Money Matters

Iceland's Financial State In Full Meltdown Mode

March 31,2008

Elaine Meinel Supkis

Iceland is falling down the old rabbit hole. They were tempted to go to infinity and now the system is resetting to zero! I remember some of the online pundits who are more popular than I, touting the krona of Iceland as a great currency. Selling Iceland as a great place to park money to protect it from the ravages of the US empire's financial collapse. But...as I keep on pointing out, THERE IS NO SAFE HARBOR WHEN A GREAT EMPIRE COLLAPSES! We must instead, build our communities and our families so they are strong enough to withstand the coming storm. Or we can listen to History who tells us happily, how revolutions, wars and other things naturally spring from similar circumstances.

Iceland's Biggest Banks Targeted by `Unscrupulous' Speculators

Iceland's lenders are under attack from what its central bank called ``unscrupulous dealers'' amid concern reliance on foreign funding may undermine their operations.

The cost to protect the country's biggest lenders from default is the highest of 81 banks worldwide with credit-default swaps listed on Bloomberg. The country's benchmark index of stocks has shed 20 percent this year, while the krona has lost almost a quarter of its value against the euro.

``The longer this goes on, the worse it gets,'' said Olivia Frieser, a London-based bank analyst at BNP Paribas SA, France's biggest lender. ``It is a question of confidence.''

Iceland's banks have expanded outside of the $16 billion island economy by taking on more borrowing. They account for about 80 percent of the country's gross external debt, which is five times gross domestic product.

``Iceland has been likened to a hedge fund because the banks borrowed to invest in equity,'' Paul Rawkins, a senior director at Fitch Ratings in London, said in an interview. ``It was a punt on getting higher returns to pay off the debt. They are exposed now, and sentiment has shifted against them.''

All the world's tiny kingdoms, republics and dependencies have sought to turn themselves into pirate coves and tax havens. They found the Golden Goose and hoped to haul in much of the planet's wealth and like the huge investment banks, skim this for money to keep for themselves. This game has utterly and totally warped the globe's financial flows and as each year passed and more and more tiny entities played this destructive game, the more many bigger and bigger ones tried to join in the game. So miniscule postage-stamp sized detritus of the great European Empires thrived the last 20 years under the generous umbrella of the US naval empire.

This cute little game of intercepting wealth and parking it well outside of the larger nations and in particular, the huge, expensive American Empire, is directly responsible for a good portion of the present banking system collapse. Of course, the financiers and powerhouses of the US are directly responsible for this situation because they are the ones who persuaded most of these postage stamp entities, they would be most useful if they become a tax haven! The super-rich wanted these tiny tot sovereign nations as pirate coves and home bases for hiding their wealth. Once these places were set up, the rich poured in much of their wealth and thus, sent all the larger nations spiraling into deeper and deeper debts or higher and higher taxes. Due to bizarre notions about sovereignty and alliance, the rich who control the US government have managed to keep their private pirate coves free and clear of any interference, large or small.

The methodologies of the wealthy tax cheats in the US and Europe had a huge impact on these formerly very poor micro-countries. Many of them subsisted on fishing and some grazing animals. The Falkland Islands, Shetland, Jersey Islands, the Isle of Man, just for example, were of this sort. These backwaters became the Fountain of Wealth overnight. It is no surprise to me to see Iceland and Ireland do the same.

As the bag men for the very rich showed up at everyone's lonely shores, armed with great plans for setting up this marvelous alternative banking system, how could these poor fishers and herders say no? Of course not. They all jumped in with both feet.

Part of the dynamics of the total collapse of the financial systems of the West is due directly to this diversion of money flow. Instead of enriching the base of finance, it was undermined as money was diverted into the wrong places and in the wrong amounts. The flow started as a mere trickle post-Bretton Woods II. But as they discovered that the US government and certainly, Britain's government was easily corrupted, bribed or manipulated, the activity steadily grew. What was a small nuisance in 1985 grew into the present monster we see today. The previous postage stamp kingdoms like Monaco that subsisted on gambling turned into huge financial trafficking points. Once computers were fully installed within the world bankings system, funneling funny money became very simple. It didn't take much staff or facilities to do this. So some of the biggest modern banking destinations or centers are tiny islands with small offices and only a few computers and a handful of staff.

This strange, insecure, unregulated, ill-conceived system is now the biggest force in world banking outside of a very, very few central banks in Asia. This system is so poorly articulated, mere clerks working overtime in cubicles can warp billions of dollars of world trade values or the profits of many banks just by monkeying around with their computers in creative ways! This is sort of like running global finances using an army of monkeys randomly typing in numbers! 294733900128753.....on and on the numbers tally up. None of this is controlled by anyone sane. The bankers playing this game, unsupervised like naughty boys turned loose to play hookey in a thunderstorm, have happily splashed around, throwing frogs in the air while blowing them up with firecrackers.

Now the system is breaking down due to the numbers taking off and heading rapidly towards infinity. Iceland seems to be one of the first of these entities to go under. Let's visit Iceland to see why it is melting:

Some of Iceland's past economic history:

Iceland remained under Norwegian kingship until 1380, when the Royal House of Norway died out. Iceland and Norway came under the control of the Danish Crown. Unlike Norway, Denmark did not need Iceland's fish and homespun wool. This created a dramatic deficit in Iceland's trade, and as a result, no new ships for continental trading were built. The small Greenland colony, established in the late 10th century, died out completely before 1500, perhaps due to a lack of resources that were normally provided by Iceland.

With the introduction of absolute monarchy in Denmark in 1660, the Icelanders relinquished their autonomy to the crown, including the right to initiate and consent to legislation. Denmark, however, did not provide much protection for the Icelandic islands which were raided in 1627 by an Ottoman pirate fleet, which abducted almost 300 Icelanders into slavery (The Turkish abductions).
*snip*
In 1602 Iceland was forbidden to trade with other countries than Denmark, by order of the Danish Government. The Danish trade monopoly would remain in effect until 1854.

In the 18th century, climatic conditions in Iceland reached an all-time low since the original settlement. On top of this, the Laki volcano in Iceland erupted in 1783, spitting out three cubic miles (12.5 km³) of lava. Floods, ash, and fumes wiped out 9,000 people and 80 percent of the livestock. The ensuing starvation killed a quarter of Iceland's population.[1] This period is known as the Mist Hardship (Icelandic: Móðuharðindin).

Note how the King of Denmark locked Iceland into trade! All the empires in Europe did this. This fueled many wars. The point was to take a land captive and then force them to buy things at a great disadvantage. This way, the Kings of even very small empires could live outrageous lives in huge, fancy palaces and do as they pleased. The lack of interest in the lives and deaths of their victims is notorious. People who gain an upper hand over others tend to try for this blessed state of tyranny. Under this despotic rule, a great catastrophe happened which killed over 1/3rd of the people. This is not unusual at all, it is unfortunately, quite common. Note the disinterest of the British Crown or Parliament when the Irish suffered similar decimation under a similar ecological/natural disaster.

Certainly, not very many if any ships sailed from Denmark to Iceland to help. Indeed, all of Europe saw huge crop failures and various crop diseases during this time due to the volcanic activity in Iceland.

The German occupation of Denmark on April 9, 1940, severed communications between Iceland and Denmark. As a result, on April 10, the Parliament of Iceland, Alþingi, elected to take control of foreign affairs, electing a provisional governor, Sveinn Björnsson, who later became the republic's first president. During the first year of World War II, Iceland strictly enforced a position of neutrality, taking action against both British and German forces violating the laws of neutrality. On May 10, 1940, Operation Fork was launched and British military forces began an invasion of Iceland by sailing into Reykjavík harbour. The government of Iceland issued a protest against what it called a "flagrant violation" of Icelandic neutrality. On the day of the invasion, prime minister Hermann Jónasson read a radio announcement telling Icelanders to treat the British troops with the politeness due to guests. The Allied occupation of Iceland would last throughout the war.

At the peak of their occupation of Iceland, the British had around 25,000 troops stationed in Iceland, all but eliminating unemployment in the Reykjavík area and other strategically important places. In July 1941, responsibility for Iceland's defence passed to the United States under a U.S.-Icelandic defence agreement. The British needed all the forces they could muster closer to home and, thus, coerced the Alþingi into agreeing to an American occupation force. Up to 40,000 soldiers were stationed on the island, outnumbering all grown Icelandic men. (At the time, Iceland had a population of around 120,000.)

Following a referendum, Iceland formally became an independent republic on June 17, 1944. Since Denmark was still occupied by Nazi Germany, many[attribution needed] Danes felt offended that the step should have been taken at this time. Despite this, the Danish king, Christian X, sent a message of congratulations to the Icelandic people.

Naturally, the King wanted possession of that which his household had a poor history of stewardship! Also note how the US and England seized Iceland for war purposes! The history of doing this is obvious: no island nation can unilaterally destroy another nation's finances or commerce and not expect military retaliation. This is supposedly why we have our navy, for example. But as I keep pointing out, these tiny principalities are all being used by our own rulers who use them to evade paying their fair share in taxes or being regulated by our own just laws! Naturally, the last thing they want is for us to demand these wonderful pirate coves be closed down!

Iceland isn't a pirate cove, they are their own pirates! They discovered the wonderful utility of being a national bank and exploited this generously. This allowed them to create funny money to infinity. Of course, they tried to keep from that. But every year, the temptation to head off into infinity was an alluring prospect. Impossible to resist forever. So each year, the economic base of their banking system shrank more and more compared to the loans they were creating for themselves so they could go on a buying spree.

Iceland had prospered during the course of the war, amassing considerable currency reserves in foreign banks. The government, led by an unlikely three-party majority cabinet made up of conservatives (Sjálfstæðisflokkurinn), social democrats (Alþýðuflokkurinn) and socialists (Sósíalistaflokkurinn), decided to put the funds into a general renovation of the fishing fleet, the building of fish processing facilities, and a general modernization of agriculture. These actions were aimed at keeping Icelanders' standard of living as high as it had become during the prosperous war years.
The government's fiscal policies were strictly Keynesian, and their aim was to create the necessary industrial infrastructure for a prosperous industrialized country. It was considered essential to keep unemployment down to an absolute minimum and to protect the export industry, i.e. the fishing industry, by manipulation of the currency and other means. Due to the country's dependence both on unreliable fish catches and foreign demand for fish products, Iceland's economy remained very unstable well into the 1990s, when the country's economy was greatly diversified.

Up until the 1990's, Iceland was a working island. People built boats, went fishing, fought over fishing rights, they herded sheep and tapped into the energy of their volcanic forces. They diversified and exploited the education of their people and went heavily into biological sciences, for example. All of this was very good. But as I noted, the temptation to become super-rich playing sovereign wealth games using their hard-earned cash to create infinite loans was their downfall. A small population to keep happy enabled this. Low social overhead, little supervision, many people happy over the thought of all this easy money: temptation personified.

The Cod Wars were a series of conflicts between Iceland and the United Kingdom from the late 1950's to the mid-1970's. The first Cod War took place in 1958 when Britain was unable to prevent Iceland from extending its fishing limits from 4 to 12 miles (7 to 22 km) off the coast of Iceland. The second Cod War lasted from 1972 to 1973, when Iceland extended the limit to 50 miles (93 km). The third Cod War began in November 1975, when Iceland extended its zone of control over fishing from 50 miles to 200 miles (370 km). Great Britain did not recognize Iceland's authority in the matter and continued to fish inside the disputed area, marking the third time that Iceland and Great Britain had clashed over fishing rights. Iceland deployed a total of eight ships: six Coast Guard vessels and two Polish-built stern trawlers, to enforce her control over fishing rights. In response, Great Britain deployed a total of twenty-two frigates, seven supply ships, nine tug-boats and three auxiliary ships to protect its 40 fishing trawlers. While few shots were fired during the seven-month conflict, several ships were rammed on both sides, causing damage to the vessels and a few injuries to the crews.[1]

Events took a more serious turn occurred when Iceland threatened closure of the U.S.-manned NATO base at Keflavík, which, in the military perception of the time, would have severely impaired NATO's ability to defend the Atlantic Ocean from the Soviet Union. As a result, the British government agreed to have its fishermen stay outside of Iceland's 200 mile (370 km) exclusion zone without a specific agreement.[

Iceland was so poor, they were willing to take on the musty, bedraggled British Empire and go to blows over possession of some fish! Of course, one of the biggest entities playing this infinite money game is the moth-eaten Lion of England. Both Iceland and England's currencies shot up in value. Real estate shot up in value. Wealth poured into their coffers and more loans were made based on this surge in wealth! And endless loop around the planet ends with money flowing into these island coffers. And seemingly impossible to stop or change.

Click here for information about global fishing: Regulating the Global Commons – Part I

To stop the oceans from being fished out, sovereignty must be reigned in

Just as there are a finite number of fishes in the sea, there is a finite level for money creation. When this is violated, instead of there being more fishies or more money each year, suddenly, the spawning of money ceases and the fishes vanish, too! Overfishing like over-lending is hazardous. All the tax haven islands and principalities are in heavy competition with each other to grant favors and allow dangerous money making for the pirates and rulers. In other words, everyone is forced to bid against each other to attract people seeking to channel wealth away from the world's democracies and empires and into hiding places. As these places proliferate, the schemes proliferated. Since a devilish system of money governance that is all about anarchy and evasion as well as fraud can't last long, we are seeing it die a swift death after less than 30 years of growth.

There is a side issue concerning the blow up of volcano Laki:

An Explosive History

Most notably, Iceland is the site of the largest lava flow in recorded global history. In 1783, an eruption at a mountain called Laki tore a chain of giant craters in the earth. Besides releasing 2.9 cubic miles of lava and inundating 218 square miles of land, the craters also belched a haze of toxic particles into the air, which was reported as far away as Syria. The poisoned air devastated Iceland's livestock and farmland, contributing to a famine that killed about a quarter of the island's residents.

My very favorite American, Ben Franklin, was in Paris negotiating with the French Crown during this time.

Super-eruptions: global effects and future threats

Report of a Geological Society Working Group

"There seems to be a region higher in the air over all countries, where it is always winter, where frost exists continually, since, in the midst of summer on the surface of the earth, ice falls of ten from above in the form of hail... During several of the summer months of the year 1783, when the effect of the sun’s rays to heat the earth in these northern regions should have been greatest, there existed a constant fog overall all Europe and great part of North America. This fog was of a permanent nature; it was dry, and the rays of the sun seemed to have little effect towards dissipating it, as they easily do a moist fog, arising from water..."The cause of this universal fog is not yet ascertained,…: or whether it was the vast quantity of smoke, long continuing to issue during the summer from Hecla in Iceland, or that other volcano…..”

Extracts from Meterological Imaginations and Conjectures, by Benjamin Franklin, LL.D., Fellow R. Soc., and Acad. Reg. Sci. Paris Soc. etc., Communicated by Dr. Percival Read December 22, 1784, to the Manchester and Liverpool Philosophical Society. Franklin was in Paris, France, in the summer of 1783 as U.S. Ambassador to France.

One impact of the Laki gas and aerosols over the U.K. during 1783 was to increase deaths, possibly due to respiratory disorders, as shown by map of distribution of English parishes experiencing “Crisis Mortality”, much-above-average numbers of deaths per month, during the Laki fissure eruption.

The resulting famines, poisoning of farm animals, cold winters and wet summers led directly to the French Revolution. The fatal combination of heavy debts, agricultural collapse and revolutionary thought from the Americans doomed the French aristocrats.

Today, we are watching with fascination as the whirlwind of banking collapse collides with other important historical forces to change the history of humanity. Now, let's visit the central banks of the Great Nations, the G7's top powers:

Here are the actual Fed Reserve numbers:

Note that the 'non-borrowed' numbers went from positive to negative. Note also how the negative numbers rise and rise. And then jump over the moon! And see the Term Auction Credit, the magic window for the bankrupt financiers to use to prop up their failed banks! It not only has lots of billions of dollars pouring out, it too, is going up and up each week. The banking crisis is accelerating, not ending!

The simplistic joy on Wall Street today over the infantile notion that the crisis is over now that the Fed is trying to pass a coup through Congress is pathetic, to put it mildly. This is exactly 100 years after the Fed was created in a conspiracy of the top bankers and financial owners of huge hunks of the American economy. They didn't want to compete, they wanted to CONSPIRE. And now they are CONSPIRING yet again to take even more of our economy and control it FOR THEMSELVES! They have been an abject failure at helping our nation in the past. Now they are openly looting it ruthlessly. Let's visit one of my favorite fellow bloggers:

The Financial Ninja:

With the credit crisis entering its ninth month, Bank of England Governor Mervyn King and European Central Bank President Jean-Claude Trichet are on the verge of new steps to spur lending and increase liquidity, say economists at Lloyds TSB Group Plc and Royal Bank of Scotland Group Plc. Interest-rate cuts may be next if the crisis persists.”

Oh dear god! THE GREAT GLOBAL MONETARY EASING is yet to come? I thought we just came off ‘the great global monetary easing’ and that THAT is exactly what got us into this mess in the first place! Correct me if I’m wrong, but wasn’t it absurdly low REAL rates that literally forced the entire financial system to REACH FOR YIELD? That is to say to leverage up using derivatives in a vain attempt to turn something yielding 2% or 6% into something closer to 9%? Wasn’t it the super cheap and EASY access to credit by both individuals and corporations that lead to runaway SPECULATION in hard assets such as REAL ESTATE?

Instead of allowing for an orderly and DESERVED unwinding, de-leveraging and general deflation of this mania, the major Central Banks of the world propose to co-ordinate a new round of monetary EASING? Brilliant. Just brilliant.

“The Fed chairman needs all the help he can get. In addition to lowering interest rates at the fastest pace in two decades, Bernanke has committed as much as 60 percent of the $700 billion in Treasury securities on his balance sheet to expand lending. The Fed has also offered a $29 billion loan against illiquid securities to assist the buyout of failing securities firm.”

HAHAHA. Correct! I bet the Financial Ninja hangs under the rafters, watching these shoguns count their loot. He waits and then springs....

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Reviving the R.T.C.; The next Big Plan from the Bernanke Politburo

March 31, 2008

by Mike Whitney

"Instead of just propping up bankrupt banks, the governments should be democratising them - mobilising their assets to stimulate the productive economy, repairing infrastructure, researching and developing new markets, and refitting western economies to combat climate change." Iain MacWhirter, "The Red Menace"

The Federal Reserve is presently considering an emergency operation that is so risky it could send the dollar slip-sliding over the cliff. The story appeared in the Financial Times earlier this week and claimed that the Fed was examining the feasibility of buying back hundreds of billions of dollars of mortgage-backed securities (MBS) with public money to restore investor confidence and clear the struggling banks' balance sheets. The Fed, of course, denied the allegations, but the rumors abound. Currently the banking system is so clogged with exotic investments, for which there is no market, they can't perform their main task of providing credit to businesses and consumers. Bernanke's job is to clear the credit logjam so the broader economy can begin to grow again. So far, he has failed to achieve his objectives.

[ELAINE: I'm sorry, but the busy beavers in the Federal Reserve LLP CREATED this logjam in the first place. They did this because they wanted to make their buddies in the banking/investment world very rich. And this was done to create support for bizarre, stupid wars in the Middle East. And the oil con men in places like Texas dearly wanted these wars so they could raise the price of oil globally and make a killing. And so all these guys destroyed the dollar and our economy as well as wrecked our military. Indeed, this logjam is on a river of red ink. That is still flowing even as it is like the ancient maps showing ships sliding off the side of the flat earth. And is it no wonder that the buddies of Bernanke and Greenspan, like Friedman, love to talk about the 'Flat Earth'? HAHAHA. Flat as the World Trade Center.]

Since September, Bernanke has slashed interest rates by 3 percent and opened various auction facilities (Term Securities Lending Facility, the Term Auction Facility, the Primary Dealer Credit Facility, and the new Term Securities Lending Facility) which have made $400 billion available in low-interest loans to banks and non banks. He has also accepted a “wide range” of collateral for Fed repos including mortgage-backed securities and collateralized debt obligations (CDOs) which are worth considerably less than what the Fed is offering in exchange. But the Fed's injections of liquidity have not solved the basic problem which is the fall in housing prices and the persistent downgrading of mortgage-backed assets that investors refuse to buy at any price. In fact, the troubles are gradually getting worse and spreading to areas of the financial markets that were previously thought to be risk-free. The credit slowdown has also put additional pressure on hedge funds and other financial institutions forcing them to quickly deleverage to meet margin calls by dumping illiquid assets into a saturated market at fire-sale prices. This process has been dubbed the “great unwind”.

In the last six years, the mortgage-backed securities market has ballooned to a $4.5 trillion dollar industry. The investment banks are presently holding about $600 billion of these complex debt instruments. So far, the banks have written-down $125 billion in losses, but there's a lot more carnage to come. Goldman Sachs estimates that banks, brokerages and hedge funds will eventually sustain $460 billion in losses, three times greater than today. Even so, those figures are bound to increase as the housing market continues to deteriorate and capital is drained from the system.

The Fed has neither the resources nor the inclination to scoop up all the junk bonds the banks have on their books. Bernanke has already exposed about half of the Central Bank's balance sheet to credit risk. ($400 billion) But what is the alternative? If the Fed doesn't intervene, then many of country's largest investment banks will wind up like Bear Stearns; DOA. After all, Bear is not an isolated case; most of the banks are similarly leveraged at 25 or 35 to 1. They are also losing more and more capital each month from downgrades, and their main streams of revenue have been cut off. In fact, many of Wall Street's financial titans are technically insolvent already. The generosity of the Fed is the only thing that keeps them from bankruptcy.

[ELAINE: Some of these 'banks' have been around since the Gilded Era when corruption and power politics destroyed US democracy. Why on earth should we save J.P. Morgan's outfit? It is one of the FOUNDERS, nay, the CHIEF INSTIGATOR of the Federal Reserve's creation. Old J.Pirate Morgan owned Jekyll Island where the coup was plotted. If that pernicious organization were to fall, it would be like seeing the Mafia defeated. About time! But since J.P. owns the Fed, this Mafia group will use it to save THEMSELVES while dumping the rest of us overboard. One trick is for the Fed to seize all the savings in America via instituting 1% lending again which means no one saves money if they put their savings in any banks! They will be forced to hand it over the the J.PIRATES who will then make it 'grow' by using it to invest after taking their 20% profit off the top. I.e.: this is bankrobbery and the robbers are the BANKERS.]

It's generally accepted that the market for MBS will not improve until housing prices stabilize, but that's a long way off. Mortgages are the cornerstone upon which the multi-trillion dollar structured investment market rests, and that cornerstone is crumbling. If housing prices continue to fall, the MBS market will remain frozen and banks will fail; it is as simple as that. No one is going to purchase derivatives when the underlying asset is losing value. The Bush administration is pushing for a “rate freeze” and other clever ways to keep homeowners from defaulting on their mortgages, but its a hopeless cause. The clerical work needed to change these complex mortgages is already proving to be a daunting task. Plus, since 60 percent of these mortgages were securitized, it is nearly impossible to change the terms of the contracts without first getting investor approval; another fly in the ointment.

Also, the tentative plans to expand Fannie Mae and Freddie Mac, so they can absorb larger mortgages (up to $729,000 jumbo loans) is putting an enormous strain on the already-overextended GSE's. By attempting to reflate the housing bubble, the administration will only increase the rate of foreclosures and put the two mortgage behemoths at risk of default without any clear sign that it will help.

[ELAINE: but the savior will be the Fed. They will become the owner/landlords of most American homes. Isn't that SWEET? My ancestors ruled their baronies in Europe quite contentedly. Oppressing the peasants, making extractions, meddling in their housing affairs, kicking them out again if we decided to use the land for grazing sheep rather than raising wheat, etc. This is called 'feudalism' and if Americans are stupid, they will fall for these schemes being cooked up to 'save' them from things the Fed created in the first place.]

Yesterday's release of the Case/Schiller Index of the 20 largest cities in the country, shows that housing prices have slipped 10.7 percent in the last year while sales were down 23 percent year over year. That means that retail equity of US homes just took a $2 trillion haircut. Still, prices have a long way to go before they catch up to the 50 percent decline in sales from the peak in 2005. From this point on, prices should fall and fall fast; following a trajectory as steep as sales. Many economist expect housing prices to drop at least 30% (Paul Krugman and G-Sax) which means that $6 trillion will be shaved from aggregate home equity. In a slumping market, many homeowners will be better off just “walking away” from their mortgage instead of making payments on an asset of steadily decreasing value. Who wants to make monthly payments on a $500,000 mortgage when the current value of the house is $350,000? It's easier to pack the kids and vamoose then waste a lifetime as a mortgage slave. Besides, the Bush administration has no interest in helping the little guy stay out of foreclosure. Its a joke. All of the rescue plans are designed with just one purpose in mind; to save Wall Street and the banking establishment. Period.

There is a widespread belief that Bernanke has been proactive in addressing the turmoil in the credit markets. But it's not true. The Fed chairman has simply responded to events as they unfold. The collapse of Bears Stearns came just weeks after the SEC had checked the bank's reserves and decided that they had sufficient capital to weather the storm ahead. But they were wrong. The bank's capital ($17 billion) vanished in a matter of days after word got out that Bear was in trouble. The sudden run on the bank created a risk to other banks and brokerages that held derivatives contracts with Bear. Something had to be done; Rome was burning and Bernanke was the only man with a hose.

[ELAINE: Wrong instrument! Bernanke was holding the VIOLIN. And sawing away like mad. The smell of Bears Stearn's goose being cooked attracted the three headed hell hounds and the pirates who founded the Fed and who basically run it. So it took a mere phone call to arrange the dining room and to get the chef, Bernanke, to cook and carve up the Bear. The media wants us to think this is the other way around. It is NOT.]

According to the UK Telegraph: “Bear Stearns had total (derivatives) positions of $13.4 trillion. This is greater than the US national income, or equal to a quarter of world GDP - at least in "notional" terms. The contracts were described as "swaps", "swaptions", "caps", "collars" and "floors". This heady edifice of new-fangled instruments was built on an asset base of $80bn at best.

On the other side of these contracts are banks, brokers, and hedge funds, linked in destiny by a nexus of interlocking claims. This is counterparty spaghetti. To make matters worse, Lehman Brothers, UBS, and Citigroup were all wobbling on the back foot as the hurricane hit.

"Twenty years ago the Fed would have let Bear Stearns go bust," said Willem Sels, a credit specialist at Dresdner Kleinwort. "Now it is too interlinked to fail." (Ambrose Evans-Pritchard, UK Telegraph)

[ELAINE: And this is the fearsome Derivatives Beast who lives in the Cave of Death. Slaying it is a no-no. The dwarves have to first find some Siegfried to do the dirty work. When he kills the Dragon, it will tell him the truth and he will go out and seek to kill Wotan, the dwarves and everyone in his path. This is called 'World War III.']

Bernanke felt he had no choice but to step in and try to minimize the damage, but the outcome was disappointing. Bernanke and Secretary of the Treasury Henry Paulson worked out a deal with JP Morgan that committed $30 billion of taxpayer money, without congressional authority, to buy toxic mortgage-backed securities from a privately-owned business that was failing because of its own speculative bets on dodgy investments. Wow. The transaction turned out to be bad for shareholders, bad for employees and bad for taxpayers. It made the Federal Reserve look like the unelected and unaccountable oligarchy of bankster sharpies they really are. The only people who made out were the investors who were holding derivatives contracts that would have been worthless if Bear went toes up.

[ELAINE: HAHAHA. Bernanke had no choice? This creep knows just as well as I, what the hell is going on. But he has to enrich and protect the CRIMINALS who are wrecking America. This is because he is a TRAITOR. And should be arrested. Along with Greenspan. The $30 billion is a raid on the Treasury arranged by Paulson who happens to be a PIRATE, himself. And should be treated like pirates: captured and hung. And duh! The other people in this deal were all destroyed. But not the TOP GUYS who OKed this deal. They, being pirates, were happy to abscond with their multimillions. They sold out long before this.]

Still,the prospect of a system-wide derivatives meltdown left Bernanke with few good options, notwithstanding the moral hazard of bailing out a maxed-out, capital impaired investment bank that should have been fed to the wolves.

It is worth noting that derivatives contracts are a fairly recent addition to US financial markets. In 2000, derivatives trading accounted for less than $1 trillion. By 2006 that figure had mushroomed to over $500 trillion. And it all can be traced back to legislation that was passed during the Clinton administration.

“A milestone in the deregulation effort came in the fall of 2000, when a lame-duck session of Congress passed a little-noticed piece of legislation called the Commodity Futures Modernization Act. The bill effectively kept much of the market for derivatives and other exotic instruments off-limits to agencies that regulate more conventional assets like stocks, bonds and futures contracts.

Supported by Phil Gramm, then a Republican senator from Texas and chairman of the Senate Banking Committee, the legislation was a 262-page amendment to a far larger appropriations bill. It was signed into law by President Bill Clinton that December.” (“What Created this Monster” Nelson Schwartz, New York Times)

[ELAINE: Clinton was paid back quite handsomely. Note how his dear wife is being rewarded.]

Now the investment giants are lashed together by trillions of dollars of unregulated counterparty swaps. If one bank fails, it could domino through the whole system. Bernanke now finds himself in the unenviable position of having to make sure that all the equity bubbles are properly inflated so the banking system doesn't suddenly come crashing to earth. Meanwhile, the tumbling housing market has paralyzed the corporate bond and structured investment markets which means that Bernanke's job will get much harder, if not impossible.

[ELAINE: Bernanke's job is lookout man and get away car driver. He probably has to use Mapquest to plot his elaborate run from the cops. The cops being probably the Chinese and maybe even the Canadians! Only Canada has, as the guy in charge of their own banking system, a pirate from Goldman Sachs. So they can also kiss their assets goodbye.]

The Fed chief is now facing a number of brushfires that will have to be put out immediately. The first of these is short term lending rates, which have stubbornly ignored Bernanke's massive liquidity injections and continued to rise. The banks are increasingly afraid to lend to each other because they don't really know how much exposure the other banks have to risky MBS. This distrust has sent interbank lending rates soaring above the Fed funds rate to more than double in the past month alone. So far, the Fed's TAF hasn't helped to lower rates, which means that Bernanke will have to take more extreme measures to rev up bank lending again. That's why many Fed-watchers believe that Bernanke will ultimately coordinate a $500 billion to $1 trillion taxpayer-funded bailout to buy up all the MBSs from the banks so they can resume normal operations. Of course, any Fed-generated scheme will have to be dolled up with populous rhetoric so that welfare for banking tycoons looks like a selfless act of compassion for struggling homeowners. That shouldn't be a problem for the Bush public relations team.

[ELAINE: Oh, they trust each other! They conspire with each other. Oops, they backstab each other, too! Never mind. One thing is certain: they can't 'lend' to each other for the simple reason: THEY ARE FUCKING BANKRUPT!!!!! There is no money there.]

The probable solution to the MBS mess is the restoration of the Resolution Trust Corp., which was created in 1989 to dispose of assets of insolvent savings and loan banks. The RTC would create a government-owned management company that would buy distressed MBS from banks and liquidate them via auction. The state would pay less than full-value for the bonds (The Fed currently pays 85% face-value on MBS) and then take a loss on their liquidation. “According to Joseph Stiglitz in his book, Towards a New Paradigm in Monetary Economics, the real reason behind the need of this company was to allow the US government to subsidize the banking sector in a way that wasn't very transparent and therefore avoid the possible resistance.”
The same strategy will be used again. Now that Bernanke's liquidity operations have flopped, we can expect that some RTC-type agency will be promoted as a prudent way to fix the mortgage securities market. The banks will get their bailout and the taxpayer will foot the bill.

[ELAINE: They can't have a Resolution anything due to the hard fact, they have to first declare bankruptcy. This is why they are scheming like mad to create a new system that lets them float over this fact. They need to tap into the public purse to bankroll their reserves!]

The problem, however, is that the dollar is already falling against every other currency. (On Wednesday, the dollar plunged to $1.58 per euro, a new record) If Bernanke throws his support behind an RTC-type plan; it will be seen by foreign investors as a hyper-inflationary government bailout, which could precipitate a global sell-off of US debt and trigger a dollar crisis.

Reuters James Saft puts it like this:

“It is also hugely risky in terms of the Fed's obligation to maintain stable prices.... it could stoke inflation to levels intolerable to foreign creditors, provoking a sharp fall in the dollar as they sought safety elsewhere.” (Reuters)

Saft is right; foreign creditors will see it as an indication that the Fed has abandoned standard operating procedures so it can inflate its way out of a jam. According to Saft, the estimated price for this folly could be as high as $1 trillion dollars. Foreign investors would have no choice except to withdraw their funds from US markets and move them overseas. In fact, that appears to be happening already. According to the Wall Street Journal:

"While cash continues to pour into the U.S. from abroad, this flow has been slowing. In 2007, foreigners' net acquisition of long-term bonds and stocks in the U.S. was $596 billion, down from $722 billion in 2006, according to Treasury Department data. From July to December as jitters about securities linked to US subprime mortgages spread, net purchases were just $121 billion, a 65% decrease from the same period a year earlier. Americans, meanwhile, are investing more of their own money abroad.” ("A US Debt Reckoning" Wall Street Journal)

$121 billion does not even put a dent the $700 billion the US needs to pay its current account deficit. When foreign investment drops off, the currency weakens. Its no wonder the dollar is falling like a stone.

Bernanke should seriously consider the consequences of his next move before he acts. Once the dollar starts to free-fall, there's no telling where it will land.

[ELAINE: The elimination of the dollar is obvious. What on earth is the Amero, anyway? Our main trading partners all put tons of dollars in their FOREX reserves and now we will destroy these reserves by forcing them to turn over the money and have it revalued in the new, lesser currency. Back when Germany and Japan revalued their currencies with the dollar, each time, the dollar cutting its value by 50%, they had few dollars held in government accounts. Today, their central banks hold trillions of dollars along with China, all the oil selling nations and quite a few others. So forcing them to turn over the dollars with a 50% or greater haircut, is a VERY REAL possibility. Indeed, this is in lieu of another Bretton Woods Accord!

The only thing keeping this from happening is our need to not stab both Mexico and Canada in the back. So the Amero is the solution. Both of these nations will get a 1:1 exchange of their banking holdings of dollars or they will turn off the oil taps. This program has many dangerous side issues. One is, we still consume way too much oil and Mexico and Canada can't supply it all. And China might make a deal with the other oil pumping nations locking us out! Thus, the military option rears its ugly horned head.

The temptation to launch WWIII will be very strong for the US. The US is between a rock and a frying pan. Or rather, we will be a rock in a fire. The Amero solution is still very, very iffy. I would surmise that the northern half of the US might be sorely tempted to join with Canada and shove off from the strange political practices of the southern half of the country. I know that I would probably vote for something like this if the south keeps voting into office jerks like the Bushes. But then, voting for war mongers who pay no attention to the finances is a plague on all of our states at this point. It is just a lot of work, moving further north. Heh.

In economic chaos, countries do change their borders, sometimes, very rapidly.]

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Loans For College Collapse And Vanish

March 31, 2008

Elaine Meinel Supkis

Banks have ceased to lend money to students. Even with government guarantees. This will have a very vile ripple effect. Many colleges will go bankrupt this year if their incoming student body vanishes. Meanwhile, Congress will debate yet another $100 billion emergency spending bill for the hyper-expensive war in Iraq that is costing us trillions of dollars. Congress also must debate the 200 page reoranization bill handed over by the right wing neo cons who plan to destroy America. Anyone who OKs anything this gang does is insane or a traitor. Arrest the neo cons for wrecking our nation. Treason can be the charge.

US credit crunch hits education as banks abandon student loans

One of America’s leading banking associations has given warning that the United States faces a growing educational apartheid as some lenders withdraw from student loans amid new evidence that the credit crisis has spread across all types of borrowing.

In the past fortnight, some banks, including HSBC, have pulled out of the $85 billion (£42 billion) a year US student loans market, fuelling anxiety that the turmoil that hit debt markets on Wall Street last summer is spilling over into the wider economy and making credit more difficult to secure for ordinary American households.

In the US, many undergraduates take out a federal guaranteed loan and top up their financial needs with a private loan from lenders such as Bank of America, JPMorgan Chase and Citi-group. In the academic year 2005-06, $17 billion in private student loans was used to finance higher education.

Banks have become reluctant to offer private student loans because worsening credit conditions have meant that they cannot package up the loans and sell them on.

All over the mainstream media, I read stories about the hopes of the investment community that the collapse of the US banking/economic system is finished and life will return to 'normal'. 'Normal' being 'continuous financial overruns, oceans of red ink' status quo normalcy. When any great economic system finally collapses, there is this raging desire to regain the worse aspects of the previous system. This desire is tremendously strong in empires. Since they are accustomed to ignoring reality, they figure, why not ignore it forever? In normal downturns, the investing classes constantly chatter about how things are turning around rapidly. When it takes longer than a year, they grow glum and then angry. But the first year of any collapse, they love to pretend this time will be short and the pain, a mere pin prick.

History, on the other hand, views this with her usual grim amusement and the picks up her bloody pen to scratch more painful news into the unscrolling parchment of Reality Biting. The news at the top of the story today infuriates me [how UNUSUAL!!! HEH.] Here we are, Congress is going to begin 'debating' the latest spending bill for IRAQ. The bill for this misbegotten, miserable war, is heading towards the trillions of dollars. The price of oil before this invasion was less than $50 a barrel. The collapse of our 'in the red' economy has gone off the cliff thanks to the high cost of oil and war spending. Every time Congress has to consider shutting the public purse to this wild, useless spending, they do the opposite.

They are afraid of being called 'traitors'. Well, I have something to say about that: they are ALL TRAITORS if they stupidly vote to keep on this useless, wild spending! Instead of educating our youth, we are spending hideous sums to kill Iraqis. Public education post high-school is now going to collapse due to the inability to spend public money on important things like the education of our youth. My own family is being hammered by this. The availability of government loans to students has collapsed in the last 7 years. As inflation has eaten away at these funds ability to cover 4 years of college, students had to go to banks for supplementary loans. Now, these are vanishing! Poof!

This directly hits my own children. Now, colleges will see registrations vanish next fall as even more students cannot get loans. This collapse is EASY TO FIX. All we have to do is have Congress decide to vote for the AMERICAN PEOPLE and FUND the education of OUR CHILDREN. And they can easily do this by cutting totally, every penny going to the misbegotten Iraq war! Sadr just called a ceasefire which was brokered by Iran. Iran has won this war. Iran can do what Iranians love to do: make fun of us as they chase us out of Shi'a lands. But what else do we expect? We want the Chinese chased out of Tibet, after all!

So we can go! Goodbye! The Shi'ites are perfectly capable of running their own affairs. Perhaps, if our collective brains kick in, we can realize doing business with the Persians has an upside: both we and they will do much better. Eh?

Instead, our educational system will now collapse. The loss of these loans will HAMMER our educational system ferociously. The wave of cut backs in colleges will be disastrous and deep. And what was all that garbage from those flat earth flat worms like Friedman and his six months, all will be well in Iraq?

Stomp on them! Feed them to robins. Robins came to my mountain looking for worms. I will send them to the New York Times to eat.

G7 to press big banks to reveal extent of credit crunch losses

The world’s big banks are to face stronger demands from finance ministers and central bankers of the Group of Seven (G7) leading economies to declare the full scale of their exposure to losses from the US housing market slump and the global credit crunch.

The G7 move comes after the Financial Stability Forum (FSF), the policy group of leading economies’ finance ministries, regulators and central banks, said at the weekend that lack of clarity over the extent of banks’ losses is worsening the credit crunch.
*snip*
The warning from G7 meanwhile came as the Basle-based FSF finalised a report to G7 finance ministers on responding to the credit crisis, including recommendations for toughening regulation and scrutiny of financial institutions and markets.

The banking collapse continues. This isn't due to some small problem. It is a systematic failure that can't be fixed by some simple jiggering of interest rates. Since the ultimate reason is a lack of savings coupled with wild spending and irresponsible debt creation in order to fund imperial adventures, fixing this collapse is no easy thing. When banks issue too many debts to kings and emperors, when those guys default and they always do, the banking system collapses. From the earliest days in history to modern times, these collapses are as inevitable as the sun rising or setting.

This 'lack of clarity' isn't a symptom. It is a cause. And the way to tackle this issue is easy: you arrest the people who devised financial systems and instruments that are concealing the truth. We call people who make such things 'con men' or 'rip off artists.' And the sole reason for making anything impossible to trace, explain or understand is simple: it is to hide frauds. In the case of the explosion in new instruments that were made of bad debts, the opacity was to hide the TRUTH about the quality of these underlying loans. And the people engineering this knew this perfectly well. They thought, no one would figure out that these tricks we are playing have diluted the true value of these things we are selling.

Note that Goldman Sachs even boasted about betting that these instruments would fail even as they sold them to outsiders who had no idea that a ton of pure junk, utter garbage, had been parked inside of AAA rated instruments! So I say, arrest these guys. The top ones have many millions in profits from this fraud. Governments can use these profits to fund education for our youth.

Trichet, King May Support Fed as Ammunition Runs Low

Federal Reserve Chairman Ben S. Bernanke has so far shouldered most of the burden of saving the global economy and financial markets. He may be about to get more help.

With the credit crisis entering its ninth month, Bank of England Governor Mervyn King and European Central Bank President Jean-Claude Trichet are on the verge of new steps to spur lending and increase liquidity, say economists at Lloyds TSB Group Plc and Royal Bank of Scotland Group Plc. Interest-rate cuts may be next if the crisis persists.

``We're inching closer to the great global monetary easing,'' says Joachim Fels, co-chief economist at Morgan Stanley in London.

Lloyds predicts King's next step will be to accept more types of collateral for loans. Trichet will pump more money into banks, RBS forecasts. Such measures would take Europe's two biggest central banks further down the path laid out by Bernanke this month.

To save this corrupt banking/investing system set into motion by con artists, the central banks will now drop interest rates to 0%. But they will not be funding student's loans at that rate! Which is why I am calling for no loans but rather, GRANTS to our young people. Education is supposed to pull us out of our post-industrial wasteland and into intellectual pursuits. And note how this article talks about BERNANKE 'shouldering the burden.' This idiot isn't shouldering anything. He is imitating the Bank of Japan. Super-cheap loans to governments and exporters, no money for the working classes. Note that this hasn't helped the lower classes of Japan! And in the US, wages are dropping, access to higher education is being strangled, we have no idea how to deal with all this!

One thing is certain: imitating Japan will put the entire planet into a depression. As I often point out. Japan has the 0% regime, super-low import regime down pat. If everyone locks out the import of high-value materials like Japan has, we will have no world trade except in commodities. If that! But the G7 nations focus only on China with fatal results to world trade. Europe and Japan wanted the US to drop interest rates so America can buy more of their exports. The US can't afford to do this. In Japan, I read yesterday that a Japanese airline is going to start buying only planes from Mitsubishi who is going back into the business. Japan bought American and European planes for many years as a counterbalance to the car trade which is totally one way from Japan to the outside world.

Now that they rule the roost internationally, they are now going to rebuild their aviation industry. They US trade statistics with Japan would be near $0 going to Japan while Japan exports $30 billion to the US. We have to deal with this one-way trade just as we have to cease our imperial overreach and wasteful wars. Our G7 buddies want us to continue all this. They are our TRADE RIVALS and they are BEATING US UP.

Stock Markets Call Bluff of Asian `Decoupling': Andy Mukherjee

The four best-performing Asian markets have been Taiwan, Pakistan, Thailand and Sri Lanka, posting modest gains of between 2 percent and 8 percent in U.S. dollar terms.

Is this the Asian ``decoupling'' that global investors had so fondly hoped for? Weren't the larger and faster-growing economies of China and India supposed to shield investors from the mortgage- and credit-related financial crisis in the U.S.?
*snip*
The winners' story is much more remarkable, especially when you consider that the quarter began with a heightening of political risk in two out of these four markets and -- at least at the time -- a far-from-certain process of reduction of the same risk in the two remaining ones.

In other words, the biggest investing houses that fueled our financial collapse are STILL running after Miz Risky! Countries that are politically unstable, outright insurrections, even, are the 'best bets.' This is due to the higher interest rates for loans in these unstable places. So money is flowing there. Is this a good idea? Or total insanity? Obviously, anyone who screams, they want safety only to take the government-sponsored loans from the Fed Reserve window and then rush off to the most dangerous parts of the planet to watch it 'grow' is...insane.

Weird interest rates

Continuing the discussion about the weird (and worrying) state of the financial markets, here’s a picture showing just how strange things are. Normally, we just say that the Fed sets “short-term interest rates,” because all very short rates are about the same. Below is the Fed funds target rate and the one-month Treasury bill rate; they’ve always been right on top of each other.

Always, that is, until now. Treasury rates have plunged close to zero, even though Fed funds is still 2.25%. Since open-market operations take place in Treasuries, I take this to mean that the Fed may not actually be able to reduce short-term rates much from current levels — which means, in turn, that conventional monetary policy has been taken off the table. As Brad says, be afraid — be somewhat afraid.

All the charts and graphs show the same thing: off the cliff. This is scary. Because this is a sign we are going into a depression. Commodities shot up right before the Great Depression and the previous Long Depression. This is a symptom of an impending depression. Once the higher commodities eat up domestic budgets and industry struggles to pay for higher material costs by CUTTING LABOR just like they just did in Japan for 15 years, we get a dead market due to workers unable to buy anything but the barest necessities. Depressions are all about necessities. And as commerce ceases, the prices of commodities falls, of course.

As we are beginning to see, barely. The instability in the commodities markets is proof that the buying ability of billions of workers is now beginning to be sopped up and will end up eating up all the incomes of the mass of humanity. Then, money becomes precious since workers will be cut out of the money stream. money is wealth ONLY if it moves. This includes gold. If it sits in a vault or underground or in a deep cave under some Dragon, it is no longer wealth. It is a dead horde, a grave.

This process of defunding workers has been going on for a while. Workers in Asia have, outside of Japan, seen their finances going up and up. But now, all nations will see their workers lose ground. And the more they lose purchasing power, the more the depression will hammer world economies. 0% interest rates won't increase the buying power of workers seeing their wages collapse and jobs vanishing.

Long Fight Ahead for Treasury Blueprint

Lawmakers and regulators said yesterday that an ambitious plan by the Treasury Department to revamp the nation's decades-old financial regulatory structure could require congressional action stretching over several years and would not help the economy out of its current credit crisis.

Battle lines are already forming over Treasury's major proposals even though top officials have just begun to digest the 200-page regulatory blueprint, which was released to them late Friday night.

Some Democrats and consumer groups criticized the plan for serving the needs of financial markets but not consumers. Former and current regulators hinted at a likely fight over proposals to strip authority from agencies such as the Securities and Exchange Commission, and the head of another imperiled body, the Office of Thrift Supervision, was dismissive of the Treasury blueprint in an e-mail Friday to his employees. Other officials worried whether the effort to streamline financial oversight would lead to a massive disruption and elimination of positions across the federal government.

The bulls and bears in Congress will tussle over this. It won't pass, of course. First of all, the power structure is in flux there. And we may have a new President soon, I hope. Clinton's candidacy is now fading fast. People realize, she can't win through hook or crook. And the flurry of negative news about Obama's pastor is fading fast, too, as the economic whirlwind rapidly destroys more sectors of our economy. People are increasingly focused on the economy. And McCain's hope to bomb, bomb, bomb, bomb Iran and Iraq is going to be shoved aside in favor of 'hell, we have to save ourselves!' just as the Vietnam war abruptly ended not due to student uprisings or our inner cities burning but due to bankruptcy. Our economy was collapsing and we had to save ourselves. Our puppets in Vietnam had to fend for themselves.

If Obama is being advised by Volker, there is some hope we will avoid the 0% deflationary trap. One can only hope.

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Kent's Sugar House, Berlin, New York

Kent's Sugar House, Berlin, New York

March 30, 2008

Elaine Meinel Supkis

Instead of worrying about the world, I went off this lovely Sunday to visit one of my neighbor's businesses. Kent's Sugar House produces all the maple syrup we use at home. We love this product and are always fascinated to visit the Kent family as they manufacture their syrup the old fashioned way. They also are a part of Americana that we all adore: hard working people who make wonderful things, often, by themselves. So sit back and enjoy one of the most wonderful things in spring in the Northeast. Mud season is bearable if we can have maple syrup the rest of the year.

Note: click on all images to enlarge.

Our road up the mountain turns to mud. Mud as bad as that which bogged down Napoleon and Hitler's armies in Russia. When the snow melts and runs into the ground, it turns to mud. Mud deeper than the axels of our one ton truck. But when we look out at all this mud which covers our boots and the paws of the dogs and which discourage the cats who look in disgust at the mess, we see the first signs of spring. The trees 'thicken'. Instead of thin, delicate branches waving in the howling winds, covered with snow or black against the snow, the filigree of the forest blushes pink and the trees look fatter. For the sap is rising!

Being smarter than humans, the trees know to retreat in winter. They shed their leaves swiftly after a lovely display of amazing colors which are all the colors of the rainbow, they then hunker down for winter. The sap leaves the branches and travels down into the roots which dig deep under the rocks left behind by glaciers. There, under the earth and snow, the sap sits and waits and waits. While it waits, it gets concentrated. Unlike in summer, when it rushes to the outermost leaves to feed the chlorophyll in the leaves, it is very thin. But the concentrate that flows in the spring is rich!

This sweet sap is sweetest in the sugar maples. These splendid forest dyrads put on the prettiest dresses in fall and turn brilliant red and orange. Or gold. In spring, this sap flows fastest and hardest with these trees. And the people of the Northeast figured out hundreds of years ago, how to capture some of this sap by tapping the trees. And if this sap is boiled down, it makes the sweetest yet most subtle of sugars! A complex bouquet of taste and scent, a memory of the entire spring, summer and fall, like a fine perfume.

My neighbors who run a sugar house have built a fine business over the years and I have watched them at work as they figure out how to do business. And it pays to look at people at the lower levels of our economy to see how enterprise, hard work and faith can create and grow a business without any tricky things that are not healthy or good. The Kents are rock-ribbed Yanks who embody all the virtues of these people.

The sugar house is on a steep mountainside about a mile from my own hillside farm. It is right next to Plank Road. This road is one of the first toll roads built in America. It connects Troy, New York, to Williamstown, Mass. The road runs right past my own farm and up into the mountains where it has now dwindled into a track. Abandoned since the 1940's, for a while, a hermit lived up there with 'No Tresspasin'' signs.

The Kents have lived here for generations. They owned various farms about this region. My own ancestors lived out here, too, in the 1600's. People seldom hold the same farms, though. Only a very few have had the same land for 10 generations. Most moved about the region, buying and selling or being tenants on various plots of land, large or small. Many made money over the centuries doing various seasonal things. And rendering down maple syrup has a very long history here. It is a good money maker just like making

The person in charge of changing Kent's Sugar House into its present incarnation is a dynamic and intelligent man. He loves the woods, he loves nature. He also loves this region. The changing seasons bring pleasure and makes one energetic. He wishes to stay here and he has worked hard to find ways to increase his profits as he does his seasonal work that his family has done for hundreds of years. He has been open to new ideas for marketing his produce and making maximum value from his labor.

He and a number of farmers here in our valleys and mountains has figured out that many people want to be entertained while learning about food. So over the years, he has improved his sugar house and his systems so it attracts a big crowd. This operation is very genuine and straight forward. People can watch real people make real maple syrup and then can buy it literally hot off the presses. They learn about the many grades of maple syrup while watching it being made.

Greatgrandpa is pushing 90 years. I met a number of old men and women like him when I came to Berlin. They all had endless practical information to pass on. We learned many things from them. Such as how to run and train an ox team, for example. The Kents have oxen just as we did. These gentle giants are Brown Swiss.

These boys are babies compared to our oxen. They are only half the size our team reached when they both died of old age. Oxen have big, brown eyes. They are very patient and quite gentle. When one wishes to work with them, a kind voice and a good relationship can work wonders. 'Gee' and 'Haw' tells them which way to turn and a hearty, 'Come on UP, boys!' gets them to put their huge shoulders to work and heave-ho, they pull the sledge in the woods. For the best maple syrup comes from trees on mountains. The steeper, the better! And you can't tear up the roots with tires, either. But the oxen can pull a sledge deep into the woods, straight uphill!

When the trees are tapped, the flow of juices used to go into buckets but now they flow through tubes to big tanks on sledges. Here is an old poster at the Kent Sugar House showing how maple syrup is made:

The temperature and timing of all this is very important. Usually, the old men stand about and look at the snow, look at the sun, look at the streams to see how they are running. They sniff the air, look at the trees 'thickening' and then proclaim, 'Time to go sugering!' and off they go, into the woods. The ideal weather is very cold at night, the colder, the better, then warming in the sun to above freezing but not too warm. If it is over 40 degrees F in the shade, moulds and other things begin to grow in the holding tanks and the sap has to be dumped. So the people with the longest memories of weather are the experts here. They can tell, in their bones, when it is the best time to tap the trees.

One of the tragedies of modern life is the loss of this body of knowledge. We are happy some of our neighbors still can pass this lore on to the next generation. It is very valuable knowledge. In the future, perhaps life and death.

This last week has been perfect, by the way. Several snow storms blasted in with thaws in between. Most days, the temperature has risen above freezing but not above 40 F. So the maple syrup makers are happy. Signs went up around our village this week warning us, the Kents were going to be making syrup day and night and time to PARTY! And party is the correct word here. This would be mere hard work except the Kents invite everyone over. And they make money doing this as they ought.

The syrup has to be cooked for many hours. Reduced by 90%. Watched the whole time, like the hawk watches our chicken pen from high in the sky these days! Being practical New Englanders, the Kents use their oxen to haul in many cords of firewood. This has to be cut up, split and stacked. Hard work, yet Great-grandpa sets to work, doing all that. The cooker has a big iron door at the base. The wood is popped into the box and ignites. The temperature of the fire has to be carefully controlled. If it is too hot and the sugar burns, the syrup is ruined. Great-grandpa watches for this and he tastes the syrup to see if it is correct. The other family members check the gages and controls and adjust the cooking pans. The whole family does this with few words for everyone knows how the steps of this elaborate dance!

The grades of syrup are determined by taste and color. These jars are a guide and are set in the window to catch the sun. Samples from the cooking today are checked against these jars and put in the appropriate containers. I happen to love the super-dark flavors. The Kents are partial to this, too. But many people may find the flavor to be too powerful. So there are many permutations of flavor which the consumer can pick and choose. The Kents even have taste-tests for customers.

They even keep a chart tracking the business. The amount they can make varies greatly from year to year. The window of opportunity to tap trees varies greatly due to weather conditions. Warm springs are terrible. We had several years where spring was literally only a few days long, summer roaring in nearly instantly right after the snow melt! This is bad. Other winters ended with long, cold, slow springs. This drives people nuts but is a joy for all maple syrup makers. Because they can track production and see how much their average is, they can make forward financial plans. They understand the need to be realistic. They know that there will always be significant variations year to year and they plan for this. We hope other humans figure this obvious lesson out and cease desiring always to have a bumper crop, so to speak. Heh.

Hewitt's is one of the last of several local grocery stores we used to have. Berlin has lost a tremendous amount of commercial business over the last 100 years. It is on the verge of vanishing entirely. A terrific loss, I say. But Hewitt's hangs in there and like the Kents, the owners are locals who have been here a long time and love this place. They sell local produce and production. This is where we usually buy Kent's maple syrup. One hand helps the other. And this is what we call 'community' and it is the bedrock of any nation on earth: the daisy chain of villages and towns surrounding the larger industrial/commercial centers. Each supporting the other. And this is why I often talk about international trade and politics. Free trade has rapidly decimated Berlin, NY. Many industries that have been here for over 100 years, some of them very big, employing hundreds of people, have vanished in less than 20 years! The place is increasingly deserted. Abandoned houses dot the town's landscape and empty businesses are everywhere and closing, one by one.

The fact that a few hang on is a miracle and we can thank the hard working people who believe and love in our town, still keep on going. And may they go on for another 300 years!

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The Fed Coup: Destroy The SEC!!!!

Kennedy's funeral 1963

March 29, 2008

Elaine Meinel Supkis

The unfolding crisis in our banking system caused BY THE BANKERS THEMSELVES...continues to not only unfold but is being used as cover for a COUP. The private entities which we should call 'The Real Rulers' are using their own crimes as an excuse to destroy even more parts of our democracy and our Constitution. They hate the Constitution and some of these parties were against the Constitution from Day One. The 'reforms' proposed by the pirate who runs the Treasury that has no treasures left and the Federal Reserve that has no reserves is no reforms but a serious grab for more power. They want to kill the Security and Exchange Commission! My god, one of the few functional Federal agencies left! Time to talk about the Dr. Jekyll and Mr. Hydes pulling this coup.

Treasury Dept. Plan Would Give Fed Wide New Power

The Treasury Department will propose on Monday that Congress give the Federal Reserve broad new authority to oversee financial market stability, in effect allowing it to send SWAT teams into any corner of the industry or any institution that might pose a risk to the overall system.

Like 9/11: they let operatives terrorize the nation [Atta and his buddies were all enabled by the CIA and Mossad] then they slap a huge pile of papers on the desks of a frightened Congress and tell them to sign away gigantic hunks of our civil rights, past legal customs and the Constitution. In this case, the very same people who created this banking mess are slapping down an equally huge pile of papers that sign away the last of US government authority over our financial systems! This is a COUP. Damn it. The destruction of our democracy is continuing and speeding up. Is the media alert to this?

NO! They make this all sound like the pirates and hell hounds who are doing this are saving us! If we trust them, they will protect us and not loot us???? I am speechless with fury but luckily, my fingers can still type. GAAAHHHHH!!!! Damn. I am pissed.

What is this stupid SWAT team going to do? Taser Bernanke? Taser Paulson? Or will it smash down the doors of UBS offices or J.P. Morgan Chase? HAHAHA. Right. Of course not. This SWAT team really means, 'Swat away anyone trying to stop the looting as if they are flies' sort of swat teaming. The three monkeys that can't see, hear or speak SWAT team.

Of course, the criminals destroying our nation want 'stability'. And what is this fabled 'stability'? HUGE DEBTS that go on and on and on! They want us in debt! And debt=death and debt=slavery. And debt=war! And we can die in looting wars overseas for these cowards.

The New York Times, owned by one of the Ruling Elites, continues to cheerfully tell us all about how we will be ruled:

According to a summary provided by the administration, the plan would consolidate an alphabet soup of banking and securities regulators into a powerful trio of overseers responsible for everything from banks and brokerage firms to hedge funds and private equity firms.

While the plan could expose Wall Street investment banks and hedge funds to greater scrutiny, it carefully avoids a call for tighter regulation.

The plan would not rein in practices that have been linked to the housing and mortgage crisis, like packaging risky subprime mortgages into securities carrying the highest ratings.

The plan would give the Fed some authority over Wall Street firms, but only when an investment bank’s practices threatened the entire financial system.

The Federal Reserve will control Wall Street? But only lightly, of course! All those alphabet soup organizations that struggle to control the greed and wild risks and temptations to criminality will be superseded by Santa Claus who coddles the banks and Wall Street! YES, that will fix it, all right! FOR THE CRIMINALS! And papa Bernanke won't interfere unless it threatens the ENTIRE financial system?

HAHAHA. He will helicopter in the Fed SWAT team that will do what? Pour money all over the mess and give them an open window with cheap loans so they can continue no matter what???? GADS. Talk about insane.

The Times continues:

And the plan does not recommend tighter rules over the vast and largely unregulated markets for risk sharing and hedging, like credit default swaps, which are supposed to insure lenders against loss but became a speculative instrument themselves and gave many institutions a false sense of security.

Parts of the plan could reduce the power of the Securities and Exchange Commission, which is charged with maintaining orderly stock and bond markets and protecting investors. The plan would merge the S.E.C. with the Commodity Futures Trading Commission, which regulates exchange-traded futures for oil, grains, currencies and the like.

The blueprint also suggests several areas where the S.E.C. should take a lighter approach to its oversight. Among them are allowing stock exchanges greater leeway to regulate themselves and streamlining the approval of new products, even allowing automatic approval of securities products that are being traded in foreign markets.

That's the game: kill the SEC, one of the few functional arms of the government. One of the few organizations that actually muscles these con artists and puts them in PRISON. As well as levying fines in the multi-millions or even billions of dollars. Muzzled and distracted as well as cut out of the process, the SEC will join all the other laws, regulations and rules that have been killed since Reagan. Everything and I do mean EVERYTHING put in place after the Great Depression has been eliminated or circumvented. They work day and night to kill Social Security. They killed the unions. They won't be happy until we are reduced to total servitude.

Let's see how the other media are handling this hideous news:

Keeping U.S. Financial Markets Competitve

The plan to overhaul the regulation of U.S. financial markets that Treasury Secretary Henry Paulson will announce on Monday morning is as broad and sweeping as it is overdue.

It has been in the works for a year, and predates the present crisis in credit and mortgage markets that started last August. That, though, has given urgency and focus to the work as well as providing an unwanted dress rehearsal for the envisioned expanded role of the Federal Reserve as the primary regulator of market stability.

It will take far longer than a year for the Paulson blueprint to become reality, or at least to become a reality in full--and it does present both "short- " and "intermediate-term" recommendations, as well as an "optimal" regulatory regime.

America's financial system of financial regulation has developed piecemeal, usually in response to episodic financial instability. Some of it dates back to aftermath of the Great Crash of 1929; the Fed itself was set up in 1913; national bank charters date to 1863.

It is also divided between state and federal governments. The result has been a warren of vested interests, both in the financial services industry and Congress, that has proved resistant to change.

But no longer are all these important rules, regulations and organizations, no longer will any of them be allowed to stand in the path of the pirates! The resistance to elimination of ALL barriers, controls and systems set up to thwart the looting of America will now FALL. And will a corrupt Congress try to stop this?

Or will they hail this as our salvation?

Of course! They will stuff their pockets with the lobbyists' loot and ride along with the pirates and the demons and others who are dying with anxiety now that the Derivatives Beast is stirring in the Cave of Death! They will all rush there to assure it, no one will stop if from becoming INFINITE! And this is the plan: to keep this creature growing until it isn't merely $500 trillion in size but $500 quadtrillion or whatever number astronomers assign to the number of light years the entire universe is plus all the atoms and all photon units and everything in all creation is the same size!

And this insane, stupid thing is IMPOSSIBLE. And Paulson should be arrested. Bush, impeached. Congress, driven out with whips! What the hell is going on here?

Who owns the Fed, not who works for but who OWNS the Fed?

The banks listed below have significant control over the New York FED District, which controls the other 11 FED Districts. These banks also are partly foreign owned and control the New York FED District Bank: First National Bank of New York, James Stillman National City Bank, New York, Mary W. Harnman, National Bank of Commerce, New York, A.D. Jiullard Hanover, National Bank, New York, Jacob Schiff, Chase National Bank, New York, Thomas F. Ryan, Paul Warburg, William Rockefeller, Levi P. Morton, M.T. Pyne, George F. Baker, Percy Pyne, Mrs. G.F. St. George, J.W. Sterling, Katherine St. George, H.P. Davidson, J.P. Morgan (Equitable Life/Mutual Life), Edith Brevour, T. Baker.

Here is another web page trying to list the owners of the Federal Reserve:

a) Rothschild Banks of London and Berlin;

b) Lazard Brothers Bank of Paris;

c) Israel Moses Seif Banks of Italy;

d) Warburg Bank of Hamburg and Amsterdam;

e) Lehman Brothers Bank of New York;

f) Kuhn, Loeb Bank of New York;

g) Chase Manhattan Bank of New York;

h) Goldman Sachs Bank of New York;

i) Approximately three hundred people, known to each other and/or relations of the "owners," who hold stock in the Federal Reserve System. They comprise an interlocking, International Banking Cartel of wealth beyond comprehension.

Is there a list of everyone who owns the Fed? NO. Ask Ron Paul! Even he, a big snoop, can't find this list. This list is secret because it happens to be the list of the Real Rulers! And the real rulers are NOT AMERICANS AT ALL. A great number are foreigners who believe in the New World Order. Bush Sr. gave a big speech one fine day, it was September 11, 1991, a hyper-magic-number day. The topic: the inevitability of the New World Order! He was rejoicing over turning our military into MERCENARIES which he lent to the KING of Saudi Arabia and the Kuwaiti rulers! To royalty! This traitor sold our soldiers and had them die for a bunch of KINGS! And he and his buddies were PAID. And note how his 9/11/1 son and Cheney are looting the US using military adventures? Halliburton has moved to Dubai but still gets huge government contracts even though it is an ALIEN corporation? HAHAHA. And here we sit, watching the bills for these invasions climb and every penny, this time, is being put on our collective bills. Which the Federal Reserve makes certain, we pay! We are in debt and it is nearly $10 trillion and climbing. And Congress will be asked to add even more to that total in May. More war money for wars for Kings and emirs who conspire with our 'President'. And for what purpose?

Here is another web page trying to penetrate who these ROYALS and other RULING ELITES are:

The initial drive to create an American central bank came from Europe, where old banking dynasties such as the House of Rothschild had profited greatly from the existence of central banks such as the Bank of England, Banque de France and Reichsbank of Germany.

Paul Warburg, a representative of the Rothschild banking dynasty, came over to America from Germany and became the unofficial architect of the Federal Reserve. His blue-print for the Federal Reserve was elaborated and discussed with other bankers on a private island owned by J. P Morgan .Jr, who, in addition to being a member of the global banking elite in his own right, was also a representative of the interests of the House of Rothschild in America.

Morgan once directed the Council on Foreign Relations, a branch of a secret society dedicated to British cultural and political supremacy, and insisted that his junior partners show allegiance to Britain in their financial dealings.

Benjamin Strong, Morgan's protégé and one of the bankers present at the highly secret meeting on Morgan's private island, became the first Governor of the Reserve Bank of New York (he was the joint nominee of Morgan and 'Kuhn, Loed and Company', the Banking house which Paul Warburg had joined upon arriving in America). Within a relatively short time this branch of the Federal Reserve became its unofficial headquarters. When Norman Montagu became the Governor of the Bank of England, he and Strong joined forces, frequently visiting one another and spending their holidays together.

The bankers who make money off of wars want these changes. They need to have as little feed-back, interference or even any knowledge of how they operate. They claim they want to illuminate the Cave of Death where money is made. But this is a lie. They can't operate in the light of day. They are vampires. They need the cover of night. This is why the Derivatives Beast is so difficult to see. And when we do notice this gigantic thing bigger than all the wealth on earth a dozen times over, they pooh-pooh it all and say, 'It is nothing, it is very small, we just made it LOOK big, that's all!'

Which is a lie. The record of truth-telling by the ruling elites is dim at best. I would suggest, it is nearly impossible for them to be truthful about nearly anything at all. Within my own family, lying about things was second nature! Discussions about nuclear tests in the early 1960s before Kennedy finally stopped the surface bombing of this planet, was nearly impossible! Violent, even. And the truth about those bomb tests wasn't released for many more years later! This is true about many things. Where is the list of the shareholders of the Federal Reserve? Ron Paul has asked for it and he hasn't gotten it. I have a very good idea who is on that list [sigh] but can't PROVE it.

This takes us to other Presidents, unlike the Bushes, who got killed:

Executive Order 11110

This executive order allowed the U.S. Secretary of the Treasury to issue silver certificates against silver bullion based on authority delegated by the President to the Secretary under the Thomas Amendment to the Agricultural Adjustment Act. This order directly contradicted the role of the Federal Reserve, and many suspect that this may be the primary motive behind the unsolved assassination of President Kennedy.

The Order was for the Treasury to issue silver certificates against all silver held by the government which did not already have certificates against it. The Order was needed due to the passage of Public Law 88-36 which repealed the Silver Purchase Act and other related monetary measures. One result was that after the repeals, only the President could issue new silver certificates. The Federal Reserve System could replace the certificates, but only in larger denominations. The thrust of the Order returned the authority to issue new silver certificates (and specify denominations) back to the U.S. Treasury. This allowed for the Federal Reserve System to distribute and exchange currency at lower denominations that met the growing economic need. The authoritative basis for the Order was nullified in 1982 with the passage of Public Law 97-258.

Right after Kennedy was killed, LBJ plunged into Vietnam and debased the currency. Or rather, the Mint had to debase the coins to catch up with the debasement of the dollar thanks to the Ruling Elites destroying the currency via the Federal Reserve. No sooner was Kennedy carried down Pennsylvania Avenue in his black draped gun carriage with the black horse of death prancing riderless behind, he vanished from the White House. At the funeral, they read his famous words: "Ask not what your country can do for you - ask what you can do for your country." Then they set out, for THEY were all there at that funeral, THEY set out to order us into wars of great destruction. Wars fought and lost by the other empires. And they wanted us to take up where they left off.

Executive Order 11110

AMENDMENT OF EXECUTIVE ORDER NO. 10289
AS AMENDED, RELATING TO THE PERFORMANCE OF
CERTAIN FUNCTIONS AFFECTING THE DEPARTMENT OF THE TREASURY

By virtue of the authority vested in me by section 301 of title 3 of the United States Code, it is ordered as follows:

SECTION 1. Executive Order No. 10289 of September 19, 1951, as amended, is hereby further amended --

(a) By adding at the end of paragraph 1 thereof the following subparagraph (j):

"(j) The authority vested in the President by paragraph (b) of section 43 of the Act of May 12, 1933, as amended (31 U.S.C. 821 (b)), to issue silver certificates against any silver bullion, silver, or standard silver dollars in the Treasury not then held for redemption of any outstanding silver certificates, to prescribe the denominations of such silver certificates, and to coin standard silver dollars and subsidiary silver currency for their redemption," and

(b) By revoking subparagraphs (b) and (c) of paragraph 2 thereof.

SEC. 2. The amendment made by this Order shall not affect any act done, or any right accruing or accrued or any suit or proceeding had or commenced in any civil or criminal cause prior to the date of this Order but all such liabilities shall continue and may be enforced as if said amendments had not been made.

JOHN F. KENNEDY

THE WHITE HOUSE,
June 4, 1963.

By 1972, the dollar was worth half of what it was worth at that funeral. The silver coinage had pretty much vanished, replaced with ever-cheaper metals. Today, our coins are as fake as our dollars. And yet, they want more from us. While looking into this story and getting rather pissed, I decided to visit the Kennedy Library because I am a masochist. Listening to intelligent speeches is soothing and infuriating. How we have fallen! Anyway, I came across one of Kennedy's last orders.

Executive Order 11100

ESTABLISHING THE PRESIDENT'S COMMISSION ON
REGISTRATION AND VOTING PARTICIPATION

WHEREAS less than sixty-five percent of the United States population of voting age cast ballots for Presidential electors in 1960; and

WHEREAS popular participation in Government through elections is essential to a democratic form of Government; and

WHEREAS the causes of nonvoting are not fully understood and more effective corrective action will be possible on the basis of a better understanding of the causes of the failure of many citizens to register and vote:

NOW, THEREFORE, by virtue of the authority vested in me as President of the United States, it is ordered as follows:

SECTION 1. (a). There is hereby established the President's Commission on Registration and Voting Participation (hereinafter referred to as the Commission).

(b) The Commission shall be composed of not more than eleven members, each of whom shall be appointed by the President. One of the members of the Commission shall be designated by the President as the Chairman thereof.

SEC. 2. The Commission shall:

(a) Study the reasons for the failure of many citizens to register and vote in elections for selection of Members of Congress, the President, and Vice President including:

(1) Laws which restrict registration and voting on the basis of residence, economic status, or other reasons,

(2) Procedures for registration of voters,

(3) Absentee voting provisions, and

(4) Causes of nonvoting by persons who are otherwise qualified to vote.

(b) Prepare and present to the President recommendations for increasing citizen participation in Government through the exercise of the right to vote.

SEC. 3. The Commission shall not consider matters placed under the jurisdiction of the Commission on Civil Rights by the Civil Rights Act of 1957 (71 Stat. 634), as amended.

SEC. 4. All who may be in a position to do so are requested to furnish the Commission information pertinent to its work and otherwise to facilitate the Commission's work.

SEC. 5. Each member of the Commission shall receive compensation of $75 for each day such member is engaged upon the work of the Commission, except that any member who then receives other compensation from the United States shall serve as such member without compensation under this order. The Commission is authorized to appoint such personnel as may be necessary to assist the Commission in connection with the performance of its functions without regard to the civil service and classification laws, but no such personnel shall receive compensation at a rate in excess of $17,500 per annum. The Commission is authorized to obtain services in accordance with the provisions of Section 15 of the Act of August 2, 1946 (5 U.S.C. 55a), at rates not in excess of $75 per diem for individuals.

SEC. 6. The compensation of the members and personnel of the Commission, lawful allowances therefor, and any other necessary expenses arising in connection with the work of the Commission shall be paid from the appropriation appearing under the heading "Special Projects" in title III of the Treasury-Post Office Departments and Executive Office Appropriation Act, 1963, 76 Stat. 310, and such appropriation as may be provided for the same purposes for the fiscal year 1964. Such payments shall be made without regard to the provisions of Section 3681 of the Revised Statutes and Section 9 of the Act of March 4, 1909, 35 Stat. 1027 (31 U.S.C. 672 and 673).

SEC. 7. The General Services Administration is hereby designated as the agency which shall provide administrative services for the Commission on a reimbursable basis.

SEC. 8. The Commission in its discretion may transmit to the President such preliminary or interim report or reports as it may deem appropriate. It shall transmit its principal study and recommendations to the President not later than November 30, 1963, together with such supporting materials as it deems appropriate. The Commission shall terminate not later than sixty days after the submission of its principal report to the President.

JOHN F. KENNEDY

Have our elections improved since then? Can we count votes, even? HAHAHA. Nope. This process gets only worse and worse and more riddled with corruption and deception. And failing that, they simply toss out the votes! Note how Hillary is now attempting to justify overlooking the Will of the People? She wants the super-delegates to ignore us. How typical. Bush went to the Supreme Court to demand the votes not be counted. And the Supreme Court agreed! Shockingly. And threw away a part of our Constitutional rights. All this, for what? So we can get a man who can't compose a sentence as our ruler.

Here is an executed order Kennedy made just before a bullet was put through his head:

Executive Order 11125

DELEGATING AUTHORITY OF THE PRESIDENT UNDER SECTIONS 205 AND 208 OF TITLE 18 OF THE UNITED STATES CODE, RELATING TO CONFLICTS OF INTEREST

By virtue of the authority vested in me by section 301 of title 3 of the United States Code, and as President of the United States, it is ordered as follows:

SECTION 1. As used in this order, "department" means an executive department, "agency" means an independent agency or establishment or a government corporation and "head of an agency" means, in the case of more than one person, the chairman or comparable member of such agency.

SEC. 2. There is delegated, in accordance with and to the extent prescribed in sections 3 and 4 of this order, the authority of the President under sections 205 and 208(b) of title 18, United States Code, to permit certain actions by an officer or employee of the Government including a special Government employee, for appointment to whose position the President is responsible.

SEC. 3. Insofar as the authority of the President referred to in section 2 extends to any appointee of the President subordinate to or subject to the chairmanship of the head of a department or agency, it is delegated to such department or agency head,

SEC. 4. Insofar as the authority of the President referred to in section 2 extends to an appointee of the President who is within or attached to a department or agency for purposes of administration, it is delegated to the head of such department or agency.

SEC.5. Notwithstanding any provision of the preceding sections to the contrary, this order shall not be deemed to include a delegation of the authority of the President referred to in section 2 insofar as it extends to (a) the head of a department or agency, including an agency in the Executive Office of the President; (b) presidential appointees in the Executive Office of the President who are not subordinate to the head of an agency in that Office; and (c) presidential appointees to committees, boards, commissions or similar groups established by the President.

JOHN F. KENNEDY

THE WHITE HOUSE,
October 29, 1963.

Conflicts of interest! Indeed, the United States of America should be renamed the Conflicts of Interest of America! And this angers me: the conflicts of interest when Bernanke and JP Morgan, one of the CREATORS of the Federal Reserve, secretly meet on a weekend and spring a totally outside of all legal and customary 'rescues' that allows Morgan to soak up a ton of wealth while palming off all the RISKS onto the US taxpayers who have to bankroll all this via the Fed lending money to our government, this round about way of looting us...damn. If it isn't illegal, it should be!

I suppose the Fed will break into my house with their SWAT team and taser me but I must say this: ARREST THESE PEOPLE, arrest everyone who is one of the secret owners of our central banks. We can find them at the Bohemian Grove party in summer. Or at the Skull and Bones alumni dinners. Or in the White House and Westminster.

President Kennedy's many speeches are available here. It pays to listen to them carefully. Sometimes, it is rather painful. The stutterer-in-chief who can't remember his own name is insufferable. How did this creature get into the White House, anyway....indeed. The Real Rulers have a fondness for Idiot Kings. They don't get in the way. Easy to rule.

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Obama Backs Volker

From Antiwar.com, Sadr hammers the Green Zone.
March 29, 2008

Elaine Meinel Supkis

The differences between Obama and Clinton accumulate. Obama has Volker in his camp. Clinton has Rubin in her camp. This is an obvious difference that matters to me. Greenspan endorses Clinton over Obama because she, like him, wants the funny money solution to fix our financial collapse. But all candidates want to keep the housing market set at the bubble rate and not decline like it always does after a feeding frenzy at the Well of EZ Money. This is impossible. Housing prices have fallen in the past and will do this in the future. This is a fact of life we have to live with and learn from, lord help us. Eventually we will figure this out. And we also visit the Federal Reserve LLP to see what the new lending window is all about and incidentally, visit the Derivative Beast who is a Dragon in the Cave of Death. And I marvel at how stupid we are to not slay that beast 10 years ago when it was 55 times smaller than today. Also, the credit crisis continues to hammer Europe. This is a global meltdown. And Lehman Brothers is the victim of a Japanese rip-off scam to the tune of $250 million in loans.

Clinton, Obama Tout Rubin, Volcker to Show Expertise

Clinton named former Treasury Secretary Robert Rubin as representative of the quality of an economic team that Americans and markets will trust.

``People like former Secretary Rubin are pretty hard to beat when it comes to managing the economy,'' Clinton, a New York senator, said in an interview on Bloomberg Television's ``Political Capital with Al Hunt,'' to be aired today.

Obama, in a separate interview as he campaigned in Pennsylvania, noted that former Federal Reserve Chairman Paul Volcker, a supporter, was advising him on the financial crisis and said he also speaks to billionaire investor Warren Buffett ``on a regular basis.''
*snip*
Clinton, 60, and Greenspan have praised each other over the last year, although the former Fed chairman has indicated he will vote for Republican candidate John McCain in a general election.

Obama didn't call for reinstatement of the Glass-Steagall Act. Instead, he said, there is a need to ``build new regulatory systems that are flexible and reflect new realities.'' He has called for the Federal Reserve to have more regulatory authority over financial institutions, which would have to increase capital reserves held to protect against losses.

Clinton also acknowledged that deregulation may have gone too far in 1999, saying conditions have changed. ``The global economy when Glass-Steagall passed was not what it is today,'' she said. ``We have to deal with things now that didn't exist, like sovereign-wealth funds.''

OK: I support Obama. At least he doesn't have a totally insane economic advisor who wants to feed the Derivatives Beast more money! At least his advisor isn't talking about creating infinite wealth by having the government take over all our banking, financial and housing systems. Volker is a grim man. He knows the only way to slay this monster that was bred by his successors is to raise interest rates until all the bad loans, cheap money and wild spending is replaced by savings and then more savings. Hillary's advisor wants to have more of what poisoned our well poured into the ground. And note that Greenspan is Hillary's ideal. And she thinks the most important economic issue facing us is...get this....SOVEREIGN WEALTH FUNDS????? HAHAHA. Right! We ain't got none. That is the crisis.

No, she wants to control other people's funds that they got fair and square. She wants to order our creditors around. She wants to be the dictator of the wealth we squandered. This is so beyond childish, it shows clearly she doesn't have the maturity to be our ruler. Not that ANY of the last 4 Presidents have been anything but utter children! The US people chased out Jimmy Carter because he was an adult. He wanted to balance the books. He wanted to stop inflation. And he wanted us to save money, turn down the thermometer, build alternative energy systems, etc. Sort of like what Gore wanted, I dare say.

Americans want Santa Claus and Bernanke helicopters. The only people yelling about all this, I fear, are the dwindling numbers of savers in our economy. Everyone else is screaming for 0% loans at 0% down and no verification of anything. This desire to have eternal easy money is at the root of our economic and moral collapse. I will note here that all the charts and graphs clearly show that outside of Japan, any nation running on this 'free money all the time' system usually goes BANKRUPT. And is flooded with imports. And the government runs up huge debts. Indeed, it has been proven that people who get access to easy money don't get out of debt, they ALWAYS increase their indebtedness. They go deeper into the hole. The easier the money's terms, the deeper into the hole they go. This is why the era of easy lending as rates fell during the last 4 Presidencies, the deeper the US government debt and the worse our trade deficit.

Japan can have easy rates because they are a Fortress that keeps out outsiders. And as we shall see, the temptation to rip off outsiders who come into that country to do business is very great. Back to the election:

``We have to try to stem the foreclosure crisis that is at the root of our credit and market challenges,'' she said.

Obama's plan includes $10 billion for homeowners facing foreclosure, aid for state and local governments to prevent service cuts and expanding unemployment insurance to cover more workers.

``We can create a floor in the housing market that will help restore some confidence in the overall credit markets, which has to be our No. 1 priority,'' he said.

There is no floor here. The roof fell onto the floor and the floor is buckling and will collapse into the basement. I build houses and know that if termites eat away at the sills and the rafters, the building will fall. And $10 billion isn't anywhere big enough a support to prop up a collapsed house. Maybe, $10 trillion will do it. But I have lived through more than one housing collapse in my life. You have to take the hard knocks. People who defrauded banks or bankers themselves must be arrested, put on trial and put in prison. Government officials should be fired. And politicians must be fired, too. And replaced with new people. The pain of this process is obvious. But the need to do it is even more obvious. If we keep propping up collapsed housing markets, we end up living in a SLUM for crying out loud! So we can't do this.

The government's role here is to provide life-support services to the people made poor by all this. The rest of us have to bite the bullet. I have lost tremendous sums this way and don't regret it. I did swear to not be trapped in such a grinder again. Lessons are learned! And passed onto the children. Which is the only service I can provide.

But evading the truth of a collapse is dangerous. People think, 'Why should I save for a rainy day? Why should I be careful? Why should I pay for all this?' when the rescue of reckless debtors is enabled. The value of housing was grossly inflated. Why on earth should we be stuck FOREVER at these price levels? The ONLY way out if we do this is HORRID INFLATION and we have tried this trick before...and...it...doesn't...work in the bitter end. Period. We know this for a fact. History tells us this. Her bloody pen has scratched across the pages of time and it is a grim story. Yet if we face reality and do the right thing, after a short period of pain, all is well. We thrive. We are saved. But getting there is the problem.

The 'surge' in Iraq has collapsed. As the picture at the top of this story shows, the surge has utterly failed. As saner people recognized and as I said back last year, the surge could not work and would only provide time for Sadr and others to rearm, reorganize and reset their strategic goals. As usual, doubters were right and the neo cons were totally wrong. The failure of our military strategic planners to understand simple war theory is amazing and discouraging. Just like our top economists refusing to understand simple economics. This is rooted in their dream world: they DESIRE outcomes but can't accept the hard work and losses that lead to profits and victories. So we muddle along, going down hill rapidly. Just as Sadr is lobbing rockets and missiles into the heart of the Green Zone and hitting more and more targets better and better, honing in his sights, so it is with the Destroyer of Wealth. This invisible foe represents 'Market Risk'. And who is that?

MIZ RISKY! The charming, reckless female, daughter of Death. She cannot be defeated or stopped except in one way only: we have to take care of and listen to Miz Safety. She is the one who saves money, is very careful and who faints if she sees numbers suddenly taking off to infinity.

Fannie and Freddie free to set size of capital raise

Fannie Mae and Freddie Mac regulator on Friday said it is up to the housing finance companies to determine how much money they must raise to buoy the U.S. housing market.

The regulator, the Office of Federal Housing Enterprise Oversight, said it was clarifying an earlier statement made by its director indicating the combined amount could be as high as $20 billion, more than twice what many analysts had expected.

Ofheo this month eased constraints on the government-chartered companies in an agreement that prods them to raise "significant" amounts of capital. The move allows the GSEs to boost their support of the housing market through the purchase of hundreds of billions of dollars in loans or mortgage securities.

See how the salvage of the collapsing US housing market is already over $20 billion. Even as Obama struggles to explain this business, the amount DOUBLED. And trust me, it will double again and again. Recently, a neighbor of mine wanted to fix his foundation of his 200 year old house. I explained the financially sound way to do this. He didn't want it to look like a cement wall. He wanted rock. So he hired someone who built him a stone wall basement. Only the problems accumulated as they always do when one tinkers with foundations. The work went on and on. All Fall and then today, it continues. I know that a day of three guys working in this way equals well over $400. So, if we look at more than a month of $400 days, the cost of rebuilding this foundation could end up costing more than the house itself. 60 days at $400 a day is $24,000. This is why one has to be cautious about taking on such projects.

Fannie Mae and the other Fed agencies are all supposed to sop up all the bad loans generated by the lending machines we call 'banks' and 'financial institutions.' They don't want to hold this junk, they want the Fed to 'buy' it as if it is worth something. And to do this, the Federal agencies have to raise money. And they can't do this by going to savers and investors for funds. These people, burned by the losses so far, are not giving a penny. So everyone in the government is lending to each other to bail out these guys who made billions in profits and fees while making these reckless, stupid and obviously dangerous loans! And will they stop doing this in the future?

No! Since they will all be bailed out and not bankrupt or in prison or jumping out of windows, they will keep their palaces and yachts and get to start all over again, scheming as to how they can leech even more money out of the systems! How goofy is that? Time to visit the Federal Reserve LLP:

Federal Reserve Discount Window Lending Programs:

The restructuring of the Discount Window at the beginning of 2003, including repositioning the discount rate from below the FOMC's target rate to above the target rate, was designed to improve the window's operation as a mechanism for implementing monetary policy and as a backup source of funds for individual depository institutions.

The primary credit program aids the implementation of monetary policy by: (1) making funds readily available at the primary credit rate when there is a temporary shortage of liquidity in the banking system, thus keeping the actual federal funds rate from rising much above the primary credit rate, (2) making the process of borrowing from the Discount Window administratively easier, and (3) promoting consistency in the lending function across the Federal Reserve System. By minimizing the administration of and restrictions on the use of Discount Window credit, and by limiting extensions of credit to generally sound depository institutions, the primary credit program reduces depository institutions' reluctance to borrow, thus making the Discount Window a more effective policy instrument. The secondary credit program makes credit available, when appropriate, to meet backup liquidity needs of depository institutions that do not qualify for primary credit.

The new rules below are for the 'lending window' that had to be fixed so no one would be 'harmed' if they use it. The biggest financial houses have rushed to the window while loudly declaiming that they are not going to be hurt by using it and they grabbed at the easy funds with both fists. Their stocks went up, not down. This made them immensely happy and they declared this window raid a success. From now until...ETERNITY...they will go to this window for cheap loans you or I can't get. And they will use these loans to lend us money at a much, much higher rate. And they will happily sop up their 10-20% handling fees! HAHAHA. Can't lose! So let's explore the rules of this new window of opportunity:

Here is the old chart from before last week.

Note several things here: the length of time has been elongated greatly. So 'emergencies' can be very long term, not overnight or for a few days. Note the other deals here: NO QUESTIONS ASKED. HAHAHA. I would LOVE a bank that has that! No one glowering and demanding what I am going to do with the money they are lending. 'I need to buy tickets to Argentina. Give me a loan for $1 million. No, make that $20 million. I need it for my living expenses down there!' Right! No questions. Also, NO RESTRICTIONS. Wow. Argentina, here I come! Whoo hoo! Maybe I should make this a loan for $200 million. No, $200 billion. Hell, why not go for it all: $200 trillion. And now we can see dimly where the Derivatives Beast feeds. The 'no restrictions/no questions asked' loot may be used to buy federal funds.

And here is the snake eating its own tail: the Fed has to sell bonds to fund money growth at all times. And the Federal government has been running in the red ever since the Vietnam War except for one year and one year only! And the entire system has been reset to reflect the needs of this 'totally in the red all the time' system. Note that both Obama and Clinton don't talk about this. And McCain wants to bomb, bomb, bomb our way to hell as his nostrum for all this.

Federal Reserve emergency rates:

How is the primary credit rate set?

On March 17, 2008, the primary credit rate was reduced to 25 basis points above the FOMC's target for the federal funds rate. This spread will remain in place until the Federal Reserve determines that market liquidity has improved.

The Federal Reserve Act requires Reserve Banks' boards of directors to establish the discount rate, subject to review and determination by the Board of Governors, at least every two weeks. Reserve Banks' boards of directors establish the level of the primary credit rate, not a spread relative to another rate. Though the spread between the primary credit rate and the FOMC's target for the federal funds rate has been 100 basis points, the spread could vary. Policymakers sought a rate spread that would give most depository institutions the incentive to obtain regular funding from market sources rather than from the Discount Window. Experience with the above-market-rate Y2K Special Liquidity Facility, information about the pricing of correspondent lines of credit, and information from other central banks that have above-market-rate lending facilities indicated that a spread of 100 basis points is appropriate to accomplish this goal.

The 'market forces' have collapsed. So it is the Fed or nobody. And the way the dollar is faring, there will be nobody from overseas. The US has grown accustomed to soak up nearly all of the planet's financial lending. The flow of 'funds' into America has been even faster than the flow of red ink as we misspend. This is due to our ongoing fire sale. Everything is for sale in America. And we are recklessly inviting foreign powers and competitors to relocate here so they can garner profits here and send it home or use it to expand their base of power here. This means we have been losing sovereignty at a mad rate. The more we do this, the more we lose sovereignty.

Now that we have utterly collapsed our banking system, the Fed has to lend and to lend means to produce money out of thin air. If this were still a bubble, this action would be causing great inflation. But money is vanishing faster than the Fed can lend it. The Fed is dropping more and more rules and has been edging into 'no restrictions/no questions asked' more and more and has expanded this from banks that are 'sound financial condition' to not only bad banks but to NON-BANKS. This insane policy will stop the collapse but only at great cost. And it will keep all the bad things going. The things that are at the base of this collapse will continue, not end. There is no resolution. Instead, there is an acceleration of the bad things as they get worse and worse.

Federal Reserve emergency window rules:

14. Is there any threshold for the size of a loan beyond which a Reserve Bank will ask the depository institution some questions regarding the loan?

No size limitations or thresholds exist. Reserve Banks use judgment to decide when, if at all, a loan request is large enough to warrant asking questions at the time of the request or after the fact.

15. In what situations may a Reserve Bank extend primary credit for consecutive days? What is the maximum period that credit can be outstanding?

Please Note: On March 17, 2008, the primary credit program was temporarily changed to allow primary credit loans for terms of up to 90 days. Also, the spread of the primary credit rate over the FOMC's target federal funds rate has been reduced to 25 basis points. These changes will remain until the Federal Reserve determines that market liquidity has improved.

Primary credit may be extended for periods of up to approximately one month to small depository institutions in generally sound financial condition that cannot obtain temporary funds in the market at reasonable terms. Credit extensions outstanding for more than several consecutive days may be subject to increased administration. The borrower may be asked to explain why it needs longer-term credit. Reserve Banks may make multi-day secondary credit loans to enable a timely return to a reliance on market sources of funding or the orderly resolution of a troubled institution. The appropriate duration of multi-day loans will be at the discretion of the local Reserve Bank. Borrowing by depository institutions when the federal funds rate rises to or above the primary credit rate is not subject to any frequency considerations.

The Fed can go to infinity. They can give loans forever. And we enter the realm of magic and death! First, let's look at more charts:

From IMF via ITulip:

The US imports capital and consumes it. Japan is the world's biggest exporter of this. Not China, Japan. As this news service here likes to point out again and again, we must examine the actual foundation of the present banking and trade systems to see what is really going on. Japan is the heart of the 'no questions/no limits/0%' system! And the US is trying to imitate this only Japan has a huge trade surplus with the world and the US has the exact opposite: the biggest trade deficit with the entire world, totally head and shoulders above everyone else. The dynamics here are against our recovery if we continue doing what we have done in the past. We can't get the benefits of the Japanese system if we also have the world's highest trade deficits! And killing the dollar may stabilize it at a dire level but will not reverse it.

If we reverse it, the entire dynamics of our banking system will collapse. And the dollar may vanish as a currency but this won't fix our bankruptcy, it will accelerate it. Indeed, it will happen with astonishing swiftness. One day, the dollar buys things, 24 hours later, it buys nothing overseas. Already, more and more nations doing trade are refusing to denominate it in dollars. Starting with Iran.

Now, time to revisit the creature no politician dares talk about, not banker dares utter its name: the Derivatives Beast. Many people are puzzled by this mysterious and dark creature that lives in caves. I can see it only because I passed through the Gates of Death in the past, when hit by lightning. So instead of mystery, I see it for what it is: the fear of death has caused bankers to feed the creature that guards the Gates of Death. And it is very devoted to numbers and loves random chance and infinity. When we stare at it in the glittering eyes, we see the inner workings of black holes that are at the center of all galaxies. Time stops, the vortex is all-powerful and there is no escape. Let's visit the government agency that tracks these things:

Office of the Controller of the Currency: OCC’s Quarterly Report on Bank Derivatives Activities

Third Quarter 2007

• U.S. commercial banks generated $2.3 billion in revenues trading cash and derivative instruments in the third quarter of 2007, down 62% from the $6.2 billion reported in the second quarter. This decline is attributed largely to the difficult trading environment in credit markets.

• Net Current Credit Exposure increased $53 billion, or 27% from the prior quarter, to $252 billion.

• The notional amount of derivatives held by U.S. commercial banks increased $19.7 trillion to $172.2 trillion in the third quarter, 13% higher than in the second quarter. Bank derivative contracts remain concentrated in interest rate products, which represent 81% of total notionals.

• The notional amount of credit derivatives, the fastest growing product in the derivatives market, increased 19% from the second quarter to $14 trillion. Credit default swaps represent 98% of the total amount of credit derivatives.

Credit Derivatives

Credit derivatives have grown rapidly over the past several years. Tables 11 and 12 provide detail on individual bank holdings of credit derivatives by product and maturity, as well as the credit quality of the underlying hedged exposures. As shown in the first chart below, credit default swaps remain the dominant product at 98% of all credit derivatives notionals.

The notional amount of credit derivatives in the third quarter of 2007 rose $2.2 trillion, or 19%, to $14.0 trillion.

Contracts referencing investment grade entities with maturities from 1-5 years represent the largest segment of the market at 43% of all credit derivatives notionals. Contracts of all tenors that reference investment grade entities are 73% of the market.

The notional amount for the 30 U.S. commercial banks that sold credit protection (i.e., assumed credit risk) was $6.2 trillion, an increase of $0.9 trillion from the second quarter. The notional amount for the 36 banks that purchased credit protection (i.e., hedged credit risk) was $7.8 trillion, an increase of $1.3 trillion.

Trillions, not billions. When I first began to read about derivatives way back in the post-Volker era, I was horrified to see the billions being created there. I argued long ago, this wasn't protecting us. And indeed, as we go through one housing bust/stock market bust/commodity market bust after another, it is painfully obvious, there is no system that can stop these collapses or protect all wealth from all collapses. These collapses always win in the end. And if they are fixed by inflating things, this makes it much worse in the long run. Yet the desire to evade responsibility for these over-runs and collapses continues. Today, this has caused the latest scheme for evading reality, the derivatives market, to expand to amazing size, far, far, far beyond anything real or useful. The fact is, the money makers and lenders have discovered a system that can be set at infinity! And tempted by this, they are rapidly moving towards infinity. In the mistaken idea, if they reach infinity, eternal wealth is theirs.

Credit Default Swaps are the vast majority of what the bankers created. The impossibility of anyone paying back anyone else in this game they creates is total. There is no way in hell any of these swaps can be honored for the simple reason, they are way, way, way too big, too vast, too encompassing. No one wanted to take any possible losses. So everything was parked in this scheme. And as always, when we see 'everything' and 'all the time' as well as 'infinite' we are looking into the swirling darkness of the Beast's malign eyes.

This chart shows the nature of the base supporting these derivatives: garbage, junk, trash and more. The trash isn't one quarter of these funds, it has now reset as ALL of the funds! We know that NOTHING held by the banks and investment houses are worth 100% value. All have to be 'haircut' and in this case, the choppers take off the entire head. Like all those jokes about haircuts during the French Revolution.

This chart, if you click on it, enlarges. It is important to read the numbers here:

10 years ago, the notional amount of these derivatives was $26 trillion. 20 years before that, it wasn't even a trillion dollars, just as a reminder of where this business is going...up! The spread between dealers and end users was around $23.1 trillion. Already, this spread was totally insane when we consider the fact that both were very close once upon a time back when this started after the gold window closed during Nixon's reign. Ten years later, just ten years----the dealer's notionals shot up to $155.3 trillion and the end users' notational was, get this, $2.8 trillion. It literally doubled while the dealer's end rose 55.5 times greater!!! Ten years ago, the spread was 'only' 17 times the base. These damn derivatives multiplied like rabbits on steroids. Each year, the rate of the spread widened tremendously. The rate of climb accelerated in the last 2 years. This is the dread Derivatives Beast. This is the creature that has been activated in the last 6 months.

Why is that?

Logic! One thing about the magic of money and the cave of wealth where death lives, is that it can be made to go to infinity if one is using only numbers. The less grounded in reality a magic money system is, the more the temptation to go to infinity. But this is a TRAP. Infinity happens to be death! And the demons in the cave know this and wait happily for silly humans to come into the cave and begin tallying up insane numbers. They egg the humans on and rub their claws with glee, anticipating the inevitable which is when they get to 'reset' the system back to zero again! Always, the humans wail and gnash their teeth and scream curses which the demons love. Then the humans beg for help. How can they stop this process? How can they prevent infinity from resetting to zero? The demons suggest going out and killing people and openly stealing stuff. That will fix everything.

'But we are already killing people and stealing stuff! But the people we are killing are resisting us and we are losing money trying to steal stuff!' the humans trapped in the demonic cave of eternal wealth wail.

'Kill some more. Pay no attention to morals. They don't matter. We promise, we will reset at infinity as soon as you return with gold and carcasses we can devour. If you don't we will devour you,' whispers the Dragon as the demons chatter and clash their pitchforks against the pile of gold upon which the Dragon sleeps. So off the humans go, seeking loot to bring to the Dragon. Alas for the poor humans, the dragon doesn't reset the game back to infinity even after the wars. Usually, he eats everyone he can for he loves death and war. He is a Dragon, after all.

Most other 'bad news' web sites talk about all sorts of things but few talk about WWIII. This is because we all wish that the foolish humans who decided to play number games with the Dragon won't listen to this dread creature when it finally tells them how to fix things. Alas, the temptation to kill in response to economic woes is very strong in humans. Very strong. It lies at the very base of our existence as a species. We live to kill.

ECB Lends Six-Month Cash as Policy Makers Warn of Higher Rates

The European Central Bank, struggling to ease gridlock in credit markets, will lend six-month money for the first time even as policy makers warned higher interest rates may be needed to combat inflation.

The ECB said it will auction 50 billion euros ($79 billion) in emergency six-month funds to support ``the normalization of the functioning of the euro money market.'' At the same time, council members Axel Weber and Juergen Stark said Europe's economy is coping with the jump in global credit costs and the central bank may need to raise its benchmark interest rate to fight inflation.

The ECB's twin-track approach contrasts with the Federal Reserve's response to the credit crisis. In addition to emergency liquidity injections, the U.S. central bank has cut its main rate by the most in two decades to prevent the economy slipping into recession. The danger for Europe is that higher credit costs will eventually drag down growth.

``There are increasing risks that the ongoing stress in the interbank market will ultimately impact the real economy and thus force the ECB to reconsider the division of tasks that it currently defends,'' said Jacques Cailloux, chief European economist at Royal Bank of Scotland Group Plc in London.

As the Derivatives Beast comps on us here in America, the creature is dragging in all of the world's bankers and investors and devouring them and their wealth. We tried to park all risks in this cave and instead, created a risk far above, far worse than the original dangers. And the risks were all in the name of earning big profits while not creating real things but leaving that dirty business to the Chinese and Japanese. Who are extracting their price. Now we are in a panic. The West wants to punish Asia and is delirious with desire to somehow destroy the power there like we did in the past when much of the world's wealth flowed to Asia for 4,000 years. Armed with weapons of mass destruction [cannons and guns] the Europeans destroyed Asia and tried to rule it with an iron fist. And finally failed in the end.

Lehman Target of $250 Million Swindle in Japan, Journal Says

Lehman Brothers Holdings Inc. may have been cheated out of as much as $250 million in loans using forged documents said to be from Marubeni Corp., the Wall Street Journal said, citing a person familiar with the situation.

Lehman will take legal action to recover all of the funds that were ``fraudulently misappropriated'' in transactions through one of its affiliates, the New York-based investment bank said in an e-mailed statement to Bloomberg News. The statement didn't disclose the amount of the funds.

The loan was to help finance the purchase of medical equipment for hospitals through a company affiliated with LTT Bio- Pharma, a Tokyo-based biotechnology company, the Journal said.

This is rather funny. Note who is the biggest lender on earth: the Bank of Japan. But it won't lend to JAPANESE! Only the top exporters get this lending! At 1% interest, of course. But all the others go to banks that get the Bank of Japan carry trade money which Japan generously lends to foreigners Japan wants under her thumb, and these foolish foreigners turned around and for a tidy profit, lent this money back to the Japanese who said, 'Ask no questions. We won't give answers, anyway. Just give us the money. GOODBYE, hahaha.' And now there is no one to pay the ganjin bankers! Who will have to take losses. So I suppose they will beg the Bank of Japan for more loans...or run to the US Fed LLP for no questions asked loans...hahaha. Yes. This is why the magic window exists.

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The Fed Makes Up Rules As They Roll Along

March 28, 2008

Elaine Meinel Supkis

Michael Nystrom compares the Fed rescue via the TSAF window to a junk yard selling old wrecks as 'antiques.' Heh. A good read. And Bernanke's helicopter is going to pass over the banking system every two weeks from now on, dropping $100 billion a month. Except if the investment houses want more frequent drops. Then he will stuff another $100 billion or more into his copter. And Mr. McCarthy is scared of talking about conspiracies. This is because he can't believe that a bunch of greedy, idle, creepy people with agendas won't converge with each other and figure out con games and cheats that benefit themselves even if it destroys great nations? HAHAHA. They conspire. They certainly do this. But often, more subtle than most people think. They are big believers in provocations.

The Fed's New Term Securities Auction Facility (TSAF) Explained Michael Nystrom

Instead of talking about abstract concepts like investment houses and mortgage-backed securities, let's substitute something more concrete. Let's say instead of an investment bank, I'm an auto dealer. And instead of an inventory of mortgage-backed securities, I have an inventory of classic cars:

Most people don't appreciate it, but these cars are really valuable. After all - they're not making any more '59 Caddies! And based on my very complex, proprietary valuation model, the inventory you see above is worth a cool ten million dollars ($10,000,000).

The only problem is that recently, the market for classic cars, like the market for MBS's, has seized up. In fact, if I were to put my inventory on the market, it is likely there would be no bids at all for my fabulous collection of rare and unique automobiles. If push came to shove, my collection might only be valued at ten cents on the dollar -- or less -- in a forced fire sale. Ten cents! This is ridiculous, as these assets clearly have value! Check out the tailfins:

Michael Nystrom has, by far, the very best analogy for what the Fed LLP is now up to! A must-read article! I laughed my head off as well as nodding in agreement. Bravo! The photos are hilarious, too. Sometimes it pays to make the big things smaller in order to understand them. The 'sale' of raunchy supposed AAA papers based on a potpourri of various loans of uncertain parentage was fake. The real value is well known. It is certainly not 95 cents on the dollar! It is, at best, 50 cents to the dollar and dropping. The only reason they are not at 5 cents to the dollar is due to Uncle Bernanke's generous helicopter drops.

From the Markit ABX.HE graphs:

The site set up to process the sales of these ill-fated things was arranged back last spring in preparation for compliance with the Basel II Accords. Namely, banks and investment houses could no longer take AAA script and roll into them a bunch of cheap shots and then have them all listed at a much lower risk danger and thus, meant the bankers and offshore pirates could claim these CDs were as good as gold and then use them as assets from which they could then extend more loans. And as they piled up these mixed-up loans they made ever-more mixed up BBB and CCC loans which were folded and sliced into the AAA loans and this mountain of lending is at the core of the banking collapse we are now seeing.

They forgot about one tiny detail: the loans had to be paid off!

Now, the only way our banking system can limp along is to admit these things cannot be sold and then to sell them, one bad batch at a time, to the Federal Reserve LLP. This former central bank that had no center but was actually a consortium of bankers and financial wizards, has turned itself without the intervention of any legal changes or laws being passed or even ANY DEBATE...into an amazing thing: the world's biggest UNLIMITED partnership! Indeed, I should change the LLP part to ULP. Unlimited Partnership! This totally new entity operating on totally new systems is our new banking system. And this is a disaster. It will permit the present system which is so rotten, it is falling apart totally, it can now limp along merrily with the central bank destroying everything from our joint currency, our joint savings, our national pride and anything that once made America great: down the damn toilet it flushes.

But it gets worse, much worse.

Fed lends $75B worth of securities to investment banks

Big investment banks took the Federal Reserve up on its first-time offer Thursday to let them borrow Treasury securities, the latest effort to ease a painful credit crisis.

The Federal Reserve auctioned $75 billion worth of Treasury securities. Bidders paid an interest rate of 0.33%. Demand was high. The Fed received bids of $86.1 billion worth of the securities.

Um, all over the net are stories of handouts from the Fed. It is nearly impossible to track them. The main gist here is, the numbers are rapidly rising, the rescues are happening more frequently than in an old silent movie era 'Perils of Pauline' and the amounts are staggering. Well over a trillion so far with more trillions to go. The Fed is, of course, dishonest about all this. They and the outrageous financiers who created this mess know perfectly well, how much of these bad ABX CDOs and SIVs and other crap cost. They know how much they must palm off onto the Fed. But dare not say the total. For it is in TRILLIONS. So they devised an ILLEGAL system that is NOT SET UP BY CONGRESS or any laws of the land to tip-toe through the Tulip Mania Collapse to go to the 'window' and shove in these stupid, worthless bonds and get in return, 'Treasuries' which they can then rush off and turn into gold or some other commodity.

They decided, at the historic meeting where the final pretense of having a banking system was strangled, on St. Paddy's Day, they decided to do this piecemeal so the public is unaware that they just got stuck with $14 trillion in bad loans. Think about this. They hope to do this in groups of $100 billion each after the first huge doses of $200-500 billion we have seen so far!

And note also, the St. Paddy's Day rescue was supposed to be only $200 billion but the actual numbers were closer to $250 billion. Oops. Plus $30 billion for the Bear Stearns heist. Let's look at another story about this that just came out today:

Fed offers $100 billion more to banks

The Federal Reserve announced Friday it will auction another $100 billion in April to cash-strapped banks as it continues to combat the effects of a credit crisis.

The central bank said it would make $50 billion available at each of two auctions, on April 7 and April 21.

Through the end of March, the Fed has provided $260 billion in short-term loans to commercial banks through the innovative auction process. It also has employed Depression-era provisions to provide money to investment banks.
*snip*
In announcing the move to $50 billion last month, the Fed said it would continue the auctions for at least the next six months, unless credit conditions show they are no longer needed.

See? They have this nice schedule. Of course, if the melt down surges forwards, this will be tossed out and the $100 billion a month bail out will turn into a $500 billion or even trillion dollar bail out if necessary. The Fed is now committed to this. Of course, if they can do this, why not do it all at once? Eh?

They can't! This would be too obvious and maybe someone will snoop around and ask questions! Maybe someone will demand to know why the very same clowns who are running to the Fed for this huge stash of cash gave themselves RECORD bonuses last year! Not just last year, only 3 lousy months ago! Incredible. The only difference between today and 1930 is that none of the guys guilty of destroying the economy are jumping out of windows. They are jumping into the arms of the Fed ULP and being carried off as if they are 7 Brides for 7 Buffoons.

There is no escape, warns the FT’s John Authers

In yen terms, the Nikkei 225 is down 24.1 per cent, the S&P 500 is down 24.8 per cent, and the FTSE-Eurofirst 300 is down 24.5 per cent.

In dollar terms, these indices, covering totally distinct groups of stocks, are all down between 12.2 per cent and 13.1 per cent. And in euro terms, they are down between 19.5 per cent and 20.4 per cent. The indices have tracked each other perfectly.

Why is this happening? In times of crisis, correlation increases. Developed market equities, for the moment, are all the same thing, their price contingent on the latest news on the credit crisis, commodity prices and US economic data.
*snip*
Retail and institutional equity investors may now be taking their cues from the forex market; buying stocks denominated in whichever currency appears undervalued. Macro hedge funds doubtless exploit this. The result: there’s no place to hide.

This is why I can't, with a good conscience, tell readers how to save themselves. The only realistic salvation lies in becoming politically active. This election season is a wash, of course, but there is more time and more things we can do. And do them, we must. Demanding a general cleaning of the stables is important. I have been pushing for ending the political money game, for example. But every organization that has arisen to do something such as Common Cause, get corroded and fade fast. Common Cause and I had a number of very vicious battles. I literally screamed at them, 'Stop the fund raising and begin organizing the public!' For all they did was pat themselves on the back and do virtually nothing except begging for money. I told them how to organize online and they ignored me.

Entities like the Daily Kos has drawn into itself a huge audience that interacts but this election is fracturing it apart again as the denizens of that joint argue over which Tweedledum or Tweedledee is better. On the right, most ran as fast as possible from Ron Paul who attracted non-party people who came out of the woodwork only to fade again as the media worked overtime to annihilate him. But he continues to talk about the forbidden things: money itself.

And this is the problem: we have to understand money and power in order to use it to stop it from destroying our nation. And this is very difficult. I have very little money, myself. So I can't use it to mold public opinion. All I can do is write and hope someone reads. But the fact stands: there is no safe haven if the US decides to blow itself up. All the world is menaced by this. No one will escape, no system will be unscathed if we decide to be totally juvenile and destroy this planet.

Edmund M. McCarthy

The other side of the Looking Glass

It was obvious last week that, in addition to the 25bp cut in the middle of the night to the Discount Rate, the Board would have to come up with another big cut to Fed Funds. They settled on 75 bps as big enough to keep equities rocking not crashing with promises of more to come.

The dollar was in free fall and the commodities and/or that “near commodity/near currency” called gold, were on a tear. Since the big players were going to get the benefits of the marvelous TSLF, shouldn’t they help out as the Fed Fund rate was hammered? In no way would we intimate that there were any planned meetings, cabals or other get together which could ever be caviled at by the suspicious.

Of course, there were meetings and phone calls. And they constitute a 'conspiracy'. When a bunch of guys gather together in total secrecy to plot ways to do things behind our backs, plot ways to change the way entire systems and economies work, to thwart the bears betting they will fail, this is a CONSPIRACY. Humans talking to each other with the aim of protecting THEMSELVES is a CONSPIRACY. Mr. McCarthy is scared that people might think he is nuts so he ignores a conspiracy right in his face. There are many conspiracies. Some are very old and ongoing while others are newer. Some conspiracies are hatched thousands of years ago. Some are hatched by the minute. The people who hang out socially and hobnob all over the planet are always seeking ways to keep themselves in power and take things from others as cheaply as possible.

These interlocking social arrangements are at many, many levels including sexual as well as financial and political. The political connection is the weakest of them all. The sexual, the strongest. The religious angle is above all, the most powerful. If we go back to the Bible, we can see it is often all about inheritances, buying things, selling things and making bargains even with the devil or his twins, the various gods. Musty deals thousands of years old are still in operation today. People like to conspire, it is a deep part of our natures and is expressed within the ape communities from which we sprang. A good way to learn about this sort of thinking is to watch Shakespeare's plays.

Why are people afraid to talk about obvious, glaring examples of conspiracies? I would suggest, this is because it sits very close to the deepest parts of our psyches: where religion dwells. I notice that online, there are many levels of 'conspiracy communities' each of whom have their own pet belief systems. Penetrating past these, one finds it nearly impossible since the schematic belief matrixes are so important, they cannot accept new information or contradictory information and get very angry if anyone suggests anything outside the belief system. So the actual conspirators who are manipulating us get away with murder. They know that exposing these conspiracies is very difficult and if they ARE exposed, all they have to do is have agents go out and spread counter-stories that are more fantasical!

Why is this? Well, the human mind loves the fantastical. So if we can have a wonderful, utterly wrong story, we tend to lean towards this because it is comforting for it approaches godhood. This appeals to that part of the brain which is activated by these stories. Some things are painfully obvious. The people who run our financial systems belong to various religious, sexual and political affiliations. They all want certain things. The list has odd items on it. One of which is, ownership of Jerusalem and the surrounding territories. Another is to cull the ranks of humanity so the ecological crisis is evaded. Another is to encourage doctors to come up with some sort of system that will give these conspirators something resembling eternal life. They have wanted this since the very beginning, we know. Look at the Pharaohs! So we can assume the people who 'saved' the system this year conspired to do things that harmed people not in the know just like when the neo cons conspired to let the 9/11 attackers free rein so they could terrorize innocent people outside of the conspirators, all of whom refused to fly on commercial planes before 9/11.

Fed May Rethink Greenspan's Hands-Off Approach Towards Bubbles

For Fed policy makers, ``the consequences of their permissiveness have become so disastrous that they simply can't keep singing the same old tune in public,'' said Tom Schlesinger, executive director at the Financial Markets Center in Howardsville, Virginia.

While the soul-searching is unlikely to result in immediate changes to monetary policy, Stern's comments show how the credit freeze has forced officials to scrutinize long-held philosophies about the Fed's role in markets, and even ask how their current policies may undercut those views.

``As a risk manager, the Fed needs to take account of both directions, not just dealing with the aftermath,'' said Bruce Kasman, chief economist at JPMorgan Chase & Co. in New York. ``We have had two asset-prices bubbles in the last 10 years that have had big implications for the Fed's desire for a more stable macroeconomy.''

All hail the Soviets! All hail the 5 Year Plan! Gads. The 5 Year Junk Yard Lending Plans! And the Fed's paw prints are all over ALL the bubbles we have these days! This story is total bunk. The Fed isn't 'rethinking' anything. They are obeying the commands of the rulers! The people who conspire to run things their way and their way, only. None of these people care about the 'macro-economy,' of course. Otherwise, they would have to think about how to close the trade and budget deficits! Since they make these worse and worse every year for nearly my entire life, I am assuming, thoughts about the macro-economy is just so much macaroni to them.

And since when has the Fed been a 'risk manager'? They are in charge of preventing INFLATION. Inflation is due to FIAT CURRENCY. And so they have to worry about flooding our economy with money and the best way to flood the economy is to give out easy loans! And so they fix this by keeping rates high enough to choke back lending! Only they don't do this except on occasion. Frankly, they conspire with the greedy rich to boost lending as much as they dare. And they slip up all the time which is why it gets out of control all the time.

Fed Faces Zero-Interest-Rate Policy Risk From Economy, ABN Says

The Federal Reserve is probably considering its policy options should a shock to the economy force it to cut interest rates to zero, according to ABN Amro Holding NV.

Fed Chairman Ben S. Bernanke wrote a paper in 2004 with Vincent Reinhart and Brian Sack studying Japan's experience with deflation, a period where the Bank of Japan added more funds to the financial system even when its benchmark interest rate was at zero. The ``most obvious lesson'' is that central banks should avoid an outbreak of deflation and accept an inflation buffer, Robert Lind, ABN Amro's chief economist in London, wrote in a report.

``Senior officials have already laid out the potential policy choices,'' according to Lind at the Amsterdam-based bank. ``Given the scale of the potential shock to aggregate demand, I suspect policy makers are already contemplating the constraint of the zero bound.''

As I keep on pointing out, the 'ideal' is for 0% interest on 0% down and $0 taxes. This way, they can grind out infinite loans forever. And take their 10% or even 20% cut of each loan! Since there is no limit, the cuts can be even 30% or 100%. The sky is the limit! This infantile desire is barely below the surface. Over the years, I keep looking like the Hawk of Horus for information that can prove my contention that this is also fatal. As well as putting us into serfdom.

The US has been fatally weakened by our low-tax/low interest rates/free trade matrix. Countries that have the opposite are destroying us. But what do I see? The desire for more free rides! When I was a child, I was warned to never, ever accept a free ride. That there was never a free lunch. That all free gifts had strings attached. And people offering these were often criminals! Con men! DANGEROUS.

So why are we looking at them as saviors?

China's Factory Blues
The days of ultra-cheap labor and little regulation are gone. As manufacturers' costs climb, export prices will follow

The bigger multinationals may be having second thoughts, too. A report by the American Chamber of Commerce in Shanghai found that more than half of foreign manufacturers in China believe the mainland is losing its competitive advantage over countries like Vietnam and India. Almost a fifth of the companies surveyed are considering relocating out of China. "The big story here is that globalization is for real—and China is no longer what it was," says Ronald Haddock, a vice-president at consultant Booz Allen Hamilton, which wrote the report.

The rise of the yuan may be the biggest single factor driving companies to relocate. But other government policies are contributing to the crisis. Last year, Beijing decided to cut or cancel tax rebates on more than 2,000 items used to make exported goods. The impact has been huge. "The end of rebates has raised the cost of manufacturing many goods by 14% to 17% at the factory level," says Harley Seyedin, president of the Guangzhou-based American Chamber of Commerce in South China.

More proof that China has utterly changed direction. As I keep pointing out, Japan cannot, alone, keep the US afloat. If China turns inwards, this means the flow of money and goods is changing. Many are hoping to move everything to India and have the party roar onwards. India is far more unstable than China. And this flood will destabilize India further. India's government is far wilder than China's government. Changing of the guard is done more often by assassins than even in the US. Gah. We certainly have that. Whatever instabilities China has, India has in spades. China wants to move up the industrial scale. They know that pollution is killing their country and are filled with desire to bring this to a halt. India doesn't care which is why most ships, when mothballed, are sent there to be hacked apart.

Chinese exporters shun flagging dollar

Rising numbers of Chinese exporters are shunning the US dollar or devising ways to offset the impact of the falling currency as they confront rising labour and raw material costs at home.

According to Alibaba.com, the online company that matches Chinese suppliers with international buyers, the vast majority of their almost 700,000 Chinese suppliers no longer use dollars to settle non-US transactions to minimise foreign exchange risk.

And the end of the rule of the greenback has come. Eventually, we will have to protect our currency and use it to buy other currencies in order to buy oil. Maybe not this year but next year. The government is conspiring with Europe's rich and powerful as well as oil sheiks and kings placed on their thrones by the British and the French when they ripped up the Ottoman Empire...these people want to keep the present status quo for as long as possible. And this may mean they will conspire to attack Iran. The ONLY thing holding them all back is Russia and China: both can launch WWIII if they so choose.

And that is a can of worms we don't want ANYONE to open.

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Book Review: 'Trading Away Our Future'

March 28, 2008

Elaine Meinel Supkis

Recently I received an interesting book called 'Trading Away Our Future'. The Richman family wrote this book which has some sensible solutions as well as explanations about trade issues that is quite good. As usual, though, I feel that the discussion about our nation's woeful state has to include sharp discussion about treason and betrayal and how all empires end up infested with creeps who destroy the empires. We can see this election cycle, how the process works. Sensible legislation and important changes to present laws that can halt or reverse present trends are not only ignored or sandbagged. They are attacked openly as nostrums, fake cures and snake oil is peddled as the solution! To the despair of these fine authors who wrote this book. I say, arrest the people destroying our nation and then we can pass sensible laws. Impeach the parties responsible. Especially those who are allowing the Pentagon to be a hostile force looting our nation.

Ideal Taxes.com sent me an interesting book to read: Trading Away Our Future. Written by Ramond, Howard and Jesse Richman. This book is a family effort. Dr. Richman, the father of the other two authors who are also professors. Dr. Raymond Richamn is associated with the School of Public and International Affairs at the University of Pittsburgh. This book is a very good addition to books about international trade. The Richman trio indulge in one of my favorite things: charts and graphs, to explain the tax issues concerning the movement of funds across borders as well as trade. They zero in on things that non-professionals might overlook.

Educated in the Chicago School under Friedman's guidance, the chief author of this book is very good at his own field and applies himself to the task of explaining arcane regulations and rules that can warp trade, for example.

The one weakness of this book which is very good in its own way is what motives me to write every day: understanding the real underpinnings of this whole system. Understanding why treason has replaced patriotism. Why schemes to fix this mess don't fix it at all. And why bills that are perfectly sensible are not passed by Congress nor signed by Presidents. And why all the 'cures' for what ails us, kills us.

As I often say, if one doesn't understand the dynamics of imperialism, one can't understand current events. For the last 10,000 years of human history, the growth and collapse of one empire after another has built a huge historical record of how the dynamics of imperialism works. And of course, if one can understand this history, one can see how America can save itself from collapse. The cure isn't simple. Indeed, it requires first, admitting we are a global empire in its final stages of decay. And hanging onto this rotted empire is impossible.

Just as a swimmer can't swim to any shore if he is carrying a ton of lead weights, so it is with our empire. No rescue scheme can work at all unless we first dump the imperial lead weights.

This book is a very good chronicle of what we should do to stop much of the trade mess. But the authors despair that even the smallest tax code changes suggested will never see the light of day. Tax cuts, yes. But taxes designed to cut back on offshore goods produced by US corporations ending: no way in hell.

Click here to read sample chapters from this book.

I must add here, the writing is excellent. For non-experts, the three authors are careful to not use any tricky 'insider' talk so beloved by economics professors. They are quite clear about the intentions of the authors and they try to offer more than one escape from the trap we are in. They are hopeful but pessimistic. They figure, if we fail to stop things from continuing, we will have a 'hard landing' but will recover from it.

Alas, one problem with world-girdling empires crashing is, this always leads to a global struggle for dominance by rising empires. And the home base is destroyed by invaders, revolutionaries and military insurrections. The history of the total collapse of security within an empire as it collapses is crystal clear: ALWAYS the dying empire is dismembered INTERNALLY. And thoroughly, I might add. The examples are obvious and dire. The Medieval Holy Roman Empire run by the Hohenstaufen dynasty as well as the huge, powerful duchy of Austria were both destroyed by 1265 AD. The chaos from this collapse meant Austria was overrun by many other rising imperials from north, south, east and west. The raging battles destroyed one of the wealthier economies in Europe. Germany was rent to shreds and went into steep decline that took 100 years to recover from.

When the mighty Spanish empire that even conquered Portugal and its empire, they ruled the Seven Seas and set out to conquer all of Europe. In less than 200 years, they were totally bankrupt, the empire collapsing and from then on, the other Powers spend their leisure hours invading Spain itself and destroying the home base even as the Empire of Spain limped onwards overseas! Finally, dying in the 19th century with the USA giving it the coup de grace at the dawn of the 20th century. During all this, the people of Spain went from great wealth to total poverty except for the ruling elites who barely noticed their own life-styles declining. Indeed, they lived quite grandly despite the collapse in public services and the beggaring of the middle class.

This story can be repeated endlessly. Pick any empire and it follows the same trajectory. So when anyone discusses the future of the US, recognizing this horrible past and using it to project into the future is very important. ALL empires end up infested with traitors who line their own pockets and steal the public treasury like mad and who use every trick in the book to offshore and outsource so they can REMOVE THE LOOT from the empire and thus, protect THEMSELVES.

The wonderful, and I would suggest, very patriotic writers of the book here are sincere about saving the US. They even go out of their way to help Congress design and promote obviously good bills that can save us a lot of grief. Using their web page as the linking source, I explored some of these bills. Here is the first example:

PRIVATE FOREIGN SAVINGS TAX-LOOPHOLE ELIMINATION ACT

A Bill

To amend the Internal Revenue Service Code in order to eliminate the tax-loophole for private foreign savings.

SECTION 1. SHORT TITLE

This Act may be cited as the “Private Foreign Savings Tax-Loophole Elimination Act”

SECTION 2: FINDINGS

The Congress finds as follows:

(1) Since the time that Congress enacted the private foreign savings tax-loophole in 1984, the trade deficit of the United States has risen and become chronic.
(2) The balance of trade is determined by flows of financial savings. Countries that experience a net inflow of savings have trade deficits and those that experience a net outflow of savings have trade surpluses. This is because such flows are necessary to be able to import. Market forces tend normally to correct trade imbalances by changing the relative prices of imported and exported goods, but there is no correction if the flow of savings persists. The private foreign savings tax-loophole attracts private foreign savings and, along with the continuing foreign-government reserves tax-loophole, has contributed to the chronic trade deficit that the United States has experienced since 1984. In his 1994 book about the repeal of the private foreign savings tax-loophole (From Creditor to Debtor: the U.S. Pursuit of Foreign capital – The Case for the Repeal of the Withholding Tax) Giuseppe Ammendola argued that the enactment of the private foreign savings tax-loophole in 1984 contributed in the movement of the United States from being a creditor nation to becoming the world’s largest debtor nation.

(3) At the April 11, 1984 hearing on the “Tax Treatment of Interest Paid to Foreign Persons” before the Committee on Ways and Means of the House of Representatives, Robert S. McIntyre, director of federal tax policy for Citizens for Tax Justice, a group representing unions and public interest groups, pointed out that foreign investment in the U.S. was already $50 billion more than American investors were sending abroad and warned that by 1985 or so the U.S. would become a net debtor and that the resulting higher price of the dollar, relative to other currencies, would make American industry less competitive and would cause the loss of U.S. manufacturing jobs.

(4) At the April 11, 1984 hearing on the “Tax Treatment of Interest Paid to Foreign Persons” before the Committee on Ways and Means of the House of Representatives, First Boston Corporation and Morgan Guaranty Trust Co argued for a much more narrow tax-loophole, correctly predicting that the broad version of the loophole that was eventually enacted would raise the price of the dollar, relative to other currencies, increasing United States trade deficits and causing the loss of U.S. manufacturing jobs.

(5) The higher price of the dollar, partly caused by the private foreign savings tax-loophole, has given United States manufacturers an artificial disadvantage when competing in world markets.

(6) The higher price of the dollar, partly caused by the private foreign savings tax-loophole, has given United States manufacturers an artificial disadvantage when competing with foreign manufacturers in United States markets.

(7) The higher trade deficit, partly caused by the private foreign savings tax-loophole, has contributed to the fall of gross private fixed investment in the manufacturing sector of the United States from 2.2% of GDP in 1984 to 1.3% of GDP in 2005. (Source: Bureau of Economic Analysis)

(8) The higher trade deficit, partly caused by the private foreign savings tax-loophole, has contributed to the loss of jobs in the manufacturing sector of the United States economy. Some of the loss since 1984 can be attributed to greater efficiencies of production. A comparison of the United States with Canada, two countries whose manufacturing processes involve similar levels of technology, shows that from 1984 to 2005 the percentage of civilian employment in the manufacturing sector fell from 20.0% to 11.5% in the United States and from 17.0% to 13.6% in Canada. (Source: Bureau of Labor Statistics)

(9) Elimination of the private foreign savings tax-loophole will increase United States income tax collections from foreigners by about $60 billion assuming that $4 trillion of private savings is earning 5% interest. The $4 trillion estimate is obtained from two sources:
(a) According to the US Treasury, at the end of the year 2005, foreign official institutions were estimated to have approximately $1.8 trillion of the $6.7 trillion of US long-term securities held by foreign investors. Thus foreign private investors had approximately $4.9 trillion. According to the COFER database, foreign governments actually had $2.7 trillion in reserves at the end of 2005. Thus approximately .9 trillion of the 4.9 were actually foreign government reserves placed into accounts with foreign banks and then placed by those foreign banks into tax-free US accounts.
(b) The most recent IRS data release of interest earned by foreign individuals is from 2000 (available on the Internet at http://www.irs.gov/pub/irs-soi/00frusi.pdf). That year, when the average interest rate on 10-year US Treasury T-Notes was 6.11%, private foreigners earned $128 billion tax exempt, indicating approximately $2.1 trillion of savings. Since 2000, increases in foreign government savings and increases in private foreign savings have each accounted for half of the current account deficit. Since foreign government savings went up by 2.4 times from 2000 to 2006, according to estimates based upon the International Monetary Fund COFER database, private foreigners savings in the United States have also gone up 2.4 times, up to $5.0 trillion. However, if an estimated $1 trillion of that amount is foreign government savings placed into private banks abroad and then placed by those banks into US accounts under the bank’s name, that would leave $4 trillion that would remain in private accounts, should those private accounts be taxed.

(10) Ending the private foreign savings tax-loophole would likely increase the level of manufacturing investment and thus enhance the economic security of the United States. In the long-run, the strength of the dollar is determined by supply and demand – the supply of American goods and services to the world and American demand for goods and services from the world. Without increased investment in the manufacturing sector of our economy, the sector that produces the preponderance of our exports and that competes with the preponderance of our imports, there will eventually be a substantial weakening in the dollar that would produce high levels of inflation and a greatly reduced American standard of living.

(11) Ending the private foreign savings tax-loophole would enhance the national security of the United States because it would strongly encourage foreign central banks to place their dollar reserves in United States banks where their funds could be frozen when their government comes in conflict with the United States, as when President Carter froze Iranian assets in 1979. Prior to 1984 foreign governments kept almost all of their dollar reserves in U.S. accounts because of the continuing foreign-government reserves tax-loophole. But with the enactment of the private foreign savings tax-loophole in 1984, foreign governments have kept large amounts of their dollar reserves in the dollar-denominated accounts of foreign banks, which in turn place those amounts, under the bank’s name, in U.S. accounts that are tax free because of the private foreign savings tax-loophole.

The book examines this excellent possible law. All Congress has to do is pass it and the President, sign it! HAHAHA. Right! First, to pass this bill, we have to arrest everyone accepting campaign donations from people who benefit from the present system: all the hell hedge fund three headed dogs, the pirate community operating out of Queen Elizabeth II's many islands, the military/industrial complex rip off artists using the Middle East as their home base for raiding the Treasury and beggaring the US tax payers. And then there are the industrialists who are madly offshoring all our manufacturing to take advantage of cheaper labor abroad as well as lax pollution laws. There is a veritable ARMY of people who will stop this by using every trick in the book which is mostly using lobbyists to grease palms.

Defeating these corruptors is the entire battle here. And the media is on who's side? Well! We can see easily who they support! They will cover news about outrageous violations of US laws and sovereignty but not a general cleaning of the stables of all the shit piled there. Instead, we are supposed to be unaware of exactly who is doing this to us!

We just saw the spectacle of the Federal Reserve LLP saving non-banking entities who are huge fans of offshore banking, moving money between countries, exploiting the trade deficit and budget deficit for their own enrichment and of course, the destruction of laws that stop the rapine. Here is yet another bill, one that was not passed, either, of course:

S. 1607: Currency Exchange Rate Oversight Reform Act of 2007

SEC. 3. REPORT ON INTERNATIONAL MONETARY POLICY AND CURRENCY EXCHANGE RATES.

(a) Reports Required-

(1) IN GENERAL- Not later than March 15 and September 15 of each calendar year, the Secretary, after consulting with the Chairman of the Board of Governors of the Federal Reserve System and the Advisory Committee on International Exchange Rate Policy, shall submit to Congress, a written report on international monetary policy and currency exchange rates.

(2) CONSULTATIONS- On or before March 30 and September 30 of each calendar year, the Secretary shall appear, if requested, before the Committee on Banking, Housing, and Urban Affairs and the Committee on Finance of the Senate and the Committee on Financial Services and the Committee on Ways and Means of the House of Representatives to provide testimony on the reports submitted pursuant to paragraph (1).

(b) Content of Reports- Each report submitted under subsection (a) shall contain--

(1) an analysis of currency market developments and the relationship between the United States dollar and the currencies of major economies and trading partners of the United States;

(2) a review of the economic and monetary policies of major economies and trading partners of the United States, and an evaluation of how such policies impact currency exchange rates;

(3) a description of any currency intervention by the United States or other major economies or trading partners of the United States, or other actions undertaken to adjust the actual exchange rate relative to the United States dollar;

(4) an evaluation of the domestic and global factors that underlie the conditions in the currency markets, including--

(A) monetary and financial conditions;

(B) accumulation of foreign assets;

(C) macroeconomic trends;

(D) trends in current and financial account balances;

(E) the size, composition, and growth of international capital flows;

(F) the impact of the external sector on economic growth;

(G) the size and growth of external indebtedness;

(H) trends in the net level of international investment; and

(I) capital controls, trade, and exchange restrictions;

(5) a list of currencies designated as fundamentally misaligned currencies pursuant to section 4(a)(2), and a description of any economic models or methodologies used to establish the list;

(6) a list of currencies designated for priority action pursuant to section 4(a)(3);

(7) an identification of the nominal value associated with the medium-term equilibrium exchange rate, relative to the United States dollar, for each currency listed under paragraph (6);

(8) a description of any consultations conducted or other steps taken pursuant to section 5, 6, or 7, including any actions taken to eliminate the fundamental misalignment; and

(9) a description of any determination made pursuant to section 9(a).

A bill to provide for identification of misaligned currency, require action to correct the misalignment, and for other purposes.

Status:
Introduced Jun 13, 2007
Scheduled for Debate Jul 31, 2007
Voted on in Senate -
Voted on in House -
Signed by President -
This bill was considered in committee which has recommended it be considered by the Senate as a whole. Although it has been placed on a calendar of business, the order in which bills are considered and voted on is determined by the majority party leadership. Keep in mind that sometimes the text of one bill is incorporated into another bill, and in those cases the original bill, as it would appear here, would seem to be abandoned. [Last Updated: Jan 27, 2008]

We can follow the trail of crumbs to the door of the lobbying community. The media assists in all this, of course. This is why the three candidates for President are tools of the lobbyist community. Of course, actual pirates ran for President. This failed due to the American people rejecting this for spurious reasons mostly having to do with religion than economics. The discussion about the tax evasions of Romney still angers me. The media didn't examine this at all! They did discuss his religious beliefs just like they are hammering Obama on this same topic. What are we seeing? The election of a Pope? Or a President? Now, another bill recommended by the Richman family:

IN THE SENATE OF THE UNITED STATES

September 14, 2006
Mr. DORGAN (for himself and Mr. FEINGOLD) introduced the following bill; which was read twice and referred to the Committee on Finance

SEC. 2. FINDINGS.

Congress makes the following findings:
(1) Since the 1990s, the United States has experienced record trade deficits that has made the United States the largest debtor country in the world.
(2) In 2005, the merchandise trade deficit of the United States was a record $767,000,000,000, and in 2006, the merchandise trade deficit of the United States is projected to surpass the record set in 2005.
(3) The surging trade deficits could soon create a balance of payments crisis for the United States, which could wreak havoc with the economy of the United States.
(4) Article XII of the General Agreement on Tariff and Trade (GATT 1994), annexed to the Agreement Establishing the World Trade Organization entered into on April 15, 1994, permits any member country to restrict the quantity or value of imports in order to safeguard the external financial position and the balance of payments of the member country.
(5) In accordance with Article XII of the GATT 1994, the United States should take steps to restore balance to its merchandise trade, and safeguard its external financial position and its balance of payments.
(6) The imposition of import restrictions should be phased in to allow the economy of the United States to absorb the impact of import restrictions with minimal disruption.
SEC. 3. DEFINITIONS.

In this Act:
(1) BALANCED TRADE CERTIFICATE; CERTIFICATE- The terms `Balanced Trade Certificate' and `Certificate' mean a certificate issued pursuant to section 4 that provides the holder of the certificate with a license to import into the United States a good with an appraised value that is equal to or less than the face value of the certificate.
(2) DEPARTMENT- The term `Department' means the Department of Commerce.
(3) OIL OR GAS- The term `oil or gas' means any good classifiable under--
(A) heading 2709 of the Harmonized Tariff Schedule of the United States (relating to petroleum oils and oils obtained from bituminous minerals, crude);
(B) heading 2710 of the Harmonized Tariff Schedule of the United States (relating to petroleum oils and oils obtained from bituminous minerals, other than crude); and
(C) heading 2711 of the Harmonized Tariff Schedule of the United States (relating to light oils and preparations).
(4) PROGRAM- The term `Program' means the Balanced Trade Certificate Program established under section 4.
(5) SECRETARY- The term `Secretary' means the Secretary of Commerce.
SEC. 4. ESTABLISHMENT OF BALANCED TRADE PROGRAM.

(a) In General- Not later than 180 days after the date of the enactment of this Act, the Secretary shall, in cooperation with the Secretary of Homeland Security, establish a Balanced Trade Certificate Program within the International Trade Administration of the Department. The purpose of the Program is to create gradually balance between the dollar value of goods imported into the United States and goods exported from the United States.
(b) Regulatory Authority- The Secretary, in cooperation with the Secretary of Homeland Security, shall promulgate regulations in accordance with section 5 that provide for--
(1) issuing Certificates to exporters;
(2) collecting Certificates from importers;
(3) valuing the Certificates issued and collected; and
(4) trading Certificates.
SEC. 5. OPERATION OF THE PROGRAM.

(a) Exporters-
(1) ISSUANCE OF CERTIFICATES- The Program established under section 4 shall provide for the issuance of a Certificate to any person who exports a good from the United States with a face value equivalent to a multiple of the appraised value of the good determined pursuant to paragraph (2).
(2) VALUE OF BALANCED TRADE CERTIFICATES-
(A) DETERMINATION OF VALUE- The Secretary shall establish a system for the valuation of Certificates. To the extent practicable, the value of a Certificate shall be based upon the appraised value declared on the shipper's export declaration (SED), in accordance with subparagraph (B);
(B) SYSTEM OF VALUATION- The value of a Certificate shall be determined in accordance with the following table:
------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------
If a Certificate is issued: The face value of the Certificate is an amount equal to:
140% of the appraised value of the good exported. 130% of the appraised value of the good exported.
120% of the appraised value of the good exported. 110% of the appraised value of the good exported.
100% of the appraised value of the good exported
------------------------------------------------------------------------------------------------------------------

'Nyet problemy,' as my Russian friend liked to say many years ago. Yes, another possible solution to the trade deficit. Too bad, no one with real power wants anything to do with this. And this is why all empires die. The rulers get hooked on schemes that make money but are terrible for the empire. But it is so EASY to conspire with others to undermine the empire! The riches that pour in this way are unimaginable! The lucky duckies who yield to temptation can't help themselves. Below is a chart from the book. I amended it to show who is doing what, with tax policies:

I lived in Europe in the past. In 1968, Europe had huge VAT taxes. So things were 'expensive'. And gasoline was 'expensive' due to taxes, too. The US was the 'low tax' nation. We had cheap gasoline, cheap goods thanks to nearly no taxes! And we ended up, thanks to the low tax regime, deep in the hole in trade! Our nation rapidly being ruined. We are losing the 'value-added' game! I see a problem here and it can't be fixed by TAX CUTS!

On top of this, the low tax regime here has caused public debts to climb! On top of ALL this is our addiction to cheap lending. Cheap loans+low taxes=destruction of the industrial base, trade and banking. Simple, eh? And we don't want to believe this even as we see it in full, nasty operation!

The authors think the VAT tax doesn't work. Well, all of Europe has a trade SURPLUS with the US! And we don't have any advantages with them except if we totally kill the dollar and make it super-cheap, too! And we did this with Germany THREE TIMES in the past: Bretton Woods II, Plaza Accords and the Louver Accords. The DM used to be 4 to the dollar. Then 2 to the dollar and finally the dollar is what? Half a mark? And during all this, when did we ever run a trade SURPLUS with Germany?

HOW ABOUT NEVER! Ditto, Japan! Japan doesn't have a VAT tax to keep out foreigners. They have an awesome array of defenses which is why I call Japan a 'Fortress'. At any level, if foreigners get too close, too uppity, the Japanese will take stern measures INCLUDING CREATING A DEPRESSION DELIBERATELY to prevent anyone in Japan buying foreign goods. Whether it be picky inspectors at the ports, difficulties in sending in ships in the first place, finding retailers to carry goods, etc., Japan will find some means of crushing the interlopers. So they don't need a VAT. They will cheerfully kill the purchasing power of the consumer by never extending credit to them and using other tools, can have a low-interest rate regime while having no bubbles at home, all the money is exported along with their goods.

And this book, like so many others, is fooled by this. China is copying Japan except for one thing: they are not crushing the workers ruthlessly. They are open to trade. They do import stuff...even from Japan. They are not a 'one way nation' at all. And when they changed their policies this year in July to deal with inflation and excessive foreign funds flooding into China, this caused the entire planet to slide into a depression. This is because of unbalanced trade, world wide, not just in the USA. And this is due to the simple fact that the USA is going down the drain, fast. And as always, when a great empire finally rots to the core and the rulers become traitors, all the world is destabilized and goes down too. And then this is all sorted out via a machine we call 'wars'.

Note how Russia devolved. They lost half of the country's main base and all of their allies! And became so poor, they went bankrupt not once but several times! And the battle to regain ground is still going on. Successfully, I may add. This is due to the alliance with China and the need of Europe for Russian commodities. Now, if they can regain some industrial strength, then they may stride the world's stage again. But it is increasingly China's turn at this game. They ruled much of the planet in the past. And then was totally and completely dismembered by 1945. Looted and wrecked, they slowly rebuilt after some pretty nasty mistakes by the rulers such as Mao and his crazy Frau, Madame Mao.

Let's hope we don't fall that far! Ecch.

Click here for the Amazon link for buying this book. I do recommend this book as a jumping off point for pushing Congress. But of course, being nice about all this isn't working. Pushing Congress will require serious muscle. Maybe we can make them an offer they can't refuse, to paraphrase the Godfather.

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Paulson And The Chamber Of Commerce Death

March 27. 2008

Elaine Meinel Supkis

Paulson gives a speech to the Chamber of Horrors known as the Chamber of Commerce. The failure of this organization and the US Treasury to protect the US economy from destruction wasn't discussed. Instead, schemes to save the non-banking investment groups that are ravaging our economy were promised! And the profound inability to understand why the US is falling off more than one cliff is quite obvious. This blindness is deliberate. They all want something from nothing. They all want risks but safety. Meanwhile, world inflation resumes with a vengeance. And the Iraq war flares up even more and the desire for war with Iran cause world oil prices to resume climbing to the stars.

Remarks by Secretary Henry M. Paulson, Jr on Current Financial and Housing Markets at the US Chamber of Commerce

I am constantly asked how much longer will this take to play out and if this is the worst period of market stress I have experienced. I respond that every period of prolonged turbulence seems to be the worst until it is resolved. And it always is resolved. Our economy and our capital markets are flexible and resilient and I have great confidence in them. I am certain we will work through this situation and go on to new heights as we always do.

As we work our way through this turbulence, our highest priority is limiting its impact on the real economy.
*snip*
Taking this step in a period of stress recognizes the changed nature of our financial system and the role played by investment banks in the post Glass-Steagall world.

Throughout this horror, our rulers keep assuring us that all is well. The ritual remarks are important to them. Since they, themselves, are destroying our nation, they must shove off this realization as much as possible. All is well except for a few glitches! Which they will all fix! Quickly! First of all, the people sitting in the room with Paulson are mostly my age. I remember bad markets in the past. And is this the worst turbulence we have experienced?

I remember the seventies. Back then, we had, since 1966, huge riots that set fire to our inner cities. I watched huge parts of NYC burn to the ground during that time. These riots flared off and on all the way until the 1980's but most were in the same time frame as the Vietnam War. Today, all is silent. True, we now get regular mass murders in our schools. But that started with the Vietnam War, too. But armed uprisings like we saw in the past are gone. So this isn't the 'worst of times'....yet. Paulson's job yesterday was to assure everyone, the spigots for new debts would be opened and kept open. No matter what. The only question is, now to do this?

Of course, it is amazing to me that he can, right off the bat, mention 'post-Glass-Steagall'. This post-Great Depression lawlessness is the root cause of the collapse. But instead of calling for classic banking principals and the re-introduction of the important laws passed in the wake of the Great Depression destroying our banking system, he has other solutions in mind.

Paulson wants to bail out Goldman Sachs, his former home base:

While there has been extraordinary convergence in financial services, one distinction between banks and investment banks remains particularly important - banks have the advantage that they issue deposits that are insured by the Federal government. A properly designed program of deposit insurance greatly reduces the likelihood of liquidity pressures on depository institutions and as a corollary, makes the funding base of these institutions more stable. The trade-off for this subsidized funding is regulation tailored to protect the taxpayers from moral hazard this insurance creates.

For the non-depository institutions that now have temporary access to the discount window, I believe a few constructive steps would enable the Federal Reserve to protect its balance sheet, and ultimately protect U.S. taxpayers.

OK: Paulson seems to think the non-banking investment/speculative houses like Goldman Sachs, want STABILITY. Not risk. As always, the issue between these two yin/yang forces rise to the surface. The hyper-rich investment houses that use offshore banking and offshore tax havens want SECURITY. Of course, the entire reason they get those giant $500 billion bonuses for their collective efforts is due to them taking on 'risk' not playing it safe. The idea of viewing this as Miz Risky versus Miz Safety is easy if we think of this as two females, one dark, the other, light. The light one is an angel and the dark one is a demon. Wealth grows fastest in the dark, with the demons. If one consorts with the wild-haired, crazy, drunken Miz Risky, she can reward one with tremendous profits and wealth pours in. But since she is nutty as hell, she always takes TOO MANY risks! And crashes the car, destroys the economy, falls off of cliffs.

Miz Safety avoids all this. She has small but steady returns. She is incremental, not zooming upwards. She abhors bubbles and is for sobriety. Obviously, she is extremely unpopular with investment bankers who are seeking easy money as fast as possible no matter what.

The role of the government is to govern. Just as the 'governor' of a steam engine regulates the level of steam building up so it doesn't blow up, the reason we have controls on electrical systems to prevent surges which wreck things is simple: surges or build-ups of pressure leads to explosions! The government is not supposed to run out of control. It is, by definition, the controller. It supervises markets, regulates spending, controls relations between parties via laws and courts. It puts up barriers or removes them as it sees fit. It tries to avoid excesses. But of course, being run by corruptible humans, they don't do this. Instead, the temptation to NOT regulate, control or restrict is very high. Various schemes, evasions and tricks are used to increase power and wealth while not doing the simple things that create value-added production.

Often, the element that shoves nations and empires into economic disasters come from one main source: wars. This increases debts, it destroys sectors of trade, economy and even whole infrastructures and masses of humans. Nations that are at war tend to misspend money and take increasing risks. Risks in wars lead to risks in markets. And the risk level rises rapidly.

Miz Risky LOVES wars! She loves bar brawls if she can't instigate wars. She is one of the oldest goddesses. She is the daughter of Lady Luck. She gambles and enjoys 'creative destruction' which for her, means, destroying masses of humanity. The financial houses that are tumbling down the cliff this year all made their fortunes off of one main thing: the US overspending on all levels as we struggle to wage endless wars, run the world's biggest military and not pay for anything as much as possible.

The history of world bubbles and overspending often coincide with wars. Most often, the nations doing this are not having wars on their own territory. It is nearly always on someone else's territory! This is why empires are much more prone to these huge balloon/collapses. Sometimes, there is a time-lag delay. For example, England continued WWI as lower-level wars against the dying Ottoman Empire as both England and France struggled to colonize or control the Middle East. This expense, on top of the WWI expenses, accumulated. British and French trade roared ahead thanks to these many wars across the entire planet but this was NOT paid for except via debt. And the debts were being ladled out by the US and they tried to discharge these debts by flooding the US with one-way trade. The US fended this off and the Great Depression resulted. Wars didn't fade. They increased due to outright looting expeditions. And grew greater and greater until the total conflagration of WWII nearly destroyed a quarter of the planet.

Since then, the build up to further wars was transfered from Japan, Germany and England to the US, Russia and China. The Cold War has been, like all wars, irresponsibly funded. And when Russia and China surrendered, the US, like Britain and France after WWI, launched more wars and invasions of the Middle East. Today, the fighting rages even higher in Iraq. The surge failed utterly and now the violence is again, consuming us. Oil has been nearly totally stopped at Basra. And world oil prices will, due to rising risk, shoot up yet again.

The US has egged the world into putting on even greater restrictions on Iran due to Iran opening its oil bourse and demanding yen and euros for oil. This, too, is going to cause world oil prices to rise. Switzerland just made a gas deal with Iran and the US wants to kill the contract and is, right now, hammering Switzerland on this issue. Meanwhile, inflation rages in the US as the value of our assets and equities collapse. The more we do these things, the worse it will be. But our rulers are intent on doing these things no matter what. Just like in the lead up to WWII.

Paulson:

Second, and perhaps most importantly, the Federal Reserve should have the information about these institutions it deems necessary for making informed lending decisions. The Federal Reserve is currently working to ensure the adequacy of such information. We suggest that the Federal Reserve, the SEC, and the CFTC continue their work of building a robust cooperative framework. Already, at the invitation of the SEC, the Federal Reserve is working alongside their teams within these institutions. These regulators should consider whether a more formalized working agreement should be entered into to reflect these events.

With this added information flow, the Federal Reserve will be better positioned to consider market stability issues like liquidity provisioning and the interconnectedness of financial institutions. The Federal Reserve's participation could also allow for broader consideration of market stability issues by the SEC and the CFTC. This collaborative process will necessarily have a strong focus on liquidity and funding issues.

The combination of these steps should provide the Federal Reserve with a structure and the information that it would need to make liquidity backstop loans during periods of market instability to non-banks. They address the current situation, in which investment banks have temporary access to the discount window. Clearly, many difficult policy questions must also be addressed on a going-forward basis.

I see these remarks as the opening shots in getting the US government, which is rapidly going bankrupt, to provide the protections of the FDIC to non-banking entities that are not even really American but are rather, funnels for moving money to offshore accounts and shoveling money around the planet for profit. These investment houses are very cruel in their moves and will slit the throat of any nation they find non-profitable. They seek maximum returns, not safe returns. Now they want us to protect them while they loot us? Isn't that the definition of insanity? If they want to be secure, they can turn into 'banks' and follow the banking laws we had before we decided to go bankrupt.

The regular banks would not hand out EZ loans to everyone. They asked for all sorts of assurances before lending. But the non-bankers loved to give loans! They didn't keep them, either. And since they were barely or not at all regulated, they could do this with no money down, nothing. And they flooded the markets with EZ money which then caused global inflation and bankruptcies. The US governors didn't regulate all this. They thought, this was making us 'richer'. And the sudden ballooning of values was confirmation that we were getting 'richer'. Well, such banking should be outlawed. Note how letting non-banks hand out loans has turned into a total disaster!

Paulson:

As we work through this period, we will learn through this experience. And the Federal Reserve will learn as it works with financial institutions as they come to the window. It is appropriate that we evaluate that experience in the coming months, and use the lessons of that experience to inform a path forward. Very relevant to this issue is the fact that bank regulation, which applies to institutions with an explicit taxpayer-funded backstop, is fundamentally different from non-bank regulation, which applies to institutions that are not supported by federal deposit insurance. The President's Working Group on Financial Markets will evaluate these issues and their implications for regulation of bank and non-bank financial institutions.

This last sentence is ominous. It means one of two things: the government will regulate these non-banks and force them out of business or it means we will insure these non-banks so they can continue to destroy our financial systems and drive us totally into bankruptcy. Past experience with Paulson and his ilk makes me very gloomy and cross.

They will try the second option just as surely as the sun rises in the East.

Moody’s takes axe to CDO ratings

Moody’s Investors Service unleashed a wave of ratings downgrades and negative outlooks on more than $25bn worth of complex credit products on Wednesday due to continued deterioration in the underlying assets.

The ratings actions, which affected more than 250 tranches from more than 40 deals, were mostly taken on collateralised debt obligations backed by other kinds of complex debt such as mortgage backed bonds or other CDOs.

It has been obvious since July 17, 2007, that the ratings on all the complex debt instruments created by non-banks that are barely regulated, were wrong. And these ratings continue to drop as the markets implode. Back then, we saw how things went off the cliff and they 'stabilized' only slightly as the government tries to rescue these instruments that should NEVER been created in the first place. But the stabilization has failed and they continue to fall.

Click here to see how far the ABX.HE indexes have fallen. And here is a chart I drew up at the very beginning of the huge collapse.:

When I drew that chart in July, they were still up in the 90's range. Today, they have collapsed into the 5-50 pts range and are now taking yet another downturn. So Moody's has to revalue all of them. There are no more real 'AAA' securities. They are all junk. And the fact that the bottom most ratings are near zero but still there is due only to hopeful thinking that the Federal Reserve, now an LLP, will save them.

But they can't be saved if the properties backing them are falling off the cliff. And California, a place where everyone boasted about their wonderful housing wealth, is leading the way downwards. The fall there has picked up its pace this last month:

California freefall: Home prices fell 26% in February

-In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: "During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge."

"It's bad. It's really bad," market analyst Nima Nattagh told the Daily News.

The California Association of Realtors reports median prices fell 27.2% from year-ago levels in the hard-hit Inland Empire east of Los Angeles, 30.9% in Sacramento, and 39.1% in Santa Barbara County.

On a percentage basis, the California price meltdown is more than three times as severe as the national decline of 8.2% in median prices reported this week by the National Association of Realtors. On an absolute basis, the California meltdown is even more severe: Nationally, prices fell over the past year at a rate of $338 per week; in California, prices fell at a rate of $2,788 per week.

Wealth is no longer pouring into California, it is vanishing. It isn't moving elsewhere, it is vanishing. This is the problem with wealth creation via debt creation. It can work only if there are enough wages involved to keep the payments up that are the basis of this system. If the buyers can't pay the loans, the loans don't find a new home, they VANISH. For these are promises for the future, not existing wealth today. And if the person promising the wealth has no way of repaying, it ceases to exist. And bankers who hand out loans to dead beats are punished by taking the losses. This is why some elementary caution has to be part of the whole concept and system.

Great banking collapses in the past often hinged on wild lending to warring parties who then default on the loans. In this case, the US, wishing to run endless wars and military build ups across the planet, paid for this by bankrupting our economic system. We had to let our creditors flood our markets with goods and we had to have super-cheap interest rates for our war bonds and this depressed savings at home since there are no returns. And this killed our own financial base. Nations that can't save, go bankrupt. Savings is the basis of banking.

The non-banks Paulson wants to rescue have debt/savings ratios that are ridiculous. 90:1 in the red, or carrying derivatives that are more than $100 trillion in the case of J.P. Morgan: impossible. These arcane, baroque systems were devised to hide the harsh fact that these non-bankers have no savings. And they can't be easily put under the FDIC umbrella unless they do nothing but try to save money and sell off their trillions in 'assets'. And this will cause a huge depression. The US can't trick its way out while fighting wars. It needs easy loans at cheap rates. And so it wants the banking system to run down reserves and create more money out of thin air.

Lunch Lady Suffers as Banks Prepare $2 Trillion in Lending Cuts

Credit is drying up as lenders, staggered by losses, try to raise capital and clamp down on financing for a U.S. economy that likely is in recession, economists at Goldman Sachs Group Inc. said in a March 7 report. The supply of credit for businesses and consumers may decline $2 trillion, the report said, equivalent to 7 percent of household, corporate and government debt.

Banks have to restore their savings. Since they are being forbidden to do this the classic way--raising interest rates to attract savings---they are going to find other means to do this. Not lending, in other words. The mismatch between interest rates for savings and lending rates means only the guys running the printing presses, the Fed LLP, will be able to lend. And this causes inflation since the Fed saves nothing. Our reserves are pathetic compared to our debts. The only thing saving us is the climb in the value of gold which boosts the value of Fort Knox. Yet the Fed wants to push down the gold markets so they can make more money via Fed loans! This is the good old 'Horns of Dilemma' yet again. The choices we must make are stark and obvious: either we cease our endless wars or we go bankrupt. Trying to save the system while waging wars that are costing us a fortune and raising the value of commodities, we must stop. It is pretty pathetically simple.

But never mentioned by either our regulators, governments or the media.

Chart from Steven Keene of Australia:

Debt as part of the GNP: the numbers climb going into WWII and then, after that episode of creative destruction, it begins its relentless climb during the Cold War. And now, it is out of control again.

UAE money supply soars to 37%, Bahrain’s 36%

Inflation created by the Bank of Japan LDP and the Federal Reserve LLP continues to flood into the commodity countries. Iran isn't having inflation due to being locked out of the banking system's stream. So money pours in but they can't use it. They collect it. This is a lot of money being held outside the system. But it isn't enough to stop inflation. In the ally countries that are siding with the US/Israeli wars, the inflation caused by rising oil prices due to these wars brought huge benefits and wealth to these countries. But now, it is bringing destruction. Since it isn't being plowed back into value-added commerce, it accumulates. The US as well as the Arab kingdoms spend much of this wealth on housing schemes. This is the easy way out, of course. Build palaces. The flood of wealth from the New World built two things in Europe: wars and palaces. The palaces had such excesses, they had to gild the roofs with gold to use it up. But the poverty of the peasants and surrounding populations increased, not decreased. Not until the Industrial Revolution, did this change.

Soybeans Rise After Argentina Protests; Gold, Crude Oil Advance

Inflation-inspired riots are spreading. After being hammered by the G7 central banks, the commodity markets resumed their march upwards. Obviously, inflation from the central banks producing easy money for the non-banking sector has to go somewhere. And it briefly went into stocks but now has returned to the fundamentals. The very same non-banking investment houses are directly responsible for this. Instead of letting these leeches go bankrupt and thus, the money vanishes, the central bankers are increasing this money in the hopes of keeping the money supply high. Thus, the continuing inflation.

A Northern Rock style crisis is threatening Iceland's entire banking system, writes Iain Dey

Total assets of the banking sector have grown from 96 per cent of gross domestic product at the end of 2000 to eight times Iceland's GDP at the end of 2006.

But it's not all that simple. The high interest rates that Iceland introduced to help curb inflation attracted investment from overseas, and also made it a major haven for currency market investors. Volatility in the Icelandic Kronor precipitated a mini Icelandic financial crisis in 2005. But while credit markets were booming, global investors in the financial markets were quite happy to buy debt from Icelandic institutions, in exchange for the higher yields on offer.

Like the oil nations, Iceland has chosen to try to sop up this flood of easy money from wild lending. And is getting the exact same inflationary forces. Like the Arab oil kingdoms, the population is too small to soak it up as a value-added industrial based system. Only China and India have the populations and only China has the industry to do this. And guess what?

China is winding this DOWN. They are crushing inflation the old-fashioned way: higher interest rates, higher savings ratios, more government regulation of debt creation. They are NOT sopping up the trillion dollars created by the G7 central banks in the last six months. They are parking a lot of money in their FOREX reserves. And now they are turning inwards to cope with public unrest. The US rulers should not rejoice in this. After all, this will leap across the planet and come here!

Unrest grows in Egypt as food prices soar

And inflation in the many dictatorships and despots ruling unruly countries: this is going to cause huge upheavals. The US is frantically lending Pakistan many billions in the hopes that this will prevent revolution there. But the government is corrupt and the military spending is wild. The billions we 'lent' were borrowed from China. And the Dragon is very suspicious and furious with us for it knows the US has been fostering rebellion within China, itself. The Dragon may think, 'Maybe it is time to teach them a lesson.' But Taiwan is being slowly reeled in. China will be patient. Up to a point.

But as we bomb Iraq some more and battle the populace there some more, as Palestinians fight the European and American invaders there, as the wars rage across the Islamic nations, the chances that inflation in these places might lead to rebellion, insurrection and wars is 100% and we won't like the results. It won't be us winning these battles. We lost the 'hearts and minds' part. Next, we will lose the economic values parts.

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President's Pigs Flying Economic Report

March 26, 2008

Elaine Meinel Supkis

I almost missed reporting on the 'Economic Report of the President' that was issued last week. It is chock full of laughs and should go down in history as an exhibit as to why the mighty US Empire collapsed. Over the years, I have noticed that all government agencies talking about trade always talk about our exports but never, ever, our imports. If they are mentioned, it is in passing. Also, a report on the most prosperous and stable nations has some eye-openers. Seems the richest and most stable are all pirate coves or ruled by Queen Elizabeth II. Global instability is growing greater thanks to warped trade/commodity values coupled with monetary policies that have flooded the planet with inflationary financing.

Wealth Effects on Consumption and Saving

Household wealth rose rapidly relative to disposable personal income from 2002 through the second quarter of 2007, supporting the growth of consumption and a decline in the saving rate. Over the 2002–07 period, the ratio of household wealth to annual-income increased 0.7 years, to 5.7 years of accumulated income(that is, consumers collectively accumulated an extra 70 percent of a years’ income). During the late 1990s and again during 2004–06, a strong rise in household net worth coincided with a sizable increase in consumer spending relative to disposable personal income.
***********************************************

Average hourly earnings of production or non-supervisory workers (who constitute about 80 percent of total employment on nonfarm payrolls) increased 3.7 percent (in nominal terms) during the 12 months through
December 2007—somewhat below the pace a year earlier of 4.3 percent. These nominal hourly earnings were outstripped by the 4.4 percent increase in the overall CPI for wage earners, and so real earnings fell 0.7 percent during 2007 (following a 1.8 percent gain in 2006). Even so, the recent pace of these nominal wage increases is above various measures of expected price inflation (such as those implied by the market for inflation-indexed Treasury securities), and suggests that employers and employees expect a gain in real
earnings in 2008. The situation is similar to a year ago, but during 2007, price inflation was higher than expected because of sharp and unanticipated increases in food and energy prices. In the long run, real hourly compensation increases with productivity growth, which is projected to remain solid.
*************************************************

The rapid growth of U.S. exports has been one of the most important economic developments of the past few years. In the 3 years from the end of 2003 to the end of 2006, real exports grew at an annual average rate of 8.3 percent, more than twice as fast as the overall U.S. economy. This growth has provided clear benefits to the entrepreneurs, owners, and workers of firms in export-oriented industries and, more broadly, to the U.S. economy as a whole. This chapter identifies the factors that have driven recent export growth and discusses several longer-term trends that have lifted exports over time. More broadly, the chapter also addresses the benefits that flow from open trade and investment policies as well as some related challenges.

The key points of this chapter are:

• The United States is the world’s largest exporter, with $1.5 trillion in goods and services exports in 2006. The United States was the top exporter of services and second-largest exporter of goods, behind only Germany.

• In recent years, factors that have likely contributed to the growth in exports include rising foreign income, the expansion of production in the United States, and changes in exchange rates. One reflection of that
growth is that exports accounted for more than a third of U.S. economic growth during 2006 and 2007.

• Over time, falling tariffs and transport and communication costs have likely lowered the cost of many U.S. goods in foreign markets, boosting demand for U.S. exports.

• Open trade and investment policies have increased access to export markets. Increased investment across borders by U.S. companies facilitates exports.

• Greater export opportunities give U.S. producers incentives to innovate for a worldwide market. Increased innovation and the competition that comes from trade liberalization help raise the living standard of the average U.S. citizen.

• Nearly all economists agree that growth in the volume and value of exports and imports increases the standard of living for the average individual, but they also agree that the gains from trade are not equally
distributed and some individuals bear costs. The Administration has proposed policies to improve training and support to individuals affected by trade disruption.

I amended the government's chart. This report has many charts that often tell a much different story from the text. But what is more annoying is the lack of charts. This report cunningly leaves out any charts or graphs showing the red ink. A report about our joint over-all economic state that leaves out all mention of government and trade red ink is a fraud. A lie. A deception. Throughout this maladministration, we have an endless stream of falsified reports. The refusal to look at the important facts and figures is a problem for over 35 years. Anyone can make any assertion so long as they control what information is debated. By leaving out ALL of the red ink items from this report except for, of course, Social Security and other benefit programs, is a crime.

Any government doing this should be replaced. Any ministers doing this should be impeached. Any financial advisors doing this should be arrested. Lying about finances is a crime. It isn't a scheme or a trick. Bookkeepers who help corporation Presidents lie to investors are arrested. Presidents of corporations who lie about profits while selling stocks are arrested by the Security and Exchange Commission and put on trial.

So why aren't we using this report to arrest the people who issued it? Bush signed this report so he is the first to be arrested. I am rather harsh about this matter because the infection of lying about finances has insidiously spread throughout our government to the point that the corruption is now openly destroying our nation. This is treason. For example, anyone calling for increased military spending and military adventures while calling for tax cuts or ignoring the need for tax hikes, should be impeached or arrested. The people at large who vote for these corrupt officials can't help themselves. Everyone wants a free ride. But any nation interested in staying afloat has to stop this sort of voter-bribery. In the past, Congress tried this with a 'debt ceiling'. This is the ultimate 'glass ceiling': it shatters regularly. At this point, far from feeling fear when the red ink and tax cuts cause our deficits to grow rapidly, when the red ink hits this glass ceiling, it shatters and Congress and the President all rush past it and double the red ink production.

This is a crime against America. It is a generational crime for it is burdening our grandchildren for things we want now. It is destroying our finances and weakening our nation. And this report has virtually no mention of this. Indeed, like all the usurper's reports, this report celebrates the very same tax cuts that have created this problem. The same is with global trade: not a peep about our trade deficit. This is very childish. It is like a 12 year old putting money in his piggybank and then not only spending all of it, but stealing from mom's purse, too. Then, when confronted, whines, 'I put over $5 in my piggy bank! I am so saving money!'

Well, if that child is buying computer games that cost $50 from that $5 something is wrong.

And this is how our nation is being operated: lies on top of lies. As we go into debt. The report notes that wages, for example, have gone up in the last 7 disastrous years. Which may be true [barely!] but using their own false inflation statistics, they admit, wages have FALLEN. Which is obvious to anyone who buys anything in the last 7 years! Later, in this report, they claim that we are 'richer' due to free trade and if workers are displaced, they get better jobs. And can be 'retrained'. As what, we ask. Certainly, our economists and bankers should be retrained! Not to mention, our craven politicians. We could train them to clean toilets or muck pig sties.

What bothers me the most is the opening statement by this crew of incompetents: they trumpet a rise in 'wealth' in the US due to the housing bubble! Our 'wealth' increased due entirely to the 'value' of our housing rising rapidly thanks to a cheap loan regime set into motion by Greenspan! Bankers took advantage of this sub-inflation rate finances from both our central bank and then the Bank of Japan, to flood the US with lending plopped down on top of our housing stock and businesses. This sudden flood of DEBT is our 'wealth'. And this basic misunderstanding of what wealth really is---this is the problem today.

Debt is NOT wealth. If my house rises in value by 50% and I sell it, if I owe no money on that rise in value, I am 'richer' but only if I live poorer! In other words, if I move into another house of equal quality, I end up with 0% profit! If I downsize or move to a much cheaper place and buy a cheaper house, then I have a profit but it is due to downsizing or living at a lower standard. Which is not a profit, either.

What I have done over the years is buy run down houses, fix them up and sell them for another property that needs development. This means I make a profit but it is 'capitalism': I add labor and thus, value, to something. Pure inflation caused by banks lending to anyone who wants loans who then bid up things like housing, stocks, bonds and commodities, is not 'capital'. Speculative wealth is dangerous since it encourages, desires and needs loose lending and thus, inflation. What is produced is far less important than bidding up the paper that represents value.

The present banking collapse is being hit by a decline in housing value but what was bid up in value far beyond its real worth wasn't just housing. It was the bonds issued by the banks that was BACKED by the housing. The actual value of the housing is immaterial. The ability to pay back the loans: that is what matters here. And as this report notes very briefly, wages are falling and we know that it is falling rapidly vis a vis inflation. And inflation is caused by banks issuing too many loans too recklessly and speculators using loans from Japan to play in the commodities and stock markets. And the more commodities rise, the less people are able to pay off loans for housing or buy housing in the first place.

The recent attempt at killing inflation in commodities has not worked. Once again, they are climbing thanks to the huge infusion of funds from central banks. This report, of course, misunderstands all this and talks as if they, the government, who are producing an epic flood of red ink, are not responsible for the problems this report mentions in passing. To them, the red ink they are producing is vanishing ink.

Britain is world's 7th most stable and prosperous nation

The United Kingdom has been ranked as one of the most stable and prosperous countries in the world, beating the United States, France and even Switzerland in a global assessment of every nation’s achievements and standards.

A one-year investigation and analysis of 235 countries and dependent territories has put the UK joint seventh in the premier league of nations. The top ten comprise also the Vatican, Sweden, Luxembourg, Monaco, Gibraltar, San Marino, Liechtenstein, the Netherlands and the Irish Republic.
*snip*
The bottom ten, surprisingly, do not include Iraq. They are listed as Gaza and the West Bank, Somalia, Sudan, Afghanistan, Ivory Coast, Haiti, Zimbabwe, Chad, the Democratic Republic of Congo and the Central African Republic.

Palestinians live in terrible conditions thanks to their lovely neighbors who just want them to go away. The other nations have either been invaded repeatedly by imperial European or American powers or were victims of centuries of slave raiders or the end destination of slaves from these regions.

Here is the winner's list:

1 Vatican [Elaine: HAHAHA---last time that place was looted, it was by the French King 500 years ago!]

2 Sweden [Elaine: The socialist state!]

3 Luxembourg

4 Monaco

5 Gibraltar

6 San Marino

7 Liechtenstein

8 UK

9 Netherlands

10 Ireland

11 New Zealand

12 Denmark

13 Austria

14 Andorra

15 Germany

16 Iceland

17 Switzerland

18 Portugal

19 Australia

20 Norway

21 Malta

22 France

23 Canada

24 USA

25 Belgium

26 Spain

27 Italy

28 Japan

The vast majority of the nations that are rated high are either pirate coves or part of the House of Brunswick royals in England. England, itself, is not 'rich'. The top layer is quite rich and they use the Queen's cool pirate coves to evade taxes and run banking/speculative schemes. Other nations here are also running various tax haven/money laundering schemes. The ones that are larger than a postage stamp are now having problems caused by the collapse of the banking system in the US and England. Iceland, for example, is suddenly having problems. Their currency is rapidly falling and the flood of easy money that flowed in is now flowing out as frantic hedge fund hell hounds and pirates try to recapitalize their sinking funds.

Other nations on this list are oil pumping nations with low population levels. But if we go to Norway, for example, we discover the people there are not living high off the hog at all. In the US, thanks to easy lending, we drive big, fat cars and live in big, fat houses. This isn't true in Norway. As for 'stability': many nations on this list were totally destroyed by war in the last 75 years! This isn't very stable.

The Arab kingdoms didn't make this list because they are 'bad' unlike other, equally bad nations. This is a judgement call, of course. Even when they have socialist policies where income is distributed. I wanted to include this list because the President's report loves to pretend the US is the best nation on earth. And this is just plain silly. And talking about silly, time to look at Greenspan's latest speech:

We will never have a perfect model of risk

By Alan Greenspan

The current financial crisis in the US is likely to be judged in retrospect as the most wrenching since the end of the second world war. It will end eventually when home prices stabilise and with them the value of equity in homes supporting troubled mortgage securities.
*snip*
The crisis will leave many casualties. Particularly hard hit will be much of today’s financial risk-valuation system, significant parts of which failed under stress. Those of us who look to the self-interest of lending institutions to protect shareholder equity have to be in a state of shocked disbelief. But I hope that one of the casualties will not be reliance on counterparty surveillance, and more generally financial self-regulation, as the fundamental balance mechanism for global finance.

The problems, at least in the early stages of this crisis, were most pronounced among banks whose regulatory oversight has been elaborate for years. To be sure, the systems of setting bank capital requirements, both economic and regulatory, which have developed over the past two decades will be overhauled substantially in light of recent experience. Indeed, private investors are already demanding larger capital buffers and collateral, and the mavens convened under the auspices of the Bank for International Settlements will surely amend the newly minted Basel II international regulatory accord. Also being questioned, tangentially, are the mathematically elegant economic forecasting models that once again have been unable to anticipate a financial crisis or the onset of recession.

Far from shocked disbelief, a number of people who write about economics online are not shocked but enraged about the stream of lies and deceptions that poured out of Greenspan, our government and the banking system for the last 7 years if not much longer! Greenspan and his gang all pushed our concerns aside and still do this. And note how this man still embraces 'self-control'! Like the President's Report which embraces free trade even as it kills us, he continues to believe that people tempted by greed can exercise self-control!

And this man is a liar! He thinks this started in the parts of the system that were the most controlled? What? I saw this begin at the offshore pirate coves! The lending of easy money to homeowners, for example, wasn't from the classic banking system! Countrywide is a recent bank-lending system that basically operated outside of the present upper-tier banking system. This is why it grew so very fast in very few years! They disregarded the older banking laws. On top of this, Greenspan's libertarian buddies eliminated all the rules and regulations! Far from over-regulated, all regulations were collapsing! And they loved this! And want more of this!

So, as Greenspan stands in the center of the mess he created, he thinks more of the same is called for? Talk about lunacy.

Greenspan:

I do not say that the current systems of risk management or econometric forecasting are not in large measure soundly rooted in the real world. The exploration of the benefits of diversification in risk-management models is unquestionably sound and the use of an elaborate macroeconometric model does enforce forecasting discipline. It requires, for example, that saving equal investment, that the marginal propensity to consume be positive, and that inventories be non-negative. These restraints, among others, eliminated most of the distressing inconsistencies of the unsophisticated forecasting world of a half century ago.

But these models do not fully capture what I believe has been, to date, only a peripheral addendum to business-cycle and financial modelling – the innate human responses that result in swings between euphoria and fear that repeat themselves generation after generation with little evidence of a learning curve. Asset-price bubbles build and burst today as they have since the early 18th century, when modern competitive markets evolved. To be sure, we tend to label such behavioural responses as non-rational. But forecasters’ concerns should be not whether human response is rational or irrational, only that it is observable and systematic. [Elaine: Greenspan needs a mirror. People who cause both bubbles and panics always refuse to see themselves as the agent and enabler of these events.]

This, to me, is the large missing “explanatory variable” in both risk-management and macroeconometric models. Current practice is to introduce notions of “animal spirits”, as John Maynard Keynes put it, through “add factors”. That is, we arbitrarily change the outcome of our model’s equations. Add-factoring, however, is an implicit recognition that models, as we currently employ them, are structurally deficient; it does not sufficiently address the problem of the missing variable.

Generational waves explains how fools who are greedy always push aside sober, careful people. When the last person who remembers past disasters dies, the newer generation undo all the laws and regulations that prevent these excesses. Once the last rule created in the wake of the previous total collapse is removed, they immediately run things all the way up and cause a new major collapse! This is not 'emotional' but rather, a loss of experience. All the lessons I learned about banking, I learned from survivors of first, the Depression of 1893 and the Great Depression. The warnings from 100 year olds I knew as a child were reinforced by warnings from my father-in-law who was an adult in 1929 and who worked on the Roosevelt rescue team.

The present crop of fools all mock people who saved us last time around. Bernanke thinks he is smarter than my former father-in-law, for example. He preens himself on his magic scheme to save us from our follies: print money! Lend cheap!

Junk Bond Losses Top $35 Billion, JPMorgan Sees More

High-yield, high-risk bonds are off to their worst start ever, and the biggest investors say there's no recovery in sight.

Junk bonds have fallen an average 3.9 percent this year, losing about $35 billion, according to data from Merrill Lynch & Co. indexes. Some funds managed by John Hancock Advisers LLC, OppenheimerFunds Inc. and Fidelity Investments are down more than 7 percent, showing that even the largest investors were caught off guard by the collapse.

While the Federal Reserve has slashed benchmark interest rates by 3 percentage points since September, it has been unable to get investors to increase their purchases of the riskiest assets. The declines are choking off financing for speculative- grade companies, boosting defaults. The debt is likely to ``struggle'' for months as the economy enters a recession, according to JPMorgan Securities Inc., the top high-yield research firm in Institutional Investor magazine's annual poll.

Want to fix junk bonds? HAHAHA. Even they call these crummy things 'junk'! People play with fire because they can make money fast this way! Except in down markets. Then junk turns to crap. And anyone who plays with them gets burned! Do we rescue these junk bonds and the speculators who played with them? Are we nuts? If they want safe bonds, they can buy them...LAST YEAR. Instead, they rolled the dice. This is a situation that calls for cold-hearted measures: too bad, suckers. You lose.

Instead, Bernanke will be out there, trying to save these miscreants. And this is why our system is doomed: we cannot save every fool who tried to make a killing. They have to die by the sword because they lived by the sword. If we want a safe system, all the Fed LLP has to do is raise interest rates. A la Volker.

Dollar’s painful role in rebalancing the economy

How cheap? Based on International Monetary Fund purchasing power parity calculations for the end of 2007, much of the euro area is between 15 per cent and 30 per cent more expensive than the US, while Australia, Canada and New Zealand are all about 30 per cent pricier by this measure. For the latter group of Anglo-Saxon countries, the currency rate deviations from PPP are at all-time extremes.

So how much cheaper will the US become, and how much should “value” count in currency forecasts?

Fiat currencies, backed by nothing more than the monetary authority, do not have an esteemed place in history for holding their value. Since the fall of Bretton Woods in 1973, a rolling dollar investment in a one-year US Treasury bill has yielded less than half the value of an investment in the “barbaric relic” that Keynes dubbed gold. Gold barbarians are among those now banging at the US central bankers’ gate, pronouncing the dollar a victim of past excess liquidity and easy money.

Warren Buffett has spoken of policies that have force-fed overseas investors “a few billion” dollars a day. But the ultimate “value investor” has yet to see value in the US dollar.

A long article about the dollar. The misunderstanding here is, the ultimate value of any currency is supposed to be its relation to TRADE and DEBT. If both run out of control, the money is supposed to 'reset' at a lower value. This is pure hogwash. All central banks manipulate their balances to keep up as much one-way trade as possible. Of course, in the case of the US, our central bankers do this to make trade and debts WORSE. This is why our nation is going downhill. And every one of our 'friends' want us to do more of this. A bad thing. Which no one is trying to stop or even slow down.

Iceland Lifts Key Rate to 15% at Unscheduled Meeting

Iceland's central bank raised its key interest rate by a record 1.25 percentage points at an emergency meeting to halt a slump in the krona and a surge in inflation. The currency made its biggest ever jump against the euro.

Sedlabanki raised the repo rate to 15 percent, the Reykjavik- based bank said on its Web site today. It hadn't planned to hold a rate meeting until April 10. It was ``crucial'' to reverse the krona's decline ``as quickly as possible,'' the bank said.

The krona tumbled 17 percent against the euro in the past three weeks on concern that the global financial turmoil would make it harder for Iceland to finance one of the world's largest current account deficits. The country risks ``spiraling'' wages and inflation if that decline isn't pared, the central bank said. Inflation reached a one-year high of 6.8 percent last month.

See? Their currency is going down due to too much debts! No one cares. But if we try to deal with this, the world goes into action to assure us, we don't need to stop our red ink problems. But we must ignore this and still do it. So what do our rulers think we should do to fix things?

How's Social Security, Medicare?

WASHINGTON -- The Bush administration renewed calls for action to overhaul Social Security and Medicare, as trustees of the nation's two largest entitlement programs sounded the alarm again about their long-term financial challenges. But with an election looming, Congress will likely leave the issue to the next president.

These criminals have increased military spending every year this last 7 years. And their fixes all involve starving Americans to death or killing us in other ways. They can't see any other solution. If we all drop dead, this would please them. They are even tempted to shove us into a war and kill us that way, too! While making huge profits via the sales of very expensive weapons which get destroyed instantly. This is why I worry about WWIII all the time. These people are so cruel, so short sighted and demented, they would be seriously tempted to do this terrible thing to us. Just so they can make a few more pennies.

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