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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.

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