Money Matters

Japanese Carry Trade Resumes Flooding Planet With Red Ink

April 20, 2008

Elaine Meinel Supkis

McCain, a very wealthy man, wants to have us never pay taxes to fund our spending. We must face the truth: the US ruling elites are tax cheats. They promise to cut spending but they generate wars so spending is always rising. The US is going bankrupt and the media loves anyone who suggests we cheat on our taxes! Oil prices will now rise rapidly as OPEC has decided to slit the US throat, they have a new friend called 'China'. But no worry: the Japanese carry trade is resuming with a vengeance and the flood of funny money will cause double global inflation. And few people seem to understand this dynamic. Bush wants to sign a free trade agreement with South Korea. Just what we need. More trade red ink. And the media has been very eager to call this 'recession' over and done with. More money=fun times ahead, the status quo returns.

McCain: Cutting taxes more important than balanced budget

Republican John McCain said Sunday that cutting taxes and stimulating the economy are more important than balancing the budget, and accused both Hillary Rodham Clinton and Barack Obama of supporting tax hikes that would worsen the impact of a recession.

"The goal right now is to get the economy going again," the GOP presidential nominee-in-waiting said on ABC's "This Week," adding that he would put the country "on a path to a balanced budget" by attacking wasteful spending.

First off: anyone who dares, at this point in our history, suggest we not pay our way should be taken to Yankee Stadium, stood on the pitcher's mound and then whacked with a baseball bat. This is a very serious breach in ruling our nation. Anyone who dares to suggest this should be viewed as a traitor. When Bush proposed we ignore paying our bills, he actually said, revenues were greater than the budget so why not 'give it back'? He explained that paying our debts would ruin the banking system [which is pure 100% unadulterated debts]. So he 'fixed' this by giving taxpayers huge cuts. All of which caused the budget to go very deep in the red. And then there was our many wars: this pushed us deeper in the red. Now, we have doubled our national debt thanks to Greenspan and Bush devaluing the dollar very rapidly while running huge deficits. The Treasury would hand over to the Fed a fistful of IOUs which the Fed called 'assets' which then allowed the Fed to lend money to banks at 1% interest. This, in turn, fed the housing boom as well as wild speculative stock market merger games.

This debt merry-go-round was a huge bonanza for the bankers and elite investors. They got tremendously rich and paid little taxes on this windfall. Now we are going bankrupt. Anyone running for office, talking wildly about the US spending freely, is either insane or a traitor or possibly, in McCain's case, both. No sane person wanting to protect America would dare suggest we spend wildly for another 7 years. We can't double the national debt every 7 years for 100 years. This is physically impossible so we may as well stop while we have a dim chance of avoiding bankruptcy.

This venal, foolish, dangerous warmonger really believes he will win popularity if he says we can spend and spend and pay no attention to the bottom line. If America did this from day one, we would be an outpost of Mexico by 1900. Instead, our ancestors agonized over how to balance the budget and still run a good economy. This task is difficult. But I would hope we have enough smart people around to be able to figure out how to do this. Or we can ask the Germans.

OPEC chief: Oil prices would go higher regardless of supply

"Oil prices, there is a common understanding that has nothing to do with supply and demand," al-Badri said on the sidelines of an energy conference in Rome.

Oil prices reached a new high Friday at $117 a barrel.

A host of supply and demand concerns in the U.S. and abroad, along with the dollar's weakness, have served to support prices, even as record retail gasoline prices in the U.S. appear to be dampening demand. Crude prices have risen as much as 4 percent last week.

The US doubled its embargo of Iran last month. The pin heads who run our State Department for Israel crowed that we had Iran cornered and Iran would fall like a ripe apple. But Iran is a kitty cat, not an apple. And it has claws and a bad temper. This cat has a long record of scratching the noses and eyeballs of anyone who tries to grab it. So here we are: world oil prices are shooting upwards. We claim, our embargo of Iran is to save Saudi Arabia. The King is rolling about his palace, snarling with joy as he counts the flood of money that is pouring in, thanks to this stupid embargo. He is worried that Iran will join the Shanghai Pack and be allied with Russia and China. So he is negotiating with both to see if they can find common cause. Since the US insists on stealing little mud huts and bent, old olive trees in the Holy Land, this is driving the King into the embrace of the Dragon of China. Who can't wait to snag this goodie.

And they will, in the end. For the simple reason, they have no desire to steal anything in the Holy Land. It isn't Holy to them. It could drop off the face of the earth and vanish as far as they are concerned. They do want all that oil. With the dollar getting weaker as the US picks the wrong solution to this financial riddle we are stuck in, the chanced of the Chinese winning Saudi Arabia is very high right now. The US, if is runs bigger budget OR trade deficits while dropping interest rates to the cellar, will have an ever-weaker dollar. No matter how this infuriates Germany who don't want any inflation at all, the US will cheerfully follow the old trail that took us down to hell. We will assist Japan in restarting the carry trade! No matter what! Talk about TOTAL SUICIDE!!!!

Yen Falls as Rally in Stocks Bolsters Confidence in Carry Trade

The yen fell against the euro and dollar after the biggest weekly gain in U.S. stocks in almost three months gave investors confidence to buy higher-yielding currencies with funds from Japan.

The yen declined to 164.34 per euro at 7:54 a.m. in Tokyo, from 163.96 in New York on April 18 when it reached 164.68, the lowest level since Dec. 31. The Japanese currency dropped to 103.98 per dollar from 103.67. The yen weakened to 97.10 per Australian dollar from 96.89 and 207.88 per British pound from 207.13. The dollar was little changed at $1.5810 per euro.

In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them. Japan's benchmark rate of 0.5 percent is the lowest among major economies and compares with 7.25 percent in Australia.

Japan desperately wanted to restart the weak yen. The billionaires who rule America have been in hysterics since August due to the carry trade ending. Now, it will restart. To their intense joy. They flooded this planet with red ink and then wailed about 'no liquidity'. Now, we will get 'liquidity' with a vengeance. The US plans to overspend our budgets nonstop. And the Japanese will supply us with infinite red ink. And remember this: INFINITY IS DEATH. The whole point is to stop these forces that aim to go to infinity. We can't overspend forever. We must pay the piper! We can't devalue the yen and the dollar, the world's top two economies cannot both do this all the time forever. And if we have China and Germany doing the opposite, they will rule the earth in 25 years. Or sooner if we are very stupid. Already, they are both #1 and #2 in key areas of international trade and industrial development. How is that for a disaster for the US? We can't go to the past. We must look to the future. And the future is dark if we paint it in red ink.

Our only salvation is to kill the Japanese carry trade and imitate China and Germany, not imitate Argentina. Or the Roman Empire.

Bank of England Will Unveil Bond Swap to Ease Mortgage Market

(Bloomberg) -- The Bank of England will today announce a plan to swap about 50 billion pounds ($100 billion) of government bonds for mortgage-backed securities to lower credit costs, people familiar with the matter said.

The plan will ``unfreeze the situation we've got at the moment,'' Chancellor of the Exchequer Alistair Darling said yesterday in an interview with the BBC, without specifying how much would be made available. ``What the Bank of England will do is, in effect, lend the banks that money. In the meantime, the Bank of England will take a security.''

Prime Minister Gordon Brown's government is trying to encourage lending after a surge in borrowing costs prompted banks to withdraw their best mortgage offers, threatening to exacerbate the worst housing downturn since 1992. The plan is a change of approach by the Bank of England after three interest-rate cuts since December failed to ease the logjam.

Last month, the British were exclaiming that their housing market was strong, unlike the US. The flood of funny money has been sopped up by British homeowners. This is true in many nations. So much carry trade red ink was created, it flooded into whatever real estate markets there were and all went shooting upwards due to this. Now, it has fallen. Will reflooding it work?

I say, no. For housing prices outstripped incomes. And the deadly side effects of free trade have so hammered the G7 industrialists sectors, we see no rise in people's incomes. And since the carry trade money can't flow into housing anymore, it is flowing into speculation on COMMODITIES. This is why the King of Saudi Arabia mentioned that speculators are to blame for this week's rapid inflation in oil prices. The King knows the funny money buying his hard substance that fuels world civilization is losing value due to the resumption of both the carry trade and wild lending by the G7 central bankers. He knows he must park this loot somewhere fast before it loses even more value as the inflation machine grips the earth in its boney, hard skeletal hands. What if he invests it in China? Gads. The mind reels. Or will he invest it in the US stock market which is now soaring due to happiness over the resumption of the evil carry trade red ink flood?

Five signs the stock market has bottomed

Are we there yet? That's what investors want to know as they search for a bottom after six punishing months for stocks. People are understandably eager to be done with this downturn and see markets move forward.

It's a tough wish at a time when the U.S. economy is clearly contracting and likely in recession. The good news is that stocks typically recover several months ahead of the economy. The bad news is that we're probably closer to the beginning of this slump than the end.

"People are just stunned by what's going on in the economy, by their finances, by the stress," said Bernard Baumohl, managing director of The Economic Outlook Group, a forecasting firm. "We're in the belly of the recession beast, and we're going to have to get used to it."

Easier said than done. Debate rages about what stage our economic crisis is in. Some are optimistic that the government's moves to flood the economy with liquidity means a shallow recession or none at all; others believe Washington alone can't repave deep potholes on Wall Street and Main Street, and are braced for a long, bumpy road ahead.

Remember that the stock market will show signs of bottoming well before every bit of bad economic news is wrung from the headlines. These milestones won't be obvious or appear at once, and keep in mind that just because stocks stop going down doesn't mean prices will roar to new records. The damage to the economy is done, and will take time to repair.

Like little babies, the US investing public demands an end to the bad times. To fix these bad times, all they need is LIQUIDITY. And as the Fed sucks up all the bad debts and parks it in their vaults, as the Japanese carry trade resumes, we will have infinite liquidity. Which has to be parked somewhere. The Wall Street betting houses is a great place to restart this game. So what if the US is going under in debt? So what if we can't pay our bills or save money? So what if oil shoots higher in price, food becomes nearly impossible to buy and the working classes suffer terrible crushing loss of income? LET THEM EAT CAKE!

The federal funds rate is the overnight rate at which banks and other deposit-taking institutions lend to each other. The Federal Reserve has lowered fed funds during the credit crisis to bring down short-term interest rates. That strengthens the financial sector, as banks can borrow money cheaply and lend at higher rates, which stimulates the economy.

The two-year Treasury note, meanwhile, is the short-term rate that investors classically embrace when they're nervous about the future and aren't comfortable in higher-risk securities.

Demand pushes up bond prices and depresses yield. In this credit crisis so many investors flocked to two-year Treasurys that its yield slipped below the fed funds rate. "That's not a sign of a healthy economy," said Baumohl, the Economic Outlook Group strategist.

As I keep on saying, why have interest rates? Japan has done wonderfully without them. When they tossed interest rates out the window, and they are wildly talking about reducing the 0.5% rates down to 0.25%, their industries boomed, their exports shot through the roof, profits for Toyota shot upwards. True, their workers are dying, but so what?

ROBOT AGRICULTURE (1): Strawberry-Picking Robot Uses Camera To Determine Ripeness

TOKYO (Nikkei)--With farmers aging and having a hard time finding successors to take over their land, engineers are developing robots to aid with the more laborious work and help enhance productivity. A strawberry-picking robot developed by a start-up firm is one of them.

They don't need them! The very real hope of the upper classes in Japan is to have an army of robots do all the chores the underclass did. This is their Brave New World or rather, like the all-robot planets of Asimov's 'Foundation' series. Eventually, humans couldn't stand each other and lived alone with their armies of robots who eventually eliminated even the very last of them.

Bush Meets South Korea's Lee, Vows to Push Trade Deal

April 19 (Bloomberg) -- President George W. Bush, meeting with South Korea's Lee Myung Bak, said he'll push for congressional approval of a free-trade agreement between the two allies and vowed to maintain pressure on North Korea to dismantle its nuclear-weapons program.

``The Korea free-trade agreement is a priority for this administration, and we will press hard with the United States Congress,'' Bush told reporters today at Camp David, Maryland, as he concluded a two-day meeting with Lee, the first South Korean leader to visit the presidential retreat.

And our robotic ruling elected leaders are stupidly marching off the same cliff over and over again. Everywhere we turn, we see more 'free trade'. This is pure insanity! How on earth can red ink America run more trade deficits? Every single one of these things increased our trade deficits. And then, we are told, by weakening the dollar, we can regain our losses over the long run. So what, if this means we can't drive our cars or eat? Die, bothersome workers, die! And this is the long range plan: to have us imitate the Japanese who are thoughtfully ceasing to reproduce. Eventually, the earth's problems will be solved. The ruling elites will live in a robotic paradise! This is the long range plan.

Chairman Ben S. Bernanke
At the World Affairs Council of Greater Richmond's Virginia Global Ambassador Award Luncheon, Richmond, Virginia
April 10, 2008

Addressing Weaknesses in the Global Financial Markets: The Report of the President's Working Group on Financial Markets

In recent months, the Federal Reserve has been intensely focused on the continuing strains in financial markets. Healthy, well-functioning financial markets are essential to sustainable growth. In particular, much experience shows that economies cannot perform at their full potential when financial conditions are such as to restrict the supply of credit to sound borrowers. We are addressing these financial strains and their potential economic consequences with a number of tools, including the provision of extra liquidity to the system and reductions in our target for the federal funds rate.

Even as we have worked to resolve the current crisis, however, the Federal Reserve has also been part of a national and international effort to draw at least some preliminary conclusions about the sources of the current turmoil as well as the implications for public policy. In my remarks today I will discuss some of these conclusions and, in the process, identify some measures that should be taken to strengthen the global financial system in light of the recent experience.
*snip*
As I noted earlier, the turmoil in financial markets has also revealed significant weaknesses in the risk-management practices of some large, globally active financial institutions; these weaknesses have exacerbated the problems in the markets by compromising the abilities of these key firms to absorb risk and serve as intermediaries. Prudential supervisors in the affected financial markets began joint work late last summer to identify common deficiencies on which they and the firms should focus. The supervisors concluded that the firms that suffered the most significant losses tended to exhibit common problems, including insufficiently close monitoring of off-balance-sheet exposures, inadequate attention to the implications for the firm as a whole of risks taken in individual business lines, dependence on a narrow range of risk measures, deficiencies in liquidity planning, and inadequate attention to valuation issues. To be sure, firms varied in the degree to which they were subject to these weaknesses, with better performance on these dimensions generally being reflected in better financial performance.

Correcting these weaknesses is, first and foremost, the responsibility of the firms' managements and they have powerful incentives to do so. But prudential supervisors, including the Federal Reserve, must also review their existing policies and guidance to identify areas where changes could help firms strengthen their risk management--a process that is already under way. Two areas of focus in this review will be capital and liquidity, the principal buffers that firms have against unexpected shocks. Regulators should adopt policies that lead financial institutions to hold capital and liquidity cushions commensurate with their firm-wide exposures to adverse market events. The PWG also will be asking U.S. regulators, working together and through international groups such as the Basel Committee on Banking Supervision, to enhance their guidance in a variety of areas in which weaknesses were identified. I expect, for example, to see work forthcoming on liquidity risk management, concentration risk management, stress testing, governance of the risk-control framework, and management information systems.

Off-balance-sheet vehicles have been singled out for attention because of the pressures they have put on financial firms' capital and liquidity during the current episode. The PWG made a number of recommendations on this topic, including urging regulators to require financial institutions to provide more detailed and comprehensive disclosures about off-balance-sheet commitments. The PWG also recommended that the Financial Accounting Standards Board (FASB) evaluate the need for further modifications to accounting standards related to consolidation and securitization, and that FASB and the International Accounting Standards Board achieve more rapid international convergence of accounting standards in this area.

This man is insane. The reason the entire US banking system from top to bottom, collapsed, is not because it was strong and hale and hearty. It was dying. And is still dying. It is dying because it tried to create infinite debts. And lending has to stop since it must stop. If it is restarted artificially, this means the whole wretched mess will collapse even worse once all this red ink Bernake and the Bank of Japan are creating, drowns us like rats. The pitiful regulations he is proposing won't fix the Japanese carry trade. The problem isn't here at home any more than the problems that created the Great Depression were not brewed here at home. This is international. This is why the US must break with the G7 and step back from ALL its allies and rethink what the hell we are doing.

Playing this game to the end means certain death for our nation.

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As Reserves Vanish, Fed Pretends We Don't Need This

April 20, 2008

Elaine Meinel Supkis

I compare two studies today. One is for the Federal Reserve and is filled with nonsense that tries to see how minimal a reserve we can get away with. The other is for NBER and is a study examining previous housing boom/busts in the last 30 years. It, at least, is sort of sensible. Citigroup has only 7.7% reserves which is utterly laughable. They blew through $16 billion in reserves this last six months. They are more or less bankrupt. But their stock has soared on the absurd assumption that the banking crisis is over thanks to the stupid Federal Reserve using their helicopters to drop trillions of dollars into the grinding maw of asset destruction. And this is worsening global inflation. But the Fed pretends they have nothing to do with global inflation. And truckers in the US are going on strike May first while Russia won't sell any more gold in international markets, they are keeping it at home to fight inflation.

Citigroup May Need to Sell Assets to Bolster Capital

Citigroup Inc. shareholders, cheered by a $5.1 billion first-quarter loss that wasn't as big as some analysts forecast, face growing concern that the bank may have to sell assets, reduce the dividend and attract outside investment to bolster capital.

Citigroup's so-called Tier 1 capital ratio -- a measure of its ability to withstand loan losses -- fell to 7.7 percent at the end of March, the New York-based bank said yesterday. Citigroup says it needs a 7.5 percent ratio to provide a margin of safety and preserve its credit ratings.

The bank's shares surged 4.5 percent yesterday after it reported $16 billion of asset writedowns during the quarter, less than some observers predicted. The writedowns burned through much of the $30 billion of capital Citigroup has raised since late last year, leaving it vulnerable to further charges and loan-loss provisions.

There is so much Federal Funny Money™ floating around the planet right now, strange and stupid things are happening. The sudden rocket-upwards of the stock markets this week based on what is basically very bad news is typical. Across the land, in the last few days, there has been much hue and cry about how the massive banking collapse in the West G7 nations is now over and all is well and the previous status quo is now reset and will resume. The feeling is, we are back in 2003 with super-low interest rates and cheap oil. And we will now plow ahead, getting richer, faster. All assets in the G7 community will resume climbing thanks to a new flood of red ink from the central banks.

There is a gigantic fly in all these ointments: unlike in 2003, we now have global inflation raging. And the flood of Federal Funny Money™ is making this worse and worse, rapidly worse. In 2003, we could cut taxes because the Federal deficit was 'only' $6 trillion. Now it is reaching to $10 trillion. We can't run up half a trillion in red ink every year forever. Like all systems that have a fast growth rate, there is a ceiling. There is a point in time when it will collapse.

Citigroup is basically bankrupt. This fictional bank only has 'reserves' due to the Federal Reserve manufacturing fake money to hand out as 'reserves'. And these 'reserves' are not gold, they are not other nation's currencies, they are TREASURIES which are debts! Which we, the US pubic, owes! Even so, the reserves of this bankrupt bank is only 7.7%? Talk about ridiculous! Why have any reserves if they are so low? Citibank had to go to the Arab oil kings for more funding because their reserves vanished. The Saudis are getting very steamed about all this. The Federal Reserve had to assure them, the US isn't out to cheat them.

There is a direct connection between Citibank's bankruptcy and the fact that Saudi Arabia this week announced they are cutting oil production is very possible. The Saudis are very angry that Citibank wrote down $16 billion which they replaced to keep it from going Bear Stearns. This article notes that these losses 'burned through' all the money Citibank got but doesn't mention from whom.

The Saudis know how to count. They are balancing their books by dropping oil production until they make up this extra $16 billion Citibank burned. The other day, there was news about a bank in India that allowed termites to eat up paper stored in their vaults. Then they told the victims to drop dead, they were not going to restore the lost wealth. Inflation is a termite colony set out to reduce the debts of the bankers and the ruling elites. They eat up all the savings and then the losers are told to go starve to death.

Saudi Arabia is now determined to regain their lost Sovereign Wealth via raising the price of oil. Since the US has cut Iran out of world oil markets, this is laughably easy. As we all die from high energy costs, just remember: the US wanted this. Our overlords set up the system that makes this possible. We are not at the Hubbert's Oil Peak yet but we are drawing close due to consumption rising. Every little political disruption will hammer us quite suddenly and ferociously.

Citibank should be forced into receivership. Saving it by creating hideous global inflation is stupid.

For first time, Central Bank buys gold from producers

MOSCOW. April 18 (Interfax) - For the first time, the Central Bank
of Russia purchased gold for its international reserves from gold
producers, a source in banking circles told Interfax.

Previously the Central Bank had always purchased gold on the
interbank market.

Last year, to boost the dollar, the EU and Switzerland decided to pretend that gold had no value to bankers. This novel idea has been peddled by debt-raddled empires for centuries. When an empire is gaining strength, they are pro-gold. When the debts from endless wars and infinite corruption mount, all empires decide that gold is worthless and they don't need it. This infantile approach leads to hideous inflation as well as infinite debts and the results are stark: destruction of the empire, the capital in flames, all is lost. If the Goddess of History is certain about something, this is it. It is most interesting that the Russian empire which imploded and collapsed is slowly rebuilding and using the ancient virtues and principles of wealth accumulation. China, even more so. China's pursuit of old banking styles is most impressive. They admit to inflation and realize that food and fuel inflation is very important. And they raised the bank ratios to an impressive 16%. This is much more than double what Citibank considers to be a good reserve ratio. Citibank's ratios in the face of rising and worsening inflation is laughable. The US government should force all the banks to raise their reserve ratios and to not let them use crummy, illiquid papers as reserves for making loans.

Traditionally, banks had to attract SAVINGS in order to generate more money via the magic of signing on more loans. Instead, they played this game that excluded savings which is why the US has negative savings. Back when that dire news hit, I predicted a banking collapse. Which we are deep into these days. Savings are NOT improving at all. Instead, thanks to the super-low interest offered for savings, people are saving even less. And this is getting worse. Until interest rates rise above the rate of inflation, savings will collapse. But if the US lowers reserves so they don't matter, then the bankers can hand out loans with impunity, of course. Which is the problem!

Now here is a study commissioned by the Federal Reserve that shows us clearly how stupid they have become. This is due to being befuddled by modern economic teaching which has replaced intelligent analysis based on real dynamics with this goofy system of making up scientific formulas that 'describe' situations without UNDERSTANDING them. This mindless sort of mathematical magician work is hopelessly incapable of explaining relationships and systems. But it makes for great magic spells!

Federal Reserve Bank of New York
Staff Reports: Monetary Policy Implementation Frameworks: A Comparative Analysis

Abstract
We compare two stylized frameworks for the implementation of monetary policy. The first framework relies only on standing facilities, and the second one relies only on open market operations. We show that the Friedman rule cannot be implemented in the first framework, but can be implemented using the second framework. However, for a given rate of inflation, we show that the first framework unambiguously achieves higher welfare than the second one. We conclude that an optimal system of monetary policy implementationshould contain elements of both frameworks. Our results also suggest that any such system should pay interest on both required and excess reserves.
*snip*
Our analysis yields two main results: First, a pure corridor system cannot achieve very low rate of growth of the supply of reserves. Second, for rate of growth of the supply of reserves that can be achieved by both systems, the corridor system provides higher welfare. Using a simple parametrization of the model, we find that implementing a 2% inflation target with a corridor system induces a welfare gain of about 1% relative to implementing it with open market operations only. This result arises from the fact that a CB paying interest on reserves reduces the distortion associated with holding these reserves for any inflation rate. The first result arises because the CB does not have the authority to tax agents to remove reserves from the economy. Only the government has the power to tax agents to finance its debt.

However, the CB can require that open market operations be conducted using the governmentís debt (Treasury securities). By buying some of it, the CB can then ináuence the amount of reserves that is extracted from the economy through taxation. Hence, the CB can remove reserves from the economy, but only indirectly. A CB that uses a pure corridor system can reduce the supply of reserves by charging a high interest rate for the reserves it lends. However, as the rate of inflation becomes su¢ ciently low, the opportunity cost of reserves decreases and agents prefer to hold reserves than using the CBís borrowing facility. This effect imposes a lower bound on the growth rate of the supply of reserves, which is necessarily higher than the Friedman rule.

And what is the gist of this magical wand waving? I fear, it is seeking an excuse to have little to no reserves! I joke about how the Federal Reserve is neither Federal nor has reserves! And look! We don't! It is that simple! The Federal Reserve, unlike the Bank of Japan or the Bank of China, has virtually no reserves! Both of our competitors have huge dollar reserves. We have tiny yen and yuan reserves. China and Russia are building up their gold reserves. We are not. Note how this study talks about the government taxing people to remove reserves from the economy! Isn't that interesting? Do our politicians talk about this?

In wartimes, the government sells bonds in order to soak up excess savings and stop inflation! But who is going to buy these bonds if inflation is raging out of control? This study was probably begun over a year ago back when the goofy idiots in the Fed imagined, thanks to offshoring our industries and reducing wages ruthlessly, the US had no inflation. When there was inflation in food and fuel, they decreed this didn't count! So they could pretend there was 2% inflation when it was well above 5%. Now, this paper arrives at Bernanke's desk right when rampant inflation is raging and there is NO reserves in the populace outside of the top 1% of the rich, who can 'sop up' this inflation via taxes!

Indeed, it is so much the exact opposite, it is very painful! Look at the tax goodies being handed out! Instead of collecting taxes to cut down on inflation, the Fed and the Fed are both creating more inflation! Already, I see commercials on TV preparing to lure everyone into stores to buy stuff with this government inflationary handout. And the government has been inflating for the last 35 years! Only very briefly, for one year, did this stop. And it so upset the guys inflating our currency to death, they ran off screaming for tax cuts. Tax cuts=inflation. See how simple is that? The Fed, itself, admits this.

The sole reason they have these complex magic formulas is so they can find a way of cheating reality. They hope, if they finesse things enough, they can have their cake and eat it too and not cause huge inflationary stresses. This stupid and childish desire is at the root of these equations, not a seeking of good systems that are reliable, sane and healthy. The Fed wants to see how sick they can make our system and not kill it. But they are killing it. This is because of the nature of magic formulas: they never work in the end due to simple greed. Everyone wants infinity.

Now here is a non-Federal Reserve study. It is actually quite good. It is from the National Bureau of Economic Research and was outsourced to Harvard. This sensible study tries to compare a group of different banking collapses to see if we can find a common matrix, a systematic course of events, one thing following another. Obviously, history is a great guide to the future and they use this tool to peer into our own future:

Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International
Historical Comparison*

Carmen M. Reinhart
University of Maryland and the NBER

Kenneth S. Rogoff

Harvard University and the NBER

The first major financial crisis of the 21st century involves esoteric instruments, unaware regulators, and skittish investors. It also follows a well-trodden path laid down by centuries of financial folly. Is the “special” problem of sub-prime mortgages this time really different?

Our examination of the longer historical record, which is part of a larger effort on currency and debt crises, finds stunning qualitative and quantitative parallels across a number of standard financial crisis indicators. To name a few, the run-up in U.S. equity and housing prices that Graciela L. Kaminsky and Carmen M. Reinhart (1999) find to be the best leading indicators of crisis in countries experiencing large capital inflows closely tracks the average of the previous eighteen post World War II banking crises in industrial countries. So, too, does the inverted v-shape of real growth in the years prior to the crisis. Despite widespread concern about the effects on national debt of the early 2000s tax cuts, the run-up in U.S. public debt is actually somewhat below the average of other crisis episodes. In contrast, the pattern of United States current account deficits is markedly worse.

At this juncture, the book is still open on the how the current dislocations in the United States will play out. The precedent found in the aftermath of other episodes suggests that the strains can be quite severe, depending especially on the initial degree of trauma to the financial system (and to some extent, the policy response). The average drop in (real per capita) output growth is over 2 percent, and it typically takes two years to return to trend. For the five most catastrophic cases (which include episodes in Finland, Japan, Norway, Spain and Sweden), the drop in annual output growth from peak to trough is over 5 percent, and growth remained well below pre-crisis trend even after three years. These more catastrophic cases, of course, mark the boundary that policymakers particularly want to avoid.

Except for Japan, all the other nations in this study were not world powers. When a small country does what the US or Japan has done, they are hammered pretty relentlessly by outsiders. The US is quite different and this study doesn't examine the obvious and important differences. Namely, the entire world outside of a handful of terrorists who are taking great delight in our economic fumbles, the rest of the world runs a huge trade surplus with the US. So they want to help us keep on our wild misspending and wild overspending! They will literally move heaven and earth to keep us afloat. They desire for us to not change course. They want a strong dollar! They are not seeking to drop the value of the dollar. Asia is holding amazing amounts of dollars in order to control US inflation and US banking values. The oil pumping nations are trying to keep our banking system solvent!

They are not selling us. Or rather, because they are selling to us, they are letting us skate on very thin ice. But even China cannot keep the US afloat if we bloat our debts to impossible highs. There is a limit and then a grinding global collapse will happen. This study is rather shortsighted because it is not examining the US troubles in light of other GLOBAL EMPIRES. These have only a stellar few but significant few: the collapse of the Roman empire, the Holy Roman Empire, the Spanish Empire, the Netherlands Empire, the French Empire, the English Empire and the German Empires. All three of them. They feature something this study ignores: wars. Not one of the nations in this study were overspending on futile wars. ALL empires collapse due to this.

Aside from this caveat, this study is worth reading. Let's look at the charts they provided:

All banking collapses follow on the heels of huge runs in creating mortgages. The more these deadly things are made, the greater the crash. The faster the loan are lent, the swifter the decline as the army of new debtors give up as housing values collapse. This is a bad system that has to be avoided. This is simple: when regulators see housing suddenly climbing in value and numbers, they raise interest rates! Wow! We better tell Greenspan and Bernanke!

This chart shows us that running more and more red ink means more and more likely there will be a banking crisis. Duh. This simple correlation needs no fancy mathematical formulas. It is laughably easy to spot. Too much money spent on stupid wars=bankrupt empires. Haw! This could be the a one sentence 'Decline and Fall of Great Powers'! And of course, as Professor Kennedy said in his great work, deindustrializing is a certain road to non-great power status! I will also note that Germany is the most allergic to inflation and they are the world's #1 export industrial power! WOW. With unions! WOW. And communist China is now #2 and rapidly closing in on Germany's top status. The US is below that, we export a lot of stuff. We just don't worry about importing twice as much. Gah.

And none of these studies tie in this vital, utterly important fact! The red ink is all over the systems! And NO nation can thrive this way. NEVER. As Germany, China and Japan struggle to keep us afloat, we can't float if our boat is filled with nothing but red ink. End of story.

The debt-riddled US economic system hopes we can avoid going into negative growth numbers. To achieve this end, we are inflating global systems. Anyone can grow with global inflation! This is the definition of inflation! But there is a problem: the US can inflate the world but this will cause riots, revolutions, wars and utter destruction across the entire planet. This is STUPID. The world's biggest empire should be as allergic to this as Germany seems to be allergic to inflation.

Harvard:

Perhaps the United States will prove a different kind of happy family. Despite many superficial similarities to a typical crisis country, it may yet suffer a growth lapse comparable only to the mildest cases. Perhaps this time will be different as so many argue. Nevertheless, the quantitative and qualitative parallels in run-ups to earlier post- war industrialized-country financial crises are worthy of note. Of course, inflation is lower and better anchored today worldwide, and this may prove an important mitigating factor. The United States does not suffer the handicap of a fixed exchange rate system.

On the other hand, the apparent decline in U.S. productivity growth and in housing prices does not provide a particularly favorable backdrop for withstanding a credit contraction.

Another parallel deserves mention. During the 1970s, the U.S. banking system stood as an intermediary between oil-exporter surpluses and emerging market borrowers in Latin America and elsewhere. While much praised at the time, 1970s petro-dollar recycling ultimately led to the 1980s debt crisis, which in turn placed enormous strain on money center banks.3 It is true that this time, a large volume of petro-dollars are again flowing into the United States, but many emerging markets have been running current account surpluses, lending rather than borrowing.

This part of the study had to be included for all the infants and babies who have to read this report. Why, thanks to the Chinese and Germans and maybe the Saudis, we won't have to pay the piper! If we ignore global inflation, US wars and other horrors, maybe we can have a shallow recession! Right! And this is the problem: we can do this only so long as the Chinese want to bail us out of our own messes. And trust me, they are getting extremely angry about all this. The push by the US and Europe to dismember China this month has been tremendously dangerous. It is beyond words: life and death. This is a great way to start WWIII. Russia disintegrated peacefully---except for Chechnya---and the Europeans promised to not let the US menace Russia and put military bases in Russia.

But we did! And Europe broke promises and moved NATO forwards to Russia's front doorstep and sneered at Russian objections as the US parked offensive missiles aimed at Moscow in Eastern Europe! China knows they can't trust the West even slightly. The Russians keep forgetting this important lesson. So we have a financial system built on the good graces of China and Russia being friendly with Europe and the US even as both work hard to destroy Russia and China. Only the red ink is killing the G7. They goofed. They left out this important consideration. And they are nervous about the energy issues. Trapped, they wonder about just making global inflation and this way, destroying China's economic power and to render the loot sent to the oil pumping nations, worthless.

This is a most dangerous game. I sense it is evolving into a dynamic whereby the oil nations will declare an alliance with Russia and China. Already, we pushed Iran in this direction. Next: Saudi Arabia.

MAY DAY: A Call To Action

UPDATE: The Teamsters Union is also planning a strike. The Postal Workers are planning moments of silence and work stoppage.
*snip*
Nearly one hundred Longshore Caucus delegates voted on February 8 to support a resolution calling for an eight-hour "stop-work" meeting during the day-shift on Thursday, May 1 at ports in CA, OR and WA to protest the war by calling for the immediate, safe return of U.S. troops from Iraq.

“The Caucus has spoken on this important issue and I’ve notified the employers about our plans for 'stop work' meetings on May 1,” said ILWU International President Bob McEllrath.

Diesel is now a dollar more per gallon than gasoline. This is totally insane. Diesel requires less refining! But the inflation in fuel used for commerce is faster than consumer uses! This is a VERY BAD SIGN. This is hammering farmers and truckers. Since these people also are big Republican supporters, they have to look in a mirror to see who was the fool. In Europe, truckers have shut down whole nations, hugely. And the military had to be called out. Here, I am betting this will have virtually no effect. Until the guys who do the labor figure out they have been conned, they will flounder and die. Soon, Mexico will flood us with cheap trucking labor. This is part of NAFTA. Note that any anti-NAFTA people running for office have been ruthlessly eliminated by the media.

The giant sucking sound continues. And it is connected to inflation and to the overspending by our government and our banking system that has no reserves! Lord help us all.

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Federal Funny Money™ Floods World Markets

April 19,2008

Elaine Meinel Supkis

The Federal Reserve has now accepted more than a trillion in crappy, stupid loans from our bankers who are now cheerfully using all this new Federal Funny Money™ to resume flooding the planet with inflationary dollars. The financial world is ecstatic with joy. They get to do what they did from 2003-2005 all over again! Only this time around, we won't see rising house values. We will see massive food and fuel inflation. Just like under Nixon. Instead of fixing things, the Fed has increased global inflation in the very worst sectors, the ones that are literally life and death. Yet the G7 central bankers continue down this obviously dangerous and even potentially revolutionary road. 'Let them eat debts!' yells the Queen from her balcony.

Forget the headlines, listen to the bond market!

By Cliff Drake:

The LIBOR rate premium over the T-bill rate has been declining sharply ever since peaking out back in mid-January. When the Libor rate goes up sharply it reflects the intense fear of British bankers over financial and economic conditions, just as it did during the January panic. But notice the Libor rate has been coming down conspicuously ever since then and has not approached the high levels of fear of over two months ago. The public remains afraid, yet the monetary powers are clearly not as worried over the state of U.S. financial affairs as they were earlier this year.

Noted economist Ed Yardeni noted back in February that,“ARM resets are less threatening partly because of the Hope Now Alliance (a.k.a., the ‘teaser freezer’), but mostly because the Fed has lowered the federal funds rate by 225bps since last September to 3%. Home mortgage refinancing activity is rebounding. The big banks raised lots of capital to offset their losses last year. The money markets (especially Libor and commercial paper) seem to have calmed down.”

The gigantic infusions of free funny money from the central bankers in the G7 community has 'fixed' the banking collapse it would seem. They raise their cups and salute each other for this tremendous effort. And what was this effort?

Very simple. The central bankers sopped up all the bad loans made by all the many on and especially the offshore investment banks. The recent run up in wild lending was fixed by having the biggest banks on earth, the ones backed by some of the biggest economies on earth, simply suck up all the bad loans, big and small. This was done so the biggest LIARS on earth could simply lie about the value of these things! It is so easy for central governments and bankers to lie! They lie about wars. They lie about economics. They lie about intentions. They lie about politics. Lying is natural for them. They truly believe in the magic of lies. If they lie, reality MUST conform to their lies.

Of course, understanding all this is key to figuring out the future. These rampant liars love to lie about the future. They want to deceive us about the future effects of their lies. They desperately want us to be lured into traps by their lies. So they tell us, with a straight face, 'We can't see into the future.'

This is literally life and death for all of us. As these hellish people who brought us World War I and World War II shove us relentlessly towards World War III, we must counteract them by showing the truth and explaining how historic forces work and how we can avoid WWIII by stopping the mad expansion of credit. Yes, this is one of several keys to locking WWIII down. Wars are possible thanks to debts. The US government, the most indebted government on earth, has spent the vast majority of its excess spending, building the machine that will rain death upon all humanity. It is just amazing to see the US spending trillions of dollars on building up and expanding a deadly military machine that is aimed squarely at eliminating most humans in the most frightful fashion.

Back to the news about the Fed flooding the markets with a trillion in funny money: this was done so the US people can continue to support the building of the Mega Death Machine. Note that at no time in the last 7 years as we have had ridiculous interest rates relative to the true rate of inflation, has the government not increased military spending. Even after the stock market and the housing bubbles burst, the government's military spending bubble balloons like crazy. As our trade deficit worsened, the military balloon grew even faster. We must recognize that the efforts of the central bankers in America is for this purpose: to expand military spending while not having this show up in the form of tax hikes or cutting consumer spending.

Of course, all rulers for the last several hundred years know that this is very inflationary. So this is why lying is so important: if the rulers of America can lie about inflation, they can keep this massive military bubble blowing up bigger and bigger. Eventually, they hope to turn our own military against us and control us outright like in Zimbabwe or China. China, far from being a bad example, is their great desire and the Chinese know this. The problem for the ruling elites is, they are not Mongols. Or Han Chinese. They are European. Shoving the US into a Chinese-style power system is their goal. This is why we saw the elimination of any candidates for President who were not warmongers who support the actions of the investment bankers who want the Derivative Beast to double in size every year and infinite loans. Right now we are seeing the attempt at eliminating Obama because he is choice #3 for the rulers. So they are desperate to undermine him. They managed to silence Ron Paul, for example, some time ago. He continues down his lonely road, confronting the wild money creating machine of the Federal Reserve. But he is like the proverbial tree in the forest: it falls but no one hears since the media is deaf and dumb when it comes to him.

Here are three videos of Ron Paul trying to chop down the Bernanke tree using the axe of logic and history:

Back to the insanity of Mr. Clif Drake:

As Don Hays recently pointed out, “For the last year, institutions had no way to make money. They squeezed earnings by squeezing home owners that could not afford the homes they were buying. Now, the opportunity to make money is back with the 10-year Treasury [more than] 50% higher than the 90-day T-bill. The Yield Curve also tells you how much you are being rewarded to take risk. Six months ago, there was no reason to take risk with short-term rates higher than long-term rates. Now, the rewards are becoming greater to take more risk by tying your money up longer.
*snip*
”The improvement in the yield curve has been truly head-spinning and incredible. In just a 1-week period in March, the yield curve rose from 2.57 to 9.78! That’s the type of improvement you only see about once every ten years. It happens whenever the economy goes down too far and the monetary authorities become panic-stricken about restoring liquidity to the system.
*snip*
The final consideration in the re-liquification process is the daily securities lending volume. The Fed has been loaning securities at a rate not seen in its history. Take a look at the historic lending volumes of just the past days – they are simply through the roof!

This writer is celebrating the creation of a sea of red ink. Like many very short-sighted people who worry only about how much a cut they can get from a dying cow, this hyena is happy because the Fed is creating tremendous inflationary forces! Whoopee. People who have high incomes don't mind inflation so long as it means a lot of the inflationary money flows through their hands. They love this! Inflation kills the elderly on fixed incomes. Inflation kills global trade. Inflation kills nations. But if the rich get richer via inflation, they will happily inflate until the cows come home. Or rather, the hyenas eat all the cattle and a terrible depression then takes over.

Mr. Drake provides some charts which I amended with my own comments:

This amazing infusion of Federal Funny Money™ is truly historic. This is Bernanke's infamous helicopter crew going 'whap-whap-whap' as they fly over the banking system, dumping dollars into bankrupt bank vaults. The bankruptcy of the entire system is painfully obvious. So why isn't there a global run on American banks?

This is very simple: ALL nations have trade surpluses with the US. Not one of them wants this to stop. The US certainly has been egging China into stopping this. We should be happy they choose not to do this...yet. Instead, we saw a series of hysterical meetings by the G7 nations to figure out how to save the bankrupt US system while at the same time, lying about the solvency of the system. The US Federal Reserves has virtually no reserves compared to nearly any nations on earth. Tiny principalities have bigger international reserves than the Federal Reserve! This is utterly irresponsible. But the arrogance of the system is this: we make up Federal Funny Money™ out of thin air. And all our trade partners agree to accept this FFM™ as 'real money with real value' since this benefits them greatly and kills us.

Of course, any time a nation plays this game, they see sharply increasing inflation. And voila! Here it is! As usual, it always shows up first in food and fuel, the necessities of life no one can easily escape. If the price of microwaves rises, we can simply not buy one. But freezing to death or starving to death is very problematical. As usual, when inflation of necessities rises rapidly, we see an increase in spending because people buy new energy systems to get more efficiency and they replace gas guzzlers with more efficient cars. This gives the illusion that commerce is picking up and is OK. But the rulers know this game, they understand perfectly well, how this cycle works.

We are now nearly done with the 'improve all systems' part of the inflationary cycle. Now we are in the 'everyone has to cut back all discretionary spending' part of the cycle. This is where the many lay-offs and offshore work bites the working classes very hard. Job losses soar. Bankruptcies soar. Already, many Americans are unable to pay their mortgages and their credit outstanding. The collapse of the ability of the working class to pay their debts has just begun, not ended. The stock markets shot up on the imaginary belief that the collapse of our economy has been stopped by creating massive inflation.

As I go about, doing my business, I see naked fear on the streets. I see, in the stores, befuddlement and pain as people try to find ever-cheaper food. At the pump, there is rage. The news media doesn't tell us that the Federal Reserve's rescue plan is to kill us with inflation. This raid on all savers is theft. And few people in our government dares mention this. Interest on savings has collapsed. But not on bonds. And as the bankers recharge their bottom lines at the expense of savers, we get a worsening of this historic condition: the collapse of savings in the G7 nations. Replacing debt for savings means inflation! And the chart above shows us that over a trillion dollars in debt was made based on nothing except the value of the entire USA. And these bonds are chains that will lead us into slavery.

Drake goes nuts with joy over the prospect of our enslavement:

The combined message of this action is that not only is the liquidity crisis a thing of the past, but the widespread fears of further economic deterioration are without foundation. The bond market is saying, “Look forward, not backward. Better times are coming!”

This chart is one of a thousand that show clearly how the US has fallen off a cliff. Credit collapsed because it hit a natural ceiling. The accumulation of debt has led to a collapse in the ability to repay the INTEREST on these debts. To fix this, the Fed had to pretend there is no inflation so there is nearly no INTEREST that has to be paid. And what is interest, anyway?

It is to make up for inflation! And so they lie about inflation and its reality and how it grows and how we can see if it is coming. This means never tracking or talking about food and fuel inflation. So the entire planet now writhes under the whip of massive global food and fuel inflation. While the G7 pour more gasoline on the fire and as they pray to the Fire Gods to make the Fires of Hell hotter and hotter, these arsonist demons jump for joy when they succeed in setting the entire planet on fire.

Here is a graph from the World Bank:

It is painfully obvious that the 0% interest regime set up by Japan and imitated by the USA, is causing a mega-global balloon. And this balloon is painfully obvious and its demise will be very destructive. The rescue efforts of the G7 central banks now means this bubble will blow up not today but when it triples in size if not even bigger. The only question is, will China pop this bubble before then?

Deutsche, Citigroup See Yuan Gains Slowing on Exports

April 18 (Bloomberg) -- Yuan gains will slow as China shifts policy later this year to support exporters' earnings, say Deutsche Bank AG and Citigroup Inc., two of the world's three biggest currency traders.

The currency has risen 18 percent since China ended a fixed exchange-rate in 2005 as the central bank seeks to slow inflation at an 11-year high. Exporters are ``afraid to sign contracts'' as the yuan keeps rising, Minister of Commerce Chen Deming said last month as demand for China's goods rose at the slowest pace in five years in February.

``We are now looking at a greater risk of an economic slowdown in China and therefore a modest slowdown in the pace of yuan appreciation,'' said Mirza Baig, a Singapore-based economist at Deutsche Bank, who forecasts the policy shift in the third quarter.

China lies in the very center of this storm. They know that if they ride the US inflationary beast, they will destroy us. But they must take care that this dire creature doesn't devour China, too. This tension is at the heart of the deliberations of the Chinese as they gage what will happen next. Their main question is, 'When will the US go belly up? When will the US die?' They can't get caught slicing the US monetary throat too soon. Then they get punished. But if they do it in the correct time, they become the rulers of the world. This is why they are careful: Germany jumped the gun when it came to confronting the British Empire that was already rotting away badly in 1915.

Bloomberg News:

``Markets are aggressively priced for more inflation-driven acceleration of yuan appreciation,'' Baig said. ``We see that story being fully priced by markets already and now advocate taking the other side.''

China's inflation held near an 11-year high at 8.3 percent in March. Growth slowed to 10.6 percent in the first quarter from 11.2 percent in the prior three months. Policy makers are trying to prevent rising food prices from stoking social instability while avoiding a sharper slowdown.

``Export profits may collapse and export jobs may fall,'' wrote Huang Yiping, chief Asia economist of Citigroup in Hong Kong in a report dated yesterday. ``Therefore, further currency appreciation should become politically very unpopular.''

Japan is in hysterics, trying to weaken the yen. Europe is doubly in hysterics. They want to do the same. Ditto, China. All are focused on making the US the destination of trade that kills our industrial base. This has happened in the past. After WWI, for example, everyone wanted to do this to us so we sensibly set up tariffs and barriers to prevent our industries from dying on the vine or a flood of Europeans and Japanese financiers coming here with fistfuls of fiat currency to buy up all our assets.

Across Globe, Empty Bellies Bring Rising Anger

“It’s the worst crisis of its kind in more than 30 years,” said Jeffrey D. Sachs, the economist and special adviser to the United Nations secretary general, Ban Ki-moon. “It’s a big deal and it’s obviously threatening a lot of governments. There are a number of governments on the ropes, and I think there’s more political fallout to come.”

Indeed, as it roils developing nations, the spike in commodity prices — the biggest since the Nixon administration — has pitted the globe’s poorer south against the relatively wealthy north, adding to demands for reform of rich nations’ farm and environmental policies. But experts say there are few quick fixes to a crisis tied to so many factors, from strong demand for food from emerging economies like China’s to rising oil prices to the diversion of food resources to make biofuels.

There are no scripts on how to handle the crisis, either. In Asia, governments are putting in place measures to limit hoarding of rice after some shoppers panicked at price increases and bought up everything they could.

Note that when the US last tried to inflate our way out of war debts, this exact same thing happened. Inflation took over the entire planet. And like today, it expressed itself most powerfully in the sector of food and fuel. And this is why food and fuel price hikes are the #1 leading forecast indicators for global inflation. And this is why the US government lies about this matter. Bernanke doesn't dare make this connection.

The REAL cost of inflation: The Mail's Cost of Living Index reveals food prices rising at SIX times official figure

The true, devastating scale of rising prices is revealed today - by the new Daily Mail Cost of Living Index.
It shows that families are having to find more than £100 a month extra this year to cope with increases in the cost of food, heat, light and transport.

Since this inflation is global, it means all the global organizations run by the global ruling elites who hold secret meetings protected by despotic military rulers, should get off their asses and do something. Instead, they are the CAUSE of this global inflation. And everyone who thought Santa Claus was giving us wonderful gifts during the years these people handed out free funny money, well, now we pay the price. The inflation of housing values was due to them unloading inflationary debts onto our houses. Now that the houses have sopped up all this red ink generated by the bankers, it is now flowing all over and has to be sopped up by food and fuel. Just like during the Nixon years. And Volker knows how to end this mess: high interest rates!

Buiter Says U.K. Banks Need $200 Billion Aid From BOE

April 19 (Bloomberg) -- Former Bank of England policy maker Willem Buiter said the central bank will need to offer loan swaps to financial institutions of at least 100 billion pounds ($200 billion) to kick-start the U.K. mortgage market.

The central bank, the Treasury and Prime Minister Gordon Brown's office may unveil a plan to swap mortgage-backed securities for government bonds as soon as next week, which the British Broadcasting Corp. reported yesterday will total 50 billion pounds. Banks including HBOS Plc have curbed lending and raised the cost of mortgage loans even after policy makers cut the benchmark lending rate three times since December to help avert a U.K. recession.

As British people grind their teeth over food and fuel inflation, their own central bank now plans to flood the markets with even more money. The bankers hope this will flow into real estate again. BUT IT WON'T AND CAN'T. It will, just like in the US, flow directly into the food and fuel markets. This is the usual end of such inflationary cycles. This is the warning sign that making more liquidity is fatal. Far from fixing the economic imbalances, this flood of funny money is worsening the very imbalances that caused this inflation to show up in the first place.

Of course, the hope is the financiers will use this funny money to move factories about the planet seeking cheaper labor. This way, inflation will be masked. But they are running out of exploitable labor which is connected with a stable government, good schools and developing infrastructure. Factories don't do so well in societies that have poor or no schools, no roads, rail or ports. Or political stability. It would be like building factories in Iraq.

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Oil Hits $117 A Barrel And China Is Almost #1 World Export Power

April 18, 2008

Elaine Meinel Supkis

Nearly the entire population of the planet earth is flipping out today due to relentlessly rising oil and food prices. But in La-La-Land, the pirates and bankers are dancing with joy. They imagine that the worst is over and not only can they resume their happy activities, making trillions of dollars appear out of thin air again, they can do this with utter impunity since the central banks of the demented G7 nations have given them all a green light! Pour on the liquid red ink! But there is something wrong. China is acting like a dragon. In the news, China is rapidly overtaking the #1 exporting nation on earth and it is NOT the US or Japan, it is GERMANY. Quietly, Germany has outstripped the US as well as former Axis ally, Japan. History loves this story. And look: the price of oil is now running up to $117 a barrel. And the children running Wall Street think this is the END of inflation? The END of the banking collapse? Ask Volker. He knows the truth.

China passes US as second-biggest exporter

Global trade growth is expected to slow to a six-year low of 4.5 per cent this year but China has overtaken the US as the world's second-biggest exporter, the World Trade Organisation (WTO) said yesterday.

Heavily influenced by the turmoil in financial markets and the sharp economic slowdown in leading western economies, global merchandise trade is forecast to rise by 4.5 per cent this year, against last year's 5.5 per cent.
*snip*
In 2007, buoyed by strong performances by dynamic emerging economies such as China. India, Brazil, and Russia, world merchandise trade in value terms increased by 15 per cent to $13.6 trillion (£6.8 trillion).

Emerging countries accounted for more than half of the world's trade growth last year, Mr Low added.

Meanwhile, trade in commercial services, boosted by big increases in transport and travel services, last year increased by 18 per cent to $3.3 trillion, said the WTO.

Another stellar performance by China, which recorded a 26 per cent rise in its merchandise exports to $1.2 trillion, enabled it to surge ahead of the US to be ranked the world's second biggest exporter and is breathing down the neck of top-placed Germany.

OK: this is bad news for us on many, many fronts. First of all: both Germany and China have made themselves better than us not only in the world but DIRECTLY at our own expense. Both have huge trade surpluses with us. Both are building powerhouses at our expense. Neither of these nations are buying lots of high-end value-added stuff from us. We are their feedlot. Both intend to dominate our INDUSTRIAL life. Both have this big thing about controlling the ball-bearing markets. And high-speed trains. Just for example. Worse, both are very chummy. Both want the same things and both are cooperating to get these things.

Worse still, both are triangulating with Russia. China, more than Germany. But Germany is getting nervous about Merkel alienating Russia. The next President of Germany will probably rectify this. They certainly can't let China hog Russia's resources while they get stuck with a dying duck USA market.

As China roars ahead, I must say, we can't push China around if they are #2 in several major ways including #2 on the military front. True, the US spends more than the entire planet on our military. But this is mostly wasted dollars. The thrifty Chinese will get more bang for their bucks. They can do cheap stuff whereas we have to give our dead and dying half a million in order to get anyone to enroll in the military. The imperial waste and thievery is rampant in the US. Indeed, the Chinese know that a few well-placed bullets to the back of well-heeled hack heads is a great cost-cutting tool for the military.

Bernard Arnault offers support to China after threat of LVMH boycott

Bernard Arnault, the chairman of LVMH, the French luxury goods group, distanced himself from the Dalai Lama with a show of support for Beijing yesterday amid growing concern in France over Chinese calls for a boycott of Gallic products.

France’s best-known business leader spoke out with Chinese internet users targeting Paris for criticism following the pro-Tibetan demonstrations that accompanied the Olympic torch relay.

Consumers are being urged to boycott groups such as Carrefour, the supermarket chain, and Mr Arnault’s celebrated LVMH brands, which include Louis Vuitton, Hennessy and Fendi.

With French exports to China worth €9.1 billion (£7.3 billion) last year, officials and industrialists in Paris are keen to smooth over the row.

The Chinese are very riled up. They are angry that the Tibetans rioted and were portrayed as innocents while they rampaged about, murdering innocent Han Chinese. They are very angry that the Europeans and Americans want to rip China apart. Especially the Americans who fought a vicious war 150 years ago in order to force half of the nation to remain part of the USA. The Chinese will now lash out at anyone who wants to play hard ball. I know the leadership. They are trying hard to be 'nice' but won't be nice if anyone tries to push them off a cliff.

The whole world is writhing from global inflation tonight. Food riots will be all the rage soon. Many half-functional 'nations' will be out there with begging bowls, pleading for food. The leaders of these nations will scour the earth for someone, anyone who can save them from financial ruin. And this someone will not by the Dalai Lama. Nor will it be the 'bomb, bomb, bomb Iran' American Presidents. It will be China! And this will cement China's #1 standing with the planet, the parts that we ignore but which China is courting heavily. The US and Europe have been trying hard to peel Africa away from China's embrace. But flooding Africa with excess US dollars that are losing value faster than the River Nile runs North, well...good luck. I don't see anyone being much impressed by this.

Global food crisis looms as Asia's rice bowl empties and world price soars

THE crisis over rice showed no signs of easing yesterday as the price of the world's benchmark jumped 10 per cent in just one week, fanning fears that millions across Asia will struggle to afford their staple food.

In a clear sign of the strain on output after major exporters began to curb exports earlier this year, a tender from the Philippines, the world's top importer, attracted offers to sell only about two-thirds of the half a million tonnes it sought.

In Bangkok, Thai 100 per cent B grade white rice, considered the world's benchmark, hit $950 (£482) per tonne, three times its price at the start of 2007.

Say, instead of giving Israel 50% of our foreign aid, we shuffle more to Africa. From $10 billon a year to $20 billion. This won't pay for any increase in food shipments if the price per ton doubles every three months! Farmers and oil men LOVE inflation. Since they have what people need, they can match the inflation caused by speculators, nature and war. This is profiteering. And since we applaud people getting rich via profiteering, our government does absolutely nothing. The problem with this system is, the cities get hammered and all revolutions begin in the cities, not the countryside. Governments that forget this harsh fact usually end up as historical stories like 'A Tale of Two Cities.'

The Chinese advantage in all this is obvious: Africa will be theirs for the foreseeable future. And probably South America, too. In the case of South America, due not to hunger but to the need to sell food and get real money in return, say, in cash, not IOUs churned out by the Federal Reserve's computer banks.

Oil Rises to Record on Signs Stronger Economy May Boost Demand

Crude oil and gasoline climbed to records in New York as better-than-expected earnings results signaled a strengthening economy that may boost demand.

U.S. stocks rallied, capping the best week since February for the Standard & Poor's 500 Index, following earnings reports from companies such as Google Inc. and Caterpillar Inc. that exceeded analyst estimates. Refineries operated at 81.4 percent of capacity last week, the Energy Department reported.

``The real gloomy scenario has been sort of ameliorated with some of these very positive earnings and the indication that the worst is behind us,'' said John Kilduff, vice president of risk management at MF Global Ltd. in New York. ``There will be an uptick in energy demand with the renewed economic outlook for the second half of the year in particular.''

Crude oil for May delivery rose $1.83, or 1.6 percent, to settle at $116.69 a barrel at 2:46 p.m. on the New York Mercantile Exchange, a record close. Oil touched an all-time high of $116.97 a barrel at 5:01 p.m. in electronic trading. The Nymex posted a high trade of $117 a barrel at 2:47 p.m., and the quote was subsequently withdrawn.

These people are NUTS. So long as food and energy are climbing to the heavens, this is BAD ECONOMIC NEWS. If gold shoots up, this is BAD ECONOMIC NEWS. If wages shoot up, this is good news. But not on modern Wall Street! They want cheap lending, not higher wages. Of course, the entire economic mess is due to dropping wages and worsening employment conditions meeting higher energy and food head on! The more energy rises, the worse it will be and the longer the worse will last! I have lived through SEVERAL huge oil price hikes in my life. Always, food shoots up too! And both hammer me at home until I can't do much of anything except scrabble about to feed the family and go to work. It is NOT a good time. Not at all! And it never ends until inflation ends. This is why, after Volker shot rates to nearly 20%, a long 15 year cycle of relentless oil and food price hikes finally nose dived. And life became much, much easier.

We are NO WHERE NEAR THAT YET. Instead, just like under Nixon or Bush I, they are trying the 'let's drop interest rates really low below the rate of inflation and see if that fixes things!' This was done for Bush II and look at what it spawned: global inflation. The more Japan and the US keep their joint interest rates below the rate of inflation, the more the Fed lends trillions in sub-inflation rate money to the bankers, the more inflation we will have. And inflation is BAD. Bad! VERY bad! And for the goofy guys on Wall Street to imagine the worse is over, it ain't! Not even slightly.

Credit derivatives continue to boom, but the old order is under threat

BANKERS gathering in Vienna this week for the annual bash of the International Swaps and Derivatives Association (ISDA) had some big numbers to celebrate. The overall market for over-the-counter derivatives shot up to $455 trillion at the end of 2007. Some $62 trillion of that were credit-default swaps (CDSs), whose supercharged growth continues in spite of the crunch. But the emphasis this year was as much on playing down dangers as playing up volumes. ISDA was quick to point out that actual credit exposure was a mere 2% of the notional value of all contracts.

This coyness is hardly surprising. Regulators have been fretting since 2005 that the market's infrastructure was not keeping up with its growth. Then, in March, came the sudden implosion of Bear Stearns, a top-ten actor in CDSs, rescued partly because of the fear of chaos if such a large counterparty were to fold. The market's overseers may not agree with Christopher Whalen of Institutional Risk Analytics, a consultancy, when he describes off-exchange derivatives as an “act of Satan”. But they want to see more robustness, especially in credit derivatives, and have hinted that they will impose their own solution if the market does not.

Conceived in the 1990s as a hedging tool, CDSs soon took off as a way to speculate on the likelihood of a firm going bust without having to trade its underlying bonds. For much of this decade, they have been celebrated as a means of spreading risk around the financial system. However, their rampant success led to processing backlogs and errors. Under pressure from the Federal Reserve Bank of New York and others, the industry accelerated trade automation and clarified the rules of engagement (for instance, making sure banks were notified when the firm on the other side of the trade sold its interest to another party).

But problems remain. A rise in late confirmations accompanied the spike in trading last summer, suggesting that the plumbing still lacks scalability (see chart). As of December, 13% of outstanding CDS trades were unconfirmed. Technology vendors say solutions exist, but banks and supervisors have been slow to adopt a standard. “It's like the world is starving and we're just standing here with the rice,” says the chief executive of one derivatives-software firm.

This story from today astonishes me. Far from 'spreading risk' these stupid things have INCREASED risk. This thing has been growing frantically in size. No one wants risk so everyone wants this thing they created out of thin air to fix risk by being larger than all possible risks. This stupid enterprise that can't work is going to the be the biggest riskiest thing on earth in all human history. The longer these crazy people pile all possible risk into this one thing, the worse it will be and they can't see this! Amazing, isn't it? And to think that some computer dudes have a solution? HAHAHA. Computers can run to infinity in no time flat! I remember UNIVAC at the University of Chicago when I was a small child. It was the world's biggest computer and used for making nuclear bombs and looking at the universe. Well, everyone's computer is a univac. And can run to infinity in groups. And this stupidity is bad when it comes to money. The point with money is very simple: the more you have, the more worthless it is. If you create $550 trillion dollars but the earth stays stubbornly the same size as when you created only $5 trillion, then we get INFLATION. It is pretty simple.

We can't get out of our banking crisis until we figure out, the solution is not to run computer programs to various levels of infinity. And not only is the banking crisis not over, by the way, it has barely begun. There has been virtually no 'house cleaning'. Very few bankruptcies. And the fundamentals are bad and getting worse. And the worst of this is the Derivatives Beast. And since the OCC has released more Derivative 666 Beast from Hell data, it pays to visit to see exactly how screwed up our finances are and how hopeless it is to fix it with the present band aids and schemes such as driving the US government deep into debt on wild spending, freebies for taxpayers and printing money nonstop. We will compare charts and statements from the beginning of 2007 and the fourth quarter of 2007:

OCC’s Quarterly Report on Bank Derivatives Activities

Second Quarter 2007

Executive Summary

• U.S. commercial banks generated $6.2 billion in revenues trading cash and derivative instruments in the second quarter of 2007, the second highest total ever, and 30% higher than the second quarter of 2006. Revenues in the second quarter are 12% less than the record level set in the first quarter.

• Net Current Credit Exposure, the net amount owed to banks if all contracts were immediately liquidated, increased $20 billion from the prior quarter to $199 billion.

• The notional amount of derivatives held by U.S. commercial banks increased $7.7 trillion to $152.5 trillion in the second quarter, 5% higher than in the first quarter and 28% higher than a year ago. 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 of the global derivatives market, increased 16% from the first quarter to $11.8 trillion. Credit default swaps represent 98% of the total amount of credit derivatives. Credit derivatives contracts are 79% higher than a year ago.

• The largest derivatives dealers continue to strengthen the operational infrastructure for over-the- counter derivatives through a collaborative effort with financial supervisors.

Whew. Back then, the OCC thought this was all good news. What do we see?

$7.7 trillion more in inflation! Look! In this sector, they discovered a machine that could create INFINITE MONEY. And so they merrily did this! And the OCC did nothing to stop this! Nothing at all! And our entire government did nothing! Our bankers were in sexual frenzy of joy over this magical means of instant total wealth that was unimaginable! The fact is, it has to either vanish or it translates into global inflation. And it is doing BOTH since it is obscenely huge. Note how this Derivative Beast had grown 79% in ONE YEAR???? Talk about inflationary! Talk about bizarre, dangerous and obviously utterly hideous and totally whacked. If I were running the OCC that year, I would have been heard running around screaming like a cow whacked on the udder by a horse fly.

Note the last sentence: these clowns inflating global currencies did this while collaborating with financial supervisors! Arrest them all! How insane is that? This infuriates me. I suppose these idiots thought they were strengthening derivatives by making them multiply like irradiated rabbits after a nuclear war. Let's look at the latest OCC report for the fourth quarter of 2007:

OCC’s Quarterly Report on Bank Trading and Derivatives Activities
Fourth Quarter 2007

Executive Summary


• Fourth quarter 2007 trading in cash and derivative instruments resulted in losses of $9.97 billion for U.S. commercial banks, compared to revenues of $2.3 billion in the third quarter of 2007. The loss reflects a continuation and deepening of the turmoil in capital markets that began in the third quarter, particularly for credit instruments.

• For fiscal year 2007, U.S. commercial banks reported trading revenues of $5.5 billion, compared to record revenues of $18.8 billion in 2006. The weaker 2007 revenues resulted from poor trading results in the second half of 2007.

• Net current credit exposure increased 22% to $309 billion from the third quarter, and is 67% higher than at the end of 2006. The rapid increase in credit exposure results from sharply lower interest rates and higher credit spreads, which created a large increase in derivatives receivables.

• The notional value of derivatives held by U.S. commercial banks decreased $8 trillion, or 5 percent, to $164.2 trillion in the fourth quarter. The decline in notional values, while unusual, is not surprising given the current turmoil in global capital markets.

• Derivative contracts remain concentrated in interest rate products, which comprise 79% of total derivative notional value. The notional value of credit derivative contracts increased 3% during the quarter to $14.4 trillion, with 98% of those contracts being credit default swaps.

Market Risk

Banks control market risk in trading operations primarily by establishing limits against potential losses. Value at Risk (VaR) is a statistical measure that banks use to quantify the maximum loss that could occur, over a specified horizon and at a certain confidence level, in normal markets. It is important to emphasize that VaR is not the maximum potential loss; it provides a loss estimate at a specified confidence level. A VaR of $50 million at 99% confidence measured over one trading day, for example, indicates that a trading loss of greater than $50 million in the next day on that portfolio should occur only once in every 100 trading days under normal market conditions. Since VaR does not measure the maximum potential loss, banks stress test their trading portfolios to assess the potential for loss beyond their VaR measure.

Call Report instructions do not require banks to report their VaR measures; however, the large trading banks
disclose their average VaR data in published financial reports. To provide perspective on the market risk of
trading activities, it is useful to compare the VaR numbers over time and to equity capital and net income. As shown in the table below, market risks reported by the three largest trading banks, as measured by VaR, are small as a percentage of their capital and earnings:

To test the effectiveness of their VaR measurement systems, trading institutions track the number of times that daily losses exceed VaR estimates. Under the Market Risk Rule that establishes regulatory capital requirements for U.S. commercial banks with significant trading activities, a bank’s capital requirement for market risk is based on its VaR measured at a 99% confidence level and assuming a 10-day holding period. Banks back-test their VaR measure by comparing the actual daily profit or loss to the VaR measure. The results of the back-test determine the size of the multiplier applied to the VaR measure in the risk-based capital calculation. The multiplier adds a safety factor to the capital requirements. An “exception” occurs when a dealer has a daily loss in excess of its VaR measure. Call Reports do not include a line item for the number of “exceptions.” Some banks, however, make such disclosures in their published financial reports. Because of the unusually high market volatility and large write-downs in CDOs in the third and fourth quarters, as well as poor market liquidity, a number of banks experienced back-test exceptions and therefore an increase in their capital multiplier.

Concentrations in highly rated but illiquid ABS CDOs, as well as non-normal market conditions, caused several large dealer institutions (both bank and non-bank) to incur very significant trading losses in the fourth quarter. Historically, these ABS CDOs had not exhibited significant price variability given their “super senior” position in the capital structure, so measured risk in VaR models was very low. However, rapidly increasing default and loss estimates for subprime mortgages have caused an abrupt and significant reassessment of potential losses in these super senior ABS CDOs. Because VaR models rely on historical price movements and assume normal market conditions, this particular risk measurement tool may not fully capture the effect of severe market dislocations. As such, the OCC advocates the use of complementary risk measurement tools such as stress testing and scenario analysis.

The Value that is at Risk here is the dollar itself: this Derivative Beast is one of many creatures that is working to destroy the dollar as a currency. This OCC report doesn't even begin to try to understand why the Derivatives Market self-destructed. Of course, anyone with a brain who understands charts and graphs can clearly see that the Day of Doom had to come. The rate of increase was just utterly and hopelessly unsustainable.

It could not possibly rise from $168 trillion to $350 trillion in one year. Nor double yet again to $700 trillion or double again to over $1.4 quadrillion and onwards. The days of wine and roses were over. The doubling had to stop. Every system that does this does the same thing. When a galaxy is so compressed that it can fit into a thimble, it explodes. When something reaches a natural limit, it either dies or blows up. Nothing in all creation doubles every year forever, not even the universe itself. So the OCC should have been in hysteria last year before the 'reset' occurred. I believe, from my own analysis, that the 'reset' was triggered by China. China decided to switch gears and move their banking system in a new direction. They decided to kill their own hot stock markets before they ran out of control. They clamped down on speculators. The US, instead of instantly copying China, did the opposite and continues to do the opposite.

The US is encouraging speculators. The US is feeding a trillion dollars into the maws of the very people causing global inflation to turn into hyper inflation. The more the US does this, the worse the hyper inflation. This is so irritating the Chinese, who knows what they will do. They already raised their own banking reserves to 16% and higher. The US has basically lost its own banking reserves. We see from the OCC charts and graphs how things are dropping into the negative. Far from holding bigger and bigger reserves in order to kill inflation, the Fed is dropping rates and letting the banks use the Fed as a reserve so they can make MORE loans and create MORE money out of thin air! This is pure insanity. Let's look at some scary charts:

Third quarter 2007:

Fourth quarter 2007:

This pair of charts are each only four months long, one following the other. The August banking/financial collapse barely began in the first chart. Note how the equity and credit swaps are collapsing. But everything else is still in the green. The vast majority of wealth is created out of thin air via the interest rates sector. Playing these derivative games is very productive if one wants lots of inflation! Especially with the wonderful Japanese carry trade!

But the following quarter, as the Japanese carry trade vanishes thanks to the currency war between China and Japan on the heels of the G7 nations attacking China over currency issues, and look! The interest benefits that produce so much funny money is NEGATIVE. And the foreign exchange is much reduced. Credit collapses to dire levels! And total trading revenues are no longer in the green, they are deep in the red, too. And do we think this is over? HAHAHA. No.

Click on all images to enlarge:

Second quarter 2007:

Fourth quarter 2007:

This pair of charts show the losses in total. Note the fact that the vast majority of the value of the Derivatives Beast is owned by only 5 banks. Look at the numbers on the side! We are talking trillions in dollars! Even with the collapse of the general banking system, the Derivatives Beast's owners go from $155 trillion to $165 trillion in size in FOUR MONTHS.

Here is the list of the investment bank owners of the Derivatives Beast. Note the right hand side of this chart: the total credit exposure to capital ratios:

Let's look at the pirates at J.P. Morgan: they got Bears Stearns wrapped in colorful paper and with a ribbon of $55 billion from the very inflationary Federal Reserve and the US taxpayers! Look at these clown's ratios: FOUR HUNDRED AND NINETEEN TO ONE! Forget that Chinese banking reserves ratio of 16%. This is beyond gigantic. It is as if a thimble were equal to an entire planet! No way! No way in HELL. And they hold derivatives to the tune of $85 trillion! This is pure insanity! There is NO WAY these valuations or things can equal any other things on this planet or the sun or this galaxy. This is out of control numbers. HSBC has a ratio that is even worse: 483:1. Most of the banks below the top five mad banks have ratios between 8-15:1

The top two, Citibank and JP both are more than $100 trillion in size. Now that is utterly unbelievable. And we know that Citibank is pretty much bankrupt at this point. And Citibank's ratios is 223:1. So what is JP Morgan? How about one dead duckie! At least, if the Derivatives Beast chooses to appear in public. And this is what our government doesn't want!

But I assure everyone, if the US irritates China too much, we will discover exactly how big this monster is. And anyone who says we will never see it because China will eat all the dollars we grind out, they are nuts. China has no intention of doing this for us. They are not stupid. Personally, I wish our rulers didn't act like small children. I suspect this is due to being sheltered from reality. I would love to pop them into helmets and shove them into Sadr City for an eduction they will never forget. Or leave them stranded without a cell phone in Gaza. Or perhaps drop them into the garbage dumps of Haiti. Or leave them in Darfur without a gun.

Anything to teach them about reality. Then we can make them figure out how to make the Derivative Beast disappear. I suggest burning the dollars in the furnace like they did in Germany. Or give it away to the people of Zimbabwe. It would be meaningless instantly.

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Wizards At Work, Watch For Potholes!

April 17, 2008

Elaine Meinel Supkis

An EU official is screaming at all the FX traders to stop making the euro strong. He is threatening them with dire consequence! Why won't these traders listen? Maybe he will wave his magic wand and turn them into newts! We don't know! The G7 officials are screaming mad that the status quo of last year is lost. They want it back, badly. Bush wants yet another $100 billion for his insane wars. And the US has cut even more Iranian oil out of world markets so the price of oil is now over $115 a barrel. And Saudi Arabia is cutting oil production, not increasing it after Cheney and Bush both crawled on their bellies for more oil. And New York is thinking of cutting gasoline taxes so we can have gas at only $3.00 a gallon, not $3.50 a gallon. Potholes, here we come! Bang!

Dollar touches record low then bounces
Euro flirts with $1.60 before easing after comments by European Union official.

The euro threatened to break $1.60 for the first time ever, trading at $1.5982 in late-morning European trading, above the record $1.5978 it fetched Wednesday.

But the euro dropped back well under $1.59 after Luxembourg Prime Minister Jean-Claude Juncker, who leads talks among finance ministers from the 15 countries that use the currency, said it is moving in a "direction I don't consider desirable."

"I don't have the impression that financial markets and other actors correctly and entirely understood the message of the G-7 meeting," he added.

In their first shift in stance for four years, Group of Seven finance officials last week promised vigilance over the rapid decline of the U.S. currency. They said that "there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability."

The yen is 102 to the dollar right now. As if Japan's economic position is weak! Hopes for a weak yen lift spirits today in Japan as the Nikkei rises over 250 points based on the news that the Europeans will boost the dollar somehow. It is rather sad and amusing at the same time, watching wizards wail. In this case, snarl. The wizards unleashed the demonic powers of the FX markets long ago when Nixon decided to ditch gold overboard and let a pack of crazed speculators set the value of our currencies. 'The Fed will fix them!' snapped Nixon at Kissinger. 'Jawohl, mein Fünky Führer,' saluted his top aide de campaign.

Like so many half-baked banking concepts, this business rates up there with 'Let's have an international committee design and build the Tower of Babel!' Or, 'Let's race to New York harbor in record time, damn the icebergs, full speed ahead...ooops!' Some things are best not done. Floating a planet of fiat currencies that have whatever value they have between each other based on people buying and selling these pieces of paper is pure insanity. It is the open door to too much mischief. Over and over and over again, we have seen huge hunks of the planetary trade and financial systems go flying right off the cliff. For the traders make money when the DESTROY THINGS. They don't make money from stability. They make money, acting like the Mongol Hordes screaming into a city and setting it to the torch.

The nature of risk is, stability is bad, chaos is great.

Since risk makes profits, we learn today that one lucky trader made $2.6 billion placing bets in the Burning House Lotto of the FX markets. Of course, people who trade stuff can make money playing the FX game too. But only if they have some help from interested central bankers. Japanese manufacturers need a weak yen. It doesn't matter if this means stealing every last yen from Mrs. Watanabe's tea cup, they will steal every last yen from her bank account and force her to live in a closet in order to weaken the yen. In the US, savers have to contend with sudden inflationary surges brought upon them by the central bankers when they need to fund the speculators. So we have an ugly monetary choice: weak dollar and expensive stuff or strong dollar and no jobs due to surges in imports.

The idea that there are other, saner ways to regulate trade, prices and currency values, eludes all of our rulers. They make lots of money with the wretched, messy system they created. If some schlub can make several billion in a month betting on FX movements then we can bet, the powerful people who control the value of currencies and conspire with each other, made a lot more than that. So long as no one notices that the rulers make a lot of loot this way, they can duck below the radar and continue playing these lucrative and lousy games. So what if they wipe out everyone's savings? So what if they bankrupt banks or destroy whole nations? So what if their money movements create global food and energy inflation?

Let them eat cake! This is why we have history: periodically, people wake up and notice they are being deliberately destroyed by their own protectors and masters. So here we have the head of the European banking system ordering everyone to stop betting that the euro is going to be stronger and the dollar, weaker. He will do some mysterious thing to correct this situation.

What the hell is that? Will he reverse course and say, 'We will no longer sell gold but BUY gold and base the euro on gold! And we will not accept any fiat currencies in exchange!' HAHAHA. Wow. That would be funny. And frankly, it is entirely possible. The Swiss cut off their gold link and now regret it. The Germans and French did this only under the cover of the US dollar. Now they are worried, they made a huge historical mistake. Eventually, everyone will figure out, this system is destroying itself.

US needs more war funds by June-Bush budget chief

Assuming Congress gives Bush the remaining $102 billion for the two conflicts this year, total U.S. war funding since 2001 would total $752 billion, according to the Congressional Budget Office.

In his testimony to the Senate panel, Nussle reiterated warnings that Congress should not load up the war-funds bill with additional spending on domestic programs.

"The president has made clear that he will veto any attempt to hijack this much needed troop funding bill," Nussle said.

But Senate Appropriations Committee Chairman Robert Byrd, a West Virginia Democrat and outspoken opponent of the Iraq war, said the Bush administration budget request "reveals no evidence of funding to bolster our country's economy or to help Americans deal with lost jobs, mortgage foreclosures and the rising cost of living."

OK: the package of goodies for US taxpayers is roughly $20 billion less than the 'war' spending in Iraq and Afghanistan, to countries we easily overran and took over 5 years ago. When will we learn? The game plan is for the US to go bankrupt running pointless wars. It is working like a gold Swiss watch crusted with diamonds. Now, Congress wants to ADD to this bill to fix our nation???? HAHAHA. Why not cut funding to these twin war disasters and spend all the money here at home? A novel idea. One that can't fit into the pea brains of our 'representatives.' The US still thinks our fiat nation and dictate to the world via military might. Eventually, even the stupidest person will figure out, this isn't working.

Merrill Posts a Loss and Plans to Cut 2,900 More Jobs

The bank reported worst-than-expected earnings for the first quarter, including $6.5 billion in write-downs and adjustments to assets in its mortgage, leveraged finance and other assets. The write-downs bring Merrill’s total in the last three quarters to more than $30 billion.

Merrill said in its earnings release that it had lost $1.96 billion or $2.19 a share, after its write-downs, in the first three months, down from a profit of $2.106 billion or $2.26 a share in the same period a year ago.

Analysts surveyed by Bloomberg News had expected a loss of $1.79 a share.

Merrill’s revenue, including interest and dividends, was $2.9 billion — down 69 percent from a year ago.

Merrill Lynch is the next Bears Stearns. And has the same bottom line, the same toxic mix of troubles, the same greed, the same stupidity. Monkey see, monkey do is the strategy here. Thousands of young people are going to lose their jobs thanks to all this. Many an aspiring young pirate will walk the plank. They will lose their homes, be unable to pay their college bills, they will lose their race cars and their trophy wives or fancy husbands. This collapse is already killing the NYC real estate markets. Not that these young people weren't warned. They grew up under the Reagan umbrella which was full of holes.

Of course, history vanishes faster than it is written so many people have zero memory of the savings and loans disaster or the 1987 stock collapse that then shot up again but it was a barometer for the coming storm. Only the recession wasn't hideous. We sent our armies to Kuwait and the emirs paid us. We became mercenaries. This time out, no one is paying us a penny and we are being hammered to death and the bills are rising. Someone has to pay. The young people who voted for the Republican nightmare have only to look in mirror. They didn't want the other road.

Not that there is another road! The US is committed to spending all our money on wars. We are a war machine. Our remaining industries are mostly war industries. We must face the fact that we can't war our way to prosperity. And we can't have mortgage schemes while blowing up houses in Fallujah. Either we stop it there or it will begin, here. Just like in 1970. we can't do both.

Congress tackles credit card reform
Lawmakers say legislation is needed to curb many of the 'unfair' practices employed by credit card issuers.

The focus of Thursday's hearing, however, was the Credit Cardholders' Bill of Rights - legislation proposed earlier this year by subcommittee chairwoman Rep. Carolyn Maloney, D-NY.

Levin, who was among a group of 15 different witnesses scheduled to testify, introduced a similar bill in the Senate last year. If passed, the law would stop credit card issuers from charging interest rates on debt that is paid on time and require that interest rate hikes apply only to future credit card debt and not debt already incurred.

The issue has also garnered the attention of the Federal Reserve, which has proposed separate action, including requiring credit-card issuers to notify consumers at least 45 days notice if they plan on raising interest rates.

We need Federal usury laws. Period. As well as Federal regulations for lending. And regulations for the broker who write loans. And taxes on money generated via getting loans in Japan and then shifting it to here. There has to be limits. If there are no limits, loans shoot to infinity. They always do this. Ergo: any sane nation that doesn't want to go bankrupt as frequently as Argentina better have strong regulations about banking reserves and lending. If the bankers can get Congress to pass bankruptcy laws that benefit them, then the Federal government MUST regulate the banks very closely. Fair is fair!

If the banks whine about this, they can repeal all national bankruptcy laws and let the states set the rules just like in banking. See? Simple solutions for simple minds. And the bankers would rather drown in a tub of hungry sharks than do that.

Saudi cuts output

Saudi Arabia, the world's top oil exporter, has trimmed its output to about nine million barrels per day (bpd), a Saudi oil source said yesterday.

The level is slightly lower than the 9.2m bpd that Saudi Arabia had been producing until now and reflects lower customer demand, the source said.

"Saudi oil production currently is around nine million barrels per day, which reflects the demand from our customers," the Saudi oil source said.

He reiterated the kingdom's production capacity stands at 11.3m bpd and will rise to 12.5m bpd by next year.

Oil is now $115 a barrel. And gold is playing catch up at $944.70 per ounce. And isn't the Hubbert Oil Peak fun? Way back, 4 years ago, the Saudis boasted they could pump over 12 million barrels of oil. I said, 'Bullshit.' And as usual, it was a lie, I was right. The Saudis cannot pump more oil. It just isn't possible in the real world. It is done. We now must either face reality or... the alternative is not fun.

The US is talking about not collecting gasoline taxes. Wow. I can't wait to drive my one ton truck on roads that are wall to wall pot holes. Maybe I will take out my tractor and drive it around. I remember when NYC decided to fix things by starting 'deferred maintenance': they wouldn't fix anything. Eventually, all the subway systems broke down. My German boss yelled, 'Can't you Americans make the trains run on time?' And all the city lights went out, one by one. The fire hydrant in front of my brownstone broke and I lost my electricity. I had to hike to City Hall and with Channel 2 and Channel 11 in tow, literally burst into the office of the City Manager and yelled, 'I am moving in until you fix the lights and fix the fire hydrant!'

They fixed both. It was interesting. So we will not pay gas taxes and will pay the piper. I see gas guzzling monsters all over the place still. Obviously, people haven't figured out, this is a stupid thing. I see gas guzzler for sale. We haven't changed course at all. I still see the US menacing Iran. I see the US cutting down on Iran's oil sales to the world in order to make the world safe.

For what? Pot hole dwelling demons?

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Everyone Wants More Free Loans, More Free Money

April 17, 2008

Elaine Meinel Supkis

April 15th was a happy day in America. Everyone filed swiftly in order to get the $600 bonus per person our government is handing out like candy at Halloween. The discussion as to what to do about our looming bankruptcy seems centered on how to restart the debt cycle. There is tremendous desire to restart the carry trade from Japan while reviving the housing balloon with lots of free, government-backed money. All this risk is being transfered to the taxpayers who are getting hand outs. No one is saving anything. We want more red ink, infinite red ink. Time to look at the maw of the Derivative Beast and the desire of Wimpy for more free hamburgers which he will never pay back.

Credit Swaps Top $62 Trillion in Rush to Hedge Losses

Credit-default swaps worldwide expanded to cover $62.2 trillion of debt in 2007 as investors rushed to protect against losses triggered by the collapse of the U.S. subprime mortgage market.

Contracts outstanding rose 37 percent in the second half of 2007 from $45.5 trillion in the first half, the New York-based International Swaps and Derivatives Association said today. The market, which has grown from $34.5 trillion in 2006, doubled in each of the previous three years as traders used the derivatives as a cheaper and easier way to invest in corporate debt.

``Trading volume has gone up dramatically,'' said David Verschoor, a default swap trader at BNP Paribas SA in Hong Kong. ``People are punting it harder than they punt equities.''

Credit derivative trading rose amid the global credit crisis that toppled Bear Stearns Cos., shut down hedge funds and caused more than $245 billion of asset writedowns and losses at the world's biggest banks and securities firms. The cost to protect corporate bonds from default using contracts on the benchmark Markit CDX North America Investment Grade Index more than quadrupled to a record 198.5 basis points last month from 42 at the end of June, according to London-based CMA Datavision.

One of the features of modern finance is how our money making moguls all worked so very hard to set up systems that would prevent losses. These various schemes and interlocking exchanges were all designed in the beginning to prevent losses from accelerating and wrecking the systems. But of course, instead of doing that, they created a system that amplifies losses and spreads them all far and wide! And not only this, anyone with an understanding about the nature of wealth and money magic could clearly see this coming. The systems being rigged were of course, all self-referential. Namely, all of it, every last bit, was based on debts.

Debt-based systems are by their very natures, black holes for finance. The wealth that can pour out of debt creation disappears as rapidly as it was made in the first place. Since all it takes to create this wealth is for one person to say to another, 'I'll pay you next Thursday for a hamburger today.' This is why they always talk about 'trust'. If Wimpy pays back, all is well. But we can see from the cartoons, Wimpy is very fat and quite lazy. He doesn't want to produce anything or exert any energy. He wants Popeye to lend him more money so he can eat endless hamburgers. If Popeye keeps giving him money, he will happily eat until he bursts. His appetite for hamburgers on loan is infinite. And of course, nonproductive.

If Popeye runs out of money to lend to Wimpy for his hamburgers, he can go to Bluto and get a big loan. In turn, he can charge Wimpy 30% interest and live well off of the differential between the Bank of Bluto's 3% loans. But only if Wimpy pays back. But Wimpy can't and won't pay back. So, after this lending cycle runs its course, eventually someone notices NO MONEY IS COMING IN FROM WIMPY. The system then collapses.

We are in the middle of a huge banking collapse. It is only in the West. This is due to the West deciding to be Wimpy. Why produce anything when the hamburgers come floating over the oceans into our nation's gullet? We just lie there and sign IOUs to Popeye who gets 1% loans from the Bank of Japan. China then holds the money lent and ships over more hamburgers. Now that everyone knows that the USA is simply eating everything and not doing a thing about producing value-added goods, the whole system is breaking down. The first warnings was inflation.

Food and fuel began it rise in price. This is because cooking hamburgers, feeding cows for slaughter and transporting these to the USA uses lots of fuel and food resources. In the news today is the startling news that many nations are now restricting food exports! The flood of hamburgers to Wimpy in the USA is now going to end! Now, Wimpy has to send out food to the other nations to pay for the IOUS. These IOUS are held by pirates. Who didn't work any harder than Wimpy for the money. They got these IOUs they hold from the Bank of Japan and other banks! So they bought IOUs from Wimpy via IOUs from the hamburger makers!

Everyone is now yelling at Popeye to fix this mess. Popeye is the US government. The US government will fix this by spending more money and getting more IOUs so it can give more money to Wimpy to eat more hamburgers. Wimpy is grossly overweight and Popeye wants him to diet. But if he stops eating the pirates holding the IOUs won't get more money from Popeye paying Wimpy's hamburger IOUs. They all know that Popeye will bail out Wimpy. And Bluto has a baseball bat and belongs to the Mafia and the Chinese Triad as well as the Yakuza. So he will come with his buddies to collect. Popeye wants to eat spinach but that is also called 'taxes' and Olive Oyl needs money to feed the family they spawned.

Isn't this exciting? So here we are, the 'swap' systems set up by a bunch of stupid pirates to protect themselves while they create infinite debts using the Bank of Japan's funny money carry trade---it ain't working. This system can't work because it has no secure financial base which has to be capital. No capital=no reserves=bankruptcy. Any time anyone tries to run a system that is always in the red and never ever comes out of the red and is based on increasing debts and never paying down debts ends up bankrupt. There is NO WAY anyone can undo this process. Any time anyone builds a system that NEVER goes bankrupt no matter how much debt is created will suddenly lurch into a black hole of nothingness due to the fact that NOTHING ever can run to infinity. If infinity is possible, we would not be in a physical universe. We would be in a black hole where there is infinite gravity that kills all motion even at the atomic level. And even these break. This is probably how universes are created. Total gravity=Big Bang.

The benchmark Markit iTraxx Europe index of credit-default swaps on 125 companies with investment-grade ratings, which peaked at a record 167 basis points last month, declined 5.5 basis points to 100.5 today, according to JPMorgan Chase & Co. The index falls as perceptions of credit quality improve.

Credit-default swaps, traded by banks and securities firms including JPMorgan Chase & Co. and Goldman Sachs Group Inc., are the fastest-growing part of the $454.5 trillion market for over- the-counter derivatives, financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in the weather or interest rates.

Whenever a bunch of pirates discover they can con someone, they all rush to do this as fast as possible. They try to con each other, of course. A warning sign that something is stupid and won't work is, everyone pours everything into the new container. In this case, the derivatives market has taken over everything. Just like these same pirates piled IOUs on every possible system and asset as free loans poured out of Japan, so it is here: they must set up a counter-betting system to soak up the flood of IOUs. So they create one game after another. And each is complex and totally useless. All of these things are non-productive.

So the real problem isn't protecting these 'investments'. The problem is excess IOUs pouring into every crevice of this planet. And the goal of these guys is to produce MORE IOUs. And pour them into more things that have no real use or function. These IOUs are supposed to GROW. And since the supply of IOUs is infinite, the desire to make them grow becomes increasingly futile. This is why our distant ancestors demanded that the Federal Reserve be based on limited gold reserves. This was to prevent infinite lending. Instead, we have a system that encourages infinite lending. And we let other banks do this with total impunity.

Here is a study a reader emailed me: Monetary Policy and the Financial
Crisis of 2007–2008

Stephen G.Cecchetti, Brandeis International Business School

Central bankers are conservative people. They take great care in implementing policy; they speak precisely; they explain changes completely; and they study the environment trying to pinpoint where the next disaster looms. Good monetary policy is marked by its predictability. But when the world changes around them, policymakers change with it. If a crisis hits and the tools at hand are not up to the job, then central bank officials can and will improvise. In August 2007, the world changed and the traditional instruments of monetary policy were not up to the task.

HAHAHA. Right off the bat, this expert strikes out repeatedly! Central bankers are NOT conservative: they are wild spending lunatics who believe the sky is the limit. Proof? The flood of funny money being lent by these same careless frumps. As for care in implementing policies? HAHAHA. They get calls from the ruling elites demanding they do something to save the very rich and they jump! The 'improvisation' of tools by these conspirators for the rich are very simple: they make up whatever they want to do and do it! I could do that too, if I ran a central bank! Obviously, they ignore reality which is why they are unable to change the banking collapse. They are making it worse since the tools they created have only one purpose: to protect the illicit wealth created by infinite lending! This is why, in a planet awash in red ink, they yap all the time about INCREASING liquidity. The last thing we need is more debt!

We need savings. And the 'savings glut' they talked about doesn't exist. There are reserves in places trading with the US but they form a function that is bad for global banking and trade: this is a naked attempt at isolating excess currency so the dollar doesn't totally collapse. This is done so they all can run trade surpluses with the US. Not because they are 'saving' money for some domestic productive service! It is purely a trade tool.

This article by a respected idiot does point up a fact that everyone but I seems unable to comprehend: this whole mess began suddenly. In July, 2008, Japan and China got in this monetary dust-up concerning their FOREX reserves and their currencies vis a vis the dollar. Japan joined the G7 in attacking ONLY China over their value of their currency while Japan ran a cheap yen against the dollar and was hammering the US in trade. China growled that this was unfair and the G7 should attack Japan. Japan said, in return, they would lower the value of the yen to 130 to the dollar by October. The carry trade IOU people went wild with joy. So they piled in to collect free money from the Bank of Japan.

But Iran demanded yen for oil. Right on the heels of China saying they would make the yen more valuable to the dollar as retaliation for joining G7 attacks on China. By August, the yen began to climb rapidly against the dollar. THIS SHUT DOWN THE CARRY TRADE. This was the trigger for the banking collapse. ONLY THE WESTERN BANKS USING THE JAPANESE CARRY TRADE COLLAPSED. China repeatedly told us, they were not having a collapse. We were. And few people but myself noticed that the Bank of Japan has had not the slightest problem due to this banking collapse. This is because both Japan and China have savings. We do not.

Even today, few in the West dare to look at this business correctly because it means we have to understand that the Japanese carry trade is pure poison and is killing us! We have to stop this! Now! Instead, the game is to restart the Japanese carry trade. And all of the news is about this topic in a wry way. They dare not say this openly. But this is the desire and the wish. And above all, Japan wishes for this.

Over the last several decades, the financial system has evolved in a way that improves the efficient operation of the economy. In the past, payment streams and risks tended to come bundled together. Bonds were sequences of coupons with a principal payment at maturity. Today bonds can be stripped so that coupons and principal can be purchased separately. More generally, it is possible to purchase or sell virtually any payment stream with any risk characteristics.

This ability to separate financial instruments into their most fundamental pieces - the financial analog to particle physicists separating atomic nuclei into protons and neutrons - has had profound implications for the
way in which risk is bought and sold. Today, risk is much more likely to go to those people who are most able to bear it. The result is that we can insure virtually anything and engage in many activities we wouldn't
have undertaken in the past.

In a critical development, the slicing and dicing of risk extended to consumer lending. Home mortgages, credit card debt, automobile loans, student loans and the like were all pooled, or grouped together, and assets were issued that were backed by the groups. These asset pools were structured in a way that both reduced the risk faced by the buyer of the "asset-backed" securities, and allowed borrowers access to credit they otherwise would not have had. It sounds like everyone wins; a pure efficiency gain.

This expert is so stupid, he couldn't even be used as a nut cracker. I have met hammers that are smarter. This whole section reeks of childish thinking! Risk does go to people who are able to bear it? Like, the American taxpayer??? This is the ONLY destination for risk! All the risks, the mountain, the derivative Beast from hell's risks all land on one and only one location: the American taxpayer. And America carries the entire burden of world trade. And we have to fix everything and protect everyone while they pile a huge mountain of debt on us! And then they sell us more debt because we can't be taxed to death so we build up more and more debt to pay for the public protections of risks! The 'activities we wouldn't have undertaken in the past' certainly are being undertaken today thanks to moving all risks onto the backs of the American people who are falling apart under the burdens being imposed this way.

All the 'pools' of IOUs were made in order to shift them enmass to the Federal Reserve or better still, to the Federal Government itself. And this is what all these 'rescues' are: transfer of IOUs to the public. And the people who made this happen can now create MORE IOUs. Which they are certain can be transfered, willy-nilly to the US taxpayer yet again.

But there is no infinite debt! There are limits! The US taxpayer is going bankrupt. This will destroy our empire just like bankruptcy destroyed many an empire. Bush, today, announced he will demand more war spending in the Middle East in May. Another $100 billion! More IOUs will pour out of DC right when DC says they will save all the risky IOUs that already exist. And will boost the value of all assets by flooding our markets with more IOUs! The liquidity creating machine is still hard at work.

Click on images to enlarge:

Our total assets are about one quarter of China's assets. Isn't that pathetic? And less than half of Japan's assets. And our LIABILITIES eat up nearly the entire total? HAHAHA. Aren't we rich? Note that Federal Reserve Notes held by our bankers is LIABILITIES not PROFITS. Not CAPITAL. Liabilities is negative, not positive. But the lending they do is based on these liabilities. The more they have them, the more they can lend. Isn't that cute?

This chart shows how destabilizing this is. All the systems set up for a functional banking system are in collapse. And we can plainly see this. The repairs we need are not more of the same. Obviously, the things that destabilized the system need to change! Not continue even longer.

Note how the lending by the central bank is rising. More and more red ink creation. And voila! The interest rates drop! What a miracle. If we go deeper into debt on our credit cards, the RAISE the interest rates, not lower them! But these same bankers, when they go to daddy in DC, get the exact opposite.

Conclusion

To recap, by early 2007 U.S. home prices had reached unprecedented levels; home owners had become more leveraged than they had ever been; mortgage quality had declined; and asset-backed securitization had spread well-beyond its traditional base. On 9 August 2007 the financial system started to crack. Banks realized that they held substantial amounts of mortgage-backed securities that were difficult to value.

Experiencing large losses, banks' balance sheets could not accommodate additional lending. As a result, some financial intermediaries began to have trouble finding the short-term financing that was essential for them to carry on their daily business.

Seeing this, policymakers tried to figure out what to do. Traditional interest rate instruments proved to be
ineffective, so Fed officials tried a variety of new things. Starting in mid-December, they changed the way in which they lent to commercial banks, creating the Term Auction Facility. Then, in mid-March they both offered to loan large amounts of Treasury securities in exchange for lesser-grade instruments, and began making loans directly to investment banks. Along the way, the Fed swapped dollars for euros with the ECB and Swiss francs with the Swiss National Bank; dramatically increased the size and term of the repurchase agreements they engaged in; and made an extraordinary loan to a single investment bank, Bear Stearns.

By lending both cash and securities, based on collateral of questionable value, the Fed has tried to bring
some order back to the market. And the amounts are massive. By the end of March 2008, the Fed had committed more than half of their nearly $1 trillion balance sheet to these new programs:

• $100 billion to the Term Auction Facility,

• $100 billion to 28-day repo of mortgage-backed securities,

• $200 billion to the Term Securities Lending Facility,

• $36 billion to foreign exchange swaps,

• $29 billion to a loan to support the sale of Bear Stearns,

• and $30 billion so far to the Primary Dealer Credit Facility.

Reflecting on all that has happened, it is natural to wonder whether the Federal Reserve should have refashioned their tools in the way that they did. It seems clear that the 19th century view of the lender of last resort does not work. But what should take its place? Should it be a more aggressive central bank that makes loans to a broader set of borrowers, taking credit risk along the way? Or, should this function belong to the Treasury?

After all, it is the fiscal authority, not the monetary authority that has responsibility for the public purse. But these are really questions for another day. In the heat of a financial crisis, the central bank is the only official body that can act quickly enough to make a difference. Politicians are not well-equipped to take
actions literally from one day to the next. So, while we might want to reassess the role of the central bank once the crisis is over, for now it is difficult to fault the Federal Reserve's creative responses to the crisis that
began in August 2007. Let's just hope that they work.

Yet another brainiac has decided, what we need is a more powerful, more uncontrolled central bank! If we have a Soviet Central Bank, they could simply make money and sop up excessive lending by simply doing it! And this will allow us to create infinite debts and spend it infinitely forever. Right! Thought worthy of a 5 year old brat. Instead of sliding into black holes of infinite debt, our central banks should be stopping the making of infinite debts. And cheap, sub-inflation rate lending always causes infinite debts. The US is now lending below the rate of inflation again. Japan is certainly doing this with a vengeance. If the world's #1 and #2 economies are both lending infinite money on sub-inflation rates, this is a fatal flow of red ink that turns instantly into inflation. The price of hamburgers is literally climbing to the moon!

Here is the professor's explanation for these charts:

Starting with the liability side of the balance sheet (what the Fed owes); note that there is a tremendous amount of currency outstanding. The number is extremely large, representing roughly $2600 per U.S. resident. But one-half to two-thirds is held outside the country.

Since currency plays no role in our story, we move immediately to the entry for commercial bank reserve
balances. Banks hold reserves at the Fed for three primary reasons: (1) they are required to hold them; (2) they need them to do business, so that they can meet customer demands for withdrawals and they can make payments to other banks; and (3), it is prudent to do so; reserves act as the bank's emergency fund - they are always ready just in case disaster strikes.

Looking at Table 1, we see that the level of these reserve balances is $18 billion. This is a relatively small
number - approximately one-tenth the level held by European banks in the national central banks of the
Eurosystem. The reason is that U.S. banks receive no interest on their reserve balances, while European banks are paid something close to the overnight interbank lending rate. The result is that American banks have a big financial incentive to economize on their reserve account balances.

Exchange Reserves

Moving to the asset side of the balance sheet (what the Fed owns), we see that the Fed holds securities both
outright and as part of repurchase agreements. It is worth making a few points about each of these. First,
the securities holdings are entirely U.S. Treasury bills, notes, and bonds. Second, the Federal Reserve Act stipulates that additions to the outright holdings can only occur through secondary market purchases. That is, the Fed cannot add to its holdings by buying securities directly from the U.S. Treasury; nor, with the exception of rolling over maturing issues it already holds, can the Fed participate in the auction in which new Treasury bills, notes and bonds are issued.

The Fed also holds securities in repurchase agreements, or "repo" for short. In Table 1, these account for
$28 billion. Repurchase agreements are extremely important, as they are the method the Fed uses to adjust the level of reserves in the banking system from day to day. And when we hear on that the Federal Reserve Bank of New York's Open Market Desk put $38 billion into the banking system on 10 August 2007, they did it with repurchase agreements.

It is worth taking a minute to understand what repos are. Here is a dictionary-style description: A repurchase agreement is a short-term collateralized loan in which a security is exchanged for cash, with the agreement that the parties will reverse the transaction on a specific future date at an agreed upon price, as soon as the next day. The easiest way to think about a repo is as an overnight mortgage (because it is fully collateralized). In the same way that you pledge your house to the bank in exchange for a loan, a financial institution pledges a bond to the Fed in exchange for funds.

Alas, the professor condemns himself to non-understanding. 'Currency has nothing to do with this story', indeed. It has everything to do with it. If the valuations of trade currencies get messed up by games played by other central banks, there would be no banking collapse today. The reserves held by the Bank of Japan thanks to totally lopsided trade profits is the basis of the wild lending done by the Bank of Japan. They are within their reserves. The US, as I keep saying with total disgust, has no reserves. Note how there our bankers hold virtually no yen while the Japanese hold a trillion dollars. This imbalance in reserves vis a vis the US and Japan is the root cause of the banking collapse that is killing us and making the Japanese laugh behind our backs. Japan wants us strong enough to take on more debt. But they do NOT want us to stop spending money on Japanese goods. Thus, the game goes on. The banking mess is not an isolated problem but is caused by policies concerning global trade.

We visited Japan today, now time to visit England. England is having the identical banking collapse as the US. England has identical trade problems and is being de-industrialized even faster than the US.

10 ways out of the credit crisis
Slash? Spend? Guarantee? Co-ordinate? We analyse the options for Gordon Brown as he heads for US talks on the credit crunch

5. Co-ordinate a global fightback

FOR: The credit crunch is an international phenomenon of vast proportions. This so-called "trillion-dollar meltdown" (that's $1,000,000,000,000) has affected every financial centre and institution. So it is a probably good idea for the world's central banks and governments to act together. For example, when the US Federal Reserve, the European Central Bank, the bank of Japan and the Bank of England all intervened simultaneously recently, it made much more impact than when they acted alone.

AGAINST: Much of the international activity – through bodies such as the IMF, the Financial Stability Forum and the Senior Supervisors Group – tends to be backward-looking.

VERDICT: When it happens, it makes headlines and boosts confidence.

The suggestions for fixing this melt down all end up actually making it worse. There is no mention of stopping the deindustrialization of England. No talk about stopping debt accumulations. And worse, it is full of stupid statement such as the idea that all the world's banks are in the same boat. THEY ARE NOT. None of the Sovereign Wealth nations are! They are doing fine! Even if they lose money, it doesn't destroy them. They are NOT going bankrupt. The US and UK are going bankrupt. Both nations owe foreign governments more public debt than the rest of the world put together! This amazing and horrifying fact is not hammered home by either politicians or economists. The media and our leaders never mention this fact. But both England and the US are going bankrupt in tandem.

Subprime: Tentacles of a Crisis
Randall Dodd

Locating the ruptures

Several points of weakness contributed to the market failure that allowed a 3 percentage point jump in serious delinquency rates on a subsection of U.S. mortgages to throw a $57 trillion U.S. financial system into turmoil and cause shudders across the globe:

The market first broke down at the juncture where the highest-risk tranches of subprime debt were placed with highly leveraged investors. Hedge funds have no capital requirements (they are unregulated in this regard), and the industry practice of highly leveraged investing allowed for excessive risk taking. Taking risks in proportion to invested capital has the prudential benefit of limiting risk taking and providing a buffer between losses and bankruptcy. Taking risks in excess of prudential limits is an unstable foundation for organizing capital markets and a weak point in the market structure.

The market also ruptured because unregulated and undercapitalized financial institutions were liquidity providers to the OTC markets in subprime collateralized debt obligations and credit derivatives. As soon as those markets' solvency troubles emerged, they became illiquid and trading essentially ceased.

Unregulated and undercapitalized mortgage originators also contributed to the crunch. The originators, like the hedge funds, operated with too little capital and used short-term financing to fund the subprime mortgages they made and expected to hold only briefly. When they could not sell those mortgages to the firms that packaged them into securities, many unregulated originators were forced out of business.

Lack of transparency in the OTC markets exacerbated the situation. The inability of market participants to identify the nature and location of the subprime mortgage risk led to a sudden shift in risk assessment. Once overly optimistic about the risks of the subprime market, scared and confused investors suddenly panicked and overestimated risk, shunning even senior, investment-grade tranches.

OTC markets also suffered from a failure of liquidity. Instead of showing resilience in the face of greater price volatility, these markets ceased trading as counterparties became untrustworthy and buyers fled.

Another stupid, insane analysis. The idea that the planet earth needs more liquidity is an idiotfixee. 'If only we can get a hold of more debt, we can continue!' This notion is nearly impossible to dislodge. The 'buffers' were discarded because they prevented infinite debt building. Buffers are limits, after all. The last thing anyone wanted. And they still want no limits. The investment bankers want to dump all their paper into our laps so they can run off, free as a bird, and demand more loans. It is that simple. And disgusting.

Bank close to agreeing plan to end drought in funding for mortgages

It is understood that the Treasury about to finalise a scheme under which the Bank would allow lenders to swap their mortgage-backed assets for government bonds rather than cash. Lenders would be able to use the gilts as collateral for loans from other banks. It is hoped that the move will ease the seizure in the credit markets and lead to a drop in mortgage rates for homeowners.

Sir John Gieve, Deputy Governor of the Bank of England, said: “We have taken and will continue to take measures to try to ease the liquidity pressures in the financial sectors.”

After a record flood of IOUs were dumped into English housing assets, the fix will be to find more red ink to pour into housing? The US is trying the same thing. The central banks can pour on infinite ink if there is no worry about bankruptcy. But the upper limit has been hit: buyers can't pay even the interest on housing loans. So they can't buy. Only if the loans are at 1% interest with no principal paid off, ever, can they even think of raising prices. This is the upper limit and we have to accept that there is an upper limit. We can't go to infinity. Infinity is death.

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Toyota Boasts Of Owning Our Political Leaders

April 17, 2008

Elaine Meinel Supkis

The authors of 'Trading Away Our Future' have launched their own webpage. So let's welcome them to the vast internet community of bloggers! And we must look at the Nikkei today to learn about our future rulers, such as Toyota. The Japanese are in hysterics over their yen getting stronger and are very eager to reverse this. We should fight them tooth and nail except they own our politicians. They even explain this to us in Nikkei News! Also, the traitors who own the Washington Post host yet another stupid pro-free trade article that is utter hogwash and indeed, filled with open lies. No statistics, of course, to back up the notion that we benefit from free trade.

I wish to announce that the authors of 'Trading Away Our Future' launched their own webpage:

The trade deficit is associated with a substantial decline (several million) in the number of manufacturing workers employed in the U.S., as we discuss in Trading Away Our Future. The decline in manufacturing employment due to the trade deficit has effects that extend well beyond the manufacturing sector. In particular, unemployed manufacturing workers (and those who choose not to pursue a manufacturing career) compete with those in other sectors of the economy.

Would eliminating the trade deficit end economic inequality? No. Would it make a difference? Probably. It would bring manufacturing employment back towards its 1965-1995 historical range of about 17 million workers. It would make a difference.

When I communicated with the Richman family when they sent me their book, 'Trading Away Our Future', I told them how wonderful it is to have a webpage and how they could get started, talking politics and encouraging sales of their books. So they joined the online community! I talked on the phone last night with the youngest Richman authors, Jesse. It turns out, we have a fair number of things in common.

The oldest of the three authors, Jesse's grandfather, Raymond, was at the University of Chicago at the same time my dad was there! There is a possibility that I may have run into them at some point in time back in the fifties, as a child. It is amazing, how small this world can be. The Richman family, like mine, was always trying out new ways of doing things and thinking about things. For example, they ended up 'homeschooling', something my family has done at various times in the past.

This homeschooling was more like being in college due to the parents having college degrees. For example, I made my children memorize Shakespeare scenes which they actually enjoyed doing. Jesse also told me that his grandfather started food co-ops during the stagflation years. I did this, too. First, we launched a food co-op in Berkeley in 1968. It was a list of people wanting various veggies and then we would use a truck to drive to the farmer's market and buy it all, wholesale, and then it would be distributed at our commune. This way, we could beat inflation.

In NYC, during the oil inflation years, we formed a landlord's heating oil co-op for the same reason. Even if it saved us only 10%, that was significant enough to be worth the bother. The Richman family didn't sit idle as economic forces caused systems to warp. They experimented with things and Jesse told me that the old co-op idea of the past was reviving due to inflation. This family is like a bedrock within the community in that they have a collective 'memory' for doing things. Indeed, they were closer to the 'hippie' concept of community in the past, became 'conservative' and now are moving towards 'classic', I would guess. Pretty much the same arc I have gone through.

The array of problems we face today can't be solved with just one thing. But to solve them, each of us has to focus on one thing or another. Megasystems are very hard to change course. I prefer to discuss global systems because this is what I know best. The Richman family have chosen to use the educational system to teach others how to deal with the rising storms we all face. I do recommend visiting their web page and striking up a conversation with them. We all learn this way, we are in a classic 1960's-style 'Teach-In' online.

Now, onto today's news about global trade and power:

Toyota's FY08 Op Profit Could Drop 20% On U.S. Woes, Strong Yen

NAGOYA (Nikkei)--Toyota Motor Corp.'s (7203) consolidated operating profit for the year ending March 31, 2009, is expected to fall about 20% on the year to between 1.7 trillion yen and 1.8 trillion yen as slower U.S. sales and a surging yen slam the brakes on its earnings expansion, The Nikkei learned Wednesday.
***********************************************
Komatsu To Double Chinese Excavator Output With New Plants

TOKYO (Nikkei)--Komatsu Ltd. (6301) plans to spend about 6 billion yen to build factories in China, a move that will roughly double its production capacity for excavators in that high-demand market by fiscal 2009, The Nikkei learned Wednesday.

I visit the Nikkei news frequently. When I troll the web looking for commentary on trade, I notice that the topic of Japan is often missing in action in US commentary. Both the mainstream and the economics community online ignore Japan nearly totally. Brad Setser, for example, is totally obsessed with China but utterly ignores Japan. We used to argue about this. I suppose he is happy I no longer bother him. But the danger from China is external. The danger from Japan is INTERNAL. China has a huge trade surplus with the US.

Japan is DISPLACING US at home AND abroad! Market share within markets we used to dominate are now dominated by Japan! This dual threat, far from being gone, is worsening. Note the above story about Toyota: their PROFITS are dropping due to a fall in the US markets. Note also how charming the Nikkei news is. They clearly say, this drop is half due to the rising yen! Aha! Now, isn't that obvious? So...why is the US cooperating with the G7 nations to make it better for Toyota? Eh? What?

Also note the Japanese talk about the continuous profit expansion they enjoyed during this long 'depression' they have been making. This 'depression' is very real to the poor Japanese who are being hammered by inflation of anything needed to stay alive while Toyota enjoys a dual bonus of super-low interest rates from the Bank of Japan coupled with super-high profit margins thanks to the weak yen. Now, the entire concept of monetarism is for any nation running big trade surpluses should see their currency strengthen while nations with huge deficits should see their own currency deteriorate in value.

But this is REVERSED. And as I keep pointing out, this reversal is malicious, deliberate and has a goal: to gain both market share and increase profits. Nations that manage to weaken their currency while running trade surpluses win. Nations that don't do this, lose. Perhaps I should go to Washington and explain this simple matter. HAHAHA. Note the second news story here: Japan continues to build factories in China. This is to supply the Chinese market which has overtaken the US market in Japanese trade statistics. Japan does more trade with China than with the US. This has a double danger for us.

Japan exports more than half of their value-added large machines like cars and construction equipment to the US. And a hunk of THAT is now made in CHINA. I have no idea if the statistics for 'China's trade with the US' breaks down who is making what and who profits. I bet a lot of the fury of the anti-China trade people is directed at the wrong targets. The real value-added stuff is made in China for US and Japanese corporations and then imported into the US. To keep this nice system flowing, they have to have 'free trade' which allows lower-level Chinese companies full access to US markets which is why we get this extra $100 billion in lopsided trade!

But the key trade is the $150 billion in product flows from Japanese and US major corporations. The Chinese still don't import Chinese cars here..yet. But Toyotas made in China probably come here. The business of the 'cheap yen' is #1 for the Japanese. They track this in their news like hawks. This should be a clue to stupid Americans who can't figure out that it isn't just lopsided trade. The Japanese don't export a flood of cheap dollar goods to the US. They are not a cheap goods-production country! They are the champions when it comes to running factories with robots that displace workers. The workforce in Japan is declining. But the Japanese industrialists don't need them! They need to keep their fortress intact and isolated while they capture and enslave others. They just want to be our masters.

Japan Bars Investment by British Hedge Fund

The Japanese government said on Wednesday that it would block a British hedge fund from buying a larger stake in a power company, in a case that is being closely watched as a test of Japan’s openness to foreign capital.

The trade ministry rejected a proposal by the hedge fund, the Children’s Investment Fund, to increase its holdings in Electric Power Development, an electricity wholesale company, to as much as 20 percent from 9.9 percent. The ministry was acting on the recommendation of a government-sponsored panel, which said the fund’s short-term profit horizon could hurt the company’s ability to provide electricity.

The rejection is the latest in a series of setbacks for foreign investors in Japan that have raised questions about the country’s commitment to welcoming foreign investment and business. Recently, Japan has appeared adrift in economic policy, seeming to waver between embracing the global economy, and erecting barriers to keep it out.

Also note how the Japanese government is working with these same ruling elites in Japan to lock out financial outsiders! Over and over again, I see in the news there stories of how the government and the courts work with the rich people in Japan at preventing any of the Japanese carry trade loot coming back home in the form of financial deals. Buy outs and buy ups, as they soared globally, didn't touch Japan. This dual role: main feeder of the financial where with all for financial deals while at the same time, forbidding them at home: this is the story! The Japanese poured a heroic amount of debt into the sea of corporate money. This is THE NUMBER ONE SOURCE of funds for the hell hounds and pirates!

But they could NOT go to Japan and dump this toxic pile of funny money back onto the Japanese! This is why the banking collapse in the West is NOT happening in Japan! And if anyone else figures this out, I will be happy. It is tedious being one of the few. Come on, guys! This is glaringly obvious! We saw in the news yesterday that China is now very irritated that this river of funny money is now flowing into China. They want to control this and they probably will, even if it requires brutal methods.

This latest story is more proof that the Japanese are conning the other G7 nations. This is why I think the US, to survive, must withdraw from the G7 matrix and watch what happens next. You can bet, there will be a scramble to change monetary systems! The inability of the US regulators to understand the new monetarist games is extremely irritating and I plan to write about that this afternoon.

Fearing Backlash, Toyota Quietly Strives To Be Good U.S. Citizen

Toyota Motor Corp. (7203) has been operating in the U.S. for half a century, in which time it has grown big enough to become well-positioned to replace General Motors Corp. as the world's largest automaker. But despite its massive size and deep roots there, the Japanese firm's bitter memory of trade friction is spurring it to continue making efforts to become a good corporate citizen in ways that go beyond merely boosting output.

In addition to having invested 17 billion dollars and employing about 37,000 people in the country, Toyota is working to become more deeply involved in the U.S. via social activities.

For example, the automaker supports literacy programs for the National Center for Family Literacy (NCFL), which provides literacy classes for Hispanic immigrants and others. In a class held at a Miami primary school for mothers, one of the participants said she was studying English because she wanted to do better in helping her kids with their homework. The 29-year-old Colombian immigrant said all she knew about Toyota before was that it made cars but that now she has "the best" image of the firm.

Sharon Darling, president and founder of the nonprofit group, said that through the Toyota partnership, the NCFL had provided educational services for more than 1 million families.

Toyota's contributions to the NCFL, which add up to 35 million dollars, do not generate immediate returns, but they do help Hispanic communities in the U.S., which supply the biggest labor force for factories, including auto plants, with their rapidly growing populations.

Several items from the Nikkei article: one is, they are hiring Mexican labor. Americans wondered about the flood of aliens into this nation in the last 10 years. Well, this is why! They are cheap labor! Even when the US was openly attacked in the biggest attack on our nation since Pearl Harbor, did our borders close? Or did that barn door stay wide open? It is obvious: the need for this cheap labor overwhelmed any pretense of national security. Homeland Security is a fake front operation. It's sole purpose is for harassing, intimidating and preventing political opposition to 'free trade.'

Nikkei:

Toyota has factories in 11 U.S. states. This gives the firm wider political connections than those of Ford Motor Co., allowing "it to call on 151 House members, 22 senators and 11 governors," local media said.

One of the most notable among them is Democratic Senator Jay Rockefeller, who expressed his support for Obama in late February.

However, Toyota President Katsuaki Watanabe is not ready to sit back and relax. "We have to gather enough information, including on political matters, and make proactive moves," he said.

Toyota has not been immune from the subprime fallout. Sluggish car sales in the U.S., which have logged year-on-year declines for four straight months, forcing the carmaker to slash production at two of its U.S. plants.

Failure to deal with the U.S. economic slowdown could possibly result in a political and social backlash for Toyota in the world's largest market, where the carmaker earns half of its profit. Its efforts to cope with this challenge, however, may prove to make the auto giant even stronger.

Well, they certainly are blunt! They own us! They own our politicians! Our politicians are supposed to control our Presidents. Note how Toyota is hoping Rockefeller, a member of one of our oldest and most powerful financial and political families reaching back to the 19th century, will exert influence on newcomer, Obama? Rockefeller, of course, will happily hobnob with foreign powers to impose a new monarchy on the US. Taming and controlling the complex aggregation of humanity that has poured into this continent is what the Rockefellers are all about. Note also how the Japanese will 'study' us and figure out how to impose their will on us. And they will make moves to insure that the US continues to support Japanese incursions into our financial lives. They will protect, fund and promote free trade lunatics and professors who never mention Japan when talking about trade. And they will smile and be friendly with anyone who becomes their servants so long as these servants serve THEM. Aren't we lucky?

And how do we spell 'traitor'? 'R-o-c-k-e-f-e-l-l-e-r'.

Toyota makes 50% of their profit off of us! We are a lucrative market. In return, we get some cheap auto jobs that pay less than the unions get in Detroit. Note also how the Japanese figured out that if they park factories all over the land, mostly in isolated rural communities far from cities, places where Mexicans can live in trailers, I suppose, then they get into the back door of governor's mansions and can own the political candidates for Congress. Sweet, isn't it? And this is DELIBERATE. They studied this matter well. They used sociologists to figure this out, they asked our ruling elites, how they operate. They then figured out a BETTER system which is now being applied to us.

This is why, even as our trade statistics get worse and worse and as our PROFIT statistics rot, no one in Washington wants to do a blasted thing. Indeed, they want to HELP the Japanese make this WORSE. And this is TREASON. The Japanese lock out foreign buyers and foreign dealers and we beg them to come here and colonize us. Now, on to China:

Miller talks trade in Chinese city

Landing in this megacity last night - a municipality with 32 million people, roughly as many as Canada - Toronto's mayor met for more than an hour with Bo Xilai, China's former Commerce Secretary and currently Chongqing's Communist Party chief.

He's also a member of the central government's powerful politburo.

The meeting with Xilai, and its length, are clear indicators that the Chinese are taking Toronto's week-long trade mission seriously here in the Middle Kingdom.
*snip*
Miller landed last night hoping to make more of it, beginning three full days of meetings in Chongqing, a Chinese economic powerhouse whose economy grew last year at a scorching 15.6 per cent.

The Mayor had hoped that some of that economic vitality might rub off in the way of business deals and investment.

Yesterday it appeared it had.

JNMC Jinchuan Group, a player in China's mining industry, announced it will soon open an office in Toronto on Bay St.

A Canadian reader tipped me off with this article. Yes, Canada is expanding connections with China. The Chinese are hyper-eager to do this. They study the Japanese and know how the Japanese work. They won't do the 'build factories in the nations we wish to conquer' business yet but this is only because they are where Japan was at 30 years ago. They know the route to follow. The one blazed by Japan. Japan is trying to do this to China, by the way. There is a problem: the Chinese leaders know this and they have their alternate plan for dealing with this: they plan to colonize JAPAN itself via population. Japan foolishly decided to annihilate its own working classes via starving them to death. So no more babies. China has lots of population. Eventually they will conquer Japan and replace the Japanese.

Being a dictatorship, they don't have to worry about elections. In the US, note that our 'choices' for ruler is very constricted by foreign powers that now veto anyone who displeases them. So the Israeli Jews and the Japanese get a strong say in who we get to choose and they choose total free trade traitors who believe these two nations should be allowed to conquer anyone they want. I can't wait for the Chinese to gain this level of power, it is only a matter of time. The system is set. The US has lost a lot of its political power via the simple mechanism of driving ourselves into debt. The more we are in debt, the less control we have over our political system and ourselves.

In fact yesterday's Chongqing Economic Times carried a front-page photo of what it described as more than 10,000 overseas Chinese and Chinese students, from Toronto, Ottawa and Montreal marching on Ottawa's Parliament Hill.

The photo, dated April 13, said the marchers took the streets to support "Beijing's Olympics, China’s unification, and to oppose to Tibetan independence elements’ attempt to separate China."

Chinese nationalism is rising. Every once and a while, it rears up and frightens the West and the Japanese. Then the dictators suppress it. But it is very much there. For example, the Japanese loved to throw mud into our faces by worshipping their war criminals. Each time they did this, they were spitting in our faces. They are huge believers in 'face' and the US, instead of raging in fury, would smile and bow. This pleased the Japanese rulers very much. They won WWII this way! But one day they did this and CHINA rose up in fury. The last time the Japanese overlords tried to sneak over to their shrine to worship their imperial powers, China's youth rioted. This started a huge boycott of all things Japanese!

The Japanese retreated. They don't dare even LOOK at that shrine, now. The Japanese/Chinese friendship year was the result. The Chinese brought the Japanese to heel. The leader of China went to Japan and vice versa. They acted very careful with each other. No insults like when Hu went to the US and Bush acted like a 5 year old. Note how Bush is toadying up to the Pope. This is UNPRECEDENTED. And the US thinks this is good. Of course. Catholics love the idea that our President is hanging out with the Pope and putting Opus Dei Papists on the Supreme Court so they can rule in favor of torture.

And lastly, here is a typical pro-free trade article in the warmongering rag, the Washington Post:

Marching Backward On Trade

The latest evidence of the gap between political rhetoric and economic reality is the Democratic-controlled House's decision to set aside, indefinitely, the free-trade agreement negotiated with Colombia by the Bush administration. On economic grounds, there's no reason to reject the agreement. Colombia's exports already enter the U.S. market duty-free under the 1991 Andean Trade Preference Act. Meanwhile, many U.S. exports to Colombia face stiff tariffs -- up to 35 percent on autos, 15 percent on tractors and 10 percent on computers -- most of which would ultimately go to zero under the agreement.

The tariffs dampen demand for U.S. exports by raising their price and putting them at a competitive disadvantage. Whirlpool annually exports about $50 million worth of refrigerators, washer-dryers and dishwashers to Colombia from plants in Ohio, Arkansas and Iowa. On a $1,000 refrigerator, a 20 percent tariff raises the retail price $200 in a fiercely competitive market with appliances also supplied by local firms and imports from Korea and elsewhere. (Why does Colombia want the agreement? Answer: Congress has to renew Colombia's present duty-free status periodically. The agreement would make it permanent.)

Yet, it's politically convenient to oppose the trade agreement because the popular imagery is that trade destroys U.S. jobs. The loss of almost 4 million U.S. manufacturing jobs since 1998 seems easy to explain by cheap imports or the flight of plants to Mexico, China and other poorer countries. The truth is murkier: Although this has occurred, job losses also stem from greater efficiency (fewer workers producing more goods) and slumping domestic demand (for communications equipment and computers after the dot-com bust and for housing materials and vehicles now). Nor has falling factory employment crippled overall U.S. job creation.

We can export computers to Columbia? We make computers??? HAHAHAHA. Wow. If Columbia wants to have tariffs, let them eat tariffs! The problem with free trade is laughably simple: yes, we can profit from it. But we are NOT profiting from free trade! WE ARE THE LOSERS, NOT THE WINNERS IN THIS GAME! It is obvious! What proof do these stupid lunatics who are published in the mainstream need? The yawning, giant grand canyon of trade deficits are proof enough, I would suggest.

Note also how this clown says we are losing manufacturing jobs because of robots. This is a lie. Yes, robots do more. But even robotic factories are moving away except if they are part of a Japanese scheme to politically dominate us so they can squeeze us for profits. After all, the collapse in manufacturing WAGES here is ENTIRELY due to 'free trade' and note that this clown doesn't point this out. The free trade pirates NEVER point out ANY downsides. They cannot. Note how, when Obama mentioned the bitterness within the US working community over free trade's dire effects, he was hammered for being an 'elitist' and for not talking nice!

MY GOD. The US working class should not just be bitter, they should be INFURIATED. And they should not worry about abortion or other side issues. They won't have grandchildren if they are made superfluous. With either cheap illegal alien labor or robots replacing them, what is their future? Shouldn't they be alarmed?

The fact that our major media supports policies and systems that are dooming the masses in America to annihilation or permanent poverty should chill us to the bone. Why do they want this? Why do they support the destruction of our liberties and the destitution of our people? Why do they want foreign domination?

This is a question few Americans dare ask. The international conspiracy to use US power as a means of ruling humanity is filed under 'conspiracy theorists'. This takes us into that murky, dark pool where many a person loses their sanity trying to figure out the obvious. But take it from me: the Normans who ruled Europe still want to rule and deceive themselves into thinking they can use the Asian rulers for their own ends. But the struggle for power between the Norman Crusaders, the Jewish leaders, the Muslim warriors and the vast Asian powers, a struggle that has run for 2,000 years, will continue.

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The G7 Banking Collapse Gets Worse

April 16, 2008

Elaine Meinel Supkis

As usual in a mega-financial collapse, the powers that be struggle to keep the old status quo going and this distorts the daily news flow of bad news. All the interested parties who wish for the old days to continue have joined forces right now to insure this happens. But the natural dynamics of a collapsing system will win in the end, as always. Today, we try to understand the business about LIBOR, the international banking systems set up by the British Empire to regulate global trade finances 150 years ago. It is now collapsing. The Derivatives Beast is called a 'Frankenstein Monster' and China is struggling to deal with a flood of funny money flowing to China, not to the US. The US is running ever-deeper in the red and needs this fatal foreign red ink. China doesn't want it.

Banks That Misquote Money-Market Rates to Be Banned, BBA Says

The British Bankers' Association said it will ban any member deliberately misquoting lending rates at daily money-market operations amid concern that some contributors are providing misleading quotes.

The global credit squeeze has raised concern lenders have been manipulating the so-called fixing process to prevent their borrowing costs from escalating, the Bank for International Settlements said in March. Participants have complained to the BBA, the Wall Street Journal said today, citing a person familiar with the matter. The BBA holds its annual board meeting today.
*snip*
``Libor will survive, although its credibility is severely weakened,'' Paul Calello, Credit Suisse Group's head of investment banking, said in a speech at the International Swaps and Derivatives Association annual conference in Vienna today. ``Continuing to base an enormous amount of derivative contracts on an index with credibility problems is a serious issue we must address.''

Bankers like to talk about 'trust'. But we can't trust them. This is very simple: the greater their powers to create money out of thin air, the greater the temptation to make more money out of thin air no matter how ridiculous or dangerous. It is like any addictive drink or drug: the same part of the brain is stimulated and this part of the brain gets great pleasure in getting more of whatever it is addicted to. Eventually, all life forces are focused only on increasing the addiction and the victim dies. This is why the classic picture of a banker is a sourpuss who is difficult to get loans from, not someone who gives 'Four out of Five!' their loans. The banker is supposed to be the one who says, when someone wants to buy a house, 'We will send over an assessor to check it out,' and the assessor then clips the price of the house and the bank sets the terms for closing. I have seen this happen. People quite willing to pay higher for a house but the bankers say, 'Nope.'

When the ultimate masters of the dark art of creating money out of nothing--the central bankers, go crazy and make too much money out of thin air, all the other bankers do the same. We have gone through a series of such bubbles the last 40 years due to the US central bankers cutting the connection between the dollar and our gold reserves. Every time it threatens to become a Weimar Republic-style hyper-inflation, the US has drawn back from the brink. But the political price is very high for anyone daring to save us from hyperinflation.

The LIBOR rates are set in London because once upon a time, long ago, Britain ruthlessly ruled the world using her guns and ships. All finances for world trade flowed through London. Since everyone used many sorts of currencies and had all sorts of inflationary or deflationary pressures, the people who coordinated the payment schedules based on all this elusive information would keep watch on the monetary systems of the world and reset it daily and then, even overnight. All the trading nations would look towards London for this information. This was thanks to the invention of the telegraph and the laying of underwater telegraph cables across the planet starting in the 1870s.

Even though London is no longer the center of world trade, it keeps its crown of 'Queen of Trade' via the LIBOR rate setting enterprises. But like all the other parts of the international banking system, this too is falling rapidly apart. Since all parts of this system interlock, it is no surprise that when one sector falls into a black hole and all of it vanishes, all other parts will do the same. The G7 can clearly see we are in a global, intense and historic devolutionary process here. This process won't end until all the 'funny money' created by the Japanese carry trade vanishes.

This is a dual system: inflation has settled into the driver's seat when it comes to necessities. No one can escape using fuel or eating. So these two things have sucked down increasing numbers of dollars. The asset market CREATED money. The commodity market EATS money. The last six months we have seen how the central bankers have tried their best to pour more and more liquidity into a system that was sopped in red ink. We saw how they desperately tried to bring up the value of assets so lending could accelerate. We know that we have reached a definite limit on the amount of debt that can be sucked up and now, all the money making simply does is cause inflation in commodities.

The world price of oil continues to shoot upwards. Gold is recovering from the panic that the hedge funds felt on the news that India stopped buying gold. Now, the excess funds provided in the multi-billions by the central banks is once again, seeking some way of dumping itself onto something, anything. With business going bad, it can't be put into markets. With housing values declining globally, it can't be parked in real estate. So it restlessly seeks something, anything, to inhabit.

The complaints today by the LIBOR officers that banks are now lying about their rates is yet another sign that this collapse is entering a new and even more toxic phase. Either they are reduced to lying outright which means these bankers are bankrupt or they are NOT lying and the LIBOR officers can't believe their eyes. This is QUITE likely. The ability of our central banking authorities to hide from reality is endless. They literally have NOT A CLUE as to what is going on. This is because they want to believe they are geniuses and on top of things when they are stupid and under things.

They cannot see their positions are now flipped, have reversed. This is the nature of all systems that suddenly switch. Systems out of balance always do this. They flip from one dynamic to an opposite dynamic. As an outsider, I can see this clearly. As insiders, they think, as their automobile flips upside down, 'How funny it is! The world is upside down while we are right side up!'

The G7 should convene a banking meeting. They should invite people like me. We can come with many charts and graphs and I can bring old history books. We can sit down and discuss how these things work. Maybe I can tell them about the magical side and how the Furies operate. Then they can see that the status quo is DEAD. Dead and gone! And they must now face the Brave New World that is upon us. This means the G7 have to talk to China in an honest and civilized way. Impossible, of course.

More BIS bullshit:

Money markets would benefit from increased transparency and ``trimming,'' or the discarding of extreme rates quoted by participating banks, the Basel, Switzerland-based BIS said in a study released in March with its quarterly report. The system still worked as it was meant to do when rates started rising last year, it said.

``The design worked as intended to moderate the influence of strategic behavior and changing perceptions of credit quality,'' researchers Jacob Gyntelberg and Philip Wooldridge wrote. The divergence of rates quoted for different currencies ``reflected dislocation in the underlying interbank markets more than shortcomings in the design of the fixing mechanisms.''

HAHAHA. See? They are upside down and blame the landscape for looking funny. Instead of recognizing that these high, strange rates are REAL and IMPORTANT they want to...IGNORE THEM! If they toss out these rates, all is well! Geeze. This is very much what the G7 have done with inflation statistics. Since the price of food and fuel changes, they decided not to include them in inflation statistics! Charming. Note how Gyntelberg and Wooldridge erroneously believe that the system's design is great even as it fails. This is like the guys who built a car that is top heavy and flips when making sharp turns saying, 'Nothing wrong with the design, it was the ice on the road.' I drive on icy roads. I like cars that don't flip on them.

Nomura, Daiwa Say Dollar to Climb as Rate Cuts End

Japan's two biggest brokerages said the dollar will rebound against the euro and yen by year-end as economic conditions in Europe and Japan deteriorate and U.S. interest-rate cuts near an end.

The European Central Bank will be forced to lower borrowing costs in the second half as growth in the region slows, according to Daiwa Securities SMBC Co. Yen buying isn't ``sustainable'' because the Japanese economy will cool and interest rates abroad are more attractive, said Nomura Securities Co.
*snip*
Ueno at Nomura Securities, a unit of Nomura Holdings Inc., Japan's largest securities firm, said investor purchases of the yen have been excessive and are due for a correction.

Figures from the Washington-based Commodity Futures Trading Commission last week showed the difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs - - was 43,067 on April 8, close to a record high of 65,920 set on March 25. The number is sometimes seen as a contrary indicator.

``Investors have already piled up huge long-yen positions,'' said Ueno. ``Investors are buying the yen by borrowing more expensive money abroad. It's not sustainable.''

The US can cut interest rates to Japanese levels. Since we are below the rate of inflation, it no longer mattes how badly anymore. Since the ONLY reason for this is to kill Japanese trade with us, we MUST continue this. And drop it to 0%. Then the system can reset itself. This means global depression but this is the only tool left to us since we no longer believe in simple tariffs and barriers. Since monetarism is the ONLY tool, we must destroy the dollar to destroy the unbalanced trade we have. The Japanese know this which is why they unbalanced trade using 0% interest rates. They export, no one imports. This is deliberate and vicious and demented. But either we do the sane thing and institute limits and tax importers here or we die.

The dollar MUST be cheaper than the yen due to the trade imbalance! Any attempt at reversing this dynamic creates a BLACK HOLE in the financial universe. And the Japanese are very anxious to restart this black hole! They can't wait. We, on the other hand, should be hammering them on this issue, not assisting Japan in slitting our throats. Note how the Japanese, despite obvious inflation, are doggedly hanging onto their miserable interest rates. While running record global trade surpluses. They hope to ride this out and be back on top of things in a few months. We should fight them tooth and nail in this matter. This means breaking up the G7 for the G7 is a Trojan horse designed to flood the US with imports.

Dollar Rises Versus Euro as Wholesale Prices, Factories Gain

The dollar rose against the euro for the first time in three days as reports showed U.S. wholesale prices increased more than forecast in March and New York state manufacturing unexpectedly expanded this month.

The U.S. currency advanced the most against the South Korean won and British pound among its major counterparts as futures traders reduced bets that the Federal Reserve will cut its target lending rate by a half-percentage point this month. Norway's krone touched a 28-year high against the dollar as oil, the country's biggest export, climbed to a record.

Why would inflation in the US cause the dollar to strengthen? Again, this makes no sense at all. The dollar strengthened because our EXPORTS grew! And our buddies in the G7 know this and hate this. They want the old status quo back. Very much so. I see no good end to this story so long as everyone thinks they are a united front and allies. We are NOT allies at all. Not in trade, that is. And the break up of the post-WWII alliance is grossly overdue. It needs to fall and new alliances grow. The US needs this very badly for the old status quo is rapidly bankrupting our nation.

Swaps Tied to Losses Became `Frankenstein's Monster'

Rather than dispersing risk and lowering borrowing costs as former Federal Reserve Chairman Alan Greenspan predicted, the contracts have exacerbated the debt crisis. What was intended as a way for lenders to protect against defaults spawned a market covering $45 trillion of bonds and loans where no one knows how much is traded and speculators who bet on deteriorating credit quality end up forcing that reality.

Some credit-default indexes have morphed into what Wachovia Corp. analysts led by Glenn Schultz call ``Frankenstein's monster'' because they now often drive prices in the so-called cash bond market, rather than the other way around. Fearing a repeat of losses, banks are refusing to support new indexes that would allow investors to wager on everything from auto loans to European mortgages, reining in a market that's about doubled in size every year for the past decade.

``The indices are just trading on their own account with no relationship whatsoever to an underlying cash market that's ceased to exist,'' Jacques Aigrain, chief executive officer of Zurich-based Swiss Reinsurance Co., said at a March 18 insurance conference in Dubai.

These 'markets' were simply excuses for creating a host of entities and places where the flood of free, funny money to go. A bunch of pirates can't go to the Bank of Japan for lending if they can't park it somewhere it can pay back the loans! They needed something and this was a nifty game they created. They could use the loans to make bets on systems! They didn't need to produce or run anything at all! They could simply bet on movements within other systems. A classic con game.

These idlers paid themselves billions in bonuses for these gambling operations that were economically useless. Since these gambling games had absolutely nothing to do with anything concrete nor produced anything useful at all, they could run to infinity and the game was to see if the gamblers could do this. The human brain tends towards this sort of addictive activity. NOTHING doubles every year without rapidly reaching infinity. A drop of water, if it doubles every minute, will flood the world in a year. All such systems flip when flooded. A limit is reached and then everything collapses or dies or explodes. And this is one fiscal Frankenstein that will die a messy death. And the G7 should be holding emergency meetings about this! The Bilderbergers should be rushing to Davos to yell at each other, 'What did we hatch?' Heh.

The world ruling elites who thought that at last, they found a means to make money doing absolutely nothing useful, are at fault here. Note how they refuse to act to stop this.

Frankenstein continues:

Markit Group Ltd., the London-based index provider, said banks last month shelved plans for indexes intended to allow investors to speculate on the $200 billion market for bonds backed by U.S. auto loans because of a lack of dealer support. Indexes on European mortgages and U.S. Alt-A loans, or mortgages made to borrowers a step above subprime, were also postponed.

``The last thing the securitization market needs is another no-cash-upfront instrument that people can use to knock the markets about with,'' said Andrew Dennis, the London-based head of the asset-backed debt syndication group for UBS AG of Zurich.

The last thing the world needs is more systems to park more red ink. The sea of red ink is flowing like crazy now. Far from being done, it is accelerating. Far from diminishing, even as assets in the G7 collapse in value, the flood of lending continues unabated.

China: Hot Money Inflows Coming in Fast and Furious

Monday’s China Daily reports a speech made over the weekend by a senior central bank advisor at the Boao Forum for Asia, in Hainan. According to the article, Fan Gang, a member of the central bank's monetary policy committee and someone whose concern about hot money has often been cited in this blog, said China should remain wary of hot money inflows. “China is seeing an even stronger capital inflow now, despite some nations suffering a credit crunch,” he said.

A perhaps franker assessment was then provided by Zhu Baoliang, vice president of State Information Center, a research institution under the National Development and Reform Commission. According to a China Daily article referencing the official Shanghai Securities News:

“More than $80 billion in hot money came into China in the first quarter, compared to the total hot money inflow for the whole of 2007 of around $120 billion and an average monthly amount of $10 billion (last year). So this year's hot money volume is three times last year's,” Zhu was quoted as saying.

The inflows in the first quarter have increased market liquidity, which in turn could put further upward pressure on inflation, he warned. Because of this, the Chinese government must be cautious in allowing faster yuan appreciation, he said. While faster currency appreciation will help ease domestic inflation by dampening the price of imports, it will also cause higher hot money inflows speculating on the currency's rise.

It is now attempting to flow into China. The Chinese were alert to this last August. The Japanese sneered that they would flood China with funny money. The Chinese tried using classic banking tools to stop this but they failed because EVERYTHING IS UPSIDE DOWN. Raising interest rates to stop inflation attracts the hoard of piratical buzz flies that feasts on corpses. Everyone is still able to get nearly free loans from the Bank of Japan that ignores inflation in Japan. So the funny money, far from vanishing, is still be generated! It can't flow to England, the US or now, even Europe. They are saturated. But it is flowing to China seeking a place to latch onto so it can become 'real'. These loans have to be turned into higher-interest paying loans so the guys who borrowed from the Bank of Japan can repay the Bank of Japan.

And the Bank of Japan is doing this so they can dominate world markets. This is pretty simple and is due to a grave misunderstanding about 'free trade'. Free trade is a hoax. It is undermined if a determined country prevents its own people from improving their lives or getting loans for anything. Japan has done this with great viciousness. They managed to create global inflation while managing a DEPRESSION at home. And note this: all systems flip. And this Bank of Japan inflation will flip to global depression the minute the US ceases wild deficit spending and China slams the doors shut on this flood of global funny money.

A prediction: this will happen in September. After the Olympics.

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More G7 Billious Bellowing About FX

April 14, 2008

Elaine Meinel Supkis

The G7 nations had their hysterical picnic. And they came up with a solution: order the incoming tide to turn! Like emperors and kings, they could sit on the economic shores and command the dollar to be stronger! And for the tide of money value flows to go backwards, the Japanese carry trade super-container ship must sail! And All Will Be Well as the status quo is rebuilt. And this pathetic move comes in the headwinds of world oil prices rising to $112 a barrel? And this is good news, too, according to the lunatics who advise us in financial matters! Am I crazy or are they all nuttier than squirrels in a forest fire?

The credit crisis engulfing the banking system on both sides of the Atlantic has further to run, said the vice-chairman of the US Federal Reserve.

As the US Treasury Secretary and central bankers gave warning that proposed financial reforms would not prevent a repeat of the biggest shock to the world economy since the Great Depression, Donald Kohn, of the Fed, said of the present trouble: “It is not over yet.”

His gloomy forecast about the duration of the credit crisis, delivered at the annual spring meeting in Washington of the Group of Seven leading economies, came after the International Monetary Fund had estimated that the market turmoil would trigger losses of almost $1 trillion (£507 billion) among banks, hedge funds and pension groups since last summer. Mr Kohn said: “The market is still adjusting. The turmoil has not settled down yet. It is still a very fragile situation.”
*snip*
US Federal Reserve says that credit crisis is not over yet. The G7 finance ministers and bankers agreed to implement reforms within a 100-day timetable, which would make banks set out “fully and promptly” losses and exposures to illiquid mortgage-backed securities blamed for the seizure of credit markets.

However, the policymakers were also keen to say that it was unrealistic to expect regulators to devise an early warning system that would identify the start of a financial crisis or a banking institution that was in difficulties.

Timothy Geithner, of the Federal Reserve Bank of New York, said: “If we could figure out a way to have on our desks a screen with the capacity to predict financial crises it would be terrific, but it is very hard to do. What we can do is make the system more resilient.”

The noble history of seers is long and funny. I like best the Greek priestesses. They used hallucinogenics and a lot of wit to give accurate predictions that were notoriously devilishly deceptive. Namely, the victims, always ruling elites, would rush off and do exactly the wrong thing due to their own hubris forcing them to misinterpret the forecasts. Such as Oedipus Rex's daddy, upon being told that his son would slay him, exposed him as a baby only he was raised by strangers and met dad on the road and both men being irritable fools, got in a fight over who was dominant and the son killed his own dad! Heh. When one priestess told a general that he would create a great empire, he thought he would be emperor. Instead, his mistakes created someone else's empire! And so on.

These priestesses were the guardian ancestress mothers to modern lawyers. On the other hand, economic priests go to their charts and graphs and try to make predictions and control markets. They can seem to have success at this venture only so long as the true priestesses, the ones with snakes and volcanoes don't interfere, and all is well. But when whole systems flip or undergo violent, historical changes, the ability to see into the future declines to zero. Except it doesn't! This is the crux of the paradox: the future is ALWAYS visible. Sometimes, blindingly so. And there is an easy way to see into the future: look into the past. All good priestesses know that the Three Fates are in charge of human affairs. One is the Past, anther is the Present and the third is the Future. The Past is the mother of all births, the Present is the mother raising the children and the Future goddess is Death. She rules in the Cave of Death where wealth is created and destroyed. And she has daughters, Libra who has the scales of balance and Miz Risky, the dame who likes to drive fast cars off of cliffs and Lady Luck, the elemental force of nature that determines the future of the entire universe.

The Fed also whines that they cannot devise any system that can foresee obvious banking collapses and other failures. This is PURE HOGWASH. First of all, they could hire me. I will bring my three legged stool, something to smoke and can sit in on their meetings and give them cryptic warnings. Heh. Better still, I could come with a baseball bat and hammer them whenever they forget important historical, economical or political details like not understanding how the Fed creates inflation, for example. Or how the Fed feeds wars which create inflation. Or how the Fed's fixes has created a deterioration in the US overall economic condition relative to our debt situation. 'We are going BANKRUPT,' I can shriek in a hallucinogenic haze. As it is, the Fed meetings are more like the Mad Hatter's Tea Party! The 2002 discussion of 'What is a Dollar Store' shows us, these people are utterly disconnected from reality.

If World Skips Recession, Yuan Must Be Revalued: Andy Mukherjee

Now that Singapore has done it, the big question for the global investment community is whether China will follow suit.

Responding to rising commodities prices -- especially the intolerable surge in the cost of imported food -- the Monetary Authority of Singapore last week signaled its preference for a stronger home currency.

What the monetary authority said it would do is to reset the middle point of the (undisclosed) band in which the Singapore dollar is allowed to fluctuate against a basket of (unnamed) trading partners' currencies.
*snip*
Singapore's anti-inflation stance is for the good of its 4.6 million residents and its status as a financial center; were China to do something similar, it would be for its own benefit as well as in the interest of the world community.

Can China use a stronger currency to tame the intolerable 23 percent pace at which its food prices rose in February from a year earlier? It can, but only if the appreciation in the yuan takes the form of a large, one-off revaluation.

Here it is: the eternal desire for the Chinese to save us from global inflation caused by the Bank of Japan and the Federal Reserve! If only the Chinese revalue their currency so it is much higher, then all will be well! And if Japan can collapse the yen further, a world of eternal delights will appear at the Mad Hatter's table and it will be filled with tea cups and cakes! HAHAHA. Well, there is a problem here. First: the Chinese curse, 'May your wish come true' is a curse. Naturally. Our wish for the status quo means the US will be bankrupt in a mere 10 years or less. Delightful thought.

And then there is the fact that China cannot stop American and Japanese inflationary forces! Only Japan and America can do this. All China can do is either exploit or ride through the storm created by the world's #1 and #2 economic powers. And the duality of the US/Japan financial systems is painfully obvious but nearly totally ignored. Why is this?

For YEARS I have hammered on this topic. I plowed this field over and over. Only recently has there been a dim recognition as to how the Japan fits into this puzzle. Mainstream analysts still find it very hard to understand how a nation supposedly mired in this 'depression' can be the root cause of global inflation. The idea that a nation can have a depression while having a growing world market share of wealth is unprecedented. This is why I focus on it rather than shove this salient fact aside. The truth is, the only way Japan's market share of world production can grow is for Japan to expand global monetary supplies so their MARKETS have easy money to spend on JAPANESE IMPORTS! It is pretty simple, actually.

From Safehaven.com comes this Powerpoint from Hahn:

And therefore, the G7 which is the heart of this system should address this problem. Which is why it is never mentioned. For this easy money makes it easier for the other G7 nations to overspend without penalties such as high interest rates. This is the basis of the 'we have no inflation' game we saw during the last 15 years. As global credit shot through the roof, this was based on Japan having declining prices and an asset deflation cycle. But now that is long gone. Instead of recognizing this force at work and why it has ended, the G7 simply wants to revive it! This is certainly true of Japan. Ignoring the dire effect on the Japanese workers, the ruling elites there want desperately to keep the 'declining prices at home/rising sales abroad' scheme.

So if the Federal Reserve wishes to see into the future, they can ask me. 'The future will NOT look like the recent past, it will look like the ancient past,' I will say with eyes glazed over.

Lagarde Says G-7's Dollar Shift on Par With 1985 Pact

French Finance Minister Christine Lagarde said investors haven't grasped the magnitude of the Group of Seven's shift in stance on exchange rates, likening its significance to the 1985 Plaza Accord.

``It's a strong statement which I am not sure the markets have yet fully understood and appreciated,'' Lagarde said in an interview on Bloomberg Television in New York.

This is so beyond stupid! Where do they find these experts? Oh, in bed! HAHAHA. Sleep with enough people and you rise to high position. After all, this was the ancient route. People had sex and then got to run things. Whether as husbands, wives or mistresses or lovers, the bed is a great thing, no? So here is this person claiming that by yapping about how the G7 wants the yen to be weak and the dollar strong, the euro to drop and the yuan to rise, this is like the Plaza Accords???? HAHAHA. Talk about stupid, wishful thinking!

I remember the Plaza Accords! They set up goals, limits and RULES. And the US had to do things such as...stop wild government spending. Well, the immediate thing that happened was the dollar became DEVALUED. The point was to stop imports from Japan and Germany! Both those countries went crazy afterwards, Japan had an immense bubble and Germany bought out Russia from East Germany and then, without warning or consultation, reunited suddenly! This cost Germany a lot of money but was viewed correctly as an investment in future power. The US dollar declined too much for our allies who needed to flood us with imports so it was ended by the Louver Accords. I suggest the French minster get her pretty head into a history book. Or use Google. The Plaza Accords devalued the dollar. She is referring to the Louver Accords that STRENGTHENED the dollar!

The US is finally seeing the tsunami of imports fade slightly as we export much more expensive grains and import fewer value-added goods. Some value-added goods are being exported, too, at least, from the East Coast. This is supposedly why our stock market is soaring today. But this is wild speculative fever, not sane at all.

For OIL PRICES SOARED. $112 a gallon and we think we will have an economy next year? All my long life, whenever the price of gas goes up, all energy sources go up too. And this causes inflation on top of whatever inflation the Fed is churning out and this always kills our economy. Always! We never do well when this happens. Rising energy prices force everyone to either lose profits, lose markets or lose their shirts. This is like termites in the economic house. This is ALWAYS bad news for energy consumers and NO nation consumes more than the USA.

Charts showing how US debt has grown:

House prices fall at fastest rate since 1978

House prices are falling at their fastest rate since records began 30 years ago as the mortgage lending freeze continues to undermine the housing market, the Royal Institution of Chartered Surveyors says today.

In a big blow to the government, which claims Britain is well-placed to withstand the global economic downturn, the RICS paints a bleak picture, in which the number of estate agents saying house prices rose, rather than fell, has dropped to the lowest point since the survey began in 1978.

The latest monthly snapshot of the housing market shows that 78.5% more surveyors reported a fall than a rise in house prices. The gulf has widened since February and easily eclipses the previous low of 64.5% in June 1990, when the economy was heading into recession.

Since the inflation in housing asset values is ultimately based on the existence of the Japanese carry trade flood of easy cheap credit, the end of this process will be the same across the planet. Recognizing how the G7 encouraged and enabled this crazy expansion in credit is key to ending the crisis. But so far, as we can clearly see in the news, the entire efforts of the G7 are focused on restarting this process. But as I keep saying, it can't be done. There is no infinite debt! There is no infinite bubble! Eventually the upper limit is reached and no more easy credit can be sucked up. Eventually, the ability to pay even very low interest on loans reaches a ceiling if the 'value' of the assets being bought and sold rise too high relative to income.

And since the easy money flooding the planet from Japan and funneled into the US and England has ballooned the values of properties and business deals to astronomical levels while the actual economies supporting all this have gotten weaker due to trade imbalances, we are in a new system now. The US government keeps crowing that the present system is now reversing the trade deficit is a sure sign of this change. Not that this helps us at home! This is causing INFLATION here: food inflation. So we are moving from a 'cheaper and cheaper manufactured foreign goods pouring in' to 'more and more expensive food at home as food pours out' matrix. This hammers the US lowest working classes the hardest. During all the years of bad wages and wage declines, the US workers were silent due to cheaper and cheaper trade goods. Cars, houses and toys all became 'cheaper' due to foreign labor or foreign lenders giving us easy loans.

This is gone! Now, even if US workers want more goods, they can't take on more debt. And the debt they are being offered is higher in higher in cost as 'risk'---bankruptcy---rises. Japan fed us cheap loans by not giving their own workers loans. So Japanese workers couldn't buy Toyotas but US workers could buy them at 0% interest.

This chart clearly shows how the US loosened credit standards while Japan tightened them:

Note how this affected the US. Our debts soared.

G7 fears sudden slide in main currencies

The Group of Seven industrialised nations has signalled shared concern over the danger of a disorderly slide in the dollar and sterling, following bouts of extreme weakness in the two currencies in recent months.

The warning came in a new sentence of the G7 communiqué, which said “there have been at times sharp movements in major currencies, and we are concerned about their possible implications for economic and financial stability”.

The G7 pledged as before to “monitor exchange markets closely and co-operate as appropriate”.

This is the biggest shift in the G7 language on currencies since the Boca Raton summit in February 2004. It signals the emergence of a new consensus on the risks posed by extreme currency weakness following months of disagreement between economies with appreciating and depreciating currencies.

Up to this point the US had rebuffed pressure from the eurozone to express concern about currency movements. The US government and the Federal Reserve see currency weakness as an essential prop to growth.

This news story shows how nervous our trade partners who are flooding us with cheap finance and expensive trade items are in terror. China is very happy to buy lots of food from US. Japan protects its own farm community with barriers so they are not buying so much food at all. Europe has food surpluses and is in terror of a flood of easy US food imports. The Doha rounds of the World Trade Organization cracked apart over the issue of farmers fearful of US food exporting to their homelands. So here we are, flooding the world with our food exports and at the same time, the global inflation from rising food prices as a flood of hedge fund speculators park their money there, we see a new system arising.

One remarkably like the time in the 1970s when food prices shot up after oil prices shot up! There is a connection here! Oil and food as well as gold, etc, collapsed only when the Fed decided to kill inflation via higher interest rates which increased savings. A novel idea, eh? Right now, the Fed is feeding inflation by making savings nearly impossible not to mention, encouraging hoarding.

The eurozone believes the level of exchange rates is a problem, not just the volatility, and hopes the US will eventually come round to this view. But for now European officials have decided to cement the consensus on volatility rather than press publicly for an acknowledgement that exchange rates themselves are out of kilter.

“The words are like a poem, they speak for themselves,” said Jean-Claude Trichet, ECB president.

'I thought I would never see an interest rate as beautiful as a tree..' Europe doesn't want volatility? This is repudiating Miz Risky! If they want a stable currency situation, they can base all the G7 currencies on GOLD! But they don't want this! So they think, flapping their lips in the hurricane force winds of global G7 generated inflation by the central banks will stop this madness. This is why wizards are lousy seers. They think they control reality via their words and wishes! They don't do the heavy lifting that makes events happen the way they wish. They think, all they need is to blow out the candles and wish for gifts. So instead of fixing what is wrong, they arrived at a conspiracy that MISLEADS everyone and PRETENDS the real problem is 'volatility' rather than their actions! Cute!

HAHAHA. This is like a kid who hits a baseball with his bat, it flies into a window. 'The ball did it, not me,' he wails.

G-7 Statement Fails to Convince Major Traders to Change Outlook

The concern that Group of Seven officials expressed about swings in exchange rates wasn't enough to change currency traders' outlook for the U.S. dollar.

Bank of America Corp., Royal Bank of Scotland Plc, JPMorgan Chase & Co. and Goldman Sachs Group Inc. maintained their dollar forecasts after the G-7's finance ministers changed the wording of their statement for the first time in four years to reflect the dollar's 8.5 percent decline against the euro and 10.8 percent drop versus the yen this year. The banks are among the world's 10 biggest traders.

``It's a fairly minor change to the wording and it hasn't affected our outlook for the dollar,'' said Adam Boyton, senior FX strategist at Deutsche Bank AG in New York, the biggest trader. ``If the G-7 wanted to influence the currency market, it should have gone about it in a more forceful way.''

HAHAHA. And the speculators and traders who take advantage of all this are so impressed! And of course, will happily continue their activities. They have to make a profit. They don't have to lie about this desire. They even have the cheek to suggest to the G7, who has to take charge here. And of course, all of this is moot if the US simply sets up tariffs and barriers to trade. Yes, world trade will die. But WE SHOULDN'T WORRY ABOUT THAT. We can't afford the present system. So the cure will be whatever works for us. We can't help this. The longer we wait to see if there is some other system, the more dead we will be. Killing ourselves so others can outstrip us and outwit us is stupid.

US banks Citigroup and Merrill Lynch reveal fresh $15bn loss

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

All the banks are like so many evil stepmothers trying to peddle poison apples. 'Eat this, my dear, and you will be strong and beautiful,' they hiss. But they are selling these poison apples to hell hounds and pirates? This is beyond hilarious. Either all will die or they will starve to death due to there being nothing BUT poison apples for sale! This is the 'liquidity' crisis: not a lack of lending but the fact that all the apples in the economic basket are poisonous or filled with worms. This is why we have to grow new apples and arrest all the evil stepmothers who are peddling the poison apples. See? Easy.

Nothing Special With Treasuries as Fed Has Mortgages

The dollar isn't the only casualty of the Federal Reserve's rescue of seized-up credit markets. Bond traders are finding there is nothing special about Treasuries anymore, now that the Fed accepts substitutes for government securities as collateral -- having concluded it wasn't enough to reduce the benchmark interest rate for overnight bank loans six times since September.

As recently as March 21, Treasuries were in such demand that traders were willing to lend cash at rates 2 percentage points less than the Fed's target for overnight loans if they could obtain the securities as collateral. Now, the gap is back in line with the 0.06 percentage point average in the 10 years prior to August, when subprime mortgage losses spread.

The $6.3 trillion-a-day repurchase agreement, or repo, market is a barometer of sentiment because it's where firms finance trades. A narrowing of the spread between the so-called general-collateral and federal-funds rates may suggest declining demand for U.S. government debt. Treasuries have lost 0.8 percent on average since March 20, when the central bank expanded the type of debt it would take in return for the securities to include mortgage and commercial real estate bonds.

This is not due to things improving. This recession has barely begun. The hope of all good hell hounds, evil step mothers and other poisonous critters is, 'Super low interest rates from the Bank of Japan, a weak yen and super low rates from the US will save us!' The shifts of vanishing money from one site to another continues as everyone seeks to make money as fast as possible WHILE PRODUCING EXACTLY NOTHING continues. This is called 'the Financial Markets' and this is the only thing that grew in England and the US in the last 30 years. Talk about hopeless.

China Has Scope to Raise Interest Rates, Zhou Says

China's central bank chief said there's still room to raise interest rates after six increases last year, as he tries to tame the highest inflation since 1996.

``The anti-inflation policy is a combination of both quantitative measures and price measures,'' Zhou Xiaochuan said in an interview with Bloomberg News in Washington yesterday. ``There's room for using interest rates further.''

China has allowed faster gains by the yuan and pushed bank reserve requirements to a record high to tackle inflation that jumped to 8.7 percent in February on food and fuel costs. Higher rates may slow the economy that contributed the most to global growth last year, just as the Group of Seven nations says the world outlook has weakened.

Again and again, China, the G8 entity, goes against the grain. Eventually, the yuan will be strong for it will be the world's currency. If China continues to follow classic banking principals and rules, they will dominate the earth if and only if this is connected to rising wages in their working classes, increasing the size of the middle class and expanding their economic/industrial base. They are sufficiently committed capitalists to perhaps pull this off. I hear that there is corruption in China, by the way, and this is supposed to kill this process.

HAHAHA...I have direct experience in bribing officials. No one could do a thing in NYC without doing that. Then I decided to stop. And worked with the FBI on this project. People went to prison. The US is very corrupt. Look at our election system! Note how an outsider, Obama, is being accused of being an 'elitist' by the elite! HAHAHA. It is irritatingly obvious and obviously stupid. A black man--none has ever gotten close to the White House, born in the lower middle class, is an 'elitist'. Well, our corrupt little system rewards people who can't balance budgets or tell the truth about the economy. Idiot who can't foresee obvious events are promoted. Anyone who can do sane things is either ignored or tormented by ridiculous allegations of 'elitism'.

The Inflation Solution to the Housing Mess

By JOHN H. MAKIN

The bottom line is this: The Fed could have watched a run on investment banks quickly turn into a run on commercial banks, or protected the creditors of investment banks (like the depositors of commercial banks) at the expense of Bear Stearns' shareholders. The Fed wisely chose the second alternative.

Still, the Fed's intervention has done no more than buy a respite from the crisis in the financial markets. The monetary easing I'm recommending can occur by having the Fed print money to purchase mortgages directly, or purchase Treasury securities directly. The latter is probably more desirable because it adds higher-quality assets to the Fed's balance sheet. The Bank of Japan was also forced to reflate by printing money in 2001, after two years of a zero interest-rate policy failed to lift the economy out of a prolonged recession that had moved Japan to the brink of a deflationary crisis.

Fed reflation – to slow the fall in home prices and alleviate the distress for households and lenders – carries many risks. But the alternative is to struggle with a patchwork of inadequate efforts to shore up mortgage markets, while the Fed sticks to its current tactic of pegging the fed funds rate without increasing the money supply. This, I would submit, is even more risky. It risks a severe recession that will only intensify the drive for reregulation of financial and mortgage markets after the election.

Printing money is a radical step that enables the Fed to stop pegging the federal-funds rate and start increasing market liquidity directly. In any event, there is substantial evidence that the fed funds rate has been well above the equilibrium level. One piece of evidence is the accelerating deterioration in credit markets and the real economy that ensued even while the Fed cut the rate. Even more compelling, consider the sharp widening of the gap between the fed funds rate and the yield on three-month Treasury bills.

The damn Fed fixes everything with inflation. Volker was the only one to refuse to do this. His reward was for him and President Carter to wander in the political wilderness for many years. This time around there is a major problem with inflating money to solve the inflated housing values: wages are dropping. And can't rise. We don't have unions. And no one can strike, they get replaced. So this part of the system is totally broken down. And if wages do rise, the US government will simply stop patrolling our borders like last time and let a flood of millions of illegal aliens to come pouring in. Simple, eh?

And they will do anything to 'improve productivity' which is fancy talk for 'drop wages.'

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Greenspan And Crew Laugh In 2002 While DC Burned

Click on all images to enlarge.
April 14, 2008

Elaine Meinel Supkis

The Federal Reserve released the minutes of meetings from 2002. Perhaps, some fine day, they will release the minutes of meetings the same week they hold them. This is supposed to be the 'new open style' of ruling us. With a mere 6 year time lag, we get to know what these guys say behind our backs. Lovely. The Wall Street Journal posted some snippets. One was Greenspan and his fellow conspirators making merry just as they were manipulating things to create the infamous housing/buy out bubbles that are now destroying global banking and wrecking our entire economy. Time to leave April, 2008 and go in the time machine to April, 2002.

April 11, 2008, 11:22 am
Fed 2002 Transcripts: The FOMC Laugh Track

CHAIRMAN GREENSPAN. Okay, let’s recess until tomorrow morning. I understand that this room will be secure so if you’d like to leave papers here, feel free to do so. At 6:00 p.m. we will have cocktails—double martinis and the usual [laughter]—followed by a dinner during which we will honor Larry Meyer, who is still legally a Board member until January 31 at midnight eastern time! [Laughter]

CHAIRMAN GREENSPAN. President Poole.

MR. POOLE. Thank you, Mr. Chairman. I read the report from the First District as being rather cautious or even downbeat. I must say that the view from St. Louis is a good bit more optimistic. I tried to convince President Minehan to accept a bet yesterday on the Super Bowl. I offered her a case of Budweiser against a case of lobster, and she just wasn’t interested!
[Laughter]

MS. MINEHAN. Somehow, even I know the value of the two!

MR. POOLE. I tried to smoke out her odds, so I suggested a case of Bud against a lobster dinner, and she still wasn’t interested. Then I said “How about against a lobster claw?”
[Laughter]

MS. MINEHAN. I just got over feeling good that our New England team didn’t disgrace themselves. [Laughter]

MR. POOLE. Well, we’re a little more optimistic than that in St. Louis.

MS. MINEHAN. Ned just realized that this discussion was about football! [Laughter]

MR. GRAMLICH. I thought you were talking about the economic outlook!

MR. POOLE. Well, let me comment on some of the reports from our District. Incidentally, Wal-Mart is headquartered in our District and is doing just fine, Mr. Moskow.

MR. MOSKOW. We noticed. [Laughter]

Hahaha. A bunch of jolly good old boys talking about drinking and joking with a female. The US economy which had been on a wrong track since 1974 thanks to Federal Reserve policies and eternal war mongering overspending, had fallen off a major cliff. This cliff was the terrible crisis when Congress and the President, for the FIRST TIME in over 30 years, produced a SURPLUS rather than selling Treasuries to the Federal Reserve in 1998. This catastrophe was very unsettling and had to be ruthlessly fixed.

This required a fake election that was cancelled by a very unconstitutional Supreme Court that ruled, our votes for President don't count. This astonishing coup was coupled with installing the LOSER in the election, Al Gore got the most votes, by the way. The media covered this up by either lying about it or refusing to tabulate the totals. They all worked in concert to prevent Al Gore from continuing this terrible policy of living within our means and not running up endless debts. Since the entire financial systems of the US were predicated on the US government doing continuous overruns, the urgency to get rid of Al Gore was tremendous.

Indeed, few Americans remember the fact that Al Gore was put in charge of stopping government overspending and he went through all the systems, looking for ways of doing this and was increasingly successful. Obviously, since our government overspending slowed down significantly. Al Gore's reward for this service was to be demonized. Just like Carter and Volker breaking the Federal Reserve's Weimar style inflation, anyone who halts government overspending and wild lending is hated and abused. People who are con artists are rewarded. Traitors are rewarded the most.

Post 2001, the wild tax cuts, wild wars and wild government misspending on everything under the sun made the Federal Reserve very cheerful. They could relax. The annoyances of Al Gore's activities, the warnings by Volker could now be ignored. All they had to do was to manipulate the Treasuries which poured into their bank so that they could reward their friends and empower the Republican Party by lowering interest rates so that money could flow like a wide river. Liquidity could now flood America! Time to party, dudes!

Like college freshmen on spring break in Florida, the Fed Reserve officers were enjoying themselves. Outside, in the real world, Americans were worried. The Dot Com crash hammered global trade. Japan was badly pinched. Factories in America were closing rapidly as the infamous flood of Chinese goods began to pick up speed. Japan was still the #1 exporter to America but China's star was rising rapidly, very rapidly.

Here are some charts showing what has happened after the stupid 2002 meeting:

Here is a later Fed meeting:

November 6, 2002: Enlightenment at the Dollar Store.

Cleveland Fed President Jerry Jordan tells his colleagues in about the economics lesson he learned on a recent shopping trip in Canada.

MR. JORDAN. In September I traveled to a small town that I’ve visited previously, and there were three new stores, with names I didn’t recognize, within walking distance of each other. I went into one of them and picked an item off the shelf, and there was no price label on it, so I asked the clerk how much it was. She said one dollar. So I picked up another item, a larger quantity of a similar product, and asked how much it was. And she said one dollar. I said I didn’t get it. She said everything in the store is one dollar always. I said, “cool.” [Laughter] This is price stability. But I asked how that could be. Why would anyone buy the smaller quantity instead of the larger quantity for the same price of one dollar? Expressing some frustration with my inability to grasp basic economics, she explained the quality difference between the two but repeated that every item in the store always costs the same amount.

I happen to remember the proliferation of dollar stores. Indian merchants, for the most part, brought over cheap Chinese goods which they bought in Asia and then distributed here in the West. To make things easier for themselves since the profit margin was so high, they priced everything at one dollar. At this time, Walmart had already spread over much of the nation and prided itself on wacky pricing by the penny to give the illusion of cheaper prices. Underpricing by one cent, a competitor is old fashioned but was thought to be 'new' again due to few people bothering with this by 1980, due to inflation. Indeed, in the previous decade, the talk was all about eliminating the penny just as this is happening today.

So here is the Fed, totally detached from the economic realities of the lower classes, going to CANADA and then suddenly noticing there are dollar stores! Gah! If these same clowns took the time to get into their stupid limos and drive to the bad neighborhoods in Washington, DC, they would have noticed these same stores popping up. But of course, that means going into the Inner Cities and this is totally not cool for any of our rulers. They go to great lengths to avoid this.

These dollar stores were the opening shots in the economic wars we are in today. Walmart, in response, began to ruthlessly cut prices. To do this, they also ran off to China and ceased buying American. I have a vast memory of junk. One is the 'Buy America!' campaign that Walmart made a big noise, telling us they were a patriotic store which loved to purchase from American organizations, not import stuff. This was due to the huge push by our rulers to open 'free trade' so they could move factories away from American jurisdictions, pollution laws and unions.

Published on November 4, 1987, Page 7E, Charlotte Observer, The (NC)

WALTON PREACHES BUY AMERICAN` AS HE OPENS CHARLOTTE STORE

With foot-stomping country music ringing through his new Sam`s Wholesale Club in Matthews, the shirt-sleeved founder of Bentonville, Ark.-based Wal- Mart Stores Inc. autographed an advertising circular for 11-year-old Jason Long. ``He`s the richest man in America,`` said the 11-year-old student at Charlotte`s St. Gabriel`s Catholic School, looking proudly at the scrawled signature. His silver mane tucked under a Wal-Mart cap, Samuel Moore Walton, 69.....

The stupid cowboy good-old boys who are all guns, all beer and all patriotism was roaring in our ears way back in 1987. This was a backdrop to the real nasty beginning of our utter destruction as an industrial power. Up until this point in time, the main things being shipped to America were high end value-added items such as Japanese and German autos. Indeed, much of our trade deficit was due to this. Our auto industries were already struggling as America began its great decline from being the world's #1 automotive power to where we are today. The push to offshore all our industries was noticed and under fire in the public. Walmart tried to take advantage of this by forcing American businesses to cut profits so they could get exclusive contracts with Walmart. Walton even had them upgrade factories here in this big push to 'buy American!'

Then everyone was betrayed. Sold down the river. Walmart began to lose customers to dollar stores. The ruthless push downwards resumed in earnest. The price war between Walmart's profit margin and these very successful stores forced Walmart to drop the 'buy America' campaign. Today, it is nearly impossible to find anything that is made in the USA in any Walmart store. They are one of the major funnels for Chinese goods. And all other stores followed suit.

Now, I was very aware of this process back in 1987. This is because I was at the heart of the opening of the Chinese trade with the US. Namely, a very few years earlier, in 1982, the Chinese government asked me to teach their top technocrats all about capitalism. This 'class' was rather ruthless. I taught them how to make money and introduced them to the foreign based shipping industrial leaders as well as the Indian and Taiwanese small merchant communities in New Jersey and NYC.

We set out to make money. They had to learn about plowing profits back into the parts of their enterprises that made the most money. And how to price things so it produced maximum profits versus people noticing you are profiting. This is tricky, by the way, and psychological.

Example: whenever I sell properties, I price them below the true market value by around 10%. This causes great excitement with the real estate agents who think they are getting an easy sale. Also, I put up a marketing scheme which entices interest in the local media, in the case where I showed the Chinese how this works, I got the New York Times to cover my mansion which was for sale. Then the crowd shows up to buy and we auction the property and get a 20% higher than the going rate BONUS! This is a classic way of doing things which we seldom see in real estate because people are scared and want to sell for the maximum so they have to be fought to drop, not raise prices.

This sort of thing was learned by the Chinese who were very innocent about these matters. Also, Hong Kong was turned over to China which was why the government wanted me to teach them all about capitalism. They knew that the younger Party members had better have some idea how capitalism worked in the streets before governing Hong Kong which was their Golden Goose.

The capitalist traders of Hong Kong are great merchants. And they were very suspicious and worried about the top Communist Party members who were due to take over Hong Kong. No longer, of course. Goes without saying. They all get along just fine today. But in 1982, this was not foreseen. I was very astonished at how swiftly the suspicious Communist party members I hosted, took to capitalism. I wrote to the US government, warning them, 'They figured out capitalism and LOVE it. They are very energetic and dangerous.'

But no one listens to me.

By 2002, the 'buy American' campaign was completely dead. So dead that if anyone wanted to publish an anti-free trade editorial in the Washington Post or the New York Times, they were politely told to go to hell. The Fed is at the heart of this: the offshore activities were 50% behind the end of 'inflation.' So the Fed could raise up or down interest rates to control WALL STREET.

Then there was the business of Russia suddenly selling oil to the West. When communism fell there, the world markets were flooded with cheap oil. So the other 50% of inflation was fixed by cheap oil. So cheap imports+cheap oil=no inflation with lots of easy growth. The Fed responded by making it easier and easier to lend money. When the Dot Com bubble formed, Greenspan did raise rates.

BUT NOT TO STOP IT. It is life and death for us to recall the real reasons why things happen. I watched this business like a hawk back before 2000. And wrote about it. I was living in a tent still but had internet services and wrote at the New York Times [now dead] forums, I talked about economics back then.

When Greenspan began to raise rates, it was after Bush declared, he was running for President. I mocked this and said it was a conspiracy. That Greenspan would shove the stock market off a cliff to make Al Gore look bad: absolutely. This was because the pay-off would be tremendous: tax cuts for the rich and no more regulations imposed on industry, imports or the Federal Reserve itself! Whoopee! I was furious.

As we got closer and closer to the election, Greenspan raised rates AS THE STOCK MARKET COLLAPSED! We had virtually no inflation. But he claimed he wanted to prevent POSSIBLE inflation. The very same week Bush was illegally installed in the White House, Greenspan and his fellow gangsters began instantly to lower interest rates very rapidly, claiming there was a recession. Well, DUH. Of course! But THEY created this recession! Deliberately and for political reasons. Time to go back to 1987 again to review actual newspaper articles from back then:

1987, another report: The Limited Issues Call to `Buy American'

To many of the U.S. apparel makers at the splashy event, it also smacked of a publicity stunt. After all, they said, the Limited, with more than $3 billion in revenue, has long seemed to view offshore production as a panacea (although [Leslie H. Wexner] was quick to point out that the company buys about 50% of its garments from U.S. manufacturers). The garment labels at its Limited, Lerner and other divisions offer a geography lesson in exotic places like Hong Kong, Sri Lanka and Bangladesh.

Sen. [John Glenn], an Ohio Democrat who is a close friend and skiing companion of Wexner, laid down the gauntlet in a keynote speech, challenging participants to regain their competitive edge. "Leslie Wexner wants to expand his buying in the U.S. but has trouble finding U.S. manufacturers to match (offshore producers in) quality, price and delivery dates," he said.

More such speedy turnarounds are needed if U.S. companies are to compete with offshore manufacturers, according to Crafted With Pride in U.S.A. Council, a New York-based coalition of apparel makers and unions that is spending $45 million over three years to promote American-made products. Its ads have featured such celebrities as Bob Hope and Loretta Swit.

Isn't it sad? Isn't it all pathetic? The poor unions and manufacturers here spent $45 million in that pathetic ad campaign. But they lost. Totally. I remember when Walton painted his Chinese Trojan Horse outlets with the red, white and blue. Note that today, this facade has been dropped. The buildings are clay colored. I suggested back in 2002, they should be painted bright red with golden stars.

So to go back to the 2002 meeting, note how the Fed officers are AMAZED and BEMUSED by the flood of cheap Chinese imports. GAH. These people should be tossed out, of course. Either they are too stupid to be allowed into the bathroom without an attendant or mommy to wipe their asses or they are criminals. Take your choice. I say, they are BOTH. Just like Bush Sr. who was shocked to see how Walmart cash registers worked.

Now for some more economic news stories from 2002:

02/05/02

Latest Economic Data Suggest Pullback Isn't Over

After seeing Tuesday's economic reports on factory orders, nonmanufacturing activity, retail sales and layoff announcements, some experts are worried that the U.S. economy might not recover as soon as most had hoped.

According to Mike Moran, an economist at Daiwa Securities, the majority of the data was disappointing. For starters, the Institute for Supply Management's nonmanufacturing index fell below 50 in January, to 49.6, after reaching 50.1 in December. Economists were expecting a reading of 51.8. A level above 50 points to expansion outside the factory sector, while a reading below that mark suggests contraction.

"The nonmanufacturing index seemed to be signaling a recovery in December, but there was no follow-through in January," Moran said. "This is not a big decline for the economy, but the report suggests it is not gaining momentum and advancing out of recession."
*snip*
"Consumers are spending less and business is spending a lot less," John Challenger, chief executive of Challenger Gray & Christmas, said in a statement. "Until this trend reverses, companies will have to continue to find ways to contain costs because there isn't enough money coming in."

Elsewhere, sales at chain stores fell 0.7% during the week ended Feb. 2, according to the Bank of Tokyo Mitsubishi and UBS Warburg weekly report.

At least one economist believes even the positive reports might not be enough to lift equities higher, at least in the near term. "With the stock market going down so sharply, businesses are not going to be encouraged to expand," said John Lonski, an economist at Moody's. "And consumers will become fearful of job security. You could argue that the latest slide in equity prices has diminished business and consumer confidence enough to sap the U.S. economy's newfound momentum."

Just a short 6 years ago, they worried about manufacturing output. We note with fearful disgust that today, there is NO talk like this. The entire talk from the President, the Federal Reserve and on down is all on SPENDING. Consumers must SPEND. This is the only imperative. And to spend, they need liquidity. And this is debts. The Fed has managed to usher us from a balanced budget and reduction in excessive military spending to the present situation where spending on the military is totally out of control, the Federal government is handing out free money by the fistful and the Fed is dropping interest rates faster than any time in our history in order to 'liquify' our economy.

In other words, drown us in red ink! I went through a very long digressive article the other day where we got to read the actual news about the founding of the Federal Reserve. I noted that the founders rigged all sorts of restrictions and controls so the Fed couldn't simply print money and drop interest rates to encourage wild investments and speculations. But they left one provision in the laws: 'In case of EMERGENCY'. Since 1913, we have had one 'emergency' after another. There is no end to these 'emergencies' and now all the Fed meetings are about 'managing' these things! This includes the 2002 meeting which happened when the Fed-created recession was made worse by 9/11. Note how grim they were. HAHAHA. See why I laugh all the time?

They think this whole thing is FUNNY! And why not? They are comfortable. They are relaxed. They are PROTECTED. 2002 is also when the Japanese began to build up their FOREX reserves in deadly earnest. It mushroomed rapidly, making the yen very weak and the dollar strong...against the yen. The Chinese began to build up their own, now much bigger, FOREX reserves one year later. For the same reason. And this all began the 'carry trade' in earnest, too. And via all this, the flood of red ink issuing from the Bank of Japan and pouring through the various pirate coves began in earnest as a flood of red ink Treasuries also hit. All of this was the 4% or even 1% basis for lending: the reserves of the banks. When DEBTS are considered to be RESERVES we get a dangerous system that is totally unstable.

Debts are INFINITE. They end only when they reach a black hole status of causing the true value of any denomination system to collapse to zero. This is a change over point when the money either runs up endless zeros like we see in Zimbabwe today or it simply vanishes into bankruptcy! There is NO OTHER ENDING. Increasing red ink worsens this. Period. End of story! And the FED OFFICERS KNOW THIS. Which is why their main tool for dealing with all the things I yell about daily is to lie. Lies are part of the Outer Darkness. If you build a fake reality and then believe in it, you end up in the Cave of Death. Humans who survived the horrors of the beginnings of the first Ice Ages had to couple an amazing ability to imagine other realities alongside with a ruthless understanding about harsh conditions and a deadly, ruthless reality.

This is why we have complex personalities and often endanger ourselves. Because we can do both hyper-realism alongside total fantasy, the danger of reversing these when dangerous conditions develop is very high. This is why the goddess of History laughs sardonically as She writes with her bloody pen. The US Federal Reserve is run by a bunch of clowns detached from reality and protected inside a bubble that allows them to amuse themselves while the world roars onwards. This is the real reason they love to complain, they can't see into the future.

If they want a woman who can see the future very well, they know my phone number. The FBI, CIA and Bush Jr all know my phone number. So does the media. I am a member of the ruling class, after all. We know each other in many ways except I foolishly declared war on the the CIA back in 1967. End of story. Heh. Back to 2002:

Mar. 20, 2002

Fed Holds Line on Rates, Drops Recession Warning.

The Federal Reserve dropped its long-held recession warning Tuesday, saying that the U.S. economy is growing at a "significant pace."

But the optimistic comments that followed Tuesday's meeting of the Fed's policy-making board will be lost on Central Florida, where any revival will be delayed at least until the second half of the year, new economic data show.

According to Economy.com Inc., a leading forecaster, employment in metropolitan Orlando will shrink by as many as 6,000 jobs this year. That's better than last year, when 8,000 jobs were lost, according to the state of Florida, but it's nothing like the salad days of the late 1990s, when thousands of new positions were added annually.

Back then, I was furious that the Fed claimed they 'fixed' the recession...which THEY caused in the first place! On top of this, it was already very painfully obvious that this 'fix' was RIGGED. The huge tax cuts coupled with massive Federal overspending of the budget was now noxiously coupled with opening our doors to a flood of imports with the triumph of 'free trade.' Note also that Florida was in trouble but getting 'better' as the fatal housing boom began due to easy lending via the Fed which was using a flood of Treasuries caused by government overspending. This flood of debt was called 'assets' and used to lend to the many banks that participate in the Federal Reserve system. The 'significant growth' business was the launching of inflation! And the launching of several, not one, balloons. Wall Street boomed due to OVER SPENDING by our government and EASY MONEY from the Fed! The end of this was obvious... in 2002. I wrote about previous periods that did the same stupid thing and explained how this would end badly with a much, much worse 'recession.' I wrote about the possibility of BANKRUPTCY of our nation.

I warned everyone that the plans of the Chinese, hatched back in 1984, was to bankrupt America this way. But according to the news media today and a huge number of very stupid economists, the idea that this was bad back then, was unforeseeable. Which is pure garbage. The Chinese not only could see this, they WANTED this and were happy about this! The other trade partners wanted us and STILL want us to do this but they want us to protect them from the Russian and Chinese empires, too! So this is typical of humans: wanting two incompatible things and too immature to make a wise choice based on obvious dangers.

Let's look at some more news from back then:

August 7, 2002:

Bush says he inherited recession

Bush, Cheney take advantage of revised GDP data to say economy a mess when they took office.

"Rebate checks, a rate reduction on tax day and a stimulus package helped turn three quarters of decline into two quarters of growth," Cheney said in a speech to the Commonwealth Club of California.

Bush, meanwhile, also called on Congress to make the tax cuts -- which expire 10 years from now -- permanent. "For the sake of our economic vitality, allowing people to plan, for the sake of small businesses across the country, we need to make tax reduction permanent," Bush said.

These sly little jerks! Of course, the recession began in 2000. The Fed made certain! But the EFFECTS of all this was so slightly time-delayed, the US public wasn't hammered until October. Gore was ahead in the polls until the very, very last two weeks in that election. Note how Bush and his robber barons were, like today, handing out goodies like crazy while spending like crazy. Note how, today, McCain is running neck to neck with Obama due to these same hand outs and wild overspending. Note also that Obama is being advised by Volkert and McCain is being advised by that devil, Greenspan! This is an EXACT repeat of 2002 including the stupidity of DROPPING interest rates before an election to boost the ruling party which is the GOP. Only when the Fed loses control of this sort of funny game like in a DEPRESSION, does this fail! Speaking of the devil:

March 1, 2002:

END OF THE RECESSION?

MARGARET WARNER: There were signs this week that the lagging U.S. economy may already be on the rebound. That was certainly the message Wednesday from Federal Reserve Chairman Alan Greenspan in testimony on Capitol Hill.

ALAN GREENSPAN: Despite the disruptions engendered by the terrorist attacks of September 11th, the typical dynamics of the business cycle have reemerged and are prompting a firming in economic activity.

MARGARET WARNER: Greenspan predicted that the U.S. Economy will grow 2 ½ to 3 percent this year, that inflation will remain low at about 1.5 percent, and that the current 5.6 unemployment rate will rise to 6 or 6 ¼ later this year.

If he's right, the recession, which officially began last March, would be the mildest in U.S. history, but, Greenspan cautioned, the recovery would be more subdued as well.

ALAN GREENSPAN: An array of influences unique to this business cycle, however, seems likely to moderate the speed of the anticipated recovery.

MARGARET WARNER: Economic reports since Greenspan's testimony seemed to bear out his analysis. On Wednesday the government said orders for big-ticket durable goods, like vehicles and appliances, rose 2.6 percent in January, the third monthly increase in a row.

Yesterday the government said the economy grew 1.4 percent in the final three months of last year, far more than the .2 percent originally estimated. And today, as we reported, there were more upbeat reports in manufacturing, consumer spending, and construction. Stocks responded strongly to the news the Dow Jones Industrial Average closed at its highest level today in more than six months.

Does all this mean the recession is over?

The flood had begun in earnest. When this interview happened, Greenspan wasn't raising rates, he was still dropping them. In the teeth of wild overspending by our government and the build up for more wars was beginning in our warmongering media. The need to attack Iraq was being touted and the 'recovery' of this faux recession as really a BUBBLE and this was obvious to sane reportage but that is something we don't see much of in this nation.

Greenspan's interview now turns to Meltzer who is a Fed board member:

MARGARET WARNER: Mr. Meltzer, Alan Greenspan-- again, going back to what he had to say-- he talked about the amazing resilience-- I think he called it remarkable resilience-- of the American economy, particularly after the terrorist attacks.

I'm just wondering whether you think there is something larger going on here, that our... that the recession was milder and shorter than any other one since World War II, but that the recovery might be, also -- of course, I know you don't totally agree with that, but is there anything at work-- fundamental in the American economy-- that is.. that might be evening out the swings, or not?

ALLAN MELTZER: Yes, there are two things. I think there are two things, or three, that are quite exceptional about the present situation. One is we have never seen a counter-cyclical monetary policy like the one where we've been going through. I mean, the Fed eased quickly, it eased by larger amounts than it ever did before.

Back in the 1960s and '70s, I often accused them of being pro-cyclical, that is making business cycles worse. They certainly didn't do that this time. They really responded very well to producing lots of money, lowering interest rates.

Second, we've had a lot of fiscal stimulus. The tax cuts, there are more tax cuts to come, the government is spending a lot of money for defense, new materials, and so on. They're short of some of the equipment, so there is going to be a lot of government spending that's coming along, and that's certainly going to add strength to the economy.

And the third thing, which we shouldn't forget, is that we've had this remarkable surge in productivity in this country, productivity growth did not show any signs of backing down during the recovery.

So on one side we have strong stimulus to demand, on the other side, we have strong output growth... potential output growth, because of the productivity rise. And those things are going to make for a better outcome than people expect.

'Productivity' is fancy talk for 'declining wages' and 'offshore labor.' This is why the entire 'boom' we just went through saw dropping wages for the majority of workers coupled with rancid job growth as well as a flood of illegal aliens who did the majority of work on the housing boom. Wages for carpenters, etc, dropped like a rock. Most Americans couldn't compete with this flood of illegal labor and now fewer and fewer native Americans know how to use a hammer and a saw or build a house from scratch. This also was 'productivity.' Note how the slip shod building that has resulted is showing up as cranes falling onto houses, crushing people to death, cardboard 'McMansions' that deteriorate almost as fast as sand castles, etc.

Note how, in the interview, Meltzer boasts about the very things put me in a howling rage: the flood of government spending in the red and the tax cuts coupled with huge interest rate drops. He thought this was GREAT! GADS! ARREST THE FRAUD! How dare he work for the Fed? How dare Greenspan do these things? Arrest Bernanke, too! Arrest all except for those who objected to all this and voted against doing it.

So let's go to the New York Times today. It is astonishing, how stupid the NYT can be sometimes. Today, editorial space was given to this utter idiot who will probably end up on the board of the Federal Reserve, he is so stupid:

Home Buyers Needed

By EDWARD E. LEAMER

Edward E. Leamer is a professor of management, economics and statistics and the director of the Anderson Forecast at the University of California, Los Angeles.

The only solution is for the federal government to offer a temporary 5 percent tax rebate — up to $25,000 — for first-time home buyers.

This rebate is ideal because it would go to middle-class families who thought they were priced out of the market forever and young couples who will benefit from getting a home sooner rather than later. It doesn’t bail out speculators. But by creating demand for homes, this rebate cushions the fall for everyone and stimulates economic growth.

Why collect taxes? Why bother with any interest rates? Why not run an economy on 0% interest with infinite lending? Why worry about keeping prices within reason? To fix ridiculously high prices for housing we can either bite the bullet and kiss all this fake wealth goodbye for 20 years or we can inflate the currency while INFLATING INCOMES so it all get realigned with a few extra zeros?

Only this won't work. It causes hyperinflation! So we are stuck between two horrible choices: hyperinflation or long, grinding depression. Which poison do we want? Or rather, do our rulers plan to feed us? Aside from all this, why should the government interfere with the price of housing? I once bought my first house. It was in a slum that just nearly burned down in riots! There was virtually no roof! I called my brownstone 'the CAVE.' We burned boxes to heat it that winter. I took a baby buggy into the park to collect firewood as if this were Berlin, 1945.

It was very cheap! Heh. This is what one must do. Interest rates were running at 10% and higher. But we survived. Rates did drop but by then, so many young people had been forced into bad neighborhoods, we took over. This is how the 'renovation' movement started in 1972, by the way! We saved the inner city by being forced into the inner city! No tax rebates, not help, nothing from the government. We did it ourselves using our brains, brawn and courage.

Now for some more news about the G7 collapsing banking system:

Deutsche Bank Seeks to Sell Up to $20 Billion of Debt

In the latest move by a major bank to unload unwanted assets, Deutsche Bank AG is seeking to sell as much as $20 billion of debt related to leveraged buyouts to a collection of investors that include private-equity firms, people familiar with the matter said.

Deutsche Bank would follow Citigroup Inc. in seeking to offload at a loss a big swath of debt that is clogging up its balance sheet and keeping it from making new loans. U.S. and European banks got stuck with hundreds of billions of dollars of ...

These stupid papers are the flood of red inked deals cooked up thanks to the Japanese carry trade and the hell hounds and pirates last year. It all got stuck in place when the Japanese carry trade collapsed last July. They will have to take a 'haircut' to unload these crummy bonds. Unlike government debt, this doesn't add to the bottom line. So they must be ditched! They are not 'assets'! Government bonds may not be profitable on the surface but if they are classified as 'assets' then they are very valuable as a means for making loans and thus, collecting fees. The only trick here is finding something to dump these endless loans onto. The riddle here is FIND STUPID CUSTOMERS. This is why they want to revive the overheated housing market. The hope is, the recent tax give outs, rate cuts by the Fed, and war overspending will create a NEW bubble! One that won't pop! Hooray!

The Washington Post chimes in today:

Harold James, a professor of history and international affairs at Princeton University

The United States today is clearly a different economy and society than Weimar Germany. But the same kinds of forces that blew up Weimar’s money are threatening.

First, there are persistently low savings rates, declining steadily since the 1970s. This is matched by higher rates of savings in fast-growing Asian economies and in Middle Eastern oil producing countries. The combination has produced a structural dependence on foreign capital inflows, and over recent years foreign investors have seen the U.S. as a good buying opportunity. There is a gigantic sucking sound of money flowing in. The United States accounts for about three-quarters of the world’s net capital inflows.

Second, the U.S. policy environment is extremely sensitive to downturns. American society was traumatized by the other 20th-century bogeyman -- the sustained depression of the 1930s. We are deeply worried about recession and unemployment. We are even more obsessed with the fear that financial assets in housing or securities might be lost.

He is correct except for one thing: the US has NEGATIVE savings and had them a while. A favorite topic of mine. And savings, which barely got a footing again last year are now being utterly destroyed by lowering interest rates to far, far below the rate of inflation. I had to buy gas yesterday. OUCH. $30 to fill the tank of my gas miser! I saw that diesel fuel, which I use for my tractor, etc, is an extra dollar more! So it is nearly $5 a gallon! MY GOD. Talk about effing inflation. And what did the Fed do?

Make it worse! And what is our government doing?

Attacking Iran! The NYT ran an editorial by Zev, a noxious man in Israel, demanding we launch WWIII and destroy America. He wants Iran attacked no matter what and if we won't, he will...while putting the onus on us! And if anyone is stupid enough to imagine that bombing Iran or letting McCain bomb, bomb, bomb Iran will fix our economy, they are NUTS.

Gas rationing, here we come! And we may as well rename this dump, 'Weimar USA.'

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