Citibank Tanks World Markets In Blackmail Attempt Against US

Long Island drunk driver ends up hitting third rail of train tracks and bursts into flames.
May 9, 2008

Elaine Meinel Supkis

All the world markets are struggling to keep from drowning in the red due to the startling news that Citibank is going to hold a huge fire sale. Yesterday, the Japanese muttered darkly about selling off nearly a trillion dollars in FOREX reserves and now Citibank is ditching half a trillion. All the other Big Bankers are trying to unload this ugly mess in drips and drabs using the new Federal Reserve Window of Opportunity™ that will accept any Tier III asset parading as a AAA Tier I property. Price of oil surges upwards so this masks the true losses on Wall Street since energy companies are traded there. And during all this hurricane and earthquake economic news, the Fed claims they are 'talking up' the dollar which is about as deluded as one can get. The banking collapse is far from over, it has really barely begun.

Pandit's Shrinking Citi

The banking giant said Friday it will sell or run off at least $400 billion of the $500 billion in assets it identified as "not central" to its mission, including $170 billion worth of marked-to-market assets in its investment banking division. The balance sheet shrinking, which will take place over the next three years, is more than double the amount analysts expected.

Vikram Pandit, Citigroup's (nyse: C - news - people ) new chief executive, is calling these "non-core" or "legacy" assets, and it's easy to conclude that he means all of the junk accumulated over the last few years of aggressive expansion into leveraged lending and structured finance at the direction of his predecessor, Charles Prince.

For example, of the $500 billion in "legacy assets," $30 billion is in highly leveraged loan commitments, another $25 billion is toxic subprime collateralized debt obligations, and $55 billion is in off-balance-sheet entities that are highly illiquid. The rest are in real estate ($175 billion) and auto loans ($20 billion).

Some of those assets are distressed and would be difficult to sell at the moment, if at all, even at steep discounts. And Citi is offering them at the same time rival Wall Street banks are shedding assets, making it all the harder to unload them quickly.

As oil hit $126 a barrel, the same crew that is trying to jawbone up the value of the dying dollar are also trying to jawbone down the price of oil. Or, failing in that, they hope to shove the blame onto someone who isn't responsible for this mess: the US government, the Federal Reserve and the American people themselves. No politician is going to say, 'I warned you not to drive SUVs and to double the gasoline tax and have severe mpg rules! But did you listen to me? NNNOOOOO.' Of course, the American public wants someone to blame, not the parties who are waging one war after another on top of oil fields. The US has worked day and night to insure that not one drop of Iranian oil makes it to the market. HAHAHA.

And we hope to drive that nation to bankruptcy. But we are the ones going bankrupt! And we deserve it.

The Arabs who are increasingly using their Sovereign Wealth Funds to buy up our systems own a big stake in Citibank and they have dropped the boom big time. Citibank is going to hold its nose and dump half a trillion or so of stinking manure right on top of global markets that can't sop up even small loads of BS. Who is going to buy all this mess? Well, only someone who has access to magic money machines, magic wands and has absolutely no personal stake in how much money he pours down the Money Pit of Hell: Bernanke. Already, Bear Stearn's dark pool of crud has been sopped up by this reckless lunatic. So why shouldn't he sop up this mess? The arm twisting will be severe.

Do we want oil? Eh? The Saudis are screaming this in our ears. If we want more oil, we better figure out some way of sopping up half a trillion in bad debts! And we will, I am predicting. The reason this made the news was the opening to the 'There is BLOOD in the streets!' screaming for the Federal Reserve to take over all this mess and give Treasuries in return. Treasuries we, the American taxpayers, must pay for in the end via either taxes or inflation or both.

Otherwise, Citibank would have dribbled this mess out as best they could, not a huge, nasty blanket announcement. And they did this on FRIDAY: just like the other times, the Fed will now meet with the Treasury this weekend and Mother's Day be Damned! They will hammer out a half a trillion dollar deal. And then the other guys holding a mountain of Tier III assets will come roaring in, demanding the same. As I have predicted in the past, we will see a multi-trillion dollar banking rescue. One we can ill afford. One that tips the US itself into bankruptcy. The only escape from this is for us to drop our military pretensions like a hot potato and run for cover, fast.

Citigroup Plans to Shed About $400 Billion of Assets

He has already announced plans that would reduce the bank's $2.2 trillion of assets by at least $65 billion, according to Susan Roth Katzke at Credit Suisse Group. Last week, Citigroup agreed to sell employee-benefit joint venture CitiStreet LLC. In April, the bank opted to sell the Diners Club International credit-card payment network and CitiCapital, a provider of leases and financing for industries including health care and construction.
*snip*
``He's carting off the non-significant operations and raising money so that he can reinvest it in the business he's in, which is loaning money,'' said Robert Olstein, chief investment officer of Purchase, New York-based Olstein Capital Management, which owns Citigroup shares.

Pandit has raised $44 billion in capital, more than any financial-services company, through stock sales and private offerings to investment funds controlled by foreign governments including Abu Dhabi.

What Citibank is saying is, they will take a $65 billion [!!!!!] haircut if the Fed takes up these assets. For if they try auctioning them all off at once in a massive bonfire of the vanities sale, they won't pick up $335 billion in hot cash. We know this is IMPOSSIBLE. Who, who, who is going to buy this junk if the Arabs are forcing this sale and they are one of the very few rich Sovereign Wealth Fund people? Not the Chinese! Nor the Japanese! There is literally NO ONE ELSE ON EARTH. If the hell hounds have access to infinite Japanese carry trade loans, they could do this but they can't because no one is lending to them at this point! Indeed, they are the ones who created this problem in the first place.

Only the #1, 2 or 3 economic powers can buy this and two of them won't. Which leaves #1, the US, as the sole bidder. We get to buy back all our garbage. All the good stuff will be kept by Citibank. All the dogs will be kenneled at the Fed. So let's call this what it is: BLACKMAIL. The news it BLACKMAIL.

Morgan Asset's Kelsoe Set to Lose Seven Funds After

The last step in James Kelsoe's transformation from top-ranked bond investor to subprime-crisis poster boy may come July 11 when shareholders of his seven funds vote on whether to dump him for a new manager.

The funds, with combined assets of $611 million, have lost an average 67 percent in the past 12 months, prompting investor lawsuits against Kelsoe and his employer, Memphis, Tennessee- based Morgan Asset Management Inc. Assets in his largest fund, Regions Morgan Keegan Select High Income, have plunged to $104 million from a peak of $1.23 billion in 2006.

The funds' meltdown followed three years in which Kelsoe outperformed peers by betting heavily on bonds with below- investment-grade ratings, trading an increased risk of default for yields higher than those on investment-grade debt. He developed what he called in a July 2007 interview an ``intoxication'' for securities backed by subprime mortgages. Then came the hangover.

American International Group Inc., the world's largest insurer by assets, plans to will raise $12.5 billion after posting its second straight record quarterly loss, sending the shares down 7.7 percent.

AIG had a first-quarter net loss of $7.81 billion, or $3.09 a share, compared with earnings of $4.13 billion, or $1.58, a year earlier, the company said in a statement. Standard and Poor's lowered AIG's credit rating after the insurer reduced the value of contracts it sold to protect fixed-income investors by $9.11 billion and marked down other holdings by $6.09 billion.

Chief Executive Officer Martin Sullivan's job may be on the line unless he stems losses from the subprime mortgage collapse and reverses a 12-month stock decline of 38 percent. Sullivan in December said writedowns from the housing market would be ``manageable.'' In February, the New York-based insurer said losses by the unit that sells the fixed-income contracts won't be ``material'' over time.

SEC to Make Banks Reveal Capital, Liquidity Levels

``One of the lessons learned from the Bear Stearns experience is that in a crisis of confidence, there is great need for reliable, current information about capital and liquidity,'' SEC Chairman Christopher Cox told reporters in Washington today. ``Making that information public can certainly help.''

The SEC is re-evaluating its oversight of securities firms after the Federal Reserve had to help rescue New York-based Bear Stearns in March to prevent a market panic amid a worldwide credit contraction. Concern that Bear Stearns was running short of cash prompted customers and lenders to desert the firm in March, forcing it to accept a takeover by JPMorgan Chase & Co.

Data on capital and liquidity will be required this year ``in terms that the market can readily understand and digest,'' Cox said in a speech today before the Securities Traders Association in Washington. The SEC already collects much of this information without giving it to the public, he said.

As we still try to probe the murky darkness surrounding the 'rescue' of Bears Stearn, we are in the middle of a much more audacious scam concerning Citibank. An honest detailing of numbers and facts is nearly impossible. We can't fathom this mess so long as all parties are anxious to not see the bottom of this dark pit. The SEC is honest in seeking some illumination. But the bosses over the SEC who are the political powers in DC do NOT want the truth known or they would be yelling about the lies surrounding simple calculations of our inflation rate or our trade problems! Instead, of all people, they are even more anxious to avoid all this. So I expect this second rescue to be manhandled through even more secretively than the Bears Stearns business.

Toyota Sees FY08 Op Profit Plunging 30% On High Materials Costs

NAGOYA (Nikkei)--Toyota Motor Corp. (7203) said Thursday it expects fiscal 2008 group operating profit to tumble 30% to 1.6 trillion yen as rising resource prices and the strong yen eat into its bottom line.

The Japanese are absolutely livid with fear and anger over the yen. And this is why today's news is also about talking up the dollar. After all, this is supposed to help the US by making oil cheaper only it has failed. But it will save Toyota! Why we are saving Toyota has to be explained later when we try to explain why investors in Bears Stearns took huge losses but the Arabs owning Citibank won't. Mexico and Venezuela are cutting oil exports to the US. Do we want to see Saudi Arabia join them? Blackmail goes hand in hand with economic black pools. The US banking system is 100% dependent upon the Japanese carry trade. And to enable this, we have to make the yen weak against the dollar no matter what! More about that later, here.

The house-price bust has a long way to go

The discrepancy between supply and demand suggests that prices could fall a lot more. By historical standards there is a huge glut of unsold homes on the market. The homeowner-vacancy rate has soared to a record level of 2.9%: there are some 1.1m “excess” houses for sale compared with the average between 1985 and 2005. Although the inventory of new homes is falling as builders have slashed their production, the supply of homes for sale is being pushed up by foreclosures.

By most measures, prices are still above the levels implied by the fundamentals. Using a model that ties house prices to disposable incomes and long-term interest rates, analysts at Goldman Sachs reckon that the correction in national house prices is only halfway through. They expect an 18-20% correction overall, or another 11-13% decline from now. But their models suggest that six states—Arizona, Florida, Virginia, Maryland, California and New Jersey, could see further price declines of 25% or more.

Citibank is giving up. Last fall, everyone pretended that all we needed was more easy money, more Funny Money™ from the Fed and the housing market would shoot up like a rocket, I and others mocked this childish dream. Incomes can't meet payments even if the rates are very low. The aggregate charges are now too high. Until incomes rise, housing is falling. Houses long ago ceased to go for 3X income. It was more like 10X income. This disparity is rock hard and won't vanish no matter what our wizards say.

And this news is what prompted Citibank to pretend to be ready to jump off the top of their Manhattan headquarters. I said last year, the Arabs would begin sending out assassins against Citibank if they didn't cough up some money. I see some energetic and frightened men wailing at Paulson and Bernanke's feet tomorrow.

As we can see from this Wall Street Journal graph, the drop in housing indices is now far, far worse than the 1990 drop. I lost a lot of money in 1990. I swore, 'I will never want to see another stupid Bush in the White House' when that happened to me. Well, ever since the clown there got in by hook and crook, I have been very pessimistic even as everyone rejoiced in the easy money for a while. The worst it was back in 1990 wa -6%. It is already below -15% and heading towards Great Depression levels.

Oil taps $126 high, ready for an over 7% weekly gain

Crude prices tacked on more than $11.17 a barrel as of Thursday, during a winning streak that began May 1. It closed out last Friday at $116.32.
Demand for oil is "outstripping supply at a drastic rate in the global picture, so despite a few weeks of positive reports via the U.S. EIA [Energy Information Administration] data, there is a general shift in attitudes," said Ryan, in emailed comments.

"A year or two down the road, we're staring at a supply/demand paradigm that is just ugly, no matter how it gets spun by pundits and policy wonks," he said.

"Too little drilling, too many restrictions, too little conservation and alternative energy efforts combined with skyrocketing global demand are going to make things look bleak 1-2 years out on the price curve," he said.

The oil news gets worse and worse. If we rush over to Iran and make some deals, we will see global oil prices drop by around 30% or more. Russia just joined the embargo on Iran in the hopes this will raise the price of RUSSIAN ENERGY another 20-50%. They are praying this embargo will drive world over to over $200 a barrel! Russia be rich! America be...hold on...BANKRUPT.

Now, I don't care how crazy Iran is, we buy oil from cruel Burma! Burma's dictators just decreed they will kill off most of their poor people and have sent away the UN food and medicine! And they are dying, those poor, poor people. But we get oil from them! YUP. We want that oil! So how is Iran different? They aren't half as bad, I would suggest. No, we want them weak. But this scheme is making RUSSIA very strong! Is that smart?

Iran has no nukes. Russia has the world's other biggest nuclear arsenal and is huge and can survive WWIII. Iran can't. So why are we enriching Russia while beggaring OURSELVES???? This makes no sense. And note that no one makes this obvious connection in public.

US Leads Effort To Prop Up Dollar

The Bush administration is leading the international effort to put a floor under the falling dollar.

The conventional wisdom holds that the Europeans, worried that the mighty euro is making their companies less competitive, prodded Treasury Secretary Henry Paulson and other group of seven finance ministers last month into signaling their joint disapproval of the dollar’s plunge. Canada has also been troubled by the strong loonie.

But a senior U.S. Treasury official says that the move actually came at the behest of the American side.

“Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability,” the G-7 statement said. Behind the carefully crafted code of G-7 communiqués, the message was clearly intended to warn markets that the dollar shouldn’t fall much further.

“The G-7 language was meant to direct attention beyond the short-term U.S. financial market turmoil,” said the senior Treasury official on Friday. The official noted that the administration expects faster growth in the U.S. and slower growth in euro zone countries in the coming months, a combination that would presumably strengthen the dollar against the euro.

Treasury officials declined to say whether they believe the G-7’s verbal push achieved its end. Currency movements are unpredictable and respond to interest rates, economic growth and other factors.

Arrest these madmen! For the last...35 amazing years, the US has tried to weaken the dollar to stop the flood of imports. But every time we start to make tiny headway, they reverse gears and save our competitors and doom us! They are TRAITORS. Or insane or both. NOTHING real is taken into account when we discuss FX markets. If reality intruded, the US would have a dollar worth less than a dime. And it will be soon enough. But only after everyone overseas unloads all their US junk bonds.

From the ALFRED series at the Federal Reserve Bank:

This Fed chart shows that the ratio of nonperforming loans versus reserves was very bad in 1990. It shot upwards into healthy territory in the 1990s. Then, after 9/11 and the Dot Com mess, it was unstable. Then, off the cliff it falls. Already, nearly at 1990 levels.

This is a very important chart. It shows not our trade balance with Mexico, China, Canada and Japan. It shows only their exports to the US. The two energy export powers, Mexico and Canada, both have rising trade in energy with us. They are very much, aside from China, our main trade partners as well as our neighbors. Note how China has started from the very bottom and has finally caught up with the #1 exporter to the US, Canada, only this last year! Japan's share has flattened but they fattened their bottom line via the weak yen. They have factories here so they don't 'import' stuff from these locales, of course. The huge spikes in the Chinese export trade are due 100% to the stupidest thing on earth: Xmas buying frenzies. Japan no longer sells us toys, they sell us Toyotas so there is less and less an annual spike. Canada's spikes are due to energy vacillations due to a host of causes from weather to manufacturing needs.

Many Americans are very aware of Chinese trade. A handful are aware of Japanese trade. But few are aware of this dual Canada/Mexico trade that is a huge volume. Ultimately, we have to grasp this and understand or we will continue in trouble here. And the latest crash boom of a major, huge banking house means we have to get our trade house in order soon. For any solution we apply to one problem pops up over here with a vengeance.

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Comments

[Michael]

Elaine,
You are making this case very well, I hope people are paying attention! One doesn't have to be a Hyman Minsky admirer (though one should be) to get it that market equilibrium requires that the massively excessive credit leveraging of the past several decades MUST AND WILL unwind, one way or another, sooner or later, with or without the Fed's cooperation, brutally or just agonizingly. There will be much suffering and blame to be passed around, as always, and you have done an excellent job of warning those who will listen. Market adjustments to credit bubbles are always unpleasant but they do work themselves out. What will send me - shotgun in hand - to dig my well by my cave stocked with food, is much more scary, and is also something you have talked about: the day China, Japan, Russia, and the PetroArabs decide to get rid of all the Treasuries and other U.S. debt they hold that is increasingly becoming worthless. On that day (or over the course of those many days) the American economy will enter a death-spiral back toward the 19th Century that almost no one (with a few exceptions such as you) seems to understand. This is not a nationalism issue; it requires no evil intent on the part of other nations to stop accepting and start unloading worthless dollars. On the contrary, in a true free trade scenario with no currency restrictions by governments (which has never existed in reality) almost none of these massive dollar reserves would have accumulated in the first place. The dollar would then FX for about 1/40th of it's current rate, treasury interest rates would be in the 30-40% range, (and we might even have much smaller federal deficits, simply because the taxpayer would revolt at creating more debt that has to pay such interest). I trust I don't have to explain what U.S. economy would look like with interest rates like that and imported goods (including oil) costing 40 times their current price. The irony is that our former "enemies" Japan and Russia, and our current "enemies" China, Venezuela and the "Terror-Supporting-Arabs" are the only ones capable of keeping us from this catastrophy by burying our increasingly worthless Treasuries under mountains (like radioactive waste). Yes, this is an argument that they are not out to destroy us (they could do that in ONE WEEK by dumping all the Treasuries on the open market). Rather, they help us push back against the natural equilibrium-seeking FX-credit forces and sustain our funky dollar, low interest rates, and fiscal and trade deficits for only one reason: to insure that their exporters can keep taking dollars for selling their oil and goods to the U.S. (their biggest customer). In other words, they're just committed capitalists. Our government actually believes that these foreigners have NO CHOICE, because the dollar is "the world's reserve currency," and there's just too much of it out there entwined with everyone's economy for them to ever dump it. That's what England thought about the Pound after WWI, too. It amazes me that such extreme disequilibrium has been maintained this long, and I'm sure it has more to run before the apocalypse of Treasury-dumping, but when it begins, run for the hills!!

[rockpaperscizzors]

No surprise about Citibank being the Enron of banking disasters. And Robert Rubin, Clinton's Sec. Of Treasury who enabled the 1999 repeal of the Glass Steagall Act of 1933 has come home to roost.

Frontline "Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant. The previous year, Weill had called Secretary Rubin to give him advance notice of the upcoming merger announcement. When Weill told Rubin he had some important news, the secretary reportedly quipped, "You're buying the government?"
http://www.pbs.org/wgbh/pages/frontline/shows/wallstreet/weill/demise.html

Fortune Mag piece on Rubin as the Citigroup director and Chair:
Robert Rubin: What meltdown?
In a talk on Wednesday, the Citigroup director said the current financial upheaval is just cyclical. And none of the blame that there was to assign went to Wall Street.
....Rubin added that politicians must face the "brutal politics around entitlement programs," cut spending and be willing to shrink the deficit using unpopular tools like higher corporate taxes.
http://money.cnn.com/2008/01/31/news/economy/rubin_benner.fortune/

Yeah, right up to the point when privatized profits disappear and all of a sudden the candy store has nothing left but fat rats. These capitalists demand their "right as gods' chosen monarchs" to demand plan B; socialize risk bailout by the US "it sucks to be you" peasant taxpayers.

BTW,he's a senior economic advisor to Hillary's campaign.

Here's an NYT adulation 'make me gag' article about "Bob" Rubin: Where Was the Wise Man?
http://www.nytimes.com/2008/04/27/business/27rubin.html?pagewanted=1&_r=1

[Richard]

I found the photo at the start of the article interesting; then when I read the first paragraph, the connection clicked.

Good choice of a photo to start your article with.

This week Citigroup, C, sold off 10.5% to re-commence the 'bear market of all ages'.

What is coming is the total dissolution of all fiat wealth; gold and gold alone is now the means of preserving wealth.

At the end of this age a Sovereign and a Seignior -- a world leader and a 'top dog investment banker' will arise to govern mankind.

[rockpaperscizzors]

Friday Dump News:

Western states rebuff plan for Italian nuclear waste in Utah
(AP) -- Eight Western states on Thursday rejected a company's plan to ship tons of radioactive waste from Italy for disposal in Utah, saying importing foreign loads would violate the group's rules.

But members of the Northwest Interstate Compact on Low-Level Radioactive Waste Management said their rules would need to be changed to allow roughly five or six rail cars of waste a year to be buried there.

The group's decision, however, doesn't mean the waste can't enter the country. A spokesman for the U.S. Nuclear Regulatory Commission, which is reviewing the import license, doubts that the unanimous vote will kill the application.

The federal public comment period on the license application ends June 10

....EnergySolutions wants to bring the Italian waste through New Orleans or Charleston, S.C., for processing and incineration in Oak Ridge, Tenn. The company then wants to bury 1,600 tons in Utah, home of the country's largest and only privately owned low-level radioactive waste dump.
http://www.physorg.com/news129530710.html

Gee, I thought Italian imports were shoes, handbags, foodstuffs, and olive oil. Americans are suckers for posh labels like Ferragamo. Just slap on a designer Italian label onto the nuclear waste and it'll be a must have.

[Elaine Meinel Supkis]

We have used Mexico and South America and CHINA as our toxic waste dumps which is why I am not angry with the Chinese over pollution, they are processing our pollution for us.

Now we will be the toxic waste dump and this is part and parcel about what 'being third world' really entails.

About this news: I will note few are as suspicious as I am but generally, anyone going backwards through my three years of blogging can see, when I make these calls, 90% of the time, they come true.

And I know the Saudi Royals and other players in this game, I grew up around them. Just like I know the Chinese leaders, up close, way up close. So I know how they think. And trust me: they are VERY aware of the temptation to cheat them and they are making counter moves right now to insure we get stuck, not them.

[GK]

Hey, I have an idea on how to deal with this.

How about we cancel the USD and replace it with a new currency, say the Amero, and get rid of our huge trade deficits with Canada and Mexico by merging them into one huge country with a new constitution.

With freedom and liberty for corporations.

And then to deal with everyone with FX outside the USS, they would get SDR (Special Drawing Rights) from the new IMF that would act as one world currency so we could have peace forever.

HAHAHAHAHAHAHAHAHAHAHAHAAHA!!

[Anthony]

btw,

I am surprised nobody has made a report yet.

1. Hezbollah is pushing away that Bush puppet gov. (m14 coalition)

2. that is why global market collapsing on Friday, and oil hitting $126.

3. Hezbollah is winning so far, with little causualties.

The middle east politics is about to be redrawn yet again.

[OC]

Except the new IMF members are China, Korea and Japan. If ME goes to China for protection, Yuan will be the new reserve currency.

As US have no manufacturing industry and having lost the reserve currency status means no food or oil unless all previous debts are unacknowledged and paid for or risk the fate of former USSR.

By the way, all those toys in the US military - they are paid for by China (their new paymaster)and the dragon will get to use them first just like what happened to former Red Army.

[Karmaisking]

Who gives a damn - the BIG news is Burma, and as an Asia-specialist I'm surprised you don't see the obvious. Whoever gets control of both the Afghan and Burma opium fields is going to make enough money to pay back Citi, Goldman, JP and all the rest. For nearly 100 years, the highest profit commodity in the world has been heroin. It is storable, with a higher value by weight than anything else in the Universe. Highest. Profit. Item. In. The. World.

The Burmese govt knows the game: "Aid" = invasion and control of agriculture. The number of Aid agencies that a fronts for intelligence organizations is INCREDIBLE. Virtually ALL of them are.

This is the BIG game now. What will the West do? What will Burma do? What will the Chinese do (who know what risks there are in allowing foreigners control opium fields)? This is HUGE right now.

[LQL]

If the House of Saud just wanted US Treasuries or even dollars, big deal. The Fed will just print more and inflation rages. No they intend to quickly convert those dollars into hard assets gold and silver and take delivery. A smart country would invest in its infrastructure, people and commodities like China. However Middle East royalty has been historically very greedy and short sighted. Now every time a Middle East leader amassed a fortune in gold and wealth somebody comes along invades and steals all of it. And this time it will be no different. The best US can hope for is to utilize our vast coal reserves in Wyoming and Montana for gas and liquid fuels in addition to electricity until we can transition to clean nuclear fusion, solar and geothermal. The US needs to pull the troops home to secure the borders and start a massive infrastructure rebuilding program for mass transportation, diversified farming, and new manufacturing facilities.

[Elaine Meinel Supkis]

Karmaisking, did you read my opium article I wrote just two days ago? The one with the lovely Asian woman arrested on Long Island for heroin dealing?

Yes, imperialism=expanding and protecting addictive drugs kept illegal for profits! And this sops up tons of inflationary dollars. Burma is a very sad, sad case. The Western media tries to blame all this on China while ignoring Afghanistan's US protected heroin.

As for SA converting US Treasuries to gold and silver: of course. All our allies we saved from the Nazis in WWII did this too back in the sixties when we started printing money to pay for the Vietnam war and the Cold War. We went off the gold standard totally because of this.

[Karmaisking]

Please forgive me. I should have realized you were way ahead of me (I only read your Money Matters blog). I didn't realize there were other sections to your blog. When do you get time to eat and sleep??? You must be an insomniac (as well as "The Enlightened One").

Bankrupt empires always turn ugly at the end. The most "civilized" nations turn into nothing but petty criminals, pornographers, primps, fraudsters and drug dealers. The British Empire started in the 1830s and kept going until WWI (and even then didn't really stop until the late 60s, when the US took over). Debt not only kills currencies. It kills moral decency and reduces humanity to cannibalism. Watch and wait.

Burma is the next step on the mad race to control the opium trade and re-establish the Triangular Trade between the West and China. If the West thinks China doesn't know what's going on they really are MAD.

Chinese proverb: Trick me once, shame on you. Trick me twice, shame on me.

If the British and the Freemasons in the US think they can re-establish the opium trade with China, they will have WWIII on their hands faster than they can say "Freemasonry, now and forever!"

[blues]

«The best US can hope for is to utilize our vast coal reserves in Wyoming and Montana for gas and liquid fuels in addition to electricity until we can transition to clean nuclear fusion, solar and geothermal. The US needs to pull the troops home to secure the borders and start a massive infrastructure rebuilding program for mass transportation, diversified farming, and new manufacturing facilities.» — LQL

You are right, LQL. Sadly, yes. The big USA gumbo pot has indeed boiled down to these dire dregs. But it's all good.

[rockpaperscizzors]

Oil stockpile a drop in the bucket
Congress is calling for a freeze in shipments to the government's Strategic Petroleum Reserve.
......Since 2001, the Bush administration has been filling the petroleum reserve, which is located in giant salt caverns hundreds of feet underground in four sites along the Gulf of Mexico. It was built in the 1970s just after the first oil embargo to help ease the shock of any future disruptions in oil supplies.

Currently, about 70,000 barrels a day are pumped into the reserve from oil the government takes in lieu of royalty payments from firms operating in the Gulf.

That represents about 0.3 percent of the nation's 20 million barrel-a-day oil habit. The Bush administration wants to fill the reserve to its full capacity of 727 million barrels and has proposed expanding the reserve to hold 1.5 billion barrels - enough oil to cover oil imports for about 150 days. Oil in the reserve currently stands at just over 700 million barrels.
http://money.cnn.com/2008/05/09/news/economy/spr/index.htm?postversion=2008050913

The MBA preznit planning for the future? What's up with that? The US oil reserves should be fully supplied, but when did the short sighted Gordon Gecko peer into the near distant future other than for greed and profit?

[Oz Observer]

Has anyone factored in the US's huge shale oil deposits in Colorado? If oil keeps increasing in price, it may become feasible to start mining the shale, what with technological improvements as well. Does this enter the equation anywhere? What are your thoughts Elaine? By the way, thanks for your articles...been reading avidly and learning a lot. Please keep informing.

[blues]

I hope to hell somebody is keeping a big fish-eye on PEAK FRESH WATER! Most of the alternative oil production technologies consume HUGE amounts of FRESH WATER. Which will peak just about when the light sweet does.

A lot of people are neglecting to keep their ducks lined up to face the realities that we are about to meet up with VERY soon!

[Elaine Meinel Supkis]

I just published an article about energy which addresses a lot of these issues stated here. Rock, thanks for the link, I found it separately but I thank you for bringing it here, anyway. Yes, few Americans know that Bush has been madly buying oil and repumping it back into the earth again. I find this totally stupid. It is because our rulers hope to start a world war and this pumping should cease.

Water: yes important as all hell, Blues!

Oz: oil shale is not a good thing. Too much energy processing it. It leads to a net energy loss and destroys too much nature in the process, to boot. We never needed SUVs and we should outlaw them. This, alone, would drop world oil prices by a goodly amount.

[Buffalo Ken]

You know the market capitalization of Citibank is $124 Billion, and yet, they are now unloading $400-500 billion in "assets". Wow. These must be some assets. I guess they are not really worth that much OR Citibank has many debts that are starting to be called in. Hmm. The times they are a changing.

[Paul S]

In the past few days, I came across a news item telling how the wheels are coming in to motion to "solve" this debt disaster. It is currently in the very initial stages, but the (corporate) Congress is planning on creating an agency similar to The Resolution Trust Company(RTC). The suspense is over; the taxpayer WILL foot the bill for Citibank, and the rest of the banking "Enronistas". BTW: only a minority of Democrats on the banking committees are going to resist this, so it isn't just Repugs who are in the bankers pockets. I watched a pretty interesting video of Senator Byron Dorgan (D-N.D.). Right there on the floor of the Senate you saw a US Senator state outright that Senate deals are done in secret and they don't take the Public interest into account. Too bad we don't have more Senators like Dorgan.

[Elaine Meinel Supkis]

The Senate is the home base for secret deals. Note who are the finalists in this election: three senators!

About Citibank: we are seeing the first claws of the Derivative Beast as it is slowly becoming very visible. They hoped it would stay invisible forever. A silly idea.

Once it becomes visible even with just one claw, the rest of it will follow eventually. This is why the secret deals to continue the status quo are totally, hopelessly insane. For the status quo can exist only if this thing remains totally invisible.

[Anthony]

That $400B citibank so called asset probably contains bunch of paper nobody wants worth 40c.

Didn't Bush try to prod the chinese to inject some money into Citi, and they refuse? Few months back I think. I guess they aren't as foolish as Bush want them to be.

Anyway, the worst is yet to come:
1. gas price still climbs
2. unemployment now starts climbing
3. states start penny pinching
4. bank refuse to gives business loan
5. stock market and commodity prices are still unstable.

no way, property price and market are going to stabilize with that kind of uncertainty

[larry, dfh]

In the extensive talk about heroin and opium here, what was not considered is the process for converting opium into heroin. This is most likely not being done in Afghanistan nor in Burma. Nor in Appalachian 'meth' labs. I have long thought that the overthrow of Aristide in Haiti was to control a world opium trans-shipment/conversion point. That would help explain why the French were so involved in the coup, as Marseilles used to be the place where opium was converted. Did Colin Powell learn the opium ropes while in Viet-Nam?

[Karmaisking]

Excellent point. I was wondering where the conversion point would be. Needs a totally corrupt government, little international or media supervision, good transport links, reasonably close to drug companies/technicians. Haiti, Panama, Hong Kong, Taiwan...they're all good candidates. Transport from Afghanistan is hell though. Where in the Middle East could you convert it? You need to convert it as quickly as possible, as transporting heroin is so much easier than black mud. I've been thinking about this myself, but still no answers.

If I was mad, I would start putting heroin derivatives in food aid to Asia. Get them to develop a taste for it.

But then I'm not mad.

Oh...on a brigher note...Happy Mothers Day Elaine. I know you're trying to be "Mother to the World", and many, many of us are misbehaving. Karma is real however and I'm quietly confident the mad will die and the good will survive. Just not in this generation. Most of the current generation will die of starvation. I'm trying to be optimistic but the facts are the facts and arable land is arable land and bees are bees.

[Elaine Meinel Supkis]

Former Warsaw pac states and places like GEORGIA which are near Afghanistan and have dictators needing lots of cash. The Russian Mafia is the modern movers of this stuff, I would suspect.

[Paul S]

I'm a lttle confused here--as I frequently am, about any number of things. But my question is, behind closed doors what do the movers and shakers--the "Enronistas"--think all this is going to wash out? Do they think that they can dump this whole mess on the "it sucks to be us" taxpayers? Do they really think the Chinese are foolish enough to eat bad paper to save the good ol' USA? Do they really think they are so much more clever than everyone else they can con their way through this mess? Or, more likely, INHO, is this deal is already wired so they aren't sweating it? And they probably assume that whatever disaster strikes, it won't affect them. I mean, unless they are completely out of touch with reality to think that they are geniuses and everyone else is in awe of them? I may be wrong, but the Chinese and the Saudis do not strike me as the most gullible folks in the world. I don't think the Saudis even like us: 9/11 was caused in part because we infidels were on their sacred land. What's going on as I see it, it's like a fixed boxing match, where the winner is going to carry the sap opponent into the 8th round so the winning boxer gets a bigger payday.

[PLovering]

Illegal drug trafficking is a $500 billion business (UN Report). Illegal drugs finance shadow governments around the world.

It is no accident that 80% of political campaign contributions come from 4 states: California, Texas, Florida, and New York.

[Elaine Meinel Supkis]

Correct.

[Royal Dutch]

Correction, 1 Trillion.
http://www.deepblacklies.co.uk/gangsters_paradise.htm

Now, translate that with fractional reserve banking.

[Paul S]

I was thinking about the 3 Senators who are our current candidates for President. Think back to earlier in the Dem. campaign this year. Can someone tell me WHY Joe Biden and Chris Dodd were in the race? We should skip the explanation that they wanted to be President. Did they even campaign or just show up and act as deflector shields for Obama and/or Hillary? Talk about inbreeding. Then there was Fred Thompson--a Senator--on the Repub. side. Our method of choosing a President has a rotten smell to it. A rigged 'game' that's getting more and more obvious. I predict 'Dubaya' will a: bomb Iran and b: greese the skids for the taxpayer bilout of his friends on Wall Street--in that order. Bush will time all this with an eye on the upcoming Presidential election. His hope will be that Patriotic fervor over Iran will stifle any scrutiny of his rescue of the bankers. Not that our corporate media would cover the story anyway. Any bets on whether 'Dubaya' cancels the coming Presidential election? Just an observation: I think Biden should stop wearing such expensive suits. He looks more like monied gangster than distinguished Senator.

[Elaine Meinel Supkis]

In the great movie, the Godfather, Michael's fiance is asking him why he can't be a Senator and instead, is becoming the Capo. She says, 'But Senators don't kill people,' and Mike stares hard at her and says, 'Now you are being naive.'

[Paul S]

Elaine: :) Good one.

[Ed-M]

There is no way the playaz will be able to dump the whole mess on the "it sucks to be us" taxpayers. It will cause exactly what Michael said in the first post is going to transpire once the most esteemed foreigners (gotta get used to it... no more American Exceptionalism except as a basket case like Zimb.) are cognizant of the extent of our troubles. Do those pirates REALLY THINK we can pay even the interest on $500 Trillion+ in derivatives plus all the other debts? At 30-40%, the interest on the derivatives beast alone would be far greater than the total annual gross economic output of the planet!

[DeVaul]

Good point, Ed-M. How could we even pay the interest on a 500 trillion debt?

The money is already gone and the game is up, but only the insiders know this. I too would love to hear their conversations in hidden quarters about how they plan to skip out on the mess they made.

I suspect some will be successful and others will be hanged, and the difference between them being only a matter of luck.

I don't think anyone on the Titanic had an escape plan.

[Elaine Meinel Supkis]

The Derivatives beast represents money that does not exist. The hope of the gamesters who created this monster is, it will NEVER ever see the light of day.

But if it does, it will destroy the entire financial systems of the world. This is why the central bankers are in total hysteria and pouring 'liquidity' like crazy all over the place; this keeps the interest rate swap Beast which is the biggest part of the Derivatives Beast, at bay.

Absolutely everything is predicated on the myth of 'cheaper and cheaper loans' which are from 'no inflation.'

[Christian W]

Craig Murray has written an interesting article on Afghanistan and the Opium trade:

http://tinyurl.com/5hz2hd

[PLovering]

Since Elaine likes the historical prospective,

Check Opium In China:

http://www.useless-knowledge.com/1234/jan/article129.html

[Royal Dutch]

Be rational here for a minute, we have been fighting a war for what? 6 years? The military is wore out. We are not going to attack anyone like Hitler. I think Elaine is wrong, I believe her derivatives beast will show its ugly head, it will be taking bids on who wants to run the US as a slave nation.New management will try to accomplish this, by liquidating the uncooporative. One more note with the industry that has left the country we will not crank out B-24 bombers out of willow run this time.

[GK]

How closely involved do you think the Yakuza are with the Japanese Carry Trade?

http://cryptogon.com/?p=2558

The Japanese National Police Agency (NPA) estimates that the yakuza have almost 80,000 members. The most powerful faction, the Yamaguchi-gumi, is known as “the Wal-Mart of the yakuza” and reportedly has close to 40,000 members. In Tokyo alone, the police have identified more than 800 yakuza front companies: investment and auditing firms, construction companies and pastry shops. The mobsters even set up their own bank in California, according to underworld sources.

Over the last seven years, the yakuza have moved into finance. Japan’s Securities and Exchange Surveillance Commission has an index of more than 50 listed companies with ties to organized crime. The market is so infested that Osaka Securities Exchange officials decided in March that they would review all listed companies and expel those found to have links with the yakuza. If you think this has nothing to do with the United States, think again. Americans have billions of dollars in the Japanese stock market. So U.S. investors could be funding the Japanese mob.

[Paul S]

For those who like bad news piled upon bad news: check out on YouTube (or elsewhwere) the videos of David Walker. Walker is the former Comptroller General of the GAO who is warning us about Social Security and Medicare. Summary of his message: we are WAY overextended re funding of these two programs and will--likely--never be able to meet the needs of the Boomers when they retire. By 2040,we will have barely enough revenue to meet the interest payments on our debt. What is it about our ruling class? Do they just assume it is their birthright to bankrupt whatever they touch? And: here's how they "solved" the "S and M" crisis. A small group, mostly Senators but Gingrich was also there, met--in the dead of night-- at Andrews Air Force base to fix the problem of Medicare. Their solution? Big cuts in benefits and and just as big increases in out of pocket expenses for recipients. You won't read about this in Gingrich's "contract" with America. What is it about Republicans? Do they have to pass a slime test to be a leader in the Party? How long has it been since Gingrich was in Congress? Didn't he leave Congress in disgreace? And why does ANYBODY listen to him? And oh yes. The current Bush, "Dubaya",signed into law a prescription drug benefit to Medicare. This is going to make--to get right to the bottom line--the Medicare funding issue much, much worse. But it DOES make for a good photo-op and that's the important thing. I bring this up knowing this isn't a Social Security or Medicare forum. I bring it up to illustrate how "our" elected officials solve problems and how they will solve the Banking problem: with secret meetings at places like Andrews Air Force base done in the dead of night with slimeballs like Gingrich deciding the solution to the problem. Chairman Mao had it absolutely right. Mao said that when the US abandons its moral and ethical code it will cease to be a power in the world. Mao knew that our value system, our sense of fair play our ideas about honesty and integrity were what made the country strong. Nowadays, we have too many people who think it's okay to screw the other guy as long as you get away with it. Hence the downward spiral to serfdom. It'll be an ugly crash.

[supra shoes]

Cons - There have been some complaints by people who claim that the shoe can be destroyed easily. This is seen after vigorous activity.