May 12, 2008
Elaine Meinel Supkis
As the Bank of China raises the reserve ratio for Chinese banks, there is a massive earthquake and Mother Nature, which sent tornadoes into the US and a huge typhoon into Burma. The costs of these catastrophes will stress global banking systems even further, of course. The looming earthquake that will rend California will, like the ones in Asia, create further stresses. China is, unlike the US, seriously trying to grapple with inflation and is using classic methods to do this. But the US persists in pretending inflation is all a psychological matter and it is OK to have interest rates very low and bank ratios at laughable levels while creating more Funny Money™ via that ever-widening new window installed in the Fed bank vaults. So today, we examine the most recent BIS report about all this.
China Raises Bank Reserve Ratio as Inflation Surges
China ordered banks to set aside more deposits as reserves for the fourth time this year after inflation accelerated, approaching the fastest pace since 1996.Banks must park a record 16.5 percent of deposits with the central bank, up from 16 percent, the People's Bank of China said today on its Web site. Consumer prices rose 8.5 percent in April from a year earlier driven by food costs, the statistics bureau said today.
The increase will freeze about 208 billion yuan ($30 billion) in the banking system, helping to cool the world's fastest-growing major economy by restraining lending. A 7.5 percentage point increase in the requirement since the start of last year has failed to stop lending growth that's helped Chinese banks to record profits.
``The central bank needs to do more and do it sooner rather than later,'' said Kevin Lai, senior economist at Daiwa Institute of Research in Hong Kong. ``The reserve requirement is not sufficient to curb inflation.''
China has been hammered by Mother Nature lately. The severe winter storms this year laid waste to southern agriculture as well as paralyzing a good part of the country for a number of days, collapsing roofs and damaging equipment. Today's massive earthquake felt across nearly all of China has killed possibly thousands of people. Perhaps 900 children in a middle school are trapped or dead in rubble. It breaks our heart to hear this news. The agony of the mothers and fathers frantically seeking their loved ones! Mother Nature is the ultimate ruler of this planet. We struggle to control or contain Her but this can be swept aside contemptuously by her vast powers which is why we must understand the intersection of life, death and reality when we discuss anything here at Culture of Life News. For one can't appreciate things unless one recognizes that we control only a small part of our own lives.
China has huge reserves. Both human as well as monetary. The US central bankers and the international banking community that plots day and night, how they can take over all the planetary financial systems, have been telling China for the last three years, they don't need big reserves. The US has run entirely on red ink since the Vietnam War and intends to continue this for the foreseeable future. The international bankers even claimed there was this fabled 'savings glut' which had to be fixed by the US borrowing epic sums. Of course, banks can lend any amount based on any reserve ratios including -0%. So there is no need for this 'savings glut' to allow wild lending.
China, with a memory of a long history of bad years interspaced with good ones, has striven to build a secure base for when there is need due to the malicious nature of Mother Nature. Japan is in the same boat and note that they, too, have huge reserves. Also, this terrible earthquake in China is a stark reminder that we cannot ignore the coming San Andreas event. Obviously, the entire Pacific rim is under tremendous stress. We had a fairly large quake in Japan last week and now a big one in China. And a volcanic eruption in Chile. I cannot fathom how the US plans to pay for rebuilding the highway, water, energy and public service systems in California if the middle section of the San Andreas shifts northwards by 45-60 feet in one second! Impossible.
Lack of foresight coupled with a refusal to take responsibility for all systems characterizes the US mind set. We seem to have this childish faith that we can rebuild or renew things simply by waving a magic wand and creating enough Funny Money™ to take care of all things. The Bank for International Settlements which was set up to deal with both German reparations and US loans to France and England after WWI sponsors papers and holds meetings concerning their ongoing efforts to explain and control all banking across the planet. They, like the Fed's regulators, believe that if they just control the players in this international game of money creation, they can increase the money supply so governments and businesses can expand and increase debt levels infinitely. With the one proviso, that there be little inflation.
As we see in the news today, international inflation caused by wild money creation is hammering China who has had the greatest growth and the biggest expansion of all the nations on earth. China now has to deal with the global money supply flowing into China like the Yangtze river. It is flooding the plains now and it threatening people's lives in China just like winter storms, spring floods and earthquakes. China has sopped up a lot of this overwhelming flood of dollars so far but now can't do it fast enough since the bankers in the West have turned on the taps full blast.
Globalisation and the determinants of domestic inflation
by William R White
AbstractThe remarkable stability of low domestic inflation in many countries requires explanation. In this paper, a number of competing hypotheses are evaluated on a stand-alone basis, and all are found to be inadequate. This includes the view that this outcome has been solely the result of more effective disinflationary monetary policies. However, a combination of these hypotheses (including a significant role for increased global competition) seems to provide a plausible explanation, not only for continuing low inflation, but also its
coexistence with rapid growth and low real interest rates. Unfortunately, the analysis also leads to the conclusion that rising inflation, unwinding financial imbalancthe welcome stability seen to date.
All global charts showing inflation show it shooting upwards when two things happened to the world's biggest economy as well as global empire: the US lost the Vietnam War to the communists and was chased out of all of Southeast Asia and wars in the Middle East between Israel and its neighbors, the oil boycott and then the overthrow of the Shah of Iran and the Iran/Iraq wars caused energy prices to shoot up as oil deliveries were severely disrupted. It wasn't mere oil price hikes but the RATIONING that created inflation to ripple through the world's markets. The US ran up giant debts to pay for the Vietnam war and this was coupled with a tax revolt at home as workers rose through the Income Tax system into higher and higher rate brackets while taking home pay that bought less and less for the dollar. The usual method of all countries to pay for wars via either higher taxes or inflating away the value of the currency so old debts could be paid off with cheaper dollars collided with each other.
Unwilling to take a hit one way or another, the American workers began a race against their own central bankers and the government itself. As the bankers and the government conspired to inflate away the debts, the workers upped the ante and we got raging inflation. All of this, of course, was blamed on the workers. The government...TO THIS DAY....refuses to change income tax rates to reflect inflation and instead, all tax 'reforms' were aimed at flattening rates so poor workers pay the same rate or more than the richest 1%. This malicious game has created a creature we call 'budget deficits'.
This grew fiendishly over the years since 1970 to the point, we are now approaching $10 trillion in debt. Nearly all government debts are paid to the bankers in the form of 'Treasuries' so this flood of an extra $9 trillion into the Federal Reserve who holds the vast majority of Federal Treasuries until recent years meant the power of the central bank consortium has grown vastly greater. The Fed also has declared these debts to not be liabilities but rather, ASSETS. So the faster the Treasury bonds pile up at the Fed, the more the Fed can lend to its fellow bankers. Since the Fed can unilaterally decide what its reserve ratio is, it can ignore even this 'asset base' and simply make up loans if necessary. We are rapidly approaching this very thing as the Fed frantically lends increasing amounts to bankrupt bankers pretending solvency.
Back to the delusion of stability and lack of inflation since the inflation peak of the early 1980's: The world price of oil rose relentlessly from 1974 until 1984. Interest rates set by the Fed lagged far behind the real rate of inflation until Volcker got fed up and crushed inflation via ruthlessly raising rates almost to 20% and thus sopped up a huge amount of excess dollars from the previous banking inflation due to easy lending below the real rate of inflation.
This and the Germans beginning to buy Soviet oil and gas as well as the North Sea oil bonanza and the Alaskan oil finds, led to two things: the breaking of the back of OPEC's pricing powers and the flooding of the world with cheaper energy. Thanks to these things, even if a desperate Saddam crushed under the costs of financing his failed invasion of Iran, when he invaded Kuwait and disrupted oil deliveries, the price hike from all this was very limited in time. But even so, it was a shot across the prow of the planet's banking systems. For this small event that caused oil prices to go up only a little bit caused a global recession!
The utter collapse of Russia saved the Western bankers. The taps were turned on in Russia and energy poured out at basement level prices. Russia was bankrupt and in the grip of the international bankers who gleefully declared an end to inflation. And they assured everyone, inflation had NOTHING to do with energy. This paper by the BIS is classic: the connection between inflation showing up on everyone's ledgers is very much connected to the price of energy. Let's first look at some of the graphs in this latest BIS report to understand what is possibly going on:
CLICK ON ALL IMAGES TO ENLARGE
This chart shows how worker's wages, in particular, at the bottom, has been ruthlessly pushed down into negative territory via the nifty tool of allowing a flood of illegal aliens come in and displace the citizens. The US is not alone in this matter. As the Soviet Union collapsed and Western European powers desired a flood of cheap labor, they enabled this to happen quite legally, in the European Union. Like in the US, wages at the bottom collapsed. Wages of all workers fell relative to inflation.
In Japan, wages were dropped by offshoring jobs to China and Southeast Asia. So we had a DEPRESSION in wages of workers while at the same time, INFLATION in the money supply which has grown.
Note how the money base, credit and money supply all began to shoot up in...1995. And government debt grew, too. Here is a chart from the Dallas Fed from 2003 that clearly shows, Japan dropped its rates to 0% in 1995:
It is a constant irritation for me, seeing the pig-headed refusal to draw obvious parallels or connect obvious events. The author of this BIS BS report has nothing about the incredible 0% Japanese interest rate regime which incidentally, began right at the same time house prices, equity growth and all monetary systems took off like a ROCKET straight upwards! What is supposed to stop ridiculous inflation with bidders? INTEREST RATES THAT ARE HIGH ENOUGH. If you have a 0% down, 0% lending and 0% payment of principal on loans, you get 100% inflation! If one half of this system goes to zero, the other shoots to infinity. It is pretty simple. If everyone remembers this, they can then stop runaway inflation.
More BIS graphs:
Thanks to the Japanese exporters crushing wages in Japan, claiming falsely, there was no inflation, the price of manufactured goods in the West dropped. Japan invaded many domestic markets and crushed the competition. Profits soared due to the super-cheap yen compared to the 'strong dollar' regime we all saw back in the 1990's. Remember when the euro was launched on a 1:1 parity with the dollar? It fell by over 18% in one year. Consumer prices in exporter countries relentlessly climbed from 1992 onwards and is still climbing. But prices of imports diverged greatly when China entered export markets aggressively. Part of this was due to the Japanese industrialists moving their factories to China and then exporting their production to the US. This masked Japanese benefits from 'free trade' and gave Americans the erroneous idea that the crafty Chinese were hammering us even as Toyota, for example, surged to become the worlds' #1 automaker, just for example.
Prices of many Japanese and American products fell drastically since ALL the global corporations were exploiting cheap labor and the free trade mania. Note that all the remaining politicians who are running for President are pro-war, pro-deeper government debt and pro-free trade expansion!
What a cruel graph this is! The lack of 'inflation' since 1980 has been at the expense of the workers! Not only have wages fallen with 'inflation' but also the SHARE of the economic pie workers get. A serious collapse. In the US and Europe, this has been offset by the bankers handing out easy payment loans. But this process is ending. Like with Japan that sopped up all lending for 20 years in a huge real estate bubble, Europe and the US and the other 'Western' nations have done the exact same thing. Today, Japanese workers have had their wages crushed, the price of all things needed to stay alive have seen tremendous inflation, and even with near 0% lending via the Bank of Japan, the workers can't afford to go into debt at all.
In the West, it will be the same. Either the value of all assets held by the middle class has to collapse or lending has to be so open-handed, inflation takes off. Even the periodic infusions of Funny Money™ by the central bankers are instantly translated into commodity inflation.
I just got a call from a man who deals with scrap metals. He reports the price fall in metals is over and the price of aluminum has nearly doubled to 70¢ a pound compared to around 35¢ last month. The 'stabilization' of the dollar pushed by the G7 bankers caused the commodity markets to contract briefly. The 'strong dollar' is supposed to be the dam that holds back this flood of Funny Money™ spilling over into places where public unrest is greatest.
The BIS inflation report:
Prior to the period of financial turmoil that began in August of last year, there were many financial and economic series in many countries that had deviated significantly from historical norms. Consistent with the premise of this being a credit- (or liquidity-) driven phenomenon, the prices of virtually all illiquid assets were driven to record highs. Consider the associated “conundrum” of low yields on US Treasuries, low spreads on high yield and sovereign bonds, high house and equity prices and record prices at global auction houses for antiques, stamps, fine wines and other collectibles.Moreover, it was also the case that the price of buying liquidity (rather than selling it) also fell significantly. Implied volatility in many markets had fallen to record lows by mid-2007, as the costs of buying insurance against all sorts of extreme events plummeted.47 While it is true that valid, idiosyncratic arguments can be put forward to help explain developments in each of these markets individually, applying the principle of Occam’s razor would seem to have some merit here. And to these financial imbalances must be added some economic ones.
Most notable, the household saving rate has fallen to very low levels in a number of countries as easy access to credit has fostered more borrowing and rising household debt levels. Closely related, the resulting increased demand for housing services has led to a boom in construction which has pushed up that sector’s share of GDP well above normal levels.48 A number of the countries most affected by these phenomena have also been running large current account deficits, as described above. Finally, while corporate balance sheets have generally improved in recent years, many companies that have recently been merged or acquired have been left with very heavy debt loads.
While these credit-driven imbalances might or might not reverse, history indicates that they often do. One possibility is that the reversal begins in the financial markets with a so-called “Minsky moment”.49 Another is that spending spontaneously falters as some catalyst forces borrowers to reassess their exposures to debt and debt service. Where the reversal first manifests itself is less important than the character of the reversal itself. In the same way that real and financial forces interact in the expansionary phase of the credit cycle, they are also likely to interact in the contractionary phase. For example, as seems to have been the case in recent months in the United States, a sudden loss of confidence in credit markets could lead to a tightening of credit conditions that could reduce spending and lead to an economic slowdown. In turn, this would lead to more credit losses materialising, which could further lower confidence, further inhibit credit growth and so on. And simultaneously, a fall could occur in the prices of previously overvalued assets (like housing), reducing the value of collateral to back loans and, in extremis, increasing the probability and expected costs of bankruptcies in both the real and financial sectors.
History also teaches us that the economic losses associated with downturns of this nature can be very great and the recovery time can be very long.50 Should nascent inflationary pressures turn to deflationary ones, under the influence of a sharp global slowdown, this would not only enhance the seriousness of the problem (debt deflation issues) but also put constraints on resolving it (the zero lower bound issue). This immediately raises two policy questions; how best to respond to such prospective developments, and how to make reforms to ensure that such difficult situations could be made less likely in the future.51 Answers to these questions are, unfortunately, beyond the scope of this paper.
We will learn the obvious answer to all these questions in due time, alas! The writer should have read the paragraph I highlighted and said to himself, 'Oh no! My entire report is pure GARBAGE! I have to start over! I have to explain why ALL the low-inflation, non-Japanese nations had a Japanese-style housing boom, increase in debt, etc! And the fact that ALL the nations with 'no or little inflation' ended up with NO SAVINGS or negative savings! And huge, huge inflation in housing! And all the businesses got dumped with trillions in debts that DIDN'T GET USED FOR EXPANSION! Wow!' Then this poor man could begin to see the truth. This would mean, he would write a frightful report chastising the central bankers of the BIS. He could write a report accusing them of enabling and promoting all this. He could then writer about who they are and their history of messing around with the planetary banking system and why this caused the Great Depression and endless wars!
And then he would have to live in a tent or the Paris sewers and change his name or join a revolutionary gang in the Himalayan mountains or something radical. Maybe join al Qeada.
Below is a trio of Bloomberg News headline stories which show clearly, the impatient people who brought us this disaster want it all over NOW and are pushing hard for this. The price of oil has stabilized for the last two days and they now imagine the sun will shine and despite the US talking wildly about wars with Iran and strangling Iran's oil business, all will be well and the price of energy will no longer reflect the huge growth in the money supply. Of course, there are still giant losses being reported by the top investment banking houses but like in the last six months, they will pretend this is the end, it is over, no more losses. Heh.
Money Markets Signal Worst of Credit Market Crisis May Be Over
he worst of the credit crisis that prompted banks to restrict lending and the Federal Reserve to rescue Bear Stearns Cos. may be over, short-term borrowing rates show.The difference between the yield on three-month Treasury bills and the rate on dollar-denominated loans in London, an indication of credit risk known as the TED spread, narrowed 7 basis points to 0.93 basis points, the smallest since Feb. 25. The gap reached 2 percentage points on March 19.
``It indicates at least that the worst part is over,'' said Theodore Ake, head of Treasuries trading in New York at Mizuho Securities USA Inc., one of the 20 primary dealers that trade with the Fed. ``There was a lot of panic built into that trade, which is going to continue unwinding. There was a massive flight to quality.''
The flight to 'quality' was all the scam artists and cons running to the governments for protection. Instead of protecting their nations, the political classes unite in saving people who should be put in prison, not saved. Everyone hopes these tricks that 'save' everything via the creation of lots and lots of Funny Money™ will restore the 'low inflation/crush the damn workers' nexus and bring even more loot to the pirates and hell hounds and their offshore tax haven accounts.
Carlyle's Rubenstein Says `Enormous' Bank Losses Unrecognized
U.S. and European banks and financial institutions have ``enormous losses'' from bad loans they haven't yet recognized and may have a harder time wooing sovereign-fund rescuers, Carlyle Group Chairman David Rubenstein said.``Based on information I see,'' it will take at least a year before all losses are realized, and some financial institutions may fail, Rubenstein said at a breakfast meeting of the Institute for Education Public Policy Roundtable in Washington. He didn't name any companies.
This is really a message from the Chinese, the Abu Dhabi sheikhs and the Saudi royals. All the major news media, addicted to the idea that they create reality and not the other way around, have been harping on how this nightmare brought to us by the central bankers, is now over, kaput. Of course, absolutely nothing has been fixed but this is to be ignored. Just like in the DTCC story yesterday, the broken systems are still very much broken!
Meruelo Maddux Tumble Puts Los Angeles on Sale at 65% Discount
A package of Los Angeles real estate on sale for 35 cents on the dollar is attracting investors to the depressed shares of Meruelo Maddux Properties Inc., the biggest private landowner in the city's four-square-mile downtown.The stock has plummeted 85 percent since an initial public offering 15 months ago as the global credit crisis threatens to disrupt refinancing of $200 million in mortgage debt coming due in the next 12 months, as well as completion of the city's tallest downtown residential tower.
Wow. Prime real estate is crashing even worse and worse. And this is the end? I seriously doubt it. I have played the real estate markets much of my life. NEVER do these downturns end in less than 2 years and it takes over 5 years for MILD drops to recover. This is an epic collapse unlike any we have seen since the Great Depression.
Elaine,
Let's ask the question, "Since income for the bottom 90% of the population has not increased (in real - inflation-adjusted - terms) since 1971, why is there such a strong feeling that the 80s, 90's and most of this decade were a period of wonderously expanding prosperity?" Try these answers on:
1. The ever-increasing use of debt by the workers-consumers in place of earned income to finance ever more upscale lifestyle (net savings went from almost 10% of income to less than 0% of income).
2. The subgroup that was around during the Depression considers everything that's happened since then to be a stairway to heaven, while the post-war baby boomer subgroup (the single biggest group) has experienced age-related income gains of individual upward career mobility. The jobs the boomers had when they were 20 now pay less than they once did (in real terms), but the boomer is now 50 and doesn't notice or care about what happens to 20 year old wage earners.
3. The surge in low-skilled immigrants since the 70's along with off-shoring has kept inflation in labor-intensive and factory-produced finished goods very low, and (with the help of ever-expanding cheap credit) the sensual pleasure of "getting more and more toys" outweighs the emotional security of having accumulated some savings. One asset bubble after another (stocks, houses, etc) helps the feeling "we're getting rich" and sustains more credit-taking while they last.
4. The official self-promoting ideology of success ("We conquered inflation," "We won the Cold War," "We kicked Saddam's ass," "We killed Union power and made profits and growth limitless", etc, etc) made rational critical examination of the steady impoverishment of the workers-consumers unpatriotic and dangerous.
Minsky Moment? Of course. And Prof. Minsky could tell you exactly what happens next: Since deflation of the credit monster would destroy the world finance system, you will see all governments which have a stake in the world finance system (just about everyone) bail out big banks and companies in distress and pump up the money supply to infinity if necessary. Inflation is a secondary consideration, that will be "dealt with" (half-heartedly and as briefly as possible) once it's clear they've survived the current crisis by sustaining bloated asset values and failing businesses. The workers-consumers will support this, as they always have, because expanding credit is the only way they can convince themselves their livestyles aren't going to completely collapse (Japan has, indeed, shown the way).
Posted by: Michael | May 12, 2008 at 06:34 PM
Indeed, you are correct. But all this hinges on giving cheap loans to the middle class. In Japan, this is not so. I expect it to be the same with us all.
Posted by: Elaine Meinel Supkis | May 12, 2008 at 06:54 PM
As the boys on Mythbusters would say "Now there's your problem". The idea that the banks can pump up the money supply to infinity if necessary is short term thinking. In resources, including money supply, there is no INFINITY. Eventually someone pays the price, usually the worker. When the dollar is so diluted that the cost of essentials is out of reach for the masses, who are the bankers going to be doing business with? As it is, all I see is a group of greedy fools playing Pass The Debt.
Posted by: Run Girl | May 12, 2008 at 07:08 PM
Michael,
You neglect to mention that there has been a successful campaign by those in power to teach that financial success means that God has blessed you, and likewise that financial hardship is punishment by God.
Sam Harris has been quoted in saying that 22% of Americans are assured that the rapture and their ascension into heaven will occur in their lifetime, and another 22% believe it will probably happen.
Most of these 44% are not in the top echelon of society.
As mentioned in "The God Who Wasn't There", the collapse of society, war, famine, etc. are evidence to these people of the coming of Jesus and their everlasting happiness. Why should they care about dollars per hour or working conditions, if this is the case.
The resurgence of Evangelicalism has to be one of the answers on your list...not only of the general public, but in the minds of the military ( especially the Air Force), which is extremely evangelical.
Posted by: Abelian | May 12, 2008 at 08:06 PM
Elaine,
Living here in Calif. (the beautiful Monterey Peninsula) can I sleep at night having nightmares about the big one (EARTHQUAKE)that is going to happen? Is it going to happen tomorrow, next week, next year, 10 years from now----damned if I know and I don't think Mother Nature has closely confided in a human being. I have taken some precautionary measures but I am not going to be scared out of my wits and not enjoy my daily. normal living. And. I do sleep well at night. The devastation in China is gut-wretching and Mother Nature can be very cruel, especially so when Man has turned his back on Her.
Betty
Posted by: Betty | May 12, 2008 at 09:22 PM
If you are currently living in California, there is no reason to worry or lose any sleep since the best you can do is to be prepared for a natural disaster, subsequent shortages, and limited government support. Imagine New Orleans just a lot bigger. Our leaders will be watching Spamalot or singing Bomb Bomb Iran while sending in Mercs to disarm and finish off the survivors, while they seek refuge in their remote Ranches in the Rocky Mountains or South America with the hope the locals don't get them first as the social order breaks down.
Also there is this false hope that the disaster in China is deflationary for oil, lol, maybe for about a month before a massive rebuilding effort takes place unlike New Orleans.
Posted by: LQL | May 13, 2008 at 12:31 AM
Just a little info regarding the Sino-Japanese talks:
'Inside China and Japan: The “Warm Spring” Summit'
http://www.stevequayle.com/News.alert/08_Unrest/080512.warm.spring.html
' No American President, on one of his occasional visits to Japan, has ever been met by Japan’s Emperor more than once. On a repeat visit, he has often not had a second meeting. China’s President Hu gets three meetings with the Emperor of Japan. No Japanese or for that matter Chinese will fail to see the historic symbolic importance of this for both nations. In effect, in seeing China’s President Hu three
times during his five-day official visit to Japan, Emperor Akihito has elevated President Hu to an equal.
No leader of any Asian nation will fail to see the true geo-political importance of this summit between Japan and China. The diplomatic rush to make new arrangements with Japan and China is already on. This can be seen in Indonesia’s announcement that it is considering leaving OPEC! There will be much more of this. The rest of Southeast Asia knows that were Japan and China now to act in parallel or in any joint action, few if any of these nations would have the economic, diplomatic or political power to withstand the pressures. Taiwan is already on the move, offering closer ties with China. North Korea has again refused further talks with the US - but made it clear that it will still talk to China.'
Posted by: OC | May 13, 2008 at 12:36 AM
Mike, you miss the most salient point. We have gotten free stuff from Japan for twenty five years, and from China for ten years. They take IOU's in fictional money, meaning Treasury notes backed by the full faith of people like Hanky Panky at the Treasury, the Bearded Clam at the Fed and Heckuva job Brownie and the Decider in Chief himself. Dredge a septic tank and you will get collateral of about equal value. This was done in exchange for us dismantling our manufacturing capacity and Sam Walton funding the Clinton library. Go Bubba.
Elaine, I take exception with you designation of these pirates. None of them holds his life in his hands like a pirate would have, prepared for the hoosegow, the sword or the gallows at any time. These are chickenhawks who expect others to fight for them. Two members of Congress have children in serving in the military - they have no stake or concern with the future here. They are sure that they are better than the rest of the proles here and above risking themselves for anything.
Posted by: calvino | May 13, 2008 at 02:54 AM
Elaine, In your comments regarding the money paid to the Fed as interest on money created out of thin air for the purchase of Treasury bonds, I have been told that the Fed returns most of their earnings back to the US Treasury. I read somewhere that even though they are a private corporation they are not allowed to make 'excess' profits. I find this hard to reconcile if they are in fact buying, or as some say monetizing Treasury bonds. The Fed cannot earn interest on phantom money.....or can they? I hear so many versions of how the Fed makes the bankers and their owners rich through interest payments. How does it really work?...does anyone really know for sure who is not on the 'inside'?
Posted by: hardrock | May 13, 2008 at 03:43 AM
Speculators Did It!
http://www.mises.org/story/2347
'When all other explanations are exhausted, modern governments usually fall back on the speculator, who is held responsible for all economic and social evils. What the witch was to medieval man, what the capitalist is to socialists and communists, the speculator is to most politicians and statesmen: the embodiment of evil. He is said to be imbued with ruthless and fickle selfishness that is capable of wrecking the national economy, government plans, and, in the case of German inflation, the national currency. No matter how blatantly contradictory this explanation may be, it is most popular with government authorities in search of a convenient explanation for the failure of their own policies.
The same German officials who denied the very existence of inflation lamented the depreciation caused by speculators, or they blamed the Allied reparation burdens and simultaneously denounced speculators for the depreciation.'
Posted by: andrei | May 13, 2008 at 05:41 AM
Speculators are like vultures: they go for the dead bodies. The bodies died usually due to other causes. Just as flies don't kill, they flock to death scenes.
Currency and interest rate speculators don't cause events, they feed off of the events being caused by the central bankers and the various governments.
The Treasury has no treasure, the Federal Reserves has the tiniest reserve of any major industrial nation, much less, the supposed #1.
Once people think about that, they can understand how Funny Money™ is without any real foundation and this is why our system is suffering such dislocations vis a vis the rest of the planet. Free trade has sealed the fate of our non-Treasury/non-Federal Reserve system. Everyone in the know knows it is fake.
And I have a terrible sneezing cold right now! It is nearly impossible to read due to watery eyes or type due to sneezing. It is a plot against me, I say! Yeah! :(
Posted by: Elaine Meinel Supkis | May 13, 2008 at 11:46 AM
according to wiki, Dubya reactivate 2 fleet. we now has 6 active fleets (including the just announced 4th)
I wonder how much all that will costs.
http://en.wikipedia.org/wiki/Seventh_Fleet
Posted by: Anthony | May 14, 2008 at 08:41 PM
Yes, I just wrote about that about half an hour ago, Anthony. Thanks for noting it anyway! Amazing. We are expanding our empire as it goes bankrupt. Just like Spain, Rome or Britain. Not to mention the French and German empires...
Posted by: Elaine Meinel Supkis | May 14, 2008 at 09:30 PM