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Paul S

Elaine: Mr. Bush's latest budget calls for a $410-$460 billion deficit and he has funded his $3 Trillion war ALL on borrowed money. Why do you call him a 'spend and spend' Republican? Well if you don't make jokes about it, you would cry. What is startling to me is the evidence shows that the only times the US economy grows is when wages of the middle class--and employment--go up. It is about the only times when the US shows a savings rate increase, and the benefits that result, NOT distributing wealth to the upper .5%. Pardon the rant.


Lots of great information in this post.

Thanks especially for the article Treasuries' Scarcity Triggers Repo Market Failures.

It is interesting that the article mentions "short"; I take this to mean two things: first, some are simply short, that is not returning, the borrowed asset; and second, have short interest, yes there is a lot of short interest in the Treasuries across the board and especially in the 2,5 and 10 year area.

And yes, today's situation is exactly like the 1929 to 1930 entrance into the Depression: deleveraging and asset deflation is on the way; famine, starvation and war is going to continue on and on globally; the result being the creation of an pyramidal society in America with the governing elite at the top, protected by Dyncorp, and a massive povertized and pauperized population at the bottom.

Lots of residential real estate will stand as glimmering tombs to a former speculative age.

It could be that Obama will become the Democrat nominee and win the Presidency; but he will continue the war in Iraq to some degree with bases there and throughout the region; the oil reserves are just too great to be left unplundered and left to the Arabs alone; our miltary bases give us some sovereignty there; and Obama if elected, may be left with a war on Iran by the current President Bush.

However, there is one thing that is different from 1929 to 1930; although platinum (being speculative) and silver (being traditionally an industrial metal rather than an investment metal) may fall in price, gold is going to to do one of two things, decrease in price less than stocks and bonds, or increase in price from its current $904 to $920 level.

I believe, in the second alternative above: in as much as gold trades inversely with the US dollar, it is going to rise from $904 to $920, with the impetus being a lower dollar, coming from a higher Yen and higher Euro as well as a sell off in the 30 Year Treasuries which will come as the US dollar falls, or will occur in late spring or early summer when the provisions of the Security and Prosperity Partnership of North America, the SPP, are applied in response to a "financial emergency", in which cash and short selling accounts at brokerages, checking accounts and money market fund accounts are not going to be honored at full face value.

Unlike those aforementioned cash accounts, gold will always be honored at face value.

Also, gold will be in demand as it will be used as a small portion of regional currencies that will arise as the Middle East oil producing countries and others de-peg from the US dollar and start up their own regional monetary integration.


Today it's 7 1/2 months before the election. I wonder if she will blow before then.

I hate to say this, but in one crucial aspect, this approaching debacle could be far worse than the 1929 one. My grandmother said the means of production were still there, but no one was working (much). Well, those factories aren't here anymore. Without the factories, we probably would have had to let Hitler have England. I have heard my share of econobabble, but I don't recall anything ever being mentioned about seriously measuring productive capacity (the strength of the productive system).

My grandmother also told me about the (to her) very eerie realization that the Great Depression was never announced. It was as is some great flood had gathered around everything, but the newspapers refused to acknowledge it.

Ronald Reagan famously asked "are you better off now than you were..." I know we are not better off than when he said that!

Said of English Professor Peter Dale Scott:

((----- Copy & Paste - W/O The Line Breaks -----))



— quote —

...he has offered us the concept of deep politics, which “posits that in every culture and society there are facts which tend to be suppressed collectively, because of the social and psychological costs of not doing so. Like all other observers, I too have involuntarily suppressed facts and even memories about the drug traffic that were too provocative to be retained with equanimity.”

— unquote —

I have witnessed this deep politics all my life. Today's absurdity becomes tomorrow's history.

Jim Smith


From your above most interesting survey of the parallels between the Great Depression and our current situation, it appeqrs you expect severe deflation. Are you ruling out hyperinflation, or what do you make the odds? I suppose a major war with intendant controls would be a separate alternative?


Commodities are down and the dollar up due to hedge fund selling and covering dollar short positions in order to meet margin requirements.


I remember the Governor of the People's Bank of China deciding to stomp on all bubbles in China with both feet, as soon as they appear. This action ALWAYS prevents the usual B/P/D cycle. Unfortunately, we couldn't do that here even if we had Paul Volcker running things due to a certain Monkey in the White House who wanted to cut taxes, go to war and borrow and spend, spend, spend to the degree that would make even drunken sailors blush. Which he went ahead and did.

Elaine Meinel Supkis

When we invaded Lebanon on behalf of Israel when Reagan was allowed to be President, only 275 Americans were blown up and he pulled out the troops INSTANTLY.

Now, they are blown up nearly every day and no one gives a hoot.

Reagan got to play cowboy thanks to Volker saving us from hyper-inflation. He did it by raising rates.

But today, they are all trying desperately to drive DOWN prices, drive DOWN interest rates while spending like fiends. This is not a good thing. I am expecting things to get out of control in the negative because the US doesn't control our economy anymore, Asia and Europe have a death grip on it.

and they need us to spend! We can't spend if we have commodity inflation. So they are in the process of killing commodities across the board.

This is a concerted action and I am still looking for proof as to how the Bank of Europe and the Bank of Japan are pulling this stunt off. Trust me, this stinks to high heaven. We saw a FLOOD of financing pour in and NONE of it is going to commodities.


I believe Elaine is right about commodities.

Gold is down 80 dollars and silver is down 4 dollars an ounce in just a week or so!!!

NBC did a report on "Gold Selling Parties" a few days ago. That means the average person now knows gold is valuable, and that is intolerable to the money managers and banking cartel.

When gold reached 1,000 an ounce, that was the psychological turning point for everyone. I expect it to go down from here and the rich will convert all their paper into cash and then rule the earth again.

Gold will be outlawed and so will silver.


Except this time round, the Dragon and the Bear has final say!!!


Elaine: one thing you wrote i cant follow: you said "And they will boost the value of this by going to Japan. But ONLY if the yen drops vis a vis the dollar!"

boost the value of wht by going how to Japan? It seems to me the end of the carry means money is returning home to Jpan whence it came


Not hard to force down commodities in a very highly leveraged paper market held by Hedge Funds. The evidence is there in plain sight. Somebody made a series of margin calls against a number of large funds that held SIVs and commodity holdings. You can easily restrict bids on the futures market but more likely after a few stops are taken out at the current technical level everybody sees the falling knife from a commodity spike and backs off. The only commodity that cannot be manipulated for an extended period of time at this point is wheat. If prices hold the end of 2007 levels then you have a correction/manipulation, if prices drop to the end of 2006 levels you just had a crash. Speculators got too greedy with the "I can just buy future call options on XYZ commodity and get 10x back in 4 to 8 weeks with no effort." mentality. The margin calls just took the excess long contracts/claims out of circulation. The demand for gold and silver definitely changed but the supply and demand for wheat (inelastic) didn't change significantly and its price in the next couple months will tell you the answer to the real question if this was just a correction (real or manipulated doesn't really matter over the long run) or the start of a severe deflationary spiral.

Elaine Meinel Supkis

I frankly can't tell yet. We don't have enough data. All is speculation.

What seems to lead me to think this is conspiratorial is the crowing, the boasting from the mainstream media that Bernanke FIXED things good by WRECKING the commodities markets.

Namely, this was his intention. Since they have many meetings with the biggest financial houses that milk us for loot, this was a gross attempt at redirecting the flow of the LOANS handed out by the central banks.

Did these guys sign papers stating they would not use this money to buy commodity futures? I would suggest this is a very real possibility.


blues, your comment about your grandmother parallels things I've heard my mother say about the Depression. It also reminded me of a story she once told me when she was comparing society then and now.

She was a girl growing up on a small farm when the Depression was at its worst. One day, a terrible storm hit, and one of the children on a neighboring farm was killed. No one had any money, and the farmer who had lost a child couldn't afford a funeral, so my grandfather rounded up the local farmers and said, "Let's go into town and take up a collection to give that child a decent burial."

When they returned to my grandfather's house to pool their collections, my mother noticed that her father had collected more money than all the other men put together. When the men had left, she asked him how he had managed to get more money than the others. He replied, "Well, you see, they all went to their churches to ask for money, but I went to every beer joint in town. If you want to find charitable people, that's where you should be looking."

Not to make light of the potential economic meltdown looming ahead of us, I'll still say that perhaps we should all gather in the beer joints when it hits.


Thanks for the additional confirmation, Daliwood.

When she blows, half will head for the churches and half will head for the beer joints.

What this country needs is a combination beer joint/church! This morning I get me a bottle of merlot, crank up my meanest word processor, and begin to write the Divine Revelation of Liquid Prophesy. I can rant pretty good, so with the help of the the Divine Bottle, the sermons are guaranteed to be outrageous.


Smacking down all commodities is a more subtle form of price controls to mask credit inflation. China has set the precedent for price controls of food and fuel for quite some time. Unfortunately this will just lead to severe global shortages later when the disincentives kick in to plant extra crops or develop energy reserves and everybody holding the cheap futures contracts demands delivery and the counter parties default. Price controls on fuel are already partially in place in the U.S., just compare the price of unleaded gasoline to diesel. Every time the PPT intervenes it makes the future worse.

Elaine Meinel Supkis

Thanks for that analysis, LQL! YOu are probably right.

Blues and Daliwood, I love both of you and thank you for the stories.

As for the beer/religion joint: Welcome to Mt. Olympus! Time for a Dionysian orgy! Worship, sex and drink all in one big bundle.

Elaine Meinel Supkis

Oh, and the gap between diesel and gas up here is nearly a dollar now. I use a lot of diesel with my farm equipment. All the farmers I know are in great fear of dropping crop prices next year coupled with all this.


Thanks Elaine!

The dentures are working out very well. The landlord inspection overlooked the patched-up dog damage from the pooch being left alone over 30 minutes with separation anxiety. A friend's illness seems not to be so bad as we feared. The Valley crocuses are opening! I should feel great, but now I seriously just want to sleep for a month. You really are getting a lot of new commenters.

Maybe we can transplant all the Iraqis to Texas (they might not even know the difference) and steal the oil. We could pay them well to patrol the border, and they could be US citizens. Any terrorism would have to be less grave than the losses we have now. It's horrendous, but about the best I could come up with.

We also need a huge demonstration where we parade around with a coffin with a huge dead dollar in it. That will get people thinking!


It took less than a week, but following in the marvelous footsteps of representative Mark Foley, Elliott Spitzer has entered rehab for his "sex addiction."
Foley tried a career in real estate sales after departing rehab, maybe Elliott will find a worthwhile career in a few months.
And because I am "unworldly" in so many ways, how exactly does one get rehabbed from enjoying sex? Electroshock therapy? Chaffing? Hours of listening to the Barney song? Going on the Karen Carpenter diet?
Just how is it done?
Next up after rehab at least two tell all books by Mr and Mrs Spitzer both of whom/which will be remaindered.
Way back in the day, I used to do a sunday sermon in one of the less reputable chat rooms on MSN ( it was a tech chat ).
Those were the days. Fire and bluescreens, hell and config.sys optimizations, Purgatory and MacLovers. I once gave a sermon on the heaps ... it was well received by the annointed, revelatory one might say.
With Diesel skyrocketing, can home heating oil be far behind. The truckers cannot continue to eat those price increases, have to love those wharehouses on wheels that Walmart believes in so strongly.
I have not noticed the demand for food falling, so unless there are bumper crops in everything, I don't see any downward pressure on food prices. Restaurants may have a decline as folks trim their credit card spending, but if you ain't eating at a restaurant you are eating somewhere else. So there may be a demand shift coupled with a decrease in volume purchases but no demand decline until the populace all goes on a diet simultaneously. The problem for the farmers is that they need a 10% price increase in money terms to maintain a 0% decrease in purchasing power. The prices won't fall but what a dollar will purchase will continue to decrease.
Greek courts have finally allowed Greeks to worship the old Greek gods.


One of the strange things about me is my brain is wired very differently than other folk's. Doctors did months of tests on it at Harvard. I seem to be using completely different neurotransmitter chemicals than anyone else they know of. My hand-eye coordination beats that of their best surgeons. But step-by-step motor sequencing is all messed up for me. After six years of practice, I've achieved a typing rate of about five words a minute. This even happens if I use Dragon Dictate with the "alpha,' "bravo," "Charley" method. I can do continuous voice dictation, but error correction and such with their dictation program is a pain in the butt. The best you can do with that is train the program minimally, then never correct anything, nor save more to the recognition files, but just say "pound sign," and go back to correct errors later. If not for this deficit, I would have almost certainly become a programmer. Bill Gates would be flipping burgers! But I learned all kinds of abstract math, logic, differential equations etc. by reading books.

My vast ten-year linguistics project has languished criminally as I have tried to stem the tsunami of political idiocy that washes up on the internet. This, I must stop doing. In order to be any kind of decent blogger, one must spend ten hours reading for each hour writing. This issue got me seriously fed up with sites like MyDD, which might conceivably be worth some effort if their posters ever bothered to read enough to know that WW-II has in fact ended.

I have communicated with the great Chomsky, and concluded that the poor guy is, at some level, nuts. The pretentious bullmanure of the field of linguistics is nonsense, as most smart people know. Human language is very, very, very different than "computer language." But one good analogy might be that you have to crack the neurological operating system before you can begin to discuss human language. This, apparently, is just what I've done. The damn thing is cosmically powerful.

So I guess I should get moving on my linguistics sites (anti-grammar.com, linguisticsredux.wordpress.com, and (eventually) linguistics.name). I would love to solve all the world's problems. And those solutions would make everybody poop their pants! But all of you just keep standing in the way. Should I stop reading the news and pump out my linguistics stuff while people can still afford computers?


1) Do what makes you happiest.
2) Do what makes you wealthiest.
3) Do what give you the most free time.
4) Do what others demand you do as they solve all the world's problems too.
The neurological operating system throws up blue screens too.
5) Any sufficiently advanced solutions for the world's problems is indistinguishable from Ex-Lax. ( Pace Arthur C, Clarke, indeed the stars are going out ).
So just remember while you are offering Ex-Lax, there is a lot of money to be made in Kaopectate and Immodium.
Significant money to be made in Dry Cleaning and tidy whitey laundry, and some motivation to wear kilts and squat when necessary.
Funniest thing of the week:
The little dutch boy stuck his finger in a dike to save Holland. Chris Matthews only fondled.



Maybe a banking cartel has been setup by the top banking managers, and now they are chasing HF leveraged on commodities, requiring bigger spreads !!!! It's an attempet to make the banks solvent again...
This makes sense, i think.

Elaine Meinel Supkis

I fear it is ALL these things, PJSV. Seriously, we are now in the second act of the Great Banking Collapse of the 21st Century. I just published a huge piece about this very topic full of charts, graphs and commentary, as usual.

I pride myself on making points based on hard data, not repeating other people's ideas. We need to keep looking backwards at history in order to see the future.


NEVER pride yourself.

This is the ultimate message.

Elaine Meinel Supkis

Aw, the gods constantly toss lightning bolts at me. I never learn. Heh.

Bear of Little Brain

Bernanke has said in his speeches that it is not inflation but the management of inflation expectations that is important. One of the members of the PPT is some head honcho from the commodities exchanges. I saw a report of a rumour that the commodities exchanges were going to raise margin requirements all round at the beginning of the week, just ahead of the markets opening (as they already have on wheat a few weeks ago). That could have prompted a panic, together with a bit of interventional encouragement from da Boyz. At this stage, I remain sceptical that the commodities boom is over, especially the basic foodstuffs (industrially-biased metals I'm avoiding anyway, as I cannot form a view about them).

Gold and silver were already looking extended on this recent up-leg and, as my holdings are for the long term, I was getting worried about a real blow-off top years too soon. (Having to get the stuff out of secured storage and hauling it off to a dealer is a good way of discouraging myself from trading!) I'm actually relieved that these PM's are backing off, it was getting silly. Mind you, an attack on Iran would change that, not to mention OIL (Operation Iraqi Liberation? Ooops,, we meant "Freedom"). I own PM's because my assessment is that we are entering a crisis period; years, not months. I understand that a lot of silver is used somehow in armaments. Gold is self-explanatory.

Grains are in short supply worldwide with producer countries raising export tariffs or banning export altogether (India only permits the export of the expensive Basmati rice, last I heard, three weeks ago). A wheat stem rust, Ug99 (Ug -Uganda, where first found; 99 - 1999, year found), has moved from Africa, across the Yemen and is now in Iran. There is something called the barberry bush in Iran (maybe throughout Asia, but I don't know). Apparently, this has the power to transform the asexual Ug99 to the sexual type (I've got no idea what all this is!). One researcher has commented that this could be catastrophic, saying "whatever blows out of Iran will be much worse than what blows in", referring to the genetic mutation(s) that could occur, rendering current attempts to find resistant strains irrelevant. That was before the Iran confirmation. (Hey, maybe George can claim that nuking Eye-ran will kill the stem rust and save the world.) From Iran it will move across all Asia. Apparently, India is the second-largest wheat producer in the world (if anyone knows different, please correct me). The most recent report I read from India reported no cases found this season, which was not the most encouraging way of putting it. Incidentally, it is entirely possible for the spores to reach the US. They are just carried on the wind. There are many researchers trying to find resistant wheat strains, but the problem is that once you have one (or several) it takes time to produce enough seed to replace the existing wheat. Years, not months. So, will the spread of the rust outpace the resistant strains? Almost certainly. Of course, the current wheat varieties which were part of the "green revolution" which averted starvation in the 1970's are also high-yielding varieties. Will the replacements have comparable yields? I'll assume the worst.
I'm afraid I don't see wheat as being anything other than a bargain on any pullback. Stockpile flour, just in case?

Perversely, I hope I lose catastrophically on gold, silver, and wheat. What I lose will be offset by the lack of losses suffered by my (adult) children, who think I've totally lost the plot, and the pleasure in knowing that the world is rolling merrily on! The children will just have to make room for their poverty-stricken father, which is better than me having to pay off their mortgages and top up their living expenses through a depression/famine.

Unfortunately, unless there is an unprecedented scientific breakthrough in agriculture and a worldwide outbreak of peace, love, and understanding (and some sanity) soon, I'm going to stick with commodities.


Barberry is a common ornamental, worldwide.
The dried fruits make Zerzeshk, a popular spice in Iran.

Mulberry Alexa

I'd actually love to review these boxes on my shopping/lifestyle blog. i wonder if they'd send me a sample box to talk about?

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