The Plaza Accords and Funny Money Today

December 2, 2008

Elaine Meinel Supkis

As the US stock market celebrates the new year, the Year of the Rat, it falls down a rabbit hole and goes to Wonderland. Gold and oil break records as the world anticipates a dying dollar and real, honest to goodness inflation. Of course, we will have a recession or worse. This always happens when the dollar dies and oil and gold rise. England, the US and Japan are all having very similar problems except Japan has a huge sovereign wealth fund which they never talk about. I got some Canadian dollars and wish to share some thoughts about this currency as well as taking a stroll back into time to revisit the Plaza Accords which was the last attempt of the US to change things by conspiring to jigger the relative value of currencies vis a vis the dollar. I nearly laugh to death, reading the protocols of the Plaza Accords.

International funds look poised to continue to outperform U.S. rivals

International stock funds enjoyed a rising tide in the past 12 months that lifted most portfolios, and fund managers predict that 2008 will be the seventh consecutive year in which foreign-stock funds top their U.S. rivals.

International stock funds rose 11.1% on average in the year through Dec. 28, according to preliminary data from fund-tracker Lipper Inc. That was better than four percentage points over their U.S. counterparts.

The US stock market, far from being the best on the planet, was actually rather stinky this year. Worse than that, much of the action was due to the pirates and hell hounds going to Japan for super-cheap loans and then piling them onto corporations in the US stock markets. Today, the market belly-flopped for the 20th time in the last 3 months.

We know that all bear markets start with a three month period of wild ups and downs as everyone rushes from one side of the sinking Titanic to the other. Panic competes with lust and the desire to have Big Daddy Federal Reserve keeping the party going is very strong and as always, the Federal Reserve, far from taking away the punch bowl, punch any short sellers in the gut by pouring in gallons of high-octane free money! This is why I warned bears to beware. When all the data obviously pointing downwards means stocks must fall, they really won't, not until many things are very much 'underwater' and the stench of rotting corpses are hard to ignore. Literally, when the US sat idle and watched a major port city die, literally, right on TV, and did nothing and then, afterwards, still did virtually nothing, it was obvious to any sane watchers, our economy was an empty vessel and was going to sink in the not-too distant future.

For much of my long life, I have had futile arguments with economists about oil price hikes and recessions. In my own life, the minute oil shoots up in price, I hunker down for a bad recession. Always. In turn, the economists have denied this obvious link by refusing to understand how we struggle to evade high oil prices and can do so, usually for about 2 years which is a long time, a very long time lag. Only when there is a cut in oil supplies causing either rationing or other dislocations, do the dire effects show up instantly.

Talking about rationing, during that time when we had alternate days for buying gasoline, a girlfriend of mine and I were driving some children to Boston. We ran out of gas right at midnight and when we got to the head of the line, our plates were out of synch by less than 5 minutes. The gas attendants were scared of giving us gas and so I said to the kids, 'Go outside and cry.' They did and the entire line of cars, people stuck out their heads and all yelled, 'Give them the gas!'

Since everyone agreed to not turn in the gas attendants, we got our gas. Otherwise, that year, I used bikes to go everywhere or the subways. I even got a bike trailer so I could go shopping, etc. The Chinese, during this time, were all riding bikes everywhere. My mother remarked that she felt guilty riding in a big government car during that time. It felt funny.

Now, the world is driving like crazy and no one went crazier than the US. When oil was cheap, we all ran out and did the very stupidest, insane and ill-considered things on earth. We consumed oil like crazy and built totally inappropriately in places that can't be serviced easily in an oil-expensive culture. My town in Berlin, NY, went from a manufacturing base to a ghost town as things we made here were shipped in from Asia and Europe. This was easy to do since the cost of fuel was so low. The price we paid for cheap oil is the same we will pay for cheap loans: death! Destruction of our nation!

Now that we must pay a more realistic price for oil and gold, we will see the value of those things we thought were valuable, drop. But not all will drop! Land in places like New York City will rise, not fall, for there is a very good transportation system and housing that makes more sense than all those McMansions with granite counters. During the time when gold and oil was this high in 1980 and the housing markets in trouble, Park Slope and other NYC brownstone neighborhoods went from slums to valuable housing due to the construction values of the pre-central heating era and the many small stores that lines all the avenues as well as superb transportation built by our pre-WWI ancestors! I bought an 1880 brownstone and didn't even revovate it fully just the electricity and heating, for only $30,000 and sold it just 3 years later for $160,000 and it had no ceilings, for example.

Commodities Surge, Led by Oil at $100, Record Gold

Crude oil reached a record $100 a barrel and gold soared to the highest ever, leading a commodity surge as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation.

Spot gold climbed to $860.10 an ounce, and wheat and soybeans jumped more than 3 percent. The UBS Bloomberg Constant Maturity Commodity Index gained as much as 2.2 percent today after climbing 22 percent in 2007. The dollar fell on speculation the Federal Reserve will cut borrowing costs in an attempt to bolster the U.S. economy.

The Federal Reserve cut the link between the paper pieces that said, 'Gold Certificate' in 1933 and in 1968, cut the promise of 'Silver Certificate' and declared all paper money is for DISCHARGING DEBTS. The creditor nation vanished into the swamps of increasing debts that, since that day, have risen on every level and every sort and type. If the older forms of debt were all used up, new 'instruments' were created out of thin air and each of these increased the overall debt load across the board. Since the government decided to issue IOU paper that can be used for debts, we have gotten exactly that: debts. The value of a house today is worth considerably less than its relative value in corn, oil, gold, silver, phosphorus, lead, medical care or virtually anything on the open market. Except for maybe, tulip bulbs!

Houses, unlike the other items, are the depository of trillions in IOUs. And as the dollar's value for paying off these IOUs declines, the value of these IOU catch basins are also declining in value. After Japan's asset balloon collapsed, they instituted near-0% interest rates and under this regime, Japan spent itself into the hole so deeply, it exceeds the GNP by over 20%.

National coffers judged 'shocking'

"Dire", "parlous", "awful", "dreadful", "shocking" are just some of the adjectives the Financial Times' panel of economists used to describe the public finances. Successive years of missed tax revenue forecasts and the government's acceptance of high deficits in good economic times led almost nine in 10 economists surveyed to assert that the national coffers were not in reasonable condition. With the public finances already deteriorating in 2007-08, David Smith of Beacon Economic Forecasting says they are in "dire shape for an economy that has not suffered a recession".

England mirrors Japan. As one of the G7 nations that has decided to flood the earth with loans, England has tried to use this as a means for becoming the 'World's banking center' which Japan, just yesterday, announced they would now displace England as the world's banking center. Both nations seem to confuse banking with simply generating as many loans as possible no matter what. Between them, we have had a flood of loans. Both nations, by the way, are signatories to the Plaza Accords which we will visit later after examining the dire news today.

Again and again, the economists in the news note that we are not in a recession. But the crushing loan of all these easy funny money debts are outrageous and are causing a collapse long before the jobs and manufacturing as well as consumption, has begun to collapse. Of course, we know this is due entirely and totally to banks offering even more loans to a populace groaning under a mountain of debts. Due to the availability of easy money and a concerted effort of the G7 bankers to keep interest rates well below the rate of inflation, we have a few more months of spending. But at what a cost!

The birds that will come home to roost from all this, and they are all dark winged vultures. Years ago, I have noted that in good times, we should put away money for bad times but instead, free-spending increases when times are good but when bad times come, everyone has spent every penny which means there are few reserves for bad times. This is very much like the story of the ant and the grasshoppers which is about 2,500 years old. England has chosen to live like princes while actually paupers. And now, the princely robes will be repossessed by the creditors and the rags of poverty will now be draped over the skeletal lion and swayed back unicorn. Despite this, England will continue to field armies and ships across the planet just like they have done in the past when equally bankrupt. The fraud of empire is an addiction.

Diagnosing the patient is much easier for economists than finding a cure. While all agree the only long-term solution to the structural budgetary problems is lower spending or higher taxes, there is little consensus around the timing.

Most economists think the threat of an economic downturn makes 2008 the wrong point to raise taxes or scale back public expenditure plans, since it risks a further deterioration in economic fortunes. Robert Barrie of Credit Suisse says: "There are no prizes for tightening policy in a slowdown," and Ben Broadbent of Goldman Sachs adds this should mean Alistair Darling, the chancellor, should, for now, play fast and loose with the fiscal rules. "A preferable course of action is to liberalise [further] the interpretation of the 'fiscal rules' while sticking hard to the spending limits set out in the comprehensive spending review," he says.

The choice is to spend like crazy in good times and then spend more in bad times. To infinity, of course. Britain happily imposes IMF rules on former colonies and trade partners who are of lower status but certainly do NOT want this for THEMSELVES. Always, the IMF forces bankrupt nations to cut services and raise taxes as well as sell off national resources. But of course, the British who pride themselves on being the world's bankers, won't do this to themselves any more than the US plans to impose IMF rules on itself.

Actually, the rulers do want to do this! They wait with eagerness, the day when they can crush the working classes, kill off all those retirees and in general, destroy the economic basis of the middle class, so they can rule with greater impunity, preferably via military dictatorship. The battle over the last 1,000 years to create a middle class and to expand it beyond the professional class such as doctors and lawyers or shop keepers and expand it to the working class blue collar masses, will reverse. And this reversal could trigger revolutions and riots if there is any resistance.

This is why I worry about the Jewish minority. The classic way the ruling elites deflect popular unrest is to blame the Jews. Who make a very tempting target of looting. The elements for this are falling into place and I suspect the Bushes, for example, who enabled Hitler, for example, are deliberately feeding the Zionists in order to blame them for everything later.

Broke Britain: millions face struggle to stay afloat as financial crisis hits home

Debt experts are predicting a record number of personal insolvencies this year as excessive Christmas shopping, rising mortgage payments and soaring food and fuel costs force thousands of people over the financial edge and into bankruptcy.

More than nine million individuals in Britain are now believed to be struggling to pay credit card bills and mortgages, with the average owed by problem debtors hitting £30,000.

In alarming figures to be released tomorrow, the accountancy firm Grant Thornton predicts the total number of personal insolvencies will jump to at least 120,000 this year, almost triple the equivalent figure in 2004, when just under 47,000 people went bankrupt.

Just six months ago, England was boasting that they were going up and up unlike the US which was already struggling with a collapsing housing market. But England, being smaller and having debts closer to the Japanese level of over 100% of GNP, is falling far faster than the US. The US, being very large and with many natural resources, is much stronger in the long run than either Japan or England. Both of those places need to be mercantilist nations but England has dropped the manufacturing part and Japan is doing the same, bit by bitter bit.

Exchanges count cost as delisting hits record of $460bn

Companies worth $460bn (£230bn) were taken off stock markets globally while new listings hit $308bn, leaving global bourses nursing a net loss of $152bn, according to figures from Thomson Financial.

The eye-catching value of 'take-private' deals looks set to signal the last hurrah for the leveraged buy-out boom. Private equity firms have taken advantage of the availability of cheap debt to plough hundreds of billions of dollars into acquisitions in recent years, but the party appears to have come to an end.

As stocks fall here, we must remember that the stock market isn't an accurate reflection of the real situation in the US. The mountain of debt that is now crushing our industrial and corporate base has been moved 'off the books' via the trick of these guys operating out of pirate coves around the world, dumping massive amounts of debts into these places and then removing them from view so we can't see these companies flounder and sink in public. Over the last 5 years, a trillion dollars was dumped on these organizations. Then they vanished from view. If they all go belly up and I am betting, this is their fate, no one will see this. Like so many 'funny money' things created to hide debts, these will not be noted until it is too late. For recessions are when the money base, which is mainly debts, vanishes.

These pirates did this so they could collect fees and resell the debts in their various incarnations all of which are rapidly losing value. The instruments are no longer playing in the orchestra. It is sort of like the famous Hayden symphony where he had each musician stop playing one by one and exit the stage until there is only one left. Only when we notice the disappearance of various stores, businesses and organizations, will we notice the money isn't there anymore But there will be no drop in the stock markets while this vanishing act is played out.

The delisting wave was led by companies quoted in the US, with three quarters of all take-private deals coming from the New York Stock Exchange and Nasdaq.

Companies worth some $310bn were taken off the NYSE, compared to $75bn in 2006. The NYSE suffered a 'deficit' of $276bn after companies worth just $35bn were listed last year.

It is at least the third year in a row where the NYSE has suffered a deficit, with a combined loss of some $344bn.

The US was much stronger in 1996 than today, a decade later. Then Japan dropped rates to near zero and discovered, this savaged the US markets in odd and interesting ways. So they kept this going. The excuse that there was no inflation has collapsed yet they won't stop, they shrug this off and announce, this makes Japan the world's top bank so to hell with the US. And note that our companies, with little debt, have been attractive take over targets. You can't load debts onto deep in debt companies! This activity, using loans from the Japanese 'carry trade' to bid on the stocks of companies with little debt overhead, this caused the stock market boom and yet, the delistings meant we are seeing a decline in the markets that is masked by virtue of not existing anymore. In other words, we have no way of gaging the value of a trillion in stock purchases since they no longer are traded but sit in vaults which are more akin to crypts in a graveyard, on distant islands.

Time to visit Japan!

Weak Yen, Low Growth To Hold Per-Capita GDP At 50% Of U.S. Level

TOKYO (Nikkei)--Japan's per-capita gross domestic product in dollar terms will slump to 54% of the figure for the U.S. in 2020 if low growth continues and the yen remains cheap, according to calculations by Nikkei Inc. and the Japan Center for Economic Research.

Japan's depression will have a dire effect. Of course, the Japanese, when running around with the other G7 dwarves, happily talks about globalism and free trade but this is all a false front, of course. Fortress Japan has always preferred to have hundreds of years of depression rather than have open trade. Nothing has changed. My litany here is constant: Japan is the world's #2 economy and has the #1 trade profit advantage over all other nations! And the condition of their own people has collapsed. This is disgusting but won't start riots in Japan due to the lack of youth willing to fight. Japan is going to be standing in this fetid pool while China races upwards and they won't understand how they created this swamp themselves. Indeed, later, I will talk about the Plaza Accords and Japan. An endlessly fascinating topic.

INTERVIEW: Yen's Weakness Reflects Declining National Power

TOKYO (Nikkei)--The weakening of the yen appears to be the result of declining national power, low economic growth and various other factors, Kaoru Yosano, a former chief cabinet secretary, said in a recent interview with The Nikkei that is part of a series that aims to examine the yen's current status.

Japan wants to replace England and the Chinese in Singapore and Hong Kong, as the world's bankers? HAHAHA. They must bite the bullet, then. England's currency was very strong for the last dozen years. The euro has shot into first place and Europe's influence has grown with this. Japan is beating Europe in the export markets, thanks to the weak yen. But the price they pay is, they become increasingly isolated in the financial world. Their pride comes from the fact that everyone is hammering on their Fortress iron doors, begging for loans. They think this buys influence. But it doesn't. Japan can't be a ragged beggar and a powerful warlord at the same time. Ditto, the USA. Indeed, the heart of this crisis lies in this very fact: the world's #1 and #2 economies are both running the worst currencies, loading everything with debts and spending like fiends in the wrong places and playing this bizarre game with each other that is doomed to failure. Japan cannot run a huge trade surplus with the US while running a much weaker currency than the dollar! It is impossible and is not sustainable. The longer this runs, the worse the crash.

Landlords face office rent crisis

DTZ is predicting a 15pc-20pc fall in office demand in 2008 as banks and other financial institutions reduce their overheads, which will almost inevitably lead to a softening of rents and the increase in incentives such as rent-free periods.

A collapse in rental demand would dash hopes of a swift revival in sentiment towards the property sector where shares have lost more than a third of their value.

The US and England have sported with the idea that all the loans pouring out of Japan can be translated into great wealth via dumping it all on properties of all sorts and sizes in our countries. So the weak yen-super-duper cheap loans has caused a trillion in delistings on the US stock markets and dumped several trillion in loans upon our properties in both the US and England. And now we have to pay this all off. Hasn't anyone figured out that if we never pay any principal off, we get a depression? Namely, nothing will come back into the system, there will be no 'savings' via paying off these magic loans? So everything goes flat-lined or downwards like it has been in Japan ever since their own housing bubble burst?

Here is a chart of Japan's stock market from the Plaza Accords to the present day:

Note that the stocks there today are where they were when the Plaza Accords were signed! Amazing. The balloon of debts burst and since then, Japan has stumbled along, the world's #2 economy that has seen its exports perform better than nearly the entire planet yet their stock market has been flat as a pancake stepped on by an elephant.

The US is pretending the weak dollar will increase exports and then we will get rich. Only we won't due to owing too much money on our loans and assets. We are following exactly the same path that Japan took after the Plaza Accords including the super-cheap money, the lies about inflation, the crushing of wages in domestic markets, etc. And this will bring us a declining GNP and lower spending potential and international weakness. What a deal that is. This is why I focus on Japan so intently: this is our future!

The following charts are from DBS research: Click on all charts to enlarge.

This chart shows how spending on new homes tracks public overspending. Our government happily overspends when money is cheap and we build lots of new houses at the same time for the same reason. These two things amplify each other in fatal ways. This is why crashes hit us so hard in the wallet as well as in revenues. The government is forced to raise interest rates due to inflation and the need to attract savings and this hammers the economy and we get a recession or worse.

This second chart shows how Japan and Britain's currencies both did better than the dollar but both are at the near bottom of the scale of rising currencies. Note how China is stronger than all three but still low since the game here is to be as weak as possible so trade with the US can continue. Canada, which sells a lot of energy to the US, has one of the biggest gains compared to the others. We will talk about the loonie presently. But right now, we have to look at more charts.

These charts clearly show the crisis that began on 7/17/7: note how the differential jumps! On the right and chart, the threads that normally move together with small differences in value suddenly and fatally diverge. The cure the central banks have for this fracture has been to pump amazing amounts of money into the banking system. It obviously has not brought us serenity but has continued this crisis and like other monetary breakdowns in the past, they will flounder about until it is nearly impossible to avoid changing something and then we will have secret meetings of the same G7 nations that foolishly lectured China and the other sovereign wealth nations and instead, will have to go begging, hat in hand, to do something, anything.

The data here is rather odd. Note how the different industrial/trade/top economic nations have such strange diversions in their inflation statistics? The euro is strong, not weak, yet they have more inflation than Japan? And the GDP growth of Japan is roughly the same as Europe? Eh? What? And China's inflation rate is far below its GDP rate of growth!

China's interest rates will be projected to be 8%? While Japan is supposed to raise it, according to this chart. Only they won't raise it. Like killing a vampire, you need garlic, a silver bullet and a stake through the heart and the Bank of Japan won't blink an eye. This chart also is suggesting that China's yuan will trade at 6.70 to the dollar rather than the present 7.38 in one year. But look at Japan! 100 yen to the dollar in a year! Oh, that will cause the Japanese to flip. They want to weaken the yen further, not strengthen it more.

The coming battle over currencies, depression-level interest rates coupled with raging inflation and collapsing wages at the bottom reminds us to remember the Plaza Accords. I often think about that deal which showed us that the monetarist dream of open markets, free trade and unfettered capitalism is nothing but crap. The game is always rigged. And every once and a while, it gets so badly out of control, the parties doing this have to meet and re-rig the rules and change the values via FIAT laws and secret accords which all the people gambling with these things can only guess at.

The inside traders who happen to be the same jerks doing the negotiations and writing or changing the rules get to profit from all this since they are the gamesters doing these things, everyone else is at their mercy. And they are, as we see at the top here in this story, the New World Order nuts! And many of them were involved in the Plaza Accords so let's go review the final documents of that last rigged game, the one that fatally weakened the USA.

Announcement the Ministers of Finance and Central Bank Governors of France, Germany, Japan, the United Kingdom, and the United States (Plaza Accord)

September 22, 1985

3. The Ministers and Governors were of the view that significant progress has been made in their efforts to promote a convergence of favorable economic performance among their countries on a path of steady non inflationary growth. Furthermore, they concluded that their countries are restoring the vitality and responsiveness of their economies. As a result of these developments, they are confident that a firm basis has been established for a sustained, more balanced expansion among their countries. This sustained growth will benefit other industrial countries and will help ensure expanding export markets for developing countries. thereby contributing importantly to the resolution of problems of heavily indebted developing countries.

In 1985, our budget and trade deficits were very small compared to today. The budget deficit was under $2 trillion. Volker killed inflation with the knife of high interest rates and this forced the government to stop wild overspending due to the higher rates but we were in trouble with trade and due to the conspirators high in our government, we refused to use the simple tools of barriers and tariffs. So we did this scheme with our trade allies and rivals! Did the Plaza Accords balance trade?

Well, we went from a deficit of about $60 billion a year to a deficit of $800 billion a year! This, in less than 20 years! As this disaster unfolded, we twisted and turned but we did not declare the Plaza Accords a failure. Instead, the declarations in favor of free trade that peppers the Plaza Accords documents here [click on the page to read all that tripe!] have been expanded and declared ever-louder until today, no one that is anti-free trade gets ANY hearing in public except for online where we are legion and loud as hell!

4. They believe that this convergence of favorable economic performance has been influenced increasingly by policy initiatives undertaken by their countries. Moreover,each of their countries is committed to the implementation of further policy measures which will reinforce favorable convergence and strengthen the sustainability of the current expansion.

5. Ministers and Governors were of the view that recent shifts in fundamental economic conditions among their countries together with policy commitments for the future, have not been reflected fully in exchange markets.

Back then, I had the Chinese living with me and they listened to me rage about the Plaza Accords as the documents were given to the news. Bastards! I was rather vocal about it. The ministers who created this situation pretended that the fiat money markets which they controlled were somehow deficient. Instead of fixing this, they decided to rig up totally false exchange rates! By FIAT. Then they declared that fiat currency was not rigged but was subject to the forces of the market place which was a total lie. And the sudden lurch the rate exchanges did right on the heels of the Plaza Accord signing set world markets racing off in all sorts of strange directions, the most spectacular one being Japan suddenly flooded with 'wealth' due to the yen jumping in value!

The Japanese bubble began instantly and grew massively, rapidly.

The Germans ran off with their new money to buy East Germany from the Russians. This cost them a great deal and they are still paying the price for this but they considered this priceless and have no regrets to this day. But Japan simply splurged.

7. The current sustained expansion is occurring within a framework of declining inflation, a phenomenon that is unprecedented in the past three decades. Inflation rates are at their lowest in nearly 20 years, and they show no signs of reviving.

8. There has been a significant fall in interest rates in recent years. Apart from welcome domestic effects this has been particularly helpful in easing the burden of debt repayments for developing countries.

9. This successful performance is the direct result of the importance given to macroeconomic policies which have reduced inflation and inflationary expectations to continued vigilance over government spending, to greater emphasis on market forces and competition, and to prudent monetary policies.

HAHAHAHA. My god, look at that! No inflation? The value of one acre of Kyoto was supposed to be the same as all of California just 5 years after the Plaza Accords? Good grief! Inflation didn't take off in Germany only because the Germans spent their windfall on buying East Germany. Buying an entire half of a country is a huge purchase no matter how we look at it. We paid a lot for the Louisiana Purchase [we stole Texas and California] and the Alaskan purchase was no small change! Japan spent it on property speculation at home.

To this day, the Plaza Accord nations REFUSE to see property asset inflation as inflation. They merrily cause these things to happen and then profess surprise that their fake low interest rates cause this huge inflationary bubble! Each time they do this, they can't see the direct connection! And this is malicious and deliberate. This is how they get rich and powerful. So they will do this over and over again. Already, they are making noises about a NEW Plaza Accords, a NEW Bretton Woods that will fix nothing but create more property values in new venues.

For example, China would love to buy Taiwan. So I expect the next deal to be about this, soaking up China's vast wealth they have accumulated, wealth they can dump on our heads and kill us with, in exchange for future reunification with Taiwan. Then all those trillions that China holds will vanish without flattening our own economy or killing the dollar so it is worth a penny.

10. These positive economic developments notwithstanding, there are large imbalances in external positions which pose potential problems, and which reflect a wide range of factors. Among these are: the deterioration in its external position which the U.S.experienced from its period of very rapid relative growth: the particularly large impact on the U.S. current account of the economic difficulties and the adjustment efforts of some major developing countries; the difficulty of trade access in some markets; and the appreciation of the U.S. dollar. The interaction of these factors-- relative growth rates, the debt problems of developing countries, and exchange rate development-- has contributed to large, potentially destabilizing external imbalances among major industrial countries. In particular, the United States has a large and growing current account deficit, and Japan, and to a lesser extent Germany, large and growing current account surpluses.

Japan also used its windfall from the Plaza Accords to buy up a great deal of US land and facilities. We had a short housing/land/commercial property boom which crashed at the same time the bubble popped in Japan. I lost money in that one, by the way, another reason why I will not forget all this stuff. Expensive lesson! Did our account deficit with Japan improve since then? Or got worse?

We all know it got MUCH worse. On top of this, despite their depression, Japan's businesses have been colonizing the US and building factories here so we can't cut trade via tariffs and barriers and on top of this, our own industries have outsourced so they make the trade balance utterly ugly. All are conspiring to make us go into the red and these same conspirators will be meeting at the next Plaza Accords to continue this game. Japan imported very few cars back in 1985 and today, virtually none! So nothing changed except we are even weaker than before.

17. The Ministers of Finance and Central Bank Governors agreed that recent economic developments and policy changes, when combined with the specific policy intentions described in the attached statements. provide a sound basis for continued and a more balanced expansion with low inflation. They agreed on the importance of these improvements for redressing the large and growing external imbalances that have developed. In that connection they noted that further market opening measures will be important to resisting protectionism

18. The Ministers and Governors agreed that exchange rates should play a role in adjusting external imbalances. In order to do this, exchange rates should better reflect fundamental economic conditions than has been the case. They believe that agreed policy actions must be implemented and reinforced to improve the fundamentals further, and that in view of the present and prospective changes in fundamentals, some further orderly appreciation of the main non-dollar currencies against the dollar is desirable. They stand ready to cooperate more closely to encourage this when to do so would be helpful.

And they clung to monetarism and free trade with amazing grimness. The US could plainly see that monetarism was not our strong suit. And when Japan wanted a weak yen again after 1994, they figured out how to use the FOREX reserves as a slush fund to force the dollar up against the yen and all this time, the US pretended that FOREX reserves were useless and stupid. Well, we are the stupid ones here and now all the top nations who want to keep the dollar strong so they can ravage us in trade, are building monumental FOREX reserves in dollar and now, in euros, too! Europe is being hammered now and is getting rather itchy about a new Plaza Accords!

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The Government of Japan noting that the Japanese economy is in an autonomous expansion phase mainly supported by domestic private demand increase will continue to institute policies intended to ensure sustainable non inflationary growth: provide full access to domestic markets for foreign goods; and the Yen and liberalize domestic capital markets.

In particular, the Government of Japan will implement policies with the following explicit intentions.

1. Resistance of protectionism and steady implementation of the Action Program announced on July 30 for the further opening up of Japan's domestic market to foreign goods and services.
2. Full utilization of private sector vitality through the implementation of vigorous deregulation measures.

3. Flexible management of monetary policy with due attention to the yen rate.

4. Intensified implementation of financial market liberalization and of the yen, so that the yen fully reflects the underlying strength of the Japanese economy.

5. Fiscal policy will continue co focus on the twin goals of reducing the central government deficit and providing a pro-growth environment for the private sector. Within that framework. local governments may be favorably allowed to make additional investments in this FY 1985, taking into account the individual circumstances of the region.

6. Efforts to stimulate domestic demand will focus on increasing private consumption and investment through measures to enlarge consumer and mortgage credit markets.

So they went home and had a big, fat party, collapsed and then RIPPED UP THE PLAZA PROMISES! Note how they kill domestic demand! It is so bad now, people can starve to death and die in ambulances and Japan's government just sits there, grinning. Onerous regulations still lock out everything possible! The US has tried to sell beef to Japan since I was a young, lithe girl. I am an old crone and they STILL won't buy our beef. The door slammed shut and has been bolted by the weak yen.

And the government pays a lot of attention to the yen. Like, in killing it. They will move heaven and earth to kill the yen. This part of the accords had me laughing so loud, my dogs ran from the room. Now to the other liars, the US government's half of the Accords:

The United States Government is firmly committed to policies designed to: ensure steady non inflationary growth; maximize the role of markets and private sector participation in the economy; reduce the size and role of the government sector; and maintain open markets.

In order to achieve these objectives, the United States Government will:

1. Continue efforts to reduce government expenditures as a share of GNP in order to reduce the fiscal deficit and to free up resources for the private sector.

2. Implement fully the deficit reduction package for fiscal year 1986. This package passed by Congress and approved by the President will not only reduce by over 1 percent of GNP the budget for FY 1986, but lay the basis for further significant reductions in the deficit in subsequent years.

3. Implement revenue-neutral tax reform which will encourage savings, create new work incentives, and increase the efficiency of the economy, thereby fostering non inflationary growth.

4. Conduct monetary policy to provide a financial environment conducive to sustainable growth and continued progress toward price stability.

5. Resist protectionist measures.

The only thing we didn't break was the promise to not have any protections. We broke everything that was good and left in and kept the one poisonous part. Isn't that charming? As well as fatal! Note also our budget deficit went from less than $3 trillion to over $9 trillion. And encouraging savings? HAHAHA. We save nothing! And before this stupid scheme, Volker's raising the interest rates to 12% or more encouraged savings! Right after this accord, interest rates were dropped due to 'no inflation' [sic] and we forced savers to go to dicey savings and loans which offered realistic rates since real banks had fake rates that were way too low, oh, how I remember this all so well!

Then, all the savings and loans with high rates went BANKRUPT. And the savers lost their assets. And today, we have no savings, we are in negative territory and this was due and is due to the Federal Reserve ripping off savers with their fake interest rates, driving them to buy CDOs that turn out to be WORTHLESS and now the banking system is collapsing as everyone is again, putting their savings into gold! Which went to the moon right before the Plaza Accords, of course. Like oil.

Last of all, today, I got in the mail a donation from a very kind reader. I never had Canadian dollars like these before. So I scanned them into my computer and got this message:

How clever! You can't scan in their dollars! The world is awash in fake dollars due to the cheats running the Federal Reserve so crummy, they can't use the technology the Canadians use? GADS. New York is one of the top finanical centers on earth and we have a stupid currency any child can forge? I want to secede from the Union! O, Canada! I'll even play hockey or hookey or push stones with brooms on ice in the Olypmics! Give me a safe currency! Part of the dollar's decline is due to forgeries.

Each loonie has this bright silver strip. It is quite pretty. And the Queen of all the pirate coves, too! What a deal. At least the people she rules have some dim idea about money and pirates! I think our Federal Reserve officers should walk the plank. And before we have more stupid accords and meetings of the G7, we should first get a real currency, one that matters. Not like that cheap scrap of paper the Japanese call 'money'.

Comments

[John East]

Elaine,
I only discovered your blog recently and must say your prose style is captivating, much better than my other regular reads.

I also agree with your sentiments, but having profited by the simple strategy of investing the opposite way to the herd for over 5 years now, I don't fear the future. My only concern is that when (if?) the dust settles after the comming recession, and when everybody is buying gold, I'll be too slow getting into the new contrarian winners.

I'll continue monitoring your words of wisdom, they might help me decide when to jump.

[Elaine Supkis]

I know what you mean. I have been a contrarian all my life, it seems. When NYC was going bankrupt, I began to invest in properties there, for example. This meant, fighting for all sorts of things like police protection, etc. It worked.

Personally, I would move into alternative energy systems. They have a bright future. Even if you might not get rich, you won't see your money vanish. Even gold can lose 75% of its value nearly overnight, it can balloon like all other assets.

[Jim Smith]

Old crone? What old crone? Then the images we've seen are not the true Elaine! Thanks for an absolutely top drawer blog. Your virtuosity, versatility and vitality overwhelm me! Keep 'em flying!

[Pat O'Meara]

Elaine;
I am a Canadian of Irish descent and have little use for the British Royalty. However, the Queen is the official Head of State and this is useful because it allows us to treat our Prime Minister with the respect he deserves. If we don't respect him then we can hoot at him and occasionally even get a pie in the face. I think this is better than having a President who is also the Head of State.

In fact the Governor General is the Queen's representative and is appointed by the Prime Minister. They have no real power. Our current Governor General is a black women immigrant from Haiti. This pleases me.

Our currency has pictures of Prime Ministers on other denominations. Each denomination is a different colour which I find useful in dimly lit bars. I used to be in the USA a lot and owned a company there in the mid west. I liked the value of the currency at the time but I hated it in bars. The bills all looked the same so I could easily give a fifty for a five and so on.

I do very much enjoy your writing and as depressing as the content is, I can still get a good laugh.

Keep up the good work.
Pat

[OC]

Hi John East,

I am not clever with finances but seems with current buying of US and European investment banks by the Chinese indicate that future determination of money and value would be based on their perceptions and beliefs.. so for your investments to pay off ..perhaps it should be based on being able to understand the PRC mindset.

Just a thought.

[Elaine Supkis]

Pat, we should put on our money some royal pain in the assets! Like Greenspan, perhaps.

[Elaine Supkis]

PRC mindset: they saw how Germany bought out the Russians and took East Germany and they saw how the Afghanis and a nasty nuclear accident destroyed the entire Soviet Union, their old enemies [remember, the more something is the same, the more hate]. So they hope to do with us.

[mock turtle]

your concerns about cheap, non-tariffed imports from countries that pay subsistence wages, and your concerns about the destruction of our currency etc are not our biggest problems.

give the ruling elite a few decades or less to further develop digital technology and then 90% or more of the worlds labor force will be unnecessary to the wealthy 10% or less who own most of everything. The rulers will produce everything they want without further need of the serfs.

Then what will they do with us?

And now you know the real reason for the governments desire to subject us to ever increasing surveillance.

[Raymond in Niagara]

Hi Elaine,

I know someone who works at the Currency Exchange window at the Niagara Falls border crossing and she deals with American visitors daily.

For many of them it is a big surprise to learn that the US$ is at par or below the CDN$ and this has led to some rage incidents. One angry American declared that our country is a "wasteland" and that "we could gobble you up." This gentleman's wife tried to restrain him and he loudly told her to "shut up."

Fortunately for my acquaintance, she is safe behind two-inch-thick plate glass.

At some point I would be interested to know the particulars of how the FRG "bought" East Germany. I had friends and family in the GDR and I flew over for the fall of the wall; it was a big deal for me personally. A decade later I hear from my cousins how they were "sold out." Any idea how much was paid?

[aa2]

If the national economy takes a severe recession the masses of citizens will empower a strongman to make radical change and implement some plan. Sometimes it can be quite good.. eg.. the neverending health bureaucracy and regulations and litigation that no politician can even stop the growth of, could easily be dealt with by a strongman.

On the other hand with that much power wars and progroms start. The 1930's saw for America Roosevelt come in and make huge systemic changes.. Germany saw Hitler come in who did the same. Both men got their countries out of depression.

Closer to our own time in 1990's I predicted a strongman would emerge in Russia. And indeed at rock bottom when pensioners were starving on the streets Putin came in. The Russian masses empowered him to make radical changes.

[Greg]

One angry American declared that our country is a "wasteland" and that "we could gobble you up." This gentleman's wife tried to restrain him and he loudly told her to "shut up."

LOL typical yanks lol

;)

[CK]

New scanners will not allow anyone to scan any currency. That little add-on was never officially announced, and it is not anywhere in the US legal code.
To scan currency you will need to find a pre 2004 scanner and its software. ( The restriction is in the software for H-P scanners and all-in-ones ) it might be a firmware restriction in other brands.
The same code in in Photoshop and probably other image editing and capturing stand alone software packages also.

[Chris Hudson]

Elaine,

The bit re having the kids cry while trying to get fuel had me laughing with pleasure @ 5 a.m.

Being on the border w/Canada here in the PNW, I'm always complimenting the Canadians on their pretty banknotes but I think Euros are even nicer. But I love the "twoonies."

I've read that some of the biggest counterfitters use old (cheap) american printing presses and hand engrave the dollars. Old school style.

[Elaine Supkis]

Germany, starting in 1980, began to pay Russia for a number of things and making deeper contacts...for energy! During these negotiations, the Germans told Russia, they would subsidize the removal of most of the Warsaw Pact troops, build them housing and pay their pensions.

So bit by bit, Russia quietly removed the troops. When the place was mostly emptied out, the East German populace noticed and began to riot. First, in Leipzig.

The government rapidly lost power to the point, they wanted CNN to broadcast a news conference which was supposed to announce some reforms.

I got up early in NY to watch it live, in German, for I knew through my contacts that the government was on the verge of falling. The offhand remark by one of the officials, a remark that was NOT sanctioned by either the East Germans or Russia, that no one was to be shot on the borders anymore, set events into motion.

NO ONE EXPECTED THIS. I laughed and said, 'A political coup of vast proportions, launched by a few words!'

West Germany went into high gear to reassure the Russians they need not fear a united Germany. More money was deposited in the communist party vaults which were, by the way, nearly empty at this point. Chernobyl was very destructive to Russia's economy.

We don't know exactly the terms, of course, they were secret. But Gorbechev decided they were necessary due to Russia's looming bankruptcy.

[JSmith]

"Then what will they do with us?"

Two words, Mock Turtle...

Soylent Green.

(Actually, they'll find something for you to do. All that digital technology still won't clean the bathroom. So get out your brushes and your Scrubbing Bubbles and start practicing!)

[CT]

First, since I'm a virgin commenter, let me take a moment to thank our spectacular and gracious hostess! If there's any hope for the future, it will proceed from this sort of sharing of common wisdom and perspective. And, Elaine, you make me laugh incessantly!

Second, and more to the point, I wanted to disabuse JSmith of his optimism for the future of serfdom:

http://www.google.com/search?q=self-cleaning+toilet

... Sorry JS, looks like the job's taken!

[mock turtle]

JS and CT...seriously

If people don't own their own land (debt, Foreclosures and subprime mess)

or

high land taxes drive them from their homes..

then we will have "proles" to quote Orwell.

elimination of all property taxes for one residence and sufficient subsistence acreage (not vacation homes or investment properties) should be the law of the land.

Otherwise we will be driven from our homes.

[Elaine Supkis]

Oh, yes, true, mock turtle. I pay pretty high property taxes on this here mountain of mine. And I used to make money off my bees, sheep and oxen but all are gone! Except for personal use. Due to free trade.

Prices collapsed. And the cost of winter corn feeding has shot up.

[JSmith]

That self-cleaning toilet is interesting - it's probably expensive to begin with, but cheaper over time than the cleaning people walking away with this-'n'-that.

[jane]

This is not a loonie it is a twenty dollar bill

[cheap computers]

Due to the availability of easy money and a concerted effort of the G7 bankers to keep interest rates well below the rate of inflation.

[christian louboutin]

What a nice photos and paintings that I have never see before!Just a small requirement,can you post a tutorial on the HDRI?I am really have difficulty of getting any real one with this.Thank you very much in advance.

[supra foot]

Even if you are the only one who wants to save your troubled marriage you can do it alone once you know what you need to do. So, relax, take a deep breath and let's get started with some things you can do to get started on saving a troubled marriage.