Money Matters

Dr. Fekete's Medicine Show

From the History of the Universe by Larry Gronik.

With the kind permission of the author/cartoonist. I highly recommend this book for all things, it is both witty and covers an amazing amount of history. One of my very favorite books.

May 21, 2008

Elaine Meinel Supkis

Today we visit Dr. Fekete's University of Sanity. He tries to explain some strange paradoxes of interest rates and the rate of wealth destruction. As usual, I back him up with today's news stories about our collapsing banking system. The US absolutely refuses to correct course and cease crazy lending at insanely low rates of interest. There are a thousand reasons why we must stop doing this but it will cause pain. So the Fed and the government unite in trying to drive us deeper and deeper into debt. Even as the price of oil now is over $132 a barrel and gold is now climbing rapidly back to the $1,000 per ounce levels. This dynamic cannot run much longer without the US falling into a total economic collapse. We have to stop the mad Funny Money™ machine before it is too late.

Antal E. Fekete: IS OUR ACCOUNTING SYSTEM FLAWED?

It may be insensitive to capital destruction

There is cause for concern in this regard. For the past 75 years the West has been fed the propaganda line, attributed to John Maynard Keynes, that the gold standard is a “barbarous relic”, ripe to be discarded. The unpleasant truth, one that propagandists have ‘forgotten’ to consider, is that the gold standard is merely a proxy for sound accounting and, yes, for sound moral principles. It is an early warning system to indicate erosion of capital. It was not the gold standard per se that politicians and adventurers wanted to overthrow. They wanted to get rid of certain accounting and moral principles, especially as they apply to banking, that had become an intolerable fetter upon their ambition for aggrandizement and perpetuation of power. Historically, accounting and moralprinciples had been singled out for discard before the gold standard was given the coup de grâce.
*snip*
It is not widely recognized that the chief eminence of the gold standard is not to be found in stabilizing the price structure (which is neither desirable nor possible). It is to be found in stabilizing the interest-rate structure. By ruling out capricious and disturbing swings, the Wealth of the Nation is maximized.

This important Fekete article dovetails with my own recent musings about the role of gold as a way of preventing wild speculative lending:

Gold is NOT wealth. Gold is a REGULATOR. Gold is LIBRA. Gold, when used as a restrictor, a curb, a control, is not part of the Cave of Death anymore. Instead, it becomes a GUARDIAN at the Gates of Death! In other words, a goddess or a Watcher. Its function is to protect OTHER WEALTH. The things that are 'real'. Like labor, rice, oil, wheat, land, trade, ships and armies. Hoarding gold doesn't work. It has to be harnessed in the role of regulator, not be a commodity that is just as uncertain as all other things. The chaos, the total chaos we see today is a dynamic of running a system with NO CONTROLS. NO BALANCE. Libra hates this.
*snip*
The only way gold can perform as a guardian deity is for the central bankers to bow to Her and sacrifice to Her and to understand Her rules and tempers. This is a very ancient role, by the way. From the first pharaohs. For some reason, humans can control the desire to be greedy if they have a system that has this sort of exterior restrictions. Isn't that funny?

When the US had a Treasury with some treasure in the form of gold and silver, the US fell into a huge Civil War. Funding this war via taxes made it very unpopular so the government, like all governments, decided to fund it via making money out of thin air by lending to itself. Gold dealers went crazy and the value of gold began to climb in NYC. The more the government lent to itself, the higher the gold shot up. This was ended rather brutally with gold collapsing in price as the government quarantined gold by restricting trade and other means. Including isolating the bonds, or so they hoped, by forwarding the debt in time. Moving debts forward is a common 'solution'. People who buy these and hold them want a return for this favor. So the longer these are held, the more they contribute to future inflation via the added money flowing from these bonds. In other words, taxes of some sort are levied and handed over to the people who bought the bonds during the war.

Governments must keep track of this forward moving financial hazard. This is why wars must be spaced out carefully. If they happen too frequently or worse, last a long time, the hazards shoot upwards. Since there is no pause to refill the financial tanks, the accumulating responsibility to pay the extra funds for the interest due on these bonds grows. Eventually, it wipes out all monetary growth via capitalist profits. When the capitalist profits are based on military manufacturing, this is twice as destructive as war spending with a solid industrial profit base.

For example, when England went to war with Germany in 1914 and 1939, each time Germany prevented trade with England via submarine warfare. Each time, England responded by going very deeply into debt to the US. Lend/Lease which was set up by Roosevelt for political reasons, was a certain sign, Britain was totally bankrupt. The US first lent the money and then took it back with a lease on equipment which was doomed to destruction. No sane government 'lends' war equipment. The nature of war is, destruction.

Dr. Feteke is very good because he takes care to mention the role wars have in the development of banking and how wars are the ultimate outcome of modern banking. After all, banking began in the West, after the Dark Ages, via the Crusades. The bonds sold by the Church were promisorry notes which supposedly gave believers a free pass to Heaven instead of waiting in line in Purgatory. All war bonds are promises of Heaven after winning a war. All nations that lose wars go immediately into economic chaos and the costs of the lost wars are paid via destruction of assets held by the losers.

Winners also get hammered! The financial birds set free by the government to pay for wars fly home in the form of either inflation or higher taxes leading to depression. Assets that ballooned during the free spending war years drop in value and wealth created during the war is destroyed as interest rates drop and war bonds become illiquid. If we look at the history of all nations, we see very, very clearly that depressions/inflation flare ups ALWAYS follow wars for winners and losers, both! This is due to both parties inflating the monetary markets with lots of new Funny Money™.

For example, when Russia couldn't afford to continue fighting in Afghanistan, they retreated. But this meant admitting the war was over. Instantly, the fires of inflation and the ice of depression hammered Russia's domestic markets. Very quickly, Russia fell off the economic cliff. When Russia surrendered in the Cold War, a very long war, the economic losses were so tremendous, the nation collapsed and huge hunks fell away. Rebellions and insurrections flared. People starved to death and the population of Russia began to fall. After 15 years of destruction of wealth, Russia had rebounded. For this is the harsh reality of wealth destruction: out of the ruins springs, like the Phoenix, a new wealth! Nations that evade this end up in long, long depressions.

For example, the Roman Empire: when it rotted, it rotted very slowly. Its rise was rapid. Its fall was slow. As Rome fell, the collapse slowed down to a crawl. So civic activity at the heart continued as if nothing was wrong all the way up until 400 AD. Then the final collapse via military defeat at the core finally wiped out the remaining wealth of Rome. The fall went from approximately 100 AD to 600 AD. That is 500 years. The Dark Ages lasted from 600 AD to 1100 AD. Note the balance of time here. All recoveries last as long as the collapses. Give or take a hundred years.

England's collapse ran from 1920 to 1950. The recovery really began, and this was with tremendous help from the US, in 1980, roughly speaking. In other words, the collapse was thirty years long. The recovery was also thirty years long. The US began to rot and fall beginning in roughly 1970. We struggled to keep up our military machine spending for the Cold War and now for more and more hot wars since 1970. Our economic condition has rapidly deteriorated during this phase. Which is now nearing 40 years long! Again: no nation that loses a war gets out scot-free. They pay a heavy price in wealth destruction. Even nations that win wars, pay this price. But losers pay double.

England won WWI and got greater territory from it. But due to the depression that followed, England couldn't hang onto its territories and Iraq successfully fought off the British invaders. So even though Britain won the major war, they began losing the minor wars. Then Ireland managed to free herself partially from British rule. The accumulating war losses meant Britain started WWII much weaker than Germany who won all their minor wars between WWI and WWII.

The US won the Cold War. But this was a very hollow victory since we lost the Vietnam War. As usual, we went into a small tail spin when both wars ended. Military spending had to decrease. This was fixed by going to war in Iraq with Gulf War I. We won that one, too. Only the following recession hammered the US pretty severely considering that we won. This was a warning that our accumulating war debts in the past were catching up. Bush Sr. claimed the war cost us nothing since the Arab oil rulers paid for all of it. Still, government spending went up so the debts continued to climb.

Then 9/11 struck right when the stock market bubble from easy lending in Japan, hammered our economy. We lost that war and the wars we started in retaliation, we are losing. We are now entering a 40 year down cycle. During this period, we can't get out from under past war spending except by debasing the currency. This, in turn, is a huge asset destroyer. It eats off of savings of any sort. The last struggles of the US to INCREASE our obligations, is doomed to failure.

Say, we keep dropping interest rates to 0% like Japan. We can't do this and keep our wealth since the only way this works is to debase the currency. So even if it looks like we are 'gaining ground' in that we have an 'economy', it will be, as Fekete so carefully explains, all fake. And it will actively destroy wealth like acid eating marble. This cheap credit is counter-intuitive. We say, 'So long as the Bank of Japan lends to us, so long as the Chinese hold our dollars in their FOREX reserves and buy our bonds, so long as offshore investment banks set up to evade taxes buy our bonds and Treasuries, we can spend in the red.'

Note who is supporting this debt: people who are not good for us. When the citizens are tapped to pay for war debts, the destruction of wealth still is building a future base. The holders of this debt are SAVERS. And also SAVIORS. The wealth they accumulate re-enters the system and wealth that was tied up in this time-frame reenters the economy but NOT ALL AT ONCE. Time is important. Time is money. The US, by flooding the markets with free Funny Money™ this year, encouraged lending....based on bad money! Not savings. Since not a soul was saving anything especially our businesses, the government and the entire populace, the present lending going on is TWICE as evil as normal. For it has no savings at the base! It is all lending being used to lend!

Impossible in the long run. Perhaps, in the short run, too.

Japan and Germany both recovered from WWII so rapidly because, unlike England, France and the US, they didn't fight either the Cold War or any hot wars since. Japan is mired in a domestic depression but NOT an international depression. In this regard, they went from destroyed nation to the world's #1 or #2 export power. And not exporting commodities. Exporting value-added industrial output. Germany is Japan's closest rival for the #1 spot with China closing in. And China has not fought a hot war since the Vietnam border war back in the late 1970's. China's military forces are purely for domestic use so they are not destroying the wealth of the nation.

The US patrols the planet and now has four navies! All of which are total red ink. We have expanded our foreign bases even as our economic condition worsens. So whatever system we use for accounting purposes, whatever the interest rate we use, whatever schemes we cook up to run things for some more time, the worse our FUTURE condition. NONE of this will help us at all. ALL of this will prolong our recovery time. Every hour we go deeper into debt and this means it takes another hour to clear the books in the future.

Fekete:

Superficial thinking may suggest that if the rise of interest rates is bad, then their fall is good for the economy. Not so. A falling rate is even more damaging than a rising one. I am aware that my thesis is highly counter-intuitive. I have been challenged by many other economists who deny the validity of my contention. They argue that if the present value of future income is lower when discounted at a higher rate, then it must be higher when discounted at a lower rate of interest. We may admit that this statement is true. However, obviously, the firm has to be around to collect the higher income. Many of them won’t be, as they succumb to capital squeeze caused by falling rates. My critics hold that falling rates are always beneficial to business and it is preposterous to suggest that they aggravate deflation. These critics confuse a falling structure of interest rates with a low structure. While the latter is beneficial, the former is lethal to producers. When interest rates are falling, the low rates of today will look like high rates tomorrow. A prolonged fall creates a permanently high interest-rate environment. This paradox explains the reluctance of the mind to admit that falling rates spell deflation and, in an acute case, depression.

Thank you, dear doctor. You are correct. There are several reasons why Feteke is correct: when viewing money creation powers, we must never forget the nature of the Cave of Death. For it is, by definition, the place where all things are widdershins, reversed, counter-intuitive. A wise person, when in this dire place, has to keep their head and realize what looks good may be very evil. What looks good to eat is poison. The beautiful apple presented to the hidden Princess is really a poisoned apple from the Evil Queen who wants to kill her. What looks like a savior is really a pirate out to steal everything. I have crunched the numbers over and over again and concluded some time ago, low to 0% interest rates are PURE POISON. For the people offered this can take on INFINITE amounts of debt, especially, as Fekete points out in his fine article, if this debt is never paid off but is rolled over and over into the future!

The horrors of the 0% interest rate/0%principal payment/0% down regime is the COMPLETE destruction of ALL wealth! This includes gold. In this terrible world, roaming bands of mercenaries, barbarians and looters use the oldest wealth-creation tools, weapons, to gain profits. Palaces are burned. Cities laid to waste. Livestock slaughtered, people murdered in their beds. History is totally adamant about this. But if you ask people if they would want this 0%/0%0% regime they react with joy. The desire for this is overwhelming.

This is why the gold basis for lending is a fine bar: it prevents the temptation. Except when government override this during wars. Which is why wars are in the end, destructive. Now to go to today's news [sorry about all the long postings here!]:

Rubin's poisoned chalice
By Henry C K Liu

It was Robert Rubin, special economic assistant to Clinton and later Treasury secretary, who worked out what has come to be known as Rubinomics, the strategy of dollar hegemony through the promotion of unregulated globalization of financial markets based on a fiat dollar that also forced deregulation on the US financial market. (See US dollar hegemony has got to go, Asia Times Online, April 11, 2002.)

The argument that financial market regulation would reduce US competitiveness because it would force US financial institutions to relocate overseas had assumed an air of immaculate logic in the ideological context of neo-liberal globalization during the Clinton years. That neo-liberal mentality set the stage for US government abdication of regulatory responsibility over the financial sector and allowed the free market to move towards the inescapable path of eventual self-destruction, despite historical experience of the Roaring Twenties and the New Deal having shown the need for regulation to rein in the suicidal excesses of financial free markets.

The neo-liberal strategy was set in motion with the help of an ever-accommodating Federal Reserve to supply more liquidity to foil even the slightest stock market correction on what Fed chairman Alan Greenspan observed as "irrational exuberance". Since for almost two decades the finance sector had grown faster than the real economy, most of the excess liquidity injected by the Fed went to develop serial debt bubbles that simply got bigger and bigger each time through financial innovations.

Next to Fekete, Liu is a great writer who has a far-vision look at the daily news. The Asia Times is heads and shoulders above all the American financial media. They are talking, of course, to the nations that will be taking over the running of this planet in the near future. The oil pumping nations are getting richer, of course. But this is not going to last the century and it gives them little dynamic power like industrial power gives the West or Asia. Also, China is one of the few countries like Russia, the US and Brazil, which can suffer a war but not be run over thanks to sheer size.

Top bankers 'leaving US for Asia'

The number of high-flying investment bankers moving from the US to Asia is set to increase, experts have said, as a result of the credit crunch. A senior Credit Suisse executive is the latest in a string of "dealmakers" to relocate from New York to Hong Kong. Big takeover deals are scarce in the US and Europe as the credit squeeze has made it hard for firms to source funds.

For 30 years, the US has confined most of the wealth destruction to the lower classes. Our inner cities mostly fell to ruin except for a very few, the ones which funneled Funny Money™ into the economy such as DC, NYC, Boston, LA, etc. The cities that funneled foreign goods into the nation as well as export items which in vain, sought to balance this flood, these places flourished too. But anyone visiting any of the manufacturing cities sees mostly ruins. The lower working class has coped with this destruction of their collective wealth by sending family members into the workforce and going into debt. At first, the cost of this was small. But over time, as debt climbs, they have been forced into longer and longer debt frames. Instead of paying off all debts by age 55 and then saving money rapidly until retirement, family debts have grown greatly and people reach retirement now, completely in debt with no possible way of paying this off, ever.

More on the Banking Backdrop, They Have Never Had So Many Loans

The primary benefit of securitization was the virtualization of the bank's balance sheet. Through securitization, banks were able to underwrite a vast amount of risk relative to their balance sheet capacity, by selling off the risk to the open markets. Despite this, banks have steadily increased the amount of risk kept on (and off, through SPEs) their books over the last 20 years, with a forced increase of this concentration in 2007 when the securitization market simply shut down - cutting off the liquidity spigot for these assets. Starting at about 2004 near the height of the securitization bubble , banks increased the pace of securitized asset retention.

At the same time the banks increased the pace of asset retention, the debt service ratio of the lending products backing the securities started climbing very quickly. Thus, not only were the banks increasing risk from a concentration perspective, they were increasing risk from a credit quality perspective simultaneously. This was all occurring during the near peak of a bubble. Unfortunately, for most of those involved in bubbles, it is nigh impossible to see the bubble until after it is too late! With debt service ratios so high, levels will trend down to the mean, either through increased income or decreased debts (charge offs).

Very good graphs here. This article details the ballooning debts in the US. This was directly due to the low interest easy lending put into motion by the Federal Reserve. Going back to Fekete's excellent article, the accounting used by the Fed to justify their cheap rates were all based on false premises. Just as they artificially jigger the consumer inflation statistics, they also ignore obvious red ink when figuring out how much our debts may grow.

By ignoring the huge, huge Federal debt, the huge budget deficits and the M3 statistics, the Fed could pretend there was no inflation and thus, they could EXPAND LENDING. Right when the US was overspending frantically, they decreed that the problems was LACK OF LOANS not OVERSPENDING. This decree was a blatant lie. Which is why I have been yelling myself hoarse for the last 40 years! We are digging our graves with cheap debts.

I proved in the past that debts grow whenever rates drop too low and savings grow when rates are high. Many economists and Americans absolutely hate and despise as well as fear Volcker because he drove down lending and upped savings for a key 5 year span. Following which, we enjoyed great wealth creation! What a shock! I remember that time well, I lived in a mansion and did very well indeed.

Money was no problem. Anyone holding the CDs and bonds at 18% were happy! The government had to retire debts because of the high rates made it hard to get loans. Once this was all paid off, the easy lending regime was reinstated. And the national debt which was only $1 trillion in Volcker's day has shot upwards to $10 trillion and climbing fast.

So what we need is a national recognition that we MUST pay off our debts before we can ask for more lending. This consensus has to cut across all lines: the government must stop deficit spending, the public must stop, and so must Wall Street. The rest of the world will hate this but we have no choice. Right now, we see a scramble for wealth even as it vanishes. There is NO system that can hide wealth from this process unless we re-establish savings again. The US is negative savings now and this is further proof the ability to take on more debt has reached its upper limit.

Citigroup Hedge-Fund Loss Weighs on Three Banks

The downward spiral of a Citigroup Inc. hedge fund has caused steep losses for at least three large U.S. banks that hoped it would rev up returns on a controversial type of employee life insurance.

Besides triggering a lawsuit against an insurer and brokerage firm that arranged the hedge-fund investment for Fifth Third Bancorp, the losses may pressure Citigroup to give the banks some of their money back, as it has agreed to do for individual investors. Such a bailout would be costly, because the clobbered banks sank more than $1.6 billion into the hedge fund, according to the lawsuit and people familiar with the matter.

The problems stem from Citigroup's Falcon Strategies hedge fund, a fixed-income vehicle whose value has plunged more than 75%. Many of the fund's investors were retail clients at the New York financial giant's Smith Barney unit, including some who were told Falcon was a haven.

This is why I probably stand alone in saying, this harsh truth: THERE IS NO SAFE HAVEN. None. When the demonic forces of wealth destruction are unleashed, nothing is safe, anywhere. No matter how deep one buries one's wealth, it vanishes. History tells us this. Say, we park it in a castle. The castle will be stormed. Or protecting it costs so much, all the money is used for that purpose and you have to leave the castle and go to war, seeking loot. Constantinople shut up all its wealth at the capital city and put up huge walls. Yet it was looted twice: once, by allies, the second time, the Ottoman armies. The fall of the Eastern Empire of Rome lasted from 1,000 AD to 1450 AD. This was 450 years of decline. The balance was settled very quickly via the Ottoman looting. They began to rot in 1800 and the decline lasted for 150 years. The elements of the Ottoman Empire are now rising from the ashes very rapidly despite wars and chaos. Wealth creation is growing even as ours is declining.

The only real safe haven is to suffer the pains of destruction of debt and once this is done, there is a solid foundation for building wealth again. Canada, Mexico and the US are actually blessed places! We have many resources, good people. We can, in the long run, recover completely. But we have to change and we won't change if we can use debt to buy our way forwards in this insane red-ink style. So don't despair. The future can, if we refuse nuclear war, is actually not so terrible at all.

Post-Subprime Economy Means Subpar Growth as New Normal in U.S.

A normal U.S. economy is likely to look a lot different, and worse, after the credit crisis is over and financial markets settle down.

Companies will continue to struggle to raise cash for expansion and innovation as investors and lenders remain focused on conserving capital. Workers, too, may have less flexibility to go after new opportunities, because many will be stuck where they are -- in homes worth less than the balances on their mortgages.

``Once you've made terrible, overly optimistic errors, that paralyzes you for some time,'' says economist Paul Samuelson, a Nobel laureate.

See? The pros are all saying what I am explaining only a little less colorfully. Note that the economist gives no time frame. And neither does he explain that our problems are made much, much worse by our ongoing Cold War domination of the planet or our hot wars are destroying our wealth. McCain cheerfully talks about a 100 years war. Bush did this too. All the neocons like to talk about this 100 years war. This is pure insanity. The Democrats vote money without question for these wars. No one seems very interested in drawing up a graph showing how we will pay for this 100 years of wars by 100 years of complete destruction of our wealth!

ECB head: Credit crunch 'ongoing'

The credit crunch is continuing and it is not evident that the worst is over, the head of the European Central Bank has told the BBC.Jean-Claude Trichet said we were seeing "an ongoing, very serious market correction," during an interview with the BBC business editor Robert Peston. He warned that if central banks were tempted to cut interest rates now, more serious problems could follow.

Note the word 'correction'. HAHAHA. See? We are CORRECTING and ERROR. The over lending was wrong. It was naughty. It caused the forces, the denizens of the Outer Darkness to begin eating our wealth we got from the Caves of Death. By increasing our deadly penetration in this cave, we will not get richer, we will become poorer over time. We have been warned and have time to CORRECT OUR COURSE. We can leave this cave and go out into the real world and work and regain our wealth through the sweat of our brows. This is what works. This is what always works.

Getting Easier to Get Big Loans

The gears of the mortgage market are starting to unlock for borrowers needing big loans. In expensive markets such as Washington, that covers most people looking to refinance or move up from an entry-level home.

Just in the past two weeks, interest rates on the new "conforming jumbo" mortgages -- for amounts between $417,000 and $729,750 -- have come down enough to make a difference to borrowers. And mortgages allowing down payments of just 3 to 5 percent are coming back to the market for borrowers who have good credit.

And look at the solutions! ARGH. People who can't afford the ludicrous prices for assets will be allowed to break the rules and not put down any money for these things. Then they will get 97% financing which they promise to pay in the future. Well, if they can't save even a few dollars, how on earth can they promise to pay back? And if the price drops, the bank won't make back the money lent. It will be out there in the form of inflation. Unfortunately, this is due to the government making it possible for people with no savings to live in nice houses while savers scrimp and sweat to put aside money. Which is destroyed by inflation caused by too much easy lending at 3% down/3% loans/30 years to pay. Hell, 50 years to pay! Indeed, the horror of all this is obvious: the vast majority of homes to go into receivership are ones bought just in the last 2 years at these very rates! Or worse, the homes bought on loans that NEVER paid off the principal.

So, rather than correct our course, we are going more and more off course. The government is bent on making lending as easy as possible even as it is going under due to too much debt. Russia knows what will happen next. History is crystal clear, what will happen next.

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Bank of Japan's ZIRP Versus The Supkis RIPOFF Statistics

U.S. Ambassador to Japan Thomas Schieffer speaks at a press conference in Tokyo Tuesday, in which he called on Japan to shoulder a bigger portion of its defense bill, citing the growing cost of maintaining security in the region. Nikkei News

May 20, 2008

Elaine Meinel Supkis

I harp all the time about Japan for a good reason: they are an alternative model for running a country. One that others are using to one degree or another. This emphatically includes the US. Various countries follow one or another of Japan's policies. But not all at the same time to the same degree. No other nation dares to have 0.5% interest rates, for example. The Bank of Japan just released more reports, statistics and has declared open war on the rest of the banking system today. For they are clinging to the ZIRP [Zero Interest Rate Program] despite raging inflation within Japan as well as across the planet. Note also the story above: the US is begging, yes, BEGGING imperial Japan to please pay us more money for protecting them from China. This is madness. We lost WWII.

BOJ Shirakawa: For Now Still Watching Downside Risks To Econ

TOKYO (Dow Jones)-- Bank of Japan Gov. Masaaki Shirakawa said Tuesday the central bank is watching both internal and external risks to Japan's economy given increasing uncertainties in the global economy, and rising energy and materials prices.
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Idemitsu Expands Overseas To Offset Slumping Domestic Business

TOKYO (Nikkei)--Idemitsu Kosan Co. (5019) is scrambling to expand overseas as domestic demand for petroleum products shrinks rapidly due to record crude oil prices and Japan's declining population.
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Movie Rentals, Downloads Boom While Theaters Suffer

TOKYO (Nikkei)--People are staying away from movie theaters in greater numbers, and while a dearth of attractive films is cited as one reason, shrinking family budgets are also hurting box office sales, shows a survey conducted by The Nikkei.

I also saw in the news somewhere that Toyota has decided to not sell so many SUVs in America but have Americans build these SUVs and then ship them to the Arab nations! So we will work for Japanese masters who will be doing business with Arabs...who are getting extremely rich off of oil sales to us. I see our future pretty clearly here. Our use of Japanese cars to drive around America has driven us into peonage with the car makers and the oil producers! Thus ends the American romance with the automobile.

Our pitiful, haggard ambassador should read a book about 'face'. Why one should never, ever lose 'face' in Japan. My godmother's father was an early US envoy to Japan when it first opened up. He had to be very patient and very wary. He had to understand when he was being insulted or pushed around. He had to call Japan's bluffs. The US should NEVER beg for money from Japan! Never. All the Ambassador has to do is send a lower level official to the Japanese government with a warning that we are arranging to move our troops out of Japan and withdraw all our naval bases and equipment to Hawaii. If this is OK with Japan, we leave. Saves us lots and lots of money. So what if our imperial overreach is gone? It is gone, anyway, if we go bankrupt.

Of course, our navy wants to be in Japan because our military/industrialists make lots of money fooling the US public into supporting US naval protection of our bitter rivals and overlords in Japan.

Today, we see in the Nikkei News how Japan is faring under its ZIRP regime. Domestic use of oil is shrinking rapidly in Japan due to the fact, no Japanese people outside of the Economic Samurai are making any money. Long ago, inflation sopped up the last of discretionary spending there. The Japanese have cut back ruthlessly their energy consumption in a desperate effort to keep alive since food is also inflating rapidly. Now the news comes in, they can't afford to go to movie theaters anymore. Eventually, they will be unable to afford much of anything. This is due to the simple fact, Japanese industrialists are removing global inflation via pay cuts just as we see in the US. This leaves workers at the mercy of global inflation doubly so.

So long as ONLY Japan was doing this, all was well. Japan's exports took off. As we see in today's Nikkei News and this week's Bank of Japan report. Japan is now filled with fear: the US can't buy Japanese very much anymore due to inflation hammering worker's wages here as well as in Japan. And China's earthquake means China is turning inwards quite unexpectedly. The problems with 30 million displaced people is gigantic. Absolutely gigantic. The surge in national pride due to the heroism of the Chinese military and civilian forces working together to save people will be replaced by demands the Chinese government cease buying US bonds that allow the US to overspend at home. The money must be spent within China. This represents a huge change in the flow of money. Absolutely huge. So Japan is hunkering down, shedding workers and driving their own people into deeper poverty to protect Fortress Japan in the obvious oncoming global trade contraction.

May 20, 2008
Bank of Japan

Japan's economic growth is slowing, mainly due to the effects of high energy and materials prices.

Exports have continued to increase. Corporate profits have been leveling off, albeit at a high level, and the pace of increase in business fixed investment has become slower. Private consumption has been firm in a situation where household income has continued rising moderately. On the other hand, public investment has been sluggish. Meanwhile, housing investment has been recovering moderately. With these developments in demand both at home and abroad, production has been more or less flat.

Japan's economy is expected to grow at a slower pace for the time being and follow a moderate growth path thereafter.

Exports are expected to continue rising, as overseas economies are likely to expand although at a slower pace. Business fixed investment and private consumption are likely to remain firm against the background of generally high, but slightly reduced, corporate profits and the moderate rise in household income. Housing investment is expected to be on a recovery trend, although the pace of recovery is likely to be modest. In light of these developments in demand both at home and abroad, production is expected to increase, after being more or less flat in the short run. Public investment, meanwhile, is projected to be on a downtrend. Due attention should continue to be paid to factors such as uncertainties regarding future developments in overseas economies and global financial markets, as well as the effects of high energy and materials prices.

On the price front, the three-month rate of change in domestic corporate goods prices has been positive, mainly due to the rise in international commodity prices. The year-on-year rate of increase in consumer prices (excluding fresh food) has been rising since around the end of last year, due to the increase in prices of petroleum products and food products, and it has been around 1 percent lately.

Domestic corporate goods prices are likely to continue increasing for the time being, primarily reflecting the rise in international commodity prices. The year-on-year rate of change in consumer prices is projected to continue to be positive due to the rise in prices of petroleum products and food products in a situation where overall supply and demand in the economy are more or less balanced.

At least the Bank of Japan admits there is inflation in Japan. The ZIRP can't exist unless the 'inflation rate' of Japan was below zero. It hasn't been for a while. Since the workers can't buy say, movie theater tickets anymore, the price of tickets will drop. The Bank of Japan, like the Federal Reserve, will then crow, 'There is no inflation' even as REAL inflation hammers the lower classes. This is why I propose a 'Real Inflation Program Of Funny Finances'. RIPOFF will track the true cost of Funny Money™ and how it affects the bottom 60% of the population of Japan and the US.

RIPOFF inflation is around 17% and rising. Not 1% or 2.5%. When we can't afford to buy TVs or movie tickets, we just don't buy them. When we can't buy food or fuel, we DIE. Since the bottom line is DEATH, we have to give food and fuel as well as medicine, a much higher inflation rating value than TVs or cars or even houses. I lived in a tent for ten years. I didn't starve. Living in a mansion and starving to death due to lack of food: this happens during wars and revolutions! People must eat. And they must have some heat in winter in the colder climates. Or you die.

This being the fundamental basis for living means we can't minimize food and fuel but the exact opposite. The statistics for inflation are the exact opposite of RIPOFF's statistics. They are designed to keep INTEREST RATES FAKE SO BANKS CAN LEND TO BUSINESSES CHEAP. And the second use: to cheat people who are on fixed incomes!

Few people know that savings we put in banks are listed as LIABILITIES and loans banks hand out are listed as ASSETS. We would think it would be the opposite. But it is not. This is why the governments of the world have to force banks to hold 'reserves'. This is why we have bank runs. The savers panic when they realize their savings are being frittered away by the bankers who refuse to protect these savings. For savings are really LOANS given to the BANKS! The banks then promise a good return as the RE-LEND it to others and they collect 90% of the profits from this secondary loan. So if you give a banker $100 they pay interest set artificially by the Central Bankers at say, 0.5% in Japan or 1.25% in the US and then LEND it out at 5.5% in Japan [today's rate for mortgages in Japan] and 6.5% in the US for mortgages, the bankers get the 500 point differential! Whoohoo. When the rates offered by the banks are below the RIPOFF rate of inflation, savings collapse and vanish. Which is what is happening today.

This is why all the banks in the G7 nations have to go to the magic windows to the Outer Darkness run by the Central Banks to get some 'savings' since they can't get this from the workers anymore. THE ENTIRE RESERVES OF THE WESTERN BANKS IS MOSTLY NOW ONLY FAKE MONEY FROM THE CENTRAL BANKS! When I show the charts that track reserves in the US, we see clearly, for the first time since the Great Depression, the reserves are now from the central bank, not from the economic base of the American savers.

Here is an old editorial by Paul Krugman in 2000:

O.K., I admit that it doesn't look important, especially to Americans. So what if last Friday the Bank of Japan finally ended its "zero interest rate policy" (yes, ZIRP)? After all, it's only a quarter-point rise, in a faraway country that doesn't interest most Americans now that it no longer seems a dangerous competitor. And yet I would not be surprised if future economic historians look back at Friday's move as the beginning of the end for an era, and not just in Japan.

For one thing, this move by the Bank of Japan is a much bigger deal than you might think, because of its potential impact on expectations. By raising interest rates, even slightly, when the economy is still depressed, the B.O.J. in effect signals anyone in Japan who might be feeling stirrings of exuberance that it is likely to step on the brakes in earnest if the economy actually shows any signs of booming, or if consumer prices start to rise even slightly.

Consider the contrast: in this country the markets expect the Fed to hold off for a while on interest rate increases even though inflation is running at more than 3 percent. Meanwhile the B.O.J. has just raised interest rates in an economy where consumer prices are actually falling, G.D.P. is lower than it was three years ago, and unemployment is at a postwar high. This says something about what kind of policy Japan can expect from its central bank in the future -- and it's not the sort of thing that would encourage people to go out and spend.

My personal guess is that in the near future, whatever optimism people are now feeling about Japan's economy will evaporate, and the nation's malaise will be deeper than ever -- thanks in large part to Friday's action. And while others are more sanguine, both the International Monetary Fund and Japan's own Ministry of Finance pleaded with the Bank of Japan not to raise rates.

Krugman, like so many other 'economists' in the US has been fooled by Japanese propaganda. If he bothered to read all the stuff at the wonderful Bank of Japan webpage, he could read lots of papers written by the Japanese concerning their bizarre and I think, nasty ZIRP business. As usual, he mixes up the consumer index with the conditions of internal finance. Any nation can have zero inflation. All they have to do is reduce wages to the same degree that prices rise! Japan did this for over 10 years! They are still doing this! Last winter, I reported that finally, some workers were offered pay raises. It was pathetic: an increase of less than 2¢ per hour? Wow. Now that real inflation, the RIPOFF statistics show honest to god inflation there, the anxiety of the Japanese upper classes to preserve ZIRP is obvious. They are trying to bring prices down even if it means opening up Fortress Japan to a flood of Chinese imports. Something they tried to prevent for years and years.

THERE'S TROUBLE IN TOKYO

May 1, 2008 MARCUS GEE

The head of the Tokyo Stock Exchange doesn't hold back when a Canadian visitor comes by his office expecting a simple rundown on the Japanese markets. Japan, he says, is walking toward the edge of a cliff. Unless it changes direction, the world's second-biggest economy faces financial ruin.

In an hour-long interview, Mr. Saito painted a grim picture of a country with a crushing national debt, a diminished stock market, a shrinking, aging work force and a ruling class too blinkered to learn from its mistakes.

Mr. Saito worked on Wall Street in the 1970s and remembers when New York faced bankruptcy. "We are in the same situation," he said. "We are the City of New York."

The difference is that New York had the U.S. government, which, after first refusing, helped rescue it from bankruptcy. "We don't have any Washington," he said. So unless something changes, "we will have to sell our country to someone else."

Mr. Saito's comments come at a time when Japan's economy has been enjoying a modest rebound after years of trouble, growing by about 2 per cent a year for four years. But in its twice-yearly forecast yesterday, the Bank of Japan lowered its growth forecast to 1.5 per cent for the year ending next March.

Mr. Saito said Japan's long-term problems are severe. The markets he presides over as president of the Tokyo exchange mirror the fall in Japan's fortunes, he said.

At the peak of Japan's boom years in the 1980s, he recalled, the combined worth of the stocks on the Tokyo exchange was $6-trillion (U.S.). The figure for the New York exchange was 30 per cent lower.

Some Japanese upperclass salarymen are worried. One or two, that is. They see the population collapsing as the lower classes give up even having children. And children in school flock to more and more useless professions, going for the gold rather than for manufacturing or production. The dire future of Japan is obvious: it will be colonized by the mainland Asians. They will take it over. The island nations conquered by the Rising Sun in WWII will flood into Japan and change the language and culture and the Japanese ethnic group will be subsumed. The natives hope to stop this by simply locking the doors. But it won't work. Either they open the purses of the bottom 60% of the population or they are doomed to be taken over by a second wave of 'black ships.'

By the way, Japan's growth rate this year was 3.3%. And since 2000, has grown by a total of 15%. The US grew at around 6% during this time! Now, who is 'depressed'?

"And we have to do this with an aging society and a shrinking work force," he said. "How can we really redeem this debt - unless we raise productivity and economic growth."

To do that, he said, Japan's conservative-minded business and political leaders will have to open the country to the world as never before, taking down many of the barriers to competition and investment that have made it what he called the "Galapagos of the world" - an isolated economic ecosystem.
*sniip*
He said he is dismayed that many Japanese leaders still talk as if Japan was No. 1, as it seemed to be back in the 1980s.

The upper class of Japan is #1. Or rather, were #1 until this last year when Germany became #1. China is closing in on the #1 position. Even with this massive earthquake. The US pretends we are #1 but we are that only in all the red ink categories. I went to the Bank of Japan's web site to read some older reports concerning the ZIRP regime and how it affected global banking and trade via the Japanese carry trade:

Zero Bound on Nominal Interest Rates and Ex Ante Positive Inflation: A Cost Analysis*

November 2003 Bank of Japan:

A zero interest rate commitment based solely on the inflation rate does not necessarily show good policy performance in promoting economic stability when recognized as a permanent policy rule. Rather, there is a risk that economic stability may be impaired because, when the commitment is in effect, the conditions of the GDP gap are not reflected in monetary policy.

A nonlinear optimal simple rule, whereby a conventional linear Taylor-type rule is optimally “curved” as the nominal interest rate approaches zero, performs well as a permanent monetary policy rule that takes the zero interest rate constraint into account. This policy rule has the effect of diminishing the “cost” of the zero lower bound via preemptive monetary easing. The desirable shape of the curve can be determined depending on structural parameters such as the target inflation rate and the long-term natural rate of interest. The nonlinear optimal simple rule provides hints regarding how high the interest rate indicated by a normal Taylor-type rule should rise before the transition from zero to positive interest rates, and the speed at which a normal Taylor-type rule should be reinstated once interest rates have turned positive.

A zero interest rate commitment can be effective when it is interpreted as a “time-restricted” monetary policy rule that will be terminated after the prevailing deflation is overcome. The content of the zero interest rate commitment – that is, the threshold rate of inflation adopted as a prerequisite for exiting the zero interest rate policy – can be optimally selected based on the economic conditions, such as the size and persistence of the demand and supply shocks, when the commitment is introduced.

We can assume a zero interest rate commitment based on a price level measure, instead of the inflation rate, but in most cases the policy effect from such a commitment is less than that from a commitment based on the inflation rate that is set optimally.

Here are two charts from the report:

Japan had a 400+ point difference above the funding costs of FX swaps until 1995 when it suddenly collapsed and became totally merged which is where it has sat now for 12 long years! This is UNPRECEDENTED. And amazing. In an economy that has grown nearly all this time.

The US chart shows a 350-650 point difference above the funding costs of the FX swaps.

This 2003 report is very important. The central bankers in Japan read it and said, 'Aso! This 0% interest rate can be made stable! We can do this for a long time, too! Wow!' The warning that this ZIRP has to be limited in time has been tossed out the door. When Japan began to grow in 2003, they found that inflation rates in the world was still low so if they dropped worker's wages, no one complained since prices dropped with the dropping wages. But the stupid Japanese carry trade began to cause world money markets to flood with new Funny Money™ and this began global inflation which first, was soaked up by the US and European property markets. That is now dead and gone. All the Japanese carry trade new Funny Money™ now is flowing like crazy into commodity markets and this hammers prices at home. So prices in Japan are rising rapidly but not wages. And wages can't drop since the Japanese [and American] workers can't get cheaper stuff to make up for wage drops. Blood will now be squeezed from stones. As I looked at dozens of Japanese reports, I could see many of them were about the ZIRP and most tried to explain how it could be either manipulated or enforced rather than alarm about its bad side effects.

The worse part is, the Bank of Japan has now come out and openly said, they will not only cling to ZIRP, they will make it WORSE. Since even they admit that inflation is double the official interest rate, they should be moving towards ending this. Instead, they frantically talk about dropping it back to the '0%' rate which would then be well below the rate of inflation. And it is far below the cost of lending within Japan! This is Super Funny Money™.

Negative Interest Rates under
the Quantitative Monetary
Easing Policy in Japan: 2004

The Mechanism of Negative Yen Funding Costs
in the FX Swap Market

Our main findings are summarized as follows. First, if the no-arbitrage conditions for both domestic and foreign banksí foreign currency funding costs between the foreign currency market and the FX swap market hold, the yen funding costs for foreign banks in the FX swap market can be written as the sum of (i) the yen risk-free interest rate, (ii) the credit risk premium for foreign banks, and (iii) the difference in the credit-risk premium for domestic banks between the yen and the U.S. dollar markets.

Second, the recent negative yen funding costs for foreign banks result from the fact that the credit-risk premium for domestic banks is lower in the yen market than in the U.S. dollar market.

Third, the difference in the credit-risk premium between the yen and the U.S. dollar markets has existed at least since the beginning of the 1990s. As the yen risk-free interest rate has declined under the quantitative monetary easing policy adopted in March 2001, however, the difference in credit-risk premium has become marked, yielding the negative funding costs.

Finally, the yen funding costs are expected to return to zero percent if foreign banks could invest in the risk-free BOJís current accounts without limits. In reality, however, the yen funding costs have remained below zero percent since foreign banks face credit lines, which limit the holdings of the BOJís current account balances.

This report tries to turn the negative interest rates of Japan into some sort of formula. Indeed, all of the Japanese reports are filled with mathematical models and formulas. But they never ever mention 'Funny Money™' much less, 'Super Funny Money™' or even the Japanese carry trade except for one paper that did mention it. I remember how that term sprang into being. Traders whispered it to each other and then some of us outsiders noticed and tried to figure out what the hell the pirates were discussing. Then, once this was uncovered, we could backtrack and see how the Japanese realized they were creating this monster... and didn't care!

For it fed their Export Industries and made them some of the strongest on earth! It made the rich Japanese overlords much richer. A rule of thumb: if any system, no matter how decrepit or evil, makes the ruling elites richer, they will strengthen and protect it. They will follow it with severe devotion and love and will fight tooth and nail, anyone who dares to meddle with it. So it is here: up until 1995, Japan had a fairly normal 'Westernized' banking system. Then they launched their own system which is utterly different. The giant FOREX reserves, the negative interest rates, the enforcing of savings from the workers and then the enslavement of these workers by making it impossible to save at all: these things were strengthened to the point, is is causing tremendous damage to Japan's future and even might utterly destroy not only the nation of Japan but the entire TRIBE of the Japanese people! Isn't that horrible?

Will they go the way of polar bears and Tasmanian devils? Will they vanish from history and become a legend? Japanese animators ask these questions with despair. But the rulers feel, they will continue onwards and will latch onto another society to live and thrive. Like, say, America. Only our own rulers are imitating them. So maybe both of these groups hope to hold onto China? History has seen this before. And the Chinese have a passion for history.

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May 19, 2008

Elaine Meinel Supkis

A number of economic 'think tanks' hate labor, hate workers and have nothing but malice towards the greater mass of humanity. Sitting upon their well-padded Olympian thrones, they snarl and snap that 'capitalism' is superior to socialism. Yet we have the very comical sight of 'socialist' and even outright 'communist' powers destroying the so-called 'capitalist' nations! Instead of trying to understand this process, most think tankers retreat into their shell and pretend there is no conflict here. Also, these same people tend to be indifferent towards the subject of slavery. This goes along with a romantic view of US slavery which was ended so bloodily. The idea that Labor=Wealth is impossible concept for many of these right wing thinkers. Time to talk about the imperial royalist, Bismark, the strange father of socialism.

Everything You Love You Owe to Capitalism

By L. Rockwell Jr.

All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies. The ancients, peering into this scene, might have assumed it to be Elysium. Medieval man conjured up such scenes only in visions of Utopia. Even in the late 19th century, the most gilded palace of the richest industrialist required a vast staff and immense trouble to come anywhere near approximating it.

We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.
*snip*
Whatever the specifics of the case in question, socialism always means overriding the free decisions of individuals and replacing that capacity for decision making with an overarching plan by the state. Taken far enough, this mode of thought won't just spell an end to opulent lunches. It will mean the end of what we all know as civilization itself. It would plunge us back to a primitive state of existence, living off hunting and gathering in a world with little art, music, leisure, or charity. Nor is any form of socialism capable of providing for the needs of the world's six billion people, so the population would shrink dramatically and quickly and in a manner that would make every human horror ever known seem mild by comparison. Nor is it possible to divorce socialism from totalitarianism, because if you are serious about ending private ownership of the means of production, you have to be serious about ending freedom and creativity too. You will have to make the whole of society, or what is left of it, into a prison.

Ruling elites love to talk about 'individuals'. When one is rich or powerful, one can be a happy individual. When one is poor, one is part of the 'masses' by definition. A poor person doesn't decide if he wishes to eat in this fine French eatery or that delightful hotel. A poor person hopes to eat anything. A rich person can decide which of McCain's six houses she wants to sleep in. A poor person sleeps under bridges. Infamously, a cheeky ruling elite in London quipped that the law against sleeping under bridges applied to the rich and the poor equally. Or as Marie Antoinette supposedly said, 'Let them eat cake.'

The life and death non-choices offered to the greater mass of humanity is not 'individualism'. And the response to this suffering often blows up into collective fury as history has a grim toll of revolutions and suppressions of the mob by armed non-individuals we call 'armies.' Indeed, the pretense of being an 'individual' is a big, fat lie. These haughty, hard hearted 'individuals' are surrounded by organized people who are so non-individual, they wear UNIFORMS. A 'uniform' is a thing that makes everyone look the same, thus the obvious name. This huge army of uniformed servants are the police, nurses, religious authorities, judges, armies, navies and so on. All the spoiled rotten little individuals are carried on the backs of this very visible mob of uniformed servitors and assistants. On top of this, the entire 'individualist' class of spoiled brats are serviced by milling millions of food producers, processors and the final mass: industrial workers, miners and builders.

Periodically in history, this seething mass organizes itself and attacks the spoiled individualists who oppress them. This is why the rulers use every tool they can grasp to destroy collective power. But whenever workers, farmers, sailors, miners, whoever manage to form unions and wrest political power, the condition of these workers improves vastly and then and ONLY then does the sun break out of the clouds and CAPITALISM takes off!

This is the iron rule of true capitalism: it rots away rapidly if it isn't shared with the workers. The workers provide labor value-added but the output becomes a burden and a waste unless workers can buy it! Why have industrialism if only 1% of the population can use it? And why on earth would a bunch of bratty individualists want to be mass-produced anything at all? They obviously do NOT want that. They want HAND CRAFTED stuff! Go ask any rich person if they want to buy a mass-produced car or a rare, hand made fancy Italian sports car. Or a hand made dress from a Paris coulture house rather than something off the rack.

Of course, they hate this sort of junk and sneer at it behind closed doors. 'That is SO common,' they sniff. But great wealth can be made by manufacturing stuff and selling these UNIFORM things to the people who have to wear uniforms or work under uniform industrial machine processes. One feeds the other. When nations cut off the ability of the workers to buy this stuff, they have to sell to someone else. And the usual game is to sell uniform manufactured capitalist stuff to some nation where workers have organized and thus, have spending power to some small degree.

What is a Luddite?

1812: For at least three hundred years the weavers from in and around the central English town of Nottingham, though commoners, enjoyed the status and rewards accorded to fine craftsmen. The weavers of Nottinghamshire produced lace and stockings that dominated the English markets and were prominent items in export trade. These products were hand made, often in the weaver's home. Today, it would be called a cottage industry. The weavers worked mainly as independent contractors, not as employees of a factory owner.

Apprenticeships, family tradition and community values insured a product of high quality. The weavers of Nottingham could afford to practice their craft with care; prices for their products, as well as for their expenses and the support of their families did not vary with the market conditions, but were governed by tradition. And the weavers had the additional protection of an ancient royal charter restricting certain kinds of textile production in England to within ten leagues of the town of Nottingham. The weavers and their families were reasonably secure in their modest lifestyle.

In the first years of the 19th century stocking frames and the early automation of the power loom threatened this long-standing way of life. Because the new equipment was expensive, the weavers could not afford to purchase it themselves and the balance of power shifted away from the weavers to the factory owners. Simultaneously the Tory government adopted a laissez-faire economic policy. For the weavers, this meant that they were asked to endure a drastic decrease in income and to submit to the regimented and unpleasant atmosphere of a factory, while the price for their food, drink, and other necessities of life increased. The weavers complained bitterly that the machines made mass produced products of shamefully inferior quality. Naturally, the weavers saw the new technology as the most powerful tool of their new oppressor, the factory owner. A vulnerable tool.

Wages collapsed. Free individual weavers lost their freedom and had to leave their comfortable homes and travel to factories where they had great regimentation and mind-numbing labor with no sense of reward. And all that for one quarter of what they earned earlier! No wonder they tried in vain to smash the Satanic Mills! But the PROFITS for the people who owned these mills were great. They didn't sell this to the English workers who now could hardly buy bread. They sold this to EXPORT markets! In Japan today, we see this insidious process at work. The working class is being squeezed to death. All inflation of commodities and raw materials have to be eaten like a bitter root by the workers while export profits are one of the highest on earth. The rich in Japan are happy individuals getting richer and the workers are getting increasingly agitated at the bottom.

The plight of the English weavers hit the rest of Europe very hard. The beginning of communism is from this time frame. Nearly instantly, Karl Marx and Frederick Engels hammered out a new way of looking at labor and capital. 'Das Kapital' is a very important economic book that has become encrusted with crazy ideas and emotional hysteria both by 'communist' dictatorships and lunatic 'individualist' right wingers. What is particularly sad about all this is how the 'individualists' who are right wingers always end up clinging to fascists for survival. Fascism is all about non-individuals marching in unison. A pathetic ironic point. Let's look at today's news to see the collapse of the US worker as an economic force:

Workers see faults in American Axle-GM deal
Around 3,600 auto workers have gone without paycheck for 80 days

Other workers said they want to keep their nearly 12-week-old strike going to hold out for a better deal. Several said there was a lot of screaming inside the meeting as more than 1,000 Detroit-area workers expressed frustration at facing a 34 percent pay cut if the contract is approved.

“I’m voting no. It’s totally unacceptable,” said Gary Reed, 52, of Warren, who criticized American Axle Chairman and CEO Richard Dauch for making millions while asking production workers to take a pay cut from $28 per hour to $18.50.

“It’s a slap in our face,” Reed said. “We’ve been watching this guy making millions and millions of dollars even while we’ve been on strike, and were going to accept a stab in the back and just walk away with a smile on our face?”

The wealthy individualists who run our corporations have fixed things so they pay very little in the way of taxes. The money flows towards the bank vaults of the extremely rich. There is so much corruption due to these rich people buying our government out, most of our Senators rise into the multi-millionaire class once they gain a foothold in DC, just for example. The working class of America was conned, during the inflation years, into demanding tax cuts rather than resetting the income tax code to reflect inflation. Via this cruel trick, individuals who wanted to pay no taxes on vast wealth snuck through all sorts of sweetheart legislation. The poor wretches who voted for tax cuts rather than redoing the tax code to reflect inflation voted for people who hate workers. In the hopes of not paying taxes, they trooped to Reagan and the Bushes.

Taxes were cut. But not removed from the government ledgers. Instead, they were turned into debts which now bedevil all of us. The news for workers ever since they foolishly voted for Reagan, is all bad news. Wages have not kept up with inflation. The purchasing power was allowed to rise but this was only by putting the other half of working families to work. Once the entire family had to work to keep up, their mobility and power to organize dropped. Also, tremendous propaganda has been poured onto all minds, telling us unions are evil. So here we are, after 30 years of Reaganism, workers are seeing wages not only not keep up with inflation, wages are being ruthlessly slashed again and again.

'Free trade' was used to flood the US with foreign goods. For a short while, the US workers benefited from cheaper stuff to buy. This filled the working class with wonder and joy every Xmas as a flood of toys and other things poured out of this seeming endless sack. But as wages collapse, the bag of Xmas toys and goodies is now being tied shut. This so alarms our trade partners who flood us with these goods, they are struggling right now to fix this problem via some sort of cheap credit. But 7 years of easy credit has pretty much driven all US working families right to the brink of bankruptcy. The Mises Institute cannot understand all of this. The need to hate workers is so intense and ideological, they really think that the cure to our problems is to have more and more 'free trade' coupled with a total crushing of workers so things will be 'cheap.'

The Mises people adore the turn of the 19th to the 20th century. This period leading right up to WWI is their Golden Age. Let's look at some information from back then:

South African Gold Mining: 1886-1933

Chinese miners were imported to the Witwatersrand between June 1904 and January 1907 and these dates define the next era of change in stoping labor force organization. It saw the establishment of several precedents important to subsequent transformation of stoping practices. Among these, a major milestone was the first ‘scientific’ examination of operations and open diffusion of this analysis to the entire industry.

When Chinese arrived on the Witwatersrand, the 1904 Labour Importation Ordinance closed all skilled and semi-skilled jobs to non-white miners. Therefore, while the arrival of the Chinese caused a loss of employment among some lower skilled whites, it also made redundant semi-skilled African miners (Davies, 1976, p. 59). This closing of upward occupational mobility to relatively low cost African miners was accepted by management as a temporary measure in order to facilitate skilled (European) miners’ acceptance of Chinese importation. The Chinese provided a large stock of relatively low cost labor on the South African market. This increased supply in South Africa undermined the bargaining position of African labor and a steady decline in their remuneration ensued.

During the 18th and 19th century, black slaves were hauled all over the planet so they could be exploited as slave labor. Wherever they were used, the wages of other 'free' workers collapsed. Just as slave labor killed the middle class in Rome. Everyone outside of the property-owning or political classes ends up as poor serfs or slaves. After Europe ravaged China and destroyed that empire, they enslaved the Chinese labor who often were opium addicts. The great canals dug during this period often had Chinese coolies doing the hard work. Building railroads or metalled roads, etc., the Chinese were used to break the back of any labor organizing.

The US was very racist back then [and still is in many ways] and didn't want Chinese labor to come in great masses. So labor from Europe was brought over. Only along with this came labor organizers and revolutionaries. Which is why the US eventually became unionized and had strong labor laws starting from 1900 until Reagan destroyed all this. The destruction of labor's powers runs right alongside with the destruction of the banking system. All the regulations set up to prevent fraud and bubbles was killed one by one. So we have a collapsing labor pool and a collapsing banking system running shoulder to shoulder.

Inflation appears tame, but you're paying more

The relentless rise in energy over the past few years has had an impact, certainly in what we pay for gasoline but also in what we pay for food. Food prices rose last year by the largest amount since 1990 and have continued surging this year in large part because of higher energy costs, which means that fertilizer is more expensive. Transporting the produce from the farm to the processor to the grocery shelves costs more, too.

But outside of increases in food prices _ partly blamed on an energy-related impact that more cropland has been diverted from growing corn for food to growing corn for ethanol _ there has been little sign that higher energy prices have become embedded in higher overall inflation.

The weak economy has played a major role in that by helping to restrain labor costs, which account for two-thirds of the cost of most goods.

With layoffs rising for four straight months and the economy flirting with a recession, there has not been a lot of pressure to raise wages. Indeed, the government reported Wednesday that inflation-adjusted wages for nonsupervisory workers fell by 1 percent in April compared to a year ago, the seventh consecutive decline.

Workers are not causing inflation. But they will, like in Japan, be forced to eat the inflation caused by reckless central bankers. Note that during the easy credit years, wages FELL. A very dangerous sign. One that suggests we will have a classic 'Long Depression' such as the one created by England when it crushed workers there in the 19th century. Not every nation wanted to be like the English, by the way. Germany was united by the iron will of one man, who happens to be the creator of Social Security:

BISMARCKSCHE SOZIALGESETZGEBUNG

What is known as Bismarck's social security legislation dates back to the Imperial Message of November 17, 1881 to the Reichstag (National Parliament), in which the conviction was expressed "that the healing of social wrongs must be sought not solely through the repression of social democratic excesses but just as much by positively advancing the well-being of the workers". In the era that followed, regulations were passed on the three most common areas of risk:

1. The Law concerning Health Insurance for Workers (Gesetz betreffend die Krankenversicherung der Arbeiter) of June 15, 1883 provided for the introduction of national compulsory insurance for most manual and white-collar workers in industry up to an annual earnings level of 2,000 Reichsmarks. This insurance was subsequently extended to the transport sector and to workers in agriculture and forestry. On April 10, 1892 the entire set of provisions was promulgated afresh in the form of the Health Insurance Act (Krankenversicherungsgesetz).

2. On July 6, 1884 there followed the Accident Insurance Act (Unfallsversicherungsgesetz) for workers in particularly dangerous establishments. Later, the construction industry and agriculture and forestry were included. On July 13, 1887 accident insurance was decreed for the shipping sector.

3. The provisions were completed on June 22, 1889 by the Law on Invalidity and Old Age Insurance for Workers, Journeymen and Apprentices (Gesetz über Invaliditäts- und Alterssicherung für Arbeiter, Gehilfen und Lehrlinge), irrespective of wage level.

In introducing a social security policy Bismarck's laws anticipated, in its main features, the present system of social security.

As England prevented its own workers from gaining any ground, as they were ground under the boot heels of the individualistic capitalists, Germany set off on the socialist road. Within a very few years, Germany was nearly able to destroy England on the battle field. As it was, Germany was destroying Britain on the manufacturing front. German workers could buy manufactured goods. English ones could barely afford to eat a very poor diet. Germans spread around the world, talking about socialism. While England sought to control markets by dumping manufactured goods on lands they conquered.

Social Security Online

Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany's Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck's behest, in 1881 by Germany's Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: ". . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state."

Bismarck was motivated to introduce social insurance in Germany both in order to promote the well-being of workers in order to keep the German economy operating at maximum efficiency, and to stave-off calls for more radical socialist alternatives. Despite his impeccable right-wing credentials, Bismarck would be called a socialist for introducing these programs, as would President Roosevelt 70 years later. In his own speech to the Reichstag during the 1881 debates, Bismarck would reply: "Call it socialism or whatever you like. It is the same to me."

The German system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government. Coupled with the workers' compensation program established in 1884 and the "sickness" insurance enacted the year before, this gave the Germans a comprehensive system of income security based on social insurance principles. (They would add unemployment insurance in 1927, making their system complete.)

My husband was disabled by work damage. Social Security and workman's comp keeps him alive. The cruel little universe of the 'individualists' who pretend they are 'capitalists' ignores this reality. It is far better to keep people like my husband alive than to have people like myself running into the government's offices, with a gun and molotov cocktail, screaming, 'Die, you bastards!' For in the long run, social security means security for all the Marie Antoinettes out there.

And we still have the riddle of why the socialist countries are doing splendidly today while the capitalist ones are dying. Eh? Germany is not a pure capitalist nation. They managed to cling to their social systems despite WWI and WWII. And today, they have the world's biggest trade surplus profits! Amazing, isn't it? And they work well with the Russian and Chinese communists. This is because they have a socialist ideological base. Japan used to have that and only in the last 7 years have they decided to ape the US and England. With disastrous results. Turning what used to be a fine worker's comfort zone into hell: the signs of outrage are growing greater there.

And also, one last thing: the Chinese workers are getting very noisy. They show more energy in loudly resisting their own rulers lately. They are organizing and marching. They are also filled with greater and greater sense of nationalism. And this goes back to Germany: the national/socialist movement which was derailed by ethnic cleansing. A ferocious and dangerous force is at work here. And anyone who thinks sitting in a palace is a good plan should review some shocking history.

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Culture of Life News Main Page

May 19, 2008

Elaine Meinel Supkis

I harp all the time about tariffs and barriers. Today's news bears me out in this matter. The US is ideologically unable to use ancient tools to protect our sovereignty. Japan's GDP is above 3% while ours is going negative. The need to protect our currency and our trade is very important. Deliberately making a currency weak for trade purposes won't work for the US. It only makes our situation worse. And increases the hidden and not so hidden future taxes of our people. We also go back to the great book, 'The Bubble That Broke the World' to learn more about gold and international trade. Also, we visit an old, old Federal Reserve report about gold reserves written the first year of WWII. Back when the US was the world's most solvent nation.

The Canadian Dollar under the Gold Standard (1854-1914)

The price-specie flow Classical economists explained international economic adjustment under the gold standard using a theory developed in part by David Hume—the price-specie flow.

Under this theory, an economic shock that led to increased demand in one country, and rising prices, would trigger an increase in imports and a countervailing outflow of specie to the rest of the world. The drain in gold from the country experiencing the shock would reduce the quantity of money in that country, leading to higher domestic interest rates (which, in turn, would slow demand), lower prices (relative to those elsewhere), and higher exports. Increased net exports and capital inflows attracted by relatively high domestic interest rates would restore equilibrium to the balance of payments.

The opposite process would happen simultaneously in the rest of the world. The successful functioning of this adjustment mechanism depends critically, however, on the sensitivity of demand to price changes in the countries affected. If the “price-elasticity of demand” was low, it would be possible under the fractional gold standard that prevailed during this period for a country’s reserves of specie to be exhausted before adjustment was completed.

The volume of thinking and writing about using gold as the basis of all banking is huge. And was all tossed out the door by first, the British empire and then somewhat later, by the American empire. This occurred during the period running from 1916-modern times when the British empire sought to re-incorporate itself into the American empire. The many prohibitions of thinking about 'isolationism' and 'anti-free trade' comes from this merger. Americans who resisted this merger were mocked ruthlessly until nearly everyone surrendered to this process. The merging of the French empire and the rending of and then absorbing of the German empire was all part of this. Oddly enough, Japan's imperial dreams also merged during this time but being a very closed society, Japan did this while remaining very much aloof and apart.

If the US were 'isolationist' it would react like Japan to the concept of trade deficits: pure poison! Instead, because our 'allies' are not allies at all but rather, joint mistresses and masters of our economic house, we are curtly ordered to ignore the trade deficit and tariffs are evil, gold standard is foolish and patrolling the entire planet for the other empires that are now embedded inside of our own empire, is to be done for free and entirely at our own potential losses. It is interesting to me that the day the US cast away its rock, the gold standard, coincides with the death of our sovereignty. This is why we cannot stop the flood of imports that ravage our nation, for example. We have foreign powers meddle, via financing our politicians in various tricky ways...note how many of the top political controllers in DC have become multi-millionaires while in office! We have no longer a decent banking or taxation system thanks to this.

All the theories about trade revolve around punishing nations that go into the hole by allowing excess imports. The quote above comes from an article about Canadian sovereignty of their own currency and how it was killed. And what killed it?

World War I. England basically took the gold reserves of Canada, a gold producing country, and used it to buy time. Slowly, Canada is losing sovereignty to the US even as the US loses it to the world. The balance of monetary values vis a vis both Canada and the US is negotiated rather than the forces of commerce. This is due to the astonishing fact that the US has a giant trade deficit with Canada. Instead of the classic solution, the US raising interest rates and making Canadian goods more expensive, they tinker with other solutions. Across the board, all the classic systems for dealing with failures like the US trade collapse, are being tossed overboard and 'new' solutions are being created. All, so this failure in trade can continue! Which is a disaster of historic proportions.

All negotiations concerning monetary rescues are based on one premise only: to maintain the US trade deficit! All the other nation's negotiators have this in mind. It is, indeed, #1, #2 and #3 on their private agendas. There is no other point to these negotiations! Europe has a big trade deficit with Asia that is growing very fast. They want to kill this and keep their trade benefits with the US. So they have conspired with Asia to raise the value of the dollar. This is being sold to the US as a triumph for us.

It is not. For we still have the trade deficit. Indeed, I have said before, years ago, using a weak dollar to fix our deficits won't work. For the simple reason, we can't make the dollar weak vis a vis all our manufacturing competitors. And it raises the cost of importing commodities we need for manufacturing. It makes our trade deficit worse by raising the value of commodities we need, like oil. While not dropping imports of manufactured goods! Trying to balance the dollar against all our competitors so it is strong with the commodity nations and weak with the manufacturing nations is IMPOSSIBLE. This is why tariffs have been very useful in the past: it targets specific areas for controls and restrictions. It also raises money for the government. Right now, we are taxed ever more for this purpose. While importers get a free ride.

But the 'thinkers' of this vast US/EU/UK imperium have forbidden even thinking about tariffs and barriers! They bend all their will towards teaching us, this is hostile and evil. We are unable to even discuss this topic anymore. It never makes the news nor do any politicians, all in the pay of outsiders wishing to use us as an imperial tool, none of them [excepting a very tiny handful like Ron Paul] even mention tariffs. Back when I hung out at other economic blogs run by professors, the minute I wrote, 'We must have tariffs and barriers' they would blow up and scold me. As if the CAUSE of the Great Depression was tariffs and barriers and not the bankruptcy of all the European empires due to WWI financing finally collapsing. Now, on to today's news:

TIPS Show Bonds See Bubble Burst for Commodity-Driven Inflation

Consumers expect prices to rise 5.2 percent in the next 12 months, according to a monthly survey by the University of Michigan in Ann Arbor, the most pessimistic they've been since 1982. Treasury Inflation Protected Securities, or TIPS, show traders anticipate inflation of about 2.9 percent by January, in line with its average of 3.1 percent the last 20 years.

The disparity has never been wider. While consumers grapple with gasoline above $3.70 a gallon, record rice prices and the escalating cost of wheat, TIPS say the commodities market is a bubble about to burst. A commodity slump would worsen losses in the $500 billion TIPS market, where investors lost 2.35 percent in April, the most since December 2006.

``There's a lot of people who just don't believe the economy's going to stay strong enough to keep prices of things where they are,'' said Chris McReynolds, who trades TIPS in New York at Barclays Plc, the largest dealer of the securities. ``Part of what's going on here is a lot of people view this price rise in oil, a lot of commodities, as being somewhat bubbleish and that they'll come off again very quickly.''

When I go around the neighborhood, I find severe despair due to inflation. It is now at the point, people can't even think of taking out a loan to shove inflation costs into the dim future. Eventually inflation will kill spending on imported goods. It is a cruel way to do this since it gives our government NO benefits nor does it release us from our rising future tax burdens. Seriously, if we paid higher prices for things due to tariffs and this money flows into DC which collects this, we still have 'inflation' but the benefits of this inflation doesn't flow overseas, it keeps our government solvent! Instead, we are going into the hole while our government digs an even deeper fiscal hole!

Our ancestors were not idiots. The tariffs were invented because they worked on several levels. I would dare to say, tariffs MADE THE USA and many things were made in the USA thanks to this. Now, we have no tariffs and lo and behold, nearly nothing is made in the USA. Isn't that....stupid? Or what? What proof do we need at this point?

The monetary solution set up by Keynes and his crew works great...for Germany and Japan. But not for the US or the UK. Since all the negotiations and deals in the past 35 years such as the Bretton Woods II negotiations, the Plaza Accords, the Louver Accords failed, we must change gears. Just discussing tariffs and barriers set all our trade partners on fire. This proves we are on the right track when we do this. It scares them therefore, it is what we should do. Since most of our exports are now commodities, we don't need to fear trade wars nearly as much as the host of nations using us for trade profits. Their losses will be greater than ours. But we have one thing we have to do before we try this: we have to stop fighting all of Europe's colonial wars!

This is the 'isolationist' side of the deal. Europe and Japan have defense budgets that are far, far smaller than ours. And both resent any American attempts at getting them to pay their own way. Negotiations over our expenses, trade imbalances and our dying currency and banking system has to be loud and hostile, not friendly. For the goals we seek are diametrically opposed to the goals of our 'allies'.

Exports again push up GDP growth

Japan's economy grew at a faster-than-expected pace during the January-March quarter, but uncertainty over the future also increased because the country remains heavily dependent on exports, analysts said Friday.

According to preliminary estimates released by the Cabinet Office on Friday, gross domestic product during the first quarter of this year rose by a seasonally adjusted 0.8 percent, or an annualized 3.3 percent, from the previous quarter in real terms.

Real GDP grew for the third straight quarter, supported by brisk exports to emerging economies and the European Union, which more than offset the decline in exports to the United States.

The US isn't 'growing.' Europe, thanks to the strong euro, isn't 'growing'. But Japan is as it has for quite a few years. The fake depression there is onesided: workers are depressed. Exporters are elated. All of this growth in Japan is due to exports. Exports to Europe are picking up rapidly as they fade somewhat with the US. Up until this year, Europe cheerfully conspired with Japan to prevent the US from adjusting our finances to deal with our giant trade deficit and government overspending. But now the knife is being turned on Europe and Europe will fall to Japan's aggressive trade policies. The queer fact is that one of the top exporters of the world has the weakest currency while the world's biggest importer, the US, has a strong currency with Japan [remember, the fall of the dollar is against the euro and others, not the yen!].

When the US tried to drop the value of the dollar deliberately in order to fix trade problems better fixed by tariffs was a failure due to Japan counteracting this via dumping excess trade dollars in their bulging FOREX reserves. This is the third issue: the US refuses to understand how FOREX reserves work as hostile trade tools. As our trade system collapses, so does our government funding and our entire banking system. We are in a crisis now where ALL our systems have collapsed and we haven't a single useful tool for dealing with this. We have a central bank which adamantly refuses to raise the value of the yen by buying and holding yen. We have no tariffs or barriers to trade and our dollar is dropping in the wrong places: energy systems, for example. So all our finances are flowing to oil pumping nations like Mexico, Canada and the Middle East rather than staying home. And comes back home in the form of other nations buying up our infrastructure and our financial tools. And we are losing sovereignty due to this.

Japan's cruel ways astonish us:

Many private-sector think tanks are forecasting a decrease in summer bonuses for the second straight year-on-year decline.
*snip*
The contraction in corporate investment in plants and equipment was caused by the sharp deterioration in business confidence amid soaring prices of crude oil and raw materials and the appreciation of the yen.

Such investment could shrink further.

Real GDP for all of fiscal 2007 rose by 1.5 percent from a year earlier, exceeding the government's forecast of 1.3 percent, but falling below the 2-percent level for the first time in five years.

GDP on a nominal basis increased by 0.6 percent in fiscal 2007, short of the government projection of 0.8 percent.

The nominal growth rate was lower than the real growth rate for the 10th straight year, underlining the deflationary trend.

The DOMESTIC markets of Japan are in a depression cycle. Wages and bonuses are being crushed even as profits from trade soar. Germany, not China, is the world's #1 trade profiteer. Japan is #2. And Japan has a depression? Only at one level. Japan's business outlook is fading due to rampant inflation of imported commodities. Just as it is here. This is why Germany's strong currency is helping their profits: commodity rises have been significantly smaller in Germany.

Bush Says Saudi Oil Boost `Not Enough' to Ease Prices

Saudi Arabia, the world's largest oil exporter, said yesterday, while Bush was in Riyadh, that the country's daily output will rise to 9.45 million barrels a day in June. Saudi Oil Minister Ali al-Naimi told reporters the kingdom took the step in response to demands from customers.

Oil prices have doubled in the past year on surging demand, supply disruptions in places such as Nigeria and commodity purchases by investors as a hedge against a weakening U.S. dollar. The price surge threatens to accelerate inflation and curb economic growth.

The US which is flooding the world with worthless dollars, wants the world flooded with oil and thus, get out of our trap. It won't work. Any excess oil will be sopped up by Japan and China as well as India. Asia has a growing desire for oil and this is due to the trade imbalances in the US. So the solution is for the US to constrict oil to the US itself and force the populace here to cut back on oil consumption via higher oil taxes. This is very unpopular, politically. So it won't happen. Thus, the only reasonable tool would be trade tariffs that bring IN taxes from the OUTSIDE. People pay higher prices but it is a haircut at the entrance to the US rather than at the exit.

Cheap energy leads to misuse and wastage. So higher prices are not a total evil. It is coming very fast which is evil. And I warned the US back when energy was cheap, to tax it higher and use the money for better transport systems like the trains and use it to launch alternative energy systems. Cheap energy is a big vote getter. Ask Reagan, the fool who drove us in this direction in the first place. He basically said, 'What, why worry about the future?' And the US celebrated this garbage. Still does.

But the writing is on the wall: the trade surplus nations will get the oil in the long run. We are not competing with Saudi Arabia for oil, we are competing with Germany, Japan and China for oil! And they, not we, have the trade profits to buy the oil. This economic fact is being masked by Germany, Japan and China so they can continue trade surpluses with the US. But we would be fools to fall for this. We must resist this with all our might. Not out of hostilities but out of a desire to survive. For only a fool can imagine we can run huge trade and tax deficits forever to infinity. This is obviously impossible. The longer we do this, the more utter our destruction when it ends.

China's Stocks Bow to Whims of Control Freaks: Michael R. Sesit

On Sunday, April 20, the China Securities Regulatory Commission, the country's market overseer, said shareholders selling more than 1 percent of a publicly traded company's stock within a month would have to execute the transaction in a block trade, instead of releasing the shares onto the open market.

The intent was to make sure buyers were already lined up, which would slow the release of new shares onto a falling market and prevent investors from being spooked by sudden new supply.

On April 24, the government cut the tax on stock trading to 0.1 percent from 0.3 percent. The change came two days after the Shanghai Composite Index fell 51 percent from its October highs. The CSI 300 Index jumped 15 percent in two days and 23 percent in seven. The market has since shed 0.3 percent.

This is no way to run a railroad, or a financial market. Typical of most bureaucrats, Chinese regulators seem to feel a need to micromanage, which raises serious doubts about the government's commitment to free markets.
*snip*
What's more, their motives are suspect. Regarded as overly concerned with maintaining face, Chinese officials are commonly believed to be eager to see the equity market rallying during the Olympic Games in August -- although there is no substantive economic or financial link between the two. It's not unlike their refusal to bow to international pressure to curtail the Olympic- torch relay.

This isn't to say that Western policy makers never seek to influence equity-market performance. The Federal Reserve and Bank of England follow stock markets because of their impact on consumer and business sentiment, and on the economy.

HAHAHA. The US government and the central bankers meddle in our markets no end. Ask Bear Stearns. In China, the government meddles. In the US, Goldman Sachs and JP Morgan meddles. Which is better? Let's see: China has a world trade surplus and a huge FOREX reserve. The US has a huge trade deficit and a tiny FOREX reserve! Shall we go on?

China's problems are half our own! Our 'wealth' is driving us into bankruptcy! Is this good? Of course not! Note the condescending talk of this hot shot American. The Chinese are stupid and the Americans are smart. This is why China will be our future rulers. The stupid things the government is doing are still leading China upwards. The government didn't want everyone putting everything into stocks and they deliberately killed the markets at a time when ours died due to stupidity! This way, people had to put money in SAVINGS. During a time when the US savings rate went negative, the first time since the Great Depression. In the US, we see frantic people bidding up the price of gold, wheat, oil, whatever in order to get a return on their savings! They can't just put money in a bank!

In China, the interest rates for banks and the reserve ratios have been aggressively moved upwards to encourage savings. Here, it is the exact opposite. Who will be the 'smart' winners in the end? The US or China?

I am betting on China, of course. This long article of mine isn't over yet. Here comes some history yet again. I try to frame my history sections with modern news so the parallels become clearer. So today we visit the history of gold reserves used to back imperial currencies. This topic is very important to today's markets and I suspect 'stupid' China and 'stupid' Russia are gearing up to reimpose the gold standard on the reckless lenders of the West.

Evolution of the World Economy, Precious Metals and India | Book Reviews

Part 2 -- The Role in the Capitalist World Economy: Some Cross-National Comparisons, 1880s-1940s -- covers three regions: Japan, South Africa and Australia. Simon Bytheway's "Japan's Adoption of the Gold Standard: Financial and Monetary Reform in the Meiji Period" (pp. 79-96) is a remarkable piece that shows how Japanese industrialization was related to the adoption of the gold standard which in turn allowed Japan to import "an unprecedented amount of foreign capital" (p. 79). Silver was produced in great quantities during those decades and there was a corresponding decline in silver prices; importing commodities from gold standard countries was more expensive. Japanese agriculture prospered but inflation in silver was disadvantageous to creditors and people living on wages. Meiji authorities chose to implement the gold standard and to industrialize the country at the expense of the export sector. The agreement to end the Sino-Japanese war included an indemnity to be paid in English pounds convertible to gold in London. Japan adopted the gold standard in October 1897. The deposit in London of a Chinese indemnity secured British economic and political cooperation. In September 1917 an embargo was placed on gold exports from Japan and the gold standard ended. (p. 94).

Russell Ally's "Gold, the Pound Sterling and the Witwatersrand, 1886-1914" (pp. 97-122) should had been placed before the previous article because in addition to examining the Witwatersrand history he succinctly explains how the gold standard of 1886-1914 was really a "sterling standard." British commercial and financial supremacy depended on the gold-convertibility of the pound, which was the responsibility of the Bank of England (p. 103). The discovery on the Witwatersrand in 1886 came after "a frantic search for the metal all over the world." The "Second Industrial Revolution" spanned two decades from 1871 to 1890 -- decades during which industry and trade reached unprecedented levels. "The gold standard could not have accommodated the growth without a corresponding increase in the stock of gold" (p. 99). The South African discovery coincided with similar events in United States, Canada, Russia, and Australia. The economic emergence of the United States and Germany challenged the hegemonic monetary position of Britain. In this context the weekly remittances of South African gold were crucial. The South African War and, more importantly, World War I indicated how the British Imperial system was dependent on the Witwatersrand gold fields (p. 114).

Gold discoveries always coincide with banking collapses. The value of gold rises just as we see today, when the banking system loses credibility due to excess credit making...granting loans too recklessly. The gold standard doesn't prevent banking collapses. This is due to dilution of the gold reserves vis a vis lending. China this year has raised the holding reserve rate ruthlessly to kill excessive, wild lending. It seems, only a very draconian dragon type government can have the balls to do this. It is very unpopular in democracies. Democracies tend to go for the easy money every time. Only a cruel government can go contrary to this. Like Japan's government which is a one party state. During the British attempt at the gold standard, every time the banks collapsed, Britain sought out more gold and gold prospecting would shoot upwards. So we get the 1849 California gold rush or the 1890 Alaskan and South African gold rushes. The African rush was particularly important. It supplied over 80% of the world's new gold for nearly a century. The South African gold also ushered in the cyanide process which is tremendously polluting but very effective for teasing out the gold flakes from dense rocks.

The cyanide kills all living things where gold is processed. Again, the striking connection between the Cave of Death and wealth creation comes to my mind. We cannot ignore this. The other day, I explained why gold is a good restrictor of the creation of wealth. And the world dealt with this restriction by seeking to find more and more gold no matter what so business could be unrestricted. Then the banking system collapses anyway! Gold or no gold. This is a human riddle we must understand. For one of my themes is, human nature will always seek a way past any restrictions or barriers set up to prevent us from falling into the pit of economic destruction. We want infinite wealth very badly. And it is fatal if we try to gain it. An issue ancient Greek philosophers struggled with in vain. A thing Jesus tried to stop using his stories and personal example. This failed, too.

Bubble That Broke The World
Page 123 :

For this now is the modern function of gold—to limit the amount of money and credit that may be wilfully, irresponsibly created and set free. Organized credit is relatively a strange thing in the economic life. New and experimental forms of it are continually being invented and we love to deceive ourselves with them. We forget that credit in any form represents debt in some other form. We know about ourselves that we have seizures of ecstasy and mass delusion; that again a time may come when the temptation to throw the monetary machine into wild motion so that everybody may become infinitely rich by means of infinite debt will rise to the pitch of mania, as it did, for example, in 1928 and 1929.

With this intelligent knowledge of ourselves we make bargains beforehand with reason; we agree that money, credit and debt shall not be inflated beyond a certain ratio to gold, under certain penalties such as we shall be very loath to pay and yet such as we cannot refuse to pay under worse penalties still.

So long as the convention is reasonably kept in the faith of credit nobody wants gold. People know what the fiction is. They may read for themselves in the published figures of the bank that its liabilities exceed its gold ten- or twentyfold, and yet they feel no anxiety about the gold value of their deposits. They may read for themselves in the figures from the public treasury that the gold reserve is only one half or one third as much as the amount of paper money in circulation. Yet they will treat that paper money as if it were gold. Nobody would dream of supposing that a country, no matter how rich, could redeem its bonds in gold. Yet its bonds will be treated as if they were gold, and one who happens to want gold for them may freely have it. All so long as the convention is kept.

I can't praise this Garrett book enough. The Mises Institute is often rather childish in clinging to a very hoary Victorian model for financial foundations. Their utter rejection of socialism means they want the British Empire complete with domestic and foreign slaves, not the Bismark ideal of a strong nation with strong, healthy workers who are educated. The failure of Germany was due to the desire to have that with slavery as an added goodie. So they kept trying to enslave neighbors as well as distant foreigners. Today, they no longer are doing this, they are trying to spread the German brand of socialism to the rest of Europe. Again.

But Garrett was an analyst, not an ideologue. I am very happy the Mises people recognize this genius and are promoting this book. I will be buying it and adding it to my own collection since reading it online is a pain. I prefer books for history because frankly, I read in the bath a lot. Heh. The above quotes are self-evident and I think, right on the money.

Bubble:

Does this mean, as some of the silly textbooks used to say, that we are all gambling upon a mythical law of averages? No. It means a very definite thing. It means that if every kind of physical wealth were priced in gold, all in one moment of inventory, the aggregate value of it would not be less than the total amount of money, credit and debt outstanding against it. Then all the money is as good as gold, all the credit is gold credit, gold itself is a nuisance in the pocket.

But let the faith be broken, let the delusion arise that the fiction is the reality, let the limit upon the amount of credit that shall be set free be left to imagination, and presently there is no way of telling what anything is worth by pricing it.

For a while this difficulty of not knowing what anything is worth but inflames the ecstasy. Everything will be priced higher and higher to make sure it is high enough; there will be the illusion that things are becoming dear and scarce. They seem to be dear because the value of the money and credit in which they are priced is falling; they will seem to be scarce because people are buying in the expectation that prices will go higher and higher still.

Suddenly doubt, then coming awake and panic. The spirit of gold has been debased by senseless inflation. The faith is lost. All with one impulse people rush to seize the gold itself as the only reality left—not only people as individuals ; banks, also, and the great banking systems and governments do it, in competition with people. This is the financial crisis.

All of it has happened. It was not the gold standard that did it; it was breaking faith with the gold standard that did it, and the case would be the same if the standard were anything else.

Hoarding leads to shortages. An example from the gas rationing of the seventies: the need for gasoline shot upwards when the price rose fast because people feared, if they drove until the tank was empty, they would pay more for gas. So everyone topped off their tanks on a daily basis rather than a weekly schedule. This caused shortages which raised prices even faster! We are seeing this again, today. People are buying gas, not slower than normal but FASTER than normal. This is 'individual hoarding' behavior. We are seeing record amounts of oil being pumped and it is vanishing from the markets faster and faster. The US government, until this week, increased purchases of oil for our reserves, for example.

The euphoria from the value of our homes shooting upwards due to monetary inflation created by the central bankers dropping interest rates well below inflation has now transmigrated to panic as the rates are again, dropped well below inflation. So people are using this bonus to bid up the price of oil, etc. And since we are all topping off the tanks again, the buying of oil products is RISING, not falling. But the percent of income devoted to this is rising, too. Which restricts spending on other things. Which depresses manufacturing, for example. As people lose their jobs, the unending troubles spread like a blood red sea at sunset as the tide rises. We can't fix this with gold or any other system at this point. We can hope gold sops up all the excess dollars. But this will lead to civil strife as people need to work, eat and live in houses.

It is far, far better to not create excess dollars to be sopped up somehow. This is the lesson we must learn, alas. As Volcker points out. Sopping up excess dollars via energy is evil. Sopping it up via higher interest returns on savings is good. Sopping it up via gold purchases is bad. Doing this via higher interest rates is healthy and good for our banking system! This is why I support Volcker and not the gold peddlers. They are selling gold and want your money. Volcker wants the damn bankers to give us our money!

Bubble:

We go on the assumption that a bank is more interested in gain than in its own solvency and if it is not watched its greed for gain will wreck it. Therefore it must be policed. Examiners clothed with arbitrary power must appear at unexpected moments, taking the bank by surprise in any wickedness, and say: "Throw open your books." And yet they fail.

It will be always impossible to keep a bank solvent by law. The law that specifies the maximum risk a bank may legally take with other people's money turns out to be a law of minimum security. A good banker will not take a risk simply because the law says he may; he will use his own judgment. On the other hand, a reckless banker will find a way to do what his greed desires, no matter what the law is, even a legal way.

But arresting bankers: that puts the fear of god in them! We did this with the Savings & Loan collapse. Except we didn't really. The Bush family, under the aegis of Bush Sr, committed banking crimes and got off scot-free. And the Bushes to this day, happily rule America and have destroyed our entire banking system. Moral of this story: if criminals run the banks and don't get arrested, they will loot the banks. Duh! This is why I say, arrest all the Bushes. If necessary, arrest all trees, too. Heh. Actually, they are directly responsible for conspiring with Goldman Sachs and JP Morgan as well as foreign powers in order to loot our banking system and our nation.

Here is an old publication by the Federal Reserve from the beginning of WWII which talks about gold:

At one time gold circulated freely as money and was the basic form into which all other types of money could generally be converted. At present, however, the gold stock in most countries is held largely or entirely by central banks and government treasuries as a legal reserve against note and deposit liabilities or for stabilizing exchange rates. All gold belonging to the United States is held by the Treasury Department. Private gold holdings are forbidden except in limited amounts for licensed purposes. Gold certificates, issued by the Treasury against a part of its gold stock, or gold certificate credits on the books of the Treasury, are held by Federal Reserve Banks as reserves against their note and deposit liabilities. Gold may also be held by Federal Reserve Banks under earmark for account of foreign central banks or governments. Such earmarked gold is not a part of the monetary gold stock of this country.

This long article is full of charts. Reading these, we can get a whiff as to how world gold markets operated during the very critical period from the beginning of WWI to the launching of WWII. Britain destroyed global banking when she tried to continue to be the premier currency in the world after going bankrupt during WWI. That grinding, epic war went on forever [actually, our stupid colonial wars seem to last a lot longer but the bankruptcy for us is just as obvious] with Germany and England hammering on each other with stupid mindlessness. The confrontation in Europe was ceremonial while the real battles were overseas as both struggled to destroy each other's trade. The US saved England by singlehandedly funding this mad war after England went bankrupt.

The huge South African gold production that made England the Queen of trade thanks to the gold standard, ceased to flow to that empire and began to flow to the US. Starting in 1914. Here are some statistics I gleaned from these charts:

***************************************
US gold reserves:

1914: $1.2 billion

1934: $4 billion then jumping to over $6 billion due to seizure of private gold hoards and revaluing the dollar.

1941: $23 billion

**************************************
UK gold reserves:

1914: $0.5 billion

1934: $1 billion [rising to $2.5 billion in 1937]

1941: $1 billion [England appropriated all of the Common Wealth gold for WWII. Canada dropped from $0.2 billion to $0.05 billion by 1940]

*************************************
France gold reserves:

1914: $0.8 billion

1934: $3 billion [greatest amount in 1934: $5.3 billion]

1941: $2 billion [taken by the Nazis]

France raised 3X the amount of gold during the year that followed England's total capitulation to reality. Even as England tried to gain the gold stocks of her empire, she only had one billion at the beginning of WWII. Gold is used to fund wars. In order to fight WWII at all, England had to again, go to the place where there was a gold reserve to tap into the credit there: the US. From 1934 when our reserves were very depressed by other central banks turning over US credit to gain gold, the political deterioration in Europe meant a flood of gold flowed to the US for protection. Physical protection, of course. All the gold in Europe was seized, often very violently, by the Nazis. They even wrenched gold fillings from victim's mouths in a medieval search for wealth.

The rise of US gold reserves from only $4 billion to the staggering amount of $23 billion in just 8 years was unprecedented. And was directly related to our power as lender to the world. England played this role before WWI by being the agent selling gold from South Africa. If we look at the tables, we can see this clearly.

New York Times, 1914, just months before WWI breaks out:

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Culture of Life News Main Page

May 18, 2008

Elaine Meinel Supkis

As usual, the central bankers who brought down on our heads this entire banking collapse, refuse to face the truth. They want this mess they created to end as swiftly as possible. They also want no inflation. They want things to 'grow'. They want to control prices while flooding the world with new money via low interest rates. They are totally insane. Right now, they are hoping that the loss of buying power in the world due to inflation will cause such a big slowdown, prices will fall. This is silly if they are also flooding the world with more and more easy money loans. The central banks are doing exactly that: flooding the world with new money even as old money vanishes as people are increasingly unable to pay off loans due to inflation.

Fed's Lockhart Says Slowdown to Reduce U.S. Inflation

Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economic slowdown may moderate inflation that has been spurred by rising prices of energy and commodities.

``We expect inflation to abate somewhat in the second half and going into 2009 based upon our forecast of weak economic growth,'' Lockhart said in response to a question following a speech today in Atlanta. ``There is some early indication that the strength of inflation has softened.''

Lockhart's comments contrast with remarks this week by Kansas City Fed President Thomas Hoenig and Richard Fisher of the Dallas Fed, who warned about rising prices. Hoenig said inflation was at an ``unacceptable level,'' while Fisher said the economy may recover from its slowdown ``at much higher base rates of inflation than we would want.''

The entire reason for having the Fed is to control inflation and the economy so there are no recessions/depressions or bubbles. Of course, the reality is, the Fed creates these things itself all the time which is why it has been a total failure. These days, they pretend they exist to control PRICES. Yet time and again, they fail there, too! If the price of one thing drops, another rises rapidly. We have been seeing rampant inflation during much of my life thanks to this inability to 'control prices.' Things got so out of hand in the early seventies, Nixon imposed unilateral wage/price controls that also failed.

The monetarists who took over our university educational systems have a doctrine of 'total control of pricing via interest rates'. This is the mythical 'gas pedal/brake' they talk about all the time. Recently, the head bankers have also said, they can't foretell what will happen next because this car of theirs which supposedly controls prices via the gas pedal/brake system of raising or lowering interest rates, is opaque. They believe that NO ONE can see through this dark windshield. Perhaps this is their salute to the reality of the Gates of Death from which wealth springs. But in reality, this is a lie. They know perfectly well, where we are driving. They refuse to say where this road goes because it is going off a cliff.

The tragedy of a banking system striving to 'control prices' is obvious: they cannot do this. They CAN control the monetary base and the rate of growth of lending. But ONLY if they control the currency and to control the currency, one must control TRADE. Which they do not. This is the role of a government, not a bank. Central banks can be an extension of a government's powers. They can't regulate trade at all. The monetarists collectively decided this was false. Banks could regulate trade via manipulating the value of the currency via interest rates. The problem here is obvious: if the bankers wish to control PRICES they have to go for the cheapest prices in goods and punish anyone who raises prices of goods! And they do this by forcing everyone to seek as low a price as possible. This means, if other nations have weak currencies, the need to import grows for this drops the price of goods and thus allows the banking system to lend more money, cheaply. This cheap money is then borrowed by the masses who have to buy cheap foreign goods in so there is no inflation.

This is why the US is going rapidly bankrupt as our trade deficit began to climb right after we got off the gold standard. The US wishes to crank out endless loans and balance this by bringing in cheaper and cheaper imports. The ONLY way to stop inflation now is to destroy the economy and this, in turn, stops consumers from buying foreign goods---not to mention, domestic goods! Why is this happening? We still have open borders to 'free trade'. Why can't the price of all goods continue dropping forever?

And this is where Marxist economics comes in: the exploitation of labor has its limits. If everyone is driven into slavery, the economy doesn't flourish, it collapses. This is simple: people who get rewarded for work, work harder. People who get nothing will go to great ends to avoid work. There are a shocking number of foolish people who think the pre-Civil War South was a wonderful economic paradise! But commentators of that time period remarked on the lassitude and lack of initiative in the South. The minute one crossed the Mason-Dixon Line, the industriousness levels dropped dramatically.

The US got away with pretending the Fed controlled prices only due to the industriousness of the great mass of Chinese labor as well as Japanese robots working alongside desperate workers who were experiencing dropping wages. The things the US wanted to consume were made cheaper and cheaper due to exploitation of foreign labor, not the Fed raising or lowering interest rates. On top of this, the only thing the Fed really controls is the housing market. If they drop rates, the market goes up in a very inflationary way, if they raise rates, the housing market crashes.

U.S. weakness, initially concentrated in housing, has undermined consumer spending, which generates about two-thirds of U.S. gross domestic product, Lockhart said.

``Personal consumption has softened,'' Lockhart told the Southern Center for International Studies at an event at Emory University. ``To the extent the world relies on strong U.S. consumer activity, this weakness could pose a threat to continued global expansion.''
*snip*
Increasing prices have become a global problem, Lockhart said, citing ``unrest'' over food prices in several countries.

``Recently inflation in many parts of the world has begun to pick up,'' he said. That ``is a growing issue for emerging economies.''

Inflation is a growing issue with ALL economies! Forget just 'emerging' ones. Lockhart's lies are at the heart of this problem. The US regulators are in denial. They pretend the problem lies with the cheap labor nations, not the globe's most important banking systems. Besides, the second lie here is 'inflation is picking up'. It is RAGING OUT OF CONTROL at this point. So the Fed's final proposition in all this is to passively watch consumer spending collapse due to inflation of all necessities eating up all discretionary incomes.

Fed, BOE Foreshadow End of Rate Cuts as Prices Rise

The world's most powerful central banks are telegraphing the end of interest-rate cuts, and traders already anticipate the first steps in the opposite direction.

Federal Reserve officials this week flagged inflation risks after slashing borrowing costs seven times since September and Bank of England Governor Mervyn King unveiled Britain's worst price outlook in a decade. Faster growth is vindicating European Central Bank President Jean-Claude Trichet's refusal to cut rates in response to the credit crisis.

``The central banks are taking a pause, but that could turn into a permanent end to rate cuts,'' said Thomas Mayer, co-chief economist at Deutsche Bank AG in London. ``The risk we won't see more cuts from the Fed and Bank of England has grown, and markets have pushed out expectations of ECB easing.''

The danger is that food and oil prices are rising so fast that inflation will replace costlier credit as the chief threat to the global economy. That may force the Fed to turn a deaf ear to what King labels the ``siren'' calls for rate cuts and perhaps consider raising them instead.

The Bank of Japan still listens to the sirens sing about 0% interest. This is because they cynically want a weak currency so they can pretend to be a low-wage third world state. And as far as the Japanese workers are concerned, they are a third world nation and their condition approaches that of the Chinese workers. So long as Japan clings to this false system, the rest of the G7 economic union's banks will see inflation no matter what their interest rates are. The EU's inflation has been muted by a stronger euro but this is destroying their export markets and they are anxious to not be the world's strongest currency. They want desperately for the US to be the strongest currency. The US, of course, even with a weak dollar, still imports far too much. But none of this is talked about when the central bankers conspire to 'fix prices'. Also, this obvious rigging of the game has been anticipated by speculators and traders. At this point, the responses to inflation, etc, are so ritualistic and easily foreseen by traders, they are all a jump ahead of the bankers and thus, evade the banker's attempts at controlling prices.

This is the 'psychology of inflation' the bankers like to talk about. The speculators WANT inflation! Whatever they buy, they pray hard that it will rise in price as fast as possible. Since the central bankers seem bent on enabling speculators to do this by giving them endless loans at cheap, sub-inflationary percentages, the amount of money being used by speculators to bet on price hikes of nearly everything on earth, continues. If one market for speculation reaches a peak, they all abandon it instantly and jump into another market. So, over the last 10 years, we have seen many balloons in prices from housing, energy, food, corporate take overs, etc. All of these burst and instantly, a new balloon replaces the burst balloon. This is thanks to the central bankers of the G7 nations feeding endless money into the system no matter what. The claims that they are fighting inflation is pure insanity if they all use the Bank of Japan for carry trade loans! Lending stopped briefly only because the Japanese carry trade collapsed last summer.

Kohlberg, Madison Find Blank-Check Buyers as IPO Prospects Dim

May 16 (Bloomberg) -- Kohlberg & Co., Madison Dearborn Partners LLC and Kirtland Capital Partners have resorted to selling holdings to so-called blank-check companies, a path more private-equity firms may follow as other buyers remain scarce.

Leveraged buyout firms stepped up the pace of takeovers in the past five years, aiming to cut costs at businesses ranging from newsprint makers to crane purveyors and then sell them to the public. Now they're turning to special-purpose acquisition companies as demand for IPOs sinks to a three-year low and tight credit markets make it harder to borrow money to finance LBOs.

``We're definitely seeing private-equity firms talk to SPACs as possible exits for their portfolio companies,'' said Thomas Ivey, a partner in the Palo Alto, California, office of Skadden, Arps, Slate, Meagher & Flom LLP. ``The M&A market for traditional private-equity purchasers is closed. The other piece is that the IPO market is closed.''

SPACs, also known as blank-check companies, are publicly traded corporate shells created solely to buy other businesses. Chicago-based Madison Dearborn, whose $60 billion of announced buyouts last year included Canadian phone company BCE Inc., was one of the first LBO firms to turn to a SPAC. Last September, Madison sold paper, packaging and newsprint businesses to Aladabra 2 Acquisition Corp. for $1.63 billion. Madison didn't say whether it earned a profit.

This is so very much like the pre-Great Depression financial markets. For 50 years, these sorts of shell games were outlawed. Note that the useless debts piled on top of corporations are now being shuffled off onto something that doesn't exist as an entity. A shell corporation is a black hole. And they are madly shoveling all the bad stuff into this black hole because it is now worthless. Namely, it profits nobody. And so it is a drag on the ability of the real corporations who can't borrow more money if they have this big overhang of previous debts. Of course, the money created by these previous debts still is circulating. This is why we have inflation. None of the debts created in the past 5 years has been paid down, of course. We have seen this before: when all of Europe went bankrupt in unison in 1929-1933.

SPAC shell games:

All told, SPACs had $13.5 billion on hand to fund purchases as of April 18, according to Morgan Joseph & Co., the New York investment bank. Global IPOs dropped 35 percent in dollar volume from last year through May 15, according to Bloomberg data. Excluding a $19.7 billion offering by Visa Inc., the world's largest credit-card network, the gap widens to 59 percent.

At the same time, the volume of deals in which private-equity firms sold companies to other buyout shops, or secondary buyouts, has plunged about 80 percent so far this year, to $11 billion from $55 billion, according to data provider Dealogic, blocking another outlet for private-equity investments.

The drop was even more severe for secondary LBOs within the U.S., which are down over 90 percent to $2 billion from $26 billion so far this year.

I am betting these SPACs are very closely related to the Derivatives Beast. Where did they get this $13.5 billion, anyway? Who is fronting this money? If we assume they are offshore hedge funds, the questionable nature of all this is obvious. They never build anything, they are people who get rich exploiting weaknesses and raiding economic systems. And the $19.5 billion deal for VISA: I suspect these funds are using debt from Japan to buy higher interest rate debt entities in the bankrupt West. The flood of red ink here is very troubling, of course. And is at the heart of why we have a depression in banking while in the real world, all real things like gold, oil or food are seeing ferocious inflation.

FDIC sees another wave of U.S. credit stress coming

The head of the Federal Deposit Insurance Corp. said on Friday another wave of U.S. credit stress was coming involving non-mortgage loans.

Bair, in prepared remarks for a Brookings Institution event, said delinquency rates were rising for construction and development lending as well as for commercial and consumer debt. However, U.S. banks are still healthy and in a much stronger position to weather the storm than they were during the savings and loan crisis of the 1980s.

In what way are our banks stronger? As far as I can see, they are much, much weaker! In the 1980's, banks offered high interest on CDs sold to the public thanks to Volcker raising interest rates of the money lent to the other banks from the Fed. So savings rose. Then Volcker was eliminated and we all rejoiced and easy lending returned. Savers had to seek high interest banks on the fringe since the main banks haughtily refused to pay reasonable rates on savings. I remember that time, I was very unhappy about these sub-inflation level CDs.

Many elderly with savings moved them to the Savings & Loan banks because these banks offered high rates on savings. This way, they could lend on the 10% base of savings and they lent recklessly. When the creditors defaulted, the whole thing collapsed. Because these S & Ls were not protected by the Fed, the savers lost everything. But then, this is why the CDs were so high: increased risk. The S & L debacle was due to the government and the Fed seeking a way around the inflation riddle. They let this alternative, unprotected banking system grow and lure in victims rather than regulating it just like the main banks. But then, they wanted to cheat on the real rate of inflation. After the S & L collapse, they fixed this mess yet again by lying and cheating. Namely, they ceased tracking real inflation and concocted a new system that was totally fraudulent. So they can merrily inflate while evading responsibility for this inflation.

Here are the shocking graphs from FRED, The Federal Reserve St. Louis research arm:

Anyone looking at these two graphs can plainly see, we are in a full-scale banking collapse far, far worse than in 1930. These graphs show that the reserves of our entire banking system have vanished. And are being replaced with Treasuries cranked out in DC: total inflation of the money supply to fix a collapse in lending repayments! The effects from all this are not over, they are barely beginning. The bloated incomes of our Senators and Congress people, our financial manipulators, our banking elites: all this is a byproduct of massive inflationary money creation. That is NOT paying interest on the lending from the past! These loans are collapsing and with them, the banking system.

The Fed officials can see these charts plain as day! This means either they are terminally stupid or more likely, they are simply lying to everyone. And lying is their job. They lie constantly to the point, they are unable to utter the truth. I suppose it would cause them to shriek and tear their hair out like Rumplestiltskin.

D.R. Schoon at Survival Blog;

Global financial markets are in extreme triage following the credit contraction of August 2007. It is believed central bankers are trying to restore markets to help the economy. In truth, they are like life insurance companies fighting to keep a wealthy patient alive so the high premiums will continue to be paid and the large death payout will be postponed. It has been only nine months since credit markets unexpectedly froze in August 2007. The central bankers who were surprised by the summer 2007 credit contraction now hope the danger has passed. But they are about to be surprised again and soon.

We are witness to the unraveling of historic levels of debt caused by central bank issuance of debt-based money. That such issuance over three hundred years has led to trillions of dollars in constantly increasing compounding debt is not unexpected. What is also not unexpected is that someday the debt could not be repaid. That realization is what happened in August 2007. Suddenly, buyers of debt, those in need of guaranteed downstream revenues realized $1.5 trillion of AAA rated subprime CDOs would not be repaid as expected. The consequences of that realization are now in motion.

He is correct. Alas, his solution---buy gold!----is faulty. History shows very ruthlessly and clearly that when gold becomes valuable due to a banking collapse, governments either seize it or invade countries that hoard it. There is no simplistic solution to the problems we face. Just as there is no 'go it alone' survivalist solution. We are a collective. Local, national and international. Struggling to understand and find solutions to each of these levels of social involvement is the only way we can sanely deal with all this. Telling the truth about things and analyzing them correctly is the first step. Right now, the cries to hoard things is rising. And this is logical in an inflationary system. Buy now or tomorrow it will eat up more of one's income!

But this is not a solution, it is desperation.

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Culture of Life News Main Page

May 17, 2008

Elaine Meinel Supkis

Quietly, this time, gold has crept back into the speculative game. After wild swings between $1000 an ounce and $800 an ounce, it has been steadily climbing. This time, the speculators are hoping no one notices and all the novices who rushed the markets will continue to sell. Meanwhile, the central bankers are desperate to get us to think all is over, all is well. But one major speculator/investor says, we are in the eye of the storm, not the end. Of course! This storm has been raging since...Nixon went to China! Rice, by the way, is plunging in price as hoards are being tapped finally. IN JAPAN. Ahem. And we visit 'The Bubble That Broke The World', a book we all should memorize.

Bernanke Requests Power to Pay Interest on Reserves

Federal Reserve Chairman Ben S. Bernanke asked Congress to give the Fed immediate authority to pay interest on reserves deposited by commercial banks, seeking to streamline efforts aimed at alleviating credit strains.

The payments would help officials push money into the banking system without influencing the main policy rate, by giving lenders an incentive to leave funds with the Fed. Congress already passed a law giving the central bank the authority, starting in October 2011.

All the central bankers like this little trick. It puts in a 'floor' so interest rates for the 'money' cranked out by the central bank doesn't 'fall'...NO MATTER HOW MUCH MONEY THEY MAKE OUT OF THIN AIR. This is, of course, inflation money. But the 'interest' that 'accrues' hides the true nature of this inflation until, get this, it flows away from the Fed or central bank and moves OVERSEAS. Many central bankers do this already and what do we see?

GLOBAL INFLATION! Oopsie! This is a nice trick like all the others but in the bitter end, the chicks hatched this way always end up flying home again and dropping bird dung on someone's bald head. I went about the web, looking at mainstream economists and their take on this. They think it 'works' since the consequences are not instantly visible. Yup. This sort of thinking characterizes our entire economic brainiac class. It is very hard to get them all to understand, they have an obligation to look into the future and foresee the ultimate outcomes of various choices and systems set up today. And to do this, we have to look at everything all the time, without exclusion.

For we have global inflation. We have tremendous global speculation. And a lot of this is over things that are already 'not real'. Ie: not gold, rice, houses, cars, timber, etc. The speculators are creating huge profit surges in interest rate games! Or selling and buying currencies while borrowing money and shifting that around, too! These various side games have grown tremendously fast in the last 35 years and now overshadow the 'real things' economy. Which is why we have madcap inflation.

Shockingly, gold has risen by 35X over 35 years ever since the US, the world ruling empire, dumped the gold standard entirely. Virtually no one made any money speculating about gold or the value of the dollar or what the interest rates would be in the future. After Nixon severed this Golden Gordian Knot, the financial system has unravelled. At all times, we struggle against hidden financial hazards. For example, during the fake 'low inflation' years, we thought we could produce money and play games that created money out of thin air, yet there was no inflation.

But anyone with curiosity and a brain could see that the fun times were due not to inflation being banished but rather, roosting temporarily at the Bank of Japan! Who, along with China, kept inflation at bay in order to undermine US industries. Now that the colonization of the US is nearly done, both are toying with releasing all these captive inflationary dollars. If they want something, all they have to do it talk about launching 'Sovereign Wealth Funds' and have this money return to the US in the form of buying out the last of our infrastructure and commodity resources! OOPS.

Rice price dives as US and Japan set to unlock grain pact

Rice prices nosedived today as Japan moved closer to unlocking its massive hidden surplus and bullish supply forecasts routed speculators.

The price collapse came as commodity experts called on Japan and the US to urgently unwind one of the biggest “invisible” distortions in global rice markets: a quirk of World Trade Organisation rules that obliges Tokyo to buy grain it does not need and effectively turns millions of tons of high-grade American rice into feed for Japanese pigs.

If that distortion were removed, said researchers at the Washington-based Centre for Global Development (CGD), and the 1.5 million tons of unwanted US rice were released from Japan’s storage silos, the crisis that has sent the price of the crop that feeds half the world would be instantly solved. Rice prices, suggested the group’s forecasts, could even halve between now and June.

Depression=hoarding. Japan has had a depression for nearly 20 years now. And they have hidden hoards we can't even begin to imagine. Even as price hikes kill off the last of the Japanese workers, the masters hung on with vicious intent, on these hoards. Even as the Japanese ruling elites saw news stories of their neighbors starving, they hung onto their hoard! This is 'dragon think'. If I were Japanese, I would be hammering on the doors of the Diet demanding a better diet. 'Let them not eat rice cakes!'

Scholes, Nobel Laureate, Says Credit Crisis May Not Be Over

Myron Scholes, chairman of Platinum Grove Asset Management LP and 1997 winner of the Nobel Prize in economics, said the worst of the crisis in credit markets may not be over.

``From my perspective, I think that we don't know if the storm has passed or if we are still in the eye of the storm,'' Scholes said in an interview with Bloomberg Radio yesterday. ``Are there other shoes to drop and new events or new shocks that will come to the fore?''

HAHAHA. There is an Imelda Marco closet filled with thousands of shoes that have yet to drop. There are enough shoes to drop, they could keep a million barefoot children shod. Already, the global money flow is shifting dramatically. China has to house 5 million people. Fast. And fix a huge amount of infrastructure. This means the money that could be squirreled away in FOREX reserves and thus, not create inflation, will flow again. China will cease adding to its tremendous reserves. And I am betting, Japan will cease, too. For the patient Japanese serfs who suffer all sorts of restricted conditions of poverty will now demand to see what else the rulers have been hoarding. Eh? They have to appease these people who can become remarkably belligerent and suddenly, too.

Gold futures surge after initial crude rally

Gold prices shot up Thursday after crude oil surged early in the day, an inflationary move that fed buying of precious metals as safe, alternative investments.
Oil eventually closed lower, as did other commodities; soybeans, rice, gasoline and heating oil futures all declined.

Gold for June delivery jumped $13.50 to settle at $880 an ounce on the New York Mercantile Exchange, after earlier rising as high as $888.50.

"We've seen projections for $150 crude so that's adding to inflation fears and helping gold," said Carlos Sanchez, analyst with CPM Group in New York. "Oil has fallen back but gold is still hanging in positive territory."

Higher crude prices tend to lead to higher inflation, prompting investors to shift funds into hard assets like gold and silver, which are known for holding their value.

NOPE. Oil shot up and gold dropped like a rock for several months. Meanwhile, first wheat and then rice, shot up rapidly. What I see is an army of hungry, hungry hell hounds and pirates rushing from one favored commodity to another. After driving up one, they all exit just as swiftly and rush the next candidate. Periodically, they come back to gold. Gold will probably now rise to $1,000 an ounce again. And oil will fall, perhaps, if the US consumers finally take it on the chin and give up trying to drive around like maniacs in huge SUVs and trucks all the time.

Frankly, we are no where near the pain threshold. During the 1970's, I and many others rode bikes. I see very few people doing this just yet. Also, there is no rationing. So this is still not serious. It will be if we start any verbal or physical wars with Iran Kitty. Kitty will scratch our eyes out. They are the ONLY oil producing nation that can reduce the oil shortage. And we are making this shortage because the US has been awesomely successful at getting everyone to boycott Iran, even maybe Japan. HAHAHA.

Except everyone who wants the US to collapse knows this success seals our fate. We are doomed to collapse thanks to it. Meanwhile, gold is a good place to play speculative games again. The Arabs are back to hoarding it again.

Scandinavians unite to end Iceland's financial chaos

The central banks of Norway, Sweden and Denmark have joined forces in a stunning move to rescue Iceland, offering a credit line of €1.5bn (£1.2bn) to beat back speculators and shore up the battered krona.

The solidarity gesture is a powerful signal to hedge funds betting on Iceland's downfall that they are up against the international system. The swap accord doubles the foreign reserve cover of the Icelandic government at a stroke.

Iceland's central bank said the deal was a "precautionary measure" to stabilise the currency, which has crashed 25pc this year.

Just seven months ago, all the speculators were big on the krone. I thought that was stupid back then. Now they are dumping it enmass and putting their money into rice, oil and now, gold again. Note that all the other bankers have to fix this by extending themselves to boost the reserves of this bankrupt nation. Iceland tried to be a pirate cove. Only, unlike the other island pirate headquarters, they have a population bigger than a postage stamp. So they have an overhead. The ideal pirate cove has virtually no humans. Just addresses. Time to go back in time to the last time a major global empire collapsed.

When Britain went bankrupt during WWI, like the US, she refused to admit this. Instead, Britain limped along, expanding her empire for another 30 years, using the US as a crutch. During this time, the global banking system collapsed very badly due to the British empire going bankrupt. This is called 'The Great Depression'. Germany also was bankrupt but this wouldn't destroy international finance for the simple reason, no one used the German Mark as their standard for international trade or banking!

Time to talk about gold since it is back in the news and we can see clearly that there is no connection anymore between a stable international currency and this ancient form of value:

A BUBBLE THAT BROKE THE WORLD Published in 1933 by Garet Garrett:

When the Bank of England suspended gold payments [in 1931] our stock of monetary gold was five billions; the French had two and one third billions. But our population is threefold that of France; our national wealth may be easily five- or sixfold greater. Therefore, France had more gold than this country, in proportion to her economic weight and rank. Our stock of monetary gold was less than $42 per capita; hers was more than $57 per capita. Yet it was France from the beginning that led the run on the American gold reserve.

Why did she want the gold? Was she fearful that the United States would abandon the gold standard? If so, did that fear seize her all at once? That would not be like French bankers. Take their record for it, they see far and straight for France. In any case, all that France could do with the gold would be to hoard it; and for that purpose she has built since the war a treasure chamber unique in the world.

Every country, of course, has massive burglar-proof vaults for its gold reserves. But France decided to make one so deep and strong and mysterious that not even a victorious modern army could break into it. You might blow the Bank of France away with bombs and its gold would be all the safer. The chamber is two and one half acres big; it lies two hundred feet deep in the earth. Over it, first, is forty feet of water, which is a lake they made by damming the subterranean river that flows beneath Paris, and then above the water fifty feet of solid rock. The way to it is through six steel towers with revolving doors moved by electric engines, and the passage of descent can be flooded at a moment's notice. At the signal of alarm a detail of defenders would instantly vanish through this passage, pull the water in after them, and be forgotten—safely forgotten for an indefinite time, or for the duration of a war, because everything has been thought of beforehand. They would find in the gold chamber a kitchen, provisions enough for two or three arctic expeditions, dishes, linen, beds, all the facilities for comfortable housekeeping.

Beginning on or about September 20th, every fast ship from New York for French ports carried gold on its way to this hiding place. The same fast ships or others carried gold also for Holland, Switzerland, Belgium and Germany. Even Germany, where three quarters of a billion of American money was frozen in the form of bank balances and overdue short-term credits—even Germany could take gold from New York.

To lose three quarters of a billion of gold in six weeks, with no saying when or where the run would end and no way of stopping it, was a very serious matter for this country, especially in view of its own condition of internal stress. No country, under any conditions, could lose gold at that rate or in that proportion for long and hold to the gold standard. That would be true if to begin with it had all the gold in the world.

Hoarding is a reflex that one does when seeing inflation. Hoarding in a depression is unlikely. Since France was hoarding gold at the beginning of the Great Depression, this means they expected their neighbors to create inflation in order to deal with the banking collapse in England. Certainly, England was now going to play the inflation game now that they could no longer play the 'reserve currency of the world' game. Within days of dropping the gold standard, the British pound shed a tremendous amount of value. People holding pounds were pounded into the ground. People holding gold were not.

The US was solvent. Europe was bankrupt. So how did the French raid our Treasury for much of our gold? France owed us tremendous sums from WWI. The US dollar wasn't losing value, it was doing fine right up until the sudden collapse in Germany and England. But since both owed to the US, this was like the US housing market going belly up: debts were suspended and the value of the bonds that backed these debts plunged in value. No one wanted them.

Secondly, note the cave business! Ah! How elegant the goddesses are! The Giants and the Dwarves toil day and night to dig out of Mother Earth, the shining gold. They steal it from Rhine maidens or they steal it from the New World. This gold is then hammered into many beautiful things. Then the rulers build first, pyramids, then excavate deep caverns and not only hide the gold in these deep caves but hide the caves themselves! Aha! Only the king and his Treasurer know the secrets of the Cave of Death! Killing off the slaves who build it, they set a three headed hell hound in charge of slaying any who enter. Or they put on the Ring of Power and turn themselves into a dragon!

The French made a terrible mistake. They didn't kill the builders of this Cave of Death. They couldn't hide the fact that they had lots and lots of gold in Paris. So it wasn't even 10 years before the looters goose stepped into Paris and seized the overlords who knew where this cave was. Like the Mongols, the Germans knew that if you torture or threaten these gold hoarders enough, they will cough up the key to the Cave of Death. And the fine golden hoard was useless for France. But not for Hitler.

Word of warning: it anyone knows about these Caves of Death, they will loot it. Sometimes it takes 8,000 years to pry open the crypt and steal all of King Tut's gold, just for example. But it is done. Always. Everyone dreams of looting these Caves of Death.

Often, the people hoarding gold die without revealing to the looters, where it is. Then it is still dug up by farmers or children using spades, etc. Or it lies on the bottom of the sea, possessions of Neptune. Until someone dives down and gets it back. Then governments do battle for the loot as we see in the news.

Gold drives men to madness. This is because it is proof against speculation in the long run! Unlike rice, it doesn't rot. Unlike oil, it doesn't burn. When it is melted, it doesn't change. It is always gold. Except if you vaporize it with a nuclear bomb or drop it into the sun, I suppose.

Bubble:

Fourthly, such a thing as the central bank of one country serving notice on the banking system of another country that because the rate of interest is too low, or for any reason, it may feel obliged to call its aggregate credit balances away in gold, was hitherto unheard of. No one could have imagined it. That is not the way it happens in the normal course of international finance.

Credit balances are continually shifting. If the rate of interest is higher in New York than in London, credit balances move automatically to New York, or if the rate of interest is higher in London they shift from New York to London, and nothing is ever said about it. The only news of it will be in the bank statistics. Now, the Bank of France very well knew that suddenly to lose $600,000,000 more gold, on top of what we had already lost to Europe—and the bulk of it to France— would create a very grave situation in this country. And mark this, that if the French themselves believed what they had been saying in Europe about the dollar and about the American financial situation in general they must have believed that to demand $600,000,000 more gold all at once from New York would pitch this country off the gold standard. Well, of course, in that event—in the event of the dollar going the way of the pound sterling —then the French franc assuredly would be the premier gold money and govern the world of finance.

France was using their CREDIT in the US to demand gold, not US financing. France was deep in debt and unable to pay the US even the interest on the debts. But the US, the year before, had suspended interest payments on these massive war debts. So France took advantage of this to tap in their existing credit to turn it to gold rather than keep it in our banks as 'assets.' Remember: 'assets' in banks are DEBTS. Only 10% or less is 'savings'. Debts are assets ONLY if they give a return in interest. When that ceases, they become the opposite of assets. They become losses! Especially if the debtor nation isn't paying either interest OR principal. This is the dread 0%/0%/0% system that is a characteristic of a depression. It really means, the banking system is bankrupt but is kept going by the government anyway, by hook and crook. Especially crooks.

Under pretence of being dissatisfied with the rate of interest in New York the Bank of France revealed to us, to Europe, to the whole world, the amazing fact that France had the power, almost if not quite, to throw the American banking system off the gold standard I To send the American dollar after the pound sterling! That was something for the premier of France to have in his hand when he should begin to examine the problems of the world and explore solutions with Mr. Hoover in the White House. But it was at the same time a revelation in no way calculated to relieve the tension then existing here and elsewhere or to check the hoarding of gold by individuals—a dread movement that was already world-wide and threatening to become uncontrollable.

OK: this is where we see clearly where we are going today. France wanted a higher interest rate on its assets [the war debts] sitting in US banks. Now this sounds strange but these where the equivalent of our modern 'Treasuries' which are also...WAR DEBTS. These are sold to central banks who hold them and collect...interest! So...France had these toys in the US that were collecting interest. But France needed more money so they demanded it go up or else. The US said, 'You aren't paying us any interest or principal on your own loans we hold!' But we were also holding French loans that they parked in the US for safety, fearing the Germans. Who were very good looters back then as history shows us.

Note the last sentence here! All the bankers moves up until the French decided to hoard gold, were to discourage hoarding of gold. We saw this for the last three years, too. Both in statements and by selling off huge amounts of gold, the central bankers of the G7 group tried very hard to discourage gold hoarding. But the hoarding has taken off thanks to the devaluing of the currencies the US and Japan! Europe has striven to prevent this which is why the euro is very strong. But they are beginning to regret this and are in the process of weakening the euro again.

The US, back in 1933, dealt very harshly and in a draconian fashion by outlawing hoarding of gold and raiding any and all gold hoards. A classic looting expedition. But in 1931, they still hoped to do things the legal, proper way. This was doomed, of course, once France decided to hoard.

Bubble:

A gold country is like a bank. Its first responsibility is to itself, for the integrity of its money, its credit and its assets, and if it suffers this imperative to be overcome by a sense of responsibility to others, no matter with what intention, it will fail in its responsibility to others because it has forgotten that first responsibility to itself. There is no other law.

In one of the bad moments last October a member of the Federal Reserve Board was heard to say: "Not only is this the worst financial crisis in all history. Something is missing that was always there before. All over the world there is this sense of something missing, like a familiar rock, an immovable principle, a wheel of balance.

And what is it? The Bank of England is missing. The value of the pound sterling is uncertain, changing from hour to hour. We never had that to contend with before." So it was. And that is why the suspension of gold payments by the Bank of England was an appalling financial event. No longer was the pound sterling worth $4.86 in gold anywhere in the world. No longer was it the universal unit of value in which all other things were priced. Now the pound sterling itself has to be priced in other things—in American dollars, for example.

Then suppose the same thing should happen to the dollar, which had recently become the next most stable unit of value in the world's opinion. Suppose the dollar, instead of being worth one hundred cents in gold anywhere in the world, should have to be priced at ninety cents, eighty cents, seventy cents, in terms of something else, maybe the French franc.

The long and familiar preeminence of the pound sterling as a universal unit of value in any kind of financial weather, war only excepted, had been worth to Great Britain an income of three or four hundred millions a year from the rest of the world in the form of banking profit, meaning discounts, commissions, interest and fees. Preeminence of the American dollar in the trade and ex- change of the world, in place of the pound sterling, would be worth 300 or 400 millions a year to this country. Or, if such preeminence passed to the French franc, it would be worth 300 or 400 millions a year to France.

First England and then the US took advantage of ruling the Seven Seas via war ships and armies sent abroad on looting or intimidation expeditions. The value of trade currencies meant the ruling empire got a 'bonus'. Because of this, the central banking systems become corrupt. This is because they can 'get away with murder'. Seeing that all traders want a steady, strong currency, they maliciously debase it while pretending it is still strong. Over time, say, 100 years, the differential between the debased currency and the pretense of value grows greater and greater. And then collapses!

ALL MONEY SYSTEMS DO THIS! If we have fractional lending, the lending banks start cheating more and more. They hold less and less. Then they play interest games that assigns fake values to things that have no real present value, only future promises. This is what 'debts' are: assets only if the future payments come in. If they don't come in, the bank collapses. To prevent this, the bankers devise other, even more devious systems. All of this is designed to allow them to create infinite Funny Money™. Since this causes inflation, they have to be under the supervision of banking authorities who restrict this lending. But this seldom happens. Everyone wants Funny Money™. Unlike capital that comes from profits due to value-added trade and then passed on to investors and labor, Funny Money™ springs from the loins of Kali, the Goddess of Death. The baby is nursed by the three headed hell hounds. It is irresistible. Creating this money is way, way too easy!

Bubble:

So you may see what was involved as between the dollar and the franc, merely in terms of national income; you may see also what Great Britain had lost. You may understand at the same time that when the British say it was a good thing for England to leave the gold standard they mean only that it was good for England that she embraced a bitter necessity in time, for if she had waited, her fortunes might have become irretrievable.

Now she will work harder, trade harder, spend less, live a little less, until she is quite solvent again. Her export of goods will increase for several reasons. They will be priced in the depreciated pound sterling, which means they will be cheaper for the world to buy, or, to say it another way, other people's gold money will buy more in England than before. Prices will rise in England, but not as much as the value of the pound sterling declines outside; as prices rise in England, real wages will fall, wherefore the labor cost of producing British goods will fall, and so will the standard of living in England, temporarily at least. And this must all happen to any country that loses the integrity of its money.

True, you will hear some British economists say it was not England that failed the gold standard; it was the gold standard that failed the world. Therefore, they say, the world may do well to try something in place of the gold standard and see if that will work any better. This is a novel way of thinking in England, yet elsewhere very old—putting the blame on money! If England had not lost her hold on the gold standard she would be the last to say the gold standard had not been working —in a remorseless manner, to be sure, yet nevertheless working as it should—in the last three years. If she had not lost her hold on it and other countries were losing theirs, the Bank of England would be saying: "This is hard, but it is the way the gold standard works."

It would be a grim thing to say, a selfish thing, perhaps, and yet quite right. For how did the pound sterling come to have preeminence throughout the world in the first place ? Its prestige was from the fact that the British had always a primary sense of their responsibility to themselves, that is to say, again, for the integrity of their own money and their own credit; and it turned out, as the law is, that the more jealous they were in this first sense of responsibility to themselves the more certain they were not to fail the world in their responsibilities to it, including the responsibility to keep the balance wheel running true. Thus the pound sterling became a symbol of stability that was a great asset to the whole world.

Where did England's gold come from? The author neglects this ugly little story. England fought a war before WWI. With people from Germany and the Low Countries: the Boer War. This war was over diamonds and gold mines! England's military weakness from imperial over stretch was painfully obvious and egged on the German High Command to consider a smashing blow on England itself. Before stealing it from Africa, using near-slave labor of the defeated tribes who fought so valiantly, the Zulu warriors defeated by gattling guns, where did England get gold?

Um, invading and destroying India and China! China, in particular, sat upon the Dragon Throne which, in turn, sat on the world's biggest gold hoard. This was looted without mercy by the Europeans. By 1931, China was now being devoured by the Japanese warlords. Indeed, the Bank of England certainly would have dearly loved to hang onto its powerful golden hoard. But they had to give it to the Americans. Or the Germans would have gotten it. For this was what we demanded before we rescued England's empire. We needed to hold this gold hostage so we could get our war loans to England paid back. For gold does NOTHING. It has to be guarded in a cave. The real money is, frankly, the Funny Money™ that is made out of thin air! The bonds, the loans were the real money makers. For interest had to be paid on it! Hah! There it is: England couldn't do this anymore. And ran out of gold to send forth as hostage. France couldn't, either. But unlike England, they didn't care if they sank the US banking system. They were of course, very stupid. They thought Germany would not be able to leap upon France and destroy her utterly in some Blitzkrieg.

Bubble:

For this now is the modern function of gold—to limit the amount of money and credit that may be wilfully, irresponsibly created and set free.

Organized credit is relatively a strange thing in the economic life. New and experimental forms of it are continually being invented and we love to deceive ourselves with them. We forget that credit in any form represents debt in some other form. We know about ourselves that we have seizures of ecstasy and mass delusion; that again a time may come when the temptation to throw the monetary machine into wild motion so that everybody may become infinitely rich by means of infinite debt will rise to the pitch of mania, as it did, for example, in 1928 and 1929. With this intelligent knowledge of ourselves we make bargains beforehand with reason; we agree that money, credit and debt shall not be inflated beyond a certain ratio to gold, under certain penalties such as we shall be very loath to pay and yet such as we cannot refuse to pay under worse penalties still.

So long as the convention is reasonably kept in the faith of credit nobody wants gold. People know what the fiction is. They may read for themselves in the published figures of the bank that its liabilities exceed its gold ten- or twentyfold, and yet they feel no anxiety about the gold value of their deposits. They may read for themselves in the figures from the public treasury that the gold reserve is only one half or one third as much as the amount of paper money in circulation. Yet they will treat that paper money as if it were gold. Nobody would dream of supposing that a country, no matter how rich, could redeem its bonds in gold. Yet its bonds will be treated as if they were gold, and one who happens to want gold for them may freely have it. All so long as the convention is kept. Does this mean, as some of the silly textbooks used to say, that we are all gambling upon a mythical law of averages? No. It means a very definite thing. It means that if every kind of physical wealth were priced in gold, all in one moment of inventory, the aggregate value of it would not be less than the total amount of money, credit and debt outstanding against it. Then all the money is as good as gold, all the credit is gold credit, gold itself is a nuisance in the pocket.

But let the faith be broken, let the delusion arise that the fiction is the reality, let the limit upon the amount of credit that shall be set free be left to imagination, and presently there is no way of telling what anything is worth by pricing it.

Gold is NOT wealth. Gold is a REGULATOR. Gold is LIBRA. Gold, when used as a restrictor, a curb, a control, is not part of the Cave of Death anymore. Instead, it becomes a GUARDIAN at the Gates of Death! In other words, a goddess or a Watcher. Its function is to protect OTHER WEALTH. The things that are 'real'. Like labor, rice, oil, wheat, land, trade, ships and armies. Hoarding gold doesn't work. It has to be harnessed in the role of regulator, not be a commodity that is just as uncertain as all other things. The chaos, the total chaos we see today is a dynamic of running a system with NO CONTROLS. NO BALANCE. Libra hates this.

I was born in the center of Libra. I have a lot of Liberian tendencies including being a liberal. I worry about balance and control. This is why I tame animals. And tend gardens while worrying about an out of control world. And I know the Gates of Death, having passed through those frightful, painful portals!

The only way gold can perform as a guardian deity is for the central bankers to bow to Her and sacrifice to Her and to understand Her rules and tempers. This is a very ancient role, by the way. From the first pharaohs. For some reason, humans can control the desire to be greedy if they have a system that has this sort of exterior restrictions. Isn't that funny?

And this is why talking about ancient religions and money go hand in glove! We definitely are seeing magic here: the magic of the human psyche, the soul. And how we battle our own inner demons. This is the hardest lesson to learn.

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Both the top and bottom of the San Andreas is shaking nearly continuously while the middle remains completely locked down.
May 16, 2008

Elaine Meinel Supkis

Bloomberg carries a totally insane article saying the Chinese are stupid because they don't have lots of earthquake insurance. The entire article is filled with bad comparisons and leaves out data concerning California and earthquake insurance. Namely, only 12%, yes, we heard this right! 12% have insurance! And this is better than China? HAHAHA. Time again to warn the dreamers in sunny California, the dark cloud of annihilation is right over the horizon waiting to come pouring in one fine day with no warning at all. And of course, the ONLY insurance we have, collectively, is our government. Which is going bankrupt. Bankrupt! Gads. Send the Chinese some donations to save the victims there and pray the gods don't punish us next.

China Quake's $20 Billion Damage Show Insurance Abyss

The most powerful earthquake in China since 1950 shows the nation's insurance industry is decades behind those of the world's biggest economies.

Just 5 percent of the more than $20 billion of damage from the quake in Sichuan province is covered by insurance, according to estimates from an official at the China Insurance Regulatory Commission. By contrast, about half of the $120 billion of estimated costs from Hurricane Katrina, the most expensive storm in U.S. history, was insured by companies or the federal government, data compiled by analysts at Jersey City, New Jersey- based Property Claim Services show.

The ragging on China continues unabated and unmercifully. The US paid 'half' of the damage from Katrina? First, the percentage paid by the US government was more than half of this half! And this went into our massive DEFICIT SPENDING. Which that year, was well over half a trillion dollars which we got from running off to ...get this...CHINA!!!!

If any brainiac thinks China who funded part of the Katrina costs, can't fix itself, they are NUTS. Secondly, comparing an earthquake with a hurricane is stupid. They are NOT the same thing at all.

Earthquake insurance in the Bay Area is expensive, risky business

Almost two decades after the Loma Prieta earthquake damaged more than 40,000 homes, most Bay Area property owners don't have insurance policies that will protect them when - and experts say it's only a matter of time - the Big One hits.

Statewide, only 12 percent of California homeowners have earthquake coverage, according to the California Earthquake Authority, a publicly managed entity that sells policies through private companies. The number of Bay Area homeowners with coverage is even lower than that, although the agency doesn't have a precise figure for the region, according to Tim Richison, the earthquake authority's chief financial officer.

Earthquake insurance is extraordinarily expensive - it typically doubles a homeowner's annual premiums - and most policies come with a 10 or 15 percent deductible, meaning that damage would have to be pretty severe before policyholders would be able to tap into their coverage.

"Conceptually, earthquake insurance is a great idea," said Mary Comerio, a professor at UC Berkeley who studies post-disaster reconstruction. "The current program only covers catastrophic loss, it's extremely expensive and the deductibles are very high. As a result, only a small number of Californians even choose to take the insurance."

12% have earthquake insurance in California? This is the state where there is a nearly 100% chance of a quake over a century for any given place where the maximum number of homes have been built? MY GOD. Someone better tell the Chinese how superior we are!

This irritates me more than anything: stupid, bloated Americans attacking other nations for things we are much worse at or about. Like attacking China for polluting the air. Geeze. Wow. After 35 years of trying to clean our own air, it still stinks! In summer, in my rural mountains, pollution from Texas to Illinois travels here and makes the air unbreathable. This killed my poor ox, Dale, one hot summer day with high pollution!

So it is with earthquake news: the US is UTTERLY unprepared for ANY 7.9+ earthquake. Housing in the entire Madrid Fault zone has ZERO earthquake building codes that could sustain damage in a classic 8.9 quake like the one that happened 160 years ago! And the quakes in China were minor compared to the horror of the San Andreas suddenly leaping 55 or more feet northwards in one second when the entire middle section blows out as all geologists have said, it certainly will. A 99% chance of this happening! And how many houses in this 500 mile region have earthquake insurance? 10,000? 20,000? Out of 2 million, 5 million homes? WOW.

After one major earthquake in LA, I flew out to my parent's home in Pasadena to fix everything that broke. Many odd things were shattered or damaged. Including the main beam in the living room ceiling. I carefully fixed everything including putting in steel plates with bolts and cross bolting parts of the house as well as building in triangulation in corners. This damage was not from a direct hit, either. And the quake was not a 8.9 affair, either. I suppose most people think their insurance is 'will I be dead, who cares?' type of insurance. Unlike a hurricane when one can flee or worry beforehand and maybe remove valuables, with earthquakes we get ZERO warning. As we saw in China this week.

May 13, 1988

California Intensifies Planning for the Big Quake

Seven months after the Whittier earthquake that killed eight people, the authorities in California have redoubled their efforts to prepare this heavily populated and quake-prone state for the devastating ''big one'' that is almost certainly inevitable.

Seven months after the Whittier earthquake that killed eight people, the authorities in California have redoubled their efforts to prepare this heavily populated and quake-prone state for the devastating ''big one'' that is almost certainly inevitable.

Schools, businesses, government offices and other organizations completed more than 150 drills and other events in April, designated as ''earthquake preparedness month'' by Gov. George Deukmejian. He also recently approved a plan to convert scientific advances in predicting temblors into concrete warnings to the public.

''We don't want to be caught the morning after and have the press say we did not pay attention to foreshocks,'' Richard Andrews, assistant director of the Governor's Office of Emergency Services, told a recent conference at the California Institute of Technology in Pasadena. ''The main problem is being caught by surprise.''

But many authorities say nothing will prevent a calamity of unparalled proportions should a major quake strike the densely populated Los Angeles or San Francisco areas. It would be the worst disaster in American history, causing up to 14,000 deaths, according to Federal estimates.

The 1988 story was 20 years ago. The population of the most vulnerable state for earthquakes has grown from around 25 million to around 40 million during this time! That is nearly double! When that earthquake shook awake the dreamers in California, the oldsters all shook their heads. No one would do much to prepare for worse, they knew. And so did the authorities at that time:

Despite Whittier, public apathy persists. ''People are not compliant,'' said Norma Gordon, disaster response consultant for the Los Angeles County Department of Mental Health. ''You can give them tons of information and the likelihood that they will comply is minimal.''

She said it was important, particularly for children, to develop ''coping skills,'' so as to avoid the psychological problems common after quakes and other major disasters, such as insomnia and depression.

''The biggest thing is apathy,'' said Charles Parcell, who heads security for the Pasadena Unified School District. He said two Parent-Teacher Association meetings a year are held to aquaint parents with disaster plans and typically fewer than 10 attend.

How touching. The chief worry isn't 'Where is the water? Where is my family? How can I survive?' but rather, bad dreams or anxieties. Mother Nature hardwired us to be anxious. This is part of our tools for survival. People who 'sleep like a baby' also get 'eaten like dinner'. So being easily roused and quick to react is how we survive. It is obvious that people are fatalists in modern societies. They just don't give a damn because they expect someone called 'Santa Claus' aka, Uncle Sam, to rescue them. Just like we rescue people from hurricanes unless, of course, they are blacks and slated for a nasty, violent form or urban renewal. Then they are left to die.

California has lots of minority populations, too. They should remember, the central government can play this urban renewal game more than once! And they shall. Even as we deride the dictators of Burma, the plans to play the same sort of games here are very real. Even as alarming quakes at the top and bottom of the San Andreas grew in volume and ferocity for a month, there were virtually no warnings from the government. Indeed, Schwarzenegger proposed more water channels that cross the fault lines. I see no moves to cajole Californian dreamers to install 250 gallon plastic agricultural tanks that can be the lifeline to survival in a building, just for example. These can be kept in garages, just for example. More important than a car. Indeed, if you run a hose from it to the house's EXTERIOR, one can get water even if the garage collapses! The more people install these things, the better the survival chance of the entire neighborhood.

But California is the land of brush fires raging in the middle of cities! And other disasters. So why bother with the really nastiest of these potential disasters? People just hope that the scythe passes over them and slays someone in China. Then we can sit here on our haunches and mock them for not looking ahead?

Good grief. The Furies and the Fates are being sorely tempted here to teach us all a hard, sharp lesson.

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May 16, 2008

Elaine Meinel Supkis

Offers of aid pour into China this week. The Chinese are grateful and are keeping a close count on who is offering what. It is quite revealing, this list. Also, Japan is seeing auto sales at home continue to collapse as the working class is vanishing into deeper and deeper poverty even as Chinese workers move upwards, rapidly. This is our future, by the way. And Germany's economy grows faster than even the Japanese economy even while German workers succeed in keeping up with inflation unlike Japanese and American workers. Thanks to the strong euro. And strong sales to Sovereign Wealth nations like China, Russia and the Arabs.

BEIJING, May 15 (Xinhua) -- Several more countries have offered aid to China whose southwest Sichuan province was hit by a massive earthquake on Monday.

Saudi Arabia's King Abdullah bin Abdul-Aziz has decided to donate 50 million U.S. dollars in cash and 10 million dollars worth of relief materials.

British Prime Minister Gordon Brown announced that his country will provide to China 1 million pounds (about 2 million U.S.) in aid.

German Foreign Minister Frank-Walter Steinmeier said his government will provide a first instalment of 500,000 euros (800,000 U.S. dollars) in aid to the German Red Cross to help China in its relief work.

Russia delivered Wednesday its second batch of humanitarian aid to China where a devastating earthquake has claimed nearly 15,000 lives in its southwestern Sichuan province, local media reported.

A cargo plane from the Emergency Ministry took off here Wednesday evening, carrying some 30 tons of aid to the quake-hit areasThe Japanese government has decided Tuesday to give 500 million yen (about 5 million U.S. dollars) of emergency grants in aid to China to support the earthquake disaster relief efforts, Japanese Foreign Minister Masahiko Komura announced in the evening.

Komura said the Japanese government made the decision after receiving a request from Beijing, and will consider giving further aid if necessary

.The Vietnamese government has decided to donate 200,000 U.S. dollars to victims of a recent earthquake in China's southwestern Sichuan province, local newspaper Saigon Liberation reported Thursday.

Here is an old cartoon I did two years ago. Appropriate today.

The U.S. embassy to China, on behalf of the U.S. government, Wednesday handed over 500,000 U.S. dollars of cash to the Red Cross Society of China for quake relief in southwestern China.

OK: the US is giving China basically nothing. Less than much smaller and 'weaker' nations. Note who is at the top of the giving list: Saudi Arabia. I have detailed over the last three years, the Chinese moves towards Saudi Arabia. Step by step, the Chinese have been displacing the Americans in Saudi Arabia. This is an insidious process that is mostly subterranean. The fact that the official Chinese news service put both SA and the US in the same headline is important.

The US cannot fathom the depth of anger the Chinese government feels towards our government. The US has outsourced much of its pollution to China. Both Japan and the US have moved their factories to China in order to pollute China or exploit cheap Chinese labor. But for both countries to turn against China and pretend all the multinational corporations that are doing this is all CHINA'S fault is too much to bear. When China raised the value of the yuan, for example, both the US and Japan plunged their currencies against all others in the world and instead of rewarding China for doing this, punished the Chinese.

I will note that Japan has changed leaders and its tune vis a vis China. Note the generosity of the Japanese which the Chinese government has lauded.

Another thing: a big, big propaganda point in the US is the lie that China doesn't want any aid. This noxious pretense flies in the face of Chinese acceptance and gratitude to the nations that ARE offering help. On top of all this, China doesn't want the sort of 'help' given to poor Indonesia when the Boxing Day Eartquake/Tsunami killed hundreds of thousands. Ships filled with all the detritus of US closets came pouring in, tying up dock workers, all flooding Indonesia with rags and junk! They poured this noxious pollution onto the beaches of this crippled nation and departed. I saw photos of mountains of discarded, dirty clothes on the beaches there. China doesn't want this sort of 'help'. They want specific things which is quite rational.

To do this, anyone offering help has to work through the Chinese government. Just as they can't let in armies of paramilitary people with dogs to dig out the survivors for fear the CIA and other secret organizations will use this as a chance to operate against China under cover, China can't just let anyone do whatever they want. Just as the US will not let in a flood of Chinese with military training and dogs if the San Andreas blows out.

Which it will.

Another cartoon from 2 years ago.

China offers help to rebuild New Orleans. This story is from Hurricane Katrina. When China offered help, the US Congress and Bush went nuts. They thought the Chinese would give us up to $2.5 trillion to rebuild! China declined. The US was undergoing a record building boom at the time of this hurricane. Since we were lavishing trillions of dollars building houses on top of the San Andreas fault as well as very close to the ocean in all the hurricane-prone states, the thought that we deserved Chinese funds to continue this madness was pure madness.

Another cartoon from two years ago.

Click here for April, 2006, Diplomacy News to see stories about the messy Hu/Bush visits. I wrote extensively about the insulting visit Bush gave Hu back in April, 2006. The US boasted openly about making Hu 'lose face.' Our attitude about this tragic earthquake continues this tradition. Instead of supporting the government of China to deal with this horror, we are sniping at China from the sidelines. I can't wait until we are in the same boat and weeping for world sympathy and aid.

All nations, to show solidarity and a desire for peace, have to suspend global power struggles when tragedies hit. This is common courtesy. Back to the markets today, the news from Asia is, as always, interesting. The impact of this Chinese earthquake is barely felt yet. But will be, increasingly, after the Olympics, when China turns inward to rebuild and to deal with the problem of all its public schools which are mostly cement structures.

Broad Impact Looms As Vehicle Ownership Falls In Japan

TOKYO (Nikkei)--The number of vehicles in Japan has started declining, a trend that will not only have an impact on related businesses, such as insurers, repair shops and gas stations, but also affect the nation's road-building policy.
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Economic Slowdown At Home Could Block Mizuho's Recovery Path

TOKYO (Nikkei)--Despite Mizuho Financial Group Inc.'s (8411) assurances that it will stage a rebound this fiscal year following a profit plunge in fiscal 2007, a domestic economic slowdown is likely to weigh on the banking group's earnings.
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MARKET SCRAMBLE: Surging Costs Test Firms' Discipline

TOKYO (Nikkei)--At a time when soaring raw materials costs threaten to eat into profit margins, companies that act quickly to prevent a decline in profitability are likely to emerge as winners and benefit from higher share prices.
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BOJ Seen Turning 'Dovish' As Uncertainty Prevails

TOKYO (Nikkei)--The Bank of Japan's policy-setting board is shifting toward a "dovish" policy stance under the new leadership of Masaaki Shirakawa, according to five prominent BOJ watchers.

Older car registrations have been falling for more than a year. Now new car registrations are falling in Japan. This is due to the same problem we see in the US: wages are dropping vis a vis real inflation. And the central banks, as they flood the world with Funny Money™ are making this worse and worse. And thanks to this inflation, the ability to buy things like cars is collapsing. This is why banks must track the real costs of inflation which is in food and fuel. Those shoot up, economies collapse. Of course, the 'cure' is to have low interest rates. But this is obviously a failure. Japan has super-low rates but thanks to the brutal cutting of wages to clip inflation, no one in Japan can afford to buy anything even if the interest on a loan is cheap. And thanks to food and fuel inflation, no one can save money anymore.

INFLATION KILLS SAVINGS. And no banking system can run on no savings for very long which is why the system is collapsing. I will note that no one within the banking system with the exception of outsiders like Volcker even mention savers at all! They don't for a reason: they want to increase debts, not savings! But we can see in Japan, this 0% system is a total failure. Also, as industrialists seek to squeeze out inflation of commodities via squeezing workers, Japan, one of the world's biggest economies, is DYING. And this is like a cancer within the global economic system. As Japan dies, its disease spreads. As Japan ceases to buy world market goods, trade falters across the planet. This is why the G7 have to turn to Japan and stop this madness. The commodities cost too much in Japan thanks to the weak yen. But to gain profits via trade, Japan wants above all, a weak yen!

Euro zone under calls for single seat in international forums

The euro zone members were called on Thursday to speak in one voice with a single seat in international forums such as International Monetary Fund (IMF).

"The euro area must build an international strategy so that it can play a full part in pursuing global stability and project and defend its interests in the world," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told an economic forum in Brussels celebrating 10 years of European Economic and Monetary Union (EMU).

"This means first developing common positions on international issues so that we can speak with a strong single voice. Once accomplished, the logical next step will be to consolidate our representation and obtain a single seat in international forums," he added.

Europe wants to have their cake and be one party but also be many little party goers at the same time. Like Russia when it joined the UN. All the provinces that left the Soviets after the fall of the communist dictators were put in the UN as separate nations. Europe wants to be a host of small principalities and nations while being one entity when it comes to important things like money. The US didn't fall for this scheme when the UN was created for fear that the US would explode apart if each state were treated as a separate nation.

So Europe is the world's biggest economy this year while not being really a nation with any real unity. Indeed, as we see in today's news from Italy, ethnic cleansing is very much alive in Europe. Many Eastern Europeans have flooded into Western Europe even as Western Europe sucks in more and more former Soviet satellites. And this is causing a reaction that is exploding across Europe. A very unstable and weak Holy Roman Empire situation, I would suggest.

Europe, like Japan, wants a stronger dollar so they can continue merrily exporting more goods than they buy from the US. Germany, due to its strong industrial base, is the most powerful part of this disjointed union which is why I call it the Fourth Holy Roman Empire, der vierte Reich.

Led by Germany, a Strong Quarter for Europe

Surprising even the most optimistic forecasters, the German economy grew 1.5 percent in the first quarter of this year, delivering its best performance in over a decade despite the global financial crisis and recessionary fears enveloping the United States.

The euro zone, where Germany accounts for a third of economic output among 15 members, grew 0.7 percent during the period, the statistics agency Eurostat reported Thursday. The region’s numbers, which represent quarter-on-quarter growth, also got a surprising lift from France, where the economy grew 0.6 percent in the first quarter.

The figures, which were about double what most economists expected, suggested that the European economy was demonstrating a resilience that seemed unlikely as recently as last autumn. However, economists said the numbers obscure severe slowdowns in Ireland and Spain, which have been battered by the global housing decline, and a probable recession in Italy.

Germany has increased its partnerships with China working on huge construction projects like the rail system. German engineers will be flooding into China soon to help with the rebuilding of the road and rail infrastructure. I notices from photos of the earthquakes, the major highways in the Chengdu region were built on the German model: huge cement slabs that are then paved over. Many of our highways are built on a lighter foundation. So it seems to me that the Chinese are using German technology and standards rather than American.

There there are the Arab countries: they prefer to buy from Germany when it comes to machinery. And also Japan these days. So both are doing well in the auto markets. Unlike you know who.

U.K. Two-Year Notes Have Biggest Four-Day Decline Since 1996

U.K. two-year government bonds dropped the most in 12 years this week as traders abandoned bets the Bank of England will cut interest rates next month.

``The unwind has been massive,'' said Matteo Regesta, a London-based interest-rate strategist at BNP Paribas SA, France's biggest bank. ``We have to completely change the way we look at the gilt market.''

And here it is: the Horns of Dilemma. Inflation is rapidly increasing in England, the US and Japan. But none can escape this since all need to keep interest rates low in order to keep increasing the indebtedness of the home bases. We need to go further and further into debt but his is a deteriorating condition with a final end of bankruptcy. We can't do this while our economies are also contracting! Contracting economies usually are forced into a depression cycle but not if savings are destroyed. Then the banking system collapses as it did after the 1929 stock market collapse. Ignoring inflation caused by efforts to stop this lending collapse is even worse. It leads to hyper inflation. So we are caught in a trap we made ourselves. And getting out via trade won't work. Not if we are alienating our potential markets. Like the Chinese.

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Culture of Life News Main Page

May 15, 2008

Elaine Meinel Supkis

As Bernanke seeks to fix the banking collapse, he falls into the trap of treating the obvious 'symptoms' while totally ignoring the underlying problems. This is because he is a tool for the very rich, not a guardian of our joint welfare. This disassociation of the ruling elites from the masses is very profound and dangerous. And this fool actually thinks, if only he can restart the lending machine, this will fix a bankrupt economy. This delusion is cultivated by our rulers who are all spendthrifts who make huge profits off of shoving us into their traps which are set by lending us money they make out of thin air. Even as the magic window the Fed set up last November lends Funny Money™ like crazy, all the top bankers in the West are yelling, 'The crisis is over and all is well and please lend money...after everyone gets some capital!' This is impossible. We don't have no more capital, dudes. We are bankrupt.

Bernanke Urges `Hunkering' Banks to Raise Capital

Federal Reserve Chairman Ben S. Bernanke pushed banks to keep raising capital in the aftermath of losses from the credit crisis, so lenders can avert deeper damage to the U.S. economy.

``Firms are hunkering down,'' Bernanke said at a conference in Chicago today. ``They have at least partially replaced the losses with new capital raising, but not entirely. They are being rather conservative in making new loans, which has implications for the broader economy.''

Bernanke's remarks reflect concerns he and other Fed officials expressed this week that financial markets have yet to return to normal. The Fed chief also said the central bank is considering strengthening its guidance to banks on how they manage risk after ``weaknesses'' that contributed to the crisis.

Banks and securities companies have raised about $244 billion of capital since July, after writedowns and credit losses in excess of $333 billion. Bernanke and Treasury Secretary Henry Paulson have repeatedly said firms should keep increasing their funds, seeking to alleviate the impact of the credit crunch.

``I strongly urge financial institutions to remain proactive in their capital-raising efforts,'' Bernanke said in the text of his speech. ``Doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve.''

Time for the old calculator: $333 minus $244=$89 billion in the red. This was after the Asian and Arab sovereign wealth funds poured many billions into the big investment banking houses in the West. Did any of these SWF investors see any profits from all this? No...? Heh. Not a penny. They did this because they have definite political reasons for taking over control of our banking systems. These reasons are not benign, either. They are hostile take overs.

For two years, I have written about Sovereign Wealth Funds. The word 'sovereign' is very important: it means it is lord over all others. In the case of our banking businesses, all of which are essentially bankrupt, they survive with massive losses, only thanks to the intervention of these kings, in many cases, quite literally kings. The US is supposed to be this fabulous, sovereign nation that is powerful and is a democracy or a republic, not a slave state or beggar at the gates of the Dragon Palace, the emperor, Hu. Just like Bernanke seldom mentions our trade deficit, so he doesn't muse about this collapse of US sovereignty in the banking system.

So what exactly does this TRAITOR mean when he says, '...remain proactive in their capital-raising efforts'? First, one of the places these pathetic fools who screwed up our banking system to the point of bankruptcy, is to go to China and ask to be bailed out. This is obviously impossible not to mention, insensitive and outright deluded. Bernanke made this speech after the Great May Quake! Perhaps a hundred thousand Chinese lie dead! And at least 5 million are without shelter, water, food. China is going to turn inwards and use what wealth they have accumulated to save their own people! They will not be building more houses in America. They will be building...in China!

Indeed, one of the problems for the US is that China has been slowly turning off the financial taps. The US insists that China not export to the US so much anymore. And this means, the Chinese won't lend us money. If China does have money inside our financial systems, they will use this to funnel more money into rebuilding China. This effort has high support within China. The earthquakes have increased the sense of unity and patriotism within China.

Then there are others who have been keeping the US banking system from declaring obvious bankruptcy: the Arab sheikhs and kings. It is obvious, after US candidates for President and Bush in Israel have delivered blood-curdling speeches aimed at the heart of Islam. I also find it rather horrible that the financial affairs of many of our top politicians in both parties have grown massively by hundreds of millions of dollars in the last 10 years even as our entire banking system which is regulated by these same TRAITORS collapses into bankruptcy and dependency on foreign powers. Someone has been stuffing their own piggy banks while stiffing the US public. Neither party mentions any of this for obvious reasons. Just like Bernanke conspires with them to not mention our growing budget deficits.

Also, Bernanke betrays his doctrinaire refusal to understand capitalism. He thinks, if the bankers just somehow get some money from other nation's trade profits, we can resume racking up more and more debt via the magic of lending! The efforts of 50 years of business schools in America wiping out all traces of Marxism has led to this sort of childish thinking about capitalism. This is why policies that kill the Golden Goose, namely, the working class, are encouraged and justified even as it is obvious to anyone, if you destroy the incomes of workers, capitalism falls off a cliff. Chinese labor can gain value-added profits only if it sells to US workers who have greater incomes. Once all workers are reduced to semi-slaver, the market for manufactured stuff collapses. This is what we call 'depressions.' Bernanke also believes that if we have a depression, it is easily fixed by debasing the currency. Then prices go up and voila! No depression!

But this works only if wages rise rapidly, too. And while the take home money for our own work force has been relentlessly falling, the consumer base is rapidly vanishing in this sector. So why would the Chinese pour more of their CAPITAL down this well? In all the statistics about wages, we forget the huge change in US working relations: the push to drive all women, even ones with small babies, into the workforce. This gave double incomes even as each individual income fell, the collective family incomes shot upwards for 25 years. This is now over and done with. There is no untapped labor left except for one: child labor. Like in any third world country, this is one frontier the US consumer nation dare not cross. I even saw, at the Mises Organization's blog, a story lauding child labor and demanding a return to this noxious, deadly abuse of our own offspring for capitalist exploitation!

Chinese children are not set to work! They work hard...at school. The tragedy of the Chinese earthquake is how many schools collapsed due to being built with nearly all cement. But our own children are caught in a collapsing school system only it isn't the buildings. It is the system itself. This is leading towards the dire last step in exploitation of labor: child labor.

Confidence Improves Amid Signs Credit Crisis Easing

Confidence in the global economy improved for the second consecutive month in May on signs the worst of the credit squeeze may be over, a survey of Bloomberg users on five continents showed.

The Bloomberg Professional Global Confidence Index rose to 22.7 from April's 14.5, with respondents becoming less pessimistic in every region. A reading below 50 indicates negative sentiment. The measure fell to as low as 13.1 in March.

``Conditions are not quite as jittery in markets as they were, so we may be through the worst,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, who took part in the survey.

Participants in the U.S. and Europe reversed their predictions of a dollar decline after the Federal Reserve indicated it's ready to pause cutting interest rates. Wall Street chief executive officers including Jamie Dimon of JPMorgan Chase & Co. said in the past month that the credit crunch is easing.

The global economy is having some difficulties due to the reliance on the US consumer markets and US rising debt to fuel a transfer of sovereign wealth via commodities sales and manufacturing profits moving out of the US and over to other nations. Absolutely everyone who produces anything has flooded into the US markets to exploit US easy lending. Since the US never had to really trade for anything, this lending is the entire basis of our economy. And it is why our banks are bankrupt. Fixing this means fixing global excess exports to the US. And the tiny change in status this last six months has barely undone any of the past damage in trade. Even as the weak dollar boosted US trade profits slightly, the pit we are in is very, very deep. The improvements, nearly microscopic. And thanks to all our trade partner's efforts, the dollar is now stronger so this improvement is now gone. Dead in the water.

'The worst...' the Royal Scottish banker was talking about is the bad times when US exports began to rise and the world's imports to the US dropped. Now, it is back to normal. But 'normal' is utterly abnormal. As well as unsustainable. And the 'credit crunch' is when easy lending stopped and wild US consumer spending slowed down. Now, it resumes? Based on sub-inflation credit? Which means, lending is cheaper than earning? And how is this sustainable? And how can this Funny Lending™ create anything except hyperinflation?

Food Prices See Greatest Monthly Increase in Nearly 20 Years

Food prices have risen 6.1 percent in the past three months on a seasonally adjusted annual basis. The one-month rise between March and April of 0.9 percent was the biggest since January 1990, according to the Bureau of Labor Statistics.

The rise in prices covered all categories of food but was most severe among such staple goods as grains and oils -- goods where inflation has touched off food riots in some less developed countries and led to concerns about supply shortages.

Say hello to hyperinflation, coming to a store near you! Sigh. Again: Bernanke and the Scottish banker don't dare utter a word about this inflation! They focus only on making loans available somehow. This is ridiculous when we see China trying to suppress inflation the old way: increasing, not decreasing, the reserve ratios for lending, increasing the interest rates.

U.S. Economy: Manufacturing Struggles as Expansion Falters

The slump in U.S. manufacturing deepened while the economy skirted recession, reports today showed.

Industrial production declined 0.7 percent in April, the Federal Reserve said in Washington today, more than twice the drop forecast by economists. Separate figures from the New York and Philadelphia branches of the central bank indicated the slide may continue this month.

Only exports and consumer spending, the largest part of the economy, are keeping the six-year expansion alive as housing shows no sign of a rebound and factories retrench.

``There is no question about whether or not there is a recession in manufacturing -- there is,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who correctly anticipated the drop in industrial production. ``Housing is in deep recession and manufacturing is in a shallow one.''

For the last 9 months, the dollar has fallen greatly against the yen and other major currencies with nations we have trade problems. Few Americans know that Europe has a huge trade advantage with the US despite the euro! But it was edging downwards in our favor until three weeks ago. Then the G7 nations, especially Japan, howled about the weak dollar and up it went. To the great satisfaction of our trade partners who wish to resume driving us into bankruptcy while they make great capitalist profits off of trade with us. The manufacturing sales from the US will now begin to vanish and we will be worse off than last year which saw nearly a trillion in trade deficits. This is why I support tariffs and barriers. Relying on monetary manipulations to control trade is an obvious, total failure for the US.

Rochelle Parker needed money for Christmas gifts and medicine, so she went online and found a Web site promising easy money. After a few key punches she was zapped a $300 loan, but one that charged an astonishing 842 percent annual interest.

The recently retired fingerprint technician for the Chicago Police Department had several other online loans that drained her financially and forced her to move in with her daughter. But getting another loan was so easy on the Internet.

"As my mother said, I'm robbing Peter to pay Paul," Parker said with a shake of her head and a sigh of regret.

Usury stalks the working classes as many in this sector go bankrupt due to loss of income caused by Bernanke's helicopter drops to keep insolvent investment bankers happy and the many multimillionaires in Congress rolling in dough. No sane person signs up for this sort of loan except the most desperate of all. A simple law passed by our multi-millionaire Congressional leaders and signed by our multi-millionaire President could fix this. But instead, they passed the odious 'Bankruptcy Laws' that made it nearly impossible for the hard-pressed workers to get rid of past debts. So we get a working class sinking into debt-slavery and no one is rescuing them. And inflation caused by debasing the currency is worsening things.

Sears majesty to hedge-fund dust
By Julian Delasantellis

To this observer, the sorry saga of Sears illustrates just how far distorted American ethics and values have become from exposure to the great credit and money carnival of the past few years. "All that is solid melts into air, all that is holy is profaned," Karl Marx wrote in 1848. In this case, nobody thought twice, nobody blinked an eye, when Wall Street took a truly unique American institution, Sears, and turned it from a fine, respected American society matron into a common streetwalker reduced to pimping through the night for Eddie Lampert.

Last year, the New York Times' Gretchen Morgenson noted that more American national income was produced by financial engineers, people like Lampert who manipulate the amorphous abstraction called money, than by the mechanical engineers who manipulate actual physical realities such as steel, concrete, mortar and oil. In his new book Bad Money (reviewed May 10 by Joe Costello), Kevin Phillips notes that "By 2004-6, financial services represented 20 to 21 percent of gross domestic product, manufacturing just 12 to 13 percent."

Somewhere along the line, America got the idea that the buck generated from financial services, from manipulating money, from passing it from hand to hand, was equivalent, or even superior to (after all, you come home with a lot better smelling clothes after a day on the trading floor compared to a day at the steel mill) the same buck made actually making and sustaining something - such as the great brand Sears once was.

The Asia Times has some of the very best economic articles. Compared to other mainstream media like the Wall Street Journal or the New York Times, the opinions in the Asian Times is often enlightening and well-written. Note how Julian even quotes...heh...KARL MARX! GE, like Sears, was turned into a hedge-fund banking entity that was looted by the top brass. GE is now selling off its actual manufacturing to...CHINA. And then there is GM: they became a lending institution and that is now bankrupting them as Toyota beats GM's pants off in international trade PROFITS. Up and down and all around, our manufacturing base has turned into a Mafioso-style lending machine that strips workers of all future earnings.

And the poor woman in the story about usury: she did this to buy presents manufactured in China for her sad family. So they could be entertained to death. I have said many years ago, Xmas should be banned. It is destroying our nation, distorting the business cycle and wrecking our environment.

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Culture of Life News Main Page

May 14, 2008

Elaine Meinel Supkis

I had to suffer through watching tons of propaganda on ABC to see the Obama/Edwards lovefest. Not only has Edwards now embraced Obama, not only has Obama embraced Volcker, but three retired SEC chiefs who worked for both Democratic and Republican Presidents endorsed Obama today! This is VERY important: they feel he is possibly the only one around who can bring some sanity to our finances. Also, Hillary and her husband both saw their incomes climb the most in the Senate this year! The number of multimillionaires in the Senate is striking. And many of them gained this via political smoozing. Stocks shot up today on the news that there is 'no inflation' even as gasoline shoots upwards at the pumps by some more pennies today! The hope is, Bernanke will drop rates to near 0% and everyone will live in that happy, happy land where there is no interest charged, no money down and you don't pay off the principal. The Pentagon and the White House reduce the capture reward for top Al Qaeda people supposedly because the Arabs don't understand zeros and think $100,000 is better than $5,000,000. Even Hillary's voters aren't that stupid. Much less, Arab chiefs. And last, we look at China and India to learn some harsh lessons.

Edwards to endorse Obama

WASHINGTON (CNN) -- Former Democratic presidential candidate John Edwards will endorse Sen. Barack Obama on Wednesday at a campaign event in Grand Rapids, Michigan, according to Obama's campaign.
*snip*
He told NBC last week that Obama, the Democratic front-runner, is the party's likely nominee. Both Obama and the his rival, Sen. Hillary Clinton, had sought Edwards' blessing.

Edwards said last week that it was "fine" for Clinton to continue making her case but expressed concern that a continued campaign could damage the party's prospects in November.

Obama is on a roll. Yes, he didn't win the white worker, the hard workers of West Virginia. But then, these people are often ill-informed thanks to our insane media which specializes in propaganda cranking rather then honest news reporting. Example from today, ABC News said, 'The soldiers in China unceremoniously dump bodies on the sidewalk...' while seeking some way of exploiting the massive tragedy there. Of course, the soldiers, overwhelmed by thousands of dead, were carefully lining them up where others could pick up the bodies, all of which they strove to cover in some way. Which is hard to do when everything is in chaos. But I remember New Orleans when it took months and months for the bodies to be taken in. In many cases, people had to complain bitterly and strangers covered the dead as best they could. And a hurricane gives lots of warning, unlike an earthquake! The soldiers, of course, were keen on saving any living souls, the care of the bodies came second. But ABC had to score points and point fingers even though our own rulers in the past have been are far more cruel than the Chinese communists.

ABC didn't linger on the Obama/Edwards love-fest because they had to go to China to mock the heroism there. And then they ran off to New Orleans....oops...Burma to talk about the Superdome and...oops again. It is hard to not be bitter and cynical. I can't wait to have someone who at least can pretend to care! But the Edward's endorsement didn't make me happy, it is the people Volcker pulled into the Obama camp:

Three Former SEC Chairmen Endorse Obama's Presidential Bid

Democratic presidential candidate Barack Obama picked up the endorsement today of three former chairmen of the Securities and Exchange Commission, two of whom were appointed by Republican presidents.

Arthur Levitt, who was appointed by Bill Clinton; William Donaldson, who was appointed by George W. Bush; and David Ruder, who was appointed by Ronald Reagan, issued a joint statement saying Obama can provide the best leadership during times of ``monumental economic challenges.''

``We believe Senator Obama can provide the positive leadership and judgment needed to take us to a stronger and more secure economic future,'' they said. The statement also was signed by former Federal Reserve Chairman Paul Volcker, who previously endorsed Obama.

The four men said they appreciated Obama's support for ``balanced regulatory reform. We believe that such a constructive approach can be extended broadly in the economic area as well as elsewhere.''

Levitt, in an interview today on Bloomberg Radio, said their backing was prompted in part by Obama's opposition to a summer gas-tax holiday advanced by Democrat Hillary Clinton and Republican John McCain. Obama called the idea a ``gimmick'' because it would save the average driver less than $30.

Now this makes the deal! Anyone voting for Ron Paul can rest easy: Ron himself, said, Obama is the best choice. This news is the cherry in the cocktail. The goofy pandering to semi-literate people concerning the gas tax was the final straw. Of course, our media never, ever, ever mentions wars as a cause of high oil prices. Nor do they point out the obvious, the more the US hammers Iran and prevents them from selling oil, the higher the price of gas. In Congress this week, hysterical multi-millionaires begged Bush to stop filling the national reserves for oil. They desperately want lower gasoline prices for this election. Speaking of a chamber of screaming demons, look at who is a multi millionaire:

Clinton's wealth rose fastest among lawmakers, report finds

Propelled by her husband's post-White House earnings, Sen. Hillary Clinton's average net worth soared from red ink to $30.7 million between 2000 and 2006, the fastest financial climb among members of Congress who arrived without assets, a watchdog group reported Tuesday.

Arizona Sen. John McCain, the presumptive Republican presidential nominee, reported a $27.6 million surge in his and his wife's average worth from 1995 to 2006. Their worth rose over that 11-year period from an inflation-adjusted average of $8.9 million to $36.4 million, the ninth-biggest rise in Congress, the nonpartisan Sunlight Foundation reported.

The Sunlight Foundation posted on its Web site the first-ever comparison of the 535 House and Senate members' latest available net worth with their earlier disclosure statements. The forms don't require any explanation for shifts of fortune.

Many members of Congress have added significantly to their wealth while in office, such as Sen. Edward Kennedy's jump from an average net worth of $7.1 million in 1995 to $102.8 million in 2006. But because lawmakers are allowed to list their assets in wide ranges and exclude homes that can be worth millions of dollars, the foundation acknowledged that the data may create misimpressions.

Democratic presidential front-runner Barack Obama's average net worth rose from $328,442 in 2004, when he was elected to the Senate, to $799,006 in 2006. But counting Obama's and his wife Michelle's pricey Chicago home, he almost assuredly has joined the Senate's ``Millionaire's Club.''

So, of all the mulitimillionaire wealthy, Obama is strictly from the 'hood. He might as well be picking up bottles for the 5¢ returns! Ouch. And note the propaganda about him, of all the Senate, being 'elitist'. HAHAHA. Not to mention, all the military/industrialist sticky fingers in the Senate. Arrest them all. No wonder they all vote for more and more money wasted on more and more wars! It is making them filthy rich. A warning to pro-Democrats: this is YOUR party doing this! And this is why reaching out to people like Ron Paul is so important. The anti-war, anti-corruption people are NOT any particular party. They are all individuals and we must take care to go after all the corrupt people and obviously, Hillary is #1 on that list not to mention dear old McCain, the other guy who is ready to answer the 3am phone call to bomb, bomb, bomb someone so the Senators can get richer.

If we make a list of all these clowns, you can bet, the huge rise in their joint incomes from 1995 to today run directly from the pirates and hell hounds who have utterly destroyed our banking system and our economic futures. These tax cheats are now in charge of our key political offices for the Senate has veto power over the House so if the House goes after these pirates and hellish hounders, the Senate can kill any bills that reform this corrupt and dangerous system. And there are only 51 who have to be bribed which is tons cheaper than the House, per vote. Then there is the ultimate bribe: the White House has great powers of veto which is why these financiers who are often thieves, are very generous with their donations and help. Let's look at the state our nation is in thanks to all this:

U.S. Stocks Advance on Consumer Price Report; Freddie Mac Gains

U.S. stocks advanced for a third day after consumer prices climbed less than forecast and Freddie Mac's results bolstered speculation the worst credit-market losses are over.

Freddie Mac, the second-largest U.S. mortgage-finance company, rallied the most in six weeks after reporting a smaller loss than analysts estimated. Macy's Inc. spurred gains in retailers on sales that topped projections. Nine of ten industry groups in the Standard & Poor's 500 Index rose as the Labor Department's April inflation report gave the Federal Reserve more leeway to stimulate the economy.

Whoopee. The investors and financial bankers are hoping the Fed will drop interest rates below 1% yet again. Then it is party time, dudes. Anticipating this shower of easy wealth via easy money, stocks are struggling to get back to where they were over a year ago. The joint agreement between the Fed and these pirates is simple: they will all discount inflation. For example, the magic inflation figures saw gas go up 'only' 2.5% this last month. Since they guessed it will rise even HIGHER, they are saying inflation is dropping since it was 'only' 2.5%. Whoopee. This sort of higher math has only one purpose: to hide the truth. Also, the prices of all other things are definitely dropping due to everyone spending every penny on food and fuel. Who would have guessed? Instead of saying, 'Oh my god, this is the Seventies Show all over again!' and hammering a nail in the forehead, they say, 'There is no inflation! We can have cheap loans again!' But there is someone who is saying the right thing, as usual. Volcker.

Volcker says current economic situation resembles early 1970s

The US economy is not now in the kind of stagflation crisis it had been in, in the late 1970s, former Federal Reserve Board Chairman Paul Volcker told Congress today, but it's not impossible.

'I think there is some resemblance now to inflation in the early 1970s,' he warned the Joint Economic Committee. The economy obviously does not have the full-blown, double-digit inflation crisis that finally appeared, but he said, 'there is an underlying tendency to inflation.'

Volcker also told the committee that the Consumer Price Index may understate the actual rate of inflation. For example, during the real estate boom, the housing component of the CPI rose only slightly.

Someone give Volcker a cigar except that is a Cuban commie cigar. No, give him a loud cheer! Wow! Someone sees the obvious! Thank the gods, he is Obamas' economic advisor. It is wonderful that this candidate has a sane courtier. I want Volcker to be in charge of all our financial data. I want him to bring back the M3 numbers. I want real inflation statistics, not lies. I want him...back! Yaahhh! He knows, like myself, that we need savers if we want a sane banking system. He knows that savers have been ravaged this last 15 years and he knows the elderly are being cheated. And I know that he is the best choice for Treasury Secretary.

US Navy resurrects Fourth Fleet to police Latin America

Washington announced at the end of last month that it is resurrecting the long-ago moth-balled Fourth Fleet to reassert US power in the Caribbean and Latin America. Created at the time of World War II to combat German submarines attacking merchant shipping convoys in the South Atlantic, the Fourth Fleet was seen as no longer necessary after the Second World War and was disbanded in 1950.

The Pentagon’s a statement on the revival of the fleet gave a far vaguer indication of its new duties, saying it would “conduct varying missions including a range of contingency operations, counter narco-terrorism, and theater security cooperation activities.”

“Rear Admiral James Stevenson, commander of U.S. Naval Forces Southern Command, said the re-establishment of the Fourth Fleet will send a message to the entire region, not just Venezuela,” AHN news reported.

And we now are ruling the Seven Seas with four fleets we cannot afford! Isn't that loverly? And it is fatal. The US has been carrying a big stick and using a very big mouth and the stick is owned by the Chinese and the Venezuelans know this, they are good buddies with Hu and Wen as well as where and what. They aren't fooled by this latest attempt at projecting power we can't own. Our oil prices are shooting upwards due to the US not being able to buy Venezuelan oil, China gets it, not us. Thank you. End of story. It should be on TV but none of this makes the news in a comprehensive way. This is why my news service survives. Hooray.

The U.S. Quietly Slashes the Reward Posted for the Leader of Al Qaeda in Iraq

he U.S. government has quietly withdrawn a $5 million reward it was offering for the killing or capture of Abu Ayyub al-Masri, named by Pentagon officials as the leader of Al Qaeda in Iraq.
*snip*
Officially, defense sources say that rewards have historically been reduced for a number of reasons. "When they have reduced rewards in the past, some of the discussion has been to devalue them [the terrorists], to not hold them in such high regard," says a senior defense official. It's psychological warfare of sorts: "It may cause them to do things that say, 'Look, I'm important,'" says the official—and in so doing, perhaps do something that makes it easier for them to be captured. The reasons in the past have also been more pedestrian, adds the official. "Sometimes the rewards are set so high that for some people maybe $100,000 is more tangible than $1 million."

And if the fools running our empire think even the dumbest desert Arab can't add and subtract, they are nuts. Modern numbers came out of the Islamic world! And the Indians invented zero. And the ancient Chinese invented computer systems to calculate large numbers quickly! While we were in the Dark Ages, counting fingers and toes and coming up with 19 due to the finger cut off by a sword in last summer's raiding expeditions. The truth is, the reward has been reduced because no Senators can claim the $5 million if they turn in al Qaeda CIA agents. And Bush can't collect it, either. He won't turn on his useful buddies.

2005: CHINA AND INDIA IN THE WORLD ECONOMY

Paper presented to the International Conference of Commercial Bank Economists

From a long-term perspective, the prospect of China becoming the world’s largest economy, and India the third largest, within the next 10-15 years, represents a return to the order which has prevailed throughout most of human history. According to calculations by Angus Maddison5, from at least the beginning of the common era until the early 19th century, China and India accounted for around half of global GDP (see Chart 1). For much of this period China and India were intact polities, had the world’s largest populations and were technological leaders.

As Jared Diamond notes, “until around AD 1450, China was technologically much more innovative and advanced than Europe”6. Chinese inventions before or during this period included the wheelbarrow, gunpowder, matches, cast iron, porcelain, magnetic compasses, sternpost rudders, paper, printing, paper money and a meritocratic civil service.7 Indian inventions from this period include the decimal system (and the concept of zero), the water-wheel, cotton-ginning, cloth dyes, brass and the extraction of crystalline sugar from cane8. The decline in the relative importance of China and India between the early 18th and late 20th centuries resulted from, inter alia, the industrial revolution in Western Europe; the formation and rapid expansion of the United States; China’s retreat from engagement with the global economy beginning during the Ming Dynasty and subsequent decay under the Qing dynasty; the impact of colonial rule on India, and ‘gunboat diplomacy’ and ‘unequal treaties’ on China; nearly fifty years of warfare and social disorder in China in the first half of the 20th century followed by another quarter-century of chaos and misrule under Mao Zedong; and forty years of growth-stultifying Nehruvian socialism in India from independence until the financial crisis of 1991.

A good pdf read. The charts show clearly, the world order is shifting back to Asia. Asian farmers and inventors in China in particular, were incredible in the past. Many inventions like printing of books, books with pages, numbers, algebra, paper money, fire power, integrated farming methods, unitary organization of villages, cities and the government, intensive farming techniques, fertilization, silk weaving, high-fired pottery, astronomy, etc: this is from the great civilizations of the East. The Olympic torch is moving to Asia. No matter what we say or how much we complain. This is what we must talk about, not making gas cheap. But how to swim with this tidal change and not drown in bankruptcy, drown in red ink.

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My lovely, free hens:

Mises Madness

May 19, 2008

Elaine Meinel Supkis

A number of economic 'think tanks' hate labor, hate workers and have nothing but malice towards the greater mass of humanity. Sitting upon their well-padded Olympian thrones, they snarl and snap that 'capitalism' is superior to socialism. Yet we have the very comical sight of 'socialist' and even outright 'communist' powers destroying the so-called 'capitalist' nations! Instead of trying to understand this process, most think tankers retreat into their shell and pretend there is no conflict here. Also, these same people tend to be indifferent towards the subject of slavery. This goes along with a romantic view of US slavery which was ended so bloodily. The idea that Labor=Wealth is impossible concept for many of these right wing thinkers. Time to talk about the imperial royalist, Bismark, the strange father of socialism.

Everything You Love You Owe to Capitalism

By L. Rockwell Jr.

All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies. The ancients, peering into this scene, might have assumed it to be Elysium. Medieval man conjured up such scenes only in visions of Utopia. Even in the late 19th century, the most gilded palace of the richest industrialist required a vast staff and immense trouble to come anywhere near approximating it.

We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.
*snip*
Whatever the specifics of the case in question, socialism always means overriding the free decisions of individuals and replacing that capacity for decision making with an overarching plan by the state. Taken far enough, this mode of thought won't just spell an end to opulent lunches. It will mean the end of what we all know as civilization itself. It would plunge us back to a primitive state of existence, living off hunting and gathering in a world with little art, music, leisure, or charity. Nor is any form of socialism capable of providing for the needs of the world's six billion people, so the population would shrink dramatically and quickly and in a manner that would make every human horror ever known seem mild by comparison. Nor is it possible to divorce socialism from totalitarianism, because if you are serious about ending private ownership of the means of production, you have to be serious about ending freedom and creativity too. You will have to make the whole of society, or what is left of it, into a prison.

Ruling elites love to talk about 'individuals'. When one is rich or powerful, one can be a happy individual. When one is poor, one is part of the 'masses' by definition. A poor person doesn't decide if he wishes to eat in this fine French eatery or that delightful hotel. A poor person hopes to eat anything. A rich person can decide which of McCain's six houses she wants to sleep in. A poor person sleeps under bridges. Infamously, a cheeky ruling elite in London quipped that the law against sleeping under bridges applied to the rich and the poor equally. Or as Marie Antoinette supposedly said, 'Let them eat cake.'

The life and death non-choices offered to the greater mass of humanity is not 'individualism'. And the response to this suffering often blows up into collective fury as history has a grim toll of revolutions and suppressions of the mob by armed non-individuals we call 'armies.' Indeed, the pretense of being an 'individual' is a big, fat lie. These haughty, hard hearted 'individuals' are surrounded by organized people who are so non-individual, they wear UNIFORMS. A 'uniform' is a thing that makes everyone look the same, thus the obvious name. This huge army of uniformed servants are the police, nurses, religious authorities, judges, armies, navies and so on. All the spoiled rotten little individuals are carried on the backs of this very visible mob of uniformed servitors and assistants. On top of this, the entire 'individualist' class of spoiled brats are serviced by milling millions of food producers, processors and the final mass: industrial workers, miners and builders.

Periodically in history, this seething mass organizes itself and attacks the spoiled individualists who oppress them. This is why the rulers use every tool they can grasp to destroy collective power. But whenever workers, farmers, sailors, miners, whoever manage to form unions and wrest political power, the condition of these workers improves vastly and then and ONLY then does the sun break out of the clouds and CAPITALISM takes off!

This is the iron rule of true capitalism: it rots away rapidly if it isn't shared with the workers. The workers provide labor value-added but the output becomes a burden and a waste unless workers can buy it! Why have industrialism if only 1% of the population can use it? And why on earth would a bunch of bratty individualists want to be mass-produced anything at all? They obviously do NOT want that. They want HAND CRAFTED stuff! Go ask any rich person if they want to buy a mass-produced car or a rare, hand made fancy Italian sports car. Or a hand made dress from a Paris coulture house rather than something off the rack.

Of course, they hate this sort of junk and sneer at it behind closed doors. 'That is SO common,' they sniff. But great wealth can be made by manufacturing stuff and selling these UNIFORM things to the people who have to wear uniforms or work under uniform industrial machine processes. One feeds the other. When nations cut off the ability of the workers to buy this stuff, they have to sell to someone else. And the usual game is to sell uniform manufactured capitalist stuff to some nation where workers have organized and thus, have spending power to some small degree.

What is a Luddite?

1812: For at least three hundred years the weavers from in and around the central English town of Nottingham, though commoners, enjoyed the status and rewards accorded to fine craftsmen. The weavers of Nottinghamshire produced lace and stockings that dominated the English markets and were prominent items in export trade. These products were hand made, often in the weaver's home. Today, it would be called a cottage industry. The weavers worked mainly as independent contractors, not as employees of a factory owner.

Apprenticeships, family tradition and community values insured a product of high quality. The weavers of Nottingham could afford to practice their craft with care; prices for their products, as well as for their expenses and the support of their families did not vary with the market conditions, but were governed by tradition. And the weavers had the additional protection of an ancient royal charter restricting certain kinds of textile production in England to within ten leagues of the town of Nottingham. The weavers and their families were reasonably secure in their modest lifestyle.

In the first years of the 19th century stocking frames and the early automation of the power loom threatened this long-standing way of life. Because the new equipment was expensive, the weavers could not afford to purchase it themselves and the balance of power shifted away from the weavers to the factory owners. Simultaneously the Tory government adopted a laissez-faire economic policy. For the weavers, this meant that they were asked to endure a drastic decrease in income and to submit to the regimented and unpleasant atmosphere of a factory, while the price for their food, drink, and other necessities of life increased. The weavers complained bitterly that the machines made mass produced products of shamefully inferior quality. Naturally, the weavers saw the new technology as the most powerful tool of their new oppressor, the factory owner. A vulnerable tool.

Wages collapsed. Free individual weavers lost their freedom and had to leave their comfortable homes and travel to factories where they had great regimentation and mind-numbing labor with no sense of reward. And all that for one quarter of what they earned earlier! No wonder they tried in vain to smash the Satanic Mills! But the PROFITS for the people who owned these mills were great. They didn't sell this to the English workers who now could hardly buy bread. They sold this to EXPORT markets! In Japan today, we see this insidious process at work. The working class is being squeezed to death. All inflation of commodities and raw materials have to be eaten like a bitter root by the workers while export profits are one of the highest on earth. The rich in Japan are happy individuals getting richer and the workers are getting increasingly agitated at the bottom.

The plight of the English weavers hit the rest of Europe very hard. The beginning of communism is from this time frame. Nearly instantly, Karl Marx and Frederick Engels hammered out a new way of looking at labor and capital. 'Das Kapital' is a very important economic book that has become encrusted with crazy ideas and emotional hysteria both by 'communist' dictatorships and lunatic 'individualist' right wingers. What is particularly sad about all this is how the 'individualists' who are right wingers always end up clinging to fascists for survival. Fascism is all about non-individuals marching in unison. A pathetic ironic point. Let's look at today's news to see the collapse of the US worker as an economic force:

Workers see faults in American Axle-GM deal
Around 3,600 auto workers have gone without paycheck for 80 days

Other workers said they want to keep their nearly 12-week-old strike going to hold out for a better deal. Several said there was a lot of screaming inside the meeting as more than 1,000 Detroit-area workers expressed frustration at facing a 34 percent pay cut if the contract is approved.

“I’m voting no. It’s totally unacceptable,” said Gary Reed, 52, of Warren, who criticized American Axle Chairman and CEO Richard Dauch for making millions while asking production workers to take a pay cut from $28 per hour to $18.50.

“It’s a slap in our face,” Reed said. “We’ve been watching this guy making millions and millions of dollars even while we’ve been on strike, and were going to accept a stab in the back and just walk away with a smile on our face?”

The wealthy individualists who run our corporations have fixed things so they pay very little in the way of taxes. The money flows towards the bank vaults of the extremely rich. There is so much corruption due to these rich people buying our government out, most of our Senators rise into the multi-millionaire class once they gain a foothold in DC, just for example. The working class of America was conned, during the inflation years, into demanding tax cuts rather than resetting the income tax code to reflect inflation. Via this cruel trick, individuals who wanted to pay no taxes on vast wealth snuck through all sorts of sweetheart legislation. The poor wretches who voted for tax cuts rather than redoing the tax code to reflect inflation voted for people who hate workers. In the hopes of not paying taxes, they trooped to Reagan and the Bushes.

Taxes were cut. But not removed from the government ledgers. Instead, they were turned into debts which now bedevil all of us. The news for workers ever since they foolishly voted for Reagan, is all bad news. Wages have not kept up with inflation. The purchasing power was allowed to rise but this was only by putting the other half of working families to work. Once the entire family had to work to keep up, their mobility and power to organize dropped. Also, tremendous propaganda has been poured onto all minds, telling us unions are evil. So here we are, after 30 years of Reaganism, workers are seeing wages not only not keep up with inflation, wages are being ruthlessly slashed again and again.

'Free trade' was used to flood the US with foreign goods. For a short while, the US workers benefited from cheaper stuff to buy. This filled the working class with wonder and joy every Xmas as a flood of toys and other things poured out of this seeming endless sack. But as wages collapse, the bag of Xmas toys and goodies is now being tied shut. This so alarms our trade partners who flood us with these goods, they are struggling right now to fix this problem via some sort of cheap credit. But 7 years of easy credit has pretty much driven all US working families right to the brink of bankruptcy. The Mises Institute cannot understand all of this. The need to hate workers is so intense and ideological, they really think that the cure to our problems is to have more and more 'free trade' coupled with a total crushing of workers so things will be 'cheap.'

The Mises people adore the turn of the 19th to the 20th century. This period leading right up to WWI is their Golden Age. Let's look at some information from back then:

South African Gold Mining: 1886-1933

Chinese miners were imported to the Witwatersrand between June 1904 and January 1907 and these dates define the next era of change in stoping labor force organization. It saw the establishment of several precedents important to subsequent transformation of stoping practices. Among these, a major milestone was the first ‘scientific’ examination of operations and open diffusion of this analysis to the entire industry.

When Chinese arrived on the Witwatersrand, the 1904 Labour Importation Ordinance closed all skilled and semi-skilled jobs to non-white miners. Therefore, while the arrival of the Chinese caused a loss of employment among some lower skilled whites, it also made redundant semi-skilled African miners (Davies, 1976, p. 59). This closing of upward occupational mobility to relatively low cost African miners was accepted by management as a temporary measure in order to facilitate skilled (European) miners’ acceptance of Chinese importation. The Chinese provided a large stock of relatively low cost labor on the South African market. This increased supply in South Africa undermined the bargaining position of African labor and a steady decline in their remuneration ensued.

During the 18th and 19th century, black slaves were hauled all over the planet so they could be exploited as slave labor. Wherever they were used, the wages of other 'free' workers collapsed. Just as slave labor killed the middle class in Rome. Everyone outside of the property-owning or political classes ends up as poor serfs or slaves. After Europe ravaged China and destroyed that empire, they enslaved the Chinese labor who often were opium addicts. The great canals dug during this period often had Chinese coolies doing the hard work. Building railroads or metalled roads, etc., the Chinese were used to break the back of any labor organizing.

The US was very racist back then [and still is in many ways] and didn't want Chinese labor to come in great masses. So labor from Europe was brought over. Only along with this came labor organizers and revolutionaries. Which is why the US eventually became unionized and had strong labor laws starting from 1900 until Reagan destroyed all this. The destruction of labor's powers runs right alongside with the destruction of the banking system. All the regulations set up to prevent fraud and bubbles was killed one by one. So we have a collapsing labor pool and a collapsing banking system running shoulder to shoulder.

Inflation appears tame, but you're paying more

The relentless rise in energy over the past few years has had an impact, certainly in what we pay for gasoline but also in what we pay for food. Food prices rose last year by the largest amount since 1990 and have continued surging this year in large part because of higher energy costs, which means that fertilizer is more expensive. Transporting the produce from the farm to the processor to the grocery shelves costs more, too.

But outside of increases in food prices _ partly blamed on an energy-related impact that more cropland has been diverted from growing corn for food to growing corn for ethanol _ there has been little sign that higher energy prices have become embedded in higher overall inflation.

The weak economy has played a major role in that by helping to restrain labor costs, which account for two-thirds of the cost of most goods.

With layoffs rising for four straight months and the economy flirting with a recession, there has not been a lot of pressure to raise wages. Indeed, the government reported Wednesday that inflation-adjusted wages for nonsupervisory workers fell by 1 percent in April compared to a year ago, the seventh consecutive decline.

Workers are not causing inflation. But they will, like in Japan, be forced to eat the inflation caused by reckless central bankers. Note that during the easy credit years, wages FELL. A very dangerous sign. One that suggests we will have a classic 'Long Depression' such as the one created by England when it crushed workers there in the 19th century. Not every nation wanted to be like the English, by the way. Germany was united by the iron will of one man, who happens to be the creator of Social Security:

BISMARCKSCHE SOZIALGESETZGEBUNG

What is known as Bismarck's social security legislation dates back to the Imperial Message of November 17, 1881 to the Reichstag (National Parliament), in which the conviction was expressed "that the healing of social wrongs must be sought not solely through the repression of social democratic excesses but just as much by positively advancing the well-being of the workers". In the era that followed, regulations were passed on the three most common areas of risk:

1. The Law concerning Health Insurance for Workers (Gesetz betreffend die Krankenversicherung der Arbeiter) of June 15, 1883 provided for the introduction of national compulsory insurance for most manual and white-collar workers in industry up to an annual earnings level of 2,000 Reichsmarks. This insurance was subsequently extended to the transport sector and to workers in agriculture and forestry. On April 10, 1892 the entire set of provisions was promulgated afresh in the form of the Health Insurance Act (Krankenversicherungsgesetz).

2. On July 6, 1884 there followed the Accident Insurance Act (Unfallsversicherungsgesetz) for workers in particularly dangerous establishments. Later, the construction industry and agriculture and forestry were included. On July 13, 1887 accident insurance was decreed for the shipping sector.

3. The provisions were completed on June 22, 1889 by the Law on Invalidity and Old Age Insurance for Workers, Journeymen and Apprentices (Gesetz über Invaliditäts- und Alterssicherung für Arbeiter, Gehilfen und Lehrlinge), irrespective of wage level.

In introducing a social security policy Bismarck's laws anticipated, in its main features, the present system of social security.

As England prevented its own workers from gaining any ground, as they were ground under the boot heels of the individualistic capitalists, Germany set off on the socialist road. Within a very few years, Germany was nearly able to destroy England on the battle field. As it was, Germany was destroying Britain on the manufacturing front. German workers could buy manufactured goods. English ones could barely afford to eat a very poor diet. Germans spread around the world, talking about socialism. While England sought to control markets by dumping manufactured goods on lands they conquered.

Social Security Online

Germany became the first nation in the world to adopt an old-age social insurance program in 1889, designed by Germany's Chancellor, Otto von Bismarck. The idea was first put forward, at Bismarck's behest, in 1881 by Germany's Emperor, William the First, in a ground-breaking letter to the German Parliament. William wrote: ". . .those who are disabled from work by age and invalidity have a well-grounded claim to care from the state."

Bismarck was motivated to introduce social insurance in Germany both in order to promote the well-being of workers in order to keep the German economy operating at maximum efficiency, and to stave-off calls for more radical socialist alternatives. Despite his impeccable right-wing credentials, Bismarck would be called a socialist for introducing these programs, as would President Roosevelt 70 years later. In his own speech to the Reichstag during the 1881 debates, Bismarck would reply: "Call it socialism or whatever you like. It is the same to me."

The German system provided contributory retirement benefits and disability benefits as well. Participation was mandatory and contributions were taken from the employee, the employer and the government. Coupled with the workers' compensation program established in 1884 and the "sickness" insurance enacted the year before, this gave the Germans a comprehensive system of income security based on social insurance principles. (They would add unemployment insurance in 1927, making their system complete.)

My husband was disabled by work damage. Social Security and workman's comp keeps him alive. The cruel little universe of the 'individualists' who pretend they are 'capitalists' ignores this reality. It is far better to keep people like my husband alive than to have people like myself running into the government's offices, with a gun and molotov cocktail, screaming, 'Die, you bastards!' For in the long run, social security means security for all the Marie Antoinettes out there.

And we still have the riddle of why the socialist countries are doing splendidly today while the capitalist ones are dying. Eh? Germany is not a pure capitalist nation. They managed to cling to their social systems despite WWI and WWII. And today, they have the world's biggest trade surplus profits! Amazing, isn't it? And they work well with the Russian and Chinese communists. This is because they have a socialist ideological base. Japan used to have that and only in the last 7 years have they decided to ape the US and England. With disastrous results. Turning what used to be a fine worker's comfort zone into hell: the signs of outrage are growing greater there.

And also, one last thing: the Chinese workers are getting very noisy. They show more energy in loudly resisting their own rulers lately. They are organizing and marching. They are also filled with greater and greater sense of nationalism. And this goes back to Germany: the national/socialist movement which was derailed by ethnic cleansing. A ferocious and dangerous force is at work here. And anyone who thinks sitting in a palace is a good plan should review some shocking history.

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Tariffs Versus Gold As Regulator Of Trade

May 19, 2008

Elaine Meinel Supkis

I harp all the time about tariffs and barriers. Today's news bears me out in this matter. The US is ideologically unable to use ancient tools to protect our sovereignty. Japan's GDP is above 3% while ours is going negative. The need to protect our currency and our trade is very important. Deliberately making a currency weak for trade purposes won't work for the US. It only makes our situation worse. And increases the hidden and not so hidden future taxes of our people. We also go back to the great book, 'The Bubble That Broke the World' to learn more about gold and international trade. Also, we visit an old, old Federal Reserve report about gold reserves written the first year of WWII. Back when the US was the world's most solvent nation.

The Canadian Dollar under the Gold Standard (1854-1914)

The price-specie flow Classical economists explained international economic adjustment under the gold standard using a theory developed in part by David Hume—the price-specie flow.

Under this theory, an economic shock that led to increased demand in one country, and rising prices, would trigger an increase in imports and a countervailing outflow of specie to the rest of the world. The drain in gold from the country experiencing the shock would reduce the quantity of money in that country, leading to higher domestic interest rates (which, in turn, would slow demand), lower prices (relative to those elsewhere), and higher exports. Increased net exports and capital inflows attracted by relatively high domestic interest rates would restore equilibrium to the balance of payments.

The opposite process would happen simultaneously in the rest of the world. The successful functioning of this adjustment mechanism depends critically, however, on the sensitivity of demand to price changes in the countries affected. If the “price-elasticity of demand” was low, it would be possible under the fractional gold standard that prevailed during this period for a country’s reserves of specie to be exhausted before adjustment was completed.

The volume of thinking and writing about using gold as the basis of all banking is huge. And was all tossed out the door by first, the British empire and then somewhat later, by the American empire. This occurred during the period running from 1916-modern times when the British empire sought to re-incorporate itself into the American empire. The many prohibitions of thinking about 'isolationism' and 'anti-free trade' comes from this merger. Americans who resisted this merger were mocked ruthlessly until nearly everyone surrendered to this process. The merging of the French empire and the rending of and then absorbing of the German empire was all part of this. Oddly enough, Japan's imperial dreams also merged during this time but being a very closed society, Japan did this while remaining very much aloof and apart.

If the US were 'isolationist' it would react like Japan to the concept of trade deficits: pure poison! Instead, because our 'allies' are not allies at all but rather, joint mistresses and masters of our economic house, we are curtly ordered to ignore the trade deficit and tariffs are evil, gold standard is foolish and patrolling the entire planet for the other empires that are now embedded inside of our own empire, is to be done for free and entirely at our own potential losses. It is interesting to me that the day the US cast away its rock, the gold standard, coincides with the death of our sovereignty. This is why we cannot stop the flood of imports that ravage our nation, for example. We have foreign powers meddle, via financing our politicians in various tricky ways...note how many of the top political controllers in DC have become multi-millionaires while in office! We have no longer a decent banking or taxation system thanks to this.

All the theories about trade revolve around punishing nations that go into the hole by allowing excess imports. The quote above comes from an article about Canadian sovereignty of their own currency and how it was killed. And what killed it?

World War I. England basically took the gold reserves of Canada, a gold producing country, and used it to buy time. Slowly, Canada is losing sovereignty to the US even as the US loses it to the world. The balance of monetary values vis a vis both Canada and the US is negotiated rather than the forces of commerce. This is due to the astonishing fact that the US has a giant trade deficit with Canada. Instead of the classic solution, the US raising interest rates and making Canadian goods more expensive, they tinker with other solutions. Across the board, all the classic systems for dealing with failures like the US trade collapse, are being tossed overboard and 'new' solutions are being created. All, so this failure in trade can continue! Which is a disaster of historic proportions.

All negotiations concerning monetary rescues are based on one premise only: to maintain the US trade deficit! All the other nation's negotiators have this in mind. It is, indeed, #1, #2 and #3 on their private agendas. There is no other point to these negotiations! Europe has a big trade deficit with Asia that is growing very fast. They want to kill this and keep their trade benefits with the US. So they have conspired with Asia to raise the value of the dollar. This is being sold to the US as a triumph for us.

It is not. For we still have the trade deficit. Indeed, I have said before, years ago, using a weak dollar to fix our deficits won't work. For the simple reason, we can't make the dollar weak vis a vis all our manufacturing competitors. And it raises the cost of importing commodities we need for manufacturing. It makes our trade deficit worse by raising the value of commodities we need, like oil. While not dropping imports of manufactured goods! Trying to balance the dollar against all our competitors so it is strong with the commodity nations and weak with the manufacturing nations is IMPOSSIBLE. This is why tariffs have been very useful in the past: it targets specific areas for controls and restrictions. It also raises money for the government. Right now, we are taxed ever more for this purpose. While importers get a free ride.

But the 'thinkers' of this vast US/EU/UK imperium have forbidden even thinking about tariffs and barriers! They bend all their will towards teaching us, this is hostile and evil. We are unable to even discuss this topic anymore. It never makes the news nor do any politicians, all in the pay of outsiders wishing to use us as an imperial tool, none of them [excepting a very tiny handful like Ron Paul] even mention tariffs. Back when I hung out at other economic blogs run by professors, the minute I wrote, 'We must have tariffs and barriers' they would blow up and scold me. As if the CAUSE of the Great Depression was tariffs and barriers and not the bankruptcy of all the European empires due to WWI financing finally collapsing. Now, on to today's news:

TIPS Show Bonds See Bubble Burst for Commodity-Driven Inflation

Consumers expect prices to rise 5.2 percent in the next 12 months, according to a monthly survey by the University of Michigan in Ann Arbor, the most pessimistic they've been since 1982. Treasury Inflation Protected Securities, or TIPS, show traders anticipate inflation of about 2.9 percent by January, in line with its average of 3.1 percent the last 20 years.

The disparity has never been wider. While consumers grapple with gasoline above $3.70 a gallon, record rice prices and the escalating cost of wheat, TIPS say the commodities market is a bubble about to burst. A commodity slump would worsen losses in the $500 billion TIPS market, where investors lost 2.35 percent in April, the most since December 2006.

``There's a lot of people who just don't believe the economy's going to stay strong enough to keep prices of things where they are,'' said Chris McReynolds, who trades TIPS in New York at Barclays Plc, the largest dealer of the securities. ``Part of what's going on here is a lot of people view this price rise in oil, a lot of commodities, as being somewhat bubbleish and that they'll come off again very quickly.''

When I go around the neighborhood, I find severe despair due to inflation. It is now at the point, people can't even think of taking out a loan to shove inflation costs into the dim future. Eventually inflation will kill spending on imported goods. It is a cruel way to do this since it gives our government NO benefits nor does it release us from our rising future tax burdens. Seriously, if we paid higher prices for things due to tariffs and this money flows into DC which collects this, we still have 'inflation' but the benefits of this inflation doesn't flow overseas, it keeps our government solvent! Instead, we are going into the hole while our government digs an even deeper fiscal hole!

Our ancestors were not idiots. The tariffs were invented because they worked on several levels. I would dare to say, tariffs MADE THE USA and many things were made in the USA thanks to this. Now, we have no tariffs and lo and behold, nearly nothing is made in the USA. Isn't that....stupid? Or what? What proof do we need at this point?

The monetary solution set up by Keynes and his crew works great...for Germany and Japan. But not for the US or the UK. Since all the negotiations and deals in the past 35 years such as the Bretton Woods II negotiations, the Plaza Accords, the Louver Accords failed, we must change gears. Just discussing tariffs and barriers set all our trade partners on fire. This proves we are on the right track when we do this. It scares them therefore, it is what we should do. Since most of our exports are now commodities, we don't need to fear trade wars nearly as much as the host of nations using us for trade profits. Their losses will be greater than ours. But we have one thing we have to do before we try this: we have to stop fighting all of Europe's colonial wars!

This is the 'isolationist' side of the deal. Europe and Japan have defense budgets that are far, far smaller than ours. And both resent any American attempts at getting them to pay their own way. Negotiations over our expenses, trade imbalances and our dying currency and banking system has to be loud and hostile, not friendly. For the goals we seek are diametrically opposed to the goals of our 'allies'.

Exports again push up GDP growth

Japan's economy grew at a faster-than-expected pace during the January-March quarter, but uncertainty over the future also increased because the country remains heavily dependent on exports, analysts said Friday.

According to preliminary estimates released by the Cabinet Office on Friday, gross domestic product during the first quarter of this year rose by a seasonally adjusted 0.8 percent, or an annualized 3.3 percent, from the previous quarter in real terms.

Real GDP grew for the third straight quarter, supported by brisk exports to emerging economies and the European Union, which more than offset the decline in exports to the United States.

The US isn't 'growing.' Europe, thanks to the strong euro, isn't 'growing'. But Japan is as it has for quite a few years. The fake depression there is onesided: workers are depressed. Exporters are elated. All of this growth in Japan is due to exports. Exports to Europe are picking up rapidly as they fade somewhat with the US. Up until this year, Europe cheerfully conspired with Japan to prevent the US from adjusting our finances to deal with our giant trade deficit and government overspending. But now the knife is being turned on Europe and Europe will fall to Japan's aggressive trade policies. The queer fact is that one of the top exporters of the world has the weakest currency while the world's biggest importer, the US, has a strong currency with Japan [remember, the fall of the dollar is against the euro and others, not the yen!].

When the US tried to drop the value of the dollar deliberately in order to fix trade problems better fixed by tariffs was a failure due to Japan counteracting this via dumping excess trade dollars in their bulging FOREX reserves. This is the third issue: the US refuses to understand how FOREX reserves work as hostile trade tools. As our trade system collapses, so does our government funding and our entire banking system. We are in a crisis now where ALL our systems have collapsed and we haven't a single useful tool for dealing with this. We have a central bank which adamantly refuses to raise the value of the yen by buying and holding yen. We have no tariffs or barriers to trade and our dollar is dropping in the wrong places: energy systems, for example. So all our finances are flowing to oil pumping nations like Mexico, Canada and the Middle East rather than staying home. And comes back home in the form of other nations buying up our infrastructure and our financial tools. And we are losing sovereignty due to this.

Japan's cruel ways astonish us:

Many private-sector think tanks are forecasting a decrease in summer bonuses for the second straight year-on-year decline.
*snip*
The contraction in corporate investment in plants and equipment was caused by the sharp deterioration in business confidence amid soaring prices of crude oil and raw materials and the appreciation of the yen.

Such investment could shrink further.

Real GDP for all of fiscal 2007 rose by 1.5 percent from a year earlier, exceeding the government's forecast of 1.3 percent, but falling below the 2-percent level for the first time in five years.

GDP on a nominal basis increased by 0.6 percent in fiscal 2007, short of the government projection of 0.8 percent.

The nominal growth rate was lower than the real growth rate for the 10th straight year, underlining the deflationary trend.

The DOMESTIC markets of Japan are in a depression cycle. Wages and bonuses are being crushed even as profits from trade soar. Germany, not China, is the world's #1 trade profiteer. Japan is #2. And Japan has a depression? Only at one level. Japan's business outlook is fading due to rampant inflation of imported commodities. Just as it is here. This is why Germany's strong currency is helping their profits: commodity rises have been significantly smaller in Germany.

Bush Says Saudi Oil Boost `Not Enough' to Ease Prices

Saudi Arabia, the world's largest oil exporter, said yesterday, while Bush was in Riyadh, that the country's daily output will rise to 9.45 million barrels a day in June. Saudi Oil Minister Ali al-Naimi told reporters the kingdom took the step in response to demands from customers.

Oil prices have doubled in the past year on surging demand, supply disruptions in places such as Nigeria and commodity purchases by investors as a hedge against a weakening U.S. dollar. The price surge threatens to accelerate inflation and curb economic growth.

The US which is flooding the world with worthless dollars, wants the world flooded with oil and thus, get out of our trap. It won't work. Any excess oil will be sopped up by Japan and China as well as India. Asia has a growing desire for oil and this is due to the trade imbalances in the US. So the solution is for the US to constrict oil to the US itself and force the populace here to cut back on oil consumption via higher oil taxes. This is very unpopular, politically. So it won't happen. Thus, the only reasonable tool would be trade tariffs that bring IN taxes from the OUTSIDE. People pay higher prices but it is a haircut at the entrance to the US rather than at the exit.

Cheap energy leads to misuse and wastage. So higher prices are not a total evil. It is coming very fast which is evil. And I warned the US back when energy was cheap, to tax it higher and use the money for better transport systems like the trains and use it to launch alternative energy systems. Cheap energy is a big vote getter. Ask Reagan, the fool who drove us in this direction in the first place. He basically said, 'What, why worry about the future?' And the US celebrated this garbage. Still does.

But the writing is on the wall: the trade surplus nations will get the oil in the long run. We are not competing with Saudi Arabia for oil, we are competing with Germany, Japan and China for oil! And they, not we, have the trade profits to buy the oil. This economic fact is being masked by Germany, Japan and China so they can continue trade surpluses with the US. But we would be fools to fall for this. We must resist this with all our might. Not out of hostilities but out of a desire to survive. For only a fool can imagine we can run huge trade and tax deficits forever to infinity. This is obviously impossible. The longer we do this, the more utter our destruction when it ends.

China's Stocks Bow to Whims of Control Freaks: Michael R. Sesit

On Sunday, April 20, the China Securities Regulatory Commission, the country's market overseer, said shareholders selling more than 1 percent of a publicly traded company's stock within a month would have to execute the transaction in a block trade, instead of releasing the shares onto the open market.

The intent was to make sure buyers were already lined up, which would slow the release of new shares onto a falling market and prevent investors from being spooked by sudden new supply.

On April 24, the government cut the tax on stock trading to 0.1 percent from 0.3 percent. The change came two days after the Shanghai Composite Index fell 51 percent from its October highs. The CSI 300 Index jumped 15 percent in two days and 23 percent in seven. The market has since shed 0.3 percent.

This is no way to run a railroad, or a financial market. Typical of most bureaucrats, Chinese regulators seem to feel a need to micromanage, which raises serious doubts about the government's commitment to free markets.
*snip*
What's more, their motives are suspect. Regarded as overly concerned with maintaining face, Chinese officials are commonly believed to be eager to see the equity market rallying during the Olympic Games in August -- although there is no substantive economic or financial link between the two. It's not unlike their refusal to bow to international pressure to curtail the Olympic- torch relay.

This isn't to say that Western policy makers never seek to influence equity-market performance. The Federal Reserve and Bank of England follow stock markets because of their impact on consumer and business sentiment, and on the economy.

HAHAHA. The US government and the central bankers meddle in our markets no end. Ask Bear Stearns. In China, the government meddles. In the US, Goldman Sachs and JP Morgan meddles. Which is better? Let's see: China has a world trade surplus and a huge FOREX reserve. The US has a huge trade deficit and a tiny FOREX reserve! Shall we go on?

China's problems are half our own! Our 'wealth' is driving us into bankruptcy! Is this good? Of course not! Note the condescending talk of this hot shot American. The Chinese are stupid and the Americans are smart. This is why China will be our future rulers. The stupid things the government is doing are still leading China upwards. The government didn't want everyone putting everything into stocks and they deliberately killed the markets at a time when ours died due to stupidity! This way, people had to put money in SAVINGS. During a time when the US savings rate went negative, the first time since the Great Depression. In the US, we see frantic people bidding up the price of gold, wheat, oil, whatever in order to get a return on their savings! They can't just put money in a bank!

In China, the interest rates for banks and the reserve ratios have been aggressively moved upwards to encourage savings. Here, it is the exact opposite. Who will be the 'smart' winners in the end? The US or China?

I am betting on China, of course. This long article of mine isn't over yet. Here comes some history yet again. I try to frame my history sections with modern news so the parallels become clearer. So today we visit the history of gold reserves used to back imperial currencies. This topic is very important to today's markets and I suspect 'stupid' China and 'stupid' Russia are gearing up to reimpose the gold standard on the reckless lenders of the West.

Evolution of the World Economy, Precious Metals and India | Book Reviews

Part 2 -- The Role in the Capitalist World Economy: Some Cross-National Comparisons, 1880s-1940s -- covers three regions: Japan, South Africa and Australia. Simon Bytheway's "Japan's Adoption of the Gold Standard: Financial and Monetary Reform in the Meiji Period" (pp. 79-96) is a remarkable piece that shows how Japanese industrialization was related to the adoption of the gold standard which in turn allowed Japan to import "an unprecedented amount of foreign capital" (p. 79). Silver was produced in great quantities during those decades and there was a corresponding decline in silver prices; importing commodities from gold standard countries was more expensive. Japanese agriculture prospered but inflation in silver was disadvantageous to creditors and people living on wages. Meiji authorities chose to implement the gold standard and to industrialize the country at the expense of the export sector. The agreement to end the Sino-Japanese war included an indemnity to be paid in English pounds convertible to gold in London. Japan adopted the gold standard in October 1897. The deposit in London of a Chinese indemnity secured British economic and political cooperation. In September 1917 an embargo was placed on gold exports from Japan and the gold standard ended. (p. 94).

Russell Ally's "Gold, the Pound Sterling and the Witwatersrand, 1886-1914" (pp. 97-122) should had been placed before the previous article because in addition to examining the Witwatersrand history he succinctly explains how the gold standard of 1886-1914 was really a "sterling standard." British commercial and financial supremacy depended on the gold-convertibility of the pound, which was the responsibility of the Bank of England (p. 103). The discovery on the Witwatersrand in 1886 came after "a frantic search for the metal all over the world." The "Second Industrial Revolution" spanned two decades from 1871 to 1890 -- decades during which industry and trade reached unprecedented levels. "The gold standard could not have accommodated the growth without a corresponding increase in the stock of gold" (p. 99). The South African discovery coincided with similar events in United States, Canada, Russia, and Australia. The economic emergence of the United States and Germany challenged the hegemonic monetary position of Britain. In this context the weekly remittances of South African gold were crucial. The South African War and, more importantly, World War I indicated how the British Imperial system was dependent on the Witwatersrand gold fields (p. 114).

Gold discoveries always coincide with banking collapses. The value of gold rises just as we see today, when the banking system loses credibility due to excess credit making...granting loans too recklessly. The gold standard doesn't prevent banking collapses. This is due to dilution of the gold reserves vis a vis lending. China this year has raised the holding reserve rate ruthlessly to kill excessive, wild lending. It seems, only a very draconian dragon type government can have the balls to do this. It is very unpopular in democracies. Democracies tend to go for the easy money every time. Only a cruel government can go contrary to this. Like Japan's government which is a one party state. During the British attempt at the gold standard, every time the banks collapsed, Britain sought out more gold and gold prospecting would shoot upwards. So we get the 1849 California gold rush or the 1890 Alaskan and South African gold rushes. The African rush was particularly important. It supplied over 80% of the world's new gold for nearly a century. The South African gold also ushered in the cyanide process which is tremendously polluting but very effective for teasing out the gold flakes from dense rocks.

The cyanide kills all living things where gold is processed. Again, the striking connection between the Cave of Death and wealth creation comes to my mind. We cannot ignore this. The other day, I explained why gold is a good restrictor of the creation of wealth. And the world dealt with this restriction by seeking to find more and more gold no matter what so business could be unrestricted. Then the banking system collapses anyway! Gold or no gold. This is a human riddle we must understand. For one of my themes is, human nature will always seek a way past any restrictions or barriers set up to prevent us from falling into the pit of economic destruction. We want infinite wealth very badly. And it is fatal if we try to gain it. An issue ancient Greek philosophers struggled with in vain. A thing Jesus tried to stop using his stories and personal example. This failed, too.

Bubble That Broke The World
Page 123 :

For this now is the modern function of gold—to limit the amount of money and credit that may be wilfully, irresponsibly created and set free. Organized credit is relatively a strange thing in the economic life. New and experimental forms of it are continually being invented and we love to deceive ourselves with them. We forget that credit in any form represents debt in some other form. We know about ourselves that we have seizures of ecstasy and mass delusion; that again a time may come when the temptation to throw the monetary machine into wild motion so that everybody may become infinitely rich by means of infinite debt will rise to the pitch of mania, as it did, for example, in 1928 and 1929.

With this intelligent knowledge of ourselves we make bargains beforehand with reason; we agree that money, credit and debt shall not be inflated beyond a certain ratio to gold, under certain penalties such as we shall be very loath to pay and yet such as we cannot refuse to pay under worse penalties still.

So long as the convention is reasonably kept in the faith of credit nobody wants gold. People know what the fiction is. They may read for themselves in the published figures of the bank that its liabilities exceed its gold ten- or twentyfold, and yet they feel no anxiety about the gold value of their deposits. They may read for themselves in the figures from the public treasury that the gold reserve is only one half or one third as much as the amount of paper money in circulation. Yet they will treat that paper money as if it were gold. Nobody would dream of supposing that a country, no matter how rich, could redeem its bonds in gold. Yet its bonds will be treated as if they were gold, and one who happens to want gold for them may freely have it. All so long as the convention is kept.

I can't praise this Garrett book enough. The Mises Institute is often rather childish in clinging to a very hoary Victorian model for financial foundations. Their utter rejection of socialism means they want the British Empire complete with domestic and foreign slaves, not the Bismark ideal of a strong nation with strong, healthy workers who are educated. The failure of Germany was due to the desire to have that with slavery as an added goodie. So they kept trying to enslave neighbors as well as distant foreigners. Today, they no longer are doing this, they are trying to spread the German brand of socialism to the rest of Europe. Again.

But Garrett was an analyst, not an ideologue. I am very happy the Mises people recognize this genius and are promoting this book. I will be buying it and adding it to my own collection since reading it online is a pain. I prefer books for history because frankly, I read in the bath a lot. Heh. The above quotes are self-evident and I think, right on the money.

Bubble:

Does this mean, as some of the silly textbooks used to say, that we are all gambling upon a mythical law of averages? No. It means a very definite thing. It means that if every kind of physical wealth were priced in gold, all in one moment of inventory, the aggregate value of it would not be less than the total amount of money, credit and debt outstanding against it. Then all the money is as good as gold, all the credit is gold credit, gold itself is a nuisance in the pocket.

But let the faith be broken, let the delusion arise that the fiction is the reality, let the limit upon the amount of credit that shall be set free be left to imagination, and presently there is no way of telling what anything is worth by pricing it.

For a while this difficulty of not knowing what anything is worth but inflames the ecstasy. Everything will be priced higher and higher to make sure it is high enough; there will be the illusion that things are becoming dear and scarce. They seem to be dear because the value of the money and credit in which they are priced is falling; they will seem to be scarce because people are buying in the expectation that prices will go higher and higher still.

Suddenly doubt, then coming awake and panic. The spirit of gold has been debased by senseless inflation. The faith is lost. All with one impulse people rush to seize the gold itself as the only reality left—not only people as individuals ; banks, also, and the great banking systems and governments do it, in competition with people. This is the financial crisis.

All of it has happened. It was not the gold standard that did it; it was breaking faith with the gold standard that did it, and the case would be the same if the standard were anything else.

Hoarding leads to shortages. An example from the gas rationing of the seventies: the need for gasoline shot upwards when the price rose fast because people feared, if they drove until the tank was empty, they would pay more for gas. So everyone topped off their tanks on a daily basis rather than a weekly schedule. This caused shortages which raised prices even faster! We are seeing this again, today. People are buying gas, not slower than normal but FASTER than normal. This is 'individual hoarding' behavior. We are seeing record amounts of oil being pumped and it is vanishing from the markets faster and faster. The US government, until this week, increased purchases of oil for our reserves, for example.

The euphoria from the value of our homes shooting upwards due to monetary inflation created by the central bankers dropping interest rates well below inflation has now transmigrated to panic as the rates are again, dropped well below inflation. So people are using this bonus to bid up the price of oil, etc. And since we are all topping off the tanks again, the buying of oil products is RISING, not falling. But the percent of income devoted to this is rising, too. Which restricts spending on other things. Which depresses manufacturing, for example. As people lose their jobs, the unending troubles spread like a blood red sea at sunset as the tide rises. We can't fix this with gold or any other system at this point. We can hope gold sops up all the excess dollars. But this will lead to civil strife as people need to work, eat and live in houses.

It is far, far better to not create excess dollars to be sopped up somehow. This is the lesson we must learn, alas. As Volcker points out. Sopping up excess dollars via energy is evil. Sopping it up via higher interest returns on savings is good. Sopping it up via gold purchases is bad. Doing this via higher interest rates is healthy and good for our banking system! This is why I support Volcker and not the gold peddlers. They are selling gold and want your money. Volcker wants the damn bankers to give us our money!

Bubble:

We go on the assumption that a bank is more interested in gain than in its own solvency and if it is not watched its greed for gain will wreck it. Therefore it must be policed. Examiners clothed with arbitrary power must appear at unexpected moments, taking the bank by surprise in any wickedness, and say: "Throw open your books." And yet they fail.

It will be always impossible to keep a bank solvent by law. The law that specifies the maximum risk a bank may legally take with other people's money turns out to be a law of minimum security. A good banker will not take a risk simply because the law says he may; he will use his own judgment. On the other hand, a reckless banker will find a way to do what his greed desires, no matter what the law is, even a legal way.

But arresting bankers: that puts the fear of god in them! We did this with the Savings & Loan collapse. Except we didn't really. The Bush family, under the aegis of Bush Sr, committed banking crimes and got off scot-free. And the Bushes to this day, happily rule America and have destroyed our entire banking system. Moral of this story: if criminals run the banks and don't get arrested, they will loot the banks. Duh! This is why I say, arrest all the Bushes. If necessary, arrest all trees, too. Heh. Actually, they are directly responsible for conspiring with Goldman Sachs and JP Morgan as well as foreign powers in order to loot our banking system and our nation.

Here is an old publication by the Federal Reserve from the beginning of WWII which talks about gold:

At one time gold circulated freely as money and was the basic form into which all other types of money could generally be converted. At present, however, the gold stock in most countries is held largely or entirely by central banks and government treasuries as a legal reserve against note and deposit liabilities or for stabilizing exchange rates. All gold belonging to the United States is held by the Treasury Department. Private gold holdings are forbidden except in limited amounts for licensed purposes. Gold certificates, issued by the Treasury against a part of its gold stock, or gold certificate credits on the books of the Treasury, are held by Federal Reserve Banks as reserves against their note and deposit liabilities. Gold may also be held by Federal Reserve Banks under earmark for account of foreign central banks or governments. Such earmarked gold is not a part of the monetary gold stock of this country.

This long article is full of charts. Reading these, we can get a whiff as to how world gold markets operated during the very critical period from the beginning of WWI to the launching of WWII. Britain destroyed global banking when she tried to continue to be the premier currency in the world after going bankrupt during WWI. That grinding, epic war went on forever [actually, our stupid colonial wars seem to last a lot longer but the bankruptcy for us is just as obvious] with Germany and England hammering on each other with stupid mindlessness. The confrontation in Europe was ceremonial while the real battles were overseas as both struggled to destroy each other's trade. The US saved England by singlehandedly funding this mad war after England went bankrupt.

The huge South African gold production that made England the Queen of trade thanks to the gold standard, ceased to flow to that empire and began to flow to the US. Starting in 1914. Here are some statistics I gleaned from these charts:

***************************************
US gold reserves:

1914: $1.2 billion

1934: $4 billion then jumping to over $6 billion due to seizure of private gold hoards and revaluing the dollar.

1941: $23 billion

**************************************
UK gold reserves:

1914: $0.5 billion

1934: $1 billion [rising to $2.5 billion in 1937]

1941: $1 billion [England appropriated all of the Common Wealth gold for WWII. Canada dropped from $0.2 billion to $0.05 billion by 1940]

*************************************
France gold reserves:

1914: $0.8 billion

1934: $3 billion [greatest amount in 1934: $5.3 billion]

1941: $2 billion [taken by the Nazis]

France raised 3X the amount of gold during the year that followed England's total capitulation to reality. Even as England tried to gain the gold stocks of her empire, she only had one billion at the beginning of WWII. Gold is used to fund wars. In order to fight WWII at all, England had to again, go to the place where there was a gold reserve to tap into the credit there: the US. From 1934 when our reserves were very depressed by other central banks turning over US credit to gain gold, the political deterioration in Europe meant a flood of gold flowed to the US for protection. Physical protection, of course. All the gold in Europe was seized, often very violently, by the Nazis. They even wrenched gold fillings from victim's mouths in a medieval search for wealth.

The rise of US gold reserves from only $4 billion to the staggering amount of $23 billion in just 8 years was unprecedented. And was directly related to our power as lender to the world. England played this role before WWI by being the agent selling gold from South Africa. If we look at the tables, we can see this clearly.

New York Times, 1914, just months before WWI breaks out:

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Central Bankers Lie About Nearly Everything

May 18, 2008

Elaine Meinel Supkis

As usual, the central bankers who brought down on our heads this entire banking collapse, refuse to face the truth. They want this mess they created to end as swiftly as possible. They also want no inflation. They want things to 'grow'. They want to control prices while flooding the world with new money via low interest rates. They are totally insane. Right now, they are hoping that the loss of buying power in the world due to inflation will cause such a big slowdown, prices will fall. This is silly if they are also flooding the world with more and more easy money loans. The central banks are doing exactly that: flooding the world with new money even as old money vanishes as people are increasingly unable to pay off loans due to inflation.

Fed's Lockhart Says Slowdown to Reduce U.S. Inflation

Federal Reserve Bank of Atlanta President Dennis Lockhart said the U.S. economic slowdown may moderate inflation that has been spurred by rising prices of energy and commodities.

``We expect inflation to abate somewhat in the second half and going into 2009 based upon our forecast of weak economic growth,'' Lockhart said in response to a question following a speech today in Atlanta. ``There is some early indication that the strength of inflation has softened.''

Lockhart's comments contrast with remarks this week by Kansas City Fed President Thomas Hoenig and Richard Fisher of the Dallas Fed, who warned about rising prices. Hoenig said inflation was at an ``unacceptable level,'' while Fisher said the economy may recover from its slowdown ``at much higher base rates of inflation than we would want.''

The entire reason for having the Fed is to control inflation and the economy so there are no recessions/depressions or bubbles. Of course, the reality is, the Fed creates these things itself all the time which is why it has been a total failure. These days, they pretend they exist to control PRICES. Yet time and again, they fail there, too! If the price of one thing drops, another rises rapidly. We have been seeing rampant inflation during much of my life thanks to this inability to 'control prices.' Things got so out of hand in the early seventies, Nixon imposed unilateral wage/price controls that also failed.

The monetarists who took over our university educational systems have a doctrine of 'total control of pricing via interest rates'. This is the mythical 'gas pedal/brake' they talk about all the time. Recently, the head bankers have also said, they can't foretell what will happen next because this car of theirs which supposedly controls prices via the gas pedal/brake system of raising or lowering interest rates, is opaque. They believe that NO ONE can see through this dark windshield. Perhaps this is their salute to the reality of the Gates of Death from which wealth springs. But in reality, this is a lie. They know perfectly well, where we are driving. They refuse to say where this road goes because it is going off a cliff.

The tragedy of a banking system striving to 'control prices' is obvious: they cannot do this. They CAN control the monetary base and the rate of growth of lending. But ONLY if they control the currency and to control the currency, one must control TRADE. Which they do not. This is the role of a government, not a bank. Central banks can be an extension of a government's powers. They can't regulate trade at all. The monetarists collectively decided this was false. Banks could regulate trade via manipulating the value of the currency via interest rates. The problem here is obvious: if the bankers wish to control PRICES they have to go for the cheapest prices in goods and punish anyone who raises prices of goods! And they do this by forcing everyone to seek as low a price as possible. This means, if other nations have weak currencies, the need to import grows for this drops the price of goods and thus allows the banking system to lend more money, cheaply. This cheap money is then borrowed by the masses who have to buy cheap foreign goods in so there is no inflation.

This is why the US is going rapidly bankrupt as our trade deficit began to climb right after we got off the gold standard. The US wishes to crank out endless loans and balance this by bringing in cheaper and cheaper imports. The ONLY way to stop inflation now is to destroy the economy and this, in turn, stops consumers from buying foreign goods---not to mention, domestic goods! Why is this happening? We still have open borders to 'free trade'. Why can't the price of all goods continue dropping forever?

And this is where Marxist economics comes in: the exploitation of labor has its limits. If everyone is driven into slavery, the economy doesn't flourish, it collapses. This is simple: people who get rewarded for work, work harder. People who get nothing will go to great ends to avoid work. There are a shocking number of foolish people who think the pre-Civil War South was a wonderful economic paradise! But commentators of that time period remarked on the lassitude and lack of initiative in the South. The minute one crossed the Mason-Dixon Line, the industriousness levels dropped dramatically.

The US got away with pretending the Fed controlled prices only due to the industriousness of the great mass of Chinese labor as well as Japanese robots working alongside desperate workers who were experiencing dropping wages. The things the US wanted to consume were made cheaper and cheaper due to exploitation of foreign labor, not the Fed raising or lowering interest rates. On top of this, the only thing the Fed really controls is the housing market. If they drop rates, the market goes up in a very inflationary way, if they raise rates, the housing market crashes.

U.S. weakness, initially concentrated in housing, has undermined consumer spending, which generates about two-thirds of U.S. gross domestic product, Lockhart said.

``Personal consumption has softened,'' Lockhart told the Southern Center for International Studies at an event at Emory University. ``To the extent the world relies on strong U.S. consumer activity, this weakness could pose a threat to continued global expansion.''
*snip*
Increasing prices have become a global problem, Lockhart said, citing ``unrest'' over food prices in several countries.

``Recently inflation in many parts of the world has begun to pick up,'' he said. That ``is a growing issue for emerging economies.''

Inflation is a growing issue with ALL economies! Forget just 'emerging' ones. Lockhart's lies are at the heart of this problem. The US regulators are in denial. They pretend the problem lies with the cheap labor nations, not the globe's most important banking systems. Besides, the second lie here is 'inflation is picking up'. It is RAGING OUT OF CONTROL at this point. So the Fed's final proposition in all this is to passively watch consumer spending collapse due to inflation of all necessities eating up all discretionary incomes.

Fed, BOE Foreshadow End of Rate Cuts as Prices Rise

The world's most powerful central banks are telegraphing the end of interest-rate cuts, and traders already anticipate the first steps in the opposite direction.

Federal Reserve officials this week flagged inflation risks after slashing borrowing costs seven times since September and Bank of England Governor Mervyn King unveiled Britain's worst price outlook in a decade. Faster growth is vindicating European Central Bank President Jean-Claude Trichet's refusal to cut rates in response to the credit crisis.

``The central banks are taking a pause, but that could turn into a permanent end to rate cuts,'' said Thomas Mayer, co-chief economist at Deutsche Bank AG in London. ``The risk we won't see more cuts from the Fed and Bank of England has grown, and markets have pushed out expectations of ECB easing.''

The danger is that food and oil prices are rising so fast that inflation will replace costlier credit as the chief threat to the global economy. That may force the Fed to turn a deaf ear to what King labels the ``siren'' calls for rate cuts and perhaps consider raising them instead.

The Bank of Japan still listens to the sirens sing about 0% interest. This is because they cynically want a weak currency so they can pretend to be a low-wage third world state. And as far as the Japanese workers are concerned, they are a third world nation and their condition approaches that of the Chinese workers. So long as Japan clings to this false system, the rest of the G7 economic union's banks will see inflation no matter what their interest rates are. The EU's inflation has been muted by a stronger euro but this is destroying their export markets and they are anxious to not be the world's strongest currency. They want desperately for the US to be the strongest currency. The US, of course, even with a weak dollar, still imports far too much. But none of this is talked about when the central bankers conspire to 'fix prices'. Also, this obvious rigging of the game has been anticipated by speculators and traders. At this point, the responses to inflation, etc, are so ritualistic and easily foreseen by traders, they are all a jump ahead of the bankers and thus, evade the banker's attempts at controlling prices.

This is the 'psychology of inflation' the bankers like to talk about. The speculators WANT inflation! Whatever they buy, they pray hard that it will rise in price as fast as possible. Since the central bankers seem bent on enabling speculators to do this by giving them endless loans at cheap, sub-inflationary percentages, the amount of money being used by speculators to bet on price hikes of nearly everything on earth, continues. If one market for speculation reaches a peak, they all abandon it instantly and jump into another market. So, over the last 10 years, we have seen many balloons in prices from housing, energy, food, corporate take overs, etc. All of these burst and instantly, a new balloon replaces the burst balloon. This is thanks to the central bankers of the G7 nations feeding endless money into the system no matter what. The claims that they are fighting inflation is pure insanity if they all use the Bank of Japan for carry trade loans! Lending stopped briefly only because the Japanese carry trade collapsed last summer.

Kohlberg, Madison Find Blank-Check Buyers as IPO Prospects Dim

May 16 (Bloomberg) -- Kohlberg & Co., Madison Dearborn Partners LLC and Kirtland Capital Partners have resorted to selling holdings to so-called blank-check companies, a path more private-equity firms may follow as other buyers remain scarce.

Leveraged buyout firms stepped up the pace of takeovers in the past five years, aiming to cut costs at businesses ranging from newsprint makers to crane purveyors and then sell them to the public. Now they're turning to special-purpose acquisition companies as demand for IPOs sinks to a three-year low and tight credit markets make it harder to borrow money to finance LBOs.

``We're definitely seeing private-equity firms talk to SPACs as possible exits for their portfolio companies,'' said Thomas Ivey, a partner in the Palo Alto, California, office of Skadden, Arps, Slate, Meagher & Flom LLP. ``The M&A market for traditional private-equity purchasers is closed. The other piece is that the IPO market is closed.''

SPACs, also known as blank-check companies, are publicly traded corporate shells created solely to buy other businesses. Chicago-based Madison Dearborn, whose $60 billion of announced buyouts last year included Canadian phone company BCE Inc., was one of the first LBO firms to turn to a SPAC. Last September, Madison sold paper, packaging and newsprint businesses to Aladabra 2 Acquisition Corp. for $1.63 billion. Madison didn't say whether it earned a profit.

This is so very much like the pre-Great Depression financial markets. For 50 years, these sorts of shell games were outlawed. Note that the useless debts piled on top of corporations are now being shuffled off onto something that doesn't exist as an entity. A shell corporation is a black hole. And they are madly shoveling all the bad stuff into this black hole because it is now worthless. Namely, it profits nobody. And so it is a drag on the ability of the real corporations who can't borrow more money if they have this big overhang of previous debts. Of course, the money created by these previous debts still is circulating. This is why we have inflation. None of the debts created in the past 5 years has been paid down, of course. We have seen this before: when all of Europe went bankrupt in unison in 1929-1933.

SPAC shell games:

All told, SPACs had $13.5 billion on hand to fund purchases as of April 18, according to Morgan Joseph & Co., the New York investment bank. Global IPOs dropped 35 percent in dollar volume from last year through May 15, according to Bloomberg data. Excluding a $19.7 billion offering by Visa Inc., the world's largest credit-card network, the gap widens to 59 percent.

At the same time, the volume of deals in which private-equity firms sold companies to other buyout shops, or secondary buyouts, has plunged about 80 percent so far this year, to $11 billion from $55 billion, according to data provider Dealogic, blocking another outlet for private-equity investments.

The drop was even more severe for secondary LBOs within the U.S., which are down over 90 percent to $2 billion from $26 billion so far this year.

I am betting these SPACs are very closely related to the Derivatives Beast. Where did they get this $13.5 billion, anyway? Who is fronting this money? If we assume they are offshore hedge funds, the questionable nature of all this is obvious. They never build anything, they are people who get rich exploiting weaknesses and raiding economic systems. And the $19.5 billion deal for VISA: I suspect these funds are using debt from Japan to buy higher interest rate debt entities in the bankrupt West. The flood of red ink here is very troubling, of course. And is at the heart of why we have a depression in banking while in the real world, all real things like gold, oil or food are seeing ferocious inflation.

FDIC sees another wave of U.S. credit stress coming

The head of the Federal Deposit Insurance Corp. said on Friday another wave of U.S. credit stress was coming involving non-mortgage loans.

Bair, in prepared remarks for a Brookings Institution event, said delinquency rates were rising for construction and development lending as well as for commercial and consumer debt. However, U.S. banks are still healthy and in a much stronger position to weather the storm than they were during the savings and loan crisis of the 1980s.

In what way are our banks stronger? As far as I can see, they are much, much weaker! In the 1980's, banks offered high interest on CDs sold to the public thanks to Volcker raising interest rates of the money lent to the other banks from the Fed. So savings rose. Then Volcker was eliminated and we all rejoiced and easy lending returned. Savers had to seek high interest banks on the fringe since the main banks haughtily refused to pay reasonable rates on savings. I remember that time, I was very unhappy about these sub-inflation level CDs.

Many elderly with savings moved them to the Savings & Loan banks because these banks offered high rates on savings. This way, they could lend on the 10% base of savings and they lent recklessly. When the creditors defaulted, the whole thing collapsed. Because these S & Ls were not protected by the Fed, the savers lost everything. But then, this is why the CDs were so high: increased risk. The S & L debacle was due to the government and the Fed seeking a way around the inflation riddle. They let this alternative, unprotected banking system grow and lure in victims rather than regulating it just like the main banks. But then, they wanted to cheat on the real rate of inflation. After the S & L collapse, they fixed this mess yet again by lying and cheating. Namely, they ceased tracking real inflation and concocted a new system that was totally fraudulent. So they can merrily inflate while evading responsibility for this inflation.

Here are the shocking graphs from FRED, The Federal Reserve St. Louis research arm:

Anyone looking at these two graphs can plainly see, we are in a full-scale banking collapse far, far worse than in 1930. These graphs show that the reserves of our entire banking system have vanished. And are being replaced with Treasuries cranked out in DC: total inflation of the money supply to fix a collapse in lending repayments! The effects from all this are not over, they are barely beginning. The bloated incomes of our Senators and Congress people, our financial manipulators, our banking elites: all this is a byproduct of massive inflationary money creation. That is NOT paying interest on the lending from the past! These loans are collapsing and with them, the banking system.

The Fed officials can see these charts plain as day! This means either they are terminally stupid or more likely, they are simply lying to everyone. And lying is their job. They lie constantly to the point, they are unable to utter the truth. I suppose it would cause them to shriek and tear their hair out like Rumplestiltskin.

D.R. Schoon at Survival Blog;

Global financial markets are in extreme triage following the credit contraction of August 2007. It is believed central bankers are trying to restore markets to help the economy. In truth, they are like life insurance companies fighting to keep a wealthy patient alive so the high premiums will continue to be paid and the large death payout will be postponed. It has been only nine months since credit markets unexpectedly froze in August 2007. The central bankers who were surprised by the summer 2007 credit contraction now hope the danger has passed. But they are about to be surprised again and soon.

We are witness to the unraveling of historic levels of debt caused by central bank issuance of debt-based money. That such issuance over three hundred years has led to trillions of dollars in constantly increasing compounding debt is not unexpected. What is also not unexpected is that someday the debt could not be repaid. That realization is what happened in August 2007. Suddenly, buyers of debt, those in need of guaranteed downstream revenues realized $1.5 trillion of AAA rated subprime CDOs would not be repaid as expected. The consequences of that realization are now in motion.

He is correct. Alas, his solution---buy gold!----is faulty. History shows very ruthlessly and clearly that when gold becomes valuable due to a banking collapse, governments either seize it or invade countries that hoard it. There is no simplistic solution to the problems we face. Just as there is no 'go it alone' survivalist solution. We are a collective. Local, national and international. Struggling to understand and find solutions to each of these levels of social involvement is the only way we can sanely deal with all this. Telling the truth about things and analyzing them correctly is the first step. Right now, the cries to hoard things is rising. And this is logical in an inflationary system. Buy now or tomorrow it will eat up more of one's income!

But this is not a solution, it is desperation.

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Gold As Regulator, Gold As Libra

May 17, 2008

Elaine Meinel Supkis

Quietly, this time, gold has crept back into the speculative game. After wild swings between $1000 an ounce and $800 an ounce, it has been steadily climbing. This time, the speculators are hoping no one notices and all the novices who rushed the markets will continue to sell. Meanwhile, the central bankers are desperate to get us to think all is over, all is well. But one major speculator/investor says, we are in the eye of the storm, not the end. Of course! This storm has been raging since...Nixon went to China! Rice, by the way, is plunging in price as hoards are being tapped finally. IN JAPAN. Ahem. And we visit 'The Bubble That Broke The World', a book we all should memorize.

Bernanke Requests Power to Pay Interest on Reserves

Federal Reserve Chairman Ben S. Bernanke asked Congress to give the Fed immediate authority to pay interest on reserves deposited by commercial banks, seeking to streamline efforts aimed at alleviating credit strains.

The payments would help officials push money into the banking system without influencing the main policy rate, by giving lenders an incentive to leave funds with the Fed. Congress already passed a law giving the central bank the authority, starting in October 2011.

All the central bankers like this little trick. It puts in a 'floor' so interest rates for the 'money' cranked out by the central bank doesn't 'fall'...NO MATTER HOW MUCH MONEY THEY MAKE OUT OF THIN AIR. This is, of course, inflation money. But the 'interest' that 'accrues' hides the true nature of this inflation until, get this, it flows away from the Fed or central bank and moves OVERSEAS. Many central bankers do this already and what do we see?

GLOBAL INFLATION! Oopsie! This is a nice trick like all the others but in the bitter end, the chicks hatched this way always end up flying home again and dropping bird dung on someone's bald head. I went about the web, looking at mainstream economists and their take on this. They think it 'works' since the consequences are not instantly visible. Yup. This sort of thinking characterizes our entire economic brainiac class. It is very hard to get them all to understand, they have an obligation to look into the future and foresee the ultimate outcomes of various choices and systems set up today. And to do this, we have to look at everything all the time, without exclusion.

For we have global inflation. We have tremendous global speculation. And a lot of this is over things that are already 'not real'. Ie: not gold, rice, houses, cars, timber, etc. The speculators are creating huge profit surges in interest rate games! Or selling and buying currencies while borrowing money and shifting that around, too! These various side games have grown tremendously fast in the last 35 years and now overshadow the 'real things' economy. Which is why we have madcap inflation.

Shockingly, gold has risen by 35X over 35 years ever since the US, the world ruling empire, dumped the gold standard entirely. Virtually no one made any money speculating about gold or the value of the dollar or what the interest rates would be in the future. After Nixon severed this Golden Gordian Knot, the financial system has unravelled. At all times, we struggle against hidden financial hazards. For example, during the fake 'low inflation' years, we thought we could produce money and play games that created money out of thin air, yet there was no inflation.

But anyone with curiosity and a brain could see that the fun times were due not to inflation being banished but rather, roosting temporarily at the Bank of Japan! Who, along with China, kept inflation at bay in order to undermine US industries. Now that the colonization of the US is nearly done, both are toying with releasing all these captive inflationary dollars. If they want something, all they have to do it talk about launching 'Sovereign Wealth Funds' and have this money return to the US in the form of buying out the last of our infrastructure and commodity resources! OOPS.

Rice price dives as US and Japan set to unlock grain pact

Rice prices nosedived today as Japan moved closer to unlocking its massive hidden surplus and bullish supply forecasts routed speculators.

The price collapse came as commodity experts called on Japan and the US to urgently unwind one of the biggest “invisible” distortions in global rice markets: a quirk of World Trade Organisation rules that obliges Tokyo to buy grain it does not need and effectively turns millions of tons of high-grade American rice into feed for Japanese pigs.

If that distortion were removed, said researchers at the Washington-based Centre for Global Development (CGD), and the 1.5 million tons of unwanted US rice were released from Japan’s storage silos, the crisis that has sent the price of the crop that feeds half the world would be instantly solved. Rice prices, suggested the group’s forecasts, could even halve between now and June.

Depression=hoarding. Japan has had a depression for nearly 20 years now. And they have hidden hoards we can't even begin to imagine. Even as price hikes kill off the last of the Japanese workers, the masters hung on with vicious intent, on these hoards. Even as the Japanese ruling elites saw news stories of their neighbors starving, they hung onto their hoard! This is 'dragon think'. If I were Japanese, I would be hammering on the doors of the Diet demanding a better diet. 'Let them not eat rice cakes!'

Scholes, Nobel Laureate, Says Credit Crisis May Not Be Over

Myron Scholes, chairman of Platinum Grove Asset Management LP and 1997 winner of the Nobel Prize in economics, said the worst of the crisis in credit markets may not be over.

``From my perspective, I think that we don't know if the storm has passed or if we are still in the eye of the storm,'' Scholes said in an interview with Bloomberg Radio yesterday. ``Are there other shoes to drop and new events or new shocks that will come to the fore?''

HAHAHA. There is an Imelda Marco closet filled with thousands of shoes that have yet to drop. There are enough shoes to drop, they could keep a million barefoot children shod. Already, the global money flow is shifting dramatically. China has to house 5 million people. Fast. And fix a huge amount of infrastructure. This means the money that could be squirreled away in FOREX reserves and thus, not create inflation, will flow again. China will cease adding to its tremendous reserves. And I am betting, Japan will cease, too. For the patient Japanese serfs who suffer all sorts of restricted conditions of poverty will now demand to see what else the rulers have been hoarding. Eh? They have to appease these people who can become remarkably belligerent and suddenly, too.

Gold futures surge after initial crude rally

Gold prices shot up Thursday after crude oil surged early in the day, an inflationary move that fed buying of precious metals as safe, alternative investments.
Oil eventually closed lower, as did other commodities; soybeans, rice, gasoline and heating oil futures all declined.

Gold for June delivery jumped $13.50 to settle at $880 an ounce on the New York Mercantile Exchange, after earlier rising as high as $888.50.

"We've seen projections for $150 crude so that's adding to inflation fears and helping gold," said Carlos Sanchez, analyst with CPM Group in New York. "Oil has fallen back but gold is still hanging in positive territory."

Higher crude prices tend to lead to higher inflation, prompting investors to shift funds into hard assets like gold and silver, which are known for holding their value.

NOPE. Oil shot up and gold dropped like a rock for several months. Meanwhile, first wheat and then rice, shot up rapidly. What I see is an army of hungry, hungry hell hounds and pirates rushing from one favored commodity to another. After driving up one, they all exit just as swiftly and rush the next candidate. Periodically, they come back to gold. Gold will probably now rise to $1,000 an ounce again. And oil will fall, perhaps, if the US consumers finally take it on the chin and give up trying to drive around like maniacs in huge SUVs and trucks all the time.

Frankly, we are no where near the pain threshold. During the 1970's, I and many others rode bikes. I see very few people doing this just yet. Also, there is no rationing. So this is still not serious. It will be if we start any verbal or physical wars with Iran Kitty. Kitty will scratch our eyes out. They are the ONLY oil producing nation that can reduce the oil shortage. And we are making this shortage because the US has been awesomely successful at getting everyone to boycott Iran, even maybe Japan. HAHAHA.

Except everyone who wants the US to collapse knows this success seals our fate. We are doomed to collapse thanks to it. Meanwhile, gold is a good place to play speculative games again. The Arabs are back to hoarding it again.

Scandinavians unite to end Iceland's financial chaos

The central banks of Norway, Sweden and Denmark have joined forces in a stunning move to rescue Iceland, offering a credit line of €1.5bn (£1.2bn) to beat back speculators and shore up the battered krona.

The solidarity gesture is a powerful signal to hedge funds betting on Iceland's downfall that they are up against the international system. The swap accord doubles the foreign reserve cover of the Icelandic government at a stroke.

Iceland's central bank said the deal was a "precautionary measure" to stabilise the currency, which has crashed 25pc this year.

Just seven months ago, all the speculators were big on the krone. I thought that was stupid back then. Now they are dumping it enmass and putting their money into rice, oil and now, gold again. Note that all the other bankers have to fix this by extending themselves to boost the reserves of this bankrupt nation. Iceland tried to be a pirate cove. Only, unlike the other island pirate headquarters, they have a population bigger than a postage stamp. So they have an overhead. The ideal pirate cove has virtually no humans. Just addresses. Time to go back in time to the last time a major global empire collapsed.

When Britain went bankrupt during WWI, like the US, she refused to admit this. Instead, Britain limped along, expanding her empire for another 30 years, using the US as a crutch. During this time, the global banking system collapsed very badly due to the British empire going bankrupt. This is called 'The Great Depression'. Germany also was bankrupt but this wouldn't destroy international finance for the simple reason, no one used the German Mark as their standard for international trade or banking!

Time to talk about gold since it is back in the news and we can see clearly that there is no connection anymore between a stable international currency and this ancient form of value:

A BUBBLE THAT BROKE THE WORLD Published in 1933 by Garet Garrett:

When the Bank of England suspended gold payments [in 1931] our stock of monetary gold was five billions; the French had two and one third billions. But our population is threefold that of France; our national wealth may be easily five- or sixfold greater. Therefore, France had more gold than this country, in proportion to her economic weight and rank. Our stock of monetary gold was less than $42 per capita; hers was more than $57 per capita. Yet it was France from the beginning that led the run on the American gold reserve.

Why did she want the gold? Was she fearful that the United States would abandon the gold standard? If so, did that fear seize her all at once? That would not be like French bankers. Take their record for it, they see far and straight for France. In any case, all that France could do with the gold would be to hoard it; and for that purpose she has built since the war a treasure chamber unique in the world.

Every country, of course, has massive burglar-proof vaults for its gold reserves. But France decided to make one so deep and strong and mysterious that not even a victorious modern army could break into it. You might blow the Bank of France away with bombs and its gold would be all the safer. The chamber is two and one half acres big; it lies two hundred feet deep in the earth. Over it, first, is forty feet of water, which is a lake they made by damming the subterranean river that flows beneath Paris, and then above the water fifty feet of solid rock. The way to it is through six steel towers with revolving doors moved by electric engines, and the passage of descent can be flooded at a moment's notice. At the signal of alarm a detail of defenders would instantly vanish through this passage, pull the water in after them, and be forgotten—safely forgotten for an indefinite time, or for the duration of a war, because everything has been thought of beforehand. They would find in the gold chamber a kitchen, provisions enough for two or three arctic expeditions, dishes, linen, beds, all the facilities for comfortable housekeeping.

Beginning on or about September 20th, every fast ship from New York for French ports carried gold on its way to this hiding place. The same fast ships or others carried gold also for Holland, Switzerland, Belgium and Germany. Even Germany, where three quarters of a billion of American money was frozen in the form of bank balances and overdue short-term credits—even Germany could take gold from New York.

To lose three quarters of a billion of gold in six weeks, with no saying when or where the run would end and no way of stopping it, was a very serious matter for this country, especially in view of its own condition of internal stress. No country, under any conditions, could lose gold at that rate or in that proportion for long and hold to the gold standard. That would be true if to begin with it had all the gold in the world.

Hoarding is a reflex that one does when seeing inflation. Hoarding in a depression is unlikely. Since France was hoarding gold at the beginning of the Great Depression, this means they expected their neighbors to create inflation in order to deal with the banking collapse in England. Certainly, England was now going to play the inflation game now that they could no longer play the 'reserve currency of the world' game. Within days of dropping the gold standard, the British pound shed a tremendous amount of value. People holding pounds were pounded into the ground. People holding gold were not.

The US was solvent. Europe was bankrupt. So how did the French raid our Treasury for much of our gold? France owed us tremendous sums from WWI. The US dollar wasn't losing value, it was doing fine right up until the sudden collapse in Germany and England. But since both owed to the US, this was like the US housing market going belly up: debts were suspended and the value of the bonds that backed these debts plunged in value. No one wanted them.

Secondly, note the cave business! Ah! How elegant the goddesses are! The Giants and the Dwarves toil day and night to dig out of Mother Earth, the shining gold. They steal it from Rhine maidens or they steal it from the New World. This gold is then hammered into many beautiful things. Then the rulers build first, pyramids, then excavate deep caverns and not only hide the gold in these deep caves but hide the caves themselves! Aha! Only the king and his Treasurer know the secrets of the Cave of Death! Killing off the slaves who build it, they set a three headed hell hound in charge of slaying any who enter. Or they put on the Ring of Power and turn themselves into a dragon!

The French made a terrible mistake. They didn't kill the builders of this Cave of Death. They couldn't hide the fact that they had lots and lots of gold in Paris. So it wasn't even 10 years before the looters goose stepped into Paris and seized the overlords who knew where this cave was. Like the Mongols, the Germans knew that if you torture or threaten these gold hoarders enough, they will cough up the key to the Cave of Death. And the fine golden hoard was useless for France. But not for Hitler.

Word of warning: it anyone knows about these Caves of Death, they will loot it. Sometimes it takes 8,000 years to pry open the crypt and steal all of King Tut's gold, just for example. But it is done. Always. Everyone dreams of looting these Caves of Death.

Often, the people hoarding gold die without revealing to the looters, where it is. Then it is still dug up by farmers or children using spades, etc. Or it lies on the bottom of the sea, possessions of Neptune. Until someone dives down and gets it back. Then governments do battle for the loot as we see in the news.

Gold drives men to madness. This is because it is proof against speculation in the long run! Unlike rice, it doesn't rot. Unlike oil, it doesn't burn. When it is melted, it doesn't change. It is always gold. Except if you vaporize it with a nuclear bomb or drop it into the sun, I suppose.

Bubble:

Fourthly, such a thing as the central bank of one country serving notice on the banking system of another country that because the rate of interest is too low, or for any reason, it may feel obliged to call its aggregate credit balances away in gold, was hitherto unheard of. No one could have imagined it. That is not the way it happens in the normal course of international finance.

Credit balances are continually shifting. If the rate of interest is higher in New York than in London, credit balances move automatically to New York, or if the rate of interest is higher in London they shift from New York to London, and nothing is ever said about it. The only news of it will be in the bank statistics. Now, the Bank of France very well knew that suddenly to lose $600,000,000 more gold, on top of what we had already lost to Europe—and the bulk of it to France— would create a very grave situation in this country. And mark this, that if the French themselves believed what they had been saying in Europe about the dollar and about the American financial situation in general they must have believed that to demand $600,000,000 more gold all at once from New York would pitch this country off the gold standard. Well, of course, in that event—in the event of the dollar going the way of the pound sterling —then the French franc assuredly would be the premier gold money and govern the world of finance.

France was using their CREDIT in the US to demand gold, not US financing. France was deep in debt and unable to pay the US even the interest on the debts. But the US, the year before, had suspended interest payments on these massive war debts. So France took advantage of this to tap in their existing credit to turn it to gold rather than keep it in our banks as 'assets.' Remember: 'assets' in banks are DEBTS. Only 10% or less is 'savings'. Debts are assets ONLY if they give a return in interest. When that ceases, they become the opposite of assets. They become losses! Especially if the debtor nation isn't paying either interest OR principal. This is the dread 0%/0%/0% system that is a characteristic of a depression. It really means, the banking system is bankrupt but is kept going by the government anyway, by hook and crook. Especially crooks.

Under pretence of being dissatisfied with the rate of interest in New York the Bank of France revealed to us, to Europe, to the whole world, the amazing fact that France had the power, almost if not quite, to throw the American banking system off the gold standard I To send the American dollar after the pound sterling! That was something for the premier of France to have in his hand when he should begin to examine the problems of the world and explore solutions with Mr. Hoover in the White House. But it was at the same time a revelation in no way calculated to relieve the tension then existing here and elsewhere or to check the hoarding of gold by individuals—a dread movement that was already world-wide and threatening to become uncontrollable.

OK: this is where we see clearly where we are going today. France wanted a higher interest rate on its assets [the war debts] sitting in US banks. Now this sounds strange but these where the equivalent of our modern 'Treasuries' which are also...WAR DEBTS. These are sold to central banks who hold them and collect...interest! So...France had these toys in the US that were collecting interest. But France needed more money so they demanded it go up or else. The US said, 'You aren't paying us any interest or principal on your own loans we hold!' But we were also holding French loans that they parked in the US for safety, fearing the Germans. Who were very good looters back then as history shows us.

Note the last sentence here! All the bankers moves up until the French decided to hoard gold, were to discourage hoarding of gold. We saw this for the last three years, too. Both in statements and by selling off huge amounts of gold, the central bankers of the G7 group tried very hard to discourage gold hoarding. But the hoarding has taken off thanks to the devaluing of the currencies the US and Japan! Europe has striven to prevent this which is why the euro is very strong. But they are beginning to regret this and are in the process of weakening the euro again.

The US, back in 1933, dealt very harshly and in a draconian fashion by outlawing hoarding of gold and raiding any and all gold hoards. A classic looting expedition. But in 1931, they still hoped to do things the legal, proper way. This was doomed, of course, once France decided to hoard.

Bubble:

A gold country is like a bank. Its first responsibility is to itself, for the integrity of its money, its credit and its assets, and if it suffers this imperative to be overcome by a sense of responsibility to others, no matter with what intention, it will fail in its responsibility to others because it has forgotten that first responsibility to itself. There is no other law.

In one of the bad moments last October a member of the Federal Reserve Board was heard to say: "Not only is this the worst financial crisis in all history. Something is missing that was always there before. All over the world there is this sense of something missing, like a familiar rock, an immovable principle, a wheel of balance.

And what is it? The Bank of England is missing. The value of the pound sterling is uncertain, changing from hour to hour. We never had that to contend with before." So it was. And that is why the suspension of gold payments by the Bank of England was an appalling financial event. No longer was the pound sterling worth $4.86 in gold anywhere in the world. No longer was it the universal unit of value in which all other things were priced. Now the pound sterling itself has to be priced in other things—in American dollars, for example.

Then suppose the same thing should happen to the dollar, which had recently become the next most stable unit of value in the world's opinion. Suppose the dollar, instead of being worth one hundred cents in gold anywhere in the world, should have to be priced at ninety cents, eighty cents, seventy cents, in terms of something else, maybe the French franc.

The long and familiar preeminence of the pound sterling as a universal unit of value in any kind of financial weather, war only excepted, had been worth to Great Britain an income of three or four hundred millions a year from the rest of the world in the form of banking profit, meaning discounts, commissions, interest and fees. Preeminence of the American dollar in the trade and ex- change of the world, in place of the pound sterling, would be worth 300 or 400 millions a year to this country. Or, if such preeminence passed to the French franc, it would be worth 300 or 400 millions a year to France.

First England and then the US took advantage of ruling the Seven Seas via war ships and armies sent abroad on looting or intimidation expeditions. The value of trade currencies meant the ruling empire got a 'bonus'. Because of this, the central banking systems become corrupt. This is because they can 'get away with murder'. Seeing that all traders want a steady, strong currency, they maliciously debase it while pretending it is still strong. Over time, say, 100 years, the differential between the debased currency and the pretense of value grows greater and greater. And then collapses!

ALL MONEY SYSTEMS DO THIS! If we have fractional lending, the lending banks start cheating more and more. They hold less and less. Then they play interest games that assigns fake values to things that have no real present value, only future promises. This is what 'debts' are: assets only if the future payments come in. If they don't come in, the bank collapses. To prevent this, the bankers devise other, even more devious systems. All of this is designed to allow them to create infinite Funny Money™. Since this causes inflation, they have to be under the supervision of banking authorities who restrict this lending. But this seldom happens. Everyone wants Funny Money™. Unlike capital that comes from profits due to value-added trade and then passed on to investors and labor, Funny Money™ springs from the loins of Kali, the Goddess of Death. The baby is nursed by the three headed hell hounds. It is irresistible. Creating this money is way, way too easy!

Bubble:

So you may see what was involved as between the dollar and the franc, merely in terms of national income; you may see also what Great Britain had lost. You may understand at the same time that when the British say it was a good thing for England to leave the gold standard they mean only that it was good for England that she embraced a bitter necessity in time, for if she had waited, her fortunes might have become irretrievable.

Now she will work harder, trade harder, spend less, live a little less, until she is quite solvent again. Her export of goods will increase for several reasons. They will be priced in the depreciated pound sterling, which means they will be cheaper for the world to buy, or, to say it another way, other people's gold money will buy more in England than before. Prices will rise in England, but not as much as the value of the pound sterling declines outside; as prices rise in England, real wages will fall, wherefore the labor cost of producing British goods will fall, and so will the standard of living in England, temporarily at least. And this must all happen to any country that loses the integrity of its money.

True, you will hear some British economists say it was not England that failed the gold standard; it was the gold standard that failed the world. Therefore, they say, the world may do well to try something in place of the gold standard and see if that will work any better. This is a novel way of thinking in England, yet elsewhere very old—putting the blame on money! If England had not lost her hold on the gold standard she would be the last to say the gold standard had not been working —in a remorseless manner, to be sure, yet nevertheless working as it should—in the last three years. If she had not lost her hold on it and other countries were losing theirs, the Bank of England would be saying: "This is hard, but it is the way the gold standard works."

It would be a grim thing to say, a selfish thing, perhaps, and yet quite right. For how did the pound sterling come to have preeminence throughout the world in the first place ? Its prestige was from the fact that the British had always a primary sense of their responsibility to themselves, that is to say, again, for the integrity of their own money and their own credit; and it turned out, as the law is, that the more jealous they were in this first sense of responsibility to themselves the more certain they were not to fail the world in their responsibilities to it, including the responsibility to keep the balance wheel running true. Thus the pound sterling became a symbol of stability that was a great asset to the whole world.

Where did England's gold come from? The author neglects this ugly little story. England fought a war before WWI. With people from Germany and the Low Countries: the Boer War. This war was over diamonds and gold mines! England's military weakness from imperial over stretch was painfully obvious and egged on the German High Command to consider a smashing blow on England itself. Before stealing it from Africa, using near-slave labor of the defeated tribes who fought so valiantly, the Zulu warriors defeated by gattling guns, where did England get gold?

Um, invading and destroying India and China! China, in particular, sat upon the Dragon Throne which, in turn, sat on the world's biggest gold hoard. This was looted without mercy by the Europeans. By 1931, China was now being devoured by the Japanese warlords. Indeed, the Bank of England certainly would have dearly loved to hang onto its powerful golden hoard. But they had to give it to the Americans. Or the Germans would have gotten it. For this was what we demanded before we rescued England's empire. We needed to hold this gold hostage so we could get our war loans to England paid back. For gold does NOTHING. It has to be guarded in a cave. The real money is, frankly, the Funny Money™ that is made out of thin air! The bonds, the loans were the real money makers. For interest had to be paid on it! Hah! There it is: England couldn't do this anymore. And ran out of gold to send forth as hostage. France couldn't, either. But unlike England, they didn't care if they sank the US banking system. They were of course, very stupid. They thought Germany would not be able to leap upon France and destroy her utterly in some Blitzkrieg.

Bubble:

For this now is the modern function of gold—to limit the amount of money and credit that may be wilfully, irresponsibly created and set free.

Organized credit is relatively a strange thing in the economic life. New and experimental forms of it are continually being invented and we love to deceive ourselves with them. We forget that credit in any form represents debt in some other form. We know about ourselves that we have seizures of ecstasy and mass delusion; that again a time may come when the temptation to throw the monetary machine into wild motion so that everybody may become infinitely rich by means of infinite debt will rise to the pitch of mania, as it did, for example, in 1928 and 1929. With this intelligent knowledge of ourselves we make bargains beforehand with reason; we agree that money, credit and debt shall not be inflated beyond a certain ratio to gold, under certain penalties such as we shall be very loath to pay and yet such as we cannot refuse to pay under worse penalties still.

So long as the convention is reasonably kept in the faith of credit nobody wants gold. People know what the fiction is. They may read for themselves in the published figures of the bank that its liabilities exceed its gold ten- or twentyfold, and yet they feel no anxiety about the gold value of their deposits. They may read for themselves in the figures from the public treasury that the gold reserve is only one half or one third as much as the amount of paper money in circulation. Yet they will treat that paper money as if it were gold. Nobody would dream of supposing that a country, no matter how rich, could redeem its bonds in gold. Yet its bonds will be treated as if they were gold, and one who happens to want gold for them may freely have it. All so long as the convention is kept. Does this mean, as some of the silly textbooks used to say, that we are all gambling upon a mythical law of averages? No. It means a very definite thing. It means that if every kind of physical wealth were priced in gold, all in one moment of inventory, the aggregate value of it would not be less than the total amount of money, credit and debt outstanding against it. Then all the money is as good as gold, all the credit is gold credit, gold itself is a nuisance in the pocket.

But let the faith be broken, let the delusion arise that the fiction is the reality, let the limit upon the amount of credit that shall be set free be left to imagination, and presently there is no way of telling what anything is worth by pricing it.

Gold is NOT wealth. Gold is a REGULATOR. Gold is LIBRA. Gold, when used as a restrictor, a curb, a control, is not part of the Cave of Death anymore. Instead, it becomes a GUARDIAN at the Gates of Death! In other words, a goddess or a Watcher. Its function is to protect OTHER WEALTH. The things that are 'real'. Like labor, rice, oil, wheat, land, trade, ships and armies. Hoarding gold doesn't work. It has to be harnessed in the role of regulator, not be a commodity that is just as uncertain as all other things. The chaos, the total chaos we see today is a dynamic of running a system with NO CONTROLS. NO BALANCE. Libra hates this.

I was born in the center of Libra. I have a lot of Liberian tendencies including being a liberal. I worry about balance and control. This is why I tame animals. And tend gardens while worrying about an out of control world. And I know the Gates of Death, having passed through those frightful, painful portals!

The only way gold can perform as a guardian deity is for the central bankers to bow to Her and sacrifice to Her and to understand Her rules and tempers. This is a very ancient role, by the way. From the first pharaohs. For some reason, humans can control the desire to be greedy if they have a system that has this sort of exterior restrictions. Isn't that funny?

And this is why talking about ancient religions and money go hand in glove! We definitely are seeing magic here: the magic of the human psyche, the soul. And how we battle our own inner demons. This is the hardest lesson to learn.

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Both China AND California Have Virtually No Earthquake Insurance!

Both the top and bottom of the San Andreas is shaking nearly continuously while the middle remains completely locked down.
May 16, 2008

Elaine Meinel Supkis

Bloomberg carries a totally insane article saying the Chinese are stupid because they don't have lots of earthquake insurance. The entire article is filled with bad comparisons and leaves out data concerning California and earthquake insurance. Namely, only 12%, yes, we heard this right! 12% have insurance! And this is better than China? HAHAHA. Time again to warn the dreamers in sunny California, the dark cloud of annihilation is right over the horizon waiting to come pouring in one fine day with no warning at all. And of course, the ONLY insurance we have, collectively, is our government. Which is going bankrupt. Bankrupt! Gads. Send the Chinese some donations to save the victims there and pray the gods don't punish us next.

China Quake's $20 Billion Damage Show Insurance Abyss

The most powerful earthquake in China since 1950 shows the nation's insurance industry is decades behind those of the world's biggest economies.

Just 5 percent of the more than $20 billion of damage from the quake in Sichuan province is covered by insurance, according to estimates from an official at the China Insurance Regulatory Commission. By contrast, about half of the $120 billion of estimated costs from Hurricane Katrina, the most expensive storm in U.S. history, was insured by companies or the federal government, data compiled by analysts at Jersey City, New Jersey- based Property Claim Services show.

The ragging on China continues unabated and unmercifully. The US paid 'half' of the damage from Katrina? First, the percentage paid by the US government was more than half of this half! And this went into our massive DEFICIT SPENDING. Which that year, was well over half a trillion dollars which we got from running off to ...get this...CHINA!!!!

If any brainiac thinks China who funded part of the Katrina costs, can't fix itself, they are NUTS. Secondly, comparing an earthquake with a hurricane is stupid. They are NOT the same thing at all.

Earthquake insurance in the Bay Area is expensive, risky business

Almost two decades after the Loma Prieta earthquake damaged more than 40,000 homes, most Bay Area property owners don't have insurance policies that will protect them when - and experts say it's only a matter of time - the Big One hits.

Statewide, only 12 percent of California homeowners have earthquake coverage, according to the California Earthquake Authority, a publicly managed entity that sells policies through private companies. The number of Bay Area homeowners with coverage is even lower than that, although the agency doesn't have a precise figure for the region, according to Tim Richison, the earthquake authority's chief financial officer.

Earthquake insurance is extraordinarily expensive - it typically doubles a homeowner's annual premiums - and most policies come with a 10 or 15 percent deductible, meaning that damage would have to be pretty severe before policyholders would be able to tap into their coverage.

"Conceptually, earthquake insurance is a great idea," said Mary Comerio, a professor at UC Berkeley who studies post-disaster reconstruction. "The current program only covers catastrophic loss, it's extremely expensive and the deductibles are very high. As a result, only a small number of Californians even choose to take the insurance."

12% have earthquake insurance in California? This is the state where there is a nearly 100% chance of a quake over a century for any given place where the maximum number of homes have been built? MY GOD. Someone better tell the Chinese how superior we are!

This irritates me more than anything: stupid, bloated Americans attacking other nations for things we are much worse at or about. Like attacking China for polluting the air. Geeze. Wow. After 35 years of trying to clean our own air, it still stinks! In summer, in my rural mountains, pollution from Texas to Illinois travels here and makes the air unbreathable. This killed my poor ox, Dale, one hot summer day with high pollution!

So it is with earthquake news: the US is UTTERLY unprepared for ANY 7.9+ earthquake. Housing in the entire Madrid Fault zone has ZERO earthquake building codes that could sustain damage in a classic 8.9 quake like the one that happened 160 years ago! And the quakes in China were minor compared to the horror of the San Andreas suddenly leaping 55 or more feet northwards in one second when the entire middle section blows out as all geologists have said, it certainly will. A 99% chance of this happening! And how many houses in this 500 mile region have earthquake insurance? 10,000? 20,000? Out of 2 million, 5 million homes? WOW.

After one major earthquake in LA, I flew out to my parent's home in Pasadena to fix everything that broke. Many odd things were shattered or damaged. Including the main beam in the living room ceiling. I carefully fixed everything including putting in steel plates with bolts and cross bolting parts of the house as well as building in triangulation in corners. This damage was not from a direct hit, either. And the quake was not a 8.9 affair, either. I suppose most people think their insurance is 'will I be dead, who cares?' type of insurance. Unlike a hurricane when one can flee or worry beforehand and maybe remove valuables, with earthquakes we get ZERO warning. As we saw in China this week.

May 13, 1988

California Intensifies Planning for the Big Quake

Seven months after the Whittier earthquake that killed eight people, the authorities in California have redoubled their efforts to prepare this heavily populated and quake-prone state for the devastating ''big one'' that is almost certainly inevitable.

Seven months after the Whittier earthquake that killed eight people, the authorities in California have redoubled their efforts to prepare this heavily populated and quake-prone state for the devastating ''big one'' that is almost certainly inevitable.

Schools, businesses, government offices and other organizations completed more than 150 drills and other events in April, designated as ''earthquake preparedness month'' by Gov. George Deukmejian. He also recently approved a plan to convert scientific advances in predicting temblors into concrete warnings to the public.

''We don't want to be caught the morning after and have the press say we did not pay attention to foreshocks,'' Richard Andrews, assistant director of the Governor's Office of Emergency Services, told a recent conference at the California Institute of Technology in Pasadena. ''The main problem is being caught by surprise.''

But many authorities say nothing will prevent a calamity of unparalled proportions should a major quake strike the densely populated Los Angeles or San Francisco areas. It would be the worst disaster in American history, causing up to 14,000 deaths, according to Federal estimates.

The 1988 story was 20 years ago. The population of the most vulnerable state for earthquakes has grown from around 25 million to around 40 million during this time! That is nearly double! When that earthquake shook awake the dreamers in California, the oldsters all shook their heads. No one would do much to prepare for worse, they knew. And so did the authorities at that time:

Despite Whittier, public apathy persists. ''People are not compliant,'' said Norma Gordon, disaster response consultant for the Los Angeles County Department of Mental Health. ''You can give them tons of information and the likelihood that they will comply is minimal.''

She said it was important, particularly for children, to develop ''coping skills,'' so as to avoid the psychological problems common after quakes and other major disasters, such as insomnia and depression.

''The biggest thing is apathy,'' said Charles Parcell, who heads security for the Pasadena Unified School District. He said two Parent-Teacher Association meetings a year are held to aquaint parents with disaster plans and typically fewer than 10 attend.

How touching. The chief worry isn't 'Where is the water? Where is my family? How can I survive?' but rather, bad dreams or anxieties. Mother Nature hardwired us to be anxious. This is part of our tools for survival. People who 'sleep like a baby' also get 'eaten like dinner'. So being easily roused and quick to react is how we survive. It is obvious that people are fatalists in modern societies. They just don't give a damn because they expect someone called 'Santa Claus' aka, Uncle Sam, to rescue them. Just like we rescue people from hurricanes unless, of course, they are blacks and slated for a nasty, violent form or urban renewal. Then they are left to die.

California has lots of minority populations, too. They should remember, the central government can play this urban renewal game more than once! And they shall. Even as we deride the dictators of Burma, the plans to play the same sort of games here are very real. Even as alarming quakes at the top and bottom of the San Andreas grew in volume and ferocity for a month, there were virtually no warnings from the government. Indeed, Schwarzenegger proposed more water channels that cross the fault lines. I see no moves to cajole Californian dreamers to install 250 gallon plastic agricultural tanks that can be the lifeline to survival in a building, just for example. These can be kept in garages, just for example. More important than a car. Indeed, if you run a hose from it to the house's EXTERIOR, one can get water even if the garage collapses! The more people install these things, the better the survival chance of the entire neighborhood.

But California is the land of brush fires raging in the middle of cities! And other disasters. So why bother with the really nastiest of these potential disasters? People just hope that the scythe passes over them and slays someone in China. Then we can sit here on our haunches and mock them for not looking ahead?

Good grief. The Furies and the Fates are being sorely tempted here to teach us all a hard, sharp lesson.

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US Gives Little To China Compared To Other Nations

May 16, 2008

Elaine Meinel Supkis

Offers of aid pour into China this week. The Chinese are grateful and are keeping a close count on who is offering what. It is quite revealing, this list. Also, Japan is seeing auto sales at home continue to collapse as the working class is vanishing into deeper and deeper poverty even as Chinese workers move upwards, rapidly. This is our future, by the way. And Germany's economy grows faster than even the Japanese economy even while German workers succeed in keeping up with inflation unlike Japanese and American workers. Thanks to the strong euro. And strong sales to Sovereign Wealth nations like China, Russia and the Arabs.

BEIJING, May 15 (Xinhua) -- Several more countries have offered aid to China whose southwest Sichuan province was hit by a massive earthquake on Monday.

Saudi Arabia's King Abdullah bin Abdul-Aziz has decided to donate 50 million U.S. dollars in cash and 10 million dollars worth of relief materials.

British Prime Minister Gordon Brown announced that his country will provide to China 1 million pounds (about 2 million U.S.) in aid.

German Foreign Minister Frank-Walter Steinmeier said his government will provide a first instalment of 500,000 euros (800,000 U.S. dollars) in aid to the German Red Cross to help China in its relief work.

Russia delivered Wednesday its second batch of humanitarian aid to China where a devastating earthquake has claimed nearly 15,000 lives in its southwestern Sichuan province, local media reported.

A cargo plane from the Emergency Ministry took off here Wednesday evening, carrying some 30 tons of aid to the quake-hit areasThe Japanese government has decided Tuesday to give 500 million yen (about 5 million U.S. dollars) of emergency grants in aid to China to support the earthquake disaster relief efforts, Japanese Foreign Minister Masahiko Komura announced in the evening.

Komura said the Japanese government made the decision after receiving a request from Beijing, and will consider giving further aid if necessary

.The Vietnamese government has decided to donate 200,000 U.S. dollars to victims of a recent earthquake in China's southwestern Sichuan province, local newspaper Saigon Liberation reported Thursday.

Here is an old cartoon I did two years ago. Appropriate today.

The U.S. embassy to China, on behalf of the U.S. government, Wednesday handed over 500,000 U.S. dollars of cash to the Red Cross Society of China for quake relief in southwestern China.

OK: the US is giving China basically nothing. Less than much smaller and 'weaker' nations. Note who is at the top of the giving list: Saudi Arabia. I have detailed over the last three years, the Chinese moves towards Saudi Arabia. Step by step, the Chinese have been displacing the Americans in Saudi Arabia. This is an insidious process that is mostly subterranean. The fact that the official Chinese news service put both SA and the US in the same headline is important.

The US cannot fathom the depth of anger the Chinese government feels towards our government. The US has outsourced much of its pollution to China. Both Japan and the US have moved their factories to China in order to pollute China or exploit cheap Chinese labor. But for both countries to turn against China and pretend all the multinational corporations that are doing this is all CHINA'S fault is too much to bear. When China raised the value of the yuan, for example, both the US and Japan plunged their currencies against all others in the world and instead of rewarding China for doing this, punished the Chinese.

I will note that Japan has changed leaders and its tune vis a vis China. Note the generosity of the Japanese which the Chinese government has lauded.

Another thing: a big, big propaganda point in the US is the lie that China doesn't want any aid. This noxious pretense flies in the face of Chinese acceptance and gratitude to the nations that ARE offering help. On top of all this, China doesn't want the sort of 'help' given to poor Indonesia when the Boxing Day Eartquake/Tsunami killed hundreds of thousands. Ships filled with all the detritus of US closets came pouring in, tying up dock workers, all flooding Indonesia with rags and junk! They poured this noxious pollution onto the beaches of this crippled nation and departed. I saw photos of mountains of discarded, dirty clothes on the beaches there. China doesn't want this sort of 'help'. They want specific things which is quite rational.

To do this, anyone offering help has to work through the Chinese government. Just as they can't let in armies of paramilitary people with dogs to dig out the survivors for fear the CIA and other secret organizations will use this as a chance to operate against China under cover, China can't just let anyone do whatever they want. Just as the US will not let in a flood of Chinese with military training and dogs if the San Andreas blows out.

Which it will.

Another cartoon from 2 years ago.

China offers help to rebuild New Orleans. This story is from Hurricane Katrina. When China offered help, the US Congress and Bush went nuts. They thought the Chinese would give us up to $2.5 trillion to rebuild! China declined. The US was undergoing a record building boom at the time of this hurricane. Since we were lavishing trillions of dollars building houses on top of the San Andreas fault as well as very close to the ocean in all the hurricane-prone states, the thought that we deserved Chinese funds to continue this madness was pure madness.

Another cartoon from two years ago.

Click here for April, 2006, Diplomacy News to see stories about the messy Hu/Bush visits. I wrote extensively about the insulting visit Bush gave Hu back in April, 2006. The US boasted openly about making Hu 'lose face.' Our attitude about this tragic earthquake continues this tradition. Instead of supporting the government of China to deal with this horror, we are sniping at China from the sidelines. I can't wait until we are in the same boat and weeping for world sympathy and aid.

All nations, to show solidarity and a desire for peace, have to suspend global power struggles when tragedies hit. This is common courtesy. Back to the markets today, the news from Asia is, as always, interesting. The impact of this Chinese earthquake is barely felt yet. But will be, increasingly, after the Olympics, when China turns inward to rebuild and to deal with the problem of all its public schools which are mostly cement structures.

Broad Impact Looms As Vehicle Ownership Falls In Japan

TOKYO (Nikkei)--The number of vehicles in Japan has started declining, a trend that will not only have an impact on related businesses, such as insurers, repair shops and gas stations, but also affect the nation's road-building policy.
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Economic Slowdown At Home Could Block Mizuho's Recovery Path

TOKYO (Nikkei)--Despite Mizuho Financial Group Inc.'s (8411) assurances that it will stage a rebound this fiscal year following a profit plunge in fiscal 2007, a domestic economic slowdown is likely to weigh on the banking group's earnings.
*****************************************************

MARKET SCRAMBLE: Surging Costs Test Firms' Discipline

TOKYO (Nikkei)--At a time when soaring raw materials costs threaten to eat into profit margins, companies that act quickly to prevent a decline in profitability are likely to emerge as winners and benefit from higher share prices.
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BOJ Seen Turning 'Dovish' As Uncertainty Prevails

TOKYO (Nikkei)--The Bank of Japan's policy-setting board is shifting toward a "dovish" policy stance under the new leadership of Masaaki Shirakawa, according to five prominent BOJ watchers.

Older car registrations have been falling for more than a year. Now new car registrations are falling in Japan. This is due to the same problem we see in the US: wages are dropping vis a vis real inflation. And the central banks, as they flood the world with Funny Money™ are making this worse and worse. And thanks to this inflation, the ability to buy things like cars is collapsing. This is why banks must track the real costs of inflation which is in food and fuel. Those shoot up, economies collapse. Of course, the 'cure' is to have low interest rates. But this is obviously a failure. Japan has super-low rates but thanks to the brutal cutting of wages to clip inflation, no one in Japan can afford to buy anything even if the interest on a loan is cheap. And thanks to food and fuel inflation, no one can save money anymore.

INFLATION KILLS SAVINGS. And no banking system can run on no savings for very long which is why the system is collapsing. I will note that no one within the banking system with the exception of outsiders like Volcker even mention savers at all! They don't for a reason: they want to increase debts, not savings! But we can see in Japan, this 0% system is a total failure. Also, as industrialists seek to squeeze out inflation of commodities via squeezing workers, Japan, one of the world's biggest economies, is DYING. And this is like a cancer within the global economic system. As Japan dies, its disease spreads. As Japan ceases to buy world market goods, trade falters across the planet. This is why the G7 have to turn to Japan and stop this madness. The commodities cost too much in Japan thanks to the weak yen. But to gain profits via trade, Japan wants above all, a weak yen!

Euro zone under calls for single seat in international forums

The euro zone members were called on Thursday to speak in one voice with a single seat in international forums such as International Monetary Fund (IMF).

"The euro area must build an international strategy so that it can play a full part in pursuing global stability and project and defend its interests in the world," EU Economic and Monetary Affairs Commissioner Joaquin Almunia told an economic forum in Brussels celebrating 10 years of European Economic and Monetary Union (EMU).

"This means first developing common positions on international issues so that we can speak with a strong single voice. Once accomplished, the logical next step will be to consolidate our representation and obtain a single seat in international forums," he added.

Europe wants to have their cake and be one party but also be many little party goers at the same time. Like Russia when it joined the UN. All the provinces that left the Soviets after the fall of the communist dictators were put in the UN as separate nations. Europe wants to be a host of small principalities and nations while being one entity when it comes to important things like money. The US didn't fall for this scheme when the UN was created for fear that the US would explode apart if each state were treated as a separate nation.

So Europe is the world's biggest economy this year while not being really a nation with any real unity. Indeed, as we see in today's news from Italy, ethnic cleansing is very much alive in Europe. Many Eastern Europeans have flooded into Western Europe even as Western Europe sucks in more and more former Soviet satellites. And this is causing a reaction that is exploding across Europe. A very unstable and weak Holy Roman Empire situation, I would suggest.

Europe, like Japan, wants a stronger dollar so they can continue merrily exporting more goods than they buy from the US. Germany, due to its strong industrial base, is the most powerful part of this disjointed union which is why I call it the Fourth Holy Roman Empire, der vierte Reich.

Led by Germany, a Strong Quarter for Europe

Surprising even the most optimistic forecasters, the German economy grew 1.5 percent in the first quarter of this year, delivering its best performance in over a decade despite the global financial crisis and recessionary fears enveloping the United States.

The euro zone, where Germany accounts for a third of economic output among 15 members, grew 0.7 percent during the period, the statistics agency Eurostat reported Thursday. The region’s numbers, which represent quarter-on-quarter growth, also got a surprising lift from France, where the economy grew 0.6 percent in the first quarter.

The figures, which were about double what most economists expected, suggested that the European economy was demonstrating a resilience that seemed unlikely as recently as last autumn. However, economists said the numbers obscure severe slowdowns in Ireland and Spain, which have been battered by the global housing decline, and a probable recession in Italy.

Germany has increased its partnerships with China working on huge construction projects like the rail system. German engineers will be flooding into China soon to help with the rebuilding of the road and rail infrastructure. I notices from photos of the earthquakes, the major highways in the Chengdu region were built on the German model: huge cement slabs that are then paved over. Many of our highways are built on a lighter foundation. So it seems to me that the Chinese are using German technology and standards rather than American.

There there are the Arab countries: they prefer to buy from Germany when it comes to machinery. And also Japan these days. So both are doing well in the auto markets. Unlike you know who.

U.K. Two-Year Notes Have Biggest Four-Day Decline Since 1996

U.K. two-year government bonds dropped the most in 12 years this week as traders abandoned bets the Bank of England will cut interest rates next month.

``The unwind has been massive,'' said Matteo Regesta, a London-based interest-rate strategist at BNP Paribas SA, France's biggest bank. ``We have to completely change the way we look at the gilt market.''

And here it is: the Horns of Dilemma. Inflation is rapidly increasing in England, the US and Japan. But none can escape this since all need to keep interest rates low in order to keep increasing the indebtedness of the home bases. We need to go further and further into debt but his is a deteriorating condition with a final end of bankruptcy. We can't do this while our economies are also contracting! Contracting economies usually are forced into a depression cycle but not if savings are destroyed. Then the banking system collapses as it did after the 1929 stock market collapse. Ignoring inflation caused by efforts to stop this lending collapse is even worse. It leads to hyper inflation. So we are caught in a trap we made ourselves. And getting out via trade won't work. Not if we are alienating our potential markets. Like the Chinese.

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Bankers Need More Capital...From Communist China

May 15, 2008

Elaine Meinel Supkis

As Bernanke seeks to fix the banking collapse, he falls into the trap of treating the obvious 'symptoms' while totally ignoring the underlying problems. This is because he is a tool for the very rich, not a guardian of our joint welfare. This disassociation of the ruling elites from the masses is very profound and dangerous. And this fool actually thinks, if only he can restart the lending machine, this will fix a bankrupt economy. This delusion is cultivated by our rulers who are all spendthrifts who make huge profits off of shoving us into their traps which are set by lending us money they make out of thin air. Even as the magic window the Fed set up last November lends Funny Money™ like crazy, all the top bankers in the West are yelling, 'The crisis is over and all is well and please lend money...after everyone gets some capital!' This is impossible. We don't have no more capital, dudes. We are bankrupt.

Bernanke Urges `Hunkering' Banks to Raise Capital

Federal Reserve Chairman Ben S. Bernanke pushed banks to keep raising capital in the aftermath of losses from the credit crisis, so lenders can avert deeper damage to the U.S. economy.

``Firms are hunkering down,'' Bernanke said at a conference in Chicago today. ``They have at least partially replaced the losses with new capital raising, but not entirely. They are being rather conservative in making new loans, which has implications for the broader economy.''

Bernanke's remarks reflect concerns he and other Fed officials expressed this week that financial markets have yet to return to normal. The Fed chief also said the central bank is considering strengthening its guidance to banks on how they manage risk after ``weaknesses'' that contributed to the crisis.

Banks and securities companies have raised about $244 billion of capital since July, after writedowns and credit losses in excess of $333 billion. Bernanke and Treasury Secretary Henry Paulson have repeatedly said firms should keep increasing their funds, seeking to alleviate the impact of the credit crunch.

``I strongly urge financial institutions to remain proactive in their capital-raising efforts,'' Bernanke said in the text of his speech. ``Doing so not only helps the broader economy but positions firms to take advantage of new profit opportunities as conditions in the financial markets and the economy improve.''

Time for the old calculator: $333 minus $244=$89 billion in the red. This was after the Asian and Arab sovereign wealth funds poured many billions into the big investment banking houses in the West. Did any of these SWF investors see any profits from all this? No...? Heh. Not a penny. They did this because they have definite political reasons for taking over control of our banking systems. These reasons are not benign, either. They are hostile take overs.

For two years, I have written about Sovereign Wealth Funds. The word 'sovereign' is very important: it means it is lord over all others. In the case of our banking businesses, all of which are essentially bankrupt, they survive with massive losses, only thanks to the intervention of these kings, in many cases, quite literally kings. The US is supposed to be this fabulous, sovereign nation that is powerful and is a democracy or a republic, not a slave state or beggar at the gates of the Dragon Palace, the emperor, Hu. Just like Bernanke seldom mentions our trade deficit, so he doesn't muse about this collapse of US sovereignty in the banking system.

So what exactly does this TRAITOR mean when he says, '...remain proactive in their capital-raising efforts'? First, one of the places these pathetic fools who screwed up our banking system to the point of bankruptcy, is to go to China and ask to be bailed out. This is obviously impossible not to mention, insensitive and outright deluded. Bernanke made this speech after the Great May Quake! Perhaps a hundred thousand Chinese lie dead! And at least 5 million are without shelter, water, food. China is going to turn inwards and use what wealth they have accumulated to save their own people! They will not be building more houses in America. They will be building...in China!

Indeed, one of the problems for the US is that China has been slowly turning off the financial taps. The US insists that China not export to the US so much anymore. And this means, the Chinese won't lend us money. If China does have money inside our financial systems, they will use this to funnel more money into rebuilding China. This effort has high support within China. The earthquakes have increased the sense of unity and patriotism within China.

Then there are others who have been keeping the US banking system from declaring obvious bankruptcy: the Arab sheikhs and kings. It is obvious, after US candidates for President and Bush in Israel have delivered blood-curdling speeches aimed at the heart of Islam. I also find it rather horrible that the financial affairs of many of our top politicians in both parties have grown massively by hundreds of millions of dollars in the last 10 years even as our entire banking system which is regulated by these same TRAITORS collapses into bankruptcy and dependency on foreign powers. Someone has been stuffing their own piggy banks while stiffing the US public. Neither party mentions any of this for obvious reasons. Just like Bernanke conspires with them to not mention our growing budget deficits.

Also, Bernanke betrays his doctrinaire refusal to understand capitalism. He thinks, if the bankers just somehow get some money from other nation's trade profits, we can resume racking up more and more debt via the magic of lending! The efforts of 50 years of business schools in America wiping out all traces of Marxism has led to this sort of childish thinking about capitalism. This is why policies that kill the Golden Goose, namely, the working class, are encouraged and justified even as it is obvious to anyone, if you destroy the incomes of workers, capitalism falls off a cliff. Chinese labor can gain value-added profits only if it sells to US workers who have greater incomes. Once all workers are reduced to semi-slaver, the market for manufactured stuff collapses. This is what we call 'depressions.' Bernanke also believes that if we have a depression, it is easily fixed by debasing the currency. Then prices go up and voila! No depression!

But this works only if wages rise rapidly, too. And while the take home money for our own work force has been relentlessly falling, the consumer base is rapidly vanishing in this sector. So why would the Chinese pour more of their CAPITAL down this well? In all the statistics about wages, we forget the huge change in US working relations: the push to drive all women, even ones with small babies, into the workforce. This gave double incomes even as each individual income fell, the collective family incomes shot upwards for 25 years. This is now over and done with. There is no untapped labor left except for one: child labor. Like in any third world country, this is one frontier the US consumer nation dare not cross. I even saw, at the Mises Organization's blog, a story lauding child labor and demanding a return to this noxious, deadly abuse of our own offspring for capitalist exploitation!

Chinese children are not set to work! They work hard...at school. The tragedy of the Chinese earthquake is how many schools collapsed due to being built with nearly all cement. But our own children are caught in a collapsing school system only it isn't the buildings. It is the system itself. This is leading towards the dire last step in exploitation of labor: child labor.

Confidence Improves Amid Signs Credit Crisis Easing

Confidence in the global economy improved for the second consecutive month in May on signs the worst of the credit squeeze may be over, a survey of Bloomberg users on five continents showed.

The Bloomberg Professional Global Confidence Index rose to 22.7 from April's 14.5, with respondents becoming less pessimistic in every region. A reading below 50 indicates negative sentiment. The measure fell to as low as 13.1 in March.

``Conditions are not quite as jittery in markets as they were, so we may be through the worst,'' said Ross Walker, an economist at Royal Bank of Scotland Group Plc in London, who took part in the survey.

Participants in the U.S. and Europe reversed their predictions of a dollar decline after the Federal Reserve indicated it's ready to pause cutting interest rates. Wall Street chief executive officers including Jamie Dimon of JPMorgan Chase & Co. said in the past month that the credit crunch is easing.

The global economy is having some difficulties due to the reliance on the US consumer markets and US rising debt to fuel a transfer of sovereign wealth via commodities sales and manufacturing profits moving out of the US and over to other nations. Absolutely everyone who produces anything has flooded into the US markets to exploit US easy lending. Since the US never had to really trade for anything, this lending is the entire basis of our economy. And it is why our banks are bankrupt. Fixing this means fixing global excess exports to the US. And the tiny change in status this last six months has barely undone any of the past damage in trade. Even as the weak dollar boosted US trade profits slightly, the pit we are in is very, very deep. The improvements, nearly microscopic. And thanks to all our trade partner's efforts, the dollar is now stronger so this improvement is now gone. Dead in the water.

'The worst...' the Royal Scottish banker was talking about is the bad times when US exports began to rise and the world's imports to the US dropped. Now, it is back to normal. But 'normal' is utterly abnormal. As well as unsustainable. And the 'credit crunch' is when easy lending stopped and wild US consumer spending slowed down. Now, it resumes? Based on sub-inflation credit? Which means, lending is cheaper than earning? And how is this sustainable? And how can this Funny Lending™ create anything except hyperinflation?

Food Prices See Greatest Monthly Increase in Nearly 20 Years

Food prices have risen 6.1 percent in the past three months on a seasonally adjusted annual basis. The one-month rise between March and April of 0.9 percent was the biggest since January 1990, according to the Bureau of Labor Statistics.

The rise in prices covered all categories of food but was most severe among such staple goods as grains and oils -- goods where inflation has touched off food riots in some less developed countries and led to concerns about supply shortages.

Say hello to hyperinflation, coming to a store near you! Sigh. Again: Bernanke and the Scottish banker don't dare utter a word about this inflation! They focus only on making loans available somehow. This is ridiculous when we see China trying to suppress inflation the old way: increasing, not decreasing, the reserve ratios for lending, increasing the interest rates.

U.S. Economy: Manufacturing Struggles as Expansion Falters

The slump in U.S. manufacturing deepened while the economy skirted recession, reports today showed.

Industrial production declined 0.7 percent in April, the Federal Reserve said in Washington today, more than twice the drop forecast by economists. Separate figures from the New York and Philadelphia branches of the central bank indicated the slide may continue this month.

Only exports and consumer spending, the largest part of the economy, are keeping the six-year expansion alive as housing shows no sign of a rebound and factories retrench.

``There is no question about whether or not there is a recession in manufacturing -- there is,'' said Michael Gregory, a senior economist at BMO Capital Markets in Toronto, who correctly anticipated the drop in industrial production. ``Housing is in deep recession and manufacturing is in a shallow one.''

For the last 9 months, the dollar has fallen greatly against the yen and other major currencies with nations we have trade problems. Few Americans know that Europe has a huge trade advantage with the US despite the euro! But it was edging downwards in our favor until three weeks ago. Then the G7 nations, especially Japan, howled about the weak dollar and up it went. To the great satisfaction of our trade partners who wish to resume driving us into bankruptcy while they make great capitalist profits off of trade with us. The manufacturing sales from the US will now begin to vanish and we will be worse off than last year which saw nearly a trillion in trade deficits. This is why I support tariffs and barriers. Relying on monetary manipulations to control trade is an obvious, total failure for the US.

Rochelle Parker needed money for Christmas gifts and medicine, so she went online and found a Web site promising easy money. After a few key punches she was zapped a $300 loan, but one that charged an astonishing 842 percent annual interest.

The recently retired fingerprint technician for the Chicago Police Department had several other online loans that drained her financially and forced her to move in with her daughter. But getting another loan was so easy on the Internet.

"As my mother said, I'm robbing Peter to pay Paul," Parker said with a shake of her head and a sigh of regret.

Usury stalks the working classes as many in this sector go bankrupt due to loss of income caused by Bernanke's helicopter drops to keep insolvent investment bankers happy and the many multimillionaires in Congress rolling in dough. No sane person signs up for this sort of loan except the most desperate of all. A simple law passed by our multi-millionaire Congressional leaders and signed by our multi-millionaire President could fix this. But instead, they passed the odious 'Bankruptcy Laws' that made it nearly impossible for the hard-pressed workers to get rid of past debts. So we get a working class sinking into debt-slavery and no one is rescuing them. And inflation caused by debasing the currency is worsening things.

Sears majesty to hedge-fund dust
By Julian Delasantellis

To this observer, the sorry saga of Sears illustrates just how far distorted American ethics and values have become from exposure to the great credit and money carnival of the past few years. "All that is solid melts into air, all that is holy is profaned," Karl Marx wrote in 1848. In this case, nobody thought twice, nobody blinked an eye, when Wall Street took a truly unique American institution, Sears, and turned it from a fine, respected American society matron into a common streetwalker reduced to pimping through the night for Eddie Lampert.

Last year, the New York Times' Gretchen Morgenson noted that more American national income was produced by financial engineers, people like Lampert who manipulate the amorphous abstraction called money, than by the mechanical engineers who manipulate actual physical realities such as steel, concrete, mortar and oil. In his new book Bad Money (reviewed May 10 by Joe Costello), Kevin Phillips notes that "By 2004-6, financial services represented 20 to 21 percent of gross domestic product, manufacturing just 12 to 13 percent."

Somewhere along the line, America got the idea that the buck generated from financial services, from manipulating money, from passing it from hand to hand, was equivalent, or even superior to (after all, you come home with a lot better smelling clothes after a day on the trading floor compared to a day at the steel mill) the same buck made actually making and sustaining something - such as the great brand Sears once was.

The Asia Times has some of the very best economic articles. Compared to other mainstream media like the Wall Street Journal or the New York Times, the opinions in the Asian Times is often enlightening and well-written. Note how Julian even quotes...heh...KARL MARX! GE, like Sears, was turned into a hedge-fund banking entity that was looted by the top brass. GE is now selling off its actual manufacturing to...CHINA. And then there is GM: they became a lending institution and that is now bankrupting them as Toyota beats GM's pants off in international trade PROFITS. Up and down and all around, our manufacturing base has turned into a Mafioso-style lending machine that strips workers of all future earnings.

And the poor woman in the story about usury: she did this to buy presents manufactured in China for her sad family. So they could be entertained to death. I have said many years ago, Xmas should be banned. It is destroying our nation, distorting the business cycle and wrecking our environment.

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Edwards And SEC Chiefs Embrace Obama

May 14, 2008

Elaine Meinel Supkis

I had to suffer through watching tons of propaganda on ABC to see the Obama/Edwards lovefest. Not only has Edwards now embraced Obama, not only has Obama embraced Volcker, but three retired SEC chiefs who worked for both Democratic and Republican Presidents endorsed Obama today! This is VERY important: they feel he is possibly the only one around who can bring some sanity to our finances. Also, Hillary and her husband both saw their incomes climb the most in the Senate this year! The number of multimillionaires in the Senate is striking. And many of them gained this via political smoozing. Stocks shot up today on the news that there is 'no inflation' even as gasoline shoots upwards at the pumps by some more pennies today! The hope is, Bernanke will drop rates to near 0% and everyone will live in that happy, happy land where there is no interest charged, no money down and you don't pay off the principal. The Pentagon and the White House reduce the capture reward for top Al Qaeda people supposedly because the Arabs don't understand zeros and think $100,000 is better than $5,000,000. Even Hillary's voters aren't that stupid. Much less, Arab chiefs. And last, we look at China and India to learn some harsh lessons.

Edwards to endorse Obama

WASHINGTON (CNN) -- Former Democratic presidential candidate John Edwards will endorse Sen. Barack Obama on Wednesday at a campaign event in Grand Rapids, Michigan, according to Obama's campaign.
*snip*
He told NBC last week that Obama, the Democratic front-runner, is the party's likely nominee. Both Obama and the his rival, Sen. Hillary Clinton, had sought Edwards' blessing.

Edwards said last week that it was "fine" for Clinton to continue making her case but expressed concern that a continued campaign could damage the party's prospects in November.

Obama is on a roll. Yes, he didn't win the white worker, the hard workers of West Virginia. But then, these people are often ill-informed thanks to our insane media which specializes in propaganda cranking rather then honest news reporting. Example from today, ABC News said, 'The soldiers in China unceremoniously dump bodies on the sidewalk...' while seeking some way of exploiting the massive tragedy there. Of course, the soldiers, overwhelmed by thousands of dead, were carefully lining them up where others could pick up the bodies, all of which they strove to cover in some way. Which is hard to do when everything is in chaos. But I remember New Orleans when it took months and months for the bodies to be taken in. In many cases, people had to complain bitterly and strangers covered the dead as best they could. And a hurricane gives lots of warning, unlike an earthquake! The soldiers, of course, were keen on saving any living souls, the care of the bodies came second. But ABC had to score points and point fingers even though our own rulers in the past have been are far more cruel than the Chinese communists.

ABC didn't linger on the Obama/Edwards love-fest because they had to go to China to mock the heroism there. And then they ran off to New Orleans....oops...Burma to talk about the Superdome and...oops again. It is hard to not be bitter and cynical. I can't wait to have someone who at least can pretend to care! But the Edward's endorsement didn't make me happy, it is the people Volcker pulled into the Obama camp:

Three Former SEC Chairmen Endorse Obama's Presidential Bid

Democratic presidential candidate Barack Obama picked up the endorsement today of three former chairmen of the Securities and Exchange Commission, two of whom were appointed by Republican presidents.

Arthur Levitt, who was appointed by Bill Clinton; William Donaldson, who was appointed by George W. Bush; and David Ruder, who was appointed by Ronald Reagan, issued a joint statement saying Obama can provide the best leadership during times of ``monumental economic challenges.''

``We believe Senator Obama can provide the positive leadership and judgment needed to take us to a stronger and more secure economic future,'' they said. The statement also was signed by former Federal Reserve Chairman Paul Volcker, who previously endorsed Obama.

The four men said they appreciated Obama's support for ``balanced regulatory reform. We believe that such a constructive approach can be extended broadly in the economic area as well as elsewhere.''

Levitt, in an interview today on Bloomberg Radio, said their backing was prompted in part by Obama's opposition to a summer gas-tax holiday advanced by Democrat Hillary Clinton and Republican John McCain. Obama called the idea a ``gimmick'' because it would save the average driver less than $30.

Now this makes the deal! Anyone voting for Ron Paul can rest easy: Ron himself, said, Obama is the best choice. This news is the cherry in the cocktail. The goofy pandering to semi-literate people concerning the gas tax was the final straw. Of course, our media never, ever, ever mentions wars as a cause of high oil prices. Nor do they point out the obvious, the more the US hammers Iran and prevents them from selling oil, the higher the price of gas. In Congress this week, hysterical multi-millionaires begged Bush to stop filling the national reserves for oil. They desperately want lower gasoline prices for this election. Speaking of a chamber of screaming demons, look at who is a multi millionaire:

Clinton's wealth rose fastest among lawmakers, report finds

Propelled by her husband's post-White House earnings, Sen. Hillary Clinton's average net worth soared from red ink to $30.7 million between 2000 and 2006, the fastest financial climb among members of Congress who arrived without assets, a watchdog group reported Tuesday.

Arizona Sen. John McCain, the presumptive Republican presidential nominee, reported a $27.6 million surge in his and his wife's average worth from 1995 to 2006. Their worth rose over that 11-year period from an inflation-adjusted average of $8.9 million to $36.4 million, the ninth-biggest rise in Congress, the nonpartisan Sunlight Foundation reported.

The Sunlight Foundation posted on its Web site the first-ever comparison of the 535 House and Senate members' latest available net worth with their earlier disclosure statements. The forms don't require any explanation for shifts of fortune.

Many members of Congress have added significantly to their wealth while in office, such as Sen. Edward Kennedy's jump from an average net worth of $7.1 million in 1995 to $102.8 million in 2006. But because lawmakers are allowed to list their assets in wide ranges and exclude homes that can be worth millions of dollars, the foundation acknowledged that the data may create misimpressions.

Democratic presidential front-runner Barack Obama's average net worth rose from $328,442 in 2004, when he was elected to the Senate, to $799,006 in 2006. But counting Obama's and his wife Michelle's pricey Chicago home, he almost assuredly has joined the Senate's ``Millionaire's Club.''

So, of all the mulitimillionaire wealthy, Obama is strictly from the 'hood. He might as well be picking up bottles for the 5¢ returns! Ouch. And note the propaganda about him, of all the Senate, being 'elitist'. HAHAHA. Not to mention, all the military/industrialist sticky fingers in the Senate. Arrest them all. No wonder they all vote for more and more money wasted on more and more wars! It is making them filthy rich. A warning to pro-Democrats: this is YOUR party doing this! And this is why reaching out to people like Ron Paul is so important. The anti-war, anti-corruption people are NOT any particular party. They are all individuals and we must take care to go after all the corrupt people and obviously, Hillary is #1 on that list not to mention dear old McCain, the other guy who is ready to answer the 3am phone call to bomb, bomb, bomb someone so the Senators can get richer.

If we make a list of all these clowns, you can bet, the huge rise in their joint incomes from 1995 to today run directly from the pirates and hell hounds who have utterly destroyed our banking system and our economic futures. These tax cheats are now in charge of our key political offices for the Senate has veto power over the House so if the House goes after these pirates and hellish hounders, the Senate can kill any bills that reform this corrupt and dangerous system. And there are only 51 who have to be bribed which is tons cheaper than the House, per vote. Then there is the ultimate bribe: the White House has great powers of veto which is why these financiers who are often thieves, are very generous with their donations and help. Let's look at the state our nation is in thanks to all this:

U.S. Stocks Advance on Consumer Price Report; Freddie Mac Gains

U.S. stocks advanced for a third day after consumer prices climbed less than forecast and Freddie Mac's results bolstered speculation the worst credit-market losses are over.

Freddie Mac, the second-largest U.S. mortgage-finance company, rallied the most in six weeks after reporting a smaller loss than analysts estimated. Macy's Inc. spurred gains in retailers on sales that topped projections. Nine of ten industry groups in the Standard & Poor's 500 Index rose as the Labor Department's April inflation report gave the Federal Reserve more leeway to stimulate the economy.

Whoopee. The investors and financial bankers are hoping the Fed will drop interest rates below 1% yet again. Then it is party time, dudes. Anticipating this shower of easy wealth via easy money, stocks are struggling to get back to where they were over a year ago. The joint agreement between the Fed and these pirates is simple: they will all discount inflation. For example, the magic inflation figures saw gas go up 'only' 2.5% this last month. Since they guessed it will rise even HIGHER, they are saying inflation is dropping since it was 'only' 2.5%. Whoopee. This sort of higher math has only one purpose: to hide the truth. Also, the prices of all other things are definitely dropping due to everyone spending every penny on food and fuel. Who would have guessed? Instead of saying, 'Oh my god, this is the Seventies Show all over again!' and hammering a nail in the forehead, they say, 'There is no inflation! We can have cheap loans again!' But there is someone who is saying the right thing, as usual. Volcker.

Volcker says current economic situation resembles early 1970s

The US economy is not now in the kind of stagflation crisis it had been in, in the late 1970s, former Federal Reserve Board Chairman Paul Volcker told Congress today, but it's not impossible.

'I think there is some resemblance now to inflation in the early 1970s,' he warned the Joint Economic Committee. The economy obviously does not have the full-blown, double-digit inflation crisis that finally appeared, but he said, 'there is an underlying tendency to inflation.'

Volcker also told the committee that the Consumer Price Index may understate the actual rate of inflation. For example, during the real estate boom, the housing component of the CPI rose only slightly.

Someone give Volcker a cigar except that is a Cuban commie cigar. No, give him a loud cheer! Wow! Someone sees the obvious! Thank the gods, he is Obamas' economic advisor. It is wonderful that this candidate has a sane courtier. I want Volcker to be in charge of all our financial data. I want him to bring back the M3 numbers. I want real inflation statistics, not lies. I want him...back! Yaahhh! He knows, like myself, that we need savers if we want a sane banking system. He knows that savers have been ravaged this last 15 years and he knows the elderly are being cheated. And I know that he is the best choice for Treasury Secretary.

US Navy resurrects Fourth Fleet to police Latin America

Washington announced at the end of last month that it is resurrecting the long-ago moth-balled Fourth Fleet to reassert US power in the Caribbean and Latin America. Created at the time of World War II to combat German submarines attacking merchant shipping convoys in the South Atlantic, the Fourth Fleet was seen as no longer necessary after the Second World War and was disbanded in 1950.

The Pentagon’s a statement on the revival of the fleet gave a far vaguer indication of its new duties, saying it would “conduct varying missions including a range of contingency operations, counter narco-terrorism, and theater security cooperation activities.”

“Rear Admiral James Stevenson, commander of U.S. Naval Forces Southern Command, said the re-establishment of the Fourth Fleet will send a message to the entire region, not just Venezuela,” AHN news reported.

And we now are ruling the Seven Seas with four fleets we cannot afford! Isn't that loverly? And it is fatal. The US has been carrying a big stick and using a very big mouth and the stick is owned by the Chinese and the Venezuelans know this, they are good buddies with Hu and Wen as well as where and what. They aren't fooled by this latest attempt at projecting power we can't own. Our oil prices are shooting upwards due to the US not being able to buy Venezuelan oil, China gets it, not us. Thank you. End of story. It should be on TV but none of this makes the news in a comprehensive way. This is why my news service survives. Hooray.

The U.S. Quietly Slashes the Reward Posted for the Leader of Al Qaeda in Iraq

he U.S. government has quietly withdrawn a $5 million reward it was offering for the killing or capture of Abu Ayyub al-Masri, named by Pentagon officials as the leader of Al Qaeda in Iraq.
*snip*
Officially, defense sources say that rewards have historically been reduced for a number of reasons. "When they have reduced rewards in the past, some of the discussion has been to devalue them [the terrorists], to not hold them in such high regard," says a senior defense official. It's psychological warfare of sorts: "It may cause them to do things that say, 'Look, I'm important,'" says the official—and in so doing, perhaps do something that makes it easier for them to be captured. The reasons in the past have also been more pedestrian, adds the official. "Sometimes the rewards are set so high that for some people maybe $100,000 is more tangible than $1 million."

And if the fools running our empire think even the dumbest desert Arab can't add and subtract, they are nuts. Modern numbers came out of the Islamic world! And the Indians invented zero. And the ancient Chinese invented computer systems to calculate large numbers quickly! While we were in the Dark Ages, counting fingers and toes and coming up with 19 due to the finger cut off by a sword in last summer's raiding expeditions. The truth is, the reward has been reduced because no Senators can claim the $5 million if they turn in al Qaeda CIA agents. And Bush can't collect it, either. He won't turn on his useful buddies.

2005: CHINA AND INDIA IN THE WORLD ECONOMY

Paper presented to the International Conference of Commercial Bank Economists

From a long-term perspective, the prospect of China becoming the world’s largest economy, and India the third largest, within the next 10-15 years, represents a return to the order which has prevailed throughout most of human history. According to calculations by Angus Maddison5, from at least the beginning of the common era until the early 19th century, China and India accounted for around half of global GDP (see Chart 1). For much of this period China and India were intact polities, had the world’s largest populations and were technological leaders.

As Jared Diamond notes, “until around AD 1450, China was technologically much more innovative and advanced than Europe”6. Chinese inventions before or during this period included the wheelbarrow, gunpowder, matches, cast iron, porcelain, magnetic compasses, sternpost rudders, paper, printing, paper money and a meritocratic civil service.7 Indian inventions from this period include the decimal system (and the concept of zero), the water-wheel, cotton-ginning, cloth dyes, brass and the extraction of crystalline sugar from cane8. The decline in the relative importance of China and India between the early 18th and late 20th centuries resulted from, inter alia, the industrial revolution in Western Europe; the formation and rapid expansion of the United States; China’s retreat from engagement with the global economy beginning during the Ming Dynasty and subsequent decay under the Qing dynasty; the impact of colonial rule on India, and ‘gunboat diplomacy’ and ‘unequal treaties’ on China; nearly fifty years of warfare and social disorder in China in the first half of the 20th century followed by another quarter-century of chaos and misrule under Mao Zedong; and forty years of growth-stultifying Nehruvian socialism in India from independence until the financial crisis of 1991.

A good pdf read. The charts show clearly, the world order is shifting back to Asia. Asian farmers and inventors in China in particular, were incredible in the past. Many inventions like printing of books, books with pages, numbers, algebra, paper money, fire power, integrated farming methods, unitary organization of villages, cities and the government, intensive farming techniques, fertilization, silk weaving, high-fired pottery, astronomy, etc: this is from the great civilizations of the East. The Olympic torch is moving to Asia. No matter what we say or how much we complain. This is what we must talk about, not making gas cheap. But how to swim with this tidal change and not drown in bankruptcy, drown in red ink.

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