51 PM
"Carlyle extended a one-year loan at 10% interest to help Carlyle Capital Corp., based in Guernsey, off the coast of France, meet lender demands for additional funds. Many Carlyle partners, including co-founders David Rubenstein, Daniel D'Aniello and William Conway, collectively own a minority stake in the mortgage fund."
off the coast of France ...
Posted by: D. F. Facti | September 26, 2007 at 12:58 PM
The bourgeoisie class will make a comeback big time. Unless you think that government licensing of economic activities will be withdrawn. You’ve got the most litigious society on the planet, do you think your government will overlook licensing requirements for plumbers, electricians, engineers and (oh boy) environmental remediation? Wait till Fiberglass falls in the same hazard category as asbestos, yikes.
Send in the SWAT team we’ve got a neighbor reporting an unlicensed water heater install!
Hmm, what’s going to happen to all those highly skilled Semi Truck drivers delivering Chinese made Barbie’s? Elbow into the bourgeoisie or straight to the soup line? Better learn how to haul cement… and like it.
Posted by: Canuck | September 26, 2007 at 06:39 PM
Yeah, Facti, off the coast of France...but owned by the damn Queen of England. Hundreds of years of wars are behind all this. They still duel over this issue.
Posted by: Elaine Meinel Supkis | September 26, 2007 at 07:03 PM
This has got to be your most alarming article yet, as for me personally. I could not survive a resetting of my mortgage interest rate by force. It would send me and my family out into the street.
To think this will happen to those who did not abuse the system instead of those who did is chilling. It is like there is no escape from the idiocy of your neighbor.
Posted by: DeVaul | September 26, 2007 at 08:35 PM
I hope this doesn't happen, either! But if we go to war while irritating our trade partners who sell us energy, what else will happen?
The US has evicted much of New Orleans with virtually no backlash. They let over a thousand people die and didn't even bother with a body count and they are building on top of the ground remains of the dead office workers and police and fire department employees at Ground Zero and they don't care about THAT.
We must learn from the monks in Burma.
Posted by: Elaine Meinel Supkis | September 27, 2007 at 12:00 AM
Thanks for the post mate.
Posted by: Forex Tracer | June 16, 2008 at 01:37 PM